Date: 20070723
Docket: T-14-05
Citation: 2007 FC 767
BETWEEN:
BIOVAIL CORPORATION
(d.b.a. BIOVAIL PHARMACEUTICALS CANADA);
BIOVAIL LABORATORIES INC. and
GLAXOSMITHKLINE INC.
Applicants
and
THE MINISTER OF NATIONAL
HEALTH
AND WELFARE and SANDOZ CANADA INC.
Respondents
ASSESSMENT OF
COSTS - REASONS
Charles E. Stinson
Assessment
Officer
[1]
This
application for an order prohibiting the Minister of National Health and
Welfare (the Minister) from issuing a notice of compliance to the
Respondent, Sandoz Canada Inc. (the Respondent), permitting sale of the
latter's new drug until after the expiry of Canadian Patent numbers 2,142,320
(the '320 Patent) and 2,168,364 (the '364 Patent) was dismissed with costs. The Minister
entered an appearance but, as is the usual practice, did not participate in the
hearing of the judicial review or this assessment of costs.
I. Objection
to Written Disposition of the Assessment of Costs
[2]
The
Applicants objected to the approval of the Respondent's request for written
disposition of this assessment of its costs on the basis that only oral
cross-examination can expose the unreasonableness of the amount claimed for one
of the Respondent's experts, Dr. Metin Celik. Specifically, the Applicants have
brought three similar proceedings against other generic pharmaceutical
companies. All respondents asserted non-infringement, an attack on the validity
of the '320 Patent being only a secondary argument. In two of those proceedings
(the Novopharm matters) and relative to the issue of validity of the '320
Patent, the respondents raised the same 92 pieces of prior art as the
Respondent here. Dr. Celik's evidence here essentially duplicated the evidence
he gave earlier in the Novopharm matters. In all three matters, the hearing
judge did not find it necessary to address the allegations of invalidity. The
protective orders covering the expert evidence in all three matters prevent the
Applicants from demonstrating the excessiveness of the amount claimed for Dr.
Celik as his work here duplicated his previous work on the Novopharm matters.
Oral cross-examination of the Respondent's experts and of the affiant who swore
the affidavit (the Katz affidavit) in support of the bill of costs is necessary
to expose the excessiveness of the amounts claimed and the insufficiency of the
evidence of their accounts.
[3]
The
Respondent argued further to Rolls-Royce plc v. Fitzwilliam, [2004]
F.C.J. No. 626 (A.O.) at para [5], that the Applicants had the right to
cross-examine on the Katz affidavit, but having failed to do so, have
effectively waived their right of objection. The costs should be assessed in
the circumstances of the litigation addressing the Respondent here and not by
reference to the Novopharm matters. The record discloses admissions by the
Applicants on two occasions that the evidence here differed from that in the
Novopharm matters.
II. Assessment
[4]
If
Rule 83 addressing the right to cross-examine the deponent of an affidavit
relating to a motion or application is not deemed broad enough to embrace the
interlocutory process of an assessment of costs, Rule 408(1) providing for
assessment officers to direct productions and the manner of conduct is
routinely evoked to permit such cross-examinations consistent with process
elsewhere in the Rules. This would apply to the Katz affidavit. I doubt that
Rule 408(1) permits me to interfere with a litigant's choice of affiant in
support of its bill of costs or to require that a given individual, i.e. Dr.
Celik, appear before me to give oral evidence. Rule 408(1) permits me to direct
oral or written assessments or a combination of both. In particular, it would
permit Dr. Celik to appear before me to give oral evidence if the Respondent
could justify that. However, with regard to the requirement for special
circumstances in Rules 316 and 371 for oral testimony on a judicial review and
on a motion respectively, that would be a rare and exceptional occurrence. Direct
access via oral examination before the assessment officer to an expert from the
trial is not generally necessary to expose problems with said expert's account:
see Halford v. Seed Hawk Inc., [2006] F.C.J. No. 629 (A.O.) [Halford].
I have agreed below that the Applicants have exposed problems with the proof. I
am sure that I can recognize a reasonable dollar amount of costs for this
matter regardless of variations in the extent of proof.
III. Maximum Column
III units ($120.00 per unit) claimed for counsel fee items 2 (respondent's record
/ available range = 4 to 7 units); 4 (preparation for motion for protective order
/ available range = 2 to 4 units); 8 (claimed five times for discrete
preparations for cross-examination of five affiants / available range = 2 to 5
units) and 9 (claimed five times for appearance on each cross-examination /
available range = 0 to 3 units per hour); 13(a) and (b) (preparation for first
and second days of the hearing respectively / available range = 2 to 5 and 2 to
3 units respectively); 14(a) (attendance at the hearing / available range = 2 to
3 units per hour) and 26 (assessment of costs / available range = 2 to 6 units)
A. The Respondent's Position
[5]
The
Respondent argued further to Rules 409 and 400(3)(c) (importance and
complexity) and (g) (amount of work) that it had to address numerous and
complex legal issues such as sufficiency of a notice of allegation, proper tests
for patent infringement and obviousness, judicial comity, principles of claims
construction, burden of proof and invalidity of patents. The Court in AB
Hassle v. Genpharm, [2004] F.C.J. No. 1087 (F.C.), a similar proceeding,
noted the considerable work required and awarded maximum Column III costs.
