Date: 20041110
Docket: T-470-02
Citation: 2004 FC 1582
BETWEEN:
AB HASSLE, ASTRAZENECA AB and
ASTRAZENECA CANADA INC.
Applicants
- and -
APOTEX INC. and
THE MINISTER OF HEALTH
Respondents
[1] Apotex Inc. ("Apotex") successfully resisted before me, reasons recorded 2004 FC 379, an application in court file T-470-02, initiated by AB Hassle et al. (the "applicants" or "Astra") under the Patented Medicines (Notice of Compliance) Regulations, (the "Regulations") after Apotex had alleged in its Notice of Allegation ("NOA") no claim in two use patents, (the "'668 and '762 patents") owned or licenced by the applicants would be infringed by it making or selling omeprazole tablets. The applicants' prohibition application was dismissed "with costs to Apotex".
[2] Apotex now moves the Court, pursuant to the relevant provisions in Part 11 of the Federal Court Rules, 1998 (the "Rules"), for an order awarding it lump sum costs on a solicitor-client scale in the amount of $92,477.35 plus full disbursements for a total of $96,665.49.
[3] In the alternative, Apotex seeks a lump sum award representing seventy-five percent (75%) of its solicitor-client fees ("costs") and, in the further alternative, seeks a lump sum award approximating fifty percent (50%) to solicitor-client fees billed to it.
[4] Apotex claims the applicants should be sanctioned by an award of solicitor-client costs principally because, according to it:
(1) the applicants made unsubstantiated allegations its NOA was untrue;
(2) the applicants attacked Dr. Sherman's credibility, an attack which it says is tantamount of an allegation of fraud in the proceeding; and
(3) for raising virtually the same issue, based on virtually the same weak evidence that was rejected by Justice O'Keefe in AB Hassle et al. v. Canada (Minister of National Health & Welfare et al.) (2001), 16 C.P.R. (4th) 21, sustained by the Federal Court of Appeal in its decision reported 2002 FCA 421.
[5] Applicants resist Apotex' cost motion on the following grounds:
(1) having made a cost award "with costs", this Court was without jurisdiction to award costs on a solicitor-client basis relying upon Manitoba Fisheries Ltd. v. The Queen, [1980] 1 F.C. 36, at page 41. Counsel for the applicants also relies upon Rule 407 which provides "Unless the Court orders otherwise, party-and-party costs shall be assessed in accordance with column III of the table to Tariff B". The applicants submit an award of solicitor-client costs may only be made on appeal from my order;
(2) absent a jurisdictional bar, examining the factors enumerated in Rule 400 and the case law, there is no basis to justify an award of solicitor-client costs in this case; and
(3) in particular, the applicants' allegations in this case do not equate to allegations of fraud or anything akin to fraud.
ANALYSIS
[6] It is useful to set out the provisions of Rule 400 and 403 of the Rules:
| 400. (1) The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid. Crown 400(2) (2) Costs may be awarded to or against the Crown. Factors in awarding costs 400(3) (3) In exercising its discretion under subsection (1), the Court may consider (a) the result of the proceeding;(b) the amounts claimed and the amounts recovered; (c) the importance and complexity of the issues; (d) the apportionment of liability; (e) any written offer to settle; (f) any offer to contribute made under rule 421; (g) the amount of work; (h) whether the public interest in having the proceeding litigated justifies a particular award of costs; (i) any conduct of a party that tended to shorten or unnecessarily lengthen the duration of the proceeding; (j) the failure by a party to admit anything that should have been admitted or to serve a request to admit; (k) whether any step in the proceeding was (i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution; (l) whether more than one set of costs should be allowed, where two or more parties were represented by different solicitors or were represented by the same solicitor but separated their defence unnecessarily; (m) whether two or more parties, represented by the same solicitor, initiated separate proceedings unnecessarily; (n) whether a party who was successful in an action exaggerated a claim, including a counterclaim or third party claim, to avoid the operation of rules 292 to 299; and (o) any other matter that it considers relevant. Tariff B
400(4) (4) The Court may fix all or part of any costs by reference to Tariff B and may award a lump sum in lieu of, or in addition to, any assessed costs.
