Federal Court Decisions

 

 

 

Date: 20061129

Docket: T-1532-05

Citation: 2006 FC 1447

Ottawa, Ontario, November 29, 2006

PRESENT:     The Honourable Mr. Justice Blais

 

BETWEEN:

ELI LILLY CANADA INC.

Applicant

and

 

NOVOPHARM LIMITED and

THE MINISTER OF HEALTH

Respondents

and

 

ELI LILLY and COMPANY LIMITED.

Respondent/Patentee

 

REASONS FOR ORDER AND ORDER

 

[1]               This is a motion by the applicant Ely Lilly Canada Inc. (“Eli Lilly”) appealing an order of Madam Prothonotary Aronovitch dated October 13, 2006, granting extraordinary costs to the respondent Novopharm Limited (“Novopharm”) in the amount of $25,511.74.

 

OVERVIEW

[2]               The applicant filed a motion seeking to strike Novopharm’s improper evidence or, in the alternative, to be granted permission to file reply evidence. The grounds for the applicant’s relief were mainly that Novopharm’s improper evidence was not founded on the Notice of Compliance (NOA).

 

[3]               At the hearing of the motion, the prothonotary considered the arguments to strike and to file reply evidence at the same time for each improper paragraph.

 

[4]               Subsequent to this motion, Prothonotary Aronovitch granted extraordinary costs to the respondent. The applicant now alleges that Prothonotary Aronovitch erred in rendering her decision on costs and that the Court is entitled to intervene.

 

ISSUE TO BE CONSIDERED

[5]               Was the prothonotary clearly wrong in that she failed to consider the factors set out in rule 400(3)? Specifically, did the prothonotary fail to consider paragraphs 400(3)(a), (c), (k) and (o)?

 

RELEVANT LEGISLATION

[6]               Federal Court Rules SOR/2004-283, s. 2

 

 

 

STANDARD OF REVIEW

[7]               As was decided in Canada v. Aqua-Gem Investments Ltd. (C.A.), [1993] 2 F.C. 425, at paragraph 95, the discretionary orders of prothonotaries may be disturbed on appeal if:

(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.

See also Merck & Co. et al. v. Apotex Inc. (2003), 30 C.P.R. (4^th) 40 (F.C.A.) (para. 19).

 

[8]               An award of costs requires a narrower approach than the analysis of all elements of the case. Nevertheless, the Court has to assess the reasons that were given for making an award of costs to establish whether the prothonotary properly exercised judicial discretion.

 

[9]               In Francosteel Canada Inc. v. M.V. African Cape (The), [2003] F.C.A. 119, it was decided that if the prothonotary fails to give sufficient weight to all of the relevant considerations in making costs award, the motion judge should review the decision.

 

ANALYSIS

[10]           In her decision rendered on October 13, 2006, the prothonotary had asked for written representations by both parties on costs and the order itself was simply four paragraphs of reasons provided.

 

 

 

Paragraph 400(3)(a): The result of the motion

[11]           On the question of the result of the motion, the first thing to note is that the applicant was mistaken in stating that Eli Lilly was 70% successful on its motion. In the first paragraph of her order on costs, the prothonotary simply wrote: “…I accept Lilly’s point that the Court found that the evidence in approximately 70% of the impugned paragraphs could not have been anticipated”.

 

[12]           It was therefore wrong for the applicant to conclude, based on that statement, that Eli Lilly was 70% successful on its motion, as this is clearly not the case. Instead, the sentence in question must be read together with the first sentence of the first paragraph of the order stating: “It is true that Novopharm, for the most part, successfully defended against having its impugned evidence struck”.

 

[13]           As noted by counsel for the respondent, the prothonotary described what she appreciated to be a mixed level of success (and thus considered rule 400(3)(a)) but did not assign relative success as between the parties.