Although there was no formal finding of voluminous work in Eli Lilly Canada v. Novopharm
Ltd.,
[2006] F.C.J. No. 1002 (F.C.), the Court still awarded maximum Column III costs.
Counsel for the Respondent had to supervise its experts in preparing their own
reports and responding to the Applicants' experts. The prior art documents and
expert reports numbered thousands of pages. In the face of documentation to the
contrary, the Applicants put the Respondent's experts to extra work by raising
an unfounded assertion concerning formulation of the latter's product. The
Respondent's counsel prepared the motion record materials addressed by the item
4 claim. The record indicates that the $166,232.87 (counsel fees and
disbursements) calculated at maximum Column III rates is less than 35% of the
actual cost ($493,786.02).
B. The
Applicants' Position
[6]
The
Applicants argued that the evidence supporting counsel fees is insufficient,
essentially consisting of the printout of recorded entries from the record.
This is information publicly available and not indicative of the actual time
taken for each task, as opposed to the law firm's time docket entries referred
to in the Katz affidavit but not produced. Given that only correspondence
between counsel was advanced in support, but not time docket entries, the
inference should be that the work associated with item 4, a motion in writing
and on consent, was likely minimal. The table advanced in the Respondent's
submissions summarizing time spent on the cross-examination of affiants is an
inadequate substitute for the law firm's time docket entries which might have
assisted in confirming the actual time associated with items 8 and 9.
[7]
The
brevity of the Court's decision indicates that the issues were simple, i.e.
only two brief paragraphs each to construe the '320 Patent and the '364 Patent.
As well, the Court noted that the opposing experts agreed on several key points
leaving only one area of disagreement. As the Court's decision considered and
rejected the Respondent's submission on judicial comity, the Respondent cannot
now raise it as a factor indicating complexity. Thus, minimal allowances for
items 13 and 14 are warranted.
C. Assessment
[8]
I
concluded at para. [7] in Starlight v. Canada, [2001]
F.C.J. No. 1376 (A.O.) that the same point in the ranges throughout the Tariff
need not be used as each item for the services of counsel is discrete and must
be considered in its own circumstances. As well, broad distinctions may be
required between an upper versus lower allowance from available ranges. The
protective order featured numerous provisions to ensure maximum coverage, none
of which however would have been difficult to conceive: I allow the mid-range
value of 3 units for item 4.
[9]
The
exact amount of time taken for a task does not always equate to the reasonably
necessary time for a task. The absence of the law firm's dockets is not
necessarily a problem but it does make evaluation somewhat less precise. As
well, time taken is not necessarily the sole factor for setting costs: see, for
example, several other possible factors in Rule 400(3). I think that the core
issues in this litigation were not novel nor the most difficult to address.
However, the underlying materials were detailed and required careful attention.
I allow 6 units for item 2.
[10]
The
cross-examinations of the experts were also key in this matter. I allow item 8
at 4 units for each of the Respondent's experts, Dr. Celik and Dieter Baun. The
Respondent's third expert, Dr. Jeffrey Gazzara, was prepared for a
somewhat narrow issue and the actual cross-examination lasted only 0.4 hours by
teleconference. I allow item 8 at 3 units for him. I allow item 8 at the
maximum 5 units for each of the Applicants' two experts. I allow item 9 at 2
units per hour for each of the Respondent's three experts and at 3 units per
hour for each of the Applicants' two experts. I think that the demands on
counsel concerning cross-examination of the opposing experts were somewhat
greater. Again, for item 13, I think that the preparation for hearing was the
key task: I allow items 13(a) and (b) at the maximum claimed. As I have in
the past when I think that the available choices of 2 or 3 units per hour for
item 14(a) do not adequately reflect the appropriate allowance, I apportion the
13 hours for hearing as follows: 7 hours and 6 hours at 3 units and 2 units per
hour respectively. I allow item 26 at 5 units.
IV. Double costs (counsel fees) per Rules 419 and
420(2)(b) given that the Applicants failed to obtain judgment subsequent to the
Respondent's settlement offer.
A. The
Respondent's Position
[11]
The
terms of the Respondent's settlement offer (letter dated January 27, 2005 to
expire on February 20, 2005) were that the Applicants discontinue this
litigation, pay Column IV costs (Column III being the default Column unless the
Court orders otherwise per Rule 407) and not assert against the Respondent any
additional patents for the subject drug. The underlying rationale was that the
result in the Novopharm matters significantly strengthened the Respondent's
position relative to the '320 Patent. As well, it was readily apparent that
formulation allegations asserted against the Respondent's drug relative to the
'364 Patent would fail and that market considerations indicated discontinuance
would be prudent. The Applicants rejected this settlement offer the next day by
simply stating that they intended to appeal the decision in the Novopharm
matters. The Respondent's evidence was that as of the date of the
settlement offer no assessable counsel fees had been incurred but that
approximately $3,000.00 for experts had been.
