Date:
20021008
Docket:
98-712-IT-G
BETWEEN:
GLAXO
SMITHKLINE INC.,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for order
Bowie
J.
[1]
On February 25, 2002, I made an Order under
Rule 99(2) requiring Dr. Barry Sherman to attend and
be examined for discovery by counsel for the Appellant. Dr.
Sherman is the chief executive of Apotex Inc., a firm that
manufactures generic drugs, and it was in that capacity the he
was to be examined. My Order was made on consent of both the
Respondent in the appeal and Dr. Sherman himself. The Order
specified 16 areas of questioning that counsel might pursue, and
it provided that Dr. Sherman might be asked to locate relevant
documents and to return to answer further questions arising from
those documents. It also provided that the examination was not to
exceed two periods of two days each.
[2]
Dr. Sherman did attend and was examined by
counsel for the Appellant for less than one full day. During the
course of that examination he was asked to produce certain
documents which one would expect to find in the records of Apotex
Inc. His responses to those requests may be summarized this way.
Either the documents no longer existed, or they were stored in
one of an unspecified number of storage facilities, unindexed, in
circumstances which would make it difficult, time consuming, and
therefore expensive to locate them. He therefore declined to
cause a search to be made for them. The motion before me now
arises out of that examination, and specifically Dr. Sherman's
refusal to search for the documents in question, while at the
same time unable to state unequivocally that they do not
exist.
[3]
The specific remedy which the Appellant's
Notice of Motion requests is:
... an order under
rules 86 and 99 and 110 directing Dr. Barry Sherman, as a
representative of Apotex Inc. ("Apotex") to provide an
affidavit confirming that the information and documentation
described below is no longer available or, alternatively, if the
information is available, to provide said information and
documentation and be examined thereon:
1.
All correspondence in Apotex's possession between Apotex and
ranitidine HC1 manufacturers or their agents involving
negotiations for the purchase of ranitidine HC1 during the years
1982 to 1995;
2.
The number of persons employed by Apotex in each of the research
and quality control departments from 1982 to 1993;
3.
All certificates of analysis (prepared by Apotex and its
suppliers) relating to batches of ranitidine HC1 acquired by
Apotex during the years 1989 to 1993;
4.
The wholesale prices for Apotex's ranitidine HC1 products for
each year 1987 to 1995;
5.
The value of the free goods and/or discounts provided by Apotex
in relation to the sale of ranitidine HC1 products for each year
1985 to 1995;
6.
All invoices for purchases of ranitidine HC1 by Apotex during
1989 to 1993;
7.
All purchase orders for purchases of ranitidine HCl by Apotex
from 1989 to 1993.
[4]
Notice of this motion was served on Dr.
Sherman. However, he chose not to appear, either personally or by
counsel, but instead to rely on the submissions to be made by
counsel for the Respondent. He did, however, arrange for Mr.
Gordon Fahner, C.M.A. to attend. Mr. Fahner is a senior employee
of Apotex, and has knowledge of the company's record-keeping.
He volunteered to give evidence and, with leave, was examined
before me. His evidence made a number of things clear. Apotex
Inc. cooperated with Revenue Canada at the time of the audit of
the Appellant. Mr. Fahner kept copies of all the documents
supplied to Revenue Canada in or near his own office. At least a
small part of the information which the Appellant seeks through
this motion is to be found in certain working papers relating to
the 1993 audit, and those are still in existence. As to some of
the records sought, it would require a search of certain storage
facilities maintained by Apotex to determine if they exist or
not. As to some others, only Dr. Sherman would know whether they
exist.
[5]
Before dealing with the specific issue before
me, it is necessary to give some context to the present motion.
The Appellant is part of a multi-national corporate group which
develops, manufactures and distributes pharmaceutical products.
