Baxter Travenol Laboratories v. Cutter (Canada), [1983] 2 SCR 388

SUPREME COURT OF CANADA

Baxter Travenol Laboratories v. Cutter (Canada), [1983] 2 S.C.R. 388

Date: 1983-11-03

Baxter Travenol Laboratories of Canada Limited, Travenol Laboratories Inc. and Baxter Travenol Laboratories, Inc. Appellants;

and

Cutter (Canada), Ltd. Respondent.

File No.: 16707.

1983: June 8; 1983: November 3.

Present: Dickson, Beetz, McIntyre, Chouinard and Wilson JJ.

ON APPEAL FROM THE FEDERAL COURT OF APPEAL

Contempt of Court — Injunction against patent infringement — Effective date of judgment — Whether there could be contempt for breach of an injunction prior to the signing of the formal judgment — Respect for the court and its process — Federal Court Rules, C.R.C. 1978, c. 663, Rules 337, 355.

Appellants, in a patent infringement action, obtained an injunction against respondent. The reasons for decision were delivered on December 11, 1980 but the formal judgment was not signed until December 18, 1980. In the meantime, respondent continued to sell the infringing product. Appellants sought and obtained an order under Rule 355 of the Federal Court Rules calling upon the respondent and its Chief Executive Officer to show cause why they should not be condemned for contempt of court. The Federal Court, Trial Division, dismissed the show cause order and the Federal Court of Appeal confirmed the judgment. This appeal is to determine whether a person may be found in contempt of court where the acts complained of—allegedly breaching an injunction—were committed after reasons for decision were delivered, but before a formal judgment was signed under Rule 337 of the Federal Court Rules.

Held: The appeal should be allowed and the matter remitted to the Federal Court, Trial Division, for a decision on the merit.

By virtue of Rule 337 of the Federal Court Rules, a judgment of that court only takes effect on the date a document in Form 14 is executed. In the present case, there was no injunction, and hence there could be no breach of the injunction, prior to December 18, 1980. Contempt, however, extends well beyond breach of court orders. Once a judge has rendered his decision by given

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reasons—and assuming any prohibitions contained therein are clearly worded—it is not open to any person to flout his disposition of the case on the ground that there is no judgment yet in effect. Such an action would constitute contempt because it would tend to obstruct the course of justice. Therefore, there could be contempt between December 11, and December 18, 1980 by reason of an interference with the orderly administration of justice and impairment of the order or dignity of the court (Rule 355).

Liberty Ornamental Iron Ltd. v. B. Fertleman & Sons Ltd., [1977] 1 F.C. 584; Powel v. Follet (1747), 1 Dick. 116; M'Neil v. Garratt (1841), Cr. & Ph. 98; Gooch v. Marshall (1860), 8 W.R. 410; Rattray v. Bishop (1818), 3 Madd. 220; Robinson v. Elton (1835), 4 L.J.Ch. 197; Gooseman v. Dann (1840), 10 Sim. 517; Scott v. Becher (1817), 4 Price 346; Poje v. Attorney General for British Columbia, [1953) 1 S.C.R. 516, referred to.

APPEAL from a judgment of the Federal Court of Appeal (1981), 54 C.P.R. (2d) 152, 23 C.P.C. 68, 41 N.R. 476, affirming a judgment of Cattanach J. (1981), 54 C.P.R. (2d) 145, 20 C.P.C. 263, dismissing a show cause order for contempt. Appeal allowed.

D. K. Laidlaw, Q.C., for the appellants.

Gordon F. Henderson, Q.C., and George E. Fisk, for the respondent.

The judgment of the Court was delivered by

DICKSON J.—The issue is whether a person may be found in contempt of court where the acts complained of, allegedly breaching an injunction, were committed after reasons for decision were delivered, but before a formal judgment was signed under Rule 337 of the Federal Court Rules.