[12]
The
Respondent argued that the Court may consider an offer to settle further to
Rule 400(3)(e) whether or not said offer falls within the parameters of
Rule 420: see Kirgan Holdings S.A. v. "Panamax Leader" (The)
(2003), 227 F.T.R. 200 (F.C.). The Respondent's offer contained a requisite
element of compromise because acceptance would have precluded payment of costs,
all of which were incurred subsequently: see Stewart v. Canada (Attorney
General),
[2003] F.C.J. No. 947 (A.O.) [Stewart]. The implicit understanding
in the second part of the settlement offer – that the Respondent would
discontinue its action for expungement – also met the threshold for compromise:
see ITV Technologies Inc. v. WIC Television Ltd., [2005] F.C.J. No. 934
(F.C.). Absent an element of compromise (which is denied here) the Court can
award increased costs: see Baker Petrolite Corp. v. Canwell
Enviro-Industries Ltd., [2002] F.C.J. No. 1710 (F.C.A.). That the
settlement offer would eventually have expired was irrelevant because the
Applicants formally rejected it the next day. Double costs were awarded in Stewart
above notwithstanding expiry circumstances.
B. The
Applicants' Position
[13]
The
Applicants argued further to Canadian Olympic Assn. v. Olymel, Société en
Commandite (2001), 8 C.P.R. (4th) 429 (F.C.) that Rule 420 is
intended to encourage the termination of litigation as an alternative to the
longer and more expensive process of a trial, but not to allow manipulation for
double costs by essentially, as here, calling for capitulation. The
Respondent's offer, calling for the Applicants to abandon their case, permit
immediate release of the Respondent's product and pay higher than the costs
eventually awarded, did not contain the requisite element of compromise. The
simple mention, in the settlement offer, of certain patents in no way implied
that the Respondent would not subsequently challenge their validity. The Applicants'
immediate rejection of the settlement offer reinforces their position that it
was simply a request for capitulation.
C. Assessment
[14]
Subsections
4 and 5.1(1) of the Federal Courts Act defining the Federal Court, and
Rule 2 of the Federal Courts Rules defining an assessment officer, mean
that the terms "Court" (as used in Rule 400(1) setting jurisdiction
to award costs) and "assessment officer" refer to separate and
distinct entities. Therefore, if the submissions relied on the premise that I
have discretion within the meaning of Rule 400(1) concerning entitlement, such
consideration was irrelevant in my disposition below.
[15]
An
amendment to Rule 420, SOR/2005-340, s. 1, which took effect on November 15,
2005, several months after the effective dates of the settlement offer, added
subsection (3) providing that Rule 420(2)(b) does not apply unless the
settlement offer is made at least 14 days before the hearing (it was) and
"is not withdrawn and does not expire before the commencement of the
hearing." This subsection was not raised before me. The Respondent
did not give notice that the offer remained open should the Applicants change
their mind. As well, they did not extend the date of expiry which was well
before the commencement of the hearing. Thus, even if the rejection did not
immediately render it withdrawn or expired it would have expired within the
meaning of Rule 420(3)(b) thereby precluding entitlement to double costs. However,
the wording of the current Rule is so much more restrictive (it clearly
disqualifies this settlement offer from triggering double costs) than the
former Rule 420(2)(b) (which imposed only the condition that a settlement offer
not be revoked) that I presume it is conceded that the settlement offer here
must be evaluated against former Rule 420(2)(b). In Astrazeneca AB v. Novopharm
Ltd.,
[2004] F.C.J. No. 1196 (A.O.) at paras. [33] and [34], I concluded that
expiration of a settlement offer does not carry the additional meaning of
revocation.
[16]
The
jurisprudence is clear on the Court's jurisdiction to temper the effect of Rule
420 doubling by some intermediate result – jurisdiction not available to me.
The large amount of money at stake in marketing pharmaceuticals was invoked by
both sides: the Respondent to reinforce its claim to higher Column III fees and
the Applicants to assert that partial indemnity costs ($166,232.87) or even
full indemnity / solicitor-client costs ($493,786.02) were insignificant
relative to market share dollars at stake, in turn effectively making the
settlement offer devoid of compromise and a call for capitulation. I do not
think for an instant that the potential amount of extra costs, i.e. about
$17,000.00, was any incentive for the Applicants to discontinue. That is,
I doubt that the avoidance of such extra costs would be the overriding
criterion for litigants in such circumstances to the absolute exclusion of their
interests in the protection of their patents and access to high market share. I
will not add analysis additional to that already in Astrazeneca above and
in Culhane v. ATP Aero Training Products Inc., [2004] F.C.J. No. 1836
(A.O.) on whether an element of compromise can ever be a factor in the face of
entrenched positions. I do not think that, short of capitulation by the
Respondent on all issues other than costs perhaps, the Applicants would have
considered settlement. As I doubt that the Court could have asserted
jurisdiction over patents not the subject of this litigation (addressed in the
second part of the offer requiring the Applicants to not assert additional
patents relative to the Respondent's drug), I will only consider the first part
of the settlement offer requiring discontinuance and payment of costs. I think
it an aggressive presumption that the Court might have awarded Column IV costs.