 

Paragraph 400(3)(c): Complexity of the issues

[14]           After reading the reasons and the order on the motion, I have no hesitation to conclude that the prothonotary was totally aware of the complexity of the issues. She explicitly mentioned in the second paragraph of her order on costs: “In the particular circumstances, however, what is more to the point, as relates to costs, is what the parties could have done to either obviate the need for the motion or to simplify it”.

 

[15]           This particular statement in the order on costs, taken in conjunction with the analysis performed by the prothonotary in the reasons, have convinced me that the importance and complexity of the issues were considered by the prothonotary in her decision.

 

Paragraph 400(3)(k): Whether any step in the proceeding was (i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution

[16]           The applicant maintains that it did not cause any improper or unnecessary steps to occur in this motion. The applicant suggests that the majority of time spent in oral arguments was used to discuss improper paragraphs of Novopharm’s affidavit. It is also mentioned that, on the second day of the hearing, the applicant realized what were the concerns of the prothonotary and provided her with a draft order specifying, with great particularity, the exact parts of each paragraph impugned.

 

[17]           Referring to the minutes of the case conference held on April 25, 2006, before the hearing of the motion, as well as to the documents provided by both parties, it seems clear that specific aspects of Novopharm’s evidence may not have been foreseen, anticipated or expected by the applicant’s witnesses. On the other hand, the entire motion might have been avoided had the draft reply affidavits simply been provided by the applicant.

 

[18]           It is also useful to mention that not a single paragraph of Novopharm’s evidence was declared improper; only two minor exhibits were removed from the evidence. The prothonotary explicitly left the question of the propriety of the evidence submitted to be decided by the hearing judge.

 

[19]           Since the applicant was asking to strike all of the impugned evidence, which the prothonotary refused to do with the exception of two minor exhibits, the principal motion by the applicant was almost completely unsuccessful. The applicant was only successful on the secondary relief, as Eli Lilly was allowed to file reply evidence.

 

[20]            The prothonotary held in paragraphs 3 and 4 of her order on costs:

While Novopharm may not have made the sort of effort called for in order to reach compromise, the principal fault, in my view, lies with Lilly in the quality of evidence it chose to adduce on the motion and serve on Novopharm prior to the motion.

 

Lilly’s failure to adduce the proposed affidavits for Novopharm’s consideration well in advance of the motion and to later, in its stead produce evidence which, by its generality, prolonged the hearing of the motion, is a practice to be discouraged and sanctioned with costs whatever the success of the party on the merits.

 

[21]           In my view, the question of whether any step in the proceeding was improper, vexatious or unnecessary or taken through negligence, mistakes or excessive caution, was fully taken into consideration by the prothonotary as is clearly reflected in her reasons for order and order on costs.

 

Paragraph 400(3)(o): Any other matter that it considers relevant

[22]           The applicant suggests that the prothonotary failed to consider the following five factors:

1.      The fact that the Court granted the majority of the applicant’s relief, despite primarily accepting the affidavit evidence of Novopharm on the motions;

 

2.      The fact that the motion was necessitated by Novopharm including improper material in its affidavits;

 

3.      The fact that the majority of the new material impugned by Eli Lilly related to new fraud allegations, not found in Novopharm's NOA;

 

4.      The fact that the law is still not settled as requiring draft reply affidavits to be filed by the party seeking such relief; and

 

5.      The fact that in filing such draft reply affidavits, Eli Lilly would have been conceding that its primary ground of relief (the striking of Novopharm’s improper evidence on the new issues of fraud not raised in the NOA) should not succeed – Eli Lilly did not and has not conceded that Novopharm’s newly raised evidence on these new issues is proper.

 

1. The fact that the Court granted the majority of the applicant’s relief, despite primarily accepting the affidavit evidence of Novopharm on the motions.

 

[23]           The applicant alleges that by their very nature, court proceedings are adversarial and as such, Eli Lilly should not be punished because it was not possible, at the time, to arrive at a compromise with the other party without the intervention of the Court through the hearing of a motion.