Directions re assessment 400(5) (5) Where the Court orders that costs be assessed in accordance with Tariff B, the Court may direct that the assessment be performed under a specific column or combination of columns of the table to that Tariff.
Further discretion of Court 400(6) (6) Notwithstanding any other provision of these Rules, the Court may (a) award or refuse costs in respect of a particular issue or step in a proceeding; (b) award assessed costs or a percentage of assessed costs up to and including a specified step in a proceeding; (c) award all or part of costs on a solicitor-and-client basis; or (d) award costs against a successful party. Award and payment of costs 400(7) (7) Costs shall be awarded to the party who is entitled to receive the costs and not to the party's solicitor, but they may be paid to the party's solicitor in trust. SOR/2002-417, s. 25(F).
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403. (1) A party may request that directions be given to the assessment officer respecting any matter referred to in rule 400, (a) by serving and filing a notice of motion within 30 days after judgment has been pronounced; or (b) in a motion for judgment under subsection 394(2). Motion after judgment 403(2) (2) A motion may be brought under paragraph (1)(a) whether or not the judgment included an order concerning costs. Same judge or prothonotary 403(3) (3) A motion under paragraph (1)(a) shall be brought before the judge or prothonotary who signed the judgment. [emphasis mine]
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400. (1) La Cour a le pouvoir discrétionnaire de déterminer le montant des dépens, de les répartir et de désigner les personnes qui doivent les payer. La Couronne 400(2) (2) Les dépens peuvent être adjugés à la Couronne ou contre elle. Facteurs à prendre en compte 400(3) (3) Dans l'exercice de son pouvoir discrétionnaire en application du paragraphe (1), la Cour peut tenir compte de l'un ou l'autre des facteurs suivants : a) le résultat de l'instance; b) les sommes réclamées et les sommes recouvrées; c) l'importance et la complexité des questions en litige; d) le partage de la responsabilité; e) toute offre écrite de règlement; f) toute offre de contribution faite en vertu de la règle 421; g) la charge de travail; h) le fait que l'intérêt public dans la résolution judiciaire de l'instance justifie une adjudication particulière des dépens; i) la conduite d'une partie qui a eu pour effet d'abréger ou de prolonger inutilement la durée de l'instance; j) le défaut de la part d'une partie de signifier une demande visée à la règle 255 ou de reconnaître ce qui aurait dû être admis; k) la question de savoir si une mesure prise au cours de l'instance, selon le cas : (i) était inappropriée, vexatoire ou inutile, (ii) a été entreprise de manière négligente, par erreur ou avec trop de circonspection; l) la question de savoir si plus d'un mémoire de dépens devrait être accordé lorsque deux ou plusieurs parties sont représentées par différents avocats ou lorsque, étant représentées par le même avocat, elles ont scindé inutilement leur défense; m) la question de savoir si deux ou plusieurs parties représentées par le même avocat ont engagé inutilement des instances distinctes; n) la question de savoir si la partie qui a eu gain de cause dans une action a exagéré le montant de sa réclamation, notamment celle indiquée dans la demande reconventionnelle ou la mise en cause, pour éviter l'application des règles 292 à 299; o) toute autre question qu'elle juge pertinente. Tarif B 400(4) (4) La Cour peut fixer tout ou partie des dépens en se reportant au tarif B et adjuger une somme globale au lieu ou en sus des dépens taxés.
Directives de la Cour 400(5) (5) Dans le cas où la Cour ordonne que les dépens soient taxés conformément au tarif B, elle peut donner des directives prescrivant que la taxation soit faite selon une colonne déterminée ou une combinaison de colonnes du tableau de ce tarif.
