Docket: T-1930-98
Citation: 2014 FC 1087
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BETWEEN:
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APOTEX INC.
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Plaintiff
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And
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HER MAJESTY THE QUEEN
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Defendant
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REASONS
FOR JUDGMENT
HUGHES J.
[1]
Apotex filed a submission with Health Canada on January 25, 1988 for approval to sell a generic version of a trazodone (sometimes called
trazadone) drug in Canada. Seven years later, after much correspondence,
telephone conversations, meetings, the institution of two lawsuits – including
one resulting in a decision by this Court – and a settlement agreement, Apotex
received that approval in February 28, 1995. By that time, two generic
competitors had already received approval to sell their versions of that drug
in Canada.
[2]
In October 1998, Apotex commenced this action
for damages, including punitive damages, based upon multiple causes of action,
including negligence, breach of a settlement agreement, misfeasance in public
office, and misrepresentation, whether negligent, fraudulent or innocent. The
Defendant, Her Majesty the Queen, has vigorously defended this action,
including asserting that the claims are barred by limitation periods and
statute; that Apotex has repudiated the settlement; that there was no duty of
care owed and that Apotex did not mitigate its damages.
[3]
For the reasons that follow, I find that Apotex
is entitled in tort to damages but was required to mitigate those damages. The
extent of those damages will be assessed at a later trial.
[4]
The following is an index, by paragraph number,
to these Reasons:
The Parties
[5]
The Plaintiff Apotex Inc. is an Ontario corporation, having its head office in the City of Toronto. Apotex carries on business
principally as a manufacturer of generic prescription pharmaceutical products
for sale in Canada and elsewhere.
[6]
The Defendant Her Majesty the Queen represents
the Minister of Health and officials of the Ministry within the Health
Protection Branch (HPB), responsible for examining pharmaceutical products
before they are permitted to be sold or distributed in Canada for the purposes
of determining safety and efficacy of those products, all as more particularly
provided for in the Food and Drugs Act, RSC 1985, c. F-27 (FDA) and Food
and Drug Regulations, CRC, c. 870, under that Act. Throughout
the period of time relevant to this action, essentially 1988 to 1995, the HPB
was organized and re-organized within a Drug Directorate (DD) and various
Divisions and Bureaus of that Directorate.
The Evidence
[7]
I commend Counsel for each of the parties for
their co-operation in organizing the evidence and presenting it in an efficient
manner. They agreed upon a large number of documents, which were produced in
evidence without requiring formal proof of each and every one. Exhibit 1, which
comprised four large volumes of documents – each identified with a numbered tab
– were admitted into evidence by agreement, the full extent of which agreement
is set out in Exhibit 4, but essentially provides that these documents will be
received in evidence as being sent or authorized by the persons indicated on
their face and received by persons so indicated on or about the date apparent from
the document. The truth of the contents was not admitted. A further single
document, Exhibit 8, was admitted in evidence under the same terms.
[8]
Also provided were books containing certain
documents filed with the court in Judicial Review proceedings instituted by
Apotex in this Court, T-2276-90 (Exhibit 2) and T-1877-91 (Exhibit 3).
[9]
Certain facts admitted by the parties for
purposes of this action were set out in Exhibit 5.
[10]
The parties each submitted a booklet containing
excerpts from the examination for discovery of the opposite party, which were
deemed to have been read into evidence. The excerpts of the examination of the Defendant
are found in Exhibits 14 and 21; and that of the Plaintiff in Exhibit 16.
[11]
The Plaintiff Apotex called one fact witness and
one expert witness in chief both of whom were examined and cross-examined. No
witness was called in reply. Called were:
•
Dr. Bernard Sherman, Toronto, Ontario, as a fact witness. He founded Apotex in 1977 and
has been the controlling mind of that corporation ever since whether as
President or as Chairman. He was personally involved in most of the events
pertinent to this case from the Apotex side of things.
•
Dr. Arthur H. Kibbe, Clarks Summit, Pennsylvania, as an expert witness. His
qualifications are set out in an agreed statement provided on behalf of Counsel
for each of the parties and marked as Exhibit 11. It says:
Expert in
pharmaceuticals (pharmaceutical dosage form design, development and
manufacture), pharmacokinetics, pharmaceutical excipients, the evaluation of
the physical and chemical composition and therapeutic equivalence of
formulations.
[12]
The Defendant, Her Majesty, called six fact
witnesses and one expert witness. Called as fact witnesses, all of whom were
examined and, except for Dr. Simon, cross-examined, were:
•
Dr. Craig Simon, Ottawa, Ontario. Associate Director, Bureau of Pharmaceutical Studies. He did not join the
organization until after 1995 and could only provide general information as to
the period in question, 1988 to 1995. He was the person offered by the
Defendant for discovery.
•
Mike Ward, Ottawa, Ontario. Manager, International Programs, International Programs Division, Bureau
of Policy, Science and International Programs Canada.
•
Bruce Rowsell, Russell, Ontario. Retired, Former Director, Bureau of Pharmaceutical Surveillance.
•
Dann Michols, Elgin, Ontario. Retired, Former Executive Director, Drugs Directorate and Former Assistant
Deputy Minister, Health Canada.
•
Mary Carman, Ottawa, Ontario. Retired, Former Director, Bureau of Nonprescription Drugs. During part of
the relevant period, she was Mary Carman Kasparek.
•
Dr. Wayne Nitchuk,
Ottawa, Ontario. Retired, Former Acting Chief, Division of Biopharmaceuticals
Evaluation, Bureau of Pharmaceutical Surveillance.
[13]
Called as an expert witness for the Defendant
was:
•
Dr. Isadore Kanfer, Toronto, Ontario. Emeritus Dean and Professor, Faculty of
Pharmacy, Rhodes University, South Africa. He was examined and cross-examined.
His qualifications are set out in an agreed statement provided on behalf of Counsel
for each of the parties and marked as Exhibit 17:
Dr. Kanfer is
an expert in the bioavailability and bioequivalence of drug products, including
the scientifically valid methods for demonstrating bioavailability and
bioequivalence, and the design, methods, Use (or application) of comparative
dissolution studies in demonstrating bioavailability and bioequivalence. He is
also an expert in biopharmaceutics.
Obtaining
Drug Approval in Canada - 1988 to 1995
[14]
In the period from 1988 to 1995 and up to today,
approval from the Minister of Health was and is required before a drug could be
sold or distributed in Canada. That approval took the form of a Notice of
Compliance (NOC) issued by the Minister. The Minister’s officials were required
to abide by the terms of the Food and Drug Act and Regulations,
supra. In addition, the Minister periodically published Guidelines and policy
statements which did not have the force of law, but were intended to provide
guidance to those seeking approval, and the Minister’s officials.
[15]
In the present case, we are dealing with the
period from 1988 to 1995. In late 1995, substantial amendments were introduced,
which affect current practice, but not the practice during the relevant time
period.
[16]
The overriding concern of the Minister is that
drugs provided to Canadians should be safe and effective for the intended
purpose. A party seeking approval for a drug not previously sold in Canada - often called an innovator - is required to provide sufficient information, usually
including extensive clinical studies, to satisfy the Minister as to safety and
efficacy of that drug for the stated purpose. This is expensive and time
consuming.
[17]
A second party – often called a generic – who
wished to sell or distribute that drug in Canada, could avoid the provision of
clinical studies, provided that it could demonstrate to the Minister’s
satisfaction that its drug was sufficiently similar (and I use those words
advisedly, because words such as identical and equivalent are important in this
case) pharmaceutically and by way of bioavailability, so as to be a
satisfactory substitute for the innovator’s drug.
[18]
I adopt and accept certain of the definitions
given by the Defendant’s expert, Dr. Kanfer, in his Report, Exhibit 18, in this
regard:
Bioavailability
Bioavailability refers to the rate and
extent to which the API (active pharmaceutical ingredient)t, or its AM (
therapeutic active entity) (substance), is absorbed from a pharmaceutical
produce (dosage form) and becomes available at the site of action or biological
fluids (plasma, serum or blood), representing the site.
Bioequivalence
Two
pharmaceutical (medicinal) products are bioequivalent if they are
pharmaceutically equivalent and if their bioavailabilities in terms of the peak
drug concentration in blood, serum or plasma (Cmax) and time to
reach the peak (Tmax) and extent of absorption or total exposure
expressed as the area under the drug concentration versus time profile (AUC)
after administration of the same molar dose under the same conditions are similar
to such a degree that their effects with respect to safety and efficacy can be
expected to be essentially the same. The U.S.A’s definition is:
...the absence of a significant
difference in the rate and extent to which the active ingredient becomes available
at the site of action when administered at the same molar dose under similar
conditions in an appropriately designed study.
Pharmaceutical equivalent
Pharmaceutical products are
pharmaceutically equivalent if they contain the same amount of the same API (active
pharmaceutical ingredient) in the same dosage form, if they meet the same or
comparable standards, and if they are intended to be administered by the same
route.
It is important to note that
pharmaceutical equivalence does not necessarily imply bioequivalence as
differences in the excipients (inactive ingredients Used as formulation
adjuncts) and/or the manufacturing process can lead to changes in drug release
and/or absorption.
The U.S.A FDA’s definition is:
...drug products that contain the
identical amounts of the identical active drug ingredient in identical dosage
forms, but not necessarily containing the same inactive ingredients, and that
meet the identical compendia or other applicable standard of identity,
strength, quality, and purity, including potency and where applicable, content
uniformity, disintegration times and/or dissolution rates.
Therapeutic equivalence
Two pharmaceutical products are
therapeutically equivalent if they are pharmaceutical equivalents and, if they
can be expected to have the same clinical effect and safety profile when
administered to patients under the conditions specified in the labelling.
Pharmaceutically equivalent products that are bioequivalent can be substituted
for each other with the full expectation that the substituted product will
produce equivalent clinical effects and safety profile as the original product.
[19]
The history of the use of bioequivalence by a
generic as a substitute for clinical studies was discussed by Dr. Kanfer at
paragraphs 15 and 16 of his Report:
15. Generic medicines contain the
same active pharmaceutical ingredient(s) (API) as the innovator product, where
previously the innovator has shown their prescribable product to be safe and
efficacious based on clinical data from their initial clinical studies in
humans. During the ‘70s the U.S. FDA decided that it was unnecessary for
pharmaceutical companies seeking approval for generic products which contained
identical active ingredients previously approved as safe and effective by the innovator
companies to duplicate those initial clinical safety and efficacy studies.
However, in lieu of those clinical studies in patients, a surrogate method
known as comparative bioavailability (BA) or Bioequivalence (BE) studies
comparing the genetic (TEST or “T”) product with the approved product of
original research (REFERENCE or “R”) was introduced. This method focuses on the
process by which the active ingredient is released from a dosage form and
move(s) to the site of action.
16. Such surrogate measures are justified
by the presumption that concentrations of drug in the blood stream reflect
concentrations at site(s) of action and that a relationship between the
resulting systemic drug concentrations and the safety and efficacy of the drug
is implied. Such studies circumvent the need to re-do time-consuming and costly
studies in patients and involve an indirect measure of safety and efficacy
where the concentration of the API in the blood of healthy human volunteers is
measured following administration of the T and R products, each on different
occasions in the same healthy human subjects. In other words, each subject
receives both the T and the R product on different occasions and blood samples
are collected at various intervals of time and analysed for the API. The
resulting data are then Used to generate drug concentration profiles where the
concentrations of drug are plotted versus time and the profiles resulting from
the T and R are compared and assessed for equivalence, i.e. BE. The figure
below is an example of a typical profile and associated parameters which are used
to assess BE.
[20]
On occasion, a generic would offer evidence as
to the dissolution rates of its drug as evidence of or in support of other
evidence as to bioequivalence. A tablet would be dissolved in a liquid such as
water, at different pH levels – and the dissolution over certain periods of
time would be measured and often plotted on a graph. The drug at issue here was
described as quick-dissolving, as it would be 95% dissolved within 15 minutes
in water or 0.1 pH water solution. The acceptance of dissolution data in the
circumstances of the present case was controversial.
Usual
Practices of Health Canada – 1988 to 1995
[21]
The Health Protection Branch (HPB) is the name
generally used in these proceedings to indicate that branch of the Ministry of
Health responsible for receiving and reviewing applications for a Notice of
Compliance and issuing that Notice if the application were to be approved.
[22]
Evidence was given by Dr. Simon and other witnesses
for the Defendant as to the general practices followed by HPB in this process
in the period from 1988 to 1995. An application would be received and given a
brief review to ensure that the requisite documents, fees and so forth were
provided. If that proved to be the case, a filing date would be assigned.
Submissions would be examined in the order as received. There was a substantial
backlog and significant delays in processing applications.
[23]
If a file was examined and, if not found to be unsatisfactory,
a letter would be sent to the applicant pointing out deficiencies, requesting
further information, and so forth. The file would be put away and not looked at
again until HPB received all the information requested and all deficiencies
addressed. Only then would the file be looked at again and only in sequence
having regard to other files requiring examination. It was a tedious practice.
It appears that the quickest that a generic could expect approval and an NOC
was one to two years from the date of original filing.
Innovator Filings
[24]
An innovator drug company, a name used to
describe the company first to seek approval from HPB to sell a drug in Canada, was
usually required to file data, including not only pharmaceutical information as
to its drug; but in vitro (in glass – laboratory) testing, and in
vivo (rats, etc) testing, and clinical testing on humans, of its drug.
Where the drug was obtained from a manufacturer outside Canada who had already
obtained approval from the country of manufacture, such as the United States,
where there were rigorous drug approval studies conducted, HPB would accept
data as submitted; for example, to the United States Food and Drug
Administration, in respect of that drug.
[25]
It was a policy of HPB not to look at the data
submitted by the innovator for purposes of evaluating a submission by a generic
who subsequently sought approval for the same drug. The generic could
“reference” that data in the sense that approval had already been given by HPB,
but HPB would not actually look at the data itself in the course of evaluating
the generic’s application. This policy does not appear to have a basis in law,
as there is no provision in the Food and Drug Act or Regulations
dealing with this matter.
Generic Filings
[26]
It was a usual practice in the 1988 to 1995
period for a generic to test its product as against the innovator’s product as
approved in Canada for bioavailability (i.e. blood sampling over intervals). However,
this was not an invariable practice. As the Agreed Facts (Exhibit 5) state, and
the evidence of Dr. Sherman and several of the fact witnesses of the Defendants
shows, there were at least a few instances where a product that had been
approved for sale and sold in another country, such as the United States, was
accepted during the period at issue as a reference product instead of a
Canadian product. No clear or consistent reason for accepting a foreign
reference product is apparent.
[27]
The “policy” of Health Canada in respect of the use of a Canadian or foreign drug product as the reference product has a
murky history.
[28]
Guidelines dated February, 1981 (Exhibit 1, Tab
2) published by the Health Protection Branch, state at page 4, only:
…the bioavailability of the new generic
drug product is compared to that of an acceptable standard…
No definition of an “acceptable standard”
was provided.
[29]
It appears that in the 1980’s, there was some
general understanding, at least within HPB, that a Canadian reference product
was required. This understanding was not reduced to writing until a Memorandum
was created by the Director General, Dr. Somers, on June 23, 1989 (Exhibit 1,
Tab 28), which stated:
STANDARD FOR COMPARATIVE BIOAVAILABILITY
AND COMPARATIVE PHARMACEUTICAL STUDIES
In conformity with past
Directorate practices, I wish to reiterate that New Drug Submissions (NDS) for
‘generic’ or synonym drug products should contain appropriate, adequate and
validated data on comparative bioavailability studies.
Such comparative studies
should be performed by the use of the corresponding currently marketed Canadian
drug formulation as the essential reference standard.
[30]
It appears that this Memorandum was never
released to the general public although Apotex was given a copy on November 30,
1988.
[31]
Some time in 1992, HPB published a “Guidance
for Industry” concerning the Conduct and Analysis of Bioavailability and
Bioequivalence Studies (Exhibit 10). It is a 49 page document which provides,
at page 15:
5.3 Selection
of Reference Product
For a new
drug substance (i.e., the first market entry), an oral solution should be used
as the reference product when possible. The oral solution can be prepared from
an intravenous solution, if available.