 

[24]           I would agree partially with the applicant on that point. Nevertheless, the fact that the applicant decided not to provide the proposed affidavits for Novopharm’s consideration well in advance. Moreover, the evidence provided, considered by the prothonotary to be general in nature, had the effect of prolonging the hearing of the motion. These were all factual elements that contributed to her decision on costs.

 

2. The fact that the motion was necessitated by Novopharm including improper material in its affidavits.

 

[25]           Regarding this particular point, I have already discussed that there is nothing in the prothonotary’s decision that could lead to the conclusion that there was improper material in the respondent’s affidavits; only two exhibits were discarded and all paragraphs alleged to be improper were maintained. It should also be noted that, aside from the issue of costs, the reasons for order and order of the prothonotary were not appealed. The impropriety of the impugned material, if there is any, will therefore be decided by the hearing judge.

 

3. The fact that the majority of the new material impugned by Eli Lilly related to new fraud allegations, not found in Novopharm's NOA.

 

[26]           In my view, the prothonotary reviewed and considered all the material provided by both parties, including the evidence that was seen by the prothonotary as not being anticipated by the applicant.

 

4. The fact that the law is still not settled as requiring draft reply affidavits to be filed by the party seeking such relief.

 

[27]           The question of draft reply affidavits that could be filed by the parties seeking such relief was addressed by the prothonotary in the case conference held on April 25, 2006, and discussed in her reasons for order and order. I do not think that we should infer from this that the prothonotary has concluded that providing draft reply affidavit was legally required. She only mentioned the consequences of not providing such draft reply affidavits in the circumstances of this case and provided reasons why it had a direct impact on her decision on costs.

 

5. The fact that in filing such draft reply affidavits, Eli Lilly would have been conceding that its primary ground of relief (the striking of Novopharm’s improper evidence on the new issues of fraud not raised in the NOA) should not succeed – Eli Lilly did not and has not conceded that Novopharm’s newly raised evidence on these new issues is proper.

 

[28]           During the hearing, counsel for the applicant suggested that the applicant had no choice but to ask to strike out what the applicant considered to be improper evidence because there would be no other possibility further on to submit this argument to the Court, even though he thought, at the time, that he could not succeed on this particular request.

 

[29]           I have difficulty with this particular argument. Given the fact that parties to a motion regularly provide alternate requests to assist the presiding judge on a motion to make decisions that will help the parties to go on with their case, providing draft reply affidavits could not be seen, in any way, as an admission of the propriety of any allegations in the NOA.

 

[30]           The applicant further alleges that the Court should not punish a party for not settling a motion and that punishment is not a proper basis for an extraordinary costs award against the successful party.

 

[31]           After a careful reading of the reasons for order and order on the motion, as well as the order on costs, I am far from convinced that granting costs to the respondent could be seen as a punishment. In the last paragraph of the reasons for the order on costs, the prothonotary clearly mentions that the way in which the applicant decided to pursue its motion “is a practice to be discouraged and sanctioned with costs whatever the success of the party on the merits”.

 

[32]           In my view, it is a proper use of discretion by the prothonotary, supported by adequate reasons. The prothonotary’s statement makes it clear that a party could be partly successful on its motion and yet see the costs awarded to the other party.

 

[33]           The applicant also made a number of arguments, relying on existing jurisprudence, regarding the necessity of providing draft reply affidavits. In my view however, there is nothing in the arguments made nor in the jurisprudence cited that is helpful in the particular circumstances of this case.

 

[34]           Both parties referred to the decision in Purdue-Pharma v. Novopharm Limited, [2006] F.C.J. No. 497, which states that the Court would be entitled to intervene in reviewing a prothonotary’s decision only if it is convinced that its discretion was exercised absent any supporting findings or evidence, or when the decision has been taken in an inappropriate way.