Its appeals before this Court are from reassessments for income
tax for the taxation years 1990 to 1993 inclusive, and are based
on the premise that during those years the Appellant paid an
excessive price to a non-arms' length supplier for the
pharmaceutical product ranitidine to be used in the manufacture
of a prescription drug. During the same period, Apotex Inc.
purchased ranitidine for its own use in the manufacture of a
competing generic product. In assessing the Appellant, the
officers of Revenue Canada, as it then was, obtained information
from Apotex Inc. as to its purchases of ranitidine, and they
relied on that information in raising the assessments that are
under appeal. It is not disputed that the comparable uncontrolled
price (CUP) method of establishing an arm's length price is at
least an appropriate one, and indeed it may be the most
appropriate one to be used in this case. To apply that
method, or alternatively, to establish that it is inappropriate
in the circumstances of a particular case, requires having
complete and accurate information relating not only to the price
paid between an arm's length buyer and seller, but also to
related costs that may affect the price. It was not suggested
that the information which the Appellant seeks in the documents
that are the subject of this motion is not relevant, but simply
that it would be too onerous to require Apotex to either locate
them or establish with some degree of certainty that they do not
exist.
[6]
I do not propose to recite at length the
questions asked of Dr. Sherman and the answers given by him which
gave rise to this motion. Two examples will suffice to show his
reluctance to cooperate in this examination.
Q.
Forty chemists and technicians in its laboratories?
A.
Well, that would include quality control. So people involved in
research may have been a total of five to ten people.
Q.
Okay. Would you call research as the development of what we just
discussed, the analytical method, the bioavailability,
etc.?
A.
Yes
Q.
Whereas you would have 35 technicians and chemists involved in
quality control?
A.
I can't give you numbers today, but those might be in the
right range.
Q.
Can you undertake to confirm?
A.
No
Q.
Why not?
A.
It would be too difficult. There would be no records I could
readily access, if they exist at all.
...
Q.
Apotex was employing about 40 technicians in the lab at that
time. Does that sound about right?
A.
I don't know. I don't know what you mean by the lab. Do
you mean research or all labs?
...
Q.
You don't seem to have a lot of documents left at Apotex
dating back to those years. Is that about correct as a general
statement? What is the retention policy?
A.
There's no specific policy. People keep whatever they think
is - needs to be kept, and the company has grown enormously. A
lot of documents have been moved into storage. They're hard
to find. If there are any, I don't know what there would be
that would be relevant but ...
Q.
Did you keep Certificates of Analyses?
A.
No.
Q.
For ranitidine? No, for ranitidine?
A.
I wouldn't think so. Not going back that far. Not going back
ten years, no.
Q.
Can you confirm that, that you don't have the Certificates of
Analysis for the 1990 to - 1987 to '93 period?
A.
I don't know how one would confirm. They may be in boxes in
storage somewhere. We have had so many staff changes and so many
location changes. We have warehouses with different records in
them and no one even knows what's there, and we do have to
start throwing things out that are in storage that have not been
thrown out. There may be records in there, but I couldn't
really tell you.
Q.
As a policy, you normally keep Certificates of Analyses, I
suppose?
A.
No. Only as long as necessary to keep them. That means as long as
the product to which they relate has not expired. Once the
products have expired, there's no need to keep Certificates
of Analyses, no requirement to keep them.
Q.
Once what has expired?
A.
The product in which the raw materials are used.
Q.
In terms of shelf life?
A.
Yes. Expiry date.
[7]
The evidence before me on the motion makes it
quite clear that Apotex has been cooperative with the Revenue
Canada auditor, and with the Respondent in this appeal. Dr.
