Date: 20021003
Docket: T-2408-91
Neutral citation: 2002 FCT 1037
Ottawa, Ontario, this 3rd day of October, 2002.
Present: The Honourable Mr. Justice Simon Noël
BETWEEN:
MERCK & CO., INC. AND
MERCK FROSST CANADA INC.
Plaintiffs
and
APOTEX INC.
Defendant
REASONS FOR ORDER AND ORDER
[1] The defendant, Apotex Inc., submitted a Notice of Motion for:
1. A review, pursuant to Rule 414 of the Federal Court Rules, 1998, of a Certificate of Assessment dated August 7, 2002 (the "Certificate") issued by Charles E. Stinson, assessment officer of the Federal Court, awarding the plaintiffs' bill of costs; and
2. An Order setting aside the assessment officer's award and substituting it for an award of not more than 15% of the claimed expert witness fees, i.e. $40,000.00;
3. An Order setting aside the award of interest on costs and substituting therefore an award of interest from the date of the amended certificate of the assessment at the rate of 4% per annum;[1]
4. Such further and other relief as this Honourable Court may deem just.
THE FACTS
[2] At trial, the plaintiffs were successful concerning infringing sales of drugs by the defendant. The plaintiffs were ordered to elect between damages or an accounting of profits, out of which the account of profits was chosen. The accounting of profits resulted in an amount of $9,546,329.59 including interest to be paid by the defendant.
[3] The Referee, the Honourable John J. Urie, awarded costs of the reference to the plaintiffs "to be taxed upon a party and party basis pursuant to the Rules of the Court". Of the $293,452.85 bill of costs requested by the plaintiffs, the assessment officer determined that they were entitled to $248,223.98.
[4] The major issues in the plaintiffs' bill of costs were the necessity and amount of charges for services of the forensic accounting firm, Kroll Lindquist Avey, and its expert, Gary Timm, to analyse, advise counsel and prepare to give evidence concerning the defendants' figures for infringing sales, particularly the creation of a computerized database for the analysis of the reconciliation of the numbers as provided by Apotex.
[5] The record shows that the plaintiffs incurred approximately $400,000 in respect of solicitors' fees for the prosecution and the reference. The defendant takes issue with the amount of $248,223.98 awarded for reimbursement of disbursements paid to the accounting firm.
THE STANDARD OF REVIEW
[6] The standard of review set by the case law, dictates that a decision of an assessment officer is not to be interfered with unless the taxing officer committed an error of law, or the award on any item is so inappropriate or the decision so unreasonable so as to suggest an error in principle. As such, the court in reviewing the taxing officer's decision should be most cautious before interfering with the decision. [inter alia, see: I.B.M. Can. Ltd. v. Xerox of Can. Ltd., [1977] 1 F.C.181 (Fed. C.A.), Diversified Products Corp. v. Tye-Sil Corp. (1990), 34 C.P.R. (3d) 207 (F.C.T.D.), McCain Foods Ltd. v. C.M. McLean Ltd. (1980), 51 C.P.R. (2d) 23 (F.C.A.)].
THE ARGUMENTS OF THE DEFENDANT
[7] Apotex, firstly, alleges an error in law relating to the reimbursement allowed for the expert's fees for functions evidenced as legal work and litigation support. The defendant argues that the expert found himself in the adversarial fray, which should be exclusive to the lawyers. For example, the expert assisted in the preliminary stages of the proceedings, he helped counsel go through document discovery, as well as preparing and assisting in the conduct of examination for discovery, and assisting the lawyers in understanding the answers given by Apotex' controller. The defendant contends that the services described in the invoices demonstrated an approach to the litigation for which recovery is simply not available on a party-and-party assessment.
[8] The second argument presented by the defendant is that the taxation officer erred in principle by allowing costs recovery for the electronic database. It is submitted that the costs for the expert services relating to this database were neither reasonable nor necessary.
THE RESPONSE OF THE PLAINTIFFS
[9] The plaintiffs argued that there was no error in law or in principle in the assessment by the officer.
[10] It was submitted that the expert accountant on a reference assists counsel with the complicated and voluminous evidence and conducts an extensive forensic accounting analysis of the defendant's profits and deductions in order to give an expert opinion as to what expenses are deductible. The analyses are required from the preliminary stages of the accounting for profits reference, through document discovery, examination for discovery, preparation of an expert affidavit, review of the defendant's expert affidavit, evaluation of proposals from opposing counsel and attendance at the hearing.
[11] It was also alleged that the plaintiffs' expert acted as a professional would normally in such circumstances and that he did not assume any legal responsibilities or an adversarial role.