In bioequivalence studies, the reference
product is:
A drug product that has been
issued a notice of compliance pursuant to section C.08.004 of the Food and Drug
Regulations, and is currently marketed in Canada by the innovator, or
a drug product acceptable to the
Director.
[32]
There is no guidance as to what might constitute
“a drug product acceptable to the Director”.
[33]
It must be made clear that neither the “policy”
nor the “Guidance” respecting a suitable reference product is to be found in
the Food and Drug Act or Regulations.
Apotex’s
Submission for an NOC – If A = B, and B = C, it follows that A = C
[34]
On January 25, 1988, HPB received a submission
from Apotex for a Notice of Compliance for a drug it called Apo-Trazad (later
called Apo-Trazadone), in both 50 mg and 100 mg tablet form. It was a generic
form of tablets containing the drug trazodone as the active ingredient.
[35]
Apotex stated that its products would be
manufactured in the United States by a company owned by it; Barr Laboratories.
Apotex stated that Barr had obtained approval from the relevant United States authorities to sell its drug in the United States by providing data comparing the Barr
drug to a drug called Desyrel, approved for sale and sold in the United States by an innovator company, Mead Johnson. Apotex provided a letter dated
December 22, 1987, from Bristol the Canadian company who had received approval
to sell the Desyrel product in Canada from Health Canada, Bristol, to a
Canadian doctor, Dr. Rein. The letter said that the Canadian and United States
Desyrel products were identical. In other words, in respect of a reference
product, Apotex submitted that it would be selling the Barr product in Canada,
that the United States authorities had approved the Barr product using the
United States Desyrel product as a reference and, given that the Canadian and
Untied States Desyrel products were identical, Apotex should be permitted to use
the same bioavailability studies relied upon by Barr in its United States
application in Apotex’s Canadian application.
[36]
Some seven years later, after voluminous
correspondence, many meetings and telephone calls, two judicial reviews having
been instituted and one of them decided by this Court, and a purported
settlement along the way, Apotex got its Notice of Compliance on February 28,
1995. The parties have admitted that two of Apotex’s competitors, Pharmascience
and Novopharm, had received Notices of Compliance for their generic trazodone
tablets before Apotex did.
[37]
It is useful to tabulate some of the more
relevant documents and events provided in evidence. I attach this as Schedule
A.
Apotex
Files its Submission – Battle Lines are Drawn
[38]
Apotex’s submission for a Notice of Compliance
for its Apo-Trazad 50 mg and 100 mg tablets was received by HPB on January 25,
1988 and received a preliminary screen. By letter dated April 25, 1988, HPB
advised Apotex that the material would be reviewed “as
soon as possible”.
[39]
The next substantive matter occurring within HPB
was at a high level when the Director of the Bureau of Human Prescription
Drugs, Dr. Johnson, sent a memorandum to the Director General of the Drugs
Directorate, Dr. Somers, which clearly draws the lines that have been followed
throughout the history of this matter: namely, on the basis of science alone,
Apotex’s submission makes sense; the decision to be made is one of policy. It
is worthwhile repeating this memorandum received January 30, 1989 (Exhibit 1,
Tab 21):
NEW DRUG SUBMISSION FOR APO-TRAZAD –
APOTEX INC.
Apotex filed a New Drug Submission for
Apo-Trazad on January 25, 1988, for the purpose of obtaining clearance for
marketing the first generic Trazodone product.
Trazodone is an antidepressant drug
marketed for a number of years in this country by Bristol Labs.
As you are aware, generic manufacturers usually
supply bioavailability data as evidence of the safety and efficacy off their
product. In this particular situation, Apotex would be expected to provide in
their submission evidence of the bioequivalence of their product as compared
with that of the innovator’s brand marketed in Canada under the trade name of
Desyrel. A preliminary review of the Apotex Submission, indicates that they
have provided instead the results of a bioavailability study comparing the
Trazodone product manufactured by Barr Laboratories in the U.S., with the standard innovator’s brand manufactured in the United States by Mead Johnson. The
comparative bioavailability study was carried out in Canada by BioResearch (Montreal) under a Canadian cleared IND.
Since Barr Laboratories are owned by
Apotex, they can presumably provide evidence that the Barr product and the
proposed Apotex product are identical from a chemistry and manufacturing
standpoint. Furthermore, they have obtained a letter from Mr. Leo P. Fleming,
Manager, Technical Services, Bristol Laboratories of Canada to Dr. A. Rein in
Toronto indicating that the product Desyrel sold by Mead Johnson in the United
States is identical to the same product sold by Bristol in Canada. Therefore,
it is not illogical to conclude that the bioavailability study done on the Barr
and Mead Johnson products is applicable to the Apotex and Bristol products
marketed in Canada.
This point is further
strengthened by the fact that the Mead Johnson product, in addition to being
identical to the Bristol product, was in fact the product mainly used in
carrying out pivotal studies performed in the U.S., which were also submitted
in support of the Canadian NDS for Desyrel.
Therefore, on the basis of
science alone, I am inclined to accept the arguments advanced by Apotex.
However, we should also examine the possibility that we may be establishing a
precedent if we follow this course of action that could see us forced to accept
similar arguments from around the world. What is to prevent, for example,
Apotex from commissioning a bioavailability study comparing the French brand of
a product as the standard? If we accept the arguments advanced in this
particular case, we could have a difficult time not allowing this type of
study. This could be the start of a process that would see us lose control over
the generic submissions.
Before a decision is made in
this particular case I suggest that you contact Mr. L.B. Rowsell. In the
future, his Bureau will be responsible for generic submissions and I do not
want to take an action that might compromise his ability to carry out the
duties that have been assigned to him. Perhaps when you have considered this
memo you might wish to discuss it with Mr. Rowsell and give me your views on
the issue.
[40]
Mr. Rowsell had, in 1988, assumed the role of
Director of Bureau Pharmaceutical Surveillance within the Drug Directorate. His
job was to oversee the people who did the actual evaluation of submissions for
drug approval. He had an undergraduate degree in pharmacy. He did not do any of
the actual reviewing or evaluating himself.
[41]
The matter was apparently referred to Mr.
Rowsell because on February 8, 1988, he wrote a memorandum to Dr. Somers
(Exhibit 1, Tab 22) stating that he anticipated substantial difficulty in
establishing that the United States reference product was identical to the
Canadian product and that this “emphasizes the need
for clear guidelines to express our requirements”.
[42]
There followed the internal policy statement of
Dr. Somers of June 23, 1989, previously referred to, as well as internal
memoranda involving Ms. Mary Carman (Kasparek) and correspondence with Apotex
(Dr. Sherman) as to the propriety in using a non-Canadian drug as the reference
standard. Dr. Johnson provided his view to Ms. Carman in a memorandum dated
July 10, 1989 (Exhibit 1, Tab 30):
STANDARD FOR COMPARATIVE
BIOAVAILABILITY AND COMPARATIVE PHARMACEUTICAL STUDIES
I am in receipt of your memo of June 30th
on this topic together with the correspondence dated June 29th and
April 3rd from Dr. Sherman. I would like to make the following
comments:
1. I believe that we should
accept data comparing the generic product against the innovator’s brand as sold
in a major market of the world if we have evidence that the innovator does not
have manufacturing capabilities in Canada and must import his product from the
major market country.
2. I do not believe we should
accept studies conducted outside Canada against the innovator’s brand as sold
in a major market area if the innovator has manufacturing capabilities in Canada and formulates his product in our country. Although the innovator’s product may have
the same master formulation throughout the world, differences in equipment and
personnel may affect the overall performance of a product and we have no
guarantee that the product manufactured by Merck, for example, in the United
States is identical to a product bearing the same name and manufactured by the
same company in Canada.
3. It is correct that in many
cases the originator has obtained his Canadian Notice of Compliance on the
basis of data generated on a product sold in a major market, however, in the
subsequent years it is the Canadian formulated product that has been accepted
as being safe and efficacious in Canada on the basis of its track record in
large numbers of Canadian patients. It must, therefore, remain our “gold
standard” against which imitators should make their comparisons.
[43]
On June 29, 1989 (Exhibit 1, Tab 29) Dr. Sherman
wrote to Dr. Somers, re-iterating his position that a United States reference product was appropriate. In response, Dr. Somers wrote to Dr. Sherman on
August 24, 1989,(Exhibit 1, Tab 32) rejecting this proposal, saying:
In your letter
of June 29th, you proposed that if a series of conditions were met
in their entirety, the Health Protection Branch could forego its normal
requirement for Canadian sourcing of the reference dosage form.
The
requirement for Canadian sourcing allows a manufacturer to establish, in very
exact terms, that their test product releases drug into the systemic
circulation at the same rate and extent as does the reference dosage form.
Where the safety and efficacy profile of the reference drug product is
acceptable, this offers a scientific basis to assert that, apart from possible
effects from impurities or excipients unique to the dosage form, the test
product will also be acceptably safe and effective. The basis for the
acceptability of the Canadian reference product stems from both premarket data
on file with the Branch and the subsequent years of performance by the product
in Canada. This aspect of performance is greatest for the first brand of that
drug product to enter the Canadian market and therefore is the appropriate norm
for comparison.
When
the reference product cannot be conclusively proven to be identical to that
marketed in Canada, parity of performance with a product known to the Branch
can not be assumed.
The
alternative is for the manufacturer of the test product to abandon comparative
bioavailability studies with marketed products and conduct original clinical
research to establish the safety and efficacy of the test product.
The
conditions that you have proposed to forego Canadian sourcing of the reference
product do not conclusively prove that a non-Canadian reference product is
identical to the Canadian version. Additionally two of the conditions bear
special note.
With
respect to your condition 4., the Branch is not at liberty to consult the file
of another manufacturer to determine the extent to which their data was
generated using a product formulation that was sold in a different country. As
well, subsequent Branch experience will have been with the formulation marketed
in Canada and the Branch need not have been apprised of ensuing formulation
changes made to the product in another country.
Secondly,
stipulation to intend to sell the product in other countries, as noted in your
condition 6., does not temper the mandate of the Food and Drugs Act for Canada.
I
trust that the preceding explanations clarify the Branch position on Canadian
sourcing of the reference dosage form for comparative bioavailability studies.
[44]
It was clear by this time that the battle lines
had been drawn. Apotex wanted to use a United States reference standard; HPB
insisted on a Canadian standard, unless the United States reference product
could be “conclusively proven to be
identical” to the Canadian product. The
evidence before me is that it is almost impossible to demonstrate that any drug
product is “identical” to another, even tablets taken from the same batch (e.g.
Dr. Kibbe’s Report, Exhibit 12, para 38). Some measure of difference must be
tolerated.
[45]
Apotex continued to press; HPB “reanalyzed” the data it had received from Apotex. A
Mr. Michalko, Chief, Division of Biopharmaceutics Evaluation, came into the
picture. On November 30, 1989 (Exhibit 1, Tab 38) he wrote to Apotex a peculiar
letter attempting to bootstrap HPB’s insistence on a Canadian reference product
by reliance upon HPB’s unpublished policy that had been reduced to writing
after Apotex had filed its submission. On December 18, 1989, Michalko wrote to
a Mr. Jeffs, Assistant Director-Operations, Bureau of Human Prescription Drugs (Exhibit
1, Tab 39) asking whether the “policy” that HPB had respecting its refusal to
look at third party information to gain information in order to verify if the
submission – in this case, of Apotex – was correct. On February 1, 1990,
Michalko wrote to Apotex stating that HPB would not look at another party’s
submission.
[46]
Here I pause to repeat what Apotex’s Counsel
stated in argument before me. HPB already knew that the United States reference product relied upon by Apotex was identical to the Canadian drug sold by the
innovator. They knew this because, in approving the innovator’s drug for sale
in Canada, the innovator had provided the data from its United States product. If HPB had referred to the innovator’s file, it would know that the United States product was identical to the innovator’s Canadian product. By refusing to
look at this file, HPB was requiring Apotex to prove to HPB that which HPB
already knew to be true. The only reason for refusing to look at the other file
was “policy”.
[47]
In late 1989, and until August 1990, when Apotex
filed its first Originating Motion for Judicial Review, there was an exchange
of correspondence between Apotex and HPB. I will not recite all of this;
suffice it to say that each party stuck to its position as to whether a
Canadian reference product was required and whether a United States reference product could be used.
[48]
Apotex filed an application for judicial review
with this Court in August, 1990.
Judicial Review # 1: T-2276-90
[49]
On or about August 13, 1990, Apotex filed an
originating Notice of Motion (as was the practice then) with the Court seeking
an Order directing that the Minister review Apotex’s Apo-Trazad applications
without requiring that the reference product be purchased in Canada, and to
issue a Notice of Compliance to Apotex. Court file number T-2276-90 was
assigned to the matter. The pertinent requests were for an Order:
(a) Directing the Respondent
Minister of National Health and Welfare (the “Minister”) to review the
Applicant’s New Drug submission in respect of its drug product, Apo-Trazad, to
determine whether same, and more particularly, the comparative bioavailability
study, literature review and other data contained therein, adequately establish
the safety and effectiveness of Apo-Trazad for use as a drug in Canada without
regard to a condition precedent to such review that the reference product
tested in the comparative bioavailability study be purchased in Canada;
(b) Directing the Respondent
Minister, upon completion of the review of the Apo-Trazad New Drug submission,
if such review is satisfactory, to issue a Notice of. Compliance in respect
thereof;
[50]
Apotex discontinued that proceeding upon a
settlement having been reached with the Minister.
Settlement Agreement
[51]
On November 5, 1990, Apotex, represented by Dr Sherman,
and its lawyer Harry Radomski, met with Bruce Rowsell, representing the
Minister and Marlene Thomas, a Department of Justice lawyer representing the
Minister in order to settle the litigation in T-2276-90. The result was a
letter from Ms. Thomas to Mr. Radomski dated November 26, 1990. This letter is
referred to as the Settlement Agreement and said:
This letter confirms the agreement
reached between the parties and counsel as to the settlement of this action,
culminating in its withdrawal without costs before Jerome, A.C.J. in Motions
Court of the Federal Court, Trial Division in Toronto on November 19, 1990.
The Respondents hereby provide the
following statement with respect to the subject matter of the litigation:
Further to recent discussions,
this confirms that the review of your Apo-trazad new drug submission is
continuing and has not been completed for the purposes of section C.08.004 of
the Food and Drug Regulations. If there are any deficiencies, they will be
identified upon completion of the examination.
Any existing and further data
provided by Apotex to establish that Apo-trazad is chemically and
therapeutically equivalent to a drug product sold in Canada will be considered.
For the purposes of a comparative bioavailability study, the Health Protection
Branch is prepared to consider evidence to establish equivalency between
Canadian and non-Canadian reference standards.
I believe this concludes the matter.
[52]
Ensuing matters did not proceed well.
Ensuing Matters-Not
All is Well
[53]
Things did not go well after the Settlement
Agreement letter was signed by Ms. Thomas and given to Apotex. In his reasons
given in the second judicial review, which I will discuss in some detail
shortly, Justice MacKay set out at considerable length what went on within HPB
and between HPB and Apotex. I refer in particular to paragraphs 17 to 30 and 38
to 87 of his reasons, reported at 59 FTR 85. Having heard the witnesses, and having
reviewed the documents in evidence in the case before me, I endorse and confirm
his findings.
[54]
I accept Dr. Sherman’s evidence as to the
discussions leading up to the Settlement Agreement, and I reject Mr. Rowsell’s
evidence in that respect. It is clearly evident from the discussions between
Apotex and HPB that the only outstanding issue was that of bioavailability. The
parties were apart in that respect, in that Apotex believed that it could
demonstrate bioavailability by equivalency, whereas HPB was looking at
identicality. The Settlement Agreement clearly states that HPB will look at the
matters from the point of view of equivalency. To say that the Agreement was
ambiguous or that HPB didn’t know what the parameters were for equivalency is
disingenuous. Sherman and Rowsell were at the settlement meeting; if HPB had
any concerns respecting equivalency, they could have been raised then, and
clarified then. HPB’s lawyer wrote the Settlement Agreement letter; if she or
her client had any doubts about what she was writing, they should have expressed
them at the time. HPB knew what the letter meant.
