Date:
20090130
Docket: A-529-08
(T-1272-97)
Citation: 2009 FCA 27
CORAM: NOËL
J.A.
NADON
J.A.
PELLETIER
J.A.
BETWEEN:
MERCK & CO., INC. and
MERCK FROSST CANADA LTD.
Appellants
(Plaintiffs)
and
APOTEX INC. and APOTEX
FERMENTATION INC.
Respondents
(Defendants)
REASONS FOR JUDGMENT
NOËL J.A.
[1]
This is an appeal by
Merck & Co., Inc. and Merck Frosst Canada Ltd. (collectively Merck) from an
order of Justice O’Keefe (the Federal Court Judge), wherein he reversed the order
of Prothonotary Aronovitch (the Prothonotary), denying Apotex Inc. and Apotex
Fermentation Inc.’s (collectively Apotex) motion to compel answers to four
related questions which were asked during the second round of examination for
discovery of Merck’s representative. The Federal Court Judge found that there
had been an implied waiver of privilege and that Merck’s representative was
required to answer the questions.
RELEVANT FACTS
[2]
Merck is the owner of
Canadian Patent No. 1,161,380 (the ‘380 Patent). The ‘380 Patent relates to
lovastatin when produced from the Aspergillus terreus micro-organism.
[3]
By way of Statement
of Claim, Merck brought an action against Apotex alleging infringement of the
‘380 Patent in relation to the sale of Apotex’ product, Apo-lovastatin tablets.
More specifically, Merck alleges infringement on the basis, inter alia,
that Apo-lovastatin is made from Coniothyrium fuckelii (the non-
infringing micro-organism) contaminated by Aspergillus terreus (the
infringing micro-organism) (Appeal Book, Vol.1 of 3, pp. 73 to 75).
[4]
At the examination
for discovery, Merck’s representative answered certain questions relating to
the testing carried out in respect of its allegations that the process used by Apotex
to manufacture the active ingredient in Apo-lovastatin tablets employed Coniothyrium
fuckelii which was contaminated by Aspergillus terreus (Reasons,
para. 11).
[5]
During the second
round of examination for discovery, Apotex posed several follow-up questions
that sought information relating to the tests performed by Merck (Reasons,
para. 12). Merck refused to answer these questions on the basis that the
information was privileged.
[6]
Merck’s refusal to
answer the questions was the subject of a motion before the Prothonotary. Apotex
claimed that Merck waived privilege by providing partial release of
information. The Prothonotary ruled as follows in paragraphs 1 and 9 of the order:
1. Items Nos. 80, 81 and
82 shall not be answered on the basis that privilege has not been waived
because of the express stipulation of non-waiver in the answer given by [Merck].
In the event [Merck] tender[s] an expert report relating to the findings
described in the answer given on Discovery, all of the factual information
requested by [Apotex] shall be provided in the expert report.
. . .
9. Items No. 56 and 57
shall not be answered on the same basis as Monaghan Items 80 to 82 referred to
above.
[7]
Apotex appealed the
Prothonotary’s order to the Federal Court which granted the appeal on the basis
that there had been a partial waiver and that fairness and consistency required
that it be treated as a complete waiver.
THE FEDERAL COURT DECISION
[8]
The Federal Court
Judge noted the standard of review to be applied to discretionary orders of
prothonotaries as set out by this Court in Merck & Co., Inc. v. Apotex
Inc., 2003 FCA 488, (2003), 30 C.P.R. (4th) 40 at paragraph 19:
Discretionary orders of
prothonotaries ought not be disturbed on appeal to a judge unless:
a) the questions raised
in the motion are vital to the final issue of the case, or
b) the orders are
clearly wrong, in the sense that the exercise of discretion by the prothonotary
was based upon a wrong principle or upon a misapprehension of the facts.
[9]
The Federal Court
Judge found that the question or issue in the appeal was not vital to the final
issue of the case. Accordingly, he went on to determine whether the
Prothonotary’s order was clearly wrong “in the sense that the exercise of
discretion by the Prothonotary was based upon a wrong principle or upon a
misapprehension of the facts” so as to cause him to exercise his discretion de
novo.
