Docket: A-538-14
Citation:
2015 FCA 257
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CORAM:
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GAUTHIER J.A.
WEBB J.A.
NEAR J.A.
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BETWEEN:
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PFIZER CANADA INC., PFIZER INC. and
PFIZER IRELAND PHARMACEUTICALS
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Appellants
(Defendants/Plaintiffs by Counterclaim)
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and
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TEVA CANADA LIMITED
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Respondent
(Plaintiff/Defendant by Counterclaim)
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and
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PFIZER PRODUCTS INC.
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Plaintiff
by Counterclaim
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PUBLIC
REASONS FOR JUDGMENT
GAUTHIER J.A.
[1]
Pfizer Canada Inc., Pfizer Inc. and Pfizer Ireland
Pharmaceuticals (together, the appellants) appeal the Order of Justice John A.
O’Keefe of the Federal Court (the judge) denying their motion for summary
judgment in respect of Teva Canada Limited’s action (the Action) against the
appellants under section 8 of the Patented Medicines (NOC) Regulations
(SOR/93-133) (the NOC Regulations).
[2]
The appellants had argued that an agreement
between the parties (the Agreement) barred Teva Canada Limited’s (Teva) Action.
In his Order (2015 FC 760), the judge granted Teva’s parallel motion for summary
judgment, finding that the appellants cannot assert the Agreement to reduce or
otherwise affect Teva’s claims in the Action.
[3]
The Agreement at the heart of this appeal is
confidential and is protected by a confidentiality order. This explains why the
public version is redacted.
I.
Facts
[4]
On December 19, 2006, Novopharm Limited filed an
Abbreviated New Drug Submission (ANDS) for its Novo-Sildenafil product, a
generic version of VIAGRA. On July 6, 2007, Novopharm served a Notice of
Allegation (NOA) on Pfizer Canada Inc. advising that it was seeking a Notice of
Compliance (NOC) for Novo-Sildenafil. In response, on August 24, 2007, the
appellants commenced an application pursuant to section 6 of the NOC
Regulations (Court file no. T-1566-07).
[5]
On April 11, 2008, ratiopharm inc. also filed an
ANDS seeking to make ratio-Sildenafil. On December 4, 2008, ratiopharm served a
NOA on Pfizer Canada Inc. in relation to its ratio-Sildenafil product, alleging
that Canadian patent no. 2,163,446 was invalid and that, in any event, ratio-Sildenafil
would not infringe it. This was the only patent it needed to address, although
Pfizer Canada Inc. had also listed the patent no. 2,044,748 on the Register. In
response, on December 15, 2008, Pfizer Canada Inc. and Pfizer Ireland Pharmaceuticals
commenced an application pursuant to section 6 of the NOC Regulations (Court
file no. T-1935-08). In April 2009, the appellants settled their application
against ratiopharm by entering into the Agreement.
[6]
In accordance with the Agreement, ratiopharm
consented to the issuance of an Order prohibiting the Minister of Health from
issuing a NOC for its ratio-Sildenafil product until either the expiry of the
patent or until the appellants consented.
[7]
The most relevant sections of the Agreement for
the appeal before us include the following recitals and provisions:
[REDACTED]
[8]
On February 16, 2010, Novopharm changed its name
to Teva.
[9]
On August 10, 2010, Teva and ratiopharm, along
with several other companies, amalgamated under section 185 of the Canada Business
Corporations Act (R.S.C. 1985, c. C-44). The amalgamated entity continued
under the name of Teva.
[10]
Meanwhile, the appellants’ application against
Novopharm (now Teva) proceeded through the courts, ultimately being dismissed
by the Supreme Court of Canada in Teva Canada Ltd. v. Pfizer Canada Inc.,
2012 SCC 60, [2012] 3 S.C.R. 625. As a result, the Minister issued a NOC for
Novo-Sildenafil on November 8, 2012, and the drug name was subsequently changed
to Teva-Sildenafil.
[11]
On the day the NOC for Novo-Sildenafil was
issued, and in accordance with the Agreement, the appellants consented to the
issuance of a NOC for ratio-Sildenafil. However, ratio-Sildenafil – which
remained distinct from Novo-Sildenafil (now Teva-Sildenafil) and was assigned
different Drug Identification Numbers (depending on the strength of the tablets)
– has since then been discontinued.
