Date: 20060228
Docket: T-1235-02
Citation: 2006 FC 262
Ottawa, Ontario, February 28, 2006
PRESENT: The Honourable Mr. Justice de Montigny
BETWEEN:
APOTEX INC.
Plaintiff
and
PFIZER CANADA INC., PFIZER CORPORATION
and HER MAJESTY THE QUEEN
Defendants
REASONS FOR ORDER AND ORDER
[1] This is a motion by Pfizer Canada Inc. and Pfizer Corporation (collectively referred to as "Pfizer") to set aside the Order of Prothonotary Milczynski dated January 30, 2006 wherein she granted, in part, Apotex's motion to compel certain answers refused or taken under advisement at the examinations for discovery of the Defendants' representatives.
[2] The underlying litigation can be summarized briefly. Apotex commenced an action on August 1, 2002, claiming for damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations (Regulations). More particularly, the action claims damages against Her Majesty the Queen by reason of the unlawful refusal of the Minister of Health to issue a Notice of Compliance to Apotex for its drug product Apo-Fluconazole tablets, for the period from January 30, 1998 to October 9, 1998. The action further claims damages against Pfizer by reason of Pfizer's initiation of a specific prohibition proceeding pursuant to section 6 of the Regulations, as well as an accounting of profits and disgorgement of revenues which accrued to Pfizer by reason of its commencement of the prohibition proceeding. The period for which damages are claimed against Pfizer is from August 11, 1995, the date upon which the prohibition proceeding was commenced, to January 30, 1998, the date upon which the proceeding was dismissed.
[3] Of crucial importance to understand this motion is the fact that Apotex is seeking damages not only from the first person, namely Pfizer Canada, but also from Pfizer Corporation, which is the owner of the patent at issue in the underlying prohibition proceeding. Pfizer Corporation was added as a party to the prohibition proceeding pursuant to section 6(4) of the Regulations.
[4] The basis for Apotex' claim against Pfizer Corporation is that it exercises complete control over the first person, Pfizer Canada, such as to make Pfizer Corporation a "first person" as well. The particulars of Apotex allegation of complete control are set out in paragraph 6 of the Statement of Claim:
Pfizer [Corporation] exercises complete control over the operations of Pfizer Canada including:
(a) whether and when Pfizer Canada will apply for and obtain an NOC in respect of a particular drug product and, if so, what the contents of the New Drug Submission ("NDS") will comprise;
(b) whether and when Pfizer Canada will be permitted to list Pfizer [Corporation] patents on a patent list submitted to the Minister by Pfizer Canada ;
(c) whether, upon receipt of a Notice of Allegation, Pfizer Canada will seek a prohibition order pursuant to the Patent Regulations;
(d) how such a proceeding will be prosecuted, including whether, at any point, it will be discontinued or other wise abandoned;
(e) how Pfizer Canada markets and sells its drug products; and
(f) how much Pfizer Canada pays to Pfizer [Corporation] for product to be sold by Pfizer Canada, and thus how much, if any, of the consolidated profit is recorded as profit of Pfizer Canada.
[5] The first round of examinations for discovery of the parties took place during the summer of 2005. In response to certain questions refused and taken under advisement but not answered during the examinations for discovery of the Defendants' representatives, on or about October 31, 2005 Apotex served a Notice of Motion seeking to compel answers to those questions refused.
[6] By Order dated January 30, 2006, Prothonotary Milczynski allowed, in part, Apotex's Motion and directed that numerous questions refused be answered by the Defendants Pfizer. Broadly speaking, these questions fall into two categories: a) source and supply of Pfizer Canada's Fluconazole; b) the structure of the Pfizer group and who makes the decisions with respect to the marketing, selling and pricing of Fluconazole.
