Date: 20050926
Docket: T-1168-01
Citation: 2005 FC 1310
Ottawa, Ontario, September 26, 2005
PRESENT: The Honourable Mr. Justice Blanchard
BETWEEN:
APOTEX INC.
Plaintiff
and
SYNTEX PHARMACEUTICALS INTERNATIONAL
LIMITED and HOFFMANN-LaROCHE LIMITED
Defendants
REASONS FOR ORDER AND ORDER
1. Introduction
[1] This is an appeal by Syntex Pharmaceuticals International Limited (SPIL) and Hoffmann-LaRoche Limited (Roche) - the Defendants in the underlying action - of an order of Prothonotary Aronovitch dated August 19, 2005. In her order, the Prothonotary declined to strike out Apotex's amended statement of claim dated May 23, 2003 (the amended claim) as it applies to SPIL in whole or in part.
[2] In this appeal, the Defendants ask the following from the Court:
1) An order allowing the within appeal and setting aside the order of Prothonotary Aronovitch dated August 19, 2005;
2) An order striking the amended statement of claim dated May 23, 2003, in its entirety as it applies to SPIL, without leave to amend, or, in the alternative, that should Apotex Inc. seek to amend its pleading to again add SPIL as a defendant, requiring that Apotex must satisfy the Court, with evidence, that Apotex has, since the date of this motion, obtained information to ground a reasonable basis for its factual assertions with respect to SPIL;
3) An order striking, without leave to amend, all references in the amended claim to any defendant, apart from Roche, or in the alternative, that should Apotex seek to amend its pleading to add another defendant, Apotex must satisfy the Court, with evidence, that since the date of this motion, Apotex has obtained information to ground a reasonable basis for its factual assertions with respect to such other defendant;
4) An order requiring Apotex to file a further amended statement of claim in accordance with paragraph 2 of this order within 10 days of the Court's order;
5) In the alternative, if the relief sought in paragraphs 1, 2, or 3 is refused, an order striking out paragraph 7 of the amended claim;
6) In the event this Honourable Court does not render a decision by the dates agreed to by the parties for discovery, namely, October 5 and 7, 2005, an order staying any order or obligation otherwise which requires any discovery of SPIL and discovery of Roche on paragraphs 6, 7 and 36, and any related paragraph of the amended claim, pending disposition of the present motion and, if unsuccessful, pending an appeal;
7) Costs of this motion and of the motion before Prothonotary Aronovitch; and
8) Such further and other relief as to this Honourable Court may seem just.
2. Factual Background
[3] On March 20, 1996, the Defendants succeeded in obtaining an order prohibiting the Minister of Health from issuing a notice of compliance to Apotex in respect of the Canadian Patent No. 1,204,671 ('671 patent). The order was upheld on appeal: Hoffmann-La Roche Ltd. v. Canada(Minister of National Health and Welfare), [1996] F.C.J. No. 1334 (QL), (1996), 70 C.P.R. (3d) 1 (F.C.A.).
[4] Apotex subsequently commenced an action for a declaration that the manufacture and sale of its naproxen slow-release tablets would not infringe the claim of the '671 patent and that the '671 patent was invalid. On April 19, 1999, Reed J. found in Apotex's favour on both grounds: Apotex v. Syntex Pharmaceuticals International Limited, (1999), 1 F.T.R. 161, [1999] F.C.J. No. 548 (QL), (1999), 1 C.P.R. (4th) 22. In a subsequent motion by Apotex, Reed J. also set aside the prohibition order: Hoffmann-La Roche Ltd. v. Canada(Minister of National Health and Welfare), (1999) 167 F.T.R. 111, [1999] F.C.J. No. 662 (QL).
[5] Apotex was issued a notice of compliance for its generic version of naproxen on May 4, 1999.
[6] By a statement of claim dated July 6, 2001, Apotex commenced an action against the Defendants for damages and/or profits on the basis that Apotex's generic version of naproxen was held off the market by reason of the Defendants' prohibition application. Apotex's claim is made pursuant to s. 8 of the Patented Medicines (Notice of Compliance) Regulations, SOR/98-166 (NOC Regulations).