I Facts and Judicial History

The plaintiffs ("Baxter Travenol") sued Cutter (Canada), Ltd. ("Cutter") for infringement of patent. At the end of trial, Gibson J. of the Trial Division of the Federal Court reserved judgment. On December 11, 1980 written reasons for decision

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were issued and sent to the parties[1]. The reasons for decision included the following:

As a consequence, Bellamy [sic Baxter Travenol] is entitled to judgment against Cutter, declaring, ordering and adjudging as follows:

1. That as between the parties hereto, Canadian Letters Patent No. 685,439 and Claims 1 to 4 thereof are valid and have been infringed by the defendant [Cutter] in manufacturing and selling to the Canadian Red Cross multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial.

2. The defendant, its employees, servants, and any person acting under its directions, are restrained and enjoined from manufacturing, offering for sale, selling or distributing multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial.

3. The defendant shall forthwith destroy under oath or deliver up to the plaintiffs [Baxter Travenol] all multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial and all such valves or components of valves in the possession, custody or control of the defendant.

The reasons further concluded there should be a reference to determine damages or an accounting of profits, the counterclaim dismissed, and the plaintiffs awarded costs. The mistaken reference to "Bellamy" in the first line of the above-quoted passage was corrected in a letter from the Deputy Clerk of Process dated December 19, 1980. Bellamy was the inventor whose patent rights had been assigned to Baxter Travenol; throughout the reasons Gibson J. referred to the invention as the "Bellamy mechanism". The erroneous reference that Bellamy was entitled to judgment was a clerical mistake only, which could not have misled Cutter.

At trial Baxter Travenol requested that if the plaintiffs were successful, formal judgment be given at the time reasons were issued. Baxter

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Travenol submitted a draft order. Gibson J. indicated he would not accede to this request. The final paragraph of his reasons read;

Counsel for either the plaintiffs or the defendant may prepare in both official languages an appropriate judgment to implement the foregoing conclusions and may move for judgment in accordance with Rule 337(2)(6).

The parties agreed on a form of order and Baxter Travenol moved for judgment. Gibson J. desired some changes. The form of the judgment was settled and issued on December 18, 1980. The portions of the judgment relating to the reference to determine damages or an accounting of profits were significantly altered from the December 11 reasons. However, the portions directed at Cutter were almost unchanged. The first three paragraphs of the conclusions quoted above were repeated verbatim in the formal judgment, except that the order enjoining Cutter from manufacturing, offering for sale, selling or distributing was varied from:

multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial.

to:

multiple blood bag sets including the type exemplified l Exhibits P-8 and P-8A to this trial.

(Emphasis added.)

In other words the formal judgment was broader than the reasons for decision.

On January 12, 1981, Baxter Travenol sought and obtained a show cause order under Rule 355 from Dubé J. of the Federal Court, Trial Division. The Rule reads:

Rule 355. (1) Anyone is guilty of contempt of court who disobeys any process or order of the Court or a judge thereof, or who acts in such a way as to interfere with the orderly administration of justice, or to impair the authority or dignity of the Court.

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[…]

(4) No one may be condemned for contempt of court committed out of the presence of the judge, unless he has been served with a show cause order ordering him to appear before the Court, on the day and at the hour fixed to hear proof of the acts with which he is charged and to urge any grounds of defence that he may have. The show cause order issued by the judge of his own motion or on application must be served personally, unless for valid reasons another mode of service is authorized. The application for the issuance of the show cause order may be presented without its being necessary to have it served.

The show cause order alleged contempt of court by Cutter and by Thomas Maxwell, its Chief Executive Officer, in the following respects:

(a) Breach of the injunction granted by the Honourable Mr. Justice Gibson herein and pronounced on December 11, 1980 restraining and enjoining the Defendant, its employees, servants and any person acting under its directions from offering for sale, selling or distributing multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial and ordering the defendant to destroy forthwith under oath or deliver up to the plaintiffs all multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial and all such valves or components of valves in the possession, custody or control of the defendant; and

(b) Acting in such a way as to interfere with the orderly administration of justice or to impair the authority or dignity of the Court by entering, after the commencement of trial herein, into an arrangement out of the ordinary course of trade, whereby multiple blood bag sets having valves as exemplified by those of Exhibits P-8 and P-8A to this trial, were transferred to the Canadian Red Cross and contrary to representations made to counsel for the plaintiffs as officers of the Court at the commencement of trial herein, and designed to defeat and subvert the Court's process herein and to render nugatory any injunction or order to be delivered by the Court.

