PRESENT: The Honourable Mr. Justice Blais
BETWEEN:
ELI LILLY CANADA INC.
and
Defendant
AND BETWEEN:
APOTEX INC.
Plaintiff by Counterclaim
and
ELI LILLY AND COMPANY and
ELI LILLY CANADA INC.
Defendants by Counterclaim
and
NOVOPHARM LTD
Defendant by Counterclaim
REASONS FOR ORDER AND ORDER
[1] This is a motion by the plaintiffs and defendants by counterclaim Eli Lilly and Company and Eli Lilly Canada Inc. (the applicants) for an order setting aside those portions of the January 18, 2007 Order of Madam Prothonotary Aronovitch (the Order), requiring that the applicants answer certain questions found at Schedule A of that Order.
BACKGROUND
[2] This proceeding arises in the context of an action brought by the applicants in 1997 against Apotex Inc., for infringement of their patent for nizatidine. Apotex Inc. has defended the action by alleging that the nizatidine it manufactured and sold was either made by a non-infringing process or was licensed nizatidine pursuant to the compulsory license held by the defendant by counterclaim Novapharm Ltd. (the respondent), and the agreement between the respondent and Apotex Inc. requiring the respondent to supply Apotex Inc. with nizatidine imported under the compulsory licence. Apotex Inc. also counterclaimed against both the applicants and the respondent, alleging conspiracy in violation of the Competition Act, R.S.C. 1985, c. C-34.
[3] While both the applicants and the respondent are co-defendants to the counterclaim, they are adverse in interest on the issue of the termination of the compulsory license. The applicants have denied the allegation of conspiracy, stating that the compulsory license granted to the respondent was terminated. The respondent has also denied the allegation of conspiracy, but maintains that the compulsory licence is still valid and subsisting.
[4] As the applicants and respondent are adverse in interest on the issue of the compulsory license and its alleged termination, it was agreed that discovery would be limited to this particular issue.
[5] The Order being appealed through this motion arose as a result of the motion brought by the respondent to compel answers to certain questions refused or taken under advisement by the applicants during discovery of the applicants by the respondent. Prothonotary Aronovitch, who heard the respondent’s motion to compel answers, is also the case management prothonotary in this action.
ISSUE TO BE CONSIDERED
[6] The issue to be considered in this motion is essentially whether the prothonotary was clearly wrong in ruling that the questions at issue on this appeal were relevant and needed to be answered.
STANDARD OF REVIEW
[7] As was stated by the Federal Court of Appeal in Merck & Co. et al. v. Apotex Inc. (2003), 30 C.P.R. (4th) 40 (F.C.A.) 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.
[8] In this case, it is not submitted that the questions are vital to the final issue, but only that the Order issued was clearly wrong. As explained by Justice Mark MacGuigan in Canada v. Aqua-Gem Investments Ltd. (C.A.), [1993] 2 F.C. 425, at paragraph 95, an order will be deemed to be “clearly wrong” when “the prothonotary has fallen into error of law”, that is to say where the discretion has been exercised “based upon a wrong principle or upon a misapprehension of the facts”.
ANALYSIS
[9] In this motion, the applicants argue that the boundaries of discovery are to be established in light of the agreement reached by the parties, or in light of the parties’ pleadings, and that the prothonotary ignored those boundaries in ordering the applicants to answer the questions at issue on this appeal. As such, the applicants submit that the prothonotary erred in law in issuing this Order, and thus the Order is clearly wrong and should be set aside. Put a different way, the applicants essentially argue, as they did before the prothonotary, that the questions which they refused to answer exceeded the scope of the discovery and were thus irrelevant.