[7] On August 1, 2001, the Defendants brought a motion to strike Apotex's action on the ground that it disclosed no reasonable cause of action. The motion was granted by a prothonotary, but was set aside by the Federal Court - Trial Division: Apotex v. Syntex Pharmaceuticals International Limited, [2001] F.C.J. No. 1880 (QL), (2001), 1 C.P.R. (4th) 473. This decision was affirmed by the Federal Court of Appeal: 2002 FCA 222, [2002] F.C.J. No. 800 (QL).
[8] On April 29, 2002, the Defendants brought a motion to strike a portion of Apotex's reply to the Defendants' statement of defence. That matter was resolved by consent of the parties to allow Apotex to amend its statement of claim.
[9] Apotex issued its amended claim on May 23, 2003.
[10] The Defendants subsequently brought a motion for summary judgment and a preliminary determination of various questions of law. On March 11, 2004, Hugessen J. dismissed the Defendants' motion: Apotex v. Syntex Pharmaceuticals International Limited, 2004 FC 383, [2004] F.C.J. No. 496 (QL).
[11] Following the examination of discovery of Bernard Sherman, Chair and C.E.O. of Apotex on July 8, 2005, the Defendants filed a further motion to strike under Rule 221 of the Federal Courts Rules, SOR/2004-283, s. 2. The Defendants sought, inter alia:
1) an order striking the amended claim in its entirety as it relates to SPIL;
2) an order striking out all references to any defendant apart from Roche; and
3) in the alternative, an order striking out paragraph 7 of the amended claim.
In an order released August 19, 2005, Prothonotary Aronovitch dismissed the motion. That order is the subject of the within appeal.
[12] In support of their motion to strike before the Prothonotary, the Defendants had relied on:
1) the examination for discovery of Bernard Sherman, officer of Apotex;
2) the affidavit of H.B. Radomski, counsel for Apotex; and
3) the cross-examination of H.B. Radomski.
[13] The Defendants submitted that the evidence of the Apotex representatives clearly establish that Apotex has no evidential basis to plead the facts alleged in its amended claim in respect of the relationship between Roche and SPIL. The Defendants further submitted that the Apotex representatives admit that Apotex wants to use the discovery process in order to identify the proper defendants. On these grounds, the Defendants moved to strike out Apotex's amended claim as it applies to SPIL.
3. The Impugned Decision
[14] In her decision, the Prothonotary held that the statements of the Apotex Representatives referred to by the Defendants do not amount to "any admission or what may amount to an admission" that Apotex has no basis for its pleadings or that Apotex is looking to use discovery to essentially find a defendant. The Prothonotary further found that Apotex has not resiled from its allegation that SPIL directed the operations of Roche. She concluded that this was not a case of insufficient allegations made on the basis of no facts at all, in hope that "something will turn up".
[15] The Prothonotary found there were reasonable grounds for Apotex to assert that Roche is subject to control by SPIL on the basis that SPIL:
a) is the owner of the '671 patent,
b) was a party to the prohibition proceeding, and
c) is a company related to Roche.
[16] The Prothonotary concluded that the Defendants had not satisfied their burden of proving that the allegations made by Apotex were bereft of a reasonable cause of action; irrelevant; frivolous or vexatious; or an abuse of the process of the Court. She accordingly dismissed the Defendants' motion to strike.
4. Standard of Review
[17] Discretionary orders of prothonotaries ought not be disturbed on appeal unless:
a) the questions raised in the motion are vital to the final issue of the case; or
b) the orders are 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.
In such circumstances, the reviewing judge ought to exercise her or his own discretion de novo: Canada v. Aqua-Gem Investments Ltd, [1993] 2 F.C. 425, F.C.J. No. 103 (QL), as reformulated in Merck & Co. v. Apotex Inc., [2004] 2 F.C.R. 459, (2003) 30 C.P.R. (4th) 40 at para. 19.
[18] Since the relief sought on the motion is to effectively strike a co-defendant to the action, it is clearly a question that is vital to the final issue of the case. I will therefore exercise my discretion de novo.
5. The Issues Raised on Appeal
[19] In this appeal, the Defendants raise the following issues:
1) Should the Court strike Apotex's amended claim as it applies to SPIL, in whole or in part, or as it applies to any defendant other than Roche?
2) Should the Court strike paragraph 7 of Apotex's amended claim?