The Applicants refused an unrevoked settlement offer and failed to obtain a
judgment leaving them in a worse position than if they had accepted the offer,
i.e. liable for costs however minimal they may be characterized relative to
market share at stake and whose potential amount I do not think was a disincentive
for the Applicants. The Respondent's offer was clear and unequivocal and barely
meets the threshold for doubling of costs – a result which I think
inappropriate in the circumstances here but which I am bound to apply. I
exclude item 26 from doubling for reasons explained in the jurisprudence cited
earlier in this paragraph.
V. Disbursements for experts Dr. Metin Celik
($127,937.12 / US$375 per hour); Dieter Baun ($7,124.50 /$150 per hour) and Dr.
Jeffrey Gazzara ($1,063.34 / US$125 per hour).
A. The
Respondent's Position
[17]
The
Respondent noted that the expert reports of Dr. Celik and Mr. Baun were
particularly lengthy and that all experts underwent cross-examination. Dr.
Celik reviewed the prior art, advised counsel on technical matters, including
their experts, in the Applicants' materials, prepared expert evidence on
formulation and provided crucial instructions and monitoring of Dr. Gazzara's
independent testing. Mr. Baun's particular experience in formulation was used
to reply to the Applicants' experts. He also reviewed the prior art but in less
detail. Dr. Gazzara addressed pH testing on dilute hydrochloric acid relative
to issues for the '364 Patent.
[18]
The
Respondent argued that this matter, involving complex patent issues resolved on
written expert evidence, meets the test in Rothmans, Benson & Hedges
Inc. v. Imperial Tobacco Ltd. (1994), 50 C.P.R. (3d) 59 (F.C.T.D.) [Rothmans],
that costs are allowable for experts demonstrably relevant to and supportive of
the case. Allied Signal Inc. v. Dupont Canada Inc. (1998), 81 C.P.R.
(3d) 129 (T.O.) [Allied] set out a three-part test, i.e. the
disbursement for an expert must be prudent and reasonable in the circumstances
existing at the time it was incurred, the terms of engagement must not
constitute a blank cheque and the extent of reliance on the expert by the trial
judge should be a factor. The Court in Kirkbi AG v. Ritvik Holdings Inc.,
[2002] F.C.J. No. 1474 (F.C.T.D.), held that the costs, even if substantial, of
an expert whose testimony was determinative of the issues should be considered in
the context of how much was at stake for both sides.
[19]
Success
by the Applicants here would have shut the Respondent out of the lucrative
Canadian market for at least eight years, a factor meeting the first part of
the Allied test above. The qualifications, experience and
reasonable hourly rates of all three experts in drug formulation easily meet
the second part. The hearing judge's considerable reliance on their expertise
meets the third part of the test, i.e. his implicit reliance on them concerning
an essential element of the '320 Patent and his explicit reliance on them
as opposed to the Applicants' experts concerning formulation and infringement
issues relative to the '364 Patent.
[20]
The
Respondent argued that its supporting evidence for these disbursements clearly
meets the test in Tariff B1(4) requiring reasonableness and an affidavit
establishing that they were paid or are payable. As well, Sarasin
Consultadoria e Servicios LDA v. Roox's Inc., [2005] F.C.J. No. 907 (A.O.),
holds that the absence of exhaustive proof should not preclude recovery if it
is apparent that real costs were incurred. In response to the Applicants'
assertion that Dr. Celik's work on validity of the '320 Patent was unnecessary
because the hearing judge did not address validity, the Respondent argued
further to Rothmans above that costs should not be assessed in hindsight,
but rather with regard to the circumstances existing at the time they were
incurred. Here, the Respondent asserted that its product did not infringe the
'320 Patent, and even if did, said patent was invalid. The hearing judge's
finding of non-infringement made the validity issue moot, but Mon-Oil Ltd.
v. Canada, [1993] F.C.J. No. 1447 (T.O.), held that counsel would be remiss
in not preparing for such issues. Contrary to the Applicants' assertion that
the hearing judge's use of a single paragraph to sum up the Respondent's expert
evidence indicated little reliance on it, he spent several paragraphs weighing
and making findings of fact based on said evidence. The brevity of the reasons
does not necessarily indicate simplicity of issues: see Bayer AG v. Apotex
Inc., [2002] F.C.J. No. 1693 (A.O.) [Bayer].
[21]
Dr.
