Date: 20070503
Docket: T-1100-97
Citation: 2007 FC 477
Ottawa, Ontario, May 3,
2007
PRESENT: The Honourable Mr. Justice Blais
BETWEEN:
ELI LILLY AND COMPANY and
ELI LILLY CANADA INC.
Plaintiffs
and
APOTEX INC.
Defendant
AND
BETWEEN:
APOTEX INC.
Plaintiff by Counterclaim
and
ELI LILLY AND COMPANY and
ELI LILLY CANADA INC.
Defendants by Counterclaim
and
NOVOPHARM LTD
Defendant by Counterclaim
REASONS FOR ORDER AND ORDER
[1]
This
is a motion by the plaintiffs and defendants by counterclaim Eli Lilly and
Company and Eli Lilly Canada Inc. (the applicants) for an order setting aside
those portions of the January 18, 2007 Order of Madam Prothonotary Aronovitch
(the Order), requiring that the applicants answer certain questions found at
Schedule A of that Order.
BACKGROUND
[2]
This
proceeding arises in the context of an action brought by the applicants in 1997
against Apotex Inc., for infringement of their patent for nizatidine. Apotex
Inc. has defended the action by alleging that the nizatidine it manufactured
and sold was either made by a non-infringing process or was licensed nizatidine
pursuant to the compulsory license held by the defendant by counterclaim
Novapharm Ltd. (the respondent), and the agreement between the respondent and
Apotex Inc. requiring the respondent to supply Apotex Inc. with nizatidine
imported under the compulsory licence. Apotex Inc. also counterclaimed against
both the applicants and the respondent, alleging conspiracy in violation of the
Competition Act,
R.S.C. 1985, c. C-34.
[3]
While
both the applicants and the respondent are co-defendants to the counterclaim,
they are adverse in interest on the issue of the termination of the compulsory
license. The applicants have denied the allegation of conspiracy, stating that
the compulsory license granted to the respondent was terminated. The respondent
has also denied the allegation of conspiracy, but maintains that the compulsory
licence is still valid and subsisting.
[4]
As
the applicants and respondent are adverse in interest on the issue of the
compulsory license and its alleged termination, it was agreed that discovery
would be limited to this particular issue.
[5]
The
Order being appealed through this motion arose as a result of the motion
brought by the respondent to compel answers to certain questions refused or
taken under advisement by the applicants during discovery of the applicants by
the respondent. Prothonotary Aronovitch, who heard the respondent’s motion to
compel answers, is also the case management prothonotary in this action.
ISSUE TO BE CONSIDERED
[6]
The
issue to be considered in this motion is essentially whether the prothonotary
was clearly wrong in ruling that the questions at issue on this appeal were
relevant and needed to be answered.
STANDARD OF REVIEW
[7]
As
was stated by the Federal Court of Appeal in Merck & Co. et al. v.
Apotex Inc. (2003), 30 C.P.R. (4th) 40 (F.C.A.) at paragraph 19:
Discretionary orders of prothonotaries ought not be
disturbed on appeal to a judge 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.
[8]
In
this case, it is not submitted that the questions are vital to the final issue,
but only that the Order issued was clearly wrong. As explained by Justice Mark
MacGuigan in Canada v. Aqua-Gem Investments Ltd. (C.A.), [1993] 2 F.C.
425, at paragraph 95, an order will be deemed to be “clearly wrong” when “the prothonotary
has fallen into error of law”, that is to say where the discretion has been
exercised “based upon a wrong principle or upon a misapprehension of the facts”.
ANALYSIS
[9]
In
this motion, the applicants argue that the boundaries of discovery are to be
established in light of the agreement reached by the parties, or in light of
the parties’ pleadings, and that the prothonotary ignored those boundaries in
ordering the applicants to answer the questions at issue on this appeal. As
such, the applicants submit that the prothonotary erred in law in issuing this
Order, and thus the Order is clearly wrong and should be set aside. Put a
different way, the applicants essentially argue, as they did before the
prothonotary, that the questions which they refused to answer exceeded the
scope of the discovery and were thus irrelevant.