[55]
However, HPB did not follow the terms of the
Settlement Agreement. It stayed on a path whereby they were insisting upon
identicality. HPB was less than full and forthright in its dealings with
Apotex. I find that there was a deliberate attempt by HPB to stick to its
position as to identicality while conveying to Apotex a sense that it was
willing to be flexible, which it was not.
[56]
Apotex, correctly in my view, was led to believe
that the submission to HPB of a bit more data; particularly with respect to
dissolution, would be sufficient to satisfy HPB. It supplied such data. The
uncontradicted evidence of Apotex’s expert Dr. Kibbe (Exhibit 12, paras 38 to
65) is that this evidence should have been sufficient to satisfy HPB as to
equivalency.
[57]
Dr. Sherman, on behalf of Apotex, wrote to Dr.
Somers of HPB a letter dated April 25, 1991 (Exhibit 1, Tab 83). It said, inter
alia:
Your letter of March 8, 1991, reporting
the results of review of our NDS, states under point 1 that there remains a
requirement for a bioavailability study using a Canadian reference.
Our submission was filed on January 25,
1988, over 3 years ago, and is one of the oldest uncleared submissions at HPB.
We received a letter from Dr. DaSilva
dated May 1, 1989 stating that a Canadian reference was needed, and the matter
has been under debate between Apotex and HPB since that time. It has been and
remains our position that the reference need not be purchased in Canada; in
fact, logically the preferred reference should be that to which the literature
establishing safety and effectiveness most closely relates, that being the
reference as sold in the originator’s home market.
As you know, we brought an action in the
Federal Court in August 1990, which was withdrawn only after we arrived at a settlement
agreement. The agreement was that the U.S. reference could be used, along with
evidence to establish the equivalence of the Canadian and U.S. references. In the course of settlement discussions, we provided Mr. Rowsell with IR spectral
comparisons and dissolution comparisons, as further evidence that the
formulations of the U.S. and Canadian references were the same, and he
confirmed that this data was the type of further data needed.
In the course of settlement discussions,
we received assurances that HPB would comply with the agreement and review our
submission in good faith.
.
. .
If Mr Rowsell did not know that there
were other examples of use of a reference not purchased in Canada, then it can
only be because he failed to inform himself, in which case he should not have
sworn in paragraph 3 of his affidavit that: “I have knowledge of the matters herein stated”.
Apotex is now suffering substantial
damages from the delay in review and approval of Apo-Trazadone.
We ask that you reconsider your position
and confirm that our bioavailability study using the reference purchased in the
U.S. will suffice. If we do not receive such confirmation within a matter of
days, we will have no alternative but to initiate another action in the Federal
Court founded, inter alia, on bad faith and on refusal to comply with the
settlement agreement. We will also claim damages flowing from the delay in
review and approval.
Please reply promptly, as time is of the
essence.
[58]
On July 2, 1991, Dr. Sherman again wrote to Dr.
Somers (Exhibit 1, Tab 102). This lengthy letter concluded:
In summary, we believe it clear that a
policy that the reference must be purchased in Canada is not well-founded on
several grounds. We believe HPB must abandon that position, or, or, in the
alternative, comply in good faith with the Settlement Agreement, whereby the
foreign reference may be used in cases in which the foreign and Canadian
references appear to be the same and the lack of any significant difference is
confirmed by laboratory comparisons.
I urge you to carefully reconsider your
position in light of the contents of this letter and to confirm that our
studies are now acceptable in accordance with the Settlement Agreement.
In the event that your answer remains
negative, which I hope will not be the base (sic), we will have no alternative
but to promptly proceed with further steps in the Federal Court. In view of the
severe damages now accruing, we will not limit our action to an Application for
an Order in the nature of mandamus, but we will also pursue a statement of
claim for damages.
I will phone you tomorrow to determine
your answer.
[59]
Again, on July 31, 1991, Dr. Sherman wrote to
Dr. Somers (Exhibit 1, Tab 111) a lengthy letter which concluded:
Summary
I believe that each and every one of the
“comments” made by you is untenable. Moreover, taken together they appear to
demonstrate an intransigent refusal to act in good faith.
Damages to Apotex are rapidly accruing,
and I urge you again to immediately confirm the acceptability of our submissions,
so as to avoid the need for us to pursue the Notice of Motion and a claim for
damages.
[60]
Apotex filed its second judicial review
application on July 17, 1991.
Judicial Review
#2: T-1877-91
[61]
On July 17, 1991, Apotex filed a second
originating Notice of Motion with the Court, assigned file number T-1877-91.
Apotex sought in respect of the Minister, the following Order:
(a) Directing the Respondent
Minister of National Health and Welfare (the “Minister”) to review the
Applicant’s New Drug Submissions in respect of its drug products, Apo-Trazad
and Apo-Zidovudine, to determine whether same, and more particularly, the
comparative bioavailability study, literature review and other data contained
therein, adequately establish the safety and effectiveness of Apo-Trazad and
Apo-Zidovudine for use as a drug in Canada without regard to a condition
precedent to such review that the reference product tested in the comparative
bioavailability study be purchased in Canada or that there be a certification
from the manufacturer of the Canadian reference product that it is identical to
the non-Canadian reference product;
(b) Directing the Respondent
Minister, upon completion of the review of the Apo-Trazad and Apo-Zidovudine
New Drug Submissions, if such review is satisfactory, to issue a Notice of
Compliance in respect thereof and if such review is unsatisfactory, to detail
the deficiencies disclosed in such review;
[62]
Among other Affidavits, the Affidavits of
Bernard Sherman and Bruce Rowsell were filed, both of whom were cross-examined.
It must be noted that Apotex put in issue not only its Apo-Trazad submission,
which is the subject of this action, but also another submission,one for
Apo-Zidovudine in which Apotex had also used a non-Canadian reference product.
In his reasons, to which I will now turn, the late Justice MacKay of this Court
identified the Apo-Trazad application as Apo-A, and the Apo-Zidovudine
application as Apo-B, as there were at that time certain concerns as to
confidentiality.
[63]
This application was heard by Justice MacKay on
March 22 to 24, 1992. He delivered his decision, with reasons, on January 19,
1993. His reasons, as reported at 59 FTR 85, were put before me in the agreed
evidence as part of Exhibit 3.
Apotex
Mitigates on Apo-Zidovudine
[64]
With respect to Apo-B (Apo-Zidovudine),
subsequent to the hearing in March 1992, Apotex provided to HPB a
bioavailability study using a Canadian originator product as a reference.
Apotex was given a Notice of Compliance by the Minister on May 25, 1992. This
matter was brought to the attention of Justice MacKay before he had given his
decision. As a result, Justice MacKay dismissed Apotex’s application respecting
Apo-B as moot. His reasons in this respect are set out at paragraphs 31 to 37.
I will not reproduce those reasons here.
[65]
With respect to its Apo-Zidovudine application,
Apotex wrote to Mr. Rowsell on May 10, 1991 (Exhibit 1, Tab 87) challenging the
“policy” respecting the use of a Canadian reference product. The letter stated,
in part:
If we do not receive your prompt
confirmation that the U.S. reference is acceptable and review has commenced, we
will instruct our solicitors to apply to the Federal Court for an appropriate
order. We will also mitigate damages by commencing the repeat study and will
seek to hold HPB liable, for both the cost of the study and damages from delay
in review and approval.
[66]
In fact Apotex did conduct a study using a
Canadian reference product and did receive approval for Apo-Zidovudine within a
few months. When cross-examined on this point, Dr. Sherman provided the
following answers at pages 474 to 477 of the Transcript:
Q. It was your – was that – was
that a statement of a – a real intention to do so?
A. Yes. And I can tell you what
happened. We were in a real hurry for this one because it was a first generic
opportunity of a substantial significance, but in addition, what distinguished
this product was that Health Canada had a fast-track policy for antiretroviral
drugs.
So in this case we knew that
if we did a repeat study and submitted it, it would not result in the long
delay for – to put it back at the end of the line because the antiretrovirals
immediately went to the front of the line so there would be no delay.
So as a pragmatic matter we
recognized that doing the mitigation, doing the repeat study was the faster
route because a judicial review would have taken a lot longer.
There’d be no delay other
than the delay of doing the study which, in this case, was relatively quick. It
was a simple study we could do in a couple of months. So pragmatically the best
way to do it was to do a repeat study for that reason of fast tracking.
And at the end we didn’t
bother suing for damages because it just wasn’t worth it. We really weren’t
delayed much because for the very reason that I told you.
And also Health Canada was, in any event, because of the fast-track policy already reviewing the
submission, in any event, even while we were doing the repeat study and to sue
for a couple hundred thousand dollars and the cost of the study would have made
no sense.
That’s what happened in this
case.
Q. I thought apo-trazadone was an
antidepressant?
A. It is. We’re talking about AZT
here, are we not? Yes, we’re not talking about AZT, zidovudine. Yes, we’re not
talking about trazadone in this – in this letter. It was zidovudine, AZT.
Q. I apologize, but the letter –
A. You’re dealing with zidovudine
which is AZT. I guess AZT since we’re in Canada.
Q. I see. So in this case you are
advising Health Canada right from the start that if we can’t get this going
we’re going to do a study –
A. Yes, for the reason –
Q. - and then come after you for
damages?
A. The reason I told you, but
then the – it turns out that there was no significant delay as a result and the
only damage would be the cost of the study which is only a couple hundred thousand
dollars. Wouldn’t make sense to sue for that.
Q. And in this case, I believe you
said it pragmatically was the best thing to do?
A. The suit, yes.
Q. No, to do the bio –
A. In the case of AZT –
Q. To sue, I’m sorry. Yes.
A. In this case, the case of
apo-trazadone if we’d done the repeat study it would have taken time and then
we would have gone back to the beginning of the queue. It would – that would
have delayed us another year.
Back to
Judicial Review #2: T-1877-91
[67]
Justice MacKay dismissed the application with
respect to Apo-A (Apo-Trazad). He did so having reviewed many of the facts and
documents as put in evidence before me, including, what was done by HPB before
and after the Settlement Agreement. Apotex’s Counsel argues that Justice MacKay
did not have the complete picture, since the matter was dealt with as an
application where no discovery was available. Apotex’s Counsel argues that, as
a result of Access to Information requests and the discovery process in this
action, a much more complete picture as to what went on at HPB is in evidence
before this Court.
[68]
Justice MacKay provided extensive reasons. At
paragraphs 8 to 16, he sets out the general procedure in effect in the early
1990’s for obtaining a Notice of Compliance. At paragraphs 17 to 30, he
reviewed, in general, Apotex’s application for approval of Apo-A (Apo-Trazad).
He then dealt with the Apo-B Apo-Zidovudine) application, which I referred to
earlier. He returned to the Apo-A application at paragraphs 38 to 87. I repeat
paragraphs 85 to 88 of his Reasons, wherein he dismissed the application on the
basis that the determinations of HPB were not “patently
unreasonable”:
In judicial
review of specialized tribunals, such as labour relations boards or
adjudicators whose decisions, based upon particular expertise and experience,
are to be final and binding and not subject to appeal or review, it is now
accepted that a court will intervene only where the decision maker has
interpreted governing legislation in a manner that is so patently unreasonable
that it demands intervention by the court. (Canadian Union of Public Employees,
Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227, 97 D.L.R. (3d)
417 per Dickson J. as he then was). In view of the discretion here, requiring
special expertise and informed scientific judgment it seems to me a comparable
sort of standard is appropriate for this Court to consider in this case. Put as
a question, in view of the particular, specialized discretion here vested in
HPB can it be said that its application of the governing regulation, section C.
08.002, to require evidence of a bioavailability study comparing Apo-A and C
(Can.) in the new drug submission for Apo-A is patently unreasonable? Is it so
unreasonable that the governing regulation clearly will not support its
application in this way?
Viewed against
that standard, the evidence on behalf of the respondent Minister, particularly
that of Dr. McGilveray, though disputed by Apotex, the fact that in many previous.
submissions by Apotex itself bioavailability studies were included with
reference to a Canadian standard product, and HPB's reference to practices
followed in some other countries, lead me to conclude that there is no basis
for this Court to determine that the HPB requirement is patently unreasonable
or beyond the discretion of the Director under section C. 08.002 of the
regulations.
Except for the
refusal to consider the bioavailability study comparing Apo-A with C (U.S.),
the Minister's responsibility to consider the Apotex submission was met,
ultimately by the letter of March 1991 advising that the new drug submission at
that stage did not meet requirements for compliance with the regulations. Among
other deficiencies then noted was the failure to establish the safety and
efficacy of Apo-A in comparison to a Canadian reference standard, which Apotex
concluded meant there was a requirement for a bioavailability study using a
Canadian reference, a conclusion borne out in subsequent correspondence with
HPB. That requirement for a revised new drug submission has not been met by
Apotex. Until there is such a submission, no duty rests on the respondent
Minister to again consider the issuance of a notice of compliance for Apo-A.
[69]
On February 8, 1993, Apotex appealed from the
decision of Justice MacKay (A-135-93: Exhibit 3 Tab 20); further discussions
between the parties occurred. The appeal was withdrawn once Apotex received its
Notice of Compliance for Apo-Trazad (Apo-A) February 28, 1995.
Justice MacKay’s Findings
[70]
In the course of his Reasons, Justice MacKay
made a number of findings. While there was an appeal taken by Apotex, it was
ultimately withdrawn. Therefore, those findings are final. I appreciate that
those findings were based on the record before Justice MacKay and the issues
before him were in the context of a judicial review. I further appreciate that
there is additional evidence before me, and that unlike Justice MacKay, I have
seen witnesses in person. I pause to note that it is agreed by counsel for each
of the parties that Justice MacKay’s use of the word “discovery”
in his Reasons is directed to transcripts of cross-examination of
persons who had filed affidavits in the proceedings before him and not on a
discovery.
[71]
Having heard the witnesses before me, and having
reviewed the evidence before me, I concur with a number of the findings made by
Justice MacKay. This oral testimony of the witnesses, and these further
documents, serve to confirm his findings, which I adopt as my own. In
particular, the following findings:
•
Apotex understood that the Settlement Agreement
required that equivalency between the U.S. reference brand used by it in its
bioavailability study and the Canadian originator brand, by laboratory tests; in
particular chemical analysis and dissolution studies, was what the Settlement Agreement
contemplated. HPB said it was prepared to “consider”
information and, through Counsel, HPB conceded that it was satisfied as to
chemical equivalency. At paragraph 47 he wrote:
Particularly
after the settlement in 1990 of the first application for judicial review in
relation to Apo-A, Apotex sought to establish equivalency, between the U.S. reference brand used for its bioavailability study and the Canadian originator brand,
by laboratory tests, in particular chemical analysis and dissolution studies.
That was what Apotex understood, as a result of the settlement agreement, would
establish equivalency. That understanding apparently was not shared by HPB.
Although HPB held out that, in accord with the settlement, it was prepared to
consider any information Apotex submitted, and that it had done so, the
submissions by Apotex did not satisfy HPB. At the hearing of this matter,
counsel for the Minister conceded that HPB was satisfied with chemical
equivalency of the two reference brands, but it was not satisfied that the test
data submitted by Apotex established their therapeutic equivalence.
•
There was still controversy as to whether
dissolution studies were sufficient so as to establish bioavailability. He
wrote at paragraphs 49 and 51:
As I interpret
these comments, they stress the difference between dissolution studies and
bioavailability studies, a difference Apotex would not deny, and they
highlight, from HPB's perspective, the limitations of dissolution studies for
purposes of establishing therapeutic effectiveness when contrasted with
bioavailability studies comparing the drugs under study in their use with human
subjects by in vivo tests.
. . .
In regard
to these concerns Mr. Sherman, by affidavit in response, urged that HPB's
concern with changes to drug products properly related to drugs marketed in Canada. In examination on their affidavits both Mr. Rowsell and Dr. McGilveray,
spokespersons for HPB, ultimately concede that, at least in theory, dissolution
studies could be designed to indicate any significant differences in
formulation and manufacturing processes used for drugs compared in the studies.
