Date: 20020807
Docket: T-2408-91
Neutral citation: 2002 FCT 842
BETWEEN:
MERCK & CO. INC., and
MERCK FROSST CANADA & CO.
Plaintiffs
- and -
APOTEX INC.
Defendant
Assessment Officer
[1] The Referee awarded costs of the reference (November 28, 2000) to the Plaintiffs "to be taxed upon a party and party basis pursuant to the Rules of Court". The Plaintiffs were successful at trial concerning infringing sales of drugs. The Federal Court of Appeal allowed an appeal in part from the Judgment, but upheld the Trial Division's findings of infringement relative to certain quantities of the Defendant's drug in issue. The Plaintiffs elected an accounting of profits, as opposed to damages. The Defendant's counsel estimated that the reference could take as long as three weeks. Shortly before commencing, the parties agreed upon estimates of revenue, production costs, administrative and research costs, and the compounding of pre-judgment interest, leaving the rates and duration of pre-judgment and post-judgment interest as the issues for the Referee. The major issues in the Plaintiffs' bill of costs are the necessity and amount of charges for services of the forensic accounting expert, Gary Timm, to analyse, advise counsel, and prepare to give evidence concerning the Defendant's figures for infringing sales. The submissions and materials before me echoed, to some extent, those made before the Referee and therefore these Reasons reflect those portions of my notes that I felt clarified or supplemented a party's position already extensively documented to date in the Court file.
[2] Essentially, the Defendant's position is that no costs, or reduced costs, are payable for the Plaintiffs' expert in the party and party context because the Defendant disclosed sales data requiring no additional analysis; the Plaintiffs' expert was not required for the issues at the reference; some of the expert's work predated the reach of the Referee's award of costs; the amounts claimed are excessive and unreasonable and the expert's work effectively was the work of counsel disguised so as to permit full indemnity as a function of the delegation of the responsibility, to this expert by counsel, for conduct at an early stage of the reference.
[3] The Plaintiffs' position is that the conduct of the Defendant and the nature of the disclosed data required a forensic accountant to establish the validity of the figures, i.e. see, for instance, the discrepancy between the initial and final figures. The Plaintiffs asserted, per Van Daele v. Van Daele [1983] B.C.J. No. 1482 (B.C.C.A.), Riello Canada v. Lambert (1987) 15 C.P.R. (3d) 257 and Rothmans, Benson & Hedges v. Imperial Tobacco (1994) 50 C.P.R. (3d) 59, that the decision to incur an expense must be considered in the context of the circumstances existing at the time said decision was made. The Plaintiffs noted that the record discloses that the Defendant agreed that expert accounting advice on its side was essential to settle the figures. The Plaintiffs indicated that, as a function of its use of the forensic accounting expert, hotel charges ($279.30) relative to the examination of the Defendant's comptroller, Gordon Fahner, and airfares (two at $495.36 each) and meals (two-thirds of $73.93), relative to document discovery at the Defendant's premises, were in issue. As well, the Plaintiffs indicated that the point to be used in the ranges for counsel fees was in issue.
The Plaintiffs' Position
[4] The Plaintiffs argued that the real expertise in this type of reference lies not with the lawyers, but with the forensic accountants. In particular, the record discloses that the forensic expert added about $1.2 million to the value of the Plaintiffs' case, resulting in a figure for profit close to that for which the Defendant settled. The Plaintiffs argued that recoverable disbursements for their expert should bear some reasonable relationship to the approximately $285,000 paid to him, particularly given that the cap imposed by Tariff B on counsel fees represents about 4.6% of the approximate $400,000.00 actually billed. The Plaintiffs argued that, notwithstanding the submissions and authorities led before him by the Defendant to do so, the Referee still did not exclude costs for Mr. Timm as he intended that the Plaintiffs receive costs for its forensic expert. The Plaintiffs argued that the conduct of the Defendant, which delayed progress through discovery and culminated with the production of Mr. Fahner, was an implicit admission that its initial nominees for discovery were not knowledgeable. The Plaintiffs asserted that the Defendant's tardy production of information, admission on discovery that it would need its own expert to substantiate its figures and its proposed schedule for the exchange of expert affidavits, all confirm the Plaintiffs' prudence in engaging a forensic expert. The Plaintiffs asserted that the agreement achieved just before the reference commenced was a function of the forensic expertise of Mr. Timm, including analysis of voluminous data for relevant sales. Contrary to multiple and redundant experts experienced by the Court in other cases, the Plaintiffs used one expert throughout this matter.
[5] The Plaintiffs argued that the record confirms its prudence in having Mr. Timm available at the reference to test or rebut adverse evidence although, as it happened, the Referee largely discredited the Defendant's witness. Decisions such as Scott Paper Co. v. Minnesota Mining and Manufacturing Co. (1983) 70 C.P.R. (2d) 68 (F.C.T.D.), Sanmammas Maritima S.A. v. "Netuno" (The), [1995] F.C.J. No. 1442, and Pardee Equipment Ltd. Canada, [1998] F.C.J. No. 751 (T.O.), held that assessable costs include those for necessary potential witnesses prepared, but not ultimately called. The Plaintiffs argued that this sort of forensic accounting expertise is the only vehicle for formulating questions, understanding answers and then formulating follow-up questions both at discovery and at the hearing. The failure to produce relevant documents necessitated Mr. Timm's attendance at the Defendant's discovery to provide forensic expert assistance for a number of issues.