Autres pouvoirs discrétionnaires de la Cour 400(6) (6) Malgré toute autre disposition des présentes règles, la Cour peut : a) adjuger ou refuser d'adjuger les dépens à l'égard d'une question litigieuse ou d'une procédure particulières; b) adjuger l'ensemble ou un pourcentage des dépens taxés, jusqu'à une étape précise de l'instance; c) adjuger tout ou partie des dépens sur une base avocat-client; d) condamner aux dépens la partie qui obtient gain de cause. Adjudication et paiement des dépens 400(7) (7) Les dépens sont adjugés à la partie qui y a droit et non à son avocat, mais ils peuvent être payés en fiducie à celui-ci. DORS/2002-417, art. 25(F). . . .
403. (1) Une partie peut demander que des directives soient données à l'officier taxateur au sujet des questions visées à la règle 400 : a) soit en signifiant et en déposant un avis de requête dans les 30 jours suivant le prononcé du jugement; b) soit par voie de requête au moment de la présentation de la requête pour jugement selon le paragraphe 394(2). Précisions 403(2) (2) La requête visée à l'alinéa (1)a) peut être présentée que le jugement comporte ou non une ordonnance sur les dépens. Présentation de la requête 403(3) (3) La requête visée à l'alinéa (1)a) est présentée au juge ou au protonotaire qui a signé le jugement. |
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(a) Issue No. 1 - Jurisdiction
[7] I do not accept the applicants' position on jurisdiction. Notwithstanding I dismissed the applicants' application "with costs", Apotex is not barred in its present motion for a lump sum award on a solicitor-client basis. I do so for a number of reasons noting the case relied upon by the applicants, the Manitoba Fisheries case, supra, has no application because it dealt with a case where the Supreme Court of Canada ruled party-party costs throughout, i.e. in the proceedings below.
[8] First, I rely on Justice Sharlow's decision in Maytag Corp. v. Whirlpool Corp., 2001 FCA 250. In that case, Whirlpool sought directions for a lump sum award of costs in the Maytag appeal in lieu of party-party costs already granted, or alternatively, directions on one of a number of bases that would result in costs in excess of column III of Tariff B. Justice Sharlow wrote the following at paragraph 7:
¶ 7 Maytag argues that if costs are awarded in a judgment, a motion for directions for a fixed amount of costs cannot be entertained unless the criteria for reconsideration of the judgment, as set out in Rule 397, are satisfied. I cannot accept this argument because it gives no effect to Rule 403(2), which specifically permits a motion for directions with respect to costs even if costs have been awarded in a judgment. Rule 403(2) overrides the more general requirements for reconsideration of a judgment in Rule 397. [emphasis mine]
[9] Second, I rely upon Justice Rothstein's decision in Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc., [2002] 22 C.P.R. (4th) 177 ("Consorzio"). That case involved a motion for increased costs under Rule 403 in which the respondent asked the Court for a lump sum award equalling approximately fifty percent (50%) of solicitor-client costs. Referring to Rule 403(2), Justice Rothstein was of the view a motion under Rule 403 "must be considered a statutorily sanctioned procedure for the amendment or variation of a judgment" and nothing in that Rule precluded a judge of the Trial Division or a panel of the Appeal Division "from directing the assessment officer to assess increased costs on the basis of a lump sum award". He interpreted Rule 403 as permitting "the panel of the Appeal Division to make a lump sum award of costs as is requested in this motion and direct the assessment officer to assess costs on that basis" (see paragraphs 3 and 4 of Justice Rothstein's reasons).
[10] Justice Rothstein was satisfied, in the circumstances of the case, the respondent should be awarded increased costs. He relied upon the following factors:
(1) the case involved an intellectual property matter with sophisticated clients;
(2) there were numerous issues raised involving complex facts and expert evidence; and
(3) the amount of work required.
[11] He added the following at paragraphs 7, 8, 9 and 10 of his reasons:
¶ 7 The increased costs to be awarded are party-party costs. They do not indemnify the successful party for its solicitor-client costs and they are not intended to punish the unsuccessful party for inappropriate conduct.