In fact, Mr. Rowsell professed no personal expertise in dissolution studies and
deferred to Dr. McGilveray as an expert. The latter professed no personal
knowledge of the Apotex studies and spoke to dissolution studies on the basis
of general principles. He acknowledged that such studies were acceptable for
purposes of comparing chemical and therapeutic equivalence in different batches
of the same drug produced by one manufacturer, even, as I understand it, when
produced in different factories. Yet he declined to accept Apotex dissolution
studies as a basis for establishing therapeutic equivalence of C (Can.) and C (U.S.) even though, belatedly, chemical equivalency was accepted. Neither Mr. Rowsell
nor Dr. McGilveray were knowledgeable about the details of any review by HPB of
the Apotex studies, though they were put forward as spokespersons on behalf of
HPB and the respondent Minister. It is apparent from their examination in
discovery that their views reflected general considerations and circumstances
rather than positions adopted after any personal consideration of the
particulars of the Apotex submissions.
•
Despite its assertions to Apotex that HPB was
prepared to accept evidence as to equivalency of the U.S. and Canadian
products, in fact HPB was only prepared to consider evidence as to
bioavailability with reference to a Canadian product. He wrote at paragraph 55:
My own
review of this portion of the evidence leads me to conclude that, in the final
analysis, HPB refuses to accept, for purposes of establishing safety and
effectiveness of the Apotex brands, evidence of equivalency of U.S. and
Canadian originator products. The emphasis, in Rowsell's affidavit, on
comparing manufacturing processes used in preparation of the Canadian and U.S.
originator brands, which ordinarily would be beyond the ability of Apotex to
obtain, in my view makes clear that HPB was not prepared to consider
equivalency of the two originator brands on the basis of any evidence Apotex
could produce by laboratory tests. Despite its protestations that it would
consider, in relation to the Apo-A submission, any further information Apotex
submitted, HPB was only prepared to consider as sufficient a bioavailability
study with reference to the Canadian originator product, C (Can.). HPB clearly
stated that no other method satisfactory to it for establishing equivalency had
been identified. While formally HPB's position was open to consider Apotex
submissions, for all practical purposes only the submission of a satisfactory
bioavailability study of Apo-A and C (Can.) would satisfy HPB of the safety and
effectiveness of Apo-A.
•
HPB was disingenuous in representing to Apotex that
it was prepared to consider all other submissions. HPB remained adamant that
only a Canadian reference product would suffice. He wrote at paragraph 56:
If those
responsible for HPB knew at the time of the settlement with Apotex in 1990 that
there was no method satisfactory to HPB identified to establish equivalency of
the U.S. and Canadian reference brands, then, in my view, in the settlement HPB
misrepresented that they were prepared to consider information to establish
that equivalency. If it became clear only after the settlement that no other
method could establish equivalency to HPB's satisfaction, it seems to me
disingenuous to continue to say they were prepared to consider all other
submissions of Apotex for this purpose, when in effect only the submission of a
bioavailability study with reference to C (Can.) would suffice to establish
safety and effectiveness in human use of Apo-A.
•
There is little evidence to support HPB’s
assertion that there was a “long-standing”
policy requiring a Canadian reference product. He concluded at paragraphs 63
and 64:
I find it
surprising that the evidence offered in support of the existence of a policy,
said to be of long-standing, is all of such recent origin. Moreover, no
explanation is offered of the interrelation of the policy, if it were of
long-standing, with omission of any reference to it in Guidelines for New
Drug Product Requirements published in February 1981 by the then Bureau
of Human Prescription Drugs of HPB. These guidelines include reference to
"General Requirements for Safety and Efficacy" and to
"Bioequivalence", and both references refer to studies relating to
acceptable brands of the drug product under review. It is noted that drugs may
be introduced in different countries. In relation to Bioequivalence the
guidelines state that "Generally the bioavailability of the new generic
drug product is compared to that of an acceptable standard, in studies in man using
an ethically acceptable dose and a validated method". No reference is made
to any necessity for studies to be related to a Canadian reference brand.
Though these guidelines might be changed by HPB acting within discretion vested
by regulation C. 08.002 (see, in relation to a change in regulatory policy
regarding the definition of "new drug" under C. 08.001, C. E.
Jamieson & Co. (Dominion) Ltd. et al. v. Canada (Attorney General) (1987),
12 F.T.R. 167 at 213, 46 D.L.R. (4th) 582 at 644, 37 C.C.C. (3d) 193 at 255),
there is no evidence that the guidelines were revised and published, as the
1981 version was, for the guidance of the industry. If HPB policy was of
long-standing, I find it extraordinary that Apotex, a major generic drug
manufacturer, was unaware of it until the matter was brought to its attention
by HPB in the latter part of 1989 in response to an Apotex new drug submission
other than for Apo-A. In its timing, the communication of HPB's policy
statement to Apotex was after its new drug submission for Apo-A, though Apotex
apparently conceded it was aware of the policy before its new drug submission
for Apo-B was put forward to HPB.
My conclusion
is that HPB may well have had a practice, not followed dogmatically as we shall
soon see, which practice was reduced to writing, as a policy statement, in June
1989, that bioavailability studies submitted in relation to new generic drugs
where an originator brand is already available in the Canadian market should be
done with reference to the brand currently sold in the Canadian market. That is
what the internal policy memorandum of June 23, 1989, clearly says. That may
have implications for circumstances where a generic brand is the first of a
drug product to be brought to market in Canada, if those circumstances are
possible, but those are not relevant here. The use of the verb form
"should be" in the policy statement may be intended to be mandatory,
but it evidently is intended as a directive for the future.
•
HPB was inconsistent in applying its “policy”
with respect to insistence upon a Canadian reference product. However, there is
no evidence that Apotex was subject to discrimination in this regard. He wrote
at paragraph 67:
The
record is one of less than consistency in the application of its stated policy
or practice by HPB, though Apotex may well have been no worse off or no better
off than any other manufacturer. The record does not depict an efficient,
effective HPB in terms of its relations with Apotex, one of the manufacturers
whose products it is required to approve for sale in Canada. Apotex was itself
the beneficiary of decisions accepting studies with reference to foreign
originator products in other cases. Nevertheless, it is difficult to agree that
it was subject to discrimination or even unfairness from the requirement of HPB
in this case on submission of a bioavailability study with reference to the
Canadian product for the discretion of the Minister and his advisers is to be
exercised in relation to each application and I am not persuaded there is a
firm basis here for comparing applications for similarities in all relevant
respects.
•
While the Food and Drug Act and its Regulations
vest discretion upon the Minister, that discretion is not unlimited and must
be exercised on consideration of the relevant factors set out therein. He wrote
at paragraph 75:
In my view the regulations
vest complete and exclusive discretion in the respondent Minister and the
Director of HPB to determine the requirements of a new drug submission in terms
of the information or evidence to be provided by the manufacturer. That
discretion is not unlimited, for it must be exercised on consideration of
factors that are relevant to the purposes of the Act and regulations. Those
purposes, in relation to new drugs, are to provide a process for approval of
new drugs to be marketed in Canada that is "in the interest of, or for the
prevention of injury to, the health of the purchaser or consumer" (the Act
s. 30(1)(e)).
•
The refusal by HPB to consider Apotex’s full
submissions on the basis that a Canadian reference product was required was an
unlawful fettering of its discretion. There was no lawful basis for refusing to
do so. He wrote at paragraphs 78 and 80:
In my view,
refusal to consider the full submission for Apo-A because of a claimed policy
that bioavailability studies be done only with reference to a Canadian product,
as for a time appears to have been the position of HPB following the letter of
May 1989, and particularly after written expression of its policy in June 1989,
would be unlawful fettering of discretion. (See e.g., Griffin v. Canada (Agriculture Can., Inspections Division) (1989), 39 Admin. L.R. 215 (F.C.T.D.); Lloyd v.
Superintendent of Motor Vehicles, [1971] 3 W.W.R. 619, 20 D.L.R. (3d) 181 (B.C.
C.A.); Re Lewis and Superintendent of Motor Vehicles for British Colombia (1980), 108 D.L.R. (3d) 525 (B.C. S.C.)). Similarly, it would be unlawful to refuse
consideration of the Apotex bioavailability study for the reason, suggested at
the hearing by counsel for the respondent, that it did not demonstrate
equivalence of C (Can.) and C (U.S.), for the study was not submitted for that
purpose and Apotex never suggested that it was. Finally, it would be unlawful
to refuse for the reason, also alluded to at the hearing, that Apotex was
simply seeking a convenient method of preparing a new drug submission, relying
upon a study of Barr Laboratories, its affiliate in the U.S., rather than
undertaking a study of its own. Surely convenient and efficient methods for
seeking approval for a submission which meets the requirements of HPB should be
encouraged, rather than discouraged, it seems to me. All of these reasons are
irrelevant to the purposes for which the bioavailability study was submitted or
to the purposes of the legislation.
. . .
This leads
me to conclude that Apotex is entitled to have the bioavailability study
reviewed in relation to assessment of the safety and effectiveness of Apo-A for
marketing in Canada. It is relevant to that assessment and no lawful reason for
refusing its review has been suggested. (See Oakwood, supra.)
•
HPB’s manner of dealing with Apotex was maladroit, at times dissembling. HPB was intransigent, and less than full and
forthright. Having reviewed more evidence than Justice MacKay did, and having
seen the witnesses in person, I find, unlike Justice MacKay, that HPB misled
Apotex into a belief that HPB would be willing to receive further data and
review it on a basis of equivalency. It was not. He wrote at para 90:
In the
manner of its dealing with Apotex, HPB seems, in my view, to have been maladroit, at times dissembling if not actually misleading. I do not believe
that it acted in bad faith or with malice. Nevertheless, it relied for a time
on a "long-standing" policy, of which it could produce no written
evidence antedating June 1989, after the Apo-A submission was initiated. HPB
reached a settlement of the first application for judicial review undertaking
"to consider evidence to establish equivalency between Canadian and
non-Canadian reference standards" and later professed that there was no
known methodology to establish this (presumably, aside from bioavailability
studies directly comparing those two brands). It was intransigent in
acknowledging it was satisfied of chemical equivalency of Canadian and U.S.
reference standards until these proceedings were initiated and the matter
heard; it failed to identify any particular dissatisfaction with dissolution
studies, unlike its practice in other respects, until pleadings and discovery
in these proceedings when its reservations were articulated. In my view it
failed to reasonably explain other examples of accepted new drug submissions
which relied upon bioavailability studies with reference to a foreign product,
some approved after its enunciation and espousal of a policy that would preclude
this. All these are instances of less than full and forthright dealing with
Apotex. Perhaps these arose from some confusion or from re-organizations within
HPB; perhaps some such circumstances are inevitable in a bureaucracy with its
attendant difficulties of coordinating management of information and of people.
But that does not excuse what must have seemed to Apotex a stubborn position
supported over time by differing explanations. In short, had HPB's relationship
with Apotex been more open and cooperative, while still setting HPB's own
requirements with rational explanations, it is quite possible that the first
application, or this one, for judicial review would not have been seen as
necessary.
After Justice
MacKay’s Decision
[72]
In the beginning of 1993, Dann Michols moved
from his position as an Assistant Deputy Minister at Health Canada to take over the responsibilities of the Drug Directorate for a period of time, as part of a
reorganization going on in Health Canada. It was recognized that the processes
within Health Canada were unconscionably slow, and were not as efficient as
similar organizations in the United States, Britain and Europe.
[73]
Under Michols’ policies, including the use of a
reference product, came under review, including consultation with “stakeholders”. In December, 1995, a final policy was
published requiring the comparator product to be a Canadian product already approved
for sale in the Canadian market or another product meeting strict criteria. By
that time, Apotex had received its NOC.
[74]
I have no doubt that Michols’ mandate was to
shake up the bureaucracy at the Drug Directorate and get things done better. On
October 7, 1993, Michols met with Dr. Sherman to discuss the Apo-Trazadone
situation, following which, on October 12, he sent a very strong memorandum to
Ms. Carman and Dr. Iain McGilveray stating in no uncertain terms that Apotex
was owed a full explanation. That memorandum is worth repeating, as it is set
out Michols instructions in clear and unmistakable terms, with a copy sent to
Health Canada’s in-house lawyer, Mr. Stuart Archibald (Exhibit 8):
Apo-Trazadone
As you know, I met with Barry Sherman on
October 7, 1993 with our respective legal advisors on the subject of Apotex’s
submission for Apo-Trazadone.
As a result, I have undertaken to write
to Dr. Sherman, within the immediate future, a letter setting out:
1.
The results of our review analysis of the
dissolution data submitted by Apotex in as detailed a manner as possible,
setting out any problems, deficiencies, etc. we may have with it.
2.
Our decision on where the Apo-Trazadone
submission stands, ie. Why we cannot issue an NOC, or if we believe we can,
what more is required before we do.
I appreciate that there are perhaps
scientific subtleties in this file which I do not fully grasp but from a public
policy perspective, we owe Apotex a full explanation of what the deficiencies
in its submissions are. If these deficiencies are scientific, ie. dissolution
data does not prove bioequivalency, then we should be prepared to say exactly why,
or, if possible, how the deficiency analysis could be improved.
If these deficiencies are of policy then
we ought to be able to state definitively why we have the policy. Dr. Sherman
gave several examples of cases where we have accepted dissolution data as the
basis for a decision (Amoxi, Theophyline). If we can counter with a solid
reaction as to why the cases were different, we should do so. If it comes down
to our agreeing that Apotex did the correct studies and we agree with the
results but simply believe that bioequivalency is not proved then we should
quote a few cases that lead us to be uncertain (eg. Gemfibrozil, maybe?).
I would appreciate it if you and Iain
would work together to provide me with a draft letter to Dr. Sherman. I have
the feeling that our practices and maybe even our policies have been
inconsistent in the past. We have new management across the board. I would like
clear signals on what our policies and practices will be.
If I have not made myself clear on this
matter, please call and we can discuss. I attach some documents that may be in
the file but were given out at the meeting anyway. Once we have a draft that I
understand, we will discuss with Stuart. You may want to involve Peter Jeffs in
your discussions.
Thank you for your dedication.
[75]
On January 14, 1994, Ms. Carman forwarded to
Michols two different drafts of a letter that could be sent to Apotex. The thrust
of the drafts was that dissolution data that had been submitted by Apotex could
not be accepted as a means of establishing bioequivalence. Such a letter was
never sent.
[76]
HPB conducted a “re-review”
of data previously submitted by Apotex. In a report from Mr. Ward, the
evaluator, to Ms. Carman, dated April 8, 1994 (Exhibit 1, Tab 159), it was
concluded that “Apotex has not adequately
established the bioequivalence of Canadian and U.S. Desyrel drug products.”
That same day, Ms. Carman wrote to Apotex (Exhibit 1, Tab 159) stating that a
Notice of Compliance would not be issued as a result of this re-review, and
inviting Apotex to contact her to arrange a discussion between Apotex’s
technical people and the reviewer.
[77]
The meeting took place on May 16, 1994 between
Apotex’s technical people and representatives of HPB. Minutes were kept (Exhibit
1, Tab 160). At that meeting Apotex undertook to
conduct further dissolution studies and provide the results to HPB.
[78]
The further studies were conducted and the
results provided to HPB, Ms. Carman, by letter dated May 31, 1994 (Exhibit 1,
Tab 162). The HPB reviewer, Mr. Ward, was immediately put to the task of
reviewing this material, and on June 23, 1994, he prepared what is referred to
as a “draft” or “unsigned”
report (Exhibit 1, Tab 164), in which Mr. Ward stated, inter alia:
DISCUSSION
In light of the acknowledgement of
chemical equivalence, the nature of the drug substance, and the results of
comparative dissolution analyses in a variety of media over the physiological
pH range, I have no outstanding concerns regarding the potential inequivalence
of U.S. and Canadian marketed Desyrel.
.
. .
CONCLUSION
The purpose of this review was to
evaluate the adequacy of data filed to establish the equivalence of U.S. and Canadian marketed Desyrel. In my opinion, Apotex has provided sufficient evidence
to allay any reasonable concerns that said products could in general perform
differently in vivo.
