Date: 19991215
Docket: T-2582-93
BETWEEN:
CIBA-GEIGY CANADA LTD.
Plaintiff
- and -
NOVOPHARM LIMITED
Defendant
REASONS FOR ORDER
REED, J.:
[1] This is an application by the defendant for an order directing either a reference or the trial of an issue, to determine the nature and quantum of damages that should be paid by the plaintiff as the result of an interim, and then, an interlocutory injunction having been obtained against the defendant.
[2] The injunctions prevented the defendant selling tablets of diclofenac sodium ("diclofenac") in the same colour, shape and size tablets as those sold by the plaintiff under its brand name Voltaren. An interim injunction was granted by Mr. Justice Gibson on November 23, 1993, and an interlocutory injunction, replacing the interim injunction, was granted by Mr. Justice Rothstein on July 21, 1994.
[3] In November 1993, the defendant was commencing to market tablets in a 100 mg size, and was contemplating marketing a 75 mg tablet. Mr. Justice Gibson's interim injunction order did not distinguish between the 100 mg and the 75 mg tablets. Mr. Justice Rothstein refused to include the 75 mg tablets in his order but indicated that when they became available for the market, the plaintiff could apply to have them included. Paragraph 2 of an order he issued on September 2, 1994, reads:
| The plaintiff's application for an interlocutory injunction and application for reconsideration in respect of the defendant's 75 mg tablets is dismissed, without prejudice to the right of the plaintiff to bring a fresh application for an interlocutory injunction if and when a sample of the defendant's said tablets is available and upon such application, the parties may rely upon the record herein and the record in Court file T-2583-93 and such further evidence as they may choose to adduce. |
[4] After the issuance of the interlocutory injunction, the defendant began marketing its 100 mg tablets of diclofenac in a colour, size and shape (a white tablet) that was not the same as the plaintiff's (pink tablets), and has continued to do so since. The defendant never marketed its 75 mg tablet in the same colour, shape and sized tablets as the plaintiff but, recognizing it would be enjoined from doing so, marketed them in a non-look-alike form from the beginning.
[5] The defendant filed an appeal of the interlocutory injunction order. The plaintiff filed an appeal of the order refusing to include the 75 mg tablet within the injunction. Neither of these were pursued. Also, the plaintiff did not pursue its action against the defendant on the merits. Consequently, on May 28, 1997, the defendant moved to have the interlocutory injunction that had been issued against it, dissolved. The plaintiff fought this application vigorously.
[6] On December 19, 1997, Mr. Justice MacKay dissolved the injunction. He reviewed the jurisprudence and concluded that the plaintiff had not met the obligation that arises, with the issuance of an interlocutory injunction in a party's favour, to proceed to trial with reasonable dispatch:
| [26] In sum, based on [the] authorities, it is my view that where a temporary, discretionary remedy, an interlocutory injunction, is granted to a plaintiff, one that infringes the liberty of action of a defendant on the basis of some future, inferred harm, it is with the implied understanding that the plaintiff's complaint will be pursued, and will be evaluated on its merits by the court, with reasonable dispatch. Where the plaintiff fails to meet its underlying responsibility to pursue the matter in the courts with due diligence, so that the injunction acts as a continuing bar on the defendant's liberty of action, the court may on application of the defendant dissolve the injunction. |
| [28] In the cases at bar, it is my view that the delay is inordinate and inexcusable. It causes the injunction to be something other than a "temporary" injunction. As the plaintiff itself acknowledges, the plaintiff has done nothing to pursue these actions. Its explanation is in essence, that the defendants have done nothing to advance the action. I note again that is the plaintiff's responsibility. It appeared to the plaintiff that all parties were treating the interlocutory injunction as having finally determined the matter. If that perception had been enunciated at the hearing before Rothstein J., his reasons might have dealt more seriously with that possibility, which was not seriously argued by the parties. At the very least, in light of the Woods exception, where it is perceived an interlocutory injunction would effectively determine finally the interests of the parties, it would not be granted without extensive review of the merits of the cases. |
| [29] In my view the plaintiff has not met its responsibility to proceed with due diligence. That failure in the circumstances of theses cases is sufficient, in my opinion, to justify dissolution of the injunctions. ... [Footnote omitted.] |
[7] In April 1998, the new Federal Court Rules were promulgated; provisions therein require a plaintiff to prosecute its claim in a timely fashion. On August 13, 1998, the plaintiff was sent a Notice of Status Review under the new Rules and on August 28, 1998, the plaintiff filed a Notice of Discontinuance of its action.
