Federal Court Cour fédérale
PRESENT: The Honourable Frederick E. Gibson
BETWEEN:
VARCO, L.P.,
WILDCAT SERVICES, L.P. and
WILDCAT SERVICES CANADA, ULC
Defendants by Counterclaim
and
PASON SYSTEMS INC.
Plaintiffs by Counterclaim
REASONS FOR ORDER AND ORDER
[1] These reasons and order follow the hearing on the 11th of May, 2009, of a motion for an order under Rule 51 of the Federal Courts Rules[1] allowing an appeal from an Order of Prothonotary Milczynski made the 22nd of April, 2009, in which the learned Prothonotary dismissed the Defendants’ motion for an Order bifurcating issues of liability from issues of quantum of recovery arising from the Plaintiffs’ claim for damages and profits for patent infringement. The bifurcation order was sought pursuant to Rule 107 of the Federal Courts Rules.
[2] Rule 107 reads as follows:
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107. (1) The Court may, at any time, order the trial of an issue or that issues in a proceeding be determined separately.
(2) In an order under subsection (1), the Court may give directions regarding the procedures to be followed, including those applicable to examinations for discovery and the discovery of documents.
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107. (1) La Cour peut, à tout moment, ordonner l’instruction d’une question soulevée ou ordonner que les questions en litige dans une instance soient jugées séparément. (2) La Cour peut assortir l’ordonnance visée au paragraphe (1) de directives concernant les procédures à suivre, notamment pour la tenue d’un interrogatoire préalable et la communication de documents.
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Background
[3] This action was commenced by the filing of a Statement of Claim on the 8th of March, 2005. The Plaintiffs claim damages and profits for patent infringement. More specifically, the Plaintiffs allege infringement of Canadian Patent No. 2,094,313 relating to automatic drilling systems used in drilling rigs to regulate the release of a drill string to achieve an optimal rate of penetration.
[4] The Defendants’ Statement of Defence and Counterclaim was filed on the 25th of April, 2005. A series of motions, orders and appeals from those orders followed in rapid succession.
[5] Case Management of the action was ordered on the 3rd of November, 2005, and Prothonotary Milczynski has been performing case management functions since that time. She is thus very familiar with this proceeding.
[6] On the 10th of March, 2009, an Amended Statement of Claim was filed. Counsel for the Defendants urges that the amendments “… add allegations of infringement and claims for damages and profits in respect of activities in other countries [that is to say, countries other than Canada], including the United States, Mexico, Argentina and Australia” and that, in the result, the complexity of the action is significantly increased. Thus, he urges, the recent amendments to the Statement of Claim triggered the motion for bifurcation. Counsel for the Plaintiffs disagrees that the amendments add jurisdictions and thus increase the complexity of the action. Rather, he urges, the amendments merely “clarify” the scope of the action. In the Reasons for Order that is here under appeal, Prothonotary Milczynski expresses the same view of the impact of the amendments as that urged by counsel for the Plaintiffs.
[7] The first round of examinations for discovery has recently been completed, subject to outstanding motions to require answers to questions where answers were refused to be provided.
The Decision Under Appeal
[8] The substance of Prothonotary Milczynski’s decision that is before the Court is quite brief. It follows:
The Defendants have raised the matter of bifurcation with the Plaintiffs on a number of occasions earlier in the proceeding, but it was only after the Statement of Claim was recently amended to clarify that the damages sought by the Plaintiffs’ related to their allegations of the Defendants’ infringing activity in Canada (the manufacture of the Defendants’ drilling equipment) and to the monies earned as a result of that infringing activity - in Canada and in the Defendants’ export markets outside Canada, did the Defendants bring this motion. The proceeding has, however, had a long history of interlocutory proceedings since the action was commenced in 2005, as both parties have outlined in their written representations.
Nonetheless, at any time in a proceeding, if the Court is satisfied that bifurcation is appropriate in the circumstances, such order may be granted. The onus is on the moving party to satisfy the Court, on a balance of probabilities, that in light of the evidence and all of the surrounding circumstances that bifurcation of the issues of liability and damages would more likely than not, lead to the most just, expeditious and least expensive determination of the proceeding on its merits.
In determining whether or not to exercise its discretion to order bifurcation of the issues of liability and damages, there are a number of factors the Court may consider, including:
(i) The complexity of the case;
(ii) Whether the issues of liability are clearly
distinct from issues of remedy and damages;
(iii) Whether the issues of liability and damages are interwoven to such a degree so that no time or great expense will be saved;
(iv) Whether a decision relating to liability will likely put an end to the action altogether;
(v) Whether the parties have already devoted resources to all of the issues;
(vi) Whether the splitting of the action will save time or lead to unnecessary delay;
(vii) Whether the parties will suffer any advantage or prejudice by the granting of the order; and
(viii) Whether bifurcation will result in the most just, expeditious and least expensive disposition of the proceeding.