[12]
Thereafter, Teva brought the Action for damages
for lost sales of Novo-Sildenafil (now Teva-Sildenafil) for the period
commencing April 25, 2008. The parties acknowledged that none of the damages
claimed in the Action relate to ratio-Sildenafil. The appellants defended the
Action on the basis that, among other things, article 7 of the Agreement
precluded the Action.
II.
Decision of the Federal Court
[13]
It is in the context of the Action that the
appellants moved for summary judgment and that Teva brought its parallel motion
for summary judgment. The judge granted Teva’s motion, finding that there was
no genuine issue as to whether the appellants could assert the Agreement to
reduce or otherwise affect Teva’s claim in the Action. The judge did not accept
the appellants’ argument that the Agreement barred Teva’s Action. Although the
Agreement did bind Teva, article 7 did not cover claims in respect of Novo-Sildenafil
(now Teva-Sildenafil). The judge awarded to Teva the costs relating to the
appellants’ motion. The judge also granted the appellants’ motion under Rule 151
for a confidentiality order. This aspect of his ruling is not at issue in this
appeal.
[14]
It is not disputed that the judge was entitled
to determine the issue raised by both parallel motions before him by way of summary
judgment.
III.
Analysis and Decision
[15]
The appellants argue that the judge made several
reviewable errors, including, among others, that (i) he erred in law by
applying a restrictive approach to the interpretation of article 7; (ii) he misconstrued
the Agreement by limiting its effect to a claim for damages arising from the
proceedings in T-1935-08; and (iii) he failed to give full effect to the legal
consequences of amalgamation. According to the appellants, the judge asked the
wrong question to determine the objective intention of the parties to the Agreement.
Teva also took issue with other findings of the judge, which I need not
enumerate here. Indeed, I do not find it necessary to address all these issues
in order to decide the merits of this appeal.
[16]
There is no dispute as to the standard of review
applicable to the issues raised; Housen v. Nikolaisen, 2002 SCC 33,
[2002] 2 S.C.R. 235; Sattva Capital Corp. v. Creston Moly Corp., 2014
SCC 53, [2014] 2 S.C.R. 633, paras. 50, 53-55 [Sattva]. In any event,
nothing turns on the standard applied, as I am satisfied that the judge came to
the correct conclusion regarding whether or not article 7 covers the claim in
the Action.
[17]
The judge held that the Agreement cannot be
interpreted as suggested by the appellants, that is, so as to include any claim
in respect of any product containing sildenafil for which an ANDS has been
filed by any company amalgamated with Teva at any time, including before the moment
the Agreement was entered into. I find it sufficient to say that even if I do
not agree necessarily with all the reasons leading to this conclusion, I agree
with the judge’s ultimate conclusion that article 7 does not cover a claim for
damages under section 8 of the NOC Regulations in respect of Teva-Sildenafil
for which an ANDS had already been filed by another company (T-1566-07).
[18]
In reaching this conclusion, I have adopted the
approach to contractual interpretation set out in Sattva. As noted by
the appellants, the most relevant principles discussed in Sattva were
recently summarised by our Court in Offshore Interiors Inc. v. Sargeant,
2015 FCA 46, paras. 86-87, 467 N.R. 355. It is worth reproducing them here:
[86] At paragraphs 56 to 58 of his reasons,
Rothstein J. indicated that it was proper to consider surrounding circumstances
in interpreting the terms of a contract, but that the circumstances, “must
never be allowed to overwhelm the words of that agreement,” adding that the
purpose of considering surrounding circumstances was to help the decision maker
to obtain a better understanding of the mutual and objective intentions of the
parties as these were expressed in the words of their contract. Further, “[t]he
interpretation of a written contractual provision must always be grounded in
the text and read in light of the entire contract” (Sattva, para. 57).
Lastly, Rothstein J. made it clear that “surrounding circumstances” could only
consist of, “objective evidence of the background and facts at the time of the
execution of the contract” (Sattva, para. 58).