[7] There is no doubt that discretionary and interlocutory decisions of prothonotaries ought not to be disturbed and reviewed de novo unless the questions raised in the motion are vital to the final issues of the case, or the order is clearly wrong in the sense that the exercise of discretion by the Prothonotary was based upon a wrong principle or upon a misapprehension of the facts: Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425, at p. 462-3 (F.C.A.); Merck & Co. v. Apotex Inc., (2003), 30 C.P.R. (4th) 40, at p. 53; Z.I. Pompey Industrie v. Ecu-Line N.V., [2003] 1 S.C.R. 450, at p. 461.
[8] In the present case, Pfizer has argued that the Prothonotary erred by failing to apply the correct principles of law. More specifically, Pfizer submitted that the Prothonotary erred in law by failing to follow the principle that relevance must be determined by the pleadings. Since the Prothonotary has not given reasons for her order, I must assume that she has adopted Apotex's arguments and proceed to review her decision on that basis.
[9] There is no dispute between the parties that in order to assess the relevance of a question, one must look at the pleadings. The purpose of discovery, after all, is to secure admissions with a view to advance the case of the parties. As Martineau J. stated in Apotex Inc. v. Merck & Co. et al. (2004), 33 C.P.R.(4th) 387 (F.C.) (QL), at par. 15 (affirmed (2005), 38 C.P.R.(4th) 289 (F.C.A.)):
The purpose of discovery, whether oral or by production of documents, is to obtain admissions to facilitate proof of all the matters which are properly in issue between the parties. The question of whether a document "relates" to an issue in the case depends upon a reasonable interpretation of the pleadings. In this regard, the party demanding a document must demonstrate that the information in the document may, either directly or indirectly, advance its own case or damage the case of its opponent...
[10] In Hayden Manufacturing Co. v. Canplas Industries Ltd. (1998), 83 C.P.R.(3d) 19 (F.C.), this Court stated that there must be limitations placed on discovery given the resources of the courts and concern over costs, congestion and delay. The Court referred to the earlier case of Reading & Bates Construction Co. v. Baker Energy Resources Corp. (1988), 25 F.T.R. 226 (F.C.) and identified six principles which place limitations on the scope of discovery. It is worth setting out these principles as presented by Prothonotary Hargrave in Hayden, above:
1. The documents to which parties are entitled are those which are relevant. Relevance is a matter of law, not discretion. The test to apply, in determining relevance, is whether information obtained may directly or indirectly advance one party's case, or damage that of the other party.
2. Questions which are too general, or which seek an opinion, or are outside the scope of a proceeding, need not be answered.
3. Discovery is confined to matters relevant to the facts which have been pleaded, rather than to facts which a party proposes to prove and thus relevance, in the context of discovery, limits questions to those that may prove or disprove allegations of fact which have not been admitted.
4. A court should not compel answers which, although perhaps relevant, are not likely to advance the party's legal position.
5. Before requiring an answer to a discovery question, the court should weigh the probability of the usefulness of the answer against the time, trouble, expense and difficulty which might be involved in obtaining it: "One must look at what is reasonable and fair under the circumstances..." (loc. cit.)
6. Fishing expeditions undertaken through far-reaching, vague or irrelevant questions are to be discouraged.
[11] It is with these principles in mind that I must now determine whether the Prothonotary erred in accepting Apotex's submissions and in ordering the parties' representatives to provide answers to a certain number of questions. Apotex has pleaded that Pfizer Corporation exercises complete control over the operations of Pfizer Canada to a level that Pfizer Corporation should, with Pfizer Canada, be held liable to Apotex pursuant to section 8 of the Regulations. Essentially, Apotex has alleged that the nature of the relationship between Pfizer Corporation and Pfizer Canada was such that Pfizer Corporation, in addition to Pfizer Canada, should be considered a "first person" pursuant to the Regulations and thus liable to Apotex. Apotex has taken the position that its right to claim profits from the Canadian corporation (Pfizer Canada) would be rendered meaningless unless Apotex were entitled to pursue a controlling affiliated entity (Pfizer Corporation).