[6] The Plaintiffs argued that Mr. Timm's invoices dated June 15, 1995 ($10,447.48 for February 17 to June 9, 1995); January 20, 1998 ($57,485.21 for November 1 to December 31, 1997); February 2, 1998 ($44,214.01 for January 1 to 31, 1998); April 9, 1998 ($34,066.12 for February 1 to March 31, 1998); May 29, 1998 ($5,188.43 for April 1 to May 29, 1998) and December 16, 1998 ($24,133.85 for May 30 to September 15, 1998) reflected reasonable effort to gain an understanding of the circumstances of the case in turn permitting an intelligent choice between an election for damages or profits, to prepare data for analysis, including devising a workable database, and to use juniors to keep costs down. The Plaintiffs argued that these invoices reflect the staggered delivery of information from the Defendant, as well as issues so complex as to require assistance to Plaintiffs' counsel in preparing letters to opposing counsel. Mr. Timm required a junior with him at discovery because one person had to follow the oral portion and the second person had to review documents. The Plaintiffs asserted that the information purged from the December 16, 1998 invoice and from the June 19, 2000 invoice ($16,890.80 for March 16 to June 15, 2000), neither resulting in the removal of charges, is irrelevant to the determination of whether the remaining information sufficiently describes the expert's work and the associated charges. The expunged information could be shown to me, but not to opposing counsel. The Defendant has effectively waived its right of objection by choosing not to cross-examine on Mr. Timm's affidavit. The Plaintiffs applied this same argument to the September 27, 1999 ($3,902.22 for December 16, 1998 to May 31, 1999) and September 28, 1999 ($9,990.59 from June 1 to September 15, 1999) invoices, the difference being that the expunged information necessitated the removal of some charges, which was done.
[7] The Plaintiffs argued that its rationale above supports the upper end of ranges for counsel fees which, in terms of column III limitations in the Tariff, still represents inadequate compensation not even close to the actual billings of some $400,000.00 to achieve the figure of $9.5 million owed as a result of the Defendant's infringing activities. The record discloses delaying conduct by the Defendant contributing to increased costs. The Plaintiffs argued that Wilson v. Canada 2000 D.T.C. 6641 confirmed that post-judgment interest on costs runs from the date of judgment and not the date of assessment of those costs. The Referee's Report became a judgment on December 28, 2000. Therefore, per the Ontario Courts of Justice Act, R.S.O. 1990, c. 43, the post-judgment interest rate during the fourth quarter of the year 2000 was 7%. The Plaintiffs claim 7% interest on costs from December 28, 2000, until date of payment.
[8] In rebuttal, the Plaintiffs argued that Canadian Express Ltd. v. Blair et al. 8 O.R. (3d) 769 is irrelevant for the costs of an expert because it addressed the limits for counsel fees in party and party costs. The Plaintiffs argued that the conclusions in Apotex Inc. v. Wellcome Foundation Ltd. (1999) 84 C.P.R. (3d) 303 (F.C.T.D.) are particular only to its circumstances and are countered by our several cases. The work of Mr. Timm, who was not the "Cadillac" of experts, reduced a reference hearing estimated by the Defendant, who also required an expert, at three weeks to one day. The Court in Ductmate Industries v. Exanno Products (1987) 13 C.P.R. (3d) 193 (F.C.T.D.) approved costs for preparation of an expert, not ultimately used, because that work resulted in substantial agreement between the parties. The Plaintiffs argued that it was prudent to have Mr. Timm at the reference because new issues at its outset might possibly have required forensic accounting expertise. As well, Mr. Timm assisted counsel in shaping the response to the Defendant's evidence.
[9] The Plaintiffs asserted that a reference on profits, as opposed to a trial on liability, is normally the longest type of hearing for patent lawyers who need the assistance of forensic accounting expertise to gain the requisite understanding for pleadings and discovery. For example, the work in the June 20, 2000 invoice, to review the Defendant's discovery motion, was necessary to prepare for a reply affidavit, if needed. The Plaintiffs argued that the Defendant, having failed to cross-examine on his affidavit, cannot now object to Mr. Timm's invoices. Mr. Timm's visit to the Plaintiffs' facility, which occurred before the election between damages and profits, was appropriate for gaining an understanding of the pharmaceutical process relative to this choice. The Plaintiffs asserted that, at the time the decision was made to start building the database to assess the sales information, there had not been any indication that the Defendant would produce the electronic sales data that it later did. That data, when produced, had significant discrepancies requiring analysis of the underlying details of deductions, as demonstrated by the Calculation of Estimated Net Profits document.
[10] In rebuttal on the issue of interest, the Plaintiffs argued that The Law of Costs, Second Edition, Mark M. Orkin Q.C. ed., at page 2-220, holds that post-judgment interest runs from the date of judgment and that the exception noted by Orkin, concerning a delay in service of a draft bill of costs, does not apply here because the Plaintiffs had provided the Defendant with a draft bill of costs well in advance of the award of costs. The Plaintiffs argued that Syed v. Randhawa (1996) 136 D.L.R. (4th) 119 and Sherman v. Drabinsky [1996] O.J. No. 1525, the latter case relying on the Ontario Courts of Justice Act, s. 129(1), both support the principle that interest on costs runs from the date of judgment. The Plaintiffs argued that the Ontario Courts of Justice Act, s. 129(1) provides for interest from the date of judgment and that, within the meaning of the Federal Court Rules, a certificate of assessment is not an "order" as contemplated by said section 129(1).