Celik did not falsify time entries or recycle them from the Novopharm matters.
The supervising lawyer forwarded the publicly available expert affidavit
of Dr. Paul Maes from the Novopharm matters to him for evaluation because it
was anticipated that the Applicants would lead similar evidence in this
proceeding. The Applicants' position in this assessment of costs on the
inadequacy of Dr. Celik's credentials and experience should be rejected because
it is identical to that considered and rejected by the hearing judge here. The
Court in the Novopharm matters also expressly qualified him as an expert. The
Applicants' submission below misstated the finding in Aerlinte Eireann
Teoranta v. Canada, [1993] F.C.J. No. 1462 (F.C.T.D.) [Aerlinte].
The Court there found that preparation of an expert report is part of
preparation to give evidence and that an expert's costs of meeting with counsel
and reviewing patents, prior art and adverse expert reports are assessable.
B. The
Applicants' Position
[22]
The
Applicants asserted that the Respondent's proof is insufficient, i.e. failure
to adduce further to Tariff A3(4) as an alternative to the $100.00 limit in
A3(2), evidence of any signed agreement with Dr. Celik for his expert services.
The amount of $127,937.12, being 87% and 78% respectively of the totals for
disbursements and the bill of costs, is exorbitant. There is no evidence that
his first three invoices were ever paid. As there is evidence that his fourth
invoice, i.e. US$24,824.27 was paid, as opposed to the first three, the
inference should be that the latter have not been paid. The absence of an
engagement agreement for his work makes it impossible to discern the parameters
of his work. Similar concerns apply to Mr. Baun and Dr. Gazzara.
[23]
The
Applicants argued that Dr. Celik's account fails all three parts of the Allied
test above and instead falls squarely within its finding in para. [77] that
exorbitant and unreasonable costs charged by experts, however essential their
supervising lawyers may consider their potential evidence, must not be passed
on to the losing litigant. Although costs were permissible for preliminary work
to determine the correct approach for a specific case, they are not for an
expert educating himself in a field with which he is not familiar: see Halford
above at para. [82]. Dr. Celik had never worked with buproprion hydrochloride
and had only limited experience as a Ph.D student with sustained release
formulations. The presence in his invoices of "travel time" to
libraries confirms that he had been working primarily in recent years as an
expert witness in proceedings such as here as opposed to work in an academic
setting. The full extent of his lack of expertise in chemistry, biology and
pharmacology, admitted on cross-examination here and in the Novopharm matters,
cannot be gauged because their transcripts are sealed by protective orders.
However, the exorbitant time (43.99 hours) charged in his invoices for review
of literature with which an expert qualified in the field should have been
familiar, i.e. 1.5 hours for "Organic Chemistry (Book) – General knowledge
that I needed to know/remember as it applies to my affidavit", illustrates
this lack of expertise.
[24]
Dr.
Celik, as an expert for this matter and the Novopharm matters, examined the
same 92 pieces of prior art. All but one patent were common to both
matters. Yet, he charged exorbitant time (79.83 hours) to review these same
materials several times over. The evidence discloses 55.08 hours for work such
as discussions with counsel of the subject patents falling outside the Court's
parameters, i.e. directly preparing to give evidence and giving evidence, expressed
in Aerlinte above. Only the costs for a single preparation of an
affidavit as opposed to multiple and repetitive drafts may be claimed: see Canadian
National Railway Co. v. Industrial Estates Ltd., [1987] F.C.J. No. 665
(T.O.). The record indicates that not only had he done this work already for
the Novopharm matters, he repeated some of it several times here. The record
discloses inflated charges of 23 hours to prepare for and attend on his
cross-examination lasting less than 3 hours plus 6.92 and 8.33 hours
respectively for repeated reviews of the 19 and 18 page affidavits of the
Applicants' two experts. Dr. Celik made false or recycled time entries,
i.e. 1.5 hours to review the affidavit of Dr. Maes, which was not used here,
from the Novopharm matters. Further to Northeast Marine Services Ltd. v.
Atlantic Pilotage Authority, [1994] F.C.J. No. 1294 (T.O.), invoices
lacking precise information should be reduced accordingly. His vague invoices
here omit dates for work allegedly completed, instead setting out overlapping
date ranges out of chronological order for repetitive work.
[25]
The
Court in Apotex Inc. v. Syntex Pharmaceuticals International Ltd.,
[1999] F.C.J. No. 1465 (F.C.T.D.), held that losing parties are not liable for
the costs of additional or unnecessary experts. Here, Dr. Celik was hired just
after Mr. Baun despite being less qualified, more expensive and giving essentially
the same evidence. The hearing judge hardly relied on the Respondent's three
experts referring to them only as a group and never individually by name. He
used only one paragraph for each patent to summarize their evidence meaning
that only Mr. Baun's evidence was necessary. As the hearing judge found issues
of validity irrelevant, Dr. Celik's work was largely irrelevant because it
mostly addressed the prior art which he had already reviewed in the Novopharm
matters.