[8] On July 13, 1999, Novopharm filed the present motion seeking a reference or the trial of an issue on the nature and quantum of damages it suffered as a result of the operation of the interim and the interlocutory injunctions. Undertakings had been given by the plaintiff as a condition of obtaining both injunctions. That in the order granting the interim injunction reads:
| The interim injunction is granted on the plaintiff's undertaking to pay any damages awarded to the defendant and against the plaintiff should the plaintiff not ultimately be successful when this case is decided on its merits. |
[9] That pertaining to the order granting the interlocutory injunction reads:
| The Plaintiff hereby undertakes to abide by any order concerning damages that this Honourable Court may make if it ultimately finds that the granting of the interlocutory injunction has caused damage to the Defendant for which this Court considers the Plaintiff ought to compensate the Defendant. |
[10] Counsel for the plaintiff argues that it is not appropriate to order either a reference or the trial of an issue because: (1) any damages that the defendant suffered would have been trivial and most were caused by the defendant's own actions rather than the operation of the injunctions; (2) the defendant failed to mitigate its damages; (3) related and protracted proceedings occurred in the trade-marks office and the results justify the merits of the plaintiff's claim; (4) the defendant accepted the merits of the injunction order by not appealing it; (5) the defendant delayed too long commencing this motion; (6) the action was terminated by a discontinuance and there has been no decision on the merits against the plaintiff; (7) the discontinuance was for a valid reason - there was nothing left to litigate.
[11] It is agreed that the enforcement of undertakings as to damages is integral to the Court's awarding of interlocutory injunctions. It is also agreed that the Court has discretion in "special circumstances" to excuse compliance with such undertakings: [1965] S.C.R. 195">Vieweger Construction Co. Ltd. v. Rush & Tompkins Construction Ltd., [1965] S.C.R. 195, at 207-8; Nelson Burns & Co. v. Gratham Industries Ltd. (1987), 19 C.P.R. (3d) 71 (Ont.C.A.)
[12] With respect to the argument that any damages would be trivial, and that they arose out of the defendant's failure to mitigate (e.g., by not moving to market a non-look-alike tablet at an earlier date), I am not persuaded that those assertions have been demonstrated to the extent required, to justify denying the defendant the opportunity to have the nature and extent of the damages it suffered determined.
[13] The defendant presented evidence that it had orders for the look-alike tablets of diclofenac and was filling those orders in November 1993, when the interim injunction was imposed. It states that it lost sales, immediately, as a result of being enjoined from selling those tablets, and that it suffered damages later, over the course of time, as a result of selling its diclofenac in a non-look-alike tablet form. That is, the defendant has produced concrete evidence of some damage, and it has put forth a reasonable argument as to why additional damage occurred. The defendant should be given the opportunity to present its evidence concerning damages and have that evidence assessed.
[14] The plaintiff argues that the defendant failed to mitigate because it did not move to market its diclofenac in a non-look-alike form as soon as possible after the interim injunction was granted on November 23, 1993, or at least by the end of January, 1994, when it became clear that the interlocutory injunction application that had been commenced on January 26, 1994, was not going to be completed quickly.
[15] Counsel for the plaintiff argues that the decision not to move quickly to market in a non-look-alike form should be characterized as a failure to mitigate and, thus, damages arising from the absence of any sales between November 23, 1993 and August 25, 1994, should not be included, as is the case for any damages claimed as a result of Apotex moving into the non-look-alike market ahead of Novopharm.
[16] The record filed for the purposes of the present motion is insufficient to determine the plaintiff's claim that there was a failure to mitigate. The defendant did not expect to litigate that issue in the context of this motion. The affiant the defendant put forward, for the purposes of the present motion, Diane Yee, had little detailed knowledge of the relevant circumstances. It is not clear to me whether the prolongation of the interlocutory injunction application from January 26, 1994 to July 21, 1994, was the result of the defendant's actions, or a matter of the Court's convenience. It is not clear to me when the various provincial formularies were published and the extent to which that would impact upon a decision to proceed or not to market. I am not convinced that the evidence before the Court is sufficient to justify a conclusion that the defendant failed to mitigate its damages.