[12] These allegations are evidenced by 6 and 48 of the Statement of Claim filed by Apotex, which read as follow:
6. Pfizer [Corporation] exercises complete control over the operations of Pfizer Canada including:
(a) whether and when Pfizer Canada will apply for and obtain an NOC in respect of a particular drug product and, if so, what the contents of the New Drug Submissions ("NDS") will comprise;
(b) whether and when Pfizer Canada will be permitted to list Pfizer [Corporation] patents on a patent list submitted to the Minister by Pfizer Canada;
(c) whether, upon receipt of a Notice of Allegation, Pfizer Canada will seek a Prohibition Order pursuant to the Patent Regulations;
(d) how such a proceeding will be prosecuted, including whether, at any point, it will be discontinued or otherwise abandoned;
(e) how Pfizer Canada markets and sells its drug products; and
(f) how much Pfizer Canada pays to Pfizer [Corporation] for product to be sold by Pfizer Canada, and thus how much, if any, of the consolidated profit is recorded as profit of Pfizer Canada.
***
48. Pursuant to section 8 of the Patent Regulations, Pfizer is liable to Apotex by way of damages or profit. The actions of Pfizer [Corporation] and Pfizer Canada were all part of a common enterprise carried out by Pfizer Canada pursuant to the direction and on behalf of Pfizer [Corporation]. Accordingly, the actions of Pfizer Canada must in law and in equity be treated as the acts of Pfizer [Corporation] which, therefore, is also liable to Apotex pursuant to section 8 of the Patent Regulations.
[13] Prior to the motion being heard, Pfizer Canada and Pfizer Corporation answered a substantial portion of the questions sought by Apotex that related to the relationship between them. For example, Pfizer Corporation provided the following answer:
a) There are no common directors between Pfizer Canada and Pfizer Corporation;
b) Pfizer Corporation does not control Pfizer Canada;
c) Pfizer Corporation does not supply or distribute fluconazole to any intermediary that would then distribute it to Canada; and
d) Pfizer Corporation does not manufacture any of the bulk fluconazole that goes to an intermediary that may enter into the Canadian marketplace.
[14] In her order, the Prothonotary ruled that representatives of Pfizer Canada and Pfizer Corporation had to answer a series of questions having to do with: 1) the manner in which Pfizer Canada is supplied with Fluconazole, and the price which it pays to purchase that material; 2) the organizational structure of the Pfizer family of companies, with a special focus on the decision-making with respect to the marketing and pricing of Fluconazole.
[15] All of these questions clearly aim to elucidate the role that an entity of the Pfizer group other than Pfizer Corporation played in these respects. They are premised on the thesis that Apotex has to dig deeper into the arrangements within the Pfizer conglomerate to determine how the apparently informal arrangements for exploiting the patent are truly managed and how compensation is directed for such exploitation. The Prothonotary seems to have accepted Apotex's submission that these questions are essential and connected to its claims, "when one considers the manner in which foreign owned multinational pharmaceutical companies are often structured, which is in a manner that the profits made by the Canadian subsidiary entity are minimized, to whatever extent possible, by the foreign controlling mind in order that minimum Canadian taxes are paid on profits earned in Canada" (Apotex's written representations, para. 25).
[16] Apotex relied heavily on Apotex Inc. v. Ely Lilly and Co. et al. (2004), 36 C.P.R.(4th) 111 (F.C.A.), which was also a proceeding launched by Apotex claiming damages against a foreign parent and Canadian subsidiary for improper prosecution of a prohibition proceeding. The motion for summary judgment brought by the foreign defendant, on the basis that it was not properly joined to Apotex's claim because it was not a "first person" for the purpose of section 8 of the Regulations, was dismissed by the Court of Appeal. Apotex submits that it had made the exact same allegations as between those defendants as are now made in relation to Pfizer Canadaand Pfizer Corporation.
[17] Despite the apparent similarities between the two sets of facts, I do not think that this decision is helpful to Apotex. First of all, the decision to dismiss a motion for summary judgment on the basis that an issue (whether a foreign defendant can be considered a "first person") is a sufficiently legal question to require a trial does not have much to do with the question as to whether a question on discovery is relevant to the pleadings. But perhaps more importantly, the Court found that the degree of control exercised between the parties may emerge on discovery. In the present case, this is not in issue since Pfizer Corporation is clearly the parent company, as has been made clear in answers to other questions put to the Defendants' representatives.