[12] The plaintiffs argued that since Apotex had not supplied an electronic database when so requested, an electronic database was created in order to analyze the records and documents from Apotex.
ANALYSIS AND CONCLUSION
[13] In determining the amount of expert witness disbursements that are appropriate, the Court has stated that expert advice on a reference to determine an accounting of profits is not only customary but essential to assist the Court arrive at a decision on a reference. Mr. Justice Errico in the British Columbia Supreme Court in the case of Hansan v. Clifford (1994), 59 C.P.R. (3d) 465 at 508, stated:
Counsel for the plaintiff has submitted that the evidence required to complete an accounting of profits is presently before me and mentioned a range that should be found. While I do have the financial statements of Group to April 30, 1993, without expert evidence to explain and analyze those statements I do not think I should attempt to determine the amount to be accounted for by the defendants.
[14] In the more recent case of Wellcome Foundation Ltd. v. Apotex Inc.(2001), F.C.T. 174, [2001] F.C.J. No. 333 (F.C.T.D.) (QL), at paragraph 10, Mr. Justice MacKay from the Federal Court stated:
In addition to these factors it is my opinion that full costs and expenses of plaintiffs' expert accountants should be recoverable as costs disbursed by plaintiffs. Without their work, reconstructing from Apotex' limited documents a reasonable historic representation of Apotex' operations, determination of the defendant's sales and profits attributable to infringing use of plaintiffs' patented process, would have been a very difficult task for the Court and the reference would have required extended hearings. Because of the necessity to review and revise the reports of accountants at least twice, after defendant's late production of documents, the expense incurred by plaintiffs for expert accountants was undoubtedly higher than would otherwise have been required. All of the plaintiffs' expenses for accounting service and advice of their experts is a disbursement that warrants recovery in an award of costs against the defendant.
[15] It is also important to note that assessing the amount of recoverable costs has to be done from the perspective of the time the expense is incurred, not in hindsight [Rothmans, Benson and Hedges v. Imperial Tobacco (1993), 50 C.P.R. (3rd) 59 at 65 (F.C.T.D.)].
[16] I do not agree with the argument that the expert found himself in the adversarial fray. An expert in such complex cases is normally involved at all stages because of his or her expertise and the communication with counsel. As an example, an expert often needs to be involved in the examination for discoveries to formulate the necessary questions to obtain information which the expert will need to prepare a report, and to evaluate and assist counsel understand the answers provided to the questions. Such an involvement does not make his role adversarial.
[17] I acknowledge that Apotex had disclosed sales documents, but it only provided the electronic data later. Consequently, I find that the plaintiffs reasonably created their own computer database to reconcile the sales documents without waiting for the defendant's electronic information. (see affidavit of Mr. Gary Timm dated November 3, 2000, paragraphs 10 and 11, Motion Record, Volume II, Tab 15)
[18] After reviewing the documentation, including the supporting affidavits, I consider that the work of the expert was clearly essential and pertinent to the plaintiffs' case. Without his involvement, the results would not have been as favourable for the plaintiffs. His services were clearly the subject for an assessment of cost.
[19] I also note that the defendant's counsel was unable to justify the 15% set as a requested limit for an award of the expert fees, other than submitting that the amount awarded would approximately be $40,000.
[20] It is important to indicate that the assessment officer's decision was meticulous. It analyzes each aspect of the claim and the invoices in conjunction with applicable case law. It accepts and rejects the charges for services with proper and relevant explanations.
[21] I have considered the defendant's arguments and I find that the defendant was unable to pinpoint any specific error in law or error in principle in the assessment officer's decision except for the general arguments mentioned above.
ORDER
THIS COURT ORDERS THAT:
1) This motion for review of the assessment officer's decision is dismissed without costs.
"Simon Noël"
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2408-91
STYLE OF CAUSE : MERCK & CO., AND MERCK FROSST
CANADA INC. and
APOTEX INC.
PLACE OF HEARING : Ottawa, Ontario by teleconference
DATE OF HEARING : September 24, 2002
APPEARANCES :
Lesley Caswell FOR THE PLAINTIFFS
James Mills
Nando De Luca FOR THE DEFENDANT
SOLICITORS OF RECORD :
Gowling Lafleur Henderson LLP
Barristers & Solicitors FOR THE PLAINTIFFS
Ottawa, Ontario
Goodmans FOR THE DEFENDENT
Barristers & Solicitors
Toronto, Ontario
[1]The Court was informed by letter dated September 23, 2002 that this part of the motion would not be argued.