Federal Court Grants Injunction For Foreign Arbitration: Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549

Tuesday 24 April 2018 @ 9.50 a.m. | Legal Research

Last Friday, 20 April 2018, the Federal Court of Australia released its judgment in the case: Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549. This case concerned the restraining of proceedings in the United States District Court of the Southern District of New York, initiated by Kraft Foods Group Brands LLC (Kraft) against Bega Cheese Limited (Bega).

Justice O’Callaghan, sitting for the Federal Court granted an injunction, restraining the US arbitration from proceeding any further, on the grounds that it could affect proceedings between the two parties already underway in the Federal Court. He therefore ordered that “the matter be relisted at 9am on 23 April for hearing about the further orders and directions for the conduct of this proceeding in light of these reasons” (paragraph [1]).

Justice O’Callaghan summarised his position at paragraphs [170] and [171]:

“As at present advised, and, of course, subject to hearing further from the parties, I am inclined to grant an injunction the effect of which will be to restrain the first applicant from taking of any further steps in the arbitration pending the determination of this proceeding, and to make directions for the filing of evidence, and fixing the proceeding for trial, with the expectation that it will commence in the next month or two.

Counsel for Kraft asked, and there was no objection from Bega, that if I were minded to grant an injunction (as I am), that I should provide the parties with an opportunity to make submissions about the form of any order that may be made, in light of my reasons.  So I will say no more about the form of relief, or trial directions, and direct that the matter to be relisted for further argument.”


In 2017, Bega aired a number of peanut butter commercials on television and radio. Following the release of the commercials, Kraft (as well as the second applicant, H.J. Heinz Company Australia Limited) alleged that Bega’s advertisements were false, misleading or deceptive. They began proceedings in the Federal Court that alleged Bega was in contravention of s 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the “Australian Consumer Law”). This section provides that “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.  Kraft allege that "the advertisements contain a number of false or misleading representations, including that Kraft peanut butter is now Bega peanut butter or is being replaced by Bega peanut butter and that the Kraft brand has changed to or is changing to Bega peanut butter."

Kraft also commenced an arbitration in the United States, which sought to compel mediation and arbitration of a dispute between Kraft and Bega about “ownership of the Peanut Butter Trade Dress” under the master agreement between the two parties. In the United States, “trade dress” is a term used to describe a products packaging, as per s 43(a) of the Trademark Act of 1946 (US).

Bega then filed an application to the Federal Court of Australia on 13 February 2018, seeking to restrain the proceedings in the United States. The United States proceeding is on hold pending the determination of the Federal Court.

The Arguments

In applying to the Federal Court of Australian for an injunction, Bega argued two grounds, relying on the decision of the High Court of Australian in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345. These two arguments are summarised as follows (see paragraph [8]):

“First, Bega says that if the arbitration is allowed to proceed at the same time as this proceeding it will interfere with, or will have a tendency to interfere with, this proceeding and the court’s processes because there is a possibility or probability of inconsistent findings.  Secondly, Bega says that such an injunction should go in the exercise of the court’s equitable jurisdiction, because to permit the arbitral proceeding to continue together with this proceeding would, according to the principles of equity, be vexatious or oppressive.”

In resisting the claim for an injunction by Bega, Kraft contended (at paragraph [15]) that:

“the causes of action and relief sought in this proceeding are entirely separate from those raised in the arbitration; that it has not waived any rights to exercise its rights to arbitrate; and that it seeks simply to enforce and to comply with the contractual bargain contained in the master agreement, which also binds Bega, as the successor to Mondelez.

Kraft says that the dispute the subject of this proceeding, which it calls “the Advertising Dispute”, and the dispute the subject of the notice of arbitration, which it calls “the Trade Dress Dispute” have nothing to do with each other, and that there is therefore no risk of inconsistent decisions being made.  It also points to the fact that the s 18 case it brings under the Australian Consumer Law in this proceeding includes a claim of misleading or deceptive conduct with respect to a radio advertisement, which self-evidently could not feature any form of trade dress.”

The Federal Court Judgment

In finding that an injunction should be granted, Justice O’Callaghan initially determined that the Federal Court has jurisdiction to grant an injunction restraining  a foreign arbitral proceeding. In deciding this, Justice O’Callaghan held that “this court has jurisdiction to grant an anti-arbitration injunction in this case because Kraft commenced this proceeding here seeking permanent relief and damages.  It is thus amenable to this court’s personal jurisdiction” (at paragraph [25]).

Justice O’Callaghan then determined that the two proceedings, both those in the US and the arbitration initiated in the Federal Court, overlapped (see paragraphs [69] and [79]):

“In assessing whether, and if so, to what extent, the issues in the two proceedings overlap, the scope of the relevant issues necessarily includes all the issues raised by the parties, including by Bega in its defence and counterclaim, and by Kraft in its statement of claim, reply and defence to counterclaim.  That is so because when a foreign party brings a proceeding in an Australian court, it submits not only to its jurisdiction in respect of its own action, but also in respect of any cross-claim that a respondent brings: Marlborough Harbour Board v Charter Travel Co (1989) 18 NSWLR 223, 232G; National Commercial Bank v Wimborne (1979) 11 NSWLR 156, 169B-174G. […]

in my view, the question of the ownership of the packaging, get-up (trade dress) is, on the pleadings in this proceeding, central to the question of whether all, or some, of the pleaded representations are false or misleading within the meaning of s 18 of the Australian Consumer Law.  That question is also the central issue raised in the notice of arbitration. For those reasons, if both the arbitration and this proceeding run there will, in my view, be a real risk of inconsistent findings on the critical question of who owns the goodwill in the packaging/get-up/trade dress.”

As it was held that the proceedings overlapped, Justice O’Callaghan then decided that an anti-arbitration injunction was necessary for the administration of justice (see paragraphs [103], [104] and [109]):

“Therefore, the critical question that falls to be decided in this case is whether restraining the taking of any further steps in the arbitration is necessary for the administration of justice to protect this court’s own proceedings or processes.  It is to that question that I now turn.

In my view, this is an appropriate case for an anti-arbitration injunction to go because of the risk of inconsistent findings about what, in my view, is a question central to both proceedings, namely, the ownership of the goodwill in the packaging and get-up/trade dress.  This question, as I have explained above, depends upon whether the goodwill at all times emanated, and continues to emanate, from the master agreement, and thus belongs to Kraft (as it contends) or whether, (as Bega contends) at least since October 2012, Kraft has not owned any of the goodwill in Australia generated in respect of the sale of peanut butter in Australia. […]

In my view, for the reasons explained above, Kraft ought to have included the claims made in this proceeding under the Australian Consumer Law in its notice of arbitration because those claims, contrary to Kraft’s submission, do fall within the ambit of the arbitration clause in the master agreement.  Instead, Kraft chose to initiate this proceeding, and then to prosecute it, including by filing a statement of claim and a reply to Bega’s defence, participating in procedural directions, seeking discovery, filing a notice to produce, consenting to the filing by Bega of a counterclaim (in which the issue of ownership of the trade dress issue is squarely raised) and then filing a defence to that counterclaim.  As Bega submitted, Kraft is the party responsible for the bringing of both proceedings.  It alone is the author of the possibility or probability of duplicated litigation and inconsistent findings.  Each of those considerations also weighs significantly in favour of restraining the arbitration, at least until this proceeding is determined.”

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Kraft Foods Group Brands LLC v Bega Cheese Limited [2018] FCA 549.

Australian Consumer Law, Schedule 2, Competition and Consumer Act 2010 (Cth), available on TimeBase's LawOne service.

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