Date: 20040712
Docket: A-668-01
Citation: 2004 FCA 258
BETWEEN:
ASTRAZENECA AB
Appellant
- and -
NOVOPHARM LIMITED
Respondent
- and -
THE REGISTRAR OF TRADE-MARKS
Respondent
Assessment Officer
[1] The Appellant was unsuccessful before the Registrar of Trade-marks and before the Federal Court concerning its application for registration of a yellow pharmaceutical (treatment of hypertension) tablet design as a trade-mark. On February 4, 2003, the Federal Court of Appeal dismissed its appeal with costs (hereafter "the Yellow Tablets Decision"). The Respondent, Novopharm Limited (hereafter "the Respondent"), renounced before me the claim for PST of 8% in its bill of costs.
Item 19 7 units claimed for Memorandum of Fact and Law (available range 4-7 units: hereafter, the numbers in brackets represent the available range)
Item 21(a) 3 units claimed for response to the Appellant's written motion for determination of the contents of the Appeal Book (2-3)
Item 22(a) 3 units claimed per hour (6 hours) for appearance at the appeal hearing (2-3)
Item 22(b) 50% of the amount calculated under Item 22(a) claimed for second counsel
Item 25 1 unit claimed for services after judgment (1)
Item 26 6 units claimed for the assessment of costs (2-6)
$1704.15 claimed for disbursements: long-distance tolls ($14.59); photocopies ($1,294.80); computer database research ($375.26) and facsimiles ($19.50)
The Appellant's Position
[2] The Appellant argued generally that the counsel fee items in Tariff B represent discrete services and therefore the disposition for one should not affect the other. For example, if items 21 or 22(b) are disallowed, items 19 or 22(a) should not be increased to compensate. It was not improper for the Appellant to resist changes to the appeal book regardless of it ultimately losing this appeal. The Appellant suggests 5 and 2 units respectively for items 19 and 22(a) in the absence of any justification for maximum claims, particularly given that the Respondent's submissions took only 46 minutes of the approximate 245 minutes for the hearing. Only four hours should be allowed for item 22(a).
[3] The Appellant argued further to Ayangma v. The Queen [2001] F.C.J. No. 576 (A.O.) that, given the Court's order was silent as to costs, nothing is allowable for item 21. As well, given that an "assessment officer" is defined as distinct from the "Court" as a function of Rule 2 and of the Federal Courts Act, ss. 3 and 5(1), nothing is allowable for item 22(b) in the absence of a direction from the Court. The absence of a jurisdictional bar against an assessment officer addressing disbursements relative to item 24 (travel by counsel) does not help the Respondent here because the direction of the Court required for it and item 22(b) refers only to fees, but not disbursements. The Appellant argued that nothing should be allowed for item 25 in the absence of evidence that recoverable services after judgment were performed. The Appellant suggested the minimum 2 units for item 26 given the relative simplicity of this assessment of costs and given evidence for disbursements consisting essentially of computer printouts.
[4] The Appellant argued further to Tariff B1(4), F-C Research Institute Limited et al. v. The Queen et al. (1995), 95 D.T.C. 5583 (F.C.T.D.) and Windsurfing International Inc. et al. v. Bic Sports Inc. et al., 6 C.P.R. (3d) 526, that the evidence supporting the disbursements is so deficient that nothing should be allowed or, in the alternative, their amounts should be significantly reduced. The Appellant noted particularly for photocopies the absence of evidence of necessity and what was copied. The photocopy rate equates to an excessive claim for 6,074 pages, ie. the Respondent was not responsible for the appeal books and the charge of $553.80 for December 2001 occurred just after institution of the appeal when significant numbers of copies should not have been required.