Sherman consented to the original Order that he be examined, but
the parts of the transcript that are before me demonstrate some
reluctance on his part to be of any more than minimal assistance
to the Appellant. He did not attend and oppose this motion, but
the Attorney General has done so enthusiastically for him. In my
view, the Appellant cannot have a fair trial without being
assured that it has access to all of the relevant records of
Apotex relating to the comparative pricing of ranitidine that
exist, as well as some assurance that any others that may have
existed at one time have been destroyed or are otherwise
irretrievably lost. It was demonstrated before me on the motion
that at least one piece of relevant information pertaining to the
number of technicians and chemists working for Apotex in quality
control is available, although Dr. Sherman, probably
inadvertently, indicated otherwise during the examination. Many
of his other answers lead me to believe that there may be other
relevant documents and information that he has been asked for
that have not been, but could be, produced by him. To grant a
remedy in precisely the terms sought by the Appellant in its
Notice of Motion would not be effective, as it would not ensure
that the records of Apotex Inc. are properly searched with a view
to locating all the relevant documents that exist. I am therefore
ordering that Dr. Sherman cause a search to be made of the
records of Apotex Inc. for the purpose of locating the documents
and information named in the Notice of Motion, following which he
is to furnish to counsel for the Appellant, copies of all the
documents located, and then re-attend to be examined as to the
efforts that have been made to find the documents and
information, and the results of those efforts, and in relation to
whatever documents and information are located by that search.
The examination is not to exceed two days, and will be conducted
at a time suitable to Dr. Sherman. Costs of this motion will be
in the cause.
Signed at
Ottawa, Canada, this 8th day of October, 2002.
J.T.C.C.
COURT FILE
NO.:
98-712(IT)G
STYLE OF
CAUSE:
Glaxo Smithkline Inc. and
Her Majesty
the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
September 19, 2001
REASONS FOR
ORDER
BY:
The Honourable Judge E.A. Bowie
DATE OF
ORDER:
October 8, 2002
APPEARANCES:
Counsel
for the Appellant: Sebastien Rheault and Zoltan Ambrus
Counsel
for the
Respondent:
Karen Janke
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Sebastien Rheault and Zoltan Ambrus
Firm:
Barsalou Lawson
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
98-712(IT)G
BETWEEN:
GLAXO SMITHKLINE
INC.,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Motion heard
on September 19, 2002, at Toronto, Ontario, by
the
Honourable Judge E.A. Bowie
Appearances
Counsel
for the Appellant: Sebastien Rheault and Zoltan Ambrus
Counsel
for the
Respondent:
Karen Janke
ORDER
UPON motion brought
by the Appellant, and upon reading the material filed and hearing
the evidence given before me by Mr. Gordon Fahner,
C.M.A.;
AND UPON hearing
counsel for the parties;
IT IS HEREBY ORDERED
THAT:
1.
Dr. Barry Sherman shall cause a search to be made of the records
of Apotex Inc. for the purpose of locating the following
documents and information;
i.
All correspondence in Apotex's possession between Apotex and
ranitidine HC1 manufacturers or their agents involving
negotiations for the purchase of ranitidine HC1 during the years
1982 to 1995;
ii.
The number of persons employed by Apotex in each of the research
and quality control departments from 1982 to 1993;
iii.
All certificates of analysis (prepared by Apotex and its
suppliers) relating to batches of ranitidine HC1 acquired by
Apotex during the years 1989 to 1993;
iv.
The wholesale prices for Apotex's ranitidine HC1 products for
each year 1987 to 1995;
v.
The value of the free goods and/or discounts provided by Apotex
in relation to the sale of ranitidine HC1 products for each year
1985 to 1995;
vi.
All invoices for purchases of ranitidine HC1 by Apotex during
1989 to 1993;
vii.
All purchase orders for purchases of ranitidine HCl by Apotex
from 1989 to 1993.
2.
Dr. Sherman shall forthwith furnish copies of any of these
documents that are located by that search to counsel for the
Appellant.
3.
Thereafter, at a time to be agreed upon, Dr. Barry Sherman shall
attend to be further examined for discovery as to the efforts
that have been made to locate the documents and information noted
in paragraph 1 above, as to the results of those efforts, and in
relation to such documents and information as have been located
by those efforts. The examination will take place at a time
suitable to Dr. Sherman, and is not to exceed two
days.
4.
The costs of this motion will be in the cause.
Signed at
Ottawa, Ontario, on the 8th day of October, 2002.
J.T.C.C.
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