[10]
The reasoning of the
Federal Court Judge for interfering with the decision of the Prothonotary is
set out in the following paragraphs of his Reasons for order:
[15]
I have reviewed the answers given to the first round of questions and I am of
the view that there has been a waiver of some privileged information. By way of
example, [question] three could have been answered by a simple “yes” instead of
stating, “Merck did test Coniothyrium fuckelii obtained from ATCC and did not
establish that Coniothyrium fuckelii made lovastatin”. As well, Merck could
have made a claim for privilege and not answered the questions.
[16]
As I am of the view that the plaintiffs made a partial waiver of the
information, I believe that in the circumstances of this case, consistency and
fairness must result in an entire waiver of the privilege.
[17]
When partial waiver of privilege has occurred as in this case, the statement
that privilege is not being waived will not save the privilege. If that is to
be the situation such as here, [Merck] could waive part of the information and
claim privilege for the remainder.
[18]
As a result, I am of the opinion that the Prothonotary’s order was clearly
wrong in the sense that the Prothonotary’s exercise of discretion was based on
a wrong principle and the decision on these points must be set aside.
Paragraphs 1 and 9 of the Prothonotary’s order must be set aside and [Merck]
are required to answer item numbers 81, 82, 56 and 57.
ANALYSIS
[11]
With
respect to the test to be applied by this Court in the present appeal, the
Supreme Court of Canada, in Z.I. Pompey Industrie v. ECU-Line N.V., 2003
SCC 27, (2003), 224 D.L.R. (4th) 577, held at paragraph 18 that this Court may
only interfere with the decision of the Federal Court Judge where he "had
no grounds to interfere with the [P]rothonotary's decision or, in the event
such grounds existed, if [the Federal Court Judge 's] decision was arrived at
on a wrong basis or was plainly wrong".
[12]
Waiver of
privilege may be established in the absence of an intention to waive where
fairness and consistency so require (S. & K. Processors Ltd. et al. v.
Campbell Ave. Herring Producers Ltd. et al., [1983], 4 W.W.R. 762 at pp.
764 to 766). In the case at
bar, although the Federal Court Judge states that fairness and consistency “must
result” in an entire waiver of the privilege (Reasons, para. 16), he does not
explain how he arrives at this conclusion.
[13]
The issue in a
“fairness and consistency” analysis is whether the partial disclosure of
privileged information can result in unfairness to the other side. Where
unfairness can be shown to result from the partial disclosure, the disclosing
party may be considered to have waived the privilege altogether even where it
had no intention of doing so.
[14]
Had the Federal Court
Judge addressed this issue, he would have been bound to conclude that there can
be no unfairness to Apotex on the facts of this case. First, the partial
answers cannot be used by Merck at trial since a party is only permitted to read
in as evidence portions of the examination for discovery of an opposing party (Federal
Courts Rules, S.O.R./98-106, Rule 288).
[15]
Second, in order for
the testing and factual basis for testing to be used by Merck at trial, the
relevant data would have to be produced at least 8 months before the trial in
conformity with a prior order issued by Prothonotary Aronovitch on March 19,
2008 (Appeal Book, Vol. 1, p. 39). This is what the Prothonotary alluded to in
the second sentence of her Reasons for order (see para. 6 above). It follows
that in the event that the testing and factual basis for testing is to be
relied upon by Merck, Apotex will have ample opportunity to respond to this
information through an expert of its own.
[16]
Apotex further argued
before us (the argument was not made before the Prothonotary) that in the
meantime it is unfairly prevented from moving for judgment with respect to the
allegation that is supported by the undisclosed information. If there is no
basis for this allegation, Apotex argues that it should not have to wait until
8 months before the trial to find out (Apotex’ Memorandum of Fact and Law,
para. 42).
[17]
The short answer is
that no unfairness can result from the partial disclosure on that basis since
Apotex would be in the exact same position if no partial disclosure had been
made.
[18]
Apotex also resisted
the appeal on the alternative ground that much if not all of the information
sought is not privileged. I am satisfied that the information in question is
properly described as litigation work product and is as such privileged.
[19]
In the end, no
unfairness to Apotex results from the partial disclosure of information. It
follows that the Federal Court Judge had no reason to interfere with the
decision of the Prothonotary.
[20]
For these reasons, I
would allow the appeal, set aside the order of the Federal Court Judge and
giving the judgment which he ought to have rendered, I would dismiss Apotex’
appeal from the order of the Prothonotary, with costs in favour of Merck both
here and before the Federal Court.
“Marc
Noël”
“I
agree.
M. Nadon J.A.”
“I
agree.
J.D. Denis Pelletier J.A.”
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