[79]
However, HPB did not communicate these findings
to Apotex, even though it was quite aware that Apotex was anxious to hear the
results. It appears that Mr. Ward sent a communication to Ms. Carman (Exhibit
1, Tab 167) saying that he was ready to meet with her before he went on holidays
to discuss the draft. No such meeting took place. Ms. Carman does not know why;
further, she could not recall receiving the draft.
[80]
In mid-October, Apotex contacted Ms. Carman to see
what was happening. She replied by voicemail that the matter was “currently under discussion with legal counsel”
(Exhibit 1, Tab 172).
[81]
An exchange of memoranda between Ms. Carman and
Mr. Jeffs occurred (Exhibit 1, Tabs 173 and 175), in which Jeffs stated that “we need to be very cautious”; Ms. Carman expressed
urgency and the need to “provide guidance”. On December 6, 1994,
Ms. Carman wrote to Apotex (Exhibit 1, Tab 171) to say that a review was
scheduled to commence December 15, 1994. Dr. Sherman wrote to Ms. Carman on December
19, 1994 (Exhibit 1, Tab 182), again expressing urgency.
[82]
On December 16, 1994, Mr. Ward signed a report
(Exhibit 1, Tab 199), which contained only slight revisions from his report
dated June 23, 1994, and sent it to Ms. Carman This signed report stated the
same findings as the June report:
DISCUSSION
In light off the Crown’s acknowledgement
of chemical equivalence, the nature of the drug substance, and the results of
comparative dissolution analyses in a variety of media over the physiological
pH range, I conclude that no basis remains for articulating concerns regarding
the potential inequivalence of U.S. and Canadian marketed Desyrel.
[83]
For unexplained reasons, Mr. Ward’s
report of December 16 was not sent to Ms. Carman until a week later – December
23 – in the result that, given the Christmas vacation, the report would not
have been received until the New Year. When asked whether the delay in
providing what was essentially the June 1994 report until the beginning of 1995
was fair to Apotex, Mr. Ward answered in one word: “No.”
(Transcript, page 785).
[84]
On January 3,
1995, Ms. Carman had read the Ward report and sent a short note to him asking
how they might extricate themselves from the matter. It is clear that she was
worried as to potential consequences. She wrote (Exhibit 1, Tab 201):
I have read your report and do not see
further difficulties presented…just the same old problems with how to extracate
(sic) ourselves from this one. If you want to discuss, please drop by.
[85]
On January 6, 1995, Counsel from the
Department of Justice, a Mr. Nagy, who had been junior counsel for the Crown in
the judicial review heard by Justice MacKay, sent a peculiar letter to the
lawyers for Apotex (Exhibit 1, Tab 103). It requested that Apotex sign a release,
a draft of which was enclosed, releasing Her Majesty and others from “any and all manner of claims, actions, causes of
action, debts”, etc. The letter read:
Further to Ms. Mary Carman’s letter to
Apotex Inc. of December 6, 1994, Dr. Sherman’s
responding letter to Ms. Carman of December 19, 1994, and my voice messages to
you over the past three days, my client is attempting to expedite the review.
It may be possible to finish the Apo-Trazadone review in less than the 120 days
indicated in Ms. Carman’s letter.
[86]
The implication of this letter is clear; Apotex
is told that it may well get its NOC once the release is signed. I view this as
an ill-advised, even bone-headed, attempt to “extricate”
HPB from the problems created by this file.
[87]
Senior Counsel at the Department of Justice
quickly sought to distance HPB from this request following a letter of
complaint from Apotex’s lawyer of January 9, 1995 (Exhibit 1, Tab 204). On
January 30, 1995, Ms. Thomas of the Department of Justice wrote (Exhibit 1, Tab
210), assuring Apotex’s lawyers that she “would not
attempt to seek any agreements which would limit recourse which your client may
properly have against mine”.
[88]
Further deliberations
took place between HPB and Apotex, causing Ms. Carman to write a handwritten
note on a memorandum of 8 February 1995 (Exhibit 1, Tab 218), in effect saying to
get on with it. She wrote:
We are or are not
satisfied. I do not support continued clarifax requests.
[89]
Apotex got its
NOC on February 28, 1995 (Exhibit 1, Tab 224).
What does
this Court make of the activity of Apotex and HPB post the Decision of Justice
MacKay?
[90]
Following the release of the reasons of Justice
MacKay January 19, 1993, Apotex continued to submit data to HPB directed to
showing equivalence between the United States reference product and the Apotex
product. This data was largely directed to dissolution rates, but it also
included other matters, such as tablet hardness. Dr. Kibbe’s unchallenged
evidence (Exhibit 12, para 61), is that this material continued to support the
equivalency of the Canadian and U.S. reference products. Apotex at no time
backed down from using the U.S. reference product. At no time did Apotex submit
results of any testing that it may have done using a Canadian reference
product.
[91]
Apotex continued to press HPB for a favourable
decision. Apotex promptly answered all HPB requests. There is no delay
attributable to Apotex in this respect.
[92]
In the meantime, HPB was undergoing a
significant re-organization. Efforts were led by Dr. Michols, and Ms. Carman,
to vastly improve how that organization was run, and decisions were made. They
had much on their plate. Still, HPB had dragged its feet, involved legal
counsel, tried to extricate itself and, sought a release from Apotex, all in a
clumsy exercise to maintain a “policy” that it had agreed not to apply.
[93]
It seems, however, that the wheels of a
bureaucracy grind slowly. There continued to be procrastination, delay,
unnecessary consultation, and the like. Some correspondence was copied to the
in-house legal department or Department of Justice. Ms. Carman’s telephone
message of October 1994 makes it clear that lawyers were closely involved in
this matter.
[94]
The delay in dealing with Mr. Ward’s findings of
June 1994 until January 1995, which would largely have resolved the matter in
Apotex’s favour, remains unexplained.
[95]
I find that there was a deliberate attempt to
frustrate Apotex’s submission for an NOC. There appears to have been endless
circling around the internal idea that a Canadian reference product must be
used, and the insistence that Apotex must prove the impossible – identicality.
[96]
Ms. Carman’s exasperated memo of 8
February 1992 “We are or are not
satisfied” can be explained through the lens of Dr. Nitchuk’s answer given in
cross-examination at page 1149 of the transcript to the question “Why do
that?”:
Because we’re a bureaucracy. I’m sorry.
That’s the reality.
[97]
The examination of the inner workings of HPB in
this period is not pretty. Just as the saying attributed to Chancellor Bismarck,
“Laws are like sausages, it is better not to see them
being made”, it may have been better for HPB not to have its bureaucratic
workings exposed. They were ugly.
After Apotex Got Its
NOC
[98]
There is little evidence as to what Apotex did
after it got its NOC on February 28, 1995. In a letter dated March 23, 1995
(Exhibit 1, Tab 226), Apotex told HPB that it was currently marketing bottles
of tablets in 50mg, 100mg and 150mg strength.
[99]
On December 5, 1995, HPB published a Drug
Directorate Policy regarding the use of a non-Canadian Reference Product
(Exhibit 1, Tab 227). It set out a number of criteria to be met.
[100] On October 9, 1998, Apotex commenced the present action by filing a
Statement of Claim with this Court. There is no evidence as to why it waited
some three years after receiving its NOC, to do so.
[101] It has taken some sixteen years for this action to come to trial.
My Overall View
of the Matter
[102] My overall view of the circumstances of this case is that Apotex was
and still is a frequent “customer” of HPB. It,
and in particular Dr. Sherman, are highly sophisticated in matters relating to
HPB and the securing of NOC’s to permit generic copies of drugs to be sold in
Canada. The nuances of these matters were well known to Apotex, and Apotex was
not reluctant to push the envelope when it wanted to make a point.
[103] HPB was, particularly in the period up to 1993, an inefficient,
badly run bureaucracy. It had unwritten policies, such as those respecting the
use of non-Canadian reference drug products and whether or not third party
files could be accessed in order to secure or confirm certain information. Even
those internal policies were more in the nature of desiderata than firmly
established policies; breaches, knowing and unknowing, occurred from time to
time. HPB exhibited some of the worst features of bureaucracy; matters were
recycled, nobody wanted to make a decision, endless consultation took place In
particular, I am cautious concerning the evidence of Mr. Rowsell. His evidence
given in the second judicial review - the one before Justice MacKay - shows
that he does not pay sufficient attention to the accuracy of his sworn
statements. Before me, he was rather quick to say that he reprimanded Dr.
Nitchuk for a letter he wrote, something Dr Nitchuk vigorously denies. I expect
Dr Nitchuk would remember a reprimand. I believe him and not Mr Rowsell.
[104] Mr Michols remembered in some detail in his evidence that he
received a telephone call at home at about 11:00 p.m. from Dr. Sherman, who
wanted to discuss matters respecting his submission. I expect that such a call,
as well as persistent correspondence from Apotex, may well have irritated
Michols. Apotex can be abrasive and aggressive. However, I do not attribute to Michols
any deliberate attempt to frustrate Apotex in the course of its dealings with
HPB.
[105] My clear sense of the matter, reviewing the evidence as a whole, is
that Apotex wanted to make its Apo-Trazad submission a test case as to whether
a non-Canadian drug product could be used a as a reference. Apotex readily
performed tests using a Canadian reference respecting its Apo-Zidovudine
product when it became clear that HPB was resisting the use of a non-Canadian
reference. Dr. Sherman’s evidence was that a Canadian reference could be used
to test the Apo-Trazad product at a cost of a few hundred thousand dollars, and
some months delay. Apotex, in fact, with respect to the Apo-Zidovudine,
threatened to do just that with HPB, and then sue to recover the cost of
testing and any loss of sales.
[106] Apotex’s Counsel, in argument before me, cast aspersions on all of
HPB’s fact witnesses, including Mr. Rowsell. Counsel used words such as wongdoings,
dishonest, invented a story, shamefully, false evidence, in addressing this
evidence. I am not buying it. I would use words like careless and unconcerned
about accuracy, about Mr. Rowsell; but as to the others, I accept that they
tried their best to be honest, but somewhat embarrassed, about the facts and
evidence as to what went on some twenty to twenty-eight years ago.
[107] Apotex knew what it was doing. It chose this as a test case. In no
way was Apotex the victim that it purports to be.
[108] HPB was inefficient, hopelessly bureaucratic, dissembling and
clumsy; as were, on occasion, its legal advisors.
Issues
[109]
The basic issue is whether Apotex is entitled to
recover damages, including punitive damages, for the failure to issue a Notice
of Compliance to Apotex in respect of its Apo-Trazad drug until the lapse of an
allegedly undue period of time of some seven years, and until after two generic
competitors had been permitted to market their versions of the drug. I will
accept that Apotex has shown that it may well have suffered damage in the
nature of lost sales and loss of the ability to be the first or second generic
in the marketplace. The quantum of such damages was not at issue before me;
having been bifurcated by an Order of this Court, dated July 31, 2003. The
issues before me relate to entitlement, if any, to damages.
[110] Apotex argues that it is entitled to damages based on one or more of
the following causes of action:
•
Misfeasance in public office;
•
Negligence;
•
Breach of contract (Settlement Agreement); and
•
Misrepresentation (fraudulent, negligent,
innocent).
[111] Her Majesty defends Apotex’s claims on several grounds:
•
Limitation Period bars the claim;
•
There was no breach of the Settlement Agreement;
•
Alternatively, the alleged breach of the
Settlement Agreement was a result of ambiguous language in the contract;
•
If there was a breach of the Settlement
Agreement, Apotex had a duty to mitigate its damages;
•
The negligence claim is statute barred;
•
There was no duty of care owed to Apotex;
•
There was no breach of the standard of care;
•
There was no misrepresentation; whether
fraudulent, negligent or innocent;
•
There was no misfeasance in public office.
I.
Misfeasance in Public Office
[112] Apotex makes several claims in tort; one of them is misfeasance in
public office. This cause of action was thoroughly reviewed by the Supreme
Court of Canada in Odhavji Estate v Woodhouse [2003] 3 S.C.R. 263. I repeat
a portion of the Reasons of that Court, written by Iacobucci J at paragraphs 18
to 32:
18 The origins of the tort of
misfeasance in a public office can be traced to Ashby v. White (1703), 2 Ld.
Raym. 938, 92 E.R. 126, in which Holt C.J. found that a cause of action lay
against an elections officer who maliciously and fraudulently deprived Mr.
White of the right to vote. Although the defendant possessed the power to
deprive certain persons from participating in the election, he did not have the
power to do so for an improper purpose. Although the original judgment suggests
that he was [page279] simply applying the principle ubi jus ibi remedium, Holt
C.J. produced a revised form of the judgment in which he stated that it was
because fraud and malice were proven that the action lay: J. W. Smith, A
Selection of Leading Cases on Various Branches of the Law (13th ed. 1929), at
p. 282. Thus, in its earliest form it is arguable that misfeasance in a public
office was limited to circumstances in which a public officer abused a power
actually possessed.
19 Subsequent cases, however, have
made clear that the ambit of the tort is not restricted in this manner. In
Roncarelli v. Duplessis, [1959] S.C.R. 121, this Court found the defendant
Premier of Quebec liable for directing the manager of the Quebec Liquor
Commission to revoke the plaintiff's liquor licence. Although Roncarelli was
decided at least in part on the basis of the Quebec civil law of delictual
responsibility, it is widely regarded as having established that misfeasance in
a public office is a recognized tort in Canada. See for example Powder Mountain
Resorts Ltd. v. British Columbia (2001), 94 B.C.L.R. (3d) 14, 2001 BCCA 619;
and Alberta (Minister of Public Works, Supply and Services) v. Nilsson (2002),
220 D.L.R. (4th) 474, 2002 ABCA 283. In Roncarelli, the Premier was authorized
to give advice to the Commission in respect of any legal questions that might
arise, but had no authority to involve himself in a decision to revoke a
particular licence. As Abbott J. observed, at p. 184, Mr. Duplessis "was
given no statutory power to interfere in the administration or direction of the
Quebec Liquor Commission". Martland J. made a similar observation, at p.
158, stating that Mr. Duplessis' conduct involved "the exercise of powers
which, in law, he did not possess at all". From this, it is clear that the
tort is not restricted to the abuse of a statutory or prerogative power
actually held. If that were the case, there would have been no grounds on which
to find Mr. Duplessis liable.
[page280]
20 This understanding of the tort is
consistent with the widespread consensus in other common law jurisdictions that
there is a broad range of misconduct that can found an action for misfeasance
in a public office. For example, in Northern Territory of Australia v. Mengel (1995), 129 A.L.R. 1 (H.C.), Brennan J. wrote as follows, at p. 25:
The tort is not limited to an
abuse of office by exercise of a statutory power. Henly v. Mayor of Lyme
[(1828), 5 Bing. 91, 130 E.R. 995] was not a case arising from an impugned
exercise of a statutory power. It arose from an alleged failure to maintain a
sea wall or bank, the maintenance of which was a condition of the grant to the
corporation of Lyme of the sea wall or bank and the appurtenant right to tolls.
Any act or omission done or made by a public official in the purported
performance of the functions of the office can found an action for misfeasance
in public office. [Emphasis added.]
In Garrett v. Attorney-General, [1997] 2
N.Z.L.R. 332, the Court of Appeal for New Zealand considered an allegation that
a sergeant failed to investigate properly the plaintiff's claim that she had
been sexually assaulted by a police constable. Blanchard J. concluded, at p.
344, that the tort can be committed "by an official who acts or omits to
act in breach of duty knowing about the breach and also knowing harm or loss is
thereby likely to be occasioned to the plaintiff".
21 The House of Lords reached the
same conclusion in Three Rivers District Council v. Bank of England (No. 3),
[2000] 2 W.L.R. 1220. In Three Rivers, the plaintiffs alleged that officers
with the Bank of England improperly issued a licence to the Bank of Credit and
Commerce International and then failed to close the bank once it became evident
that such action was necessary. Forced to consider whether the tort could apply
in the case of omissions, the House of Lords concluded that "the tort can
be constituted by an omission by a public officer as well as by acts on his
part" (per Lord Hutton, at p. 1267). In Australia, New Zealand and the United Kingdom, it is equally clear that the tort of misfeasance is not limited
to the unlawful [page281] exercise of a statutory or prerogative power actually
held.