[11] The Plaintiffs argued that little weight should be given to the Ontario cases, Dashchuk v. Canadian Fram Ltd. [1997] O.J. No. 3516 and Roberts v. Morana (1998) 37 O.R. (3d) 333, relied upon below by the Defendant, because they did not relate to costs. The Plaintiffs addressed the Defendant's other cited decision, Placentile v. Fabris (1993) 14 C.P.C. (3d) 210, by noting that it, and Mete v. Guardian Insurance Co. [1996] O.J. No. 2783 (Ont. Ct. (Gen. Div.)), which followed Placentile v. Fabris, supra, held that post-judgment interest should run from one month after the date of the award of costs as opposed to the date of assessment of those costs. The Plaintiffs asserted that, contrary to the Defendant's submissions, the Court in Wilson v. Canada, supra, did consider Placentile v. Fabris, supra, in reaching its decision. The Plaintiffs asserted that post-judgment interest on costs should run from the date that the Referee's Second Supplemental Reasons became a judgment. The Defendant had seen the draft bill of costs by that time and was aware of the amount of its liability for party and party costs.
The Defendant's Position
[12] The Defendant argued that an assessment officer, as an officer of the Registry, has a responsibility to ensure that party and party costs, the limit imposed here by the Referee, bear a reasonable relationship to the litigation so as to preclude a higher scale of costs, not intended by the Court, approaching full indemnity, i.e. by finding that the Plaintiffs' "team" approach was inappropriate and excessive for this litigation. The Defendant noted that the same invoices for Mr. Timm before me on this assessment were also before the Referee as part of the Plaintiffs' request for a lump sum award of costs. The Referee not only refused a lump sum for costs inclusive of these invoices for Mr. Timm, but also refused to order a higher scale of costs and to give directions as to experts, despite being specifically requested to do so. The Defendant noted Wellcome Foundation Ltd. v. Apotex Inc., [2001] F.C.J. 333, 2001 FCT 174, in which the Court, unlike in this matter, gave special directions and parameters for experts, meaning that I have full discretion concerning the forensic accounting expert. If the Referee had intended to preclude the Defendant from challenging this expert's accounts, he would have so directed, but he did not.
[13] The Defendant relied on Canadian Express Ltd. v. Blair, supra, in which the Court acknowledged extraordinary circumstances, but expressed concern that the result at assessment, for no apparent reason, did not reflect some reasonable relationship between the costs for pre-hearing preparation time of counsel and the costs for appearance at the hearing itself. The Court there speculated that the substantial costs actually incurred may have been appropriate in the bill as between solicitor and own client, but not in a party and party context. That principle applies here in that the Plaintiffs should not achieve the higher indemnity of solicitor-client costs by virtue of full fees for a forensic accounting expert performing work clearly belonging within the scope of duties of its lawyer for which indemnification is partial in the party and party context. The Plaintiffs' lawyer effectively delegated conduct of the litigation to the forensic accounting expert at an early stage of the reference. That approach is not recoverable in party and party costs.
[14] The Defendant argued that Allied Signal Inc. v. Dupont Canada Inc. (1998) 81 C.P.R. (3d) 129 (T.O.), stated that the jurisprudence holds that experts are not automatically payable, that their accounts may be challenged, and that their indemnification should be conservative. As well, this case suggests that the award of costs must include specific authority for the indemnification of experts' costs if that is the Court's intent. The Defendant argued that Apotex Inc. v. Syntex Pharmaceuticals International Ltd. et al. (2000) 2 C.P.R. (4th) 368, and Apotex Inc. v. Wellcome Foundation Ltd., supra, held that there must be a reasonable limit in party and party costs for the indemnification for experts. The Defendant argued that Pharmacia Inc. v. Canada, [1999] F.C.J. No. 1770, held that relevance and excessiveness are factors in assessing experts' accounts. In this litigation, liability had already been decided. Mr. Timm had nothing to do with creating the sales, which were significant, and the presence of large amounts is not determinative of whether his account is appropriate in party and party costs, but rather the issues which remained for the reference are determinative, i.e. in this case, straightforward.
[15] The Defendant summarized the jurisprudence as holding that: (i) a successful litigant does not have a "blank" cheque for necessary or desirable experts; (ii) the indemnification for experts must be closely linked to purpose in litigation, i.e. to assist the Court in matters beyond its expertise and (iii) as experts stray from this role of assisting the Court in matters beyond its expertise, i.e. by involvement in case preparation, the likelihood of indemnification for their accounts lessens. The Defendant argued that, the Plaintiffs having been successful at trial, this reference was not complicated, i.e. profits = sales less expenses. This calculation is the ordinary stuff of a patent lawyer's practice not comparable to, and uncomplicated by, for example, the composite factors of materials deemed infringing and non-infringing present in cases such as Wellcome Foundation Ltd. v. Apotex Inc., supra, which held something beyond routine accounting was necessary.
