Date: 20100528
Docket: T-1270-08
Citation: 2010 FC 581
Ottawa, Ontario, May 28, 2010
PRESENT: The Honourable Mr. Justice Zinn
BETWEEN:
GARFORD PTY LTD.
Plaintiff
and
DYWIDAG
SYSTEMS INTERENATIONAL, CANADA, LTD.,
MR.
BOB BISHOP and MR. KENNETH R. SOSTEK
Defendants
REASONS FOR ORDER AND ORDER
[1]
This is an appeal by
the plaintiff from an order of a Prothonotary, dated February 5, 2010, wherein
she bifurcated the issue of liability from the issues of damages or accounting
for profits in the plaintiff’s action.
[2]
The
plaintiff, Garford Pty Ltd., is suing the defendants, Dywidag Systems
International, Canada, Ltd., Bob Bishop and Kenneth R. Sostek, for patent
infringement and breach of the Competition Act, R.S.C.
1985, c. C-34.
Although the defendants suggest the period of alleged infringement is not
restricted, I am satisfied from a reading of the Amended Statement of Claim
that counsel for the plaintiff was correct when he stated that the plaintiff
alleges infringement between November, 2003 and March 31, 2004, and from April
1, 2005 to today.
[3]
By
motion, dated July 24, 2009, the defendants sought an order bifurcating the
liability phase of the action from the damages or accounting for profits
phase. By motion, dated January 14, 2010, the plaintiff sought leave to file
three additional affidavits relating to the bifurcation issue. The
Prothonotary permitted
the filing of two of the three affidavits, but nonetheless granted the
defendants’ motion and ordered bifurcation.
The Order Under Appeal
[4]
The
Prothonotary noted that a bifurcation order will only follow where the Court is
“satisfied, on a balance of probabilities, that bifurcation is more likely than
not to result in the just, most expeditious and cost-effective determination of
the proceeding.” She then turned to the relevant factors to consider.
The factors the Court will take into
account include, but are not limited to considerations of:
(i) The nature of the action and
whether issues for the first trial are relatively straightforward;
(ii) the extent to which the issues
proposed for the first trial are interwoven with those remaining for the
second;
(iii) whether a decision from the first trial
regarding liability is likely to put an end to the action altogether;
(iv) the extent to which the parties have
already devoted resources to all of the issues;
(v) the possibility of delay;
(vi) any advantage or prejudice the parties
are likely to experience; and
(vii)
whether
the motion is brought on consent or over the objection of one or more of the
parties.
[5]
The
Prothonotary stated that she preferred the evidence of the defendants to the
effect that the financial information “was not readily available for the entire
time in issue, and that obtaining hard copies would require a great deal of
time and resources,” but noted that the defendants’ hardship was not
determinative of the motion.
[6]
The
Prothonotary considered the complexity involved with “issues of infringement
and validity” and that “the Court will first be called upon to construe the
claims.” She also considered the fact that examinations for discover had not
yet begun.
[7]
The
Prothonotary noted that if the plaintiff was successful, bifurcation would
cause “delay in obtaining a remedy,” but held that “there is insufficient evidence
of prejudice to the Plaintiff that would arise by granting the order sought.” She
stated:
[w]ith the massive documentary production
of complex financial documentation covering a variety of products in this case
over a not insignificant period of time, the concern is that examinations for
discovery would take a considerable amount of time, and would attract
interlocutory steps that otherwise, with bifurcation, can be abbreviated or
eliminated altogether. In my capacity as case manager of this proceeding, I
have also had the opportunity to see how this litigation has been conducted
thus far, and I am also satisfied that in this case, bifurcation is not only
appropriate, but it is necessary.
(emphasis added)
[8]
On
this basis, the Prothonotary granted the motion and ordered that the liability
phase of the action be bifurcated from the quantum of damages or quantum of
profits phase.
Analysis
[9]
The
Court of Appeal has instructed that discretionary orders of Prothonotaries are
only to be disturbed on appeal where:
(a)
they 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, or
(b)
in making
them, the Prothonotary improperly exercised his discretion on a question vital
to the final issue of the case: Merck & Co., Inc. v. Apotex Inc.,
2003 FCA 488 at para. 17.
As counsel put it, they are to be given
“elbow room” when managing the action.
[10]
The
parties are agreed that the issue of bifurcation is not related to a question
vital to the final issue and that this Court may only exercise its discretion de
novo if the Prothonotary’s decision is shown to be clearly wrong. This
burden is indicative of the significant deference that is owed to
Prothonotaries in the performance of their case management role.
[11]
The
plaintiff cites a number of Ontario decisions for the
proposition that bifurcation should be ordered only in the clearest of cases.