3) Should the Court stay the discovery process if the decision of the Court is not rendered by the date set for the discovery of the Defendants?
6. Motion to Strike Apotex's Amended Claim
A. Arguments and Evidence
[20] In their original motion, the Defendants argued that Apotex's amended claim should be struck with respect to SPIL because it did not disclose a reasonable cause of action. However, at the hearing of the appeal, the Defendants conceded that the issue was no longer the sufficiency of Apotex's pleadings or that the pleadings did not disclose a reasonable cause of action against the defendant SPIL.
[21] The essence of the Defendants' arguments is that Apotex's pleadings with respect to SPIL must be struck because the allegations of material fact are speculative, particularly with respect to SPIL's control over Roche and their common enterprise. The Defendants further argue that Apotex is abusing the process of the Court by pleading facts based on speculation in the hopes of finding a true basis of a cause of action at discovery.
[22] The Defendants rely on the evidence of Dr. Sherman and Mr. Radomsky to support their assertions. It is noteworthy that the Defendants did not tender any of their own evidence on the motion.
[23] In support of their motion, the Defendants point to Dr. Sherman's testimony on cross-examination where he stated that it is Apotex's belief that SPIL is the parent company of Roche and as such, the parent company was giving direction. Further, the Defendants point to Dr. Sherman's comments that Apotex will know which companies have to be named in its action for damages after discovery of the Defendants.
[24] The Defendants also submit that the vagueness in the responses of H.B. Radomski on cross-examination show that Apotex does not have any evidence upon which it could support its pleadings in respect to SPIL. The Defendants point to Mr. Radomski's statements that Apotex may not have named the right controlling entity and may have to amend its pleadings, and that Mr. Radomski has no personal knowledge of any kind of "parental control" in the case of naproxen. In challenging his testimony about similar litigation, the Defendants submit that Mr.Radomski was unable to provide "a single factual example where there was an issue where the Canadian company indicated in some explicit way that it could not proceed until approval was obtained from a foreign parent".
[25] The Defendants acknowledge that SPIL is the owner of the '671 patent, was a party to the prohibition proceeding, and is a company related to Roche. The Defendants argue that these factors are not relevant to the threshold question of whether Apotex has a reasonable basis for asserting that SPIL controls Roche. As the patent holder, the Defendants submit, SPIL was required, by virtue of the s. 6(4) of the NOC Regulations, to be made a party to the prohibition proceedings. Furthermore, as Roche and SPIL are among the 300 companies within the Roche family of pharmaceutical companies, the fact that SPIL and Roche are related is not sufficient to establish that SPIL has control over Roche.
[26] Alternatively, the Defendants submit that paragraph 7 of the amended claim should be struck because it is irrelevant. The Defendants submit that the wording of paragraph 7 states that SPIL presently exercises control over Roche. That is, the wording does not refer to the relationship between SPIL and Roche during the relevant period of time but presently. The Defendants submit that the current relationship between the Roche and SPIL is irrelevant.
[27] In response to the motion, Apotex submits that the Defendants clearly failed to demonstrate that striking Apotex's pleadings is warranted. Apotex submits that it was wholly proper and not at all speculative for Apotex to have named SPIL as a defendant in the underlying action. In fact, Apotex characterizes this motion as another attempt by the Defendants to delay the underlying action from proceeding on its merits.
[28] Apotex advanced a number of factors on which it bases its allegation that SPIL controls Roche. Apotex points to the fact that SPIL is the owner of the '671 patent and that Roche is an exclusive licencee of that patent. Apotex submits that the very nature of the relationship between Roche and SPIL "presupposes a measure of control". Apotex points out that SPIL had to give consent to Roche (or rather, its predecessor Syntex Inc.) to list the '671 patent. Further, at the hearing, Apotex stated that SPIL was an applicant to the prohibition application by the defendants. Apotex also submits that the testimony of Mr. Radomski establishes, based on other litigation, particularly "Ketorolac Action" before the Ontario Superior Court of Justice (File No. 02-CV-22071), that Roche may be controlled by a foreign related party.