The hearing on the show cause order was held before Cattanach J. of the Federal Court, Trial Division. That is the subject of the present appeal.

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Cattanach J. dismissed the show cause order. An appeal to the Federal Court of Appeal was unanimously dismissed (Thurlow C.J., Hyde and Culliton D.JJ.). Baxter Travenol appeals to this Court by leave.

Before Cattanach J., Baxter Travenol alleged contempt of court both prior to December 1I, 1980 (the date of Gibson J.'s reasons) and between December 11 and December 18, 1980 (the date on which formal judgment was signed). Only the alleged contempt between December 11 and December 18 was pursued in this Court. Cutter raised two preliminary objections before Cattanach J. One was that the allegations against the defendants did not, in law, amount to contempt. Cattanach J. and the Federal Court of Appeal concluded this preliminary objection was well founded. In this Court this issue was narrowed to the question whether, as a matter of law, there could be contempt in respect of the injunction prior to December 18, 1980.

Cutter's other preliminary objection before Cattanach J. was that there was no admissible evidence against the defendants which could have enabled Dubé J. to grant the show cause order. Cattanach J. did not find it necessary to deal with this argument in light of his other conclusions. Nor did the Federal Court of Appeal address the evidenciary argument. It was, nonetheless, argued in this Court.

II Rule 337 and Contempt of Court

What was Cutter's legal position between December 11, 1980, when Gibson J. issued reasons for decision and December 18, 1980, when Gibson J. signed a formal order in Form 14 under Rule 337(3)? Baxter Travenol submits that even though formal judgment was not signed until December 18, the judgment was nonetheless in effect from December 11. In support of this proposition reliance is placed on a long line of English

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cases. Halsbury's Laws of England, vol. 24, 4th ed., para. 1099, summarizes the law as follows:

An injunction in prohibitory form operates from the time it is pronounced, not from the date when the order is drawn up and completed. Consequently the party against whom it is made will be guilty of contempt if he commits a breach of the injunction after he has received notice of it, even though the order has not been drawn up.

The following cases are cited: Powel v. Follet (1747), 1 Dick. 116; M'Neil v. Garratt (1841), Cr. & Ph. 98; Gooch v. Marshall (1860), 8 W.R. 410; see also Rattray v. Bishop (1818), 3 Madd. 220; Robinson v. Elton (1835), 4 L.J. Ch. 197; Gooseman v. Dann (1840), 10 Sim. 517; Scott v. Becher (1817), 4 Price 346 at p. 352. Cutter, however, argues that these cases do not apply because Rule 337 of the Federal Court Rules makes it clear that judgment is only effective from the date of signing, in this case December 18. This position was adopted by Cattanach J. and the Federal Court of Appeal. In so doing they followed an earlier Federal Court of Appeal decision: Liberty Ornamental Iron Ltd. v. B. Fertleman & Sons Ltd., [1977] 1 F.C. 584 (C.A.) at p. 587. It should be noted that Liberty Ornamental was not a contempt case; it simply concerned the date which should be inserted on the order.

Rule 337 reads as follows:

Rule 337. (1) The Court may dispose of any matter that has been the subject-matter of a hearing

(a) by delivering judgment from the bench before the hearing of the case has been concluded, or

(b) after having reserved judgment at the conclusion of the hearing, by depositing the necessary document in the Registry,

in the manner provided by paragraph (2).

(2) When the Court has reached a conclusion as to the judgment to be pronounced, it shall, in addition to giving reasons for judgment, if any,

(a) by a separate document signed by the presiding judge, pronounce the judgment (Form 14); or

(b) at the end of the reasons therefor, if any, and otherwise by a special declaration of its conclusion, which may be given orally from the bench or by a document deposited in the Registry, indicate that one

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of the parties (usually the successful party) may prepare a draft of an appropriate judgment to implement the Court's conclusion and move for judgment accordingly (which motion will usually be made under Rule 324).