The plaintiff argues that the Prothonotary failed to consider the degree to
which the financial information relevant to damages or accounting of profits
would also be relevant to the test for obviousness or the examination of
lessening of competition. The plaintiff submits that without the financial
information they will be unable to properly elect between damages or accounting
for profits. The plaintiff contends that the Prothonotary misunderstood that
electronic financial information was readily available for the relevant period
with the possible exception of about four to sixteen months where paper records
would be required, and that this electronic information would be easily
searchable for the necessary information. The plaintiff further submits that
the Prothonotary was clearly wrong when she stated that an absence of
birfurcation would necessitate a “massive documentary production”. Finally,
the plaintiff submits that the Prothonotary erred in relying on the complexity
of the defences to patent infringement as well as in rejecting the plaintiff’s
submission regarding its prejudice.
[12]
The
defendants submit that the Prothonotary’s order is entitled to deference and
that the plaintiff has not shown the Prothonotary’s order to be clearly wrong.
They contend that the Prothonotary did not ignore the potential overlap between
liability and the financial information relevant to damages or an accounting of
profits, but that she was not convinced that such overlap militated against
bifurcation. The defendants note that the importance of commercial success has
been significantly diminished in the most recent characterization of the test
for obviousness. The defendants suggest that their motion to strike the Competition
Act arguments may render this issue of overlap irrelevant and that in any
event the Prothonotary’s silence on this issue does not amount to an error of
law. The defendants contend that the Prothonotary did not err in preventing
the plaintiff from making an election as to remedy before the liability phase,
did not err in her preference of the defendants’ experts, and did not err in
her conclusion that refusing the motion for bifurcation would result in a
“massive documentary production” obligation on the defendants. The defendants
submit that the Prothonotary adequately considered the alleged prejudice of the
plaintiff resulting from bifurcation.
[13]
Even
if I agree with the plaintiff’s submission, based on the jurisprudence from the
Ontario courts, that bifurcation should be the exception not the rule, the
Prothonotary stated that in this case “bifurcation is not only appropriate, but
it is necessary.” In short, the Prothonotary was of the view that this is one
of those clearest of cases where bifurcation is warranted.
[14]
The
plaintiff’s submission that the financial information is required with respect
to the defence of obviousness is unconvincing. “Commercial success” is no
longer a central component of the test for obviousness: Apotex Inc. v.
Sanofi-Synthelabo Canada Inc., 2008 SCC
61, therefore, the financial information which is clearly relevant to the
remedy phase is not relevant to the assessment of the obviousness invalidity
attack. It is true that complete financial information may be necessary for
the plaintiff, if successful in proving liability, to properly elect between
damages or an accounting of profits as a remedy; however, there is no reason
that this election cannot come after the liability phase is completed. The
plaintiff cites no precedent in support of the proposition that the
Prothonotary committed an error in law by noting the complexity of patent
infringement and/or invalidity counterclaims. On the contrary, the plaintiff
cites the Prothonotary’s decision in Merck & Co. v. Brantford Chemicals
Inc.,
[2004]
F.C.J. No. 2195 (QL), where she held that “the complexity of the issues to be
tried” is one of many factors that can be considered when determining whether
to grant a motion for bifurcation. It would seem that the complexity of patent
litigation could properly be considered within this factor. Finally, the
Prothonotary explicitly noted the prejudice the plaintiff would suffer, but
determined that the efficiency gains from bifurcation outweighed this
prejudice; this finding was reasonable and was not clearly wrong.
[15]
Further,
I am not convinced that the Prothonotary erred in her assessment of the
evidentiary burden the defendants would face if the action was not bifurcated.
It cannot be stated with assurance that no documentary evidence would be
required to be produced in addition to the electronic records, nor is it clear
that this might not be a very substantial volume of records. Further, and in
spite of counsel’s spirited submission, I am not convinced from a reading of
the cross-examination of Mr. Kucera that his evidence changed from or was inconsistent
with that offered in his affidavit; as such, the Prothonotary was under no
obligation to address it more than she did.
[16]
The
one aspect of the plaintiff’s appeal that has merit is its submission that the
Prothonotary failed to explicitly consider the potential for overlap between
the financial information necessary at the remedy phase and the proof of the
claim for lessening of competition under the Competition Act.
[17]
The
defendants acknowledge, as they must, that the Prothonotary’s reasons fail to
show that she explicitly considered the potential overlap between the
competition claims and the financial information relevant to the remedy phase.