[17] Counsel for the plaintiff referred to protracted proceedings in the trade-marks office, concerning the plaintiff's registration application for a trade-mark in the colour, size and shape of the tablets in question - the defendant's opposition to registration was rejected. The registration issue is still not finally settled, since the decision rejecting the defendant's opposition is under appeal and, therefore, registration cannot yet issue. It is not unusual for registration proceedings to take a long time. Most importantly, however the plaintiff's claim in the present case is for passing off. It is a separate claim from that for registration. I have not been persuaded that actions that took place in the registration proceeding, can be relied upon as special circumstances for relieving the plaintiff of its undertakings to pay damages in this proceeding.
[18] The failure to pursue an appeal of the interlocutory injunction order is not relevant to whether or not the defendant should be allowed to have a determination of the nature and quantum of its damages. Interlocutory injunction orders are discretionary in nature. Appeal courts, traditionally, give such orders a considerable degree of deference. I am not prepared to conclude that the defendant acquiesced in the granting of the injunction merely because it did not vigorously pursue an appeal.
[19] Counsel for the plaintiff cited Smith v. Day (1883), 21 Ch. D. 412 and Sherk et al. v. Horwitz (1973) 12 C.P.R. (2d) 190 in support of its submission that an application for a reference on damages should be made within a reasonable time. In Smith, a delay of approximately 8 months was held to be too lengthy a delay in seeking compensation for damages pursuant to an undertaking. In Sherk the court dismisses the appeal for procedural reasons and not for delay. However, these cases are not of a recent vintage, and more importantly, each case must be decided on its own facts. The ten and a half months delay in bringing this motion is not remarkable, given the pace of these proceedings generally. The plaintiff will not suffer prejudice as a result of the motion not having been filed earlier. I do not find the delay to be a significant factor.
[20] I turn then to the fact that the plaintiff's claim was terminated by discontinuance, rather than a decision that the plaintiff's claim has no merit. Counsel for the plaintiff argues that in such circumstances, the usual assumption that an undertaking as to damages must be complied with has a lower threshold of application, or, alternatively, that such constitutes special circumstances leading to a conclusion that the plaintiff should be excused from complying with the undertakings.
[21] I have difficulty with this argument, both in its general application, and in the particular circumstances of this case. A plaintiff who commences an action and subsequently discontinues it, is required, unless there is consent to the contrary, to reimburse a defendant for costs incurred as a result of the plaintiff's now withdrawn claim. A claim by a defendant for damages arising out of the imposition of interim and interlocutory injunctions, when the plaintiff does not establish its right to those injunctions, is of a similar nature. Interim and interlocutory injunctions are granted on a provisional basis, in anticipation of a plaintiff establishing its right thereto at trial. When such rights are not established, either as a result of the plaintiff losing after full litigation at trial, or as a result of the plaintiff electing to discontinue its case, the plaintiff has had the benefit of the operation of the injunctions without establishing the right it claimed as the basis for their issuance. Often a defendant will agree to forego any claim to damages, if the plaintiff agrees to discontinue the action. In the absence of such a consent, however, I cannot conclude that the obligation to compensate pursuant to undertakings is any different in the case of a discontinuance from that applicable when the plaintiff loses on the merits.
[22] With respect to the particular circumstances of this case, before the April 1998 promulgation of the new Rules, there were no requirements that a plaintiff move expeditiously to trial. Plaintiffs who were successful in obtaining an interlocutory injunction often had an incentive to delay the trial of their action for as long as possible. In dissolving the injunction, Mr. Justice MacKay dealt with an argument that the defendant's inaction should be seen as part of the reasons for the lengthy delay in proceeding with the present action. He found that the responsibility for the delay did not rest with the defendant:
| [30] In these cases, the defendants have done nothing to end the plaintiff's delay until now, yet they cannot be said to have been obstructionist or uncooperative, and they cannot be viewed as causing the delay. For the reasons outlined above, where the court has imposed a constraint on the freedom of action of the defendants, implicitly on the basis that the plaintiff will proceed with its actions with due diligence, and the plaintiff does not do so, failure of the defendants to take any steps in these actions does not bar them from seeking to regain their liberty of action by a motion to dissolved the interlocutory injunctions. |
| [31] The plaintiff has taken no steps to proceed with the actions in these Court files for more than three years. It has taken no step in the four months following filing of the motions by Apotex and Novopharm to dissolve the injunction. The plaintiff virtually concedes it has treated the interlocutory injunctions as the permanent resolution of the disputes. In my opinion, the plaintiff had the responsibility, particularly where the injunction was granted on a quia timet basis, to pursue the matter with due diligence and dispatch. |
[23] I reach the same conclusion. I do not see any evidence on the file that convinces me that the defendant caused the lengthy delay.