The Respondent's Position
[5] The Respondent argued that the complexity of issues of law associated with the standard of review of decisions of the Registrar of Trade-marks relative to claims of distinctiveness of appearance of pharmaceutical tablets, ie. colour, shape or size, warrant maximum fees. Should items 21 and 22(b) be disallowed, the complexity throughout still warrants maximum units elsewhere. The Appellant's appeal to the Supreme Court of Canada implies the presence of complex issues. The Respondent argued for maximum fees further to Rules 409 and 400(3)(c), ie. whether the appearance of pharmaceuticals can be subject to trade-mark registration is a matter of public importance; (e), ie. the Respondent attempted settlement and (i), ie. unnecessarily lengthened proceedings because the Appellant omitted relevant documents from the appeal book.
[6] For item 19, the Respondent noted that the trial judge allowed maximum fees for analogous items 2 and 13(a) and argued for higher costs against the Appellant for pursuing this appeal in the face of existing jurisprudence, referred to in paragraph [24] of the Yellow Tablets Decision, indicating that its proposed trade-mark would not be found distinctive as a function of similar facts and law. The Respondent argued that the trial judge awarded fees for second counsel under item 22(b) and that his directions for costs, at paragraphs [5] and [6] reported at 18 C.P.R. (4th) 88 (F.C.T.D.), held that assessment officers can exercise Rule 400(1) discretion to do so as well. As well, the broad discretion vested in assessment officers to, for example, assess associated disbursements in the absence of a direction of the Court for item 24 counsel fees, should similarly be exercised here to take into account the presence of second counsel on both sides in allowing item 22(b).
[7] For item 22(a), the Respondent argued that its time spent at the hearing actually making submissions is irrelevant. Attendance time involves more than just the time entered by the court registrar, ie. six hours is a reasonable claim for commencement at 10:00 am and conclusion at 3:57 pm and accounts as well for time spent away from the office. The Respondent argued further to Chisholm v. Bank of Nova Scotia, [2000] F.C.J. 1810 (A.O.), that preparation of a bill of costs is allowable under item 25. The complexity of the case law associated with issues of double costs warrants the maximum for item 26. The Respondent argued that the sworn evidence here meets the threshold for disbursements contemplated by the costs decision of the trial judge supra. The circumstances here are distinguishable from F-C Research Institute Limited et al., supra, as a function both of the absence of experts to consider and of a different form of evidence. The photocopy rate of $0.25 per page is consistent with practice enunciated in Canadian Union of Public Employees, Local 4004 v. Air Canada, [1997] F.C.J. No. 464 (A.O.).
Assessment
[8] For item 21, the Respondent has correctly stated the law. Rule 400(1), which vests full discretionary power in the Court over awards of costs, means that orders and judgments must contain visible directions that costs have been awarded. Similarly, I cannot assume jurisdiction of the Court for item 22(b) and must disallow that as well. The assertion in paragraphs [5] and [6] of the costs decision of the trial judge, that the "discretion of this Court in regards to costs is set out in Rule 400(1)... [T]his discretion extends to the actions of assessment officers, including Registry Officers, Prothonotaries, and Judges", does not give me such jurisdiction, but simply affirms the breadth of his discretion for costs. Rule 409, providing for consideration of Rule 400(3) factors by an assessment officer, does not give me Rule 400(1) jurisdiction because my jurisdiction flows instead from Rules 2 and 405.
[9] The business of pharmaceuticals is significant both from the perspective of revenues and from the importance for society. However, I think that this was not the most complex instance of litigation. I concluded at paragraph [7] in Bruce Starlight et al. v. Her Majesty the Queen,[2001] F.C.J. 1376 (A.O.) that the same point in the ranges throughout the columns in the Tariff need not be used as each item for the services of counsel must be considered in its own circumstances and that some generalization is required between the available values in ranges. I allow 6 units for item 19. I agree to some extent with the Respondent concerning item 22(a). Counsel must be present throughout a hearing even if not called upon. An appearance at a hearing necessarily includes some time in the courtroom identifying oneself with the court registrar and waiting for the call of case, none of which is preparation time addressed by other items. Therefore, the abstract of hearing is a useful, but not absolute, guide for assessing attendance at hearing. These are not circumstances for which 2 units or 3 units per hour throughout best captures partial indemnity. I allow three hours and three hours respectively at 3 and 2 units per hour for item 22(a).