[10]
As
noted by the respondent, the threshold for relevance for the purpose of
discovery is fairly low. In Apotex Inc. v. R. (2005), 41 C.P.R. (4th)
97, the Federal Court of Appeal stated the following with respect to the issue
of relevancy in the context of discovery, at paragraph 15:
¶ 15 As the issue before the learned Prothonotary was
one of relevancy, I should indicate that the correct approach to that issue at
the stage of discovery was enunciated by this Court in Everest & Jennings
Canadian Ltd. v. Invacare Corp., [1984] 1 F.C. 856, 79 C.P.R. (2d) 138,
where Urie J.A., writing for the Court at page 2 [p. 857 F.C.] of the decision,
stated:
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[...] The correct
test of relevancy for purposes of discovery was, in our opinion, propounded
by McEachern C.J. in the case of Boxer and Boxer [page103] Holdings
Ltd. v. Reesor, et al. (1983), 43 B.C.L.R. 352
(B.C.S.C.) When, at page 359, he said:
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It seems to me that the clear right of the plaintiffs to
have access to documents which may fairly lead them to a train of inquiry
which may directly or indirectly advance their case or damage the defendant's
case particularly on the crucial question of one party's version of the
agreement being more probably correct than the other, entitles the plaintiffs
to succeed on some parts of this application.
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¶ 16 We recently reaffirmed that test in SmithKline
Beecham Animal Health Inc. v. Canada, [2002] F.C.J. No. 837
(QL), 2002 FCA 229, 115 A.C.W.S. (3d) 380.
At paragraphs 24 and 25 of her Reasons for the Court, Madam Justice Sharlow
wrote in the following terms:
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[24] The scope and application of the rules quoted above
depend upon the meaning of the phrases "relating to any matter in
question between ... them in the appeal" and "relating to any
matter in issue in the proceeding". In Compagnie Financière et
Commerciale du Pacifique v. Peruvian Guano Company (1882), 11 Q.B.D. 55 (C.A.), Brett, L.J. said
this about the meaning of the phrase "a document relating to any matter
in question in the action" (at page 63):
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It seems to me that every document relates to the matters
in question in the action, which not only would be evidence upon any issue,
but also which, it is reasonable to suppose, contains information which may -
not which must - either directly or indirectly enable the party requiring the
affidavit either to advance his own case or to damage the case of his
adversary. I have put in the words "either directly or indirectly,"
because, as it seems to me, a document can properly be said to contain
information which may enable the party requiring the affidavit either to
advance his own case or to damage the case of his adversary, if it is a
document which may fairly lead him to a train of inquiry, which may have
either of these two consequences.
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[25] The "train of inquiry" test for
documentary discovery was expressly approved by this Court in Everest &
Jennings Canadian Ltd. v. Invacare Corp., [1984] 1 F.C. 856, 55 N.R. 73, 79 C.P.R. (2d) 138
(F.C.A.), adopting the test from Boxer v. Reesor (1983), 43 B.C.L.R. 352, 35 C.P.C. 68
(B.C.S.C.). See also Ikea Ltd. v. Idea Design Ltd., [1987] 3 F.C. 317, 13 F.T.R. 306, 16 C.P.R. (3d) 65
(F.C.T.D.) and Oro Del Norte, S.A. v. The Queen (1990), 35 F.T.R. 107, [1990] 2 C.T.C. 67, 90 D.T.C. 6373
(F.C.T.D).
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[11]
Furthermore,
there is clearly disagreement between the parties as to the proper scope of the
discovery in the present case, even though they both agree that it should be
limited to the compulsory license and its alleged termination. While the
applicants claim that the compulsory license was terminated in September 1999,
and therefore the events preceding and following this date are not relevant to
the issue, the respondent takes the position that the compulsory license was
not terminated. The respondent alleges that the purported notice of termination
of the compulsory license by Eli Lilly US was ineffective and that, in any
event, it rectified the alleged breach with the proper payment of royalties,
thus making relevant the events leading up to the purported termination in
September 1999, as well as the parties’ conduct and the events following the alleged
cure, that is to say after February 2000.