22 What then are the essential
ingredients of the tort, at least insofar as it is necessary to determine the
issues that arise on the pleadings in this case? In Three Rivers, the House of
Lords held that the tort of misfeasance in a public office can arise in one of
two ways, what I shall call Category A and Category B. Category A involves
conduct that is specifically intended to injure a person or class of persons.
Category B involves a public officer who acts with knowledge both that she or
he has no power to do the act complained of and that the act is likely to
injure the plaintiff. This understanding of the tort has been endorsed by a
number of Canadian courts: see for example Powder Mountain Resorts, supra; Alberta (Minister of Public Works, Supply and Services) (C.A.), supra; and Granite Power
Corp. v. Ontario, [2002] O.J. No. 2188 (QL) (S.C.J.). It is important, however,
to recall that the two categories merely represent two different ways in which
a public officer can commit the tort; in each instance, the plaintiff must
prove each of the tort's constituent elements. It is thus necessary to consider
the elements that are common to each form of the tort.
23 In my view, there are two such
elements. First, the public officer must have engaged in deliberate and
unlawful conduct in his or her capacity as a public officer. Second, the public
officer must have been aware both that his or her conduct was unlawful and that
it was likely to harm the plaintiff. What distinguishes one form of misfeasance
in a public office from the other is the manner in which the plaintiff proves
each ingredient of the tort. In Category B, the plaintiff must prove the two
ingredients of the tort independently of one another. In Category A, the fact
that the public officer has acted for the express purpose of harming the
plaintiff is sufficient to satisfy each ingredient of the tort, owing to the
fact that a public officer does not have the authority to exercise his or her
powers for an improper purpose, such [page282] as deliberately harming a member
of the public. In each instance, the tort involves deliberate disregard of
official duty coupled with knowledge that the misconduct is likely to injure
the plaintiff.
24 Insofar as the nature of the
misconduct is concerned, the essential question to be determined is not whether
the officer has unlawfully exercised a power actually possessed, but whether
the alleged misconduct is deliberate and unlawful. As Lord Hobhouse wrote in
Three Rivers, supra, at p. 1269:
The relevant act (or
omission, in the sense described) must be unlawful. This may arise from a
straightforward breach of the relevant statutory provisions or from acting in
excess of the powers granted or for an improper purpose.
Lord Millett reached a similar
conclusion, namely, that a failure to act can amount to misfeasance in a public
office, but only in those circumstances in which the public officer is under a
legal obligation to act. Lord Hobhouse stated the principle in the following
terms, at p. 1269: "If there is a legal duty to act and the decision not
to act amounts to an unlawful breach of that legal duty, the omission can
amount to misfeasance [in a public office]." See also R. v. Dytham, [1979]
Q.B. 722 (C.A.). So, in the United Kingdom, a failure to act can constitute
misfeasance in a public office, but only if the failure to act constitutes a
deliberate breach of official duty.
25 Canadian courts also have made a
deliberate unlawful act a focal point of the inquiry. In Alberta (Minister of
Public Works, Supply and Services) v. Nilsson (1999), 70 Alta. L.R. (3d) 267,
1999 ABQB 440, at para. 108, the Court of Queen's Bench stated that the
essential question to be determined is whether there has been deliberate
misconduct on the part of a public official. Deliberate misconduct, on this
view, consists of: (i) an intentional illegal act; and (ii) an intent to harm
an individual or class [page283] of individuals. See also Uni-Jet Industrial
Pipe Ltd. v. Canada (Attorney General) (2001), 156 Man. R. (2d) 14, 2001 MBCA
40, in which Kroft J.A. adopted the same test. In Powder Mountain Resorts,
supra, Newbury J.A. described the tort in similar terms, at para. 7:
... it may, I think, now be
accepted that the tort of abuse of public office will be made out in Canada
where a public official is shown either to have exercised power for the
specific purpose of injuring the plaintiff (i.e., to have acted in "bad
faith in the sense of the exercise of public power for an improper or ulterior
motive") or to have acted "unlawfully with a mind of reckless
indifference to the illegality of his act" and to the probability of
injury to the plaintiff. (See Lord Steyn in Three Rivers, at [1231].) Thus
there remains what in theory at least is a clear line between this tort on the
one hand, and what on the other hand may be called negligent excess of power --
i.e., an act committed without knowledge of (or subjective recklessness as to)
its unlawfulness and the probable consequences for the plaintiff. [Emphasis in
original.]
Under this view, the ambit of the tort is
limited not by the requirement that the defendant must have been engaged in a
particular type of unlawful conduct, but by the requirement that the unlawful
conduct must have been deliberate and the defendant must have been aware that
the unlawful conduct was likely to harm the plaintiff.
26 As is often the case, there are a
number of phrases that might be used to describe the essence of the tort. In
Garrett, supra, Blanchard J. stated, at p. 350, that "[t]he purpose behind
the imposition of this form of tortious liability is to prevent the deliberate
injuring of members of the public by deliberate disregard of official
duty." In Three Rivers, supra, Lord Steyn stated, at p. 1230, that
"[t]he rationale of the tort is that in a legal system based on the rule
of law executive or administrative power 'may be exercised only for the public
good' and not for ulterior and improper purposes." As each passage makes
clear, misfeasance in a public office is not directed at a public officer who
inadvertently or negligently fails adequately to discharge the obligations of
his or her office: see Three Rivers, at p. 1273, per Lord [page284] Millett.
Nor is the tort directed at a public officer who fails adequately to discharge
the obligations of the office as a consequence of budgetary constraints or
other factors beyond his or her control. A public officer who cannot adequately
discharge his or her duties because of budgetary constraints has not
deliberately disregarded his or her official duties. The tort is not directed
at a public officer who is unable to discharge his or her obligations because
of factors beyond his or her control but, rather, at a public officer who could
have discharged his or her public obligations, yet wilfully chose to do
otherwise.
27 Another factor that may remove an
official's conduct from the scope of the tort of misfeasance in a public office
is a conflict with the officer's statutory obligations and his or her
constitutionally protected rights, such as the right against
self-incrimination. Should such circumstances arise, a public officer's
decision not to comply with his or her statutory obligation may not amount to
misfeasance in a public office. I need not decide that question here except
that it could be argued. A public officer who properly insists on asserting his
or her constitutional rights cannot accurately be said to have deliberately
disregarded the legal obligations of his or her office. Under this argument, an
obligation inconsistent with the officer's constitutional rights is not itself
lawful.
28 As a matter of policy, I do not
believe that it is necessary to place any further restrictions on the ambit of
the tort. The requirement that the defendant must have been aware that his or
her conduct was unlawful reflects the well-established principle that
misfeasance in a public office requires an element of "bad faith" or
"dishonesty". In a democracy, public officers must retain the
authority to make decisions that, where appropriate, are adverse to the
interests of certain citizens. Knowledge of harm is thus an insufficient basis
on which to conclude that the defendant has acted in bad faith or dishonestly.
A [page285] public officer may in good faith make a decision that she or he
knows to be adverse to interests of certain members of the public. In order for
the conduct to fall within the scope of the tort, the officer must deliberately
engage in conduct that he or she knows to be inconsistent with the obligations
of the office.
29 The requirement that the defendant
must have been aware that his or her unlawful conduct would harm the plaintiff
further restricts the ambit of the tort. Liability does not attach to each
officer who blatantly disregards his or her official duty, but only to a public
officer who, in addition, demonstrates a conscious disregard for the interests
of those who will be affected by the misconduct in question. This requirement
establishes the required nexus between the parties. Unlawful conduct in the
exercise of public functions is a public wrong, but absent some awareness of harm
there is no basis on which to conclude that the defendant has breached an
obligation that she or he owes to the plaintiff, as an individual. And absent
the breach of an obligation that the defendant owes to the plaintiff, there can
be no liability in tort.
30 In sum, I believe that the
underlying purpose of the tort is to protect each citizen's reasonable
expectation that a public officer will not intentionally injure a member of the
public through deliberate and unlawful conduct in the exercise of public
functions. Once these requirements have been satisfied, it is unclear why the
tort would be restricted to a public officer who engaged in the unlawful
exercise of a statutory power that she or he actually possesses. If the tort
were restricted in this manner, the tort would not extend to a public officer,
such as Mr. Duplessis, who intentionally exceeded his powers for the express
purpose of interfering with a citizen's economic interests. Nor would it extend
to a public officer who breached a statutory obligation for the same purpose.
But there is no principled reason, in my view, why a public officer who
wilfully injures a member of the public [page286] through intentional abuse of
a statutory power would be liable, but not a public officer who wilfully
injures a member of the public through an intentional excess of power or a
deliberate failure to discharge a statutory duty. In each instance, the alleged
misconduct is equally inconsistent with the obligation of a public officer not
to intentionally injure a member of the public through deliberate and unlawful
conduct in the exercise of public functions.
31 I wish to stress that this
conclusion is not inconsistent with R. v. Saskatchewan Wheat Pool, [1983] 1
S.C.R. 205, in which the Court established that the nominate tort of statutory
breach does not exist. Saskatchewan Wheat Pool states only that it is
insufficient that the defendant has breached the statute. It does not, however,
establish that the breach of a statute cannot give rise to liability if the
constituent elements of tortious responsibility have been satisfied. Put a
different way, the mere fact that the alleged misconduct also constitutes a
breach of statute is insufficient to exempt the officer from civil liability.
Just as a public officer who breaches a statute might be liable for negligence,
so too might a public officer who breaches a statute be liable for misfeasance
in a public office. Saskatchewan Wheat Pool would only be relevant to this
motion if the appellants had pleaded no more than a failure to discharge a
statutory obligation. This, however, is not the case. The principle established
in Saskatchewan Wheat Pool has no bearing on the outcome of the motion on this
appeal.
32 To summarize, I am of the opinion
that the tort of misfeasance in a public office is an intentional tort whose
distinguishing elements are twofold: (i) deliberate unlawful conduct in the
exercise of public functions; and (ii) awareness that the conduct is unlawful
and likely to injure the plaintiff. Alongside deliberate unlawful conduct and
the requisite knowledge, a plaintiff must also prove the other requirements
common to all torts. More specifically, [page287] the plaintiff must prove that
the tortious conduct was the legal cause of his or her injuries, and that the
injuries suffered are compensable in tort law.
[113] Thus, the tort of misfeasance of public office must, in addition to
the usual elements of tort, include:
i
deliberate unlawful conduct in the exercise of
public functions; and
ii
awareness that the conduct is unlawful and
likely to injure the Plaintiff.
[114] The Ontario Court of Appeal has stated that misfeasance in public
office need not be committed by a single individual; it can be committed by a
group of individuals. Rouleau JA, for the Court, in O’Dwyer v Ontario Racing Commission, 2008 ONCA 446, 293 DLR (4th) 559, wrote at paragraph 43:
43 The requirement that the tort be
committed by a "public officer" was addressed in the seminal case of
Three Rivers D.C. v. Bank of England (No. 3), [2000] 2 W.L.R. 1220, in which
the House of Lords commented that public office is to be defined in "a
relatively wide sense". The decision in Jones v. Swansea City Council,
[1990] 1 W.L.R. 1453 (C.A.), was cited for the purpose of demonstrating that a
collective public body such as a council can be liable for the tort. The
decision in Three Rivers was largely adopted into Canadian law through the
Supreme Court decision in Odhavji Estate v. Woodhouse.
[115] The nature of the “unlawful” act set out in the Odhavji test
encompasses a “broad range” of misconduct as stated by Iacobucci J at paragraph
20 above.
[116] In this Court, Prothonotary Aalto has considered the tort of
misfeasance in McMaster v Canada, 2008 FC 1158, 336 FTR 92; his decision
was affirmed by Mandamin J, 2009 FC 937, 352 FTR 255, at paragraph 66. In that
case, the Plaintiff was incarcerated in a federal prison and required special
shoes. The prison officials procrastinated. Prothonotary Aalto held that those
officials had committed a misfeasance in public office. He wrote at paragraphs
51 and 52:
51 Counsel for the Defendant argued
that the Plaintiff had to prove that both Ms. Allen and Ms. Wherry must have
had the intent to act unlawfully. In my view, there is no such requirement. The
actions of Ms. Wherry are sufficient to ground the cause of action.
52 Counsel for the Defendant argued
vociferously that the Defendant made reasonable efforts to satisfy the
Plaintiff's request for shoes as they were ordered three times and that the
Defendant did not know the old shoes were worn out. I disagree. The evidence
shows that the Defendant dragged its feet in ordering the correct shoes for the
Plaintiff and improperly tried to convince the Plaintiff to accept the
ill-fitting shoes when it obviously knew they did not and could not fit.
Further, the Directive requires that the Plaintiff be issued new shoes on an
annual basis. The Plaintiff requisitioned his new shoes because his old ones
were over a year old. Ms. Wherry knew this to be the case.
[117] In the circumstances of the present case, I find that HPB knew since
the date of the Settlement Agreement that they were to consider Apotex’s
submissions on the basis of equivalency. They ignored that requirement; they
stuck to an internal notion of identicality. Further, there was an effort by
HPB to conceal this notion from Apotex.
[118]
I find that:
i
Upon entering into the Settlement Agreement with
Apotex, HPB acted in bad faith by engaging in a deliberate exercise of
conducting its examination of Apotex’s submissions on the basis of
identicality, notwithstanding its undertaking to do otherwise; and
ii
HPB were quite aware that a delay or refusal to
accept Apotex’s submissions would be likely to injure Apotex, given Dr.
Sherman’s repeated warnings to HPB of the same.
[119] The case of misfeasance in public office by the Defendant’s
officials has been made out.
Negligence
[120]
Apotex alleges that HPB was negligent. The
Defendant argues, relying on Binnie J’s judgment for the Supreme Court of
Canada in Canada (Attorney General) v TeleZone Inc, [2010] 3 S.C.R. 585 at
paragraph 69, that governments make discretionary decisions all the time, which
will reflect losses on people and businesses without giving rise to causes of
action known to the law.
[121] However, there is a cause of action respecting negligence by
government officials. It is called the Cooper/Anns test. The Supreme
Court of Canada in Cooper v Hobart, [2001] 3 S.C.R. 537 considered this
test in detail. I summarized that test in Gordon v Canada, 2013 FC 597 at paragraphs 23 to 25:
23 Both parties agree that a cause of
action in respect of negligence in these circumstances is to be examined on the
basis of what is described as the Anns/Cooper test. That test originated in the
House of Lords decision of Anns v Merton London Borough Council, [1978] AC 728
and was further developed by the Supreme Court of Canada in Cooper v Hobart,
[2001] 3 S.C.R. 537. The test may be succinctly stated as a two-stage test where,
if the answer to the first question is yes, then the Court must move on to
consider the second question; but, if the answer to the first question is no,
then there is no need to consider the second question. The questions are:
1. Is there a sufficient proximity
between the party alleged to have been negligent and the party alleged to have
been injured so as to create a duty of care? If the answer is yes, then:
2. Are there policy considerations
which would negate the creation of a duty of care in the circumstances of the
case?
24 As to the first question,
McLachlin CJ and Major J for the Supreme Court in Cooper wrote at paragraph 35:
35 The factors which may satisfy
the requirement of proximity are diverse and depend on the circumstances of the
case. One searches in vain for a single unifying characteristic. As stated by
McLachlin J. (as she then was) in Canadian National Railway Co. v. Norsk
Pacific Steamship Co., [1992] 1 S.C.R. 1021, at p. 1151: "[p]roximity may
be usefully viewed, not so much as a test in itself, but as a broad concept
which is capable of subsuming different categories of cases involving different
factors" (cited with approval in Hercules Managements, [1997] 2 S.C.R.
165, supra, at para. 23). Lord Goff made the same point in Davis v. Radcliffe,
[1990] 2 All E.R. 536 (P.C.), at p. 540:
... it
is not desirable, at least in the present stage of development of the law, to
attempt to state in broad general propositions the circumstances in which such
proximity may or may not be held to exist. On the contrary, following the
expression of opinion by Brennan J in Sutherland Shire Council v Heyman (1985)
60 ALR 1 at 43-44, it is considered preferable that 'the law should develop
categories of negligence incrementally and by analogy with established
categories'.
25 As to the second question, they
wrote at paragraph 37:
37 This brings us to the second
stage of the Anns test. As the majority of this Court held in Norsk, at p.