[10] With respect, I think that the assessment officer in Chisholm, supra, may have misconceived the structure of the Tariff. That is, it is designed for indemnification of discrete services. For example, the wording of item 2 does not specifically preclude, as does item 1, appeal materials. Item 17 addresses the exception in item 1. The separation of preparation and attendance in paired items such as 5 + 6, 8 + 9, and 13 + 14 likely indicates that item 26 for assessment of costs is a global allowance which subsumes preparation. It may be arguable that item 27 embraces some aspect of assessment beyond the ordinary, but certainly item 25, which includes services such as briefing the client on the meaning and implication of judgment, does not. I allow item 25 as claimed. The issues here for doubling under Rule 420 were not straightforward: I allow 5 units under item 26.
[11] I will apply discretion to the disbursements consistent with my approach in Grace M. Carlile v. Her Majesty the Queen (1997), 97 D.T.C. 5284 at 5287 (T.O.) and with 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", in sorting out a reasonable result for costs. The proof here is vague in some respects. 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 to preclude prejudice relative to the payer of costs. However, real expenditures are needed to advance litigation: a result of zero dollars at assessment would be absurd. Given that I refused counsel fees for item 21 above, I must take into account that there may have been associated disbursements which are also not allowable. I allow $13.00, $260.00 and $15.00 respectively for long-distance tolls, computer database research and facsimiles respectively. With particular regard to my approach in Canadian Union of Public Employees, Local 4004, supra, I allow $850.00 for photocopies.
Doubling of Costs under Rule 420
[12] The settlement offer dated June 11, 2002 (hereafter "the offer") read:
Novopharm offers to settle this appeal on the following terms:
(i) AstraZeneca agrees to discontinue its appeal of the decision of Mr. Justice Kelen;
(ii) Novopharm will not seek costs of the appeal in Court File No. A-668-01 following the October 30, 2001 decision of Mr. Justice Kelen; and
(iii) AstraZeneca withdraws Canadian Trade-mark Application No. 783,267.
This offer will remain open until 2 minutes after the commencement of the hearing of the appeal in Court file A-668-01. The conditions of this offer to settle are not to be filed with the Court by AstraZeneca until a determination of the appeal has been made by the Court.
The Appellant's Position
[13] The Appellant argued that, if the offer is found to trigger double costs, items 25 and 26 are precluded because they occurred after the date of judgment defined by Rule 420(2) as the end of doubling. The Appellant argued that double costs are not allowable here because the revocation two minutes into the hearing is inconsistent with this phrase in Rule 420(2), "a written offer to settle that is not revoked". The Court in Canadian Olympic Assn. v.Olymel, Société en Commandite, 8 C.P.R. (4th) 429 (F.C.T.D.), refused doubling of costs in similar circumstances, ie. an offer expiring at the beginning of the hearing. The Court there further concluded that the absence in a settlement offer of an element of compromise, in turn prompting the capitulation of an arguable appeal, was inconsistent with the intent of the rule, as well as creating an easy mechanism to obtain double costs without the requisite underlying inducement for settlement intended by the rule.
[14] The Appellant argued that Monsanto Canada Inc. v. Schmeiser et al., 19 C.P.R. (4th) 524 (F.C.T.D.) is obiter and is not binding because the Court there did not need to, and did not, make a clear finding that the settlement offer fell within Rule 420. As well, the concurring opinion in The M.V. African Cape et al. v. Francosteel Canada Inc., [2003] 4 F.C. 284, [2003] F.C.J. No. 385 (F.C.A.), supersedes its application:
[29] In his argument before the Prothonotary, counsel for the defendants submitted that Rule 420.(2)(a) should be interpreted by reading in, at least implicitly, the following prescriptions found in Rule 49.10(2) of the Ontario Rules of Civil Procedure:
49.10(2) Defendant's offer - Where an offer to settle,
(a) is made by a defendant at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to party and party costs to the date the offer was served and the defendant is entitled to party and party costs from that date, unless the court orders otherwise.