In this case, I am not satisfied on the record filed by the Defendants that bifurcation should be ordered. As set out in the Plaintiffs’ written representations at paras.40-70, which I accept, there is nothing particularly unusual about this case, either in the complexity of the issues or the scope of the productions. I agree that if bifurcation were ordered in this case, it would be difficult not to order it in every case. I am also not satisfied that any real economy would be achieved in that the issue of the patent’s validity on the grounds of obviousness will raise the factor of commercial success, which in turn, will require some measure of financial disclosure in any event.
I am also not satisfied that bifurcation at this juncture will lead to any savings of costs and time since the parties have been preparing on the basis of a trial on all issues and are at the stage of examinations for discovery. The recent amendments that add jurisdictions may increase the volume of documents to be produced and some examinations, but I do not see that outweighing the interest of expeditious resolution of all issues in a single trial or the prejudice that will arise by the delay in the event liability is established.
[emphasis added]
[9] As Prothonotary Milczynski noted, she accepts the Plaintiffs’ Written Representations at paragraphs 40 to 70 of their memorandum which was before her. She annexed those paragraphs to the Order here under appeal. I will do the same. Those paragraphs appear as a Schedule to these reasons and order.
Standard of Review
[10] In Merck & Co., Inc. v. Apotex Inc.[2], the Federal Court of Appeal clarified the standard of review in matters such as this established in Canada v. Aqua-Gem Investments Ltd.[3] when it wrote at paragraph [19]: “... Discretionary orders of prothonotaries ought not be disturbed on appeal to a judge unless: (a) the questions raised in the motion are vital to the final issue of the case, or (b) the orders are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts.”
[11] It was not questioned before the Court that the questions here raised are not vital to the final issue of the case. Rather, counsel for the Defendants urged that the Order under appeal is “clearly wrong”.
[12] In Weatherford Artificial Lift Systems Canada Ltd. et al. v. Corlac Inc. et al.[4], Justice Mandamin wrote at paragraphs 26 to 28 of his Reasons:
The role of a case management judge was discussed by Justice Rothstein for the Federal Court of Appeal in Sawridge Band v. Canada, ... He stated:
We would take this opportunity to state
the position of this Court on appeals
from orders of case management
judges. Case management judges must
be given latitude to manage cases.
This Court will interfere only in the
clearest case of a misuse of
judicial discretion.
Justice Gibson in Microfibres Inc. v. Anabel Canada Inc. ... considered the role of a prothonotary to be of similar importance. He stated:
I conclude that Mr. Justice Rothstein’s
comments should apply by analogy to
discretionary decisions prothonotaries
make in the course of case management
in complex matters such as this.
Case management prothonotaries must
be given latitude to manage cases in
the same manner in which case management judges are entitled to such latitude.
... Case Management prothonotaries, like
case management judges are familiar with
the proceedings that they are managing to a
degree that a trial judge, sitting on appeal
from a prothonotary’s discretionary decision
in such a context, usually cannot be.
In my view, the Prothonotary was exercising his discretion in making a case management decision when he decided against the Defendants’ application for leave to serve and file the Amended Statement of Defence and Counterclaim. He was familiar with the course of the proceedings and the procedural complexities involved in the action. ...
[citations omitted]
[13] I am satisfied that precisely the same, modified only as to context, must be said here.
The Defendants’ Allegations
[14] Before me, counsel for the Defendants urged that Prothonotary Milczynski erred in dismissing the Defendants’ motion for bifurcation to the extent that she was clearly wrong, in the sense that the exercise of her discretion was based upon a wrong principle or upon a misapprehension of the facts in that:
a) she misapprehended the evidence in finding that, on a balance of probabilities, a bifurcation order would not leave to savings of cost or time;
b) she misapprehended the evidence in failing to recognize that the Plaintiffs’ recent amendments to its pleading significantly increased the complexity of this action by the addition of new jurisdictions, and that such increased complexity in the context of this proceeding favours bifurcation;
c) she misapprehended the evidence in failing to consider the Plaintiffs’ prior conduct in another matter that was before this Court, which conduct would disentitle the Plaintiffs to claim equitable relief such as profits, thereby resulting in a saving of time and resources in the conduct of this case, even if the Plaintiffs succeed on liability;
d) she erred in law in holding that there is a substantial overlap between issues of commercial success and damages, such that these issues are not readily separable by bifurcation; and
e) she erred in law, misapprehended the evidence, and exercised her discretion based on a wrong principle in adopting and accepting the Plaintiffs’ written representations at paragraphs 40 to 70 of their Memorandum that was before her and as set out in the Schedule to these reasons and order.