C. Assessment
[26]
My
view, often expressed further to my approach in Carlile v. The Queen
(1997), 97 D.T.C. 5284 (T.O.) and the sentiment of Lord Justice
Russell in Re Eastwood (deceased) (1974), 3 All.E.R. 603 at 608, that
assessment of costs is "rough justice, in the sense of being compounded of
much sensible approximation", is that discretion may be applied to sort
out a reasonable result for costs equitable for both sides. I think that my
view is reinforced by the editorial comments (see: The Honourable
James J. Carthy, W.A. Derry Millar & Jeffrey G. Gowan, Ontario Annual
Practice 2005-2006 (Aurora, Ont: Canada Law Book, 2005)) for Rules 57 and
58 to the effect that an assessment of costs is more of an art form than an
application of rules and principles as a function of the general weight and
feel of the file and issues, and of the judgment and experience of the
assessment officer faced with the difficult task of balancing the effect of
what could be several subjective and objective factors.
[27]
In
Almecon Industries Ltd. v. Anchortek Ltd., [2003] F.C.J. No. 1649 (A.O.)
at para. [31], I found certain comments in the evidence, although
self-serving, nonetheless to be pragmatic and sensible concerning the reality
of a myriad of essential disbursements for which the costs of proof might or
would exceed their amount. However, that is not to suggest that litigants can
get by without any evidence by relying on the discretion and experience of the
assessment officer. The proof here was less than absolute, i.e. claims by
Dr. Celik for January – May 2005 for preparation and teleconferences or for May
26 – 27, 2005 for post-meeting activities without identifying participants and
purpose. The evidence does not specify that his travel to Toronto on May
23-25, 2005, was to meet with supervising counsel concerning case preparation,
including his report, but that likely was the purpose. The 6 hours claimed for
January – May 2005 (preparation for teleconferences and teleconferences) likely
addressed matters relevant for said meeting – a prudent approach to maximize
the best use of that time. The lack of details makes it difficult to confirm
whether the most efficient approach was indeed used or that there were no
errors in instructions, as for example occurred in Halford above,
requiring remedial work. A paucity of evidence for the circumstances underlying
each expenditure makes it difficult for the respondent on the assessment of
costs and the assessment officer to be satisfied that each expenditure was
incurred as a function of reasonable necessity. The less that evidence is
available the more that the assessing party is bound up in the assessment
officer's discretion, the exercise of which should be conservative, with a view
to a sense of austerity which should pervade costs to preclude prejudice to the
payer of costs. However, real expenditures are needed to advance litigation: a
result of zero dollars at assessment would be absurd.
[28]
Counsel
for the Applicants submitted a decision, Janssen-Ortho Inc. v. Novopharm
Ltd., [2006] F.C.J. No. 1684 (F.C.) [Jansenn-Ortho] that came to his
attention after he had filed his reply materials. The Court there took into
account that certain work for that proceeding was identical to that done for
previous and similar proceedings. The Court there, after precluding costs for
non-appearing experts, expressed concern for mounting and extravagant charges
by experts and capped experts' charges for days in Court whether testifying or
not at the lesser of the fees actually charged or those daily fees of senior
counsel and capped preparation at one-half of such senior counsel's fee. The
Respondent replied by pointing to my finding in para. [29] of Merck &
Co. v. Apotex Inc., [2002] F.C.J. No. 1116 (A.O.) [Merck] and
arguing that what was found reasonable in the circumstances of Jannsen-Ortho
above should not determine what is reasonable in the circumstances here. I
agree with the Respondent subject to the caveat that I am bound by
jurisprudence on legislative intent.
[29]
I
have assessed the accounts of the Respondent's three experts consistent with my
approach in Merck above, affirmed by [2002] F.C.J. No. 1357 (F.C.T.D.)
and Bayer above. I considered there some of the
jurisprudence advanced here: I will not add more analysis given that reference
here was made to Halford above in which I analyzed expert accounts in
some detail. Experts may provide technical assistance, in addition to the work
for their own reports and their oral evidence, in areas of case preparation
beyond the capacity of supervising counsel. However, such work, potentially
recoverable on a full indemnity basis as a function of reasonable necessity, should
not stray into areas for which supervising counsel bear sole responsibility.
That is, Tariff limitations could be circumvented because the assessable costs
for counsel are limited to partial indemnity. I think that little, if any, such
work properly attributable to counsel occurred here. Dr. Celik's accounts may
not specify exact dates for different types of work, but the date ranges
provided contain many, but not all, entries with clear information on what
technical work he had performed. Paragraphs 14, 15 and 16 of the Katz affidavit
do set out in general terms the instructions for the experts' work, but not in
so much detail for Dr. Celik, for example, to permit confirmation that there
were not any flawed instructions from supervising counsel resulting in
unnecessary costs as occurred in Halford above at paras. [76] and [82].