B. Applicable Law
[29] Motions to strike pleadings are governed by Rule 221 of the Federal Court Rules:
| 221. (1) Motion to strike - On motion, the Court may, at any time, order that a pleading, or anything contained therein, be struck out, with or without leave to amend, on the ground that it
(a) discloses no reasonable cause of action or defence, as the case may be,
(b) is immaterial or redundant,
(c) is scandalous, frivolous or vexatious,
(d) may prejudice or delay the fair trial of the action,
(e) constitutes a departure from a previous pleading, or
(f) is otherwise an abuse of the process of the Court,
and may order the action be dismissed or judgment entered accordingly.
(2) Evidence - No evidence shall be heard on a motion for an order under paragraph (1)(a).
|
221. (1) Requête en radiation - À tout moment, la Cour peut, sur requête, ordonner la radiation de tout ou partie d'un acte de procédure, avec ou sans autorisation de le modifier, au motif, selon le cas :
a) qu'il ne révèle aucune cause d'action ou de défense valable;
b) qu'il n'est pas pertinent ou qu'il est redondant;
c) qu'il est scandaleux, frivole ou vexatoire;
d) qu'il risque de nuire à l'instruction équitable de l'action ou de la retarder;
e) qu'il diverge d'un acte de procédure antérieur;
f) qu'il constitue autrement un abus de procédure.
Elle peut aussi ordonner que l'action soit rejetée ou qu'un jugement soit enregistré en conséquence.
(2) Preuve - Aucune preuve n'est admissible dans le cadre d'une requête invoquant le motif visé à l'alinéa (1)a)
|
[30] Decisions regarding motions to strike pleadings from a statement of claim start from the premise that material facts pleaded must be taken as true, unless the allegations are based on assumption and speculation: Operation Dismantle Inc. v. Canada, [1985] 1 S.C.R. 441, (1985) 18 D.L.R. (4th) 481 at para. 27.
[31] The onus of proof on the party moving to strike is a heavy one. The discretion to strike out pleadings should only be exercised in plain and obvious cases where the Court is satisfied beyond doubt that the allegation cannot be supported and is certain to fail at trial because it contains a radical defect: Hunt v. Carey Canada Ltd., [1990] 2 S.C.R. 959, (1990), 74 D.L.R. (4th) 321.
[32] While Hunt v. Carey concerned a motion to strike for failure to disclose a reasonable cause of action, courts have held that the test for the other grounds to strike is at least as stringent: Connaught Laboratories Ltd. v. Smithkline Beecham Pharma Inc. (1998), 158 F.T.R. 194, 86 C.P.R. (3d) 36 at para. 9. The Court will strike only in the clearest and most obvious of cases.
[33] Striking a pleading is a draconian measure. A statement of claim should not be struck out on the ground that it is vexatious, frivolous or an abuse of the process of the Court, unless the plaintiff's claim is "so clearly futile that it has not the slightest chance of succeeding": Creaghan Estate v. The Queen, [1972] F.C. 732 at para. 6, (1972) 72 DTC 6215 (F.C.T.D.).
[34] Apotex does not dispute that Hunt v. Carey, is the applicable test on motions to strike. The Defendants, however, contend that a different test is applicable in the circumstances of this case. The Defendants submit that in circumstances where the pleading party has been "caught out" as having no evidence to support its allegations, the onus of proof shifts on to that party to establish on a balance of probabilities that it has an evidentiary basis for the allegations pleaded. The Defendants argue that such circumstances arise in the case at bar. The Defendants cite Caterpillar Tractor Co. v. Babcock Allatt Limited, [1983] 1 FC 487, (1982), 67 C.P.R. (2d) 135, for the principle that it is frivolous and vexatious for a party with the onus of proof to plead material facts without evidence to support the pleading. The Defendants cite Kastner v. Painblanc, (1994) 58 C.P.R. (3d) 502, [1994] F.C.J. No. 1671, for the principle that it is an abuse of the Court's process for a plaintiff to use discovery as a fishing expedition and to start a proceeding simply in the hope that "something will turn up".
[35] In my opinion, Caterpillar, supra, and Painblanc, supra, are not in conflict with the Hunt v. Carey standard for striking pleadings. These cases all concern the sufficiency of pleadings. They start from the premise that the purpose of pleadings is to ensure that the opposing party knows the case to be met. The party pleading has an obligation to plead the material facts upon which the general allegation is based. If material facts are not pleaded, then the pleadings may be struck on the grounds that they do not disclose a reasonable cause of action.