[87] While there has been some debate in
the jurisprudence over what constitutes a “factual matrix,” at a bare minimum
it encompasses the contract’s genesis, its purpose and its commercial context (Primo
Poloniato Grandchildren’s Trust (Trustee of) v. Browne, 2012 ONCA 862
(CanLII), [2012] O.J. No. 5772 at para. 69, leave to appeal to S.C.C. refused,
[2013] S.C.C.A. No. 68). As Chief Justice Winkler of the Ontario Court of
Appeal held in Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA
673 (CanLII), [2010] O.J. No. 4336 at para. 16:
16. The basic principles of
commercial contractual interpretation may be summarized as follows. When
interpreting a contract, the court aims to determine the intentions of the
parties in accordance with the language used in the written document and
presumes that the parties have intended what they have said. The court
construes the contract as a whole, in a manner that gives meaning to all of its
terms, and avoids an interpretation that would render one or more of its terms
ineffective. In interpreting the contract, the court must have regard to
the objective evidence of the "factual matrix" or context underlying
the negotiation of the contract, but not the subjective evidence of the
intention of the parties. The court should interpret the contract so as to
accord with sound commercial principles and good business sense, and avoid
commercial absurdity. If the court finds that the contract is ambiguous, it
may then resort to extrinsic evidence to clear up the ambiguity. Where a
transaction involves the execution of several documents that form parts of a
larger composite whole -- like a complex commercial transaction -- and each
agreement is entered into on the faith of the others being executed, then
assistance in the interpretation of one agreement may be drawn from the related
agreements […].
[Emphasis added]
[19]
I have also carefully considered the appellants’
argument that article 7 of the Agreement, when read in light of the last
recital paragraph, necessarily precludes Teva from claiming damages related to
its Teva-Sildenafil product. I simply cannot agree that the words of article 7,
read in light of the entire Agreement (which includes the last recital) and the
objective evidence of the background and facts at the time of the execution of
the Agreement, show the mutual and objective intention of the parties to
encompass a claim for damages arising from the lost sales of Novo-Sildenafil (now
Teva-Sildenafil) a drug covered by an ANDS filed by a different company.
[20]
Even if I were to assume that article 7 was not
restricted to the damages arising from the proceedings in T-1935-08, and the
judge should have construed the waiver to include claims relating to other litigation
which would put in play patents listed on the Register including future patents
listed in connection with VIAGRA®, I agree with Teva that this could only be
litigation in respect of a new ANDS by ratiopharm, or possibly its successors
(article 12).
[21]
As a matter of fact, the appellants acknowledged
at the hearing before us that at the time the Agreement was entered into, the
parties could not and did not intend to cover another generic company’s
products containing sildenafil for which an ANDS had already been sought and in
respect of which litigation under the Regulations was already underway.
[22]
What the appellants submit is that now that
Teva, the amalgamated company, is a party to the Agreement by operation of law,
the scope of article 7 has changed and now encompasses claims arising from the
sale of the Novopharm product that was the subject of litigation in Court file
T-1566-07. The appellants believe this is so because the Action now falls
within the general “subject matter” of article
7.
[23]
This brings me to the effect of amalgamation.
There is no dispute that Teva is bound by the Agreement, not only by operation
of the law of amalgamation, but also because the parties expressly provided so
under article 12 of the Agreement. However, this does not mean that one can go
back in time and rewrite the Agreement to apply it to claims arising from
litigation excluded under a proper construction of the Agreement (see paragraphs
17-19 above).
[24]
In R. v. Black & Decker Manufacturing Co.,
[1975] 1 S.C.R. 411, 1974 CanLII 15, p. 421, Justice Dickson used the following
analogy to illustrate the effect of amalgamation:
[…] in an amalgamation a different result is
sought and different legal mechanics are adopted, usually for the express
purpose of ensuring the continued existence of the constituent companies. The
motivating factor may be the Income Tax Act or difficulties likely to
arise in conveying assets if the merger were by asset or share purchase. But
whatever the motive, the end result is to coalesce to create a homogeneous
whole. The analogies of a river formed by the confluence of two streams,
or the creation of a single rope through the intertwining of strands have been
suggested by others.
[Emphasis added]
[25]
The appellants are now attempting to join both
streams in one river well before the amalgamation occurred. This cannot be
done. After the amalgamation, the Agreement prevented Teva from claiming
damages arising from the proceedings in T-1935-08. At best (and there is no
need to decide this, as no new ANDS has been filed), if article 7 is not
limited to the aforementioned claim, the Agreement could also prevent Teva from
claiming damages arising from litigation under the Regulations relating to a
new ANDS filed by ratiopharm or by the amalgamated company after the execution
of the Agreement (see paragraphs 19-20 above).
[26]
In light of the above, I propose that the appeal
be dismissed with costs.
"Johanne Gauthier"
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“I agree
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Wyman W. Webb J.A.”
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“I agree”
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D.G. Near
J.A.”
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