 

[35]           As it is mentioned by counsel for the respondent, the judge or prothonotary, in rendering his or her decision, has no obligation to review all factors enumerated in rule 400(3). The exact wording of rule 400(3) is that: “In exercising its discretion on section 1, the Court may consider …”. [emphasis added]

 

[36]           It must also be noted that factors enumerated in rule 400(3) were in fact considered by the prothonotary. There is nothing wrong when the prothonotary makes a decision to use an award of costs to make it clear that the Court strongly disapproves of what is considered an unreasonable position taken on behalf of a party. It is clear, in my view, that failing to file draft reply affidavits eliminated a realistic chance for settlement and likely complicated the motion. From that, it is easy for me to conclude that the prothonotary had considered and anticipated the difficulties for the parties if those draft reply affidavits were not provided, and was subsequently proven right during the motion hearing.

 

[37]           In Pharma v. Novopharm, above, Madam Prothonotary Tabib awarded costs to Novopharm because the applicant’s motion material was deficient in terms of the evidence filed and because they failed to provide draft reply affidavits. She wrote:

Nevertheless, I will award the costs of the motion in favour of Novopharm in any event of the cause. I do this in recognition of the fact that the Applicant’s motion material was so deficient in providing any notice or guidance to the Respondent as to the substance of the evidence proposed to be filed that it gave almost no opportunity for the Respondent to consent or to reach an accommodation without signing a blank cheque to the Applicant to file virtually any evidence it wished “in relation to” an extremely wide variety of issues. The Applicant’s conduct has also allowed it, on more than one occasion, to change its views as to the required evidence in the course of the hearing, such that the applicant’s argument at times became a moving target. The award of costs reflects the Court’s disapproval of this manner of proceeding.

 

 

[38]           This decision by Madam Prothonotary Tabib was appealed to the Federal Court and ultimately upheld by Justice Michel Beaudry who wrote at paragraphs 16 and 17 of his reasons:

c) Did Prothonotary Tabib err in law in awarding costs to the respondent?

 

The applicant argues that Prothonotary Tabib erred in awarding costs to the respondent because she found that the applicant had not provided guidance to the respondent of the evidence it intended to file. The applicant submits that it was not required to do so by the jurisprudence of this Court.

 

After reading Prothonotary Tabib’s reasons, I cannot agree with the applicant. The reasons clearly show that costs were awarded to the respondent because of the Court’s disapproval of the applicant’s behaviour in the course of the proceedings, including its failure to give sufficient indications as to the substance of the further evidence it sought permission to adduce. In light of my findings regarding the second issue in this case, I do not think that Prothonotary Tabib erred in awarding costs to the respondent.

 

 

[39]           In the present case, I find that I must concur with Justice Beaudry’s reasoning.

 

CONCLUSION

[40]           Having reviewed all the material provided by both parties, I find that the applicant has failed to provide sufficient evidence to convince this Court that the prothonotary was clearly wrong in rendering her decision on costs and that the Court should thus intervene.

 

[41]           Therefore, this appeal is dismissed with costs in favour of the respondent Novopharm.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ORDER

 

THIS COURT ORDERS

This appeal is dismissed with costs in favour of the respondent Novopharm.

 

 

 

 

“Pierre Blais”

 

FEDERAL COURT

 

NAME OF COUNSEL AND SOLICITORS OF RECORD

 

DOCKET:                                          T-1532-05

 

STYLE OF CAUSE:                          Eli Lilly Canada Inc. v. Novopharm Ltd et al

 

PLACE OF HEARING:                    Ottawa, Ontario

 

DATE OF HEARING:                      November 9, 2005

 

REASONS FOR ORDER AND ORDER: 

 

DATED:                                            

 

APPEARANCES:

 

Ms. Beverley Moore	For the applicant
Mr. Andrew Skodyn   Mr. Rick Woyiwada	for the respondent novopharm ltd.   for the respondent minister of health

 

SOLICITORS OF RECORD:

 

 

Gowling Lafleur Henderson LLP Barristers & Solicitors Ottawa, Ontario	FOR THE APPLICANT
Heenan Blaikie Toronto, Ontario     John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario	FOR THE RESPONDENT NOVOPHARM LTD.       FOR THE RESPONDENT MINISTER OF HEALTH