Ab Hassle v. Apotex Inc., 2004 FC 1582

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

                                                 REASONS FOR COST ORDER

LEMIEUX J.:

[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. (4^th) 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:

(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. (4^th) 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. (4^th) 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

DATED:                                  November 10, 2004

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