The Prothonotary properly refused to follow counsel's submission and concluded that Rule 420.(2)(a), as it reads, did not apply in the circumstances because the written offer made by the defendants was revoked on the fourth day of the hearing before the arbitrator. The defendants decided to withdraw their firm offer a third of the way through the hearing for a number of reasons. First, the offer had been made early in the process to avoid a trial. Second, the defendants had already incurred enormous costs in defending the claim to that point. Third, as the evidence was evolving, the defendants thought that their offer was too generous: they were afraid that it might be accepted at the end of the arbitration hearing, leaving them with irretrievable significant costs.
[30] As drafted, Rule 420.(2)(a) has a serious potential for unfairness. As the present instance shows, if the offer is revoked, even if only a day before the case is taken under advisement or before judgment is rendered, a defendant loses the benefit of the Rule and is left to rely upon an almost unfettered exercise of jurisdiction under Rule 400. As I can see in the case at bar, there is no guarantee that, even with the best of intents, the discretion will be exercised judicially. In addition, a respondent bears the heavy and difficult burden of proving an improper exercise of jurisdiction.
[31] The situation for a defendant is not any better if he leaves the offer open as requested by Rule 420.(2)(a). After nine days of trial, a plaintiff who realises that the defence witnesses have been convincing and, therefore, that the prospect of winning is not as bright as it once was may move to accept the unrevoked offer. A defendant then finds itself in an invidious position. On the one hand, he cannot claim double costs as allowed by the Rule because no judgment will be rendered. He will never know if the offer would have been equal or superior to what would have been allowed. He might be doubly penalized if his offer was inclusive of costs to the plaintiff that he might not have had to pay if a judgment had been rendered. On the other hand, because of a late acceptance of the offer, he then incurs substantial defence costs although his offer, as in the present case, may have been made long before the hearing started. Such hearing costs generated by a plaintiff's failure to accept the offer in a timely fashion cannot then be recovered by a defendant.
[32] Rule 420.(2)(a), as it exists, unfairly tips the scale in favour of a plaintiff and against a defendant who bears all the risks of an unrevoked offer. It fails to achieve, indeed it defeats, the very purpose of achieving early settlements of cases for a proper and cost-efficient administration of justice and of limited judicial resources. In comparison, the Ontario Rule has the potential and advantage of forcing an early settlement of a case pursuant to an offer: a plaintiff has to make a decision before the beginning of the hearing, otherwise he bears the risk of all subsequent costs incurred by a defendant if he fails to accept the offer when he should have. In addition, the Ontario Rule appears to be better and more fairly structures the exercise of discretion in the best and efficient interest of justice.
[33] In conclusion, the present case which has generated extensive and costly litigation on the sole issue of costs, in my opinion, illustrates the need for a review of Rule 420.
The findings of the lower court in the African Cape, supra, were not obiter and therefore leave me without jurisdiction to allow Rule 420 doubling in the face of the revoked offer here.
[15] The Appellant argued that, as the judgment awarded costs to the Respondent, but the offer did not require the payment of costs, the judgment was not less favourable than the offer, meaning Rule 420(2)(a) does not apply. As well, the offer required withdrawal of the trade-mark application, a result not possible in any judgment. The estimated value of party and party costs, ie. a possible maximum total of $6,544.00, was considerably less than the potential value of an application for leave to appeal to the Supreme Court of Canada, ie. whether a valuable trade-mark could be registered and the likelihood of much greater costs over several years to pursue an opposition proceeding, an appeal in the Federal Court and the present appeal. The offer's requirement to withdraw the trade-mark application would have precluded this latter scenario. The trial judge, faced with an offer to settle effectively on the same terms as here, except for service relatively later in the proceeding, refused to allow extra costs (directions on costs supra).