[30]
Although
I share the Applicants' concern for both repetitive work in this matter and duplication
of work from the Novopharm matters, supervising counsel could not presume that
Dr. Celik's work in the Novopharm matters might be transplanted to this
matter, with enormous market share at stake, subject only to minor tweaks.
Indeed, at paras. [7] and [8] the hearing judge accepted the Applicants'
position that the Court had to make its own findings of fact here and rejected
the Respondent's position on judicial comity, i.e. to simply adopt the decision
in the Novopharm matters. Although that suggests substantive case preparation was
required particular to this matter, I think that previous work for the
Novopharm matters should have made the work here somewhat more straightforward.
That is, para. [40] of the decision in the Novopharm matters reported as Biovail
Pharmaceuticals Inc. v. Canada (Minister of National
Health and Welfare), [2005] F.C.J. No. 7 (F.C.) [Biovail]
and para. [23] of the decision here each addressed the '320 Patent and each
made a similar finding concerning a sustained release agent. However, these two
decisions also dealt with other issues not common to each. I am not convinced
that the Applicants should bear all or some of his costs for educating himself
and for the numerous reviews of materials.
[31]
With
all due respect to the third part of the Allied test above, i.e.
assessing the reliance of the trial judge on the expert's testimony, judges
have varied writing styles and do not always set out discrete and explicit
statements of their exact use, or not, of experts. For example, the trial judge
at para. [20] in Biovail above identified Dr. Celik by name and
qualified him as an expert in the "development and formulation of
pharmaceutical products" without asserting that his expertise had
limitations. I find it of interest, relative to the Applicants' discounting of
Dr. Celik's experience as a Ph.D. student, that the trial judge in Biovail above
commented in para. [54] about the testimony of Dr. Kathryn Uhrich (she was an
expert for the Applicants in Biovail above and for the Applicants here)
that he did not "hold it against her that she was only a freshman in
college at the time." He had previously rejected a submission that she was
too young to be qualified as an expert. His decision discusses the relevance of
given experts by name. By contrast, the hearing judge's decision here does not
devote space to analyzing the qualifications of the experts or expressing the
relevance of each. However, his decision does rely on the experts as a whole
without expressing strong preferences for one or another. That is simply his
style and I certainly would not conclude that he did not rely on the experts in
making his findings. Thus, I think that the three-part test in Allied
above is a useful tool but I find that applying it without regard to the
circumstances particular to the subject litigation would distort the assessment
process. Although experts assist the trial judge in making findings, it is the
trial judge alone who is charged with making such findings and he may do so
without regard to the experts from either side if he so chooses. However,
supervising counsel would be negligent in not engaging such technical expertise
reasonably necessary, as here, in his or her professional judgment. I do not
think that the term "irrelevant" used by the Applicants to describe
the hearing judge's disposition of the matter of validity captures what was
meant. Rather, the Respondent had asserted a defence with two parts. If the
hearing judge did not accept the first part, i.e. non-infringement, then the
Respondent would assert the second part, i.e. invalidity. That the hearing
judge accepted the defence of non-infringement and stated that he therefore did
not need to decide invalidity does not mean that case preparation of the second
part of the defence was not prudent and reasonably necessary.
[32]
I
sympathize somewhat with litigants such as the Respondent here who must try and
make sense of a variety of expenditures after they had been incurred often
without having added notations for future use as justification on an assessment
of costs. Thus, they find themselves in the awkward position, as the Respondent
here, of arguing on one hand in support of Dr. Celik's account that the
Applicants had made at least two admissions that the evidence here differed
from that in the Novopharm matters and, on the other hand, also in support of
Dr. Celik's account that he did not falsify time entries because he was simply
performing work assigned here by supervising counsel, i.e. reviewing an expert
report from the Novopharm matters anticipated by supervising counsel to be used
here. Some of his invoices do contain several entries with some detail as to
tasks performed, i.e. the entry for 4 hours in invoice no. 00730 about review
of volume 1 of prior art with particular emphasis on four patents that he
thought would be crucial, thereby indicating specific focus for that task and
letting the Applicants understand the basis for the charge. Whether the
Applicants might argue that it is supervising counsel that should set the
parameters for him, i.e. as to which patents to examine, is another question.
As the assessment officer, I am grateful for the candour in some entries, i.e.
the entry for 1.5 hours to read an organic chemistry book to gain "General
knowledge that I needed to know/remember as it applies to my affidavit",
but I do not think it appropriate for the losing party to pay for such work by
an expert, described in para. [20] of Biovail above as having a
"long and steady involvement" in this field, for what I see as
elemental knowledge ordinarily resident in a qualified expert.