[12]
There
is no question that the parties’ different perceptions of the issue will have a
direct impact on the relevancy of the questions asked as part of the discovery
process. Furthermore, since the validity of each party’s arguments with respect
to the alleged termination of the agreement is an issue to be determined at
trial, the relevance of questions asked during discovery must be determined
based on both parties’ pleadings. As noted by the respondent in his
submissions, the respondent’s right to discovery on factual matters surrounding
this issue cannot be limited to the manner in which the applicants have pleaded
the issue.
[13]
Finally,
the respondent argues that a high level of deference should be given to the
decisions rendered by a case management prothonotary in the discharge of case
management functions, including decisions made on the propriety of discovery
questions (Apotex Inc. v. Merck & Co., 2007 FC 250, [2007] F.C.J.
No. 322 (QL)).
[14]
Prothonotary
Aronovitch, as the case management prothonotary, was very familiar with the
issues raised in the pleadings. She properly identified relevance as the
applicable legal principle, heard arguments from both parties, in writing
and/or orally, as to the relevance of each question at issue, and ultimately determined
which of these questions should be answered by the applicants, in a Schedule
attached to the Order.
[15]
In
light of the low threshold for relevance in the discovery process, of the
parties’ conflicting positions on the termination of the compulsory license and
the applicable timeline, and of the high degree of deference that should be
afforded to the prothonotary, I am not satisfied that the prothonotary’s
conclusion as to the relevance of the questions at issue was “clearly wrong”.
[16]
While
it is clear that the applicants disagree with the prothonotary’s ruling on the
relevance of the questions that were ordered to be answered, they have not met
their burden of showing that the prothonotary erred in principle or acted upon
a misapprehension of the facts, which would justify a de novo
consideration by this Court of the relevance of the questions asked by the
respondent during the discovery process.
[17]
The
applicants also submit that the prothonotary made an error of law by ordering
that certain questions be answered, without hearing oral arguments from the
applicants on the relevance of these questions. However, the applicants did
make written submissions on all the questions at issue, which the prothonotary
must be presumed to have considered before rendering her decision. Furthermore,
as noted by the respondent, there is no rule that gives a party the right to
make oral submissions on each and every single question at issue in a refusals
motion.
[18]
Finally,
the applicants argue that the prothonotary erred in law by changing the nature
of the draft consent order submitted by the parties, such that it no longer
reflects the oral directions given at the hearing of the motion. Specifically,
the applicants allege that the prothonotary indicated at the hearing of the
motion that all questions were to be answered in respect of nizatidine only,
and that drafts of agreements were not to be produced if the agreements were
executed. As a result of these oral directions, the applicants argue that they
did not continue to make these arguments in respect of every question to which
they applied. Nor were these limitations noted in Schedule A to the draft order
submitted to the prothonotary, as it was their understanding that these limitations
were to apply to all of the questions in the attached Schedule.
[19]
While
there is no transcript of the hearing before the prothonotary, which would
allow for a comparison between what was allegedly stated by the prothonotary
and what was found in her Order, there is clearly an important distinction
between the draft consent order submitted by the parties and the final Order of
the prothonotary.
[20]
In
the draft consent order, the following directions were placed in the numbered
paragraphs:
4. All answers ordered are only to be
answered in respect of nizatidine.
5. All answers ordered are not to be
answered in respect of draft agreements and documents.
[21]
In
the final Order of the prothonotary, the following directions are found in the
recitals portion of the Order:
Where indicated by the Court, questions
are to be answered in respect of nizatidine only.
Where indicated by the Court, prior
drafts of executed agreements do not have to be produced.
[22]
The
respondent is correct in pointing out that the Court is not bound by consent
orders submitted by parties. As stated in rule 53 of the Federal Courts
Rules, S.O.R./98-106 :
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53. (1) In making an order under these Rules,
the Court may impose such conditions and give such directions as it considers
just.
(2) Where these Rules provide that the Court
may make an order of a specified nature, the Court may make any other order
that it considers just.