(3) Upon the return of a motion under paragraph (2)(b), the Court will settle the terms and pronounce the judgment, which will be signed by the presiding judge (Form 14).

(4) A judgment pronounced under paragraph (2)(a) or paragraph (3) will, subject to paragraphs (5) and (6), be in final form.

(5) Within 10 days of the pronouncement of judgment under paragraph (2)(a), or such further time as the Court may allow, either before or after the expiration of that time, either party may move the Court, as constituted at the time of the pronouncement, to reconsider the terms of the pronouncement, on one or both of the following grounds, and no others:

(a) that the pronouncement does not accord with the reasons, if any, that may have been given therefor;

(b) that some matter that should have been dealt with has been overlooked or accidentally omitted.

(6) Clerical mistakes in judgments, or errors arising therein from any accidental slip or omission, may at any time be corrected by the Court without an appeal.

(7) This Rule applies, with necessary changes, to the pronouncement of interlocutory judgments or orders by the Court, a judge or a prothonotary except that, in any such case, a judgment or order under paragraph (2)(a) need not be made by a separate document but may be endorsed by the presiding judge or the prothonotary, as the case may be, on the notice of motion or some other convenient document on the Court file.

(8) When a judgment or order is pronounced otherwise than in open court, or a declaration of the Court's conclusions has been given under paragraph (2)(b), an appropriate officer of the Registry shall, by letter sent by registered post, send forthwith a certified copy thereof to all parties.

Gibson J. acted under Rule 337(2)(6). Cutter notes, correctly in my view, that Rule 337 draws a clear distinction between reasons for decision or conclusions on the one hand, and a judgment on the other hand. There is no judgment until a

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document in Form 14 is executed. I agree with Cutter and the Federal Court of Appeal that, by virtue of Rule 337, a judgment in that court only takes effect on the date a document in Form 14 is executed. In the present case there was no injunction, and hence there could be no breach of the injunction, prior to December 18, 1980. If this case had involved an attempt to execute or directly enforce a judgment, the effective date would be decisive of the result. In my view, however, Cutter and the Federal Court were in error in assuming the effective date of the injunction is decisive in a contempt proceeding. The inquiry does not end with a consideration of whether the injunction as such has been breached.

The general purpose of the court's contempt power is to ensure the smooth functioning of the judicial process. Contempt extends well beyond breach of court orders. Subsection (1) of Rule 355 of the Federal Court Rules, repeated here for ease of reference, provides in part as follows:

Rule 355. (1) Anyone is guilty of contempt of court who disobeys any process or order of the Court or a judge thereof, or who acts in such a way as to interfere with the orderly administration of justice, or to impair the authority or dignity of the Court.

(Emphasis added.)

Paragraph (a) of the show cause order in the present case invoked the first part of Rule 355(1), whereas paragraph (b) invoked the underlined portions. Even if there was no actual breach of an injunction so as to constitute contempt under paragraph (a), it is still necessary to consider paragraph (b).

Contempt in relation to injunctions has always been broader than actual breaches of injunctions. Cattanach J. recognized this in the present case. Thomas Maxwell is named in the show cause order as having committed contempt in his personal capacity although he is not a party to the action. He is not personally bound by the injunction and therefore could not personally be guilty of a breach. Nevertheless, Cattanach J. acknowledged he could still be found in contempt if he, with

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knowledge of its existence, contravened its terms. Although technically not a breach of an injunction, such an action would constitute contempt because it would tend to obstruct the course of justice; Kerr on Injunctions, 6th ed 1927, at p. 675; Poje v. Attorney General for British Columbia, [1953] 1 S.C.R. 516.

The same kind of analysis applies to the period between reasons for decision and the pronouncement of judgment. Cutter argues, in effect, that this constitutes a period of grace in which the defendant can contravene the prohibitions set out in the reasons for decision with impunity. To accept that argument would be to accede to the proposition that it is open to a party completely to defeat an injunction. That would subvert the whole process of going to court to settle disputes. That is precisely what the contempt power is designed to prevent.