[16] The Defendant argued that the June 15, 1995 invoice addresses a time period long before any affidavit from the Defendant was forthcoming, and before the 1995 decisions requiring an election between damages and profits and modifying the trial judgment, all equating to very preliminary work questionable for forensic accountants, i.e. such as reviewing pleadings which was a lawyer's role at that stage. The Defendant should not have to pay for this expert's April 1995 tour of the Plaintiffs' plant. He was a supposed expert and, given that the Defendant's operations were the issue, the Plaintiffs' operations were irrelevant. The Orders dated May 15 and June 15, 2000 (after the election for profits) concerning production of documents and discovery demonstrate that this reference was still at a preliminary stage.
[17] The Defendant asserted that the February 2, 1998 invoice, which confirms production of the electronic sales data, demonstrates that the work reflected in the January 20, 1998 invoice, to begin document review and compilation of the allegedly important drug sale database, almost 2.5 years before the reference hearing, was irrelevant. The Defendant should not have to pay for the Plaintiffs' unnecessary testing of the information provided. The value of that work, in reducing some $1.2 million to $75,000.00 for expenses against sales, was questionable given that the net result approximated the Referee's award excluding interest. Mr. Timm said that the $1.2 million were improperly deducted, but he never characterized that amount as improper or inaccurate. The Defendant argued that the charges in this February 2, 1998 invoice for preparation of discovery questions for Mr. Fahner are representative of other objectionable work throughout the invoices by which Mr. Timm assumes a lawyer's role instead of that of a forensic accounting expert.
[18] The Defendant argued that the first five items in the April 9, 1998 invoice duplicate work in the preceding and following invoices concerning analysis of data. The balance of this invoice, for attendance at the Defendant's office to review documents and to arrange a tour of its plant, is an improper intrusion into a lawyer's area of responsibility and it effectively achieves full indemnity for this work which should be more properly restricted to the partial indemnification of counsel fees integral to party and party costs. The Defendant made the same submissions for the series of six invoices dated May 29, 1998 to March 22, 2000 inclusive and noted the accumulation of considerable billed dollars for the "continued" analysis of data irrelevant to what was ultimately agreed upon. The Defendant argued that the expunged information in the December 16, 1998 invoice cannot be tested, effectively making this a unilateral assessment of costs. The Defendant asserted that, although the assessment hearing has informal aspects, the Plaintiffs' counsel was effectively giving evidence (the explanation that the expunged information is irrelevant) which should be ignored as it undermines the basic legal principle that a party cannot rely on a document without giving an adverse party the opportunity to test its reliability.
[19] The Defendant asserted that the first two items in the June 19, 2000 invoice, to review its motion for discovery and discuss the related affidavit, are further examples of Mr. Timm's assumption of lawyer's work. The sixth item on page 2 of this invoice represents the start of a new database after large billed amounts to create the first one. The Defendant addressed the same general objections to the July 31, 2000 invoice ($43,977.80 for June 2 to July 26, 2000) and, in particular, singled out the fifth and twelfth items, to review discovery transcripts and to prepare questions for the Defendant's expert respectively, as more unacceptable assumptions of lawyer's work. The Defendant argued that nothing should be allowed for his updating of pre-judgment interest calculations based on the Referee's report and for his attendance given that Mr. Timm did not testify at the reference.
[20] The Defendant argued that some $300,000.00 for invoices, involving eleven different named individuals plus other unnamed people, equating to approximately 1,400 hours to focus on an irrelevant database, was unreasonable. As the purpose of the database was solely to test the integrity of the Defendant's information, its associated costs are not justifiable in party and party costs given that there were no problems identified. The Defendant asserted that the attachments to the Referee's report, i.e. essentially interest charts and schedules of its borrowing costs, demonstrate what was really relevant in a reference addressing only pre-judgment and post-judgment interest and the lag time for receivables. The Defendant argued that Mr. Timm's presence at the reference hearing cannot be justified on the basis of Mr. Fahner's proposed evidence because the Plaintiffs could not have foreseen the Referee's expressed concern for that evidence. The Referee did not state that he did not believe Mr. Fahner. Although accounting issues remained until just before the reference, and there are fundamental debates concerning the accounting methods in an election for profits, these were not important factors, if factors at all, for this reference in which costs for Mr. Timm were not warranted.
[21] The Defendant noted the Calculation of Estimated Net Profits as a gauge of how settlement might have occurred, i.e. the Defendant's suggestion of deductible expenses of some $1.2 million as opposed to the Plaintiffs' suggestion of nil dollars. Eventually, the parties agreed upon a token amount of $75,000.00, but there was no dispute concerning the reality of the $1.2 million overstated in importance by the Plaintiffs and being simply a proportionate calculation relative to sales information. The Defendant noted that the maximum recoverable counsel fees here would be approximately $18,000.00, but Mr. Timm's expert account claims 17 times that, which is unacceptable in a party and party bill. The Defendant argued that the liability issues at trial were complex, but not the reference issues. It is wrong to say the reference was a job for forensic accountants. Therefore, the recovery for Mr. Timm should be capped at approximately the assessable amount of counsel fees.
[22] The Defendant argued that mid-range for counsel fees is appropriate given that this was a relatively straightforward reference exercise even if there were many documents. The fact that it was reduced to one day to address interest supports this premise of simplicity.