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53. (1) La Cour peut assortir toute ordonnance qu’elle rend en vertu des
présentes règles des conditions et des directives qu’elle juge équitables.
(2) La
Cour peut, dans les cas où les présentes règles lui permettent de rendre une
ordonnance particulière, rendre toute autre ordonnance qu’elle juge
équitable.
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[23]
That
being said, I take to heart the point made by the applicants that, by changing
the language agreed upon by the parties to reflect their understanding of the
orders given at the hearing, without changing the corresponding schedule, the
two documents can no longer be read together. Simply put, absent any actual
indication in Schedule A to the Order as to which questions are to be subject
to these limitations, it is impossible to determine the scope of said
limitations.
[24]
As
such, I am concerned that the Order may create some confusion for both parties
who will then seek clarifications from the Court at a later date and further
delay the process.
[25]
Normally,
the proper procedure to be followed in such a situation would have been to
present a motion to reconsider to the prothonotary under rule 397 of the Federal
Court Rules, which reads as follows:
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397. (1) Within 10 days after
the making of an order, or within such other time as the Court may allow, a
party may serve and file a notice of motion to request that the Court, as
constituted at the time the order was made, reconsider its terms on the
ground that
(a) the order does not accord with any
reasons given for it; or
(b) a matter that should have been
dealt with has been overlooked or accidentally omitted.
(2) Clerical mistakes, errors or omissions in
an order may at any time be corrected by the Court.
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397. (1) Dans les 10 jours après qu’une ordonnance a été rendue ou dans tout
autre délai accordé par la Cour, une partie peut signifier et déposer un avis
de requête demandant à la Cour qui a rendu l’ordonnance, telle qu’elle était
constituée à ce moment, d’en examiner de nouveau les termes, mais seulement
pour l’une ou l’autre des raisons suivantes :
a) l’ordonnance ne concorde pas avec les motifs qui, le cas échéant, ont
été donnés pour la justifier;
b) une question qui aurait dû être traitée a été oubliée ou omise
involontairement.
(2) Les
fautes de transcription, les erreurs et les omissions contenues dans les
ordonnances peuvent être corrigées à tout moment par la Cour.
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[26]
While
the applicants have not succeeded in convincing this Court that the Order of
the prothonotary is clearly wrong and should thus be set aside, I believe that
the prothonotary’s failure to indicate in the Schedule to the Order the
specific questions to which the above-mentioned limitations are to apply, falls
within the category of “clerical mistakes, errors or omissions in an
order”, which should be remedied by the Court “as constituted at the time the
order was made”, namely Prothonotary Aronovitch.
[27]
Despite
the fact that the time has expired to bring a motion under rule 397, it remains
possible for the parties to seek leave to extend the time to bring such a
motion before Prothonotary Aronovitch. However, I believe that such an approach
would only add an unnecessary delay to an action that has already been
sufficiently delayed.
[28]
Therefore, while I am not willing to grant the
applicants’ motion on the merit, the Order will be sent back to Prothonotary
Aronovitch so that it may be clarified and so that the parties may then finalize
discovery in an expedient manner.
[29]
Finally, the respondent Novopharm conceded at
the hearing that questions 3 and 4 of Schedule A, were not relevant. Therefore,
the two questions will be withdrawn from the list and Schedules A and B of the
Order will be amended to reflect this change.
ORDER
Therefore, THIS
COURT ORDERS THAT:
1. This motion is
denied, except with respect to questions 3 and 4 of Schedule A;
2. The Order is
to be returned to Prothonotary Aronovitch so that she may specify which
questions listed in Schedule A are to be answered only with respect to
nizatidine, and in the context of which questions listed in Schedule A prior
drafts of executed agreements do not have to be produced;
3. Questions 3 and
4 of Schedule A, are withdrawn and Schedules A and B of the Order will be
amended accordingly;
4. Having been
mostly successful on this motion, the respondent Novopharm is entitled to its
costs established at one thousand dollars ($1,000), payable forthwith in any
event of the cause.
“Pierre
Blais”
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