They submit that P.L. Construction Ltd. v. Canada, [1998]
F.C.J. No. 936 (F.C.A.) (QL), stands for the proposition that this silence is
not an error of law. In P.L. Construction, at paras. 4-6, the Court of
Appeal cited the Supreme Court decision in R. v. Burns, [1994] 1 S.C.R.
656 for the proposition that “skimpiness of the reasons” does not necessarily
constitute a reviewable error. In Burns, at 664-665, the Supreme Court
stated:
[f]ailure to indicate expressly
that all relevant considerations have been taken into account in arriving at a
verdict is not a basis for allowing an appeal under s. 686(1)(a). This
accords with the general rule that a trial judge does not err merely because he
or she does not give reasons for deciding one way or the other on problematic
points. The judge is not required to demonstrate that he or she knows the
law and has considered all aspects of the evidence. Nor is the judge
required to explain why he or she does not entertain a reasonable doubt as to
the accused's guilt. Failure to do any of these things does not, in
itself, permit a court of appeal to set aside the verdict.
This rule makes good sense.
To require trial judges charged with heavy caseloads of criminal cases to deal
in their reasons with every aspect of every case would slow the system of
justice immeasurably. Trial judges are presumed to know the law with which
they work day in and day out. If they state their conclusions in brief
compass, and these conclusions are supported by the evidence, the verdict
should not be overturned merely because they fail to discuss collateral aspects
of the case.
The Court of Appeal
relied on the following passage…:
Where the record, including the
reasons for judgment, discloses a lack of appreciation of relevant evidence and
more particularly the complete disregard of such evidence, then it falls upon
the reviewing tribunal to intercede.
This statement should not be read
as placing on trial judges a positive duty to demonstrate in their reasons that
they have completely appreciated each aspect of relevant evidence. The
statement does not refer to the case where the trial judge has failed to allude
to difficulties in the evidence, but rather to the case where the trial judge's
reasons demonstrate that he or she has failed to grasp an important point or
has chosen to disregard it, leading to the conclusion that the verdict was not
one which the trier of fact could reasonably have reached [citations omitted].
[18]
P.L.
Construction and Burns provide that the mere shortness of reasons
or silence of a motions judge on a particular point does not constitute a
reviewable error unless it can be shown that such short shrift amounts to a
significant lack of appreciation for a relevant point.
[19]
An
overlap between the evidential underpinnings necessary to prove liability and
the evidence necessary to determine the quantum on remedy is an important
factor on a motion for bifurcation. If evidence critical to a party being able
to establish liability or a defence to liability is not available to that party
as a consequence of a bifurcation order, then I fail to see how it can be said
that the order results in the “just” determination of the proceeding, even
though it may result is a more expeditious and cost-effective proceeding.
[20]
The
Prothonotary, on the face of the decision, does not appear to have considered
whether the action for breach of the Competition Act could be proven
without some or all of the financial information that was also necessary for
quantification of damages or account of profits. I place no stock in the
defendants’ submission that their motion to strike the competition claims may
render this aspect of the decision immaterial. The whole point of bifurcation
is to achieve the expeditious completion of litigation. If the competition
claims are not struck, and a significant portion of the financial information
is necessary to prove lessening of competition, then, in my view, the whole
rationale for bifurcation is undercut. The defendants did not submit that this
financial information was irrelevant to the plaintiff’s competition claims. I
accept the plaintiff’s submission that it is relevant and critical to
establishing the breaches of the Competition Act that it alleges.
[21]
The
defendants’ motion to strike that part of the action for breach of the Competition
Act is not scheduled to be heard until September – nearly four months from
now. In my view, only if there was no claim under the Competition Act
would the Prothonotary’s order have been proper. Accordingly, I am of the view
that this appeal must succeed at this time, as the claims under the Competition
Act are a part of the plaintiff’s action and it cannot establish liability
without that information.
[22]
The
parties were canvassed in accordance with the Court’s recent Notice to the
Parties and Profession on costs. The plaintiff proposed costs be awarded the
successful party in an amount between $2,000 and $5,000; the defendants
proposed costs of $10,000, being one-half the amount fixed by the Prothonotary
on the motion before her. In my view, costs of $5,000.00 inclusive of fees,
disbursements and taxes are appropriate on this appeal.
ORDER
THIS COURT ORDERS that:
- This appeal is
allowed and the order of the Prothonotary dated February 5, 2010 is set
aside; and;
- The
plaintiff is entitled to its costs of this appeal fixed at $5,000.00,
inclusive of fees, disbursements and taxes, and is also awarded its costs
of the motion before the Prothonotary, in an amount to be agreed upon by
the parties, or failing such agreement within 10 days, to be fixed by the
Prothonotary.
“Russel W. Zinn”
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