[23] The Defendant argued that this phrase in the Federal Court Act, R.S.C. 1995, c. F-7, "the laws relating to interest on judgments...that are in force in a province apply to the judgments of the Court", does not confine itself to statutes or legislation in force, but rather to a more generic meaning of laws which, for this matter, would mean that both the Ontario legislative scheme and jurisprudence would apply, i.e. the relevant provision being the Ontario Courts of Justice Act, s. 129(1). The Defendant argued that Placentile v. Fabris, supra, held that, further to s. 129(1), it was not reasonable for interest to run on costs until the amount of those costs had been crystallized, in turn permitting the interest calculation. The Defendant argued that Dashchuk v. Canadian Fram Ltd., supra, although not specifically addressing costs, represented a similar situation in that there had been a delay between the date of the decision as to liability and the date of the decision crystallizing the amount of that liability. The Court decided that s. 129(1) and the definition of "date of the order" in s. 127(1) of the same Act meant that interest should run from the date that the parties knew the amount of money payable. The Defendant argued that the recent case of Roberts v. Morana, supra, considered s. 129(1) and ordered interest on costs to run from the date that an amount of costs was fixed.
[24] The Defendant argued that, in view of this jurisprudence addressing s. 129(1), interest on costs should not run until they are assessed or fixed. The Defendant cited the differing views of the parties concerning the recoverability of some $275,000.00 in Mr. Timm's account, about 94% of the bill of costs, as demonstrating that it cannot know what is "properly payable" until the date of my decision. Therefore, post-judgment interest should run only from that date based on rates in effect in the Ontario Gazette, i.e. at 6% for orders made up December 31, 2001, and at perhaps at a different rate if my decision is dated later than that. The Defendant asserted that if the Plaintiffs' position is accepted, interest at 7% should accrue only from December 31, 2000 because, the Referee's report having been filed December 1, 2000, it became a judgment of the Court on December 31, 2000, and not December 28 as suggested by the Plaintiffs.
[25] The Defendant noted that Wilson v. Canada, supra, addressed jurisprudence relating to the prior legislative scheme in this Court which did not provide for reference to provincial laws. However, Wilson v. Canada, supra, also addressed jurisprudence for which the current Federal Court Act, s. 37, was applicable and the Court seemed to assume that the effect of s. 129(1) in the Ontario Courts of Justice Act had not changed from the prior legislative scheme. That is, the Court does not appear to have been referred to the above-noted Ontario jurisprudence governing the appropriate interpretation of s. 129(1).
Assessment
[26] I first will address the case law, which was also before the Referee. In my opinion, and presuming appropriate evidence and submissions, the award of costs here by the Referee would have been sufficient to address the disbursement issues in Wellcome Foundation Ltd. v. Apotex Inc. supra. The Court's conclusions there, apart from those addressing directions to exceed the limits for counsel fees in the party and party Tariff, were within the discretion of an assessment officer, but they removed the need to duplicate evidence and submissions at assessment to establish general necessity. There still remained the substantive requirement to assess reasonableness of the charges and individual components of the services. That is, the absence in an award of costs of specific references to experts' accounts does not preclude their assessment. Certainly, it can be more efficient to resolve issues by way of directions, i.e. particularizing or clarifying details for the assessment, with the Trial Judge who has directly observed the role of experts.
[27] As well, I note the Court's recognition of the role of experts when not testifying or to respond to possible adverse evidence, but without suggesting that the associated costs were automatically payable. The Court confirmed the principle that a litigant's own costs (in-house) are not recoverable. The Court approved preparation time of counsel with the experts. I agree with the Court's observation that sheer volume does not necessarily indicate complexity. As well, in my opinion, the Court's statement at paragraph 11(2), addressing general principles relative to an award of costs, that "Tariff B of the Federal Court Rules, with five different levels of recovery expressed in columns, each with a range of cost units providing flexibility for an award is intended to reasonably reflect costs incurred in litigation, but not to defray actual costs in full in any given case ... award of costs in excess of Tariff B, as, for example on a solicitor-client basis, would be exceptional", is the proper perspective on the assertion in Sanmammas Compania Maritima S.A. v. Netuno (The), supra, that the current Rules contemplate a reasonable relationship to the actual costs of litigation and a tendency to recover the actual costs.
[28] The Court in Canadian Express Ltd. v. Blair, supra, appeared to hold that an expert's preparation time is not assessable. With respect, I cannot agree with a premise that excludes what would seem only prudent and essential to ensure the actual time at hearing is the most efficient use of the Court's time. As well, the absence there of any apparent narrowing of issues does not compare well to the circumstances before me.