¶ 8 An award of party-party costs is not an exercise in exact science. It is only an estimate of the amount the Court considers appropriate as a contribution towards the successful party's solicitor-client costs (or, in unusual circumstances, the unsuccessful party's solicitor-client costs). Under Rule 407, where the parties do not seek increased costs, costs will be assessed in accordance with Column III of the table to Tariff B. Even where increased costs are sought, the Court, in its discretion, may find that costs according to Column III provide appropriate party-party compensation.
¶ 9 However, the objective is to award an appropriate contribution towards solicitor-client costs, not rigid adherence to Column III of the table to Tariff B which is, itself, arbitrary. Rule 400(1) makes it clear that the first principle in the adjudication of costs is that the Court has "full discretionary power" as to the amount of costs. In exercising its discretion, the Court may fix the costs by reference to Tariff B or may depart from it. Column III of Tariff B is a default provision. It is only when the Court does not make a specific order otherwise that costs will be assessed in accordance with Column III of Tariff B.
¶ 10 The Court, therefore, does have discretion to depart from the Tariff, especially where it considers an award of costs according to the Tariff to be unsatisfactory. Further, the amount of solicitor-client costs, while not determinative of an appropriate party-party contribution, may be taken into account when the Court considers it appropriate to do so. Discretion should be prudently exercised. However, it must be borne in mind that the award of costs is a matter of judgment as to what is appropriate and not an accounting exercise. [emphasis mine]
[12] Justice Rothstein awarded the respondent party-party costs of $25,000 inclusive of fees and the costs of the motion and directed the assessment officer to assess costs accordingly. Justice Décary dissented. He would have awarded costs on the appeal in the form of a lump sum award of $10,000.
[13] Third, I rely upon Justice Blais' decision in Trade Arbed Inc. v. Toles Ltd. et al. (2000), 196 F.T.R. 299. Justice Blais, relying on subsection 403(2) and Rule 400, saw no jurisdictional bar to a cost award on a solicitor-client basis after the prothonotary had dismissed a particular motion "with costs". I also rely on Justice Gauthier's recent decision in AstraZeneca Canada Inc. v. Apotex Inc., 2004 FC 1075, and in particular, what she wrote at paragraph 10:
¶ 10 The Court has full discretion to depart from Tariff B, however, such discretion must be used prudently. Although actual solicitor and client fees may be taken into consideration when appropriate, the Tariff B should also always be considered.
[14] After the hearing of this matter, counsel for the applicants provided me with a copy of Justice Layden-Stevenson's costs order in AB Hassle et al. v. Genpharm Inc. et al., 2004 FC 892, which involved four patents and with respect to costs, where she ordered Astra and Takeda were entitled to their costs throughout against Genpharm, "such costs to be taxed on the ordinary scale". In that case, the applicants sought, pursuant to Rule 403, directions to the assessment officer regarding the assessment of costs and, specifically, costs be assessed in accordance with the highest end of column V of Tariff B.
[15] As is clear from Justice Layden-Stevenson's cost order, the case before her is of no assistance to the applicants in this case. Justice Layden-Stevenson specifically reasoned that her order did specify the scale - the ordinary scale - at column III of Tariff B. She stated the primary issue before her was whether Rule 403 permitted her to direct the assessment of costs on an increased scale. She was of the view it was not open to her to provide the direction requested. She distinguished Consorzio, supra, as a case where the judgment did not include an order for costs. She recognized that Rule 403 was available in circumstances where the Court had awarded "costs" without specification. That was not the case before her, she said. That is the case before me.
(b) Issues Nos. 2 and 3 - Are solicitor-client costs justified in this case?
[16] The applicants justify solicitor-client costs on two bases: first, on the factors enumerated in Rule 400 and second, on the attack made by the applicants on Dr. Sherman's credibility and on Apotex' honesty.
