Date: 20000921
Docket: T-195-94
BETWEEN:
VISX INCORPORATED
Plaintiff
- and -
NIDEK CO., LTD. and
707284 ONTARIO INC., c.o.b.a. INSTRUMED CANADA,
DR. HOWARD GIMBEL and DR. DONALD JOHNSON
Defendants
REASONS FOR ORDER
DUBÉ J. :
[1] This motion filed by the plaintiff ("Visx") seeks an order requiring the defendant ("Nidek") and the other defendants ("the Defendant Doctors") to answer certain questions unanswered by their witnesses at their cross-examinations related to a previous motion under Rule 403(1) of the Federal Court Rules, 1998 ("the Rules") requesting directions to the assessment officer in respect of the award of costs between the parties.
[2] This patent case proceeded to trial before me in September and October 1999. The three patents in suit relate to an apparatus incorporating an ultra violet laser to ablate corneal tissue on a molecular basis, to reshape the cornea and to correct refractive conditions such as myopia and astigmatism. Visx alleged infringement by Nidek and the Defendant Doctors using the Nidek EC-5000 apparatus ("the EC-5000").
[3] I dismissed the action in infringement by Visx with costs and dismissed the defendants' counterclaims attacking the validity of the patents with costs.
[4] The questions unanswered by the witnesses were divided into two categories. First, the material non-disclosure at discovery of certain documents and second, the existence of an indemnity agreement between Nidek and the Defendant Doctors.
1. NON-DISCLOSURE OF DOCUMENTS
(a) Visx's Submissions
[5] In its motion for directions as to costs, Visx claims special directions denying, or reducing, Nidek's and the Defendant Doctors' costs on the ground that they failed to disclose at discoveries before the trial, or at the trial itself, documents of which they were aware, or ought to have been aware, and which might have affected the outcome of the trial.
[6] These documents include Exhibit "S", a guide entitled "The Fourth Annual Nidek International Excimer Users Meeting - Guide to Abstract" ("the Guide"). It contains numerous abstracts of articles that relate to the use of the EC-5000. Dr. Gimbel, one of the Defendant Doctors, is listed as the author of one of the articles. The Guide bears the notation "11-13 December, 1998", Cancun, Mexico". It contains at least two abstracts which suggest that the EC-5000 has, in fact, been used to ablate the epithelium.
[7] The other document (Exhibit "R") consists of a bundle of copies of print-outs of selected slides from a CD-ROM Visx obtained in November 1999. The bundle of slides appear to be from a presentation by Nidek which described key features of the EC-5000. One of the features describes the use of the EC-5000 for the removal of the epithelium, as opposed to the manual removal of the epithelium described by the defendants at trial. The slides in question would also describe the EC-5000 in ways that would result in a clear infringement of the patents in issue.
[8] It was only after the completion of the trial that Visx became aware of the existence of these documents.
[9] Under Rule 222(2), which deals with the discovery of documents, "a document of a party is relevant if the party intends to rely on it or if the document tends to adversely affect the party's case or to support another party's case". If it is relevant, it must be produced at discovery. Where a party becomes aware that his affidavit of documents is inaccurate or deficient, that party shall without delay serve a supplementary affidavit of documents correcting the inaccuracy or deficiency. The Courts may impose sanctions where there is a failure to comply with the obligations imposed by the Rules of discovery1. The Court may deprive the offending party of all or a portion of the costs as a result of a material non-disclosure2.
(b) Nidek's Submissions
[10] On the other hand, Nidek claims that the documents in question have no connection whatsoever to Canada and are totally irrelevant to any issue in this Canadian lawsuit. The slides in Exhibit "R" were obtained by Visx's U.K. sales representative at a conference in Russia in November 1999 from an Italian doctor who uses a EC-5000 in Italy. Moreover, some of the slides referred to are titled "Future Improvements and R & D Projects". They do not deal with the EC-5000 presently in use in Canada.
[11] In February 1999, Nidek provided Visx with a complete list of Canadian physicians who were using the EC-5000 in Canada, their addresses and phone numbers. The list includes 11 physicians. Visx could have contacted them to obtain the information they sought. The witness Visx used to introduce the documents in question could provide no further information concerning whether the EC-5000 used by physicians in Canada is the same in all respects as the Nidek apparatus used by physicians in other countries, or whether the items discussed in those documents had any application to the use of the EC-5000 in Canada by Canadian physicians.