[29] The conclusions in AlliedSignal Inc. v. Dupont Canada Inc., supra, were made in the context of an award of costs more particularized than the award here. The circumstances of the experts in Pharmacia Inc. v. Canada, supra, were different than here, but the caution in that case against excesses or luxuries in costs is relevant. I think that the conclusions of the Court in Apotex Inc. v. Syntex Pharmaceuticals International Ltd., supra, and in Apotex Inc. v. Wellcome Foundation Ltd., supra, concerning the necessity for multiple experts, more expensive experts as opposed to less expensive experts with comparable expertise, relevance of given experts and travel and living expenses, are all matters within my discretion as a function of the award of costs in this litigation and the evidence and submissions for and against. In so concluding, I note the relevance of applications for directions to assessment officers concerning the role of an expert with particular regard to the usefulness of the expert relative to the outcome of the litigation. I note that, in the former case and in Rothmans, Benson & Hedges, supra, the Court approved an expert in an advisory role. Given differing principles in other jurisprudence, I do have difficulty with some of the conclusions of the Court in the latter case, i.e. the denial of costs associated with experts' time in meeting with counsel and with experts not ultimately called (apart from those clearly superfluous). It is supervising counsel who set and adjust, as necessary, the parameters for the work of experts as a function of a professional legal opinion as to the technical assistance necessary for the Court. With respect, I am uncertain as to how the conclusions in this latter case could be said to account for those considerations.
[30] I agree with the Plaintiffs' cases asserting that the appropriate threshold for the test of necessity for a disbursement lies within the circumstances existing at the time the decision was made to incur it. The Court in Diversified Product Corp. v. Tye-Sil Corp. (1991) 32 C.P.R. (3d) 385, addressed burden of proof and observed at page 408 that "references to fix damages or accounting of profits are usually lengthy and technical". The case of Teledyne Industries Inc. et al. v. Lido Industrial Products Ltd., (1983) 68 C.P.R. (2d) 204, is useful for its examples of issues in an accounting of profits. The conclusions in Pardee Equipment Ltd. v. Canada, supra, affirm the principle, present in other jurisdictions, that the costs associated with witnesses prepared, but not ultimately called, are assessable if they can be shown to have been prudent and reasonable in the circumstances existing at the time the decision was made to incur them. The conclusions in Canada (Attorney General) v. Doucet, [1994] F.C.J. No. 1290 (T.O.), address solicitor-client costs which did not include charges for experts. However, they provide useful perspective on reasonable necessity in general.
[31] The conclusions in Merck & Co. v. Apotex Inc. (C.A.), [1995] 2 F.C. 723; Lubrizol Corp. v. Imperial Oil Ltd., (C.A.) (1996) 67 C.P.R. (3d) 1, and TRW Inc. v. Walbar of Canada Inc. et al., [1986] 10 C.P.R. (3d) 184, do not apply to the issues in the assessment of costs here. The comments in Dumont v. Canadian National Railway Co., [1980] F.C.J. No. 702, illustrate conclusions concerning the relevance of experts, made further to an application subsequent to reasons for judgment for special directions as to costs, also possible in an assessment of costs as a function of the circumstances of the litigation and of evidence and submissions led at assessment, i.e. in that case, the reasons for judgment detailed the difficulties with the experts' work. The Court's comments concerning the sufficiency of the accounts and the need to avoid charges inflated by a multiplicity of unnecessary theoretical approaches are relevant here.
[32] With respect, I think that the scheme of the Federal Court Rules and Tariff permit conclusions different from those in Canadian Express Ltd. v. Blair, supra, by which preparation costs of experts were denied. Such costs, occurring for no other reason than the existence of litigation, and being the charge of a disinterested third person to advance the litigation, as opposed to a litigant's personal (in-house) expenses, should not be precluded as a matter of principle, but be permitted to stand or fall on their circumstances. As well, with respect, although I appreciate the logic of the Court's assertion, addressing counsel fees, that there should be some reasonable relationship between costs for preparation time and hearing time, I do not think it appropriate to apply it absolutely as a gauge for costs because, for example, pre-hearing time may, in some circumstances, simplify or eliminate issues thereby reducing the costs for both sides at the hearing. Here, although the Defendant noted that the claimed amount for forensic accounting expertise represented about 94% of the bill of costs, said amount represents a less striking percentage when compared to solicitor-client costs or the offending sales (evidence for both being in the record).
[33] The Court had ordered (July 4, 1997) that the Plaintiffs elect between damages or an accounting of profits within 30 days of completion of the discovery of the Defendant's nominee (begun on January 14, 1998, for two days, and completed on September 22, 1998: the election date was March 3, 1999, according to the record). I think that the circumstances of a reference for accounting of profits may necessitate the assistance of a forensic accountant from the initial stages of the reference events throughout document discovery, examination for discovery, preparation of expert affidavits, analysis of adverse experts, evaluation of settlement offers and attendance at hearing to testify, advise and to evaluate. That does not mean that a successful litigant can circumvent the limitation of partial indemnity in party and party costs for the work of counsel by means of the expert assuming work properly falling with professional legal training attributable to lawyers. An example would be formulating and restating discovery questions, including supplemental questions, unless the nature of the questions falls outside ordinary professional legal expertise, i.e. forensic accounting. The circumstances of the litigation must be considered both in terms of the forensic accounting expertise allegedly required and outside of counsel's legal expertise and of the supervision of counsel to the extent that partial indemnity is not circumvented by the migration of responsibilities of counsel to the fuller indemnity of a disbursement.