[10] As noted by the respondent, the threshold for relevance for the purpose of discovery is fairly low. In Apotex Inc. v. R. (2005), 41 C.P.R. (4th) 97, the Federal Court of Appeal stated the following with respect to the issue of relevancy in the context of discovery, at paragraph 15:
¶ 15 As the issue before the learned Prothonotary was one of relevancy, I should indicate that the correct approach to that issue at the stage of discovery was enunciated by this Court in Everest & Jennings Canadian Ltd. v. Invacare Corp., [1984] 1 F.C. 856, 79 C.P.R. (2d) 138, where Urie J.A., writing for the Court at page 2 [p. 857 F.C.] of the decision, stated:
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[...] The correct test of relevancy for purposes of discovery was, in our opinion, propounded by McEachern C.J. in the case of Boxer and Boxer [page103] Holdings Ltd. v. Reesor, et al. (1983), 43 B.C.L.R. 352 (B.C.S.C.) When, at page 359, he said: |
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It seems to me that the clear right of the plaintiffs to have access to documents which may fairly lead them to a train of inquiry which may directly or indirectly advance their case or damage the defendant's case particularly on the crucial question of one party's version of the agreement being more probably correct than the other, entitles the plaintiffs to succeed on some parts of this application. |
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¶ 16 We recently reaffirmed that test in SmithKline Beecham Animal Health Inc. v. Canada, [2002] F.C.J. No. 837 (QL), 2002 FCA 229, 115 A.C.W.S. (3d) 380. At paragraphs 24 and 25 of her Reasons for the Court, Madam Justice Sharlow wrote in the following terms:
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[24] The scope and application of the rules quoted above depend upon the meaning of the phrases "relating to any matter in question between ... them in the appeal" and "relating to any matter in issue in the proceeding". In Compagnie Financière et Commerciale du Pacifique v. Peruvian Guano Company (1882), 11 Q.B.D. 55 (C.A.), Brett, L.J. said this about the meaning of the phrase "a document relating to any matter in question in the action" (at page 63): |
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It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words "either directly or indirectly," because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences. |
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[25] The "train of inquiry" test for documentary discovery was expressly approved by this Court in Everest & Jennings Canadian Ltd. v. Invacare Corp., [1984] 1 F.C. 856, 55 N.R. 73, 79 C.P.R. (2d) 138 (F.C.A.), adopting the test from Boxer v. Reesor (1983), 43 B.C.L.R. 352, 35 C.P.C. 68 (B.C.S.C.). See also Ikea Ltd. v. Idea Design Ltd., [1987] 3 F.C. 317, 13 F.T.R. 306, 16 C.P.R. (3d) 65 (F.C.T.D.) and Oro Del Norte, S.A. v. The Queen (1990), 35 F.T.R. 107, [1990] 2 C.T.C. 67, 90 D.T.C. 6373 (F.C.T.D). |
[11] Furthermore, there is clearly disagreement between the parties as to the proper scope of the discovery in the present case, even though they both agree that it should be limited to the compulsory license and its alleged termination. While the applicants claim that the compulsory license was terminated in September 1999, and therefore the events preceding and following this date are not relevant to the issue, the respondent takes the position that the compulsory license was not terminated. The respondent alleges that the purported notice of termination of the compulsory license by Eli Lilly US was ineffective and that, in any event, it rectified the alleged breach with the proper payment of royalties, thus making relevant the events leading up to the purported termination in September 1999, as well as the parties’ conduct and the events following the alleged cure, that is to say after February 2000.
[12] There is no question that the parties’ different perceptions of the issue will have a direct impact on the relevancy of the questions asked as part of the discovery process. Furthermore, since the validity of each party’s arguments with respect to the alleged termination of the agreement is an issue to be determined at trial, the relevance of questions asked during discovery must be determined based on both parties’ pleadings. As noted by the respondent in his submissions, the respondent’s right to discovery on factual matters surrounding this issue cannot be limited to the manner in which the applicants have pleaded the issue.
[13] Finally, the respondent argues that a high level of deference should be given to the decisions rendered by a case management prothonotary in the discharge of case management functions, including decisions made on the propriety of discovery questions (Apotex Inc. v. Merck & Co., 2007 FC 250, [2007] F.C.J. No. 322 (QL)).
[14] Prothonotary Aronovitch, as the case management prothonotary, was very familiar with the issues raised in the pleadings. She properly identified relevance as the applicable legal principle, heard arguments from both parties, in writing and/or orally, as to the relevance of each question at issue, and ultimately determined which of these questions should be answered by the applicants, in a Schedule attached to the Order.
[15] In light of the low threshold for relevance in the discovery process, of the parties’ conflicting positions on the termination of the compulsory license and the applicable timeline, and of the high degree of deference that should be afforded to the prothonotary, I am not satisfied that the prothonotary’s conclusion as to the relevance of the questions at issue was “clearly wrong”.
[16] While it is clear that the applicants disagree with the prothonotary’s ruling on the relevance of the questions that were ordered to be answered, they have not met their burden of showing that the prothonotary erred in principle or acted upon a misapprehension of the facts, which would justify a de novo consideration by this Court of the relevance of the questions asked by the respondent during the discovery process.
[17] The applicants also submit that the prothonotary made an error of law by ordering that certain questions be answered, without hearing oral arguments from the applicants on the relevance of these questions. However, the applicants did make written submissions on all the questions at issue, which the prothonotary must be presumed to have considered before rendering her decision. Furthermore, as noted by the respondent, there is no rule that gives a party the right to make oral submissions on each and every single question at issue in a refusals motion.
[18] Finally, the applicants argue that the prothonotary erred in law by changing the nature of the draft consent order submitted by the parties, such that it no longer reflects the oral directions given at the hearing of the motion. Specifically, the applicants allege that the prothonotary indicated at the hearing of the motion that all questions were to be answered in respect of nizatidine only, and that drafts of agreements were not to be produced if the agreements were executed. As a result of these oral directions, the applicants argue that they did not continue to make these arguments in respect of every question to which they applied. Nor were these limitations noted in Schedule A to the draft order submitted to the prothonotary, as it was their understanding that these limitations were to apply to all of the questions in the attached Schedule.
[19] While there is no transcript of the hearing before the prothonotary, which would allow for a comparison between what was allegedly stated by the prothonotary and what was found in her Order, there is clearly an important distinction between the draft consent order submitted by the parties and the final Order of the prothonotary.
[20] In the draft consent order, the following directions were placed in the numbered paragraphs:
4. All answers ordered are only to be answered in respect of nizatidine.
5. All answers ordered are not to be answered in respect of draft agreements and documents.
[21] In the final Order of the prothonotary, the following directions are found in the recitals portion of the Order:
Where indicated by the Court, questions are to be answered in respect of nizatidine only.