[12] In respect to Exhibit "S", an abstract of papers given by foreign physicians on their use of the EC-5000, Nidek, while a sponsor of the conference, did not control the subjects of the research nor recommend the manners of operation described by these physicians. Both Mr. Ohtsuki and Dr. Gimbel testified at trial and Visx had full opportunity to cross-examine them. The fact that a Brazilian doctor and a Russian doctor, or other doctors abroad, presented papers concerning the way in which they have used the EC-5000 in their respective countries is not relevant to an allegation of infringement in Canada. When Visx's witness was asked on cross-examination whether the EC-5000 described in the abstracts by foreign physicians had the same construction, features and capabilities as the EC-5000 used in Canada, he had no information to offer.
[13] Furthermore, the expert statement of Kan Ohtsuki, Nidek's witness, released to Visx some sixty days in advance of trial, read in part that "some surgeons remove the epithelium with the laser prior to operating the EC-5000 to remove corneal tissue". Thus, Visx was informed prior to trial of the capabilities of that apparatus to ablate the epithelium.
[14] As to the solicitors for the defendants, they were not aware of the existence of these documents until they were brought to their attention by Visx after the trial.
(c) Disposition
[15] Under Rule 222(2), a party has no obligation to reveal documents which do not adversely affect or support any party's case in the action. Exhibit "R" and "S" are not related to the issue of infringement by the EC-5000 in Canada and, obviously, there is no bad faith on the part of counsel for Nidek since they were not even aware of the existence of those documents before or during the trial.
[16] As mentioned earlier, the instant motion is related to another motion dealing with the awarding of costs between the parties. Under Rule 400, the Court has full discretionary power over the allocation of costs and the determination of by whom they are to be paid. In exercising its discretion, the Court may consider several factors. Pursuant to Rule 403, Visx has filed a motion for directions to be given to the assessment officer. That motion deals with a large number of items including this one for failure to comply with discovery obligations. Clearly, the burden is upon a party making the allegations to prove that the documents in question were relevant to the issues in dispute, in this case, infringement by the EC-5000 in Canada. Visx, in my view, has not met that burden.
[17] Consequently, the witnesses do not have to answer questions related to this matter.
2. THE EXISTENCE OF AN INDEMNITY AGREEMENT
(a) Visx's Submissions
[18] Both Nidek and the Defendant Doctors are claiming their own separate costs related to the main action in infringement. Visx opposes this request on the apparent existence of an indemnity agreement between Nidek as indemnor and the Defendant Doctors as indemnees. Costs between party and party are to be allowed as an indemnity and not to be imposed as a punishment3. Successful litigants are entitled to recover costs, unless there is an agreement binding on their counsel excluding the liability of the litigant to pay his counsel's fees4. Whether subrogation applies pursuant to a contract of indemnity requires an examination of the contract and its terms5. Thus, Visx must inquire into the terms of the possible indemnity agreement so as to determine whether the Defendant Doctors were under a legal obligation to pay for the services rendered by their solicitors or whether Nidek would pay their bills.
(b) Nidek's Submissions
[19] When Visx decided to add the Defendant Doctors to the instant litigation in December 1995, the Defendant Doctors were fully entitled to seek out legal representations. The Gowlings firm agreed to represent them. Had the Defendant Doctors sought to retain Nidek's counsel to represent them, it would have been improper for the latter to accept the retainer as it was reasonably obvious that a contentious issue between the Defendant Doctors and Nidek could arise in the future in the event Visx was successful and the Defendant Doctors were ordered to deliver up their EC-5000 apparatuses.
[20] An indemnity agreement between Nidek and the Defendant Doctors in relation to the issue of recovery of costs is completely irrelevant. An indemnity agreement between the Defendant Doctors and Gowlings would be relevant. In the absence of such an agreement, Gowlings acquired an undeniable right to seek payment from their clients for their professional services6. The fact that, ultimately, somebody else pays the bill is totally irrelevant, as long as the solicitors were at liberty to call upon the Defendant Doctors to pay. Consequently, all questions asked by Visx concerning agreements between Nidek and the Defendant Doctors are irrelevant.
[21] There is a presumption that a person who is represented by a legal counsel is liable to that counsel for that representation. The burden of proof rests with the party resisting payment of costs to prove the contrary by establishing that there exists a binding agreement between legal counsel and his client to the effect that legal counsel will not look to his client for fees and disbursements7. Absent evidence of any such agreement, it is presumed that the Defendant Doctors were liable to their solicitors for payment of their legal fees, which fees have now been paid. It matters not who paid them.