[34] The Court sometimes particularizes instructions for the assessment of experts. The Referee had such a request here, but declined to do so. In my opinion, that leaves discretion unfettered except to the extent that reasonable necessity applies. The limitation of partial indemnity in party and party costs essentially addresses counsel fees (note for perspective that Rule 420 addresses the doubling of counsel fees to the exclusion of disbursements). In my experience, disbursements, whether in a party and party or a solicitor-client scenario, must meet the same threshold of reasonable necessity. Relative to experts generally, or even counsel fees in solicitor-client costs, I have been leery of weighing junior versus senior persons as a factor, one way or the other, because of the uncertainty of an appreciable difference between the total costs for either as a function of the junior person's lesser experience possibly requiring more hours at a lower rate versus the senior person's greater experience possibly requiring less hours at a higher rate, all to achieve comparable results. I conclude, based on the submissions and my reading of record, that the circumstances of this reference justified assessable costs for a broader use of this expert beyond the issues remaining at the instant the reference hearing opened. That is, the dollar implications for the reference, in the context of the election for an accounting of profits, were not restricted to interest calculations, but extended to the several hundred thousand dollars associated with raw materials, production costs, administration, etcetera, and to sales of several million dollars. Although an affidavit sworn October 20, 2000, by Mr. Fahner for use at the costs hearing before the Referee asserted that it was not necessary at any time to retain outside experts for analysis of the sales data, an affidavit sworn the same day on behalf of the Defendant exhibited correspondence from 1998 to the effect that analysis of the sales data might be subject to input from an expert. The record discloses extended and ultimately unsuccessful attempts to achieve an agreed statement of facts and issues.
[35] In addressing individual invoices below, I kept in mind the approach of the Ontario Court (General Division) in Roberts et al. v. Morana, supra, (cited by the Defendant for the issue of post-judgment interest) with particular regard to matters such as judges not attempting to "act as arbiters" (p. 346) of appropriate hourly rates for either trial counsel or experts; hourly rates bearing some reasonable relationship to prevailing market rates; the potential problems for supervising counsel in retaining and setting compensation for experts; expert evidence prepared, but not called because of concessions of information gleaned via cross-examination on that issue; compensation for experts to stand by; compensation for back-up opinions and consultations with law firms possessing specialized experience.
[36] For the June 15, 1995 invoice, I concede that work preliminary to the election was necessary and could have occurred some four years before, as here. I think that the meetings, one accompanied by a junior, with supervising counsel were necessary, but I am not convinced that the purposes of reading pleadings and Reasons for Judgment could not have been accomplished by means of a briefing note (the cost for which would have been capped by the principle of partial indemnity) from supervising counsel, to an expert surely experienced enough to handle ad hoc any surprises forthcoming from the Defendant's operations. For example, paragraph 17 of the Defendant's Motion Record, filed about three months before the reference hearing, attempted to put in issue the Plaintiffs' accounting practices relative to the position it might take on the Defendant's accounting practices. The Court noted the forcefulness of the Plaintiffs' position (I note, of course, it was a position expressed almost five years after the date of this invoice), that the purpose of this motion was irrelevant for this reference to determine profits earned by the Defendant and dismissed the motion. I understand Mr. Timm's rationale for a tour of the Plaintiffs' plant to gain an understanding of pharmaceutical production. However, given the assertion in his expert affidavit sworn for use at the reference that, with specific relevance for this litigation, he had been qualified as an expert and had testified at other proceedings involving loss of profits in patent infringement matters addressing the manufacture of pharmaceuticals, I can accept some limited hours for him, but none for his juniors. I allow $1,350.00.
[37] I have read the billing statements (those in the record) to the client for the services of counsel. For the January 20 and February 2, 1998 invoices, the record is not clear as to the extent of instructions or information from supervising counsel pacing this expert's work given the intermittent delivery of sales information with discrepancies and the uncertainty of timing for delivery of electronic information. That is, the latter invoice appears to indicate that the electronic sales data started to come from the Defendant in the period of January 1 - 31, 1998. The billing statement dated December 31, 1997 for counsel fees contains entries of 1.80 and 0.30 hours respectively for December 8 and 12, 1997 addressing electronic documents. If there were other issues concerning electronic material, but unrelated to the deliveries of information from the Defendant characterized by the Plaintiffs as problematic, their details are not clear from my reading of the record. I can accept some work by a junior in the preparation of discovery questions, but not to attend the discovery itself additional to an experienced lead expert and experienced counsel (the latter being subject to partial indemnity). I allow $49,000.00 and $36,000.00 respectively. I allow the April 9 and May 29, 1998 invoices as presented at $31,837.50 and $4,849.00 (these amounts, appearing in the bill of costs, differ from those noted above for these invoices because, as is the case for other invoices, the amounts in a chart in Mr. Timm's affidavit, in the invoices and in the bill of costs were different: I have used the amounts appearing in the bill of costs to calculate assessed costs) respectively. I doubt that these parties were achieving much middle ground at this point.
[38] I find that the issue of the expunged material in the December 16, 1998 invoice is irrelevant (as a point of practice, I note that limited explanations, by way of clarification, from counsel appearing at assessment are permissible, but not desirable as a normal substitute for affidavit evidence). The test is whether the information remaining in the invoice meets the threshold of reasonable necessity and justifies the amount claimed. I am not convinced that work such as "preparation of a table identifying documentation from Apotex which was still outstanding, where it was discussed in the discoveries ... what was discussed and why it was needed" could not, in whole or in part, have been done by counsel. I allow $17,500.00. For the December 18, 1998 invoice ($16,026.53 for September 16 to December 15, 1998), I accept the necessity for this expert's involvement with the concluding stages of discovery preliminary to the election. I allow $12,500.00. The reductions reflect my concern here, and elsewhere, for possible overlap with work within the legal expertise of counsel in turn subject to partial indemnity. I allow the September 27 and 28, 1999 invoices, addressing preparation of evidence, as presented at $3,646.93 and $9,337.00 respectively.