Analysis
[15] I reiterate the words of Justice Mandamin quoted above. In my view, Prothonotary Milczynski was exercising her discretion in making a case management decision when she decided against the Defendants’ application for bifurcation. She was familiar with the course of these proceedings and the procedural complexities involved in this action. In these circumstances, it would be inappropriate for me to interfere with the learned Prothonotary’s decision unless that decision reflects on its face a clearest case of a misuse of judicial discretion. I am satisfied that this is not such a case.
[16] As earlier noted and as quoted from the Prothonotary’s reasons, the Prothonotary was satisfied that the recent amendments to the Statement of Claim herein were to “... clarify that the damages sought by the Plaintiffs related to their allegations of the Defendants’ infringing activity in Canada (the manufacture of the Defendants’ drilling equipment) and to the monies earned as a result of that infringing activity – in Canada and in the Defendants’ export markets outside Canada, ...”. In this regard, the Prothonotary preferred the submissions before her on behalf of the Plaintiffs over those that were before her on behalf of the Defendants, thus including a preference for the Plaintiffs’ interpretation of the facts of this matter, as they impact on any possible savings of cost or time, over the interpretation urged on behalf of the Defendants. Precisely the same must be said regarding the impact of the amendments to the Statement of Claim on the complexity of this matter, that is to say, that the amendments did not materially increase the complexity and thus did not work in favour of bifurcation.
[17] While the Prothonotary’s Order does not make reference to the Plaintiffs’ prior conduct that is commented on in the related file T-1845-05 in this Court, I am satisfied that it is entirely speculative to conclude that such conduct and this Court’s commentary on it would be found to disentitle the Plaintiffs to claim equitable relief such as profits, thereby resulting in a savings of time and resources, in the view of the Defendants, in the conduct of this case, even if the Plaintiffs were to succeed on liability. I am satisfied that that speculative allegation is a matter for another day and quite appropriately was not commented on by the Prothonotary in the context of her Reasons on the motion before her.
[18] With great respect, I am in no position, despite the Defendants’ submissions before me, to conclude that the Prothonotary erred in law in concluding that the Defendants were wrong in stating that, in this case, matters of infringement and whether the underlying patent is valid are “... separate and distinct from the assessment of the remedies claimed.” Based upon the materials before me and the submissions of counsel before me, I cannot but conclude that the Prothonotary’s conclusion that “bifurcation of liability and damages would do little to narrow the scope of discovery for trial” was reasonably open to her. With great respect, the Prothonotary simply did not conclude that there is a “substantial” overlap between issues of commercial success and damages.
[19] Finally, it is, with great respect, specious to urge that the Prothonotary erred in law, misapprehended the evidence and exercised her discretion based on a wrong principle in adopting and accepting the Plaintiffs’ written representations at paragraphs 40 to 70 of their memorandum that was before her. The learned Prothonotary only accepted the Plaintiffs’ written representations in those paragraphs. She did not go so far as to “adopt” them.
Conclusion
[20] For the foregoing reasons, this appeal will be dismissed.
Costs
[21] Costs would normally follow the event. Counsel for the Plaintiffs urged that costs, fixed in the amount of $3,000.00, should be made payable by the Defendants, forthwith. Counsel for the Defendants urged that, as in the case of Prothonotary Milczynski’s Order leading to this appeal, costs should be made payable in the cause. I am satisfied that appeals such as this, where the likelihood of success has been, I am satisfied, minimal, should be discouraged by costs orders. In the circumstances, I will order that costs of this motion in appeal will be payable to the Plaintiffs in any event of the cause. Such costs shall be subject to taxation.
ORDER
THIS COURT ORDERS that this appeal by way of motion under Rule 51 of the Federal Courts Rules is dismissed. The Plaintiffs are entitled to their costs to be taxed, payable by the Defendants, in any event of the cause.
“Frederick E. Gibson”
Deputy Judge
Docket: T-436-05 SCHEDULE TO THE REASONS FOR ORDER
AND ORDER DATED MAY --, 2009
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-436-05
STYLE OF CAUSE: VARCO CANADA LIMITED, VARCO, L.P.,
WILDCAT SERVICES, L.P. and
WILDCAT SERVICES CANADA, ULC v.
PASON SYSTEMS CORP and PASON SYSTEMS INC.
PLACE OF HEARING: Toronto, Ontario
REASONS FOR ORDER
APPEARANCES:
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Peter R. Wilcox and Justin G. Necpal |
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Peter W. Choe and James Blonde
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SOLICITORS OF RECORD:
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TORYS LLP Barristers and Solicitors Toronto, Ontario
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GOWLING LAFLEUR HENDERSON LLP Barristers and Solicitors Toronto, Ontario |