[18] Apotex has also relied on a few other cases (Monarch Marking Systems, Inc. v. Esselte Metro Ltd. (1983), 75 C.P.R.(2d) 130; Crestbrook Forest Industries Ltd. v. Canada (C.A.), [1993] F.C.J. No. 361) to advance its proposition that discovery should be permitted to determine the nature of these corporate structures to ensure compliance with the administration of justice in Canada. Unfortunately for the Plaintiff, a close reading of these cases reveals that they rather stand for the proposition that a party cannot hide behind the corporate veil to refuse answering a question, the answer to which could be provided by their foreign affiliates. This is a far cry from the present case, where Apotex has been provided with answers to those questions that are related to the legal entities specifically mentioned in its Statement of Claim.
[19] As much as I appreciate that relevance is a flexible concept that must be assessed in context, I fail to see how the proposed questions enumerated by the Prothonotary relates to the claims made by the Plaintiff. These questions, it seems to me, have more to do with a fishing expedition whereby the Plaintiff attempts to add other potential defendants. As this Court has stated in Sentry Piping Systems Inc. v. Dupont Canada Inc. (1988), 23 C.P.R.(3d) 123, at p. 125 :
To the extent that the information sought may produce facts that are relevant to the case as presently pleaded, the plaintiff is entitled to an order that the questions be answered. To the extent that the information would enable the plaintiff to enlarge its case by revealing possible additional defendants, or possible infringements of other claims in the patent which have not been pleaded as infringed, the questions amount to a fishing expedition and the plaintiff is not entitled to an order for answers.
See also: Faulding Canada Inc. v. Pharmacia S.p.A. (1999), 3 C.P.R. (4th) 126 (F.C.A.)
[20] We must not lose sight of the fact that an action is a device to settle disputes between a Plaintiff and a Defendant, where the Plaintiff asserts certain facts which the Defendant denies, or where the Plaintiff asserts that on undisputed facts the law entitles him to relief that the Defendant says the law does not entitle him to. The assumption is that, at the time that the proceedings are launched, the Plaintiff has grounds on which he can assert certain facts. This is why the pleadings must be particularized. If it was enough to say that Pfizer Canada is part of a corporate group to then be able to target the whole group, this rule would be jeopardized and there would be no end to the questioning that could be done on examination for discovery.
[21] I am sensitive to the challenge faced by the parties who target multinational companies whose corporate structure often defies imagination and leaves one at wits end. But the remedy does not lay in short term solutions that would upset our judicial system and potentially create more problems than those that were meant to be solved. I am comforted in this conclusion by the fact that in at least two other section 8 actions brought by Apotex, the issue of control by a related company of the defendant was raised and reference was made in the Statement of Claim to other entities of the group without limiting it to any one of them. If the Plaintiff wanted to ask questions related to other entities of the Pfizer group, this is what they should have done.
[21]
[22] As to the questions related to the source or where the drug is formulated, as well as to the questions related to pricing not involving the inter-company price between Pfizer Canada and Pfizer Corporation, they are similarly irrelevant as they are not, directly or indirectly, pleaded in the Statement of Claim.
For all the above reasons, I would grant this motion and set aside paragraph 1(i) and paragraph 1(ii), insofar as it relates to questions 49-50, 67-68, 71, 118-119, 122, 160, 166, 173-175, 189-190 of the Order of Prothonotary Milczynski dated January 30, 2006, with costs to the Defendants.
ORDER
THIS COURT ORDERS that this motion be granted and set aside paragraph 1(i) and paragraph 1(ii), insofar as it relates to questions 49-50, 67-68, 71, 118-119, 122, 160, 166, 173-175, 189-190 of the Order of Prothonotary Milczynski dated January 30, 2006, with costs to the Defendants.
"Yves de Montigny"
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