[17] A consideration of the factors enumerated in Rule 400 do not justify, in my view, in this case, any increase beyond what is provided for in Tariff B for the following reasons.
[18] First, on complexity, there were only two issues to determine and they were whether Apotex' NOA was defective and whether either the '688 or '762 patents would be infringed by patient use. There were only four affidavits filed in the proceeding; one on behalf of Apotex and three on behalf of Astrazeneca, none of which could be characterized as providing expert evidence. This case was not complex.
[19] Second, Apotex did not emphasize the amount of work performed as a factor militating for increased costs.
[20] Third, there were no amounts claimed and amounts recovered. Apotex recognized Astrazeneca did not seek to recover any particular amount but states that rather it sought to prevent Apotex from entering the marketplace with a competing pharmaceutical product for the life of the '668 and '762 patents and argued in order to gauge the amount effectively claimed in a proceeding brought under the Regulations, one must consider the value of the marketplace being fought over. I do not find it necessary to resolve this point. I accept counsel for the applicants' point there is no evidence before me on what value should be placed on this marketplace. I reject as improper Apotex' attempt to rely upon the affidavit of Michael Cloutier filed in another proceeding as to the value of that marketplace and, in any event, Apotex has not satisfied me it could enter that marketplace given the prohibition orders issued by Justices Campbell and Kelen in other proceedings related to omeprazole tablets or capsules.
[21] Apotex argues the applicants' conduct tended to unnecessarily lengthen the proceedings conflating that factor with factor 400(3)(j), namely the failure by the applicants to admit anything that should have been admitted and with factor 400(3)(k) whether the proceedings were unnecessary. Apotex submits this application should never have been brought on for hearing in the face of Justice O'Keefe's decision in AB Hassle, supra, sustained by the Federal Court of Appeal. In my view, Apotex is hard put to sustain this argument because Apotex had brought a motion for summary dismissal of this proceeding pursuant to paragraph 6(5)(b) of the Rules but withdrew its motion on July 23, 2002, an indication, according to the applicants, that the application had merit. Even if Apotex was correct on the issue of merit, the Federal Court of Appeal has ruled in Roberts v. Canada, [1999] F.C.J. No. 1529, the fact one party's claim has little merit or was "very weak" is no basis for awarding solicitor-client costs.
[22] In any event, I cannot agree with Apotex the applicants' case was without merit. As is amply demonstrated in the recent cases before this Court and the Court of Appeal on patient infringement, whether the application of that doctrine permits reaching back to the manufacturer depends upon the facts of each particular case and the evidence led. Indeed, it was on the evidence in the record Justice Sexton in AB Hassle, supra, distinguished the case of Procter and Gamble Pharmaceuticals Canada Inc. v. Canada (Minister of Health), 2002 FCA 290. As I noted in my reasons, the evidence led before me was different than in the cases I had been referred to. I had to deal with those specific facts and while ultimately I did not agree with the applicants, their case warranted careful consideration. (See, paragraphs 123 to 140 of my reasons for order.)
[23] Leaving aside for the moment the second aspect to Apotex' justification for solicitor-client costs, I am of the view that, apart from that remaining issue which I will next address, Apotex has not satisfied me that any increase above Tariff B, whether it be full or partial solicitor-client costs sought, were justified.
[24] On this point, I close by stating Apotex offered no evidence that in the ordinary course a party-and-party award should reimburse the successful party for approximately fifty percent (50%) of its solicitor-client fees plus all disbursements reasonably incurred.
[25] The last point to be decided is whether the applicants should be sanctioned with solicitor-client costs because of their attack on Dr. Sherman's credibility and on the truthfulness of Apotex' NOA.