[36] Caterpillar, supra, and Painblanc, supra, are distinguishable from the case at bar. In Caterpillar, the defendant did not plead any material facts supporting positive allegations made in its statement of defence. The defendant, in that case, merely restated the substance of certain portions of the Patent Act. The Federal Courts Rules, those applicable then and now, provide that allegations in respect to questions of law must be supported by material facts. When the defendant was asked for particulars, it did not provide them, and on being discovered the defendant admitted that it knew of no material facts to support its allegations. The issue then became one of evidence. The Court in Caterpillar held that the defendant, in effect, admitted that it had no evidence to support the allegations.
[37] Similarly in Painblanc, supra, the Court granted a motion to strike because the material facts pleaded did not establish a basis for personal liability on the part of Mr. Painblanc. The pleadings alleged that he "alone and/or in concert with others directly authorized and is directly and solely responsible for ... the operation of" the defendant company. The only material fact pleaded in support of that allegation was that Mr. Painblanc was the Chief Executive Officer and majority and controlling shareholder of the defendant company. The Court found that this material fact alone was insufficient to satisfy the legal test to establish personal liability.
[38] In contrast, in this case, the Defendants do not dispute that material facts concerning the relationship of control between SPIL and Roche were pleaded. Further, it is not disputed that if the material facts pleaded alleging SPIL's involvement are proven, then there would be a basis on which to argue SPIL's liability.
C. Analysis
[39] In the context of motions to strike where a reasonable cause of action is not at issue, the Court must be satisfied that the pleading:
(a) is immaterial or redundant,
(b) is scandalous, frivolous or vexatious,
(c) may prejudice or delay the fair trial of the action,
(d) constitutes a departure from a previous pleading, or
(e) is otherwise an abuse of the process of the Court
before the Court will strike the pleading.
[40] In the instant case, the sufficiency of the pleadings is not disputed, and in my view, the record before me does not support a finding that the pleadings are either vexatious, frivolous, irrelevant, or an abuse of process, as alleged by the Defendants.
[41] I am of the view that the evidence of Dr. Sherman and Mr. Radomski is insufficient to establish a lack of evidentiary foundation for the material facts pleaded. It is not disputed that SPIL is the holder of the '671 patent, that it was an applicant in the prohibition proceeding; and that it gave consent to Roche to list the patent. As well, and in particular, SPIL has an exclusive licensing agreement with Roche. These factors establish a sufficient factual basis for the material facts pleaded in respect to SPIL's alleged control over and common enterprise with Roche.
[42] I am also of the view that the evidence of Dr. Sherman and Mr. Radomski that Apotex may amend its pleadings following discovery does not amount to evidence of a fishing expedition, as alleged by the Defendants. I agree with Prothonotary Aronovitch's characterization of the process permitted by the Federal Courts Rules. "It common that in the course of discovery, facts come to light, or become known, that will occasion amendments to be made to pleadings to correct allegations. That is part of the purpose of discovery, as in many cases certain facts are more likely to be known to only one of the parties".
[43] In respect of the Defendants' alternative relief that paragraph 7 of Apotex's amended claim be struck as irrelevant, I agree with the Prothonotary that the wording is not "plain and obvious" as to not encompass the relevant time frame of Apotex's underlying action. In my opinion, the Defendants' reason for wanting paragraph 7 struck is not to limit Apotex's discovery to a relevant time frame, but rather to remove the basis of Apotex's cause of action against SPIL.
[44] In the result, I am satisfied that it is not plain and obvious, and beyond doubt that the allegations in Apotex's amended claim cannot be supported and are certain to fail at trial because of a radical defect.
7. Stay of Proceedings
[45] The Defendants seek a stay of any order or obligation requiring discovery of the Defendants pending disposition of the present motion and, if unsuccessful, pending an appeal. Since my order in this motion will issue before the resumption of discovery examinations set for October 14, 2005, I need only consider the request for a stay pending appeal.
A. Applicable Law
[46] The test for a stay of proceedings, as articulated in RJR Macdonald Inc. v. Canada(Attorney General), [1994] 1 S.C.R. 311 at 334, (1994), 111 D.L.R. (4th) 385, is threefold:
1. Is there a serious question to be tried?
2. If so, will failing to grant the injunction cause irreparable harm to the applicants?
3. Does the balance of inconvenience favour granting an injunction or not?
The party seeking a stay must satisfy the Court that it meets all three branches of the test.