[24] I turn then to the argument that there should be no inquiry respecting damages because, when the discontinuance occurred, there was nothing left to litigate. Once the interlocutory injunction was issued, the defendant moved to market its diclofenac in a non-look-alike form, and has not moved back. Counsel for the plaintiff refers to portions of the defendant's submissions that were filed in response to the plaintiff's request for the interlocutory injunction. The defendant, at that time, argued that the granting of an interlocutory injunction would effectively put an end to the litigation. The plaintiff argued to the contrary. Mr. Justice Rothstein accepted the plaintiff's argument. Had the defendant's argument been accepted, the plaintiff would have had to meet a much higher standard in order to obtain the interlocutory injunction (a strong prima facie case, rather than merely a serious question to be tried). There is an inconsistency between the position taken by the plaintiff when the injunction was granted and that now being taken. There would appear to be a fundamental unfairness in allowing a plaintiff an interlocutory injunction on the strength of its argument that such injunction would not put an end to the litigation, and then allowing it to avoid its undertakings to pay damages on the ground that the injunction together with the passage of time had had that result.
[25] Even if there was nothing left to litigate, as of the date of the discontinuance (the defendant not having moved to market its diclofenac in a look-alike tablet despite the dissolution of the injunction), this is not a reason to absolve the plaintiff from its obligation to recompense the defendant for damages arising from the imposition of the interim and interlocutory injunctions at an earlier stage.
[26] The plaintiff has not demonstrated that special circumstances exist so as to relieve the plaintiff of its obligations to compensate the defendant for damages arising out of the operation of the injunctions.
Scope of Reference
[27] Counsel for the plaintiff argues that if a reference is to be ordered, the Court should establish its scope. He notes that Rule 153 provides for the reference of any question of fact to a referee or a judge.
[28] This aspect of counsel for the plaintiff's argument has given me some concern. Rule 153 provides that the Court may, "for the purpose of making an inquiry and report, refer any question of fact in a proceeding to a judge or other person...". This appears to be somewhat narrower than its predecessor Rule 500, which authorized the referring of "any matter to a judge...or other person", for the purpose of "making inquiries, or for the determination of any question or issue of fact". In addition, Rule 480 described an "issue of fact" as including "any question as to the damages flowing" from an infringement and "any question as to the extent of the infringement", definitions that do not now apply to Rule 153.
[29] Whether or not Rule 153 is more restrictive than Rule 500, I consider Mr. Justice Hugessen's decision in VISX, Inc. v. Nidek Co., (1998), 81 C.P.R. (3d) 572 (F.C.T.D.), to be directly on point. In that case a motion was made for a reference under former Rule 480 to have issues of damages and profits determined by a reference. While the motion was filed before the coming into force of the new Rules, the motion was heard after that date. Mr. Justice Hugessen ordered that the issue be determined pursuant to new Rule 107, not Rule 153. He wrote that Rule 107:
| ... does not envisage a reference as such but simply a separate determination by trial or otherwise of a separate issue... |
| ...Experience has .... indicated that damages and profits are rarely exclusively matters of fact, and references [pursuant to Rule 153] are intended to be only for the determination of questions of fact. |
[30] I am persuaded that an order pursuant to Rule 107 for the trial of an issue is more appropriate in the present case than a reference pursuant to Rule 153. An order will issue accordingly.
Costs
[31] The defendant seeks solicitor-client costs for both this motion and the proceeding as a whole. The plaintiff agrees that as a result of the discontinuance, it should pay the defendant's costs of the action, but only on a party-party basis.
[32] There are costs provisions in the orders given by my colleagues. Mr. Justice Gibson's order of November 23, 1993 provides that costs of that application "will follow the event". In the absence of any indication that an award above the normal level was intended, I take this to mean an award on a party/party basis. Mr. Justice Rothstein's order of September 2, 1994, provided that costs for the proceedings before him were fixed at $17,000 in favour of the plaintiff. Mr. Justice MacKay ordered costs of the proceeding before him in favour of the defendant on a party/party basis. I have not been persuaded that I have the authority to revisit or alter those cost awards. Also, I am not persuaded that a case has been made out for solicitor-client costs, for either this motion or the proceedings as a whole.
Judge
OTTAWA, ONTARIO
December 15, 1999
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