Where indicated by the Court, prior drafts of executed agreements do not have to be produced.
[22] The respondent is correct in pointing out that the Court is not bound by consent orders submitted by parties. As stated in rule 53 of the Federal Courts Rules, S.O.R./98-106 :
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53. (1) In making an order under these Rules, the Court may impose such conditions and give such directions as it considers just.
(2) Where these Rules provide that the Court may make an order of a specified nature, the Court may make any other order that it considers just.
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53. (1) La Cour peut assortir toute ordonnance qu’elle rend en vertu des présentes règles des conditions et des directives qu’elle juge équitables.
(2) La Cour peut, dans les cas où les présentes règles lui permettent de rendre une ordonnance particulière, rendre toute autre ordonnance qu’elle juge équitable.
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[23] That being said, I take to heart the point made by the applicants that, by changing the language agreed upon by the parties to reflect their understanding of the orders given at the hearing, without changing the corresponding schedule, the two documents can no longer be read together. Simply put, absent any actual indication in Schedule A to the Order as to which questions are to be subject to these limitations, it is impossible to determine the scope of said limitations.
[24] As such, I am concerned that the Order may create some confusion for both parties who will then seek clarifications from the Court at a later date and further delay the process.
[25] Normally, the proper procedure to be followed in such a situation would have been to present a motion to reconsider to the prothonotary under rule 397 of the Federal Court Rules, which reads as follows:
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397. (1) Within 10 days after the making of an order, or within such other time as the Court may allow, a party may serve and file a notice of motion to request that the Court, as constituted at the time the order was made, reconsider its terms on the ground that (a) the order does not accord with any reasons given for it; or (b) a matter that should have been dealt with has been overlooked or accidentally omitted.
(2) Clerical mistakes, errors or omissions in an order may at any time be corrected by the Court.
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397. (1) Dans les 10 jours après qu’une ordonnance a été rendue ou dans tout autre délai accordé par la Cour, une partie peut signifier et déposer un avis de requête demandant à la Cour qui a rendu l’ordonnance, telle qu’elle était constituée à ce moment, d’en examiner de nouveau les termes, mais seulement pour l’une ou l’autre des raisons suivantes : a) l’ordonnance ne concorde pas avec les motifs qui, le cas échéant, ont été donnés pour la justifier; b) une question qui aurait dû être traitée a été oubliée ou omise involontairement.
(2) Les fautes de transcription, les erreurs et les omissions contenues dans les ordonnances peuvent être corrigées à tout moment par la Cour. |
[26] While the applicants have not succeeded in convincing this Court that the Order of the prothonotary is clearly wrong and should thus be set aside, I believe that the prothonotary’s failure to indicate in the Schedule to the Order the specific questions to which the above-mentioned limitations are to apply, falls within the category of “clerical mistakes, errors or omissions in an order”, which should be remedied by the Court “as constituted at the time the order was made”, namely Prothonotary Aronovitch.
[27] Despite the fact that the time has expired to bring a motion under rule 397, it remains possible for the parties to seek leave to extend the time to bring such a motion before Prothonotary Aronovitch. However, I believe that such an approach would only add an unnecessary delay to an action that has already been sufficiently delayed.
[28] Therefore, while I am not willing to grant the applicants’ motion on the merit, the Order will be sent back to Prothonotary Aronovitch so that it may be clarified and so that the parties may then finalize discovery in an expedient manner.
[29] Finally, the respondent Novopharm conceded at the hearing that questions 3 and 4 of Schedule A, were not relevant. Therefore, the two questions will be withdrawn from the list and Schedules A and B of the Order will be amended to reflect this change.
ORDER
Therefore, THIS COURT ORDERS THAT:
1. This motion is denied, except with respect to questions 3 and 4 of Schedule A;
2. The Order is to be returned to Prothonotary Aronovitch so that she may specify which questions listed in Schedule A are to be answered only with respect to nizatidine, and in the context of which questions listed in Schedule A prior drafts of executed agreements do not have to be produced;
3. Questions 3 and 4 of Schedule A, are withdrawn and Schedules A and B of the Order will be amended accordingly;
4. Having been mostly successful on this motion, the respondent Novopharm is entitled to its costs established at one thousand dollars ($1,000), payable forthwith in any event of the cause.
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1100-97
STYLE OF CAUSE: ELI LILLY AND COMPANY ET AL
Plaintiffs
and
APOTEX INC. Defendants
PLACE OF HEARING: TORONTO, ONTARIO
APPEARANCES:
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MR.JAY ZAKAIB MS. BEVERLEY S. MOORE
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MS. JEILAH CHAN
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(DEFENDANT IN COUNTERCLAIM – NOVOPHARM LIMITED) |
SOLICITORS OF RECORD:
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GOWLING LAFLEUR HENDERSON LLP. Ottawa, Ontario
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BENNETT JONES LLP Toronto, Ontario |
FOR THE DEFENDANT (DEFENDANT IN COUNTERCLAIM – NOVOPHARM LIMITED) |