B. Arguments and Evidence
[47] The Defendants submit that they can satisfy the three branches of the test. They argue that a serious issue is raised on the motion, namely should SPIL be struck as a co-defendant to the action by reason of there being no evidence to support its involvement as pleaded. Further, the Defendants submit that failing to grant a stay will result in irreparable harm to the Defendants because Roche and SPIL may be required to produce confidential materials to a competitor and the damages that would flow from such disclosure is irreparable. At the hearing, the Defendants further argued that if discovery were allowed to proceed, it may allow Apotex to obtain some information to maintain SPIL as a defendant or which may identify others as potential co-defendants to the action. The Defendants argue that this would constitute irreparable harm for the purposes of this interlocutory application. Finally, the Defendants submit that the balance of convenience favours the Defendants because the above harm far outweighs the inconvenience to Apotex of adjourning discovery considering that the underlying action was started more than four years ago.
[48] Apotex opposes the Defendants' motion for a stay of proceedings. Apotex argues that there is no serious issue raised and that, in fact, the Defendants' motion for a stay is frivolous and/or vexatious. Apotex further submits that the Defendants have not provided any evidentiary basis to support their assertion that they would suffer irreparable harm or that the Defendants will be inconvenienced if the discovery process is not stayed.
C. Analysis
[49] The threshold to establish a serious issue is low. In my opinion, whether SPIL is struck as a defendant to the underlying action is a serious issue for the purpose of this stay application.
[50] I would nevertheless dismiss the stay motion for failure by the Defendants to establish irreparable harm. The Defendants in this case submit that irreparable harm would be caused by the possibility that the Defendants may have to disclose confidential material to Apotex, and the possibility that Apotex may use the information learned on discovery to identify other co-defendants. In respect to protecting sensitive or confidential materials from disclosure, parties regularly employ confidentiality agreements to cover such situations. Moreover, even if it were established that sensitive information were disclosed by the discovery process, the Defendants have failed to establish how the disclosure of such evidence would lead to irreparable harm. The Defendants' allegation of irreparable harm is speculative.
[51] The balance of convenience does not weigh in favour of further delays in the proceedings of the underlying action. As the Defendants themselves note, it has already been more than four years since Apotex's action was initiated. In the circumstances, the balance of convenience favours Apotex.
[52] Accordingly, I would dismiss the motion for a stay of proceedings.
8. Conclusion
[53] For the above reasons, the motion appealing the August 19, 2005, order of Prothonotary Aronovitch is dismissed and the motion for a stay of proceedings is denied.
9. Costs
[54] Apotex submits that costs on the motion should be awarded on an elevated scale by reason of the ongoing attempts by the Defendants to delay the proceeding and in particular delay discoveries. In her order of August 19, 2005, Prothonotary Aronovitch agreed with Apotex. She wrote in her endorsement to the order:
[...] Having regard to the history and particular circumstances of this case, I am inclined to agree with Apotex's view that this represents yet another attempt by the defendants to achieve, by other means, essentially the same end as their previous motions to strike and for summary judgment, and to delay discoveries.
[55] I concur with the views expressed of the learned Prothonotary. I find, in the circumstances, that an increased costs award is warranted. In the exercise of my discretion, I award costs to Apotex to be computed in accordance with the middle of Column IV of Tariff B of the Federal Courts Rules. If the parties are unable to agree on the quantum of the costs award, they shall correspond with the Court within ten (10) days of the date of this order. In that event, after consideration of the parties' submissions, which shall not exceed five (5) pages, I will set costs.
ORDER
THIS COURT ORDERS that
1. The motion appealing the August 19, 2005, order of Prothonotary Aronovitch is dismissed.
2. The motion for a stay of proceedings is denied.
3. Costs are awarded to Apotex to be computed in accordance with the middle of Column IV of Tariff B of the Federal Court Rules.
4. If the parties are unable to agree on the quantum of the costs award, they shall correspond with the Court within ten (10) days of the date of this order. In that event, after consideration of the parties' submissions, which shall not exceed five (5) pages, I will set costs.
"Edmond P. Blanchard"
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