(c) Disposition
[22] In Zwicker v. Schubert8, Klebuc J. of the Saskatchewan Court of Queen's Bench referred to the collectibility of costs in similar circumstances and referred to the jurisprudence in the matter including Armand v. Carr9, Clarke v. Attorney General for Ontario10 and Letraset Canada Ltd. v. W.H. Brady11 and gleaned the following general principles:
| 1. Entitlement to costs turns in part on whether the claimant has incurred personal liability for the same; |
| 2. Where a person is represented by legal counsel in proceedings, the normal presumption regarding the employment of a professional will arise, namely, that the person represented by legal counsel has incurred personal liability in respect of that representation; |
| 3. The burden of proof rests with the party resisting payment of costs to prove that the successful litigant has not incurred any personal liability in respect of his representation by legal counsel; |
| 4. In order to prove that the claimant has not incurred personal liability with respect to his legal representation, the party resisting payment must prove that there exists a binding agreement between legal counsel and the claimant providing that legal counsel will not look to the claimant for his fees and disbursements. |
[23] Lambert J.A. of the B.C. Court of Appeal sets out clearly the basic principle in Huff v. Price12 as follows:
| 22 Having regard to the cases which I have referred and which were discussed by Mr. Justice Murray in Wenden v. Trikha, it is my opinion that the question of whether the liability for costs or disbursements was incurred is an entirely separate question from whether the liability has been discharged gratuitously or otherwise by another party. It is only if there has been no liability incurred that the principle that formed the basis of the decision in Qureshi v. Nickerson, becomes applicable. |
[24] Applying these principles to the instant case, there is a presumption that the Defendant Doctors have incurred personal liability in respect of the representation furnished to them by their legal counsel. Visx has not overcome the burden of proof that Gowlings could not look to the Defendant Doctors for their fees and disbursements. If Mr. O'Neill of Gowlings, who represented the Defendant Doctors at the trial and was the witness at cross-examination, had been asked that question, he would have had to answer, but he was not asked.
[25] It follows that the questions in cross-examination relating to a possible indemnity agreement between Nidek and the Defendant Doctors need not be answered because they are not relevant.
. . .
[26] Consequently, the motion is denied with costs.
OTTAWA, Ontario
September 21, 2000
Judge
__________________
1 Church of Scientology of Toronto v. Maritime Broadcasting Co. Ltd. (1979), 10 C.P.C. 174 at 175 (N.S.S.C.A.D.); Kin Franchising Ltd. v. Donco Ltd. (1993), 14 C.P.C. (3d) 193 (Alta. C.A.); Bawas Gas Bars Ltd. v. Kiosses (December 24, 1998), D.O.C. 96-CU-11269OCM (Ont. Gen. Div.) and Halifax (County) v. Fancy (1992), 115 N.S.R. (2d) 196 (S.C.T.D.).
2 Kynock v. Johnson (1975), 20 N.S.R. (2d) 586 at 589 (S.C.); Fiege v. Cornwall General Hospital (1980), 30 O.R. (2d) 691 at 697 (H.C.) et Skipper Fisheries Ltd. v. Thorbourne (1994), 31 C.P.C. (3d) 334 at 349 (N.S.S.C.); reversed on other grounds (Sealing Order) 31 C.P.C. (3d) 354 (N.S.C.A.).
3 Harold v. Smith (1860), 157 E.R. 1229 at 1231.
4[1927] S.C.R. 348"> Armand v. Carr, [1927] S.C.R. 348 and W.H. Brady v. Letraset Canada Ltd. (1990), 34 C.P.R. (3d) 433 (F.C.A.).
5 Qureshi (Guardian ad litem of) v. Nickerson (1991), 47 C.P.C. (2d) 69 (B.C.C.A.).
6 W.H. Brady v. Letraset Canada Ltd. (1990), 34 C.P.R. (3d) 433 (F.C.A.).
7 Zwicker v. Schubert, [1999] S.J. No. 605 (Sask. Q.B.), citing cases from Alberta, B.C., Ontario, the Federal Court of Canada and the Supreme Court of Canada.
8 ibid.
9 supra, no. 4.
10 [1967] 2 O.R. 393 (Ont. S.C.), aff'd (1970), 12 D.L.R. (3d) 771 (S.C.C.).
11 supra, no. 6.
12 [1993] B.C.J. No. 186.
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