[26] The law is clear that an award of solicitor-client costs is an exception and that such costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties (see, for example, Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817 and Apotex Inc. v. Canada (Minister of National Health and Welfare) (2000), 9 C.P.R. (4th) 289 (F.C.A.). As a subset of this principle, courts will sanction with solicitor-client costs a party who has made allegations of fraudulent or other improper conduct, asserted them through to and including trial without being able to substantiate them (see for example 131843 Canada Inc. v. Double "R" (Toronto) Ltd. (1992), 7 C.P.C. (3d) 15 and Murano v. Bank of Montreal (1995), 41 C.P.C. (3d) 143.)
[27] Apotex submits that on several occasions throughout the course of this application, Astra made entirely baseless attacks on the credibility of Dr. Sherman in an effort to discredit him personally and to discredit the evidence of Apotex generally. Apotex points to the applicants' memorandum of fact and law where Astra argued Dr. Sherman was not credible, he was argumentative, evasive and non-responsive, concluding he was not a credible witness.
[28] Apotex says the applicants made these assertions that Apotex' omeprazole product would, despite Apotex' undertakings to the contrary, be sold or used by Apotex in a manner that would infringe the '668 and '762 patents and that, even if Apotex itself did not use the product in an infringing fashion, Apotex would be in a position to influence third parties to do so. Apotex states this argument effectively amounts to an accusation that Apotex would not only conduct itself carefully enough to ensure that infringement by third parties would not take place but that Apotex would itself potentially promote the use of its product for unapproved use and that these allegations suggest Apotex was untruthful in its allegations or Apotex would deliberately or carelessly be lax in the manner in which it conducted itself, allegations which are analogous to accusations of fraud.
[29] My view of the proceedings differs from that of Apotex. The applicants did not, in my view, accuse Apotex of putting forward a fraudulent NOA. Its case was one related to third party infringement and, while it attempted to link patient infringement to actions which Apotex might potentially take in influencing the marketplace such as through its product monograph, such intentions or actions cannot be said to reach the level of an accusation of fraud aimed at Apotex or Dr. Sherman. Furthermore, in the context of this case, the applicants had the right to test Apotex' and Dr. Sherman's credibility without fear of a cost sanction (see, Toronto-Dominion Bank v. Grande Caledon Developments Inc. (1998), 39 O.R. (3d) 93).
[30] I would have been prepared to make a lump sum award on a party-party basis to Apotex had Apotex provided me with appropriate tools to do so. It did not provide me with a draft bill of costs. In my view, it was essential that I be provided with such draft bill of costs. I refer to the Federal Court of Appeal's decision in Her Majesty The Queen et al. v. Lagiorgia (1987), 87 D.T.C. 5378, where Justice Hugessen, then a member of the Federal Court of Appeal, stated:
One final comment in closing. On an application such as this, where a party is seeking a lump sum for costs in lieu of the amounts provided by the tariff, it would seem to me that counsel would normally have the obligation of showing the Court what such latter amounts might be expected to be. The production of a pro forma bill of costs would be a proper way of doing this. In the absence of any such material, the Court is left to determine as best it can and on its own the amounts which could be claimed under the tariff. That is not something the Court should have to do.
[31] However, I am prepared to direct that Apotex' costs be taxed at the upper level of column III in Tariff B. This result is consistent with the cost awards made by my colleagues Justices Layden-Stevenson and Gauthier in the cases previously cited which dealt with similar issues.
[32] For all of these reasons, Apotex' motion for costs is dismissed with costs.
"François Lemieux"
J U D G E
OTTAWA, ONTARIO
NOVEMBER 10, 2004
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-470-02
STYLE OF CAUSE: AB HASSLE et al. v. APOTEX INC. et al.
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: JUNE 11, 2004
REASONS FOR COSTS ORDER BY THE HONOURABLE JUSTICE LEMIEUX
APPEARANCES:
Gunars A. Gaikis
FOR APPLICANTS
Andrew Brodkin
FOR RESPONDENT
SOLICITORS OF RECORD:
Smart & Biggar
Toronto, Ontario
FOR APPLICANTS
Goodmans LLP
Toronto, Ontario
FOR RESPONDENT