1155, residual policy considerations fall to be considered here. These are not
concerned with the relationship between the parties, but with the effect of
recognizing a duty of care on other legal obligations, the legal system and
society more generally. Does the law already provide a remedy? Would
recognition of the duty of care create the spectre of unlimited liability to an
unlimited class? Are there other reasons of broad policy that suggest that the
duty of care should not be recognized? Following this approach, this Court
declined to find liability in Hercules Managements, supra, on the ground that
to recognize a duty of care would raise the spectre of liability to an
indeterminate class of people.
[122] There are decisions by a number of Courts dealing with various fact
situations in which the Cooper/Anns test may or may not apply. At one
end there was imposed a duty upon an investigating police officer in Hill v
Hamilton-Wentworth Regional Police Services Board, [2007] 3 S.C.R. 129; at the
other end a government food inspector did not owe a duty to sellers of food
products respecting the alleged negligent inspection leading to the destruction
of the sellers’ carrots; Los Angeles Salad Co v Canadian Food Inspection
Agency, 2013 BCCA 34, 358 DLR (4th) 581.
[123] Here, were it not for the Settlement Agreement, I would find that
HPB was not in a position where it owed a duty of care to Apotex over and above
any duty owed to any other pharmaceutical company seeking approval to sell a
drug in Canada. However, the Settlement Agreement changed all that. By stating
to Apotex that it would examine Apotex’s submissions on the basis of
equivalency, HPB put itself in a special relationship with Apotex and owed a
duty of care not only to examine Apotex’s submissions on that standard, but
also to be open and transparent as to what it had done (Central Trust Co v
Rafuse, [1986] 2 S.C.R. 147 at para 49). HPB failed on both counts and acted
negligently in doing so, I address the standard of care below. The answer to
the first of the Cooper/Anns questions is yes.
[124] The second of the Cooper/Anns questions is to ask whether
there are any policy considerations whereby liability should not be imposed on
HPB. The Defendant submitted two policy considerations to negate the duty (1)
HPB applied its broad discretion under the Food and Drugs Act and Regulations
in the area of public policy related to the health and safety of the public
when deciding whether to issue the NOC, and Apotex cannot challenge the
exercise of this discretion; (2) Finding a duty would expose the Crown to
indeterminate liability.
[125] On first policy consideration, it is true that HPB was considering
the “policy” of safety and efficacy when it examined Apotex’s
submission. It is also true that the Minister has a measure of discretion when
formulating policy. But that is not the issue here.
[126] The issue here is whether there is any core policy whereby HPB
should be relieved from a finding of negligence, in which it agreed to do one
thing, but did another, and attempted to conceal or dissemble that fact. There
is no such policy against this irrational conduct taken in bad faith (R v
Imperial Tobacco Canada Ltd, [2011] 3 S.C.R. 45 at para 90).
[127] On the second policy consideration, no such threat of indeterminate
liability exists here. HPB chose to enter into the Settlement Agreement with
Apotex to end the first judicial review and thus create a special relationship
with Apotex. The liability that arises is unique to this case and would not
open the door to indeterminate liability unless the government makes the choice
to conduct itself in the manner that it did in this case. Instead a finding of
liability in this case would support the policy objective of ensuring the Crown
does not negligently breach an undertaking to a party to act in a certain way
in order to induce that party to abandon a legal proceeding against the Crown.
[128] On whether HPB breached the standard of care, the Defendant argued
that Apotex merely alleged that the Crown made an administrative law error
which did not constitute a private law fault. HPB did not breach the standard
of care because it acted within its broad discretion to require information and
materials deemed necessary and had a solid scientific basis for requesting a
Canadian reference product. This argument fails for the same reason that
Crown’s argument that no duty of care existed failed. The Crown through the
Settlement Agreement bound itself to a standard of exercising its discretion
based on an equivalency standard. Its continued request for a Canadian
reference standard in the face of evidence that proved equivalence between
Canadian and U.S. Desyrel products represented its adherence to a standard of
identicality. This adherence to identicality constituted negligence.
[129] On causation, the Defendant argued Apotex was the cause of its loss
by attempting to use Apo-Trazad as a test case to force HPB to use a foreign
reference standard in the future submissions. Hence Apotex knowingly took the
risk of suffering loss of incoming including not being the first generic to
market and the taxpayer should not be liable for this choice. I agree with this
argument up until the parties entered the Settlement Agreement. Prior to the
Settlement Agreement HPB required Apotex to use a Canadian Reference product as
it did in the past, and Apotex chose to persuade HPB to pursue another avenue
of eligibility. However, once HPB entered into the Settlement Agreement it established
a duty of care towards Apotex and it was reasonable for Apotex to expect that
the Crown would not breach this duty. This breach of duty caused Apotex’s loss.
Apotex’s failure to conduct a Canadian reference study subsequent to entering
the Settlement Agreement is relevant to the issue of mitigation of damages, not
whether the Crown’s adherence to an identicality standard caused Apotex’s loss.
I address mitigation issues later in my Reasons.
[130] While no party discussed remoteness in the hearing, I find that
Apotex’s damages were not remote, it was reasonably foreseeable that delaying
issuing the NOC would cause Apotex damages in the form of lost sales and by
preventing Apotex from being the first to the market.
[131] I therefore find that the Defendant is liable for negligence.
Misrepresentation
[132] Apotex alleges that HPB made misrepresentations either deliberately or
negligently. Those misrepresentations are not freestanding, but part of the
misfeasance and negligence that I have already addressed. There is no need to
ground Apotex’s claim to damages on yet another aspect of the law of tort.
Breach of
Contract – the Settlement Agreement
[133] Apotex asserts that HPB broke the Settlement Agreement by continuing
to insist, internally, upon a standard of identicality in dealing with
bioequivalence, rather than equivalency as promised in the Settlement
Agreement. Further, Apotex asserts, HPB misled Apotex by stating that it was
applying an equivalency standard; whereas, in fact, it was not. I fully agree.
[134] Defendant’s Counsel argues that the use of the word equivalency in
the Settlement Agreement was ambiguous. As I have stated earlier in these
Reasons, it was not. Counsel also argued that HPB in fact applied an
equivalency standard. It did not, it applied the identicality test.
[135] However, as I will discuss shortly, Apotex’s claim for breach of
contract is barred by a limitation period as pleaded by the Defendant.
Limitation Period
[136] The Defendant has pleaded the provisions of the Limitations Act,
RSO 1990, Chapter L.15; in particular, Section 45 which, by virtue of section
39 of the Federal Courts Act, RSC 1985, c. F-7, applies to the parties;
both of whom are situated in Ontario. However, those provisions have only been
pleaded in respect of the claim made by Apotex in contract. As Counsel for the
Defendant admitted, no such pleading was made in respect of any of Apotex’s
various claims in tort. It is trite law, going as far back as Audette J’s
judgment in R v L’Heureux (1913), 14 Ex CR 250 at 253-254, 14 DLR 604
that a party must plead a limitations defence in order to rely upon it (see
also, Kibale v Canada, [1990] FCJ No 1079 at para 3 (CA).
[137] Here, the applicable limitations period is six years before this
action was commenced. This action was commenced on October 9, 1998; therefore,
any claim respecting breach of contract occurring before October 9, 1992 would
be extinguished by the effect of the Limitation Act, supra, provided that
Apotex knew or ought to have known of the breach.
[138] The contract at issue is the Settlement Agreement signed by HPB’s
lawyer and delivered to Apotex November 26, 1990. Almost immediately HPB broke
the terms off the Agreement. It continued to deal with Apotex’s submissions on
an “identicality” standard, rather than on an “equivalency” standard;
notwithstanding the Agreement to the contrary. Apotex could not have known this
at the beginning; however, it is clear that by April 1991, as evidenced by the
letters written by Apotex to HPB on April 25, 1991 and July 2 and 31, 1991, in
April and July of that year as reviewed earlier in these Reasons, Apotex was
aware and possessed sufficient facts to be aware that HPB was acting in breach
of the Settlement Agreement and that Apotex was suffering damage as a result
(Exhibit 1, Tabs 83, 102 and 111).
[139] Apotex’s Counsel makes a nuanced argument to the effect that it was
not until Justice MacKay delivered his decision on January 19, 1993, did Apotex
became aware and appreciate the full nature and extent of HPB’s dealings. I
reject this argument. The law is clear that the time that a person ought to
have known of a wrongdoing is when they became aware of some damage, even
though the nature and extent of the wrongdoing was not fully apparent to them.
[140] The leading case on point is the decision of the Supreme Court of
Canada in Peixeiro v Haberman, [1997] 3 S.C.R. 549, where Major J, for the
Court, wrote at paragraph 18:
18 It was conceded that at common law
ignorance of or mistake as to the extent of damages does not delay time under a
limitation period. The authorities are clear that the exact extent of the loss
of the plaintiff need not be known for the cause of action to accrue. Once the
plaintiff knows that some damage has occurred and has identified the tortfeasor
(see Cartledge v. E. Jopling & Sons Ltd., [1963] A.C. 758 (H.L.), at p. 772
per Lord Reid, and July v. Neal (1986), 57 O.R. (2d) 129 (C.A.)), the cause of action has accrued. Neither the extent of damage nor the type of damage need be
known. To hold otherwise would inject too much uncertainty into cases where the
full scope of the damages may not be ascertained for an extended time beyond
the general limitation period.
[141] The Supreme Court repeated this principle in Ryan v Moore, [2005] 2 S.C.R. 53, where Bastarache J, for the Court, wrote at paragraphs 21 to
23:
21 The debate concerning the use of
the discoverability principle in tort actions has been settled by this Court in
Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2, Central Trust and M. (K.) v.
M. (H.), [1992] 3 S.C.R. 6.
22 The discoverability principle
provides that "a cause of action arises for purposes of a limitation
period when the material facts on which it is based have been discovered or
ought to have been discovered by the plaintiff by the exercise of reasonable
diligence": Central Trust, at p. 224. In some provinces, the discoverability
rule has been codified by statute; in others, it has been deemed redundant
because of other remedial provisions.
23 While discoverability has been
qualified in the past as a "general rule" (Central Trust, at p. 224;
Peixeiro v. Haberman, [1997] 3 S.C.R. 549, at [page68] para. 36), it must not
be applied systematically without a thorough balancing of competing interests
(Peixeiro, at para. 34). The rule is an interpretative tool for construing
limitation statutes. I agree with the Manitoba Court of Appeal when it writes:
In my opinion, the judge-made
discoverability rule is nothing more than a rule of construction. Whenever a
statute requires an action to be commenced within a specified time from the
happening of a specific event, the statutory language must be construed. When
time runs from "the accrual of the cause of action" or from some
other event which can be construed as occurring only when the injured party has
knowledge of the injury sustained, the judge-made discoverability rule applies.
But, when time runs from an event which clearly occurs without regard to the
injured party's knowledge, the judge-made discoverability rule may not extend
the period the legislature has prescribed. [Emphasis added.]
(Fehr v. Jacob (1993), 14 C.C.L.T.
(2d) 200, at p. 206)
See also Peixeiro, at para. 37; Snow v.
Kashyap (1995), 125 Nfld. & P.E.I.R. 182 (Nfld. C.A.).
[142] Ducharme J’s decision in Calgar v Moore, [2005] OJ No 4606 at
para 24, 143 ACWS (3d) 754 (Sup Ct) discusses the applicability of the discoverability
principle to contract law:
24 Under the discoverability
principle, a cause of action arises for the purposes of a limitation period
when the material facts upon which it is based have been discovered by the
plaintiff or ought to have been discovered by the plaintiff by the exercise of
reasonable diligence. This is an objective test and the plaintiff is not
required to have discovered all the facts upon which his or her action is
based. The discoverability rule applies to claims in contract and in tort.
Thus, an action for breach of contract commences when the plaintiff has
sufficient facts to recognize that the contract has been breached [emphasis
added]. The plaintiff is not required to have sustained or be in a position to
assess damages before being able to sue. Error or ignorance of the law does not
postpone any limitation period.
[143] I find, therefore, that Apotex’s claim in contract, but not its claims
in tort, are extinguished by the limitations period as pleaded.
Repudiation
[144]
The Defendant argues that Apotex cannot make a
claim based on the Settlement Agreement. It is argued that the consideration
received by HPB for the Settlement Agreement was Apotex’s forbearance in
bringing or continuing legal proceedings for judicial review. Once Apotex commenced
the second judicial review, there was a failure of consideration, the Agreement
had been repudiated.
[145] Repudiation has not been pleaded by the Defendant. The first time it
was raised was a brief mention in Defendant’s Counsel’s opening statement.
[146] As with the limitation defence for negligence, I find that
repudiation, as a defence, should have been pleaded; it was not. Therefore, it
is not available to the Defendant as a defence to the action in contract.
When Do
Apotex’s Damages Begin to Accrue
[147] Apotex is entitled to be put in the position that it would have been
were it not for the wrongful acts of the Defendant. Apotex is entitled to
receive the profits, if any, that it would have received from the sale of its
Apo-Trazad product commencing at a date when it reasonably could have expected
to receive its Notice of Compliance, to the date when it actually received that
Notice. The profits that might have been made must be offset by the profits
that Apotex might have received, had it mitigated its damages; a subject which
I will address shortly.
[148] The evidence of Dr. Simon is that in the period 1988 to 1995 and
beyond, there was considerable backlog at HPB (Transcript page 626). The
evidence of Dr. Sherman is that, if Apotex had “capitulated”
to HPB’s request for a Canadian reference product, they would have submitted
the data by the end of 1990 and they could have received their NOC before the
other generics (Transcript pages 345 to 347). He said that he would have
expected to get an NOC in about a year, when Apotex filed its submission in
1988, but that he did not know what the effect of a backlog might be; instead;
Apotex brought its first judicial review application in August 1990 (Transcript
pages 348 to 353). As soon as Apotex brought that judicial review application,
Dr. Sherman testified that settlement discussions commenced; and, according to
Dr. Sherman, HPB abandoned its position and agreed to review Apotex’s
submission based on a bio-study equivalent (Transcript pages 353 to 363).
[149] I have founded my decision respecting liability in tort based on
HPB’s representations in the Settlement Agreement and failure of HPB to follow
through upon its commitments. I find that is reasonable, therefore, to use the
date of the Settlement Agreement as the date upon which HPB should have
examined Apotex’s submission and add to that one year to arrive at the date
upon which Apotex should have received its NOC. Therefore, I establish November
26, 1991 as the date upon which Apotex should have received its NOC.
Mitigation
[150]
The Defendant argues that, even if it is liable
in contract or tort, the Plaintiff failed to mitigate its losses. The Plaintiff
argues that if the Crown means that it should have tested its product against a
Canadian reference standard, then that would not have been mitigation, but
capitulation. In any event, the Plaintiff argues that it did seek to mitigate
its losses by instituting and prosecuting the second judicial review as soon as
it was reasonably aware that HPB would not change its mind concerning the use
of a Canadian reference standard; or, in the alternative, would not accept that
a non-Canadian reference product should be evaluated against a standard of
equivalency.
[151] The basic principle of mitigation is that while a wronged Plaintiff
must prove its damages, the Plaintiff is required to take reasonable steps to
avoid the unreasonable accumulation of those damages. The fundamental decision
in this regard is that of the Supreme Court of Canada in Michaels v Red Deer
College, [1976] 2 S.C.R. 324, in which Laskin CJ for the majority, wrote at
paragraphs 9 to 12:
It is, of course, for a wronged
plaintiff to prove his damages, and there is therefore a burden upon him to
establish on a balance of probabilities what his loss is. The parameters of
loss are governed by legal principle. The primary rule in breach of contract
cases, that a wronged plaintiff is entitled to be put in as good a position as
he would have been in if there had been proper performance by the defendant, is
subject to the qualification that the defendant cannot be called upon to pay
for avoidable losses which would result in an increase in the quantum of
damages payable to the plaintiff. The reference in the case law to a
"duty" to mitigate should be understood in this sense.
In short, a wronged plaintiff is
entitled to recover damages for the losses he has suffered but the extent of
those losses may depend on whether he has taken reasonable steps to avoid their
unreasonable accumulation. In Payzu Ltd. v. Saunders [[1919] 2 K.B. 581.], at p.