[39] For the March 22, 2000 invoice ($18,719.65 for September 16, 1999 to March 15, 2000), I think that the technical nature of this reference warranted a role for this expert relative to the Agreed Statement of Facts, but the extent, if any, of overlap of that work with the expertise of counsel is not clear. I have read the material in the record (except for documents sealed pursuant to protective Orders) from the date of the trial judgment. With particular regard to Mr. Timm's affidavit sworn November 3, 2000, I am not convinced that updating schedules of pre-judgment interest, which I distinguish from his essential role for financial analysis of issues such as those posed by the documents concerning alleged internal borrowing rates produced by the Defendant immediately prior to the reference hearing, was not work within the expertise of counsel. That is, Mr. Timm's expert affidavit prepared for the reference addressed pre-judgment interest rates in the context of compound versus simple interest in common business practice. I do not think, however, that interest rate schedules in legal proceedings are something beyond the Court's or counsel's technical grasp, unless there is compelling evidence otherwise, which I did not find here, so as to justify indemnification costs for a forensic accounting expert. The Defendant's expert affidavit addressed Mr. Timm's affidavit directly, but did not once mention pre-judgment interest prescribed for legal proceedings. The record discloses assertions by the Plaintiffs that pre-judgment legal issues concerning interest calculations alone were numerous. I continue to have concerns about overlap of functions. I allow $13,000.00.
[40] For the June 19, 2000 invoice, I have similar concerns relative to work falling within the expertise of counsel, i.e. obtaining or preparing schedules of bank lending and pre-judgment interest rates, regardless of their relevance for the matter of compound interest, and preparing and sending copies of cases to counsel. Given my observation above concerning the forcefulness of the Plaintiffs' position before the Court, for the Defendant's discovery motion, that the Plaintiffs' accounting methods were irrelevant in law, I am not convinced that this expert was essential for all aspects of said motion. I allow $10,500.00. For the July 31, 2000 invoice, I reject the Defendant's proposition which precludes indemnification for witnesses prepared, but not called. It presumes that the issues as initially defined undergo no adjustments and narrowing: a premise contrary to features in the scheme of the Rules such as discovery, case management, and interlocutory motions. The Referee, on November 28, 2000, at page 4 of his Second Supplement to Report of the Referee on a Reference for an Accounting of Profits, noted that, as "a practical matter, as any litigator is aware, offers of settlement have been tendered countless times literally as the parties enter the courtroom". That sentiment reflects the shifts of positions inherent to litigation. Generally, I find the work prudent and relevant for the reference preparation and attendance, but I continue to have difficulty with inclusion of pre-judgment interest calculations. I allow $35,500.00.
[41] I concluded at paragraph [7] in Bruce Starlight et al. v. Her Majesty the Queen, 2001 F.C.T. 999, that the same point in the ranges throughout the Tariff need not be used, as each item for the services of counsel is discrete and must be considered in its own circumstances. The purpose of this reference was relatively straightforward, i.e. isolate sales of a particular drug in a manner that permitted calculation of associated profits. However, getting to that point was not so straightforward. In assessing counsel fees, I kept in mind the nature and usefulness of supervising counsel's instructions to the forensic expert driving the process forward.
[42] The definition of assessment officer in Rule 2 and the constitution of the Court outlined in section 5 of the Federal Court Act preclude me from assuming jurisdiction under Rule 400(1) to address item 5 preparation for a motion (filed December 23, 1977) never heard. I disallow the 7 units claimed and the associated disbursements. For some counsel fee items, I allowed one unit less than the maximum available in the range. That included the fee for attendance at the reference hearing. However, I think the work in preparing for reference likely contributed to settlement of issues and I allowed the maximum in that area. For a few counsel fee items, I allowed the mid-range. For the attendance on discovery, I allowed the maximum on the basis of the difficulty faced by supervising counsel in controlling forensic accounting expertise. This assessment of costs was lengthy, but not particularly complex. There were important issues. I allow the maximum 6 units under item 26. I disallow the claim under item 27 for preparation of the bill of costs as item 26 includes that service. I allow the $279.30 for the expert's travel costs associated with attendance at discovery in January 1998. I disallow airfare of $495.36 and meals of $24.64 for attendance at discovery in February 1998 of the junior from the forensic accounting firm.
[43] The Second Supplement to Report of the Referee was dated and filed November 28 and December 1, 2000 respectively. Per Rule 164, it became a judgment on December 31, 2000. While I can appreciate the Defendant's position concerning interest running from the date of calculation, the authorities support the Plaintiffs. I noted the Referee's comments on variable interest rates by period. Interest on the assessed amount of costs shall run at 7% from December 31, 2000, to the date of collection. The bill of costs of the Plaintiffs, presented at $293,452.85, is assessed and allowed at $248,223.98.
(Sgd.) "Charles E. Stinson"
Assessment Officer
Vancouver, B.C.
August 7, 2002