Cutter raises another contention. In the present case Cutter sought a stay (unsuccessfully, it turned out) which it could not do until there was a judgment (Rule 1909). Cutter submits it would be unfair to make the reasons for decision binding, in effect, before judgment while leaving Cutter powerless to attack them until after judgment. I do not find this argument persuasive. Rule 337(2)(b) and the final paragraph of Gibson J.'s reasons enabled Cutter to move for judgment if it had so desired. Any obstacle to its stay application could have been removed by Cutter itself.

Cutter further submits there can be no contempt for contravention of the prohibitions contained in reasons for decision because it is open to the trial judge to change his mind before judgment is entered. This is not a case in which something was prohibited in the reasons for decision but not incorporated into the formal judgment and the hypothetical need not be addressed.

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Although theoretically it may be possible for a judge completely to change his mind between deliverance of reasons and issuance of judgment, this is hardly likely. Reasons for decision are not meant to be tentative. The hiatus between reasons for decision and formal judgment simply provides an opportunity to settle the precise language to implement the judge's conclusions. Once a judge has rendered his decision by giving reasons, and assuming any prohibitions contained therein are clearly worded, it is not, in my view, open to any person to flout his disposition of the case on the ground that there is no judgment yet in effect. The situation after reasons for decision is very different from a situation in which the defendant acts prior to any court determination. Once reasons for decision have been released, any action which would defeat the purpose of the anticipated injunction undermines that which has already been given judicial approval. Any such action subverts the processes of the Court and may amount to contempt of court.

I therefore conclude, as a matter of law, there could be contempt between December 11 and December 18, 1980 by reason of an interference with the orderly administration of justice and an impairment of the order or dignity of the Court (Rule 355). It would be covered by paragraph (b) of the show cause order. Since this question arose as a preliminary objection, there has never been a finding of fact that Cutter and/or Maxwell, with knowledge of their existence, did contravene the prohibitions contained in Gibson J.'s December 11 reasons for decision. Such a determination cannot be made in this Court; it would require a reconvened hearing before the Federal Court, Trial Division.

III The Evidenciary Argument

In addition to the above, Cutter made submissions in this Court about the kind of evidence upon which a finding of contempt is properly based. In my view, these arguments are premature. Cutter's arguments concern the affidavit attached to the show cause order. That was the basis on which the show cause order was granted, but the show cause order is not a finding of contempt. The show cause

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order is simply the document which initiates the hearing under Rule 355(4). The show cause order is analogous to a summons.

(4) No one may be condemned for contempt of court committed out of the presence of the judge, unless he has been served with a show cause order ordering him to appear before the Court, on the day and at the hour fixed to hear proof of the acts with which he is charged and to urge any grounds of defence that he may have. The show cause order issued by the judge of his own motion or on application must be served personally, unless for valid reasons another mode of service is authorized. The application for the issuance of the show cause order may be presented without its being necessary to have it served.

It is at the subsequent hearing, not in the application for the show cause order, that the contempt ultimately must be proved. It is at that hearing that questions of admissibility are properly raised. In the present case the hearing before Cattanach J. never reached the stage of adducing evidence; the hearing was aborted by Cutter's initial success in its preliminary objection in respect of what constitutes contempt. In view of my conclusion that this preliminary objection ought not to have succeeded, the matter must be remitted to the Federal Court, Trial Division, and it is there that questions of admissibility ought to be addressed. I accordingly refrain from dealing with the nature of the evidence and the objections to admissibility.

IV Conclusion

I would allow the appeal and remit the matter to the Federal Court, Trial Division, for a decision on the merits. Baxter Travenol submitted that it should have its costs on a solicitor and client basis. I do not agree this is a proper case for such an order at this stage. However, Baxter Travenol should be entitled to party and party costs throughout in the proceedings on the preliminary objection. Costs on the remitted hearing should be

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at the discretion of the trial judge.

Appeal allowed.

Solicitors for the appellants: McCarthy & McCarthy, Toronto.

Solicitors for the respondent: Gowling & Henderson, Ottawa.