589, Scrutton L.J. explained the matter in this way:
Whether it be more correct to say
that a plaintiff must minimize his damages, or to say that he can recover no
more than he would have suffered if he had acted reasonably, because any
further damages do not reasonably follow from the defendant's breach, the
result is the same.
In the ordinary course of litigation
respecting wrongful dismissal, a plaintiff, in offering proof of damages, would
lead evidence respecting the loss he claims to have suffered by reason of the
dismissal. He may have obtained other employment at a lesser or greater
remuneration than before and this fact would have a bearing on his damages. He
may not have obtained other employment, and the question whether he has stood
idly or unreasonably by, or has tried without success to obtain other
employment would be part of the case on damages. If it is the defendant's
position that the plaintiff could reasonably have avoided some part of the loss
claimed, it is for the defendant to carry the burden of that issue, subject to
the defendant being content to allow the matter to be disposed of on the trial
judge's assessment of the plaintiff's evidence on avoidable consequences. This
is the way I read what is said on the matter in such leading textbooks on the
subject as Cheshire and Fifoot's, Law of Contract, 8th ed. (1972), at p. 599,
and Corbin, Contracts, vol. 5 (1964), at p. 248. The matter is put as follows
in two passages from Williston on Contracts, vol. 11, 3rd ed. (1968), at pp. 302
and 312:
The rule of avoidable
consequences here finds frequent application. The consequence of this injury is
the failure of the employee to receive the pay which he was promised but, on
the other hand, his time is left at his own disposal. If the employee
unavoidably remains idle, the loss of his pay is actually suffered without
deduction. If, however, the employee can obtain other employment, he can avoid
part at least of these damages. Therefore, in an action by the employee against
the employer for a wrongful discharge, a deduction of the net amount of what
the employee earned, or what he might reasonably have earned in other
employment of like nature, from what he would have received had there been no
breach, furnishes the ordinary measure of damages.
...
It seems to be the generally
accepted rule that the burden of proof is upon the defendant to show that the
plaintiff either found, or, by the exercise of proper industry in the search,
could have procured other employment of an approximately similar kind
reasonably adapted to his abilities, and that in absence of such proof the
plaintiff is entitled to recover the salary fixed by the contract.
Cheshire and Fifoot, supra, expressed the
position more tersely as follows:
But the burden which lies on
the defendant of proving that the plaintiff has failed in his duty of
mitigation is by no means a light one, for this is a case where a party already
in breach of contract demands positive action from one who is often innocent of
blame.
[152] The duty to mitigate applies equally to claims in tort, as well as
in contract. Binnie J, for the majority, of the Supreme Court of Canada in British
Columbia v Canadian Forest Products Ltd, [2004] 2 S.C.R. 74, wrote at
paragraphs 106 and 107:
106 The law requires a plaintiff to
take reasonable steps to mitigate its loss. When mitigation yields a sum of
money equal to or greater than the original loss, the plaintiff has made
himself whole, and cannot claim further from the defendant. The argument is
that the Crown, having successfully recouped its loss under the CVP
"waterbed" effect, has no further claim. Hall J.A. accepted the
application of the mitigation principle here, relying on the well-known
formulation of the principle in British Westinghouse Electric and Manufacturing
Co. v. Underground Electric Railways Co. of London, Ltd., [1912] A.C. 673
(H.L.). In that case, the plaintiff, having lost the use of its obsolete
generating equipment by reason of a breach of contract, took immediate steps to
purchase more efficient generators whereby "all loss was extinguished ...
actually the respondents made a [page125] profit by the course they took"
(p. 688). In these circumstances, Viscount Haldane observed, at pp. 690-91:
The subsequent transaction, if to
be taken into account, must be one arising out of the consequences of the
breach and in the ordinary course of business.
...
The transaction was not res inter
alios acta, but one in which the person whose contract was broken took a
reasonable and prudent course quite naturally arising out of the circumstances
in which he was placed by the breach.
107 The British Westinghouse
principle of mitigation has been extended to tort claims: Andros Springs v.
World Beauty, [1970] P. 144 (C.A.); Bellingham v. Dhillon, [1973] Q.B. 304
(C.A.); 1874000 Nova Scotia Ltd. v. Adams (1997), 146 D.L.R. (4th) 466
(N.S.C.A.); and S. M. Waddams, The Law of Damages (4th ed. 2004), at para.
15.730. Waddams summarizes the effect of the mitigation cases, at para. 15.800:
These considerations suggest
what seems to be a test often applied, that is, whether the plaintiff could,
even in the absence of the wrong, have made the disputed profit. If so, it is
treated as collateral. If not, it goes to reduce the plaintiff's loss.
See also Karas v. Rowlett, [1944] S.C.R.
1; Cemco Electrical Manufacturing Co. v. Van Snellenberg, [1947] S.C.R. 121;
Apeco of Canada, Ltd. v. Windmill Place, [1978] 2 S.C.R. 385; Asamera Oil Corp.
v. Sea Oil & General Corp., [1979] 1 S.C.R. 633.
[153] To the same effect is the decision of the Ontario Court of Appeal in
Turczinski v Dupont Heating & Air Conditioning, [2004] OJ No. 4510,
246 DLR (4th) 95 (CA), where Feldman JA, for the Court, wrote at paragraphs 43
and 44:
43 [42] The trial judge was satisfied
that the respondent should receive some compensation for the loss of rent and
considered the issue to be whether the respondent had a duty to mitigate her
damage by making the rooms habitable and available to rent. The trial judge
viewed the respondent as a thin-skull plaintiff, applying the Supreme Court of
Canada decision in Janiak v. Ippolito (1985), 16 D.L.R. (4th) 1. In that case,
the plaintiff suffered a serious spinal injury in a motor vehicle accident. The
plaintiff refused to have corrective surgery that had a 70 per cent chance of
enabling him to resume his former employment. The issue was the extent of a
tort victim's duty to mitigate his damages for loss of income.
44 [43] The court held that if a tort
victim has a pre-existing psychological infirmity that makes him incapable of
making a decision regarding surgery, then he is a thin-skull plaintiff who does
not bear the burden of his incapacity. Otherwise, a tort plaintiff is obliged
to mitigate his or her damages by acting reasonably.
[154] Onus has no role to play in assessing mitigation; the duty of the
Court is to look at the evidence in the record and determine whether and when
it was appropriate to mitigate the losses claimed. Pelletier JA, for the
Federal Court of Appeal, clearly set out this principle in Chopra v Canada (Attorney General), [2008] 2 FCR 393 (CA), at paragraphs 40 to 42:
40 That said, the discretion given to
the Tribunal to award any or all of the losses suffered leaves it open to the
Tribunal to impose a limit on losses caused by the discriminatory practice. A
tribunal may well find that the principles underlying the doctrine of
mitigation of losses [page415] in other contexts apply equally in the context
of claims for lost wages under the Act. Society has an interest in promoting
economic efficiency by requiring those who have suffered a loss to take steps
to minimize that loss as it is not in the public interest to allow some members
of society to maximize their loss at the expense of others, even if those
others are the authors of the loss: see British Columbia v. Canadian Forest
Products Ltd., [2004] 2 S.C.R. 74, at paragraph 184. Thus while a tribunal is
not bound to apply the doctrine of mitigation, it is not prohibited from doing
so in the exercise of its discretion to determine the amounts payable to a
complainant.
41 Dr. Chopra argues that if those
principles are to be applied, then the Tribunal incorrectly placed the onus on
him to prove it. The following passage is illustrative, in Dr. Chopra's view,
of the Tribunal's error: "the Complainant must show that he took steps to
improve his chances of successfully competing for an EX-level position and that
he applied for such positions where the opportunity arose": see remedy
decision, at paragraph 37.
42 The question of onus is, with respect,
a red herring. Where the evidentiary record allows the Tribunal to draw
conclusions of fact which are supported by the evidence, the question of who
had the onus of proving a given fact is immaterial. The question of onus only
arises when it is necessary to decide who should bear the consequence of a gap
in the evidentiary record such that the trier of fact cannot make a particular
finding. "Onus has no role to play when all the evidence is in the
record": see Red Deer College v. Michaels, [1976] 2 S.C.R. 324 [at pages
346-347] per de Grandpré J.
[155] Therefore, in looking at the evidence in this case, it is clear that
Apotex knew it could mitigate its losses by conducting tests using a Canadian
reference standard. It did precisely that in respect of Apo-Zidovudine. As Dr.
Sherman wrote to HPB on May 10, 1991 respecting Apo-Zidovudine (Exhibit 1, Tab
87):
We will also mitigate damages by
commencing the repeat study and will seek to hold HPB liable, for both the cost
of the study and damages from delay in review and approval.
[156] In portions of Apotex’s Examination for Discovery filed by the
Defendant at trial, Dr. Sherman testified that it might have taken a few months
and cost one to two hundred thousand dollars at the time to do a repeat study
(Exhibit 16, Tab 3). In his examination in chief at trial, Dr. Sherman
testified a repeat study would have taken six months, causing an eighteen month
delay, assuming HPB issued an NOC one year after receiving the repeat study
(Pages 95-95 of the Transcript). In accordance with the rule in Browne v
Dunn, counsel for the Defendant put Dr. Sherman’s statement in the
Examination for Discovery to him at trial (Pages 344 to 346 of the Transcript):
Q. The answer is: “it might have
taken a few months and cost one to $200,000 at the time.”
A. Yes.
Q. So a few months -
A. A few months is the lower -
depends on the circumstances. If you found an outside lab that had already
validated a method and could schedule it to do it immediately you could do it
in a few months. I would say three to six months. More likely six, but it could
be a few months.
Q. Somewhere between a hundred to
$200, 000?
A. That was a guess. Depends
where it’s done. We can do bio studies in India for a hundred thousand and in North America they’re usually closer to 500 thousand.
Q. Now. What about back then?
A. I’d say 3/400 thousand.
Q. Are you resiling from the
evidence that you gave at your examination?
A. It depends on how difficult
the analytic method is. I don’t know whether this is a simple method of GC,
GCMS. I can’t say.
Q. You said a hundred to 200
thousand?
A. It might have taken a few
months, cost a few hundred thousand at the time. This is going back - 200
thousand is probably a fair estimate but I don’t know [emphasis added]
Q. You were only asked to estimate.
That’s fair enough. Thank you.
A. Yes. I notice above I was asked why it
wasn’t done and I gave the explanation. There was no reason.
Q. Which you’ve given in court
today?
A. Yes, same answer.
Q. If I could ask you then to turn
to - I think we can skip that.
A. Dr. Sherman, if you had
capitulated and chosen to do the bioavailability study and you had done it in
May of 1989 -
A. Yes.
Q. - when you first got that
letter saying we need a Canadian bioavailability study -
A. Yes.
Q. - I put it to you that had you
done that and you had undergone few months as you say of delay?
A. Three to six months, yes
[emphasis added].
[157] Hence, the record shows that the cost of a repeat study using a
Canadian reference standard for Apo-Trazadone would be about $200,000 to
$300,000, and take some three to six months (Pages 344-345 of the Transcript). Presumably
if all was satisfactory, an NOC would have been granted to Apotex in about one
year after submitting said repeat study. This is what could have been done, the
question is whether and when it would have been reasonable to do so.
[158] Apotex was persisting in its position that a non-Canadian reference
product was logical and reasonable. It wanted to make a point. Ultimately, it
did so, and received an NOC in February 1995. By the end of 1995, HPB published
a comprehensive set of guidelines respecting the circumstances respecting the
use of reference products.
[159] However, the Court should not view the question of damages and
mitigation from the point of view of a party wanting to make a point. Here, we
are dealing with economic circumstances, loss by one party, and payment out of
the public purse by another. Damages here are not an award for winning a point,
damages are to provide reasonable compensation for unavoidable loss. The
reasonable person thinks in terms of economics, not principle.
[160] In the period from April 25, 1991 to July 31, 1991, Apotex wrote to
HPB asserting that it was suffering damages and requesting that HPB accept
Apotex’s submissions based on a non-Canadian reference. On July 17, 1991,
Apotex brought its second judicial review, requesting an Order that the Court
review Apotex’s submission based on the non-Canadian reference. On January 19,
1993, the Court gave an Order dismissing Apotex’s request.
[161] I find that a reasonable person, thinking in terms of economics,
would have taken steps to mitigate its damages by July 2, 1991, the date Apotex
wrote to HPB advising that it would mitigate its damages for Apo-Zidovudine
(Exhibit 1, Tab 102). While the taking of Court proceedings is fine from a
point of principle, from a point of economics, mitigation, instead of or in
addition to Court proceedings, is what a reasonable person would have done.
[162] In find that, as of July 2, 1991, Apotex should have retested its
product using a Canadian reference standard, this would have taken three to six
months. Had it done so, at a cost of $200,000 to $300,000, and assuming the
tests were favourable, Apotex may have received its NOC in about fifteen to eighteen
months from July 2, 1991, the date it commenced the repeat study, that is,
about mid-November of 1992.
[163] Therefore, in assessing damage, the starting date should be, as I
have determined, November 26, 1991, but the termination date should be mid November,
1992, that is, to fix a date, November 16, 1992, the date an NOC would have
been received if steps to mitigate had been taken. Apotex should also recover
the costs of testing against a Canadian reference product, which were estimated
to be two to three hundred thousand dollars.
Punitive Damages
[164] Apotex has asked that the Court impose punitive damages against the
Defendant.
[165] As Binnie J held for the majority in Whiten v Pilot Insurance Co,
[2002] 1 S.C.R. 595 at para 36, punitive damages are awarded in exceptional
cases to punish a Defendant for malicious, oppressive and highhanded misconduct
that represents a marked departure from the ordinary standards of decent
behaviour and thus offending the Court’s sense of decency. Damages are intended
to compensate the wronged party for its loss. By contrast, punitive damages
would over-compensate the wronged party and should only be imposed where there
has been wrongdoing to such an extent that punishment is warranted.
[166] Here, the Defendant is Her Majesty. The Crown has, for some time,
been liable in tort and damages may be assessed against the Crown where
appropriate. Punishable wrongdoing, however, is something done by agents or
servants of the Crown. Imposing punitive damages against the Crown for the acts
of its servants or agents requires at least some form of complicity or
blameworthiness on the part of the Crown as employer (Tshekalin v Brunette,
[2004] OJ No 2855 at para 90, 132 ACWS (3d) 608 (Sup Ct), citing MacGuigan JA’s
judgment for the Federal Court of Appeal in Peeters v Canada, [1993] FCJ
No 1146 at para 20 (CA)). Similarly, in Blackwater v Plint, [2005] 3 SCR
3 at para 91, McLachlin CJ writing for the Court held that finding the Crown
vicariously liable for punitive damages requires “reprehensible
conduct specifically referable to the employer.”
[167] In the present case, I do not find that the actions of the HPB
personnel are sufficiently egregious so as to warrant an award of punitive
damages against Her Majesty. I make this finding notwithstanding my finding of
the Defendant’s liability under the tort of misfeasance in public office, as
Prothonotary Aalto found in McMaster at paragraph 66, “While the conduct causing the injury is unlawful it does not
necessarily incur a punitive element.”
Conclusions and Costs
[168]
I have found that the Defendant is liable for
damages to Apotex in tort, namely, misfeasance in public office and negligence
to Apotex. These damages should have been mitigated by Apotex. As a result,
damages should be calculated on the basis that Apotex should have been given
its NOC as of November 26, 1991, and should have mitigated its damages on July
2, 1991, which would have resulted in an NOC being given to Apotex as of November
16, 1992. Apotex should also recover the reasonable costs of testing against a
Canadian reference product, estimated to be in the range of two to three
hundred thousand dollars.
[169] A reference or trial as to the extent of damages has been Ordered on
July 31, 2003. A trial would be more expedient. Either or both parties should
apply within a reasonable time to this Court with a schedule as to how matters
should proceed in that regard.
[170] Counsel have asked that I reserve on costs pending further
submissions having regard to these Reasons. I expect to receive those
submissions in writing within the next fifteen days.
"Roger T. Hughes"
Ottawa, Ontario
November 18, 2014
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