[33]
The
Applicants asserted inflated charges, i.e. 23 hours preparation by Dr. Celik
for his cross-examination ultimately lasting less than three hours. I do not
think that there is a universal ratio to apply in such matters as supervising
counsel should be able to anticipate the strategy of opposing counsel, but not
always with certainty. His invoice broke down the 23 hours as 4 hours (transit
time reduced from actual 17 hours), 10 hours (reduced from actual 16 hours for
intense study at his hotel), 6 hours (meeting with supervising counsel) and 3
hours (cross-examination). He had already documented a considerable amount of
preparation time for his report apart from the general technical case
preparation assigned to him. People's working styles do vary and Dr. Celik may
have thrived on a schedule apparently involving a driving trip followed
immediately by several hours of preparation and continued the next day with a
meeting added to the mix. I do not think that the Applicants should bear all of
these hours, notwithstanding his voluntary reductions already. He claims
about $465.00 for mileage (1036 miles round-trip @ $0.40 per mile), tolls and
parking which, apart from consideration of charges for his time in transit,
might approximate airfare and ground transportation (in fact, the airfare and
ground transportation charges, apart from charges for a flight change, for
another trip exceeded this by about $400.00: a trip for which he apparently
booked the rack rate of $249.00 for a downtown Toronto hotel).
[34]
I
agree with the Respondent that establishment of liability to pay is sufficient
for assessment, subject however to the caveat that such amounts must be
returned if said liability is not subsequently discharged (further to the principle
that a litigant shall not profit by costs). It is irrelevant that Dr. Celik's
bill may constitute a considerable percentage of the overall charges if his
technical assistance was essential (which I find that it was) - unless his
charges are demonstrably exorbitant. As I have found in the past, work to
assist supervising counsel in case preparation is assessable if it does not
displace the latter's direct professional responsibility for which indemnity is
only partial. Striking that balance is sometimes not easy for supervising
counsel. The hearing was in April 2006. Dr. Celik's final invoice dates to July
29, 2005, indicating that supervising counsel correctly resisted the temptation
for extra briefing once Dr. Celik's work had been finalized, or simply did not
advance such extra charges if indeed incurred. I think that $104,000.00 was a
reasonable expenditure in the circumstances, which I allow for Dr. Celik
inclusive of disbursements and taxes. I allow the disbursements of $1,063.34
and $7,124.50 as claimed respectively for Dr. Gazzara and Mr. Baun.
VI. Disbursements for court reporters ($3,226.00);
law society levy ($50.00); legal research ($614.78); long distance ($63.43);
mail and courier ($530.66); notary public ($75.00); US patent and trade mark
office ($3.83); external and internal photocopies ($4,973.74 and $450.79
respectively); obtaining prior art ($154.50); service and filing ($1,156.65)
and bank draft handling charges ($12.00)
A. The Respondent's and the Applicants' Positions
[35]
The
Respondent noted that its law firm's internal photocopy rate of $0.15 per page
is considerably less than rates approved in other matters. The geographical
distances between solicitors, clients and witnesses justifies the long distance
and courier charges: see Smith v. The Queen [1985], 85 D.T.C. 5200
(F.C.T.D.). Computer research is recoverable if reasonably necessary: see Boots
v. Mohawk Council of Akwesasne, [2000] F.C.J. No. 312 (A.O.)
[36]
The
Applicants noted that there are underlying invoices totalling only $463.68 of
the $530.66 claimed for mail and couriers. There is no evidence to support the
$450.79 claimed for internal photocopies and no way to verify their necessity
given the lack of opportunity to cross-examine on the Katz affidavit. As the
account number on the external photocopying receipts has been redacted, it is
impossible to discern if they all relate to this matter. For this and the other
disbursements there is no evidence of actual payment.
B. Assessment
[37]
I
have already dealt with access to the Katz affidavit above. My comments in Canadian
Union of Public Employees, Inc. v. Air Canada, [1999] F.C.J. No. 464 (A.O.)
on photocopies, coupled with the parameters in paras. [26] and [27] above,
reflect my considerations for disbursements in striking the appropriate balance
between the right of a successful litigant to be indemnified for its reasonably
necessary costs and the right of an unsuccessful litigant to be shielded from
excessive or unnecessary costs. I allow a reduced total of $4,900.00 for
photocopies. My decision in Englander v. Telus Communications Inc.,
[2004] F.C.J. No. 440 (A.O.), confirms that I routinely allow costs for online
computer research. However, that process includes consideration of whether all,
none or only part of the research was reasonably necessary, irrelevant or
simply in the nature of cautionary or secondary authorities, keeping in mind
the professional obligation of counsel both to the client for diligent
representation and to the Court for as much assistance as reasonably possible
on all aspects of the law potentially affecting final adjudication on the
substantive issues of the litigation. I allow a reduced amount of $475.00 for
legal research. The remaining disbursements are allowed as presented as I
find them reasonable and consistent with my approach in Halford above. Although
the requisite information would be buried in the law firm's records, the
categories of disbursements to which GST claimed at $863.33 relate is not
readily apparent from the bill of costs itself. As this amount would apply to
less than 10% of the claimed disbursements, I leave it undisturbed.
[38]
The
Respondent's bill of costs, presented at $182,992.87, is assessed and allowed
at $152,906.24.
"Charles
E. Stinson"
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