[16] The Appellant argued further to this excerpt from the order of the trial judge (January 21, 2004 in T-1470-99 and T-1471-99 involving the same parties as here: hereafter "the Pink/Red-Brown Tablets Costs Decision") that, given essentially the same issues as here, ie. whether AstraZeneca AB had established on a balance of probabilities that the colour and shape of its pharmaceutical tablets distinguished them from other companies' tablets,:
...The claim for double, or some other multiple, of costs (excluding disbursements) incurred from
(a) April 9, 2001 to June 12, 2001; and
(b) February 13, 2003 to October 17, 2003.
Counsel for both parties proceeded, correctly in my view, on the basis that an essential element of an offer to settle is the ingredient of compromise or incentive to accept. In this regard in Canadian Olympic Assn. v. Olymel, Société en Commandite (2000), 8 C.P.R. (4th) 429 (F.C.T.D.), Mr. Justice Lemieux wrote at paragraphs 10 through 13:
[10] At least for the purposes of the cost award before me which does not arise in an action but in the context of an appeal from the Registrar of Trade-marks awarding Olymel two trade-mark registrations, I am of the view that the ingredient of compromise (or incentive to accept) is an essential element of an offer to settle. Other considerations may apply when considering an offer to settle liquidated or unliquidated damages in an action.
[11] The purpose of the offer to settle rule, as pointed out by Morden A.C.J.O. in Data General, supra, is to encourage the termination of litigation by agreement of the parties - more speedily and less expensively than by judgment of the Court at the end of a trial. He added the impetus to settle is a mechanism which enables a plaintiff to make a serious offer respecting his or her estimate of the value of the claim which will require the defendant to give early and careful consideration to the merits of the case.
[12] As argued by counsel for COA, Olymel's offer contained no element of compromise although it was made after Olymel had filed its respondent's memorandum of fact and law which, in my view, was not so persuasive and convincing as to render COA's continuation of the appeal without merit. In the circumstances, it was a request that COA capitulate an arguable appeal. Olymel's offer did not, in my view, advance the purposes of the offer to settle provision of the Rules.
[13] Without an element of compromise in analogous situations, an offer to settle could simply become a very easy mechanism for a respondent to obtain double costs and clearly, such a device is not within the intent of the Rules.
Counsel for both parties submitted that in order to determine whether either of the offers to settle made by Novopharm contained that essential element of compromise or incentive to accept, I should have regard to all of the surrounding circumstances.
Turning to the first offer, at the time it was made by Novopharm on April 9, 2001 AstraZeneca's applications for trade-mark registration had been outstanding since February 28, 1992. On June 14, 1999, the Trade-marks Opposition Board had rejected Novopharm's opposition. The appeals in this Court were scheduled to be heard on May 9, 2001. Without doubt AstraZeneca had by then expended significant monies from the time it filed its trade-marks applications. The April 9 offer may, in my view, fairly be seen as a last minute offer by which Novopharm afforded AstraZeneca the opportunity to give up its trade-mark applications in exchange for avoiding the costs of the Federal Court appeal proceedings. In the words of Mr. Justice Lemieux, it was a request that AstraZeneca capitulate a position that was certainly arguable and which was initially successful in this Court. While AstraZeneca was ultimately unsuccessful in the Court of Appeal this was largely as a result of jurisprudence delivered after the initial offer from Novopharm.
I find, therefore, the first offer contained no element of compromise and was an effort to obtain double costs.
Circumstances had, however, changed somewhat by February 13, 2003 when the second offer to settle was made by Novopharm. On February 4, 2003, the Federal Court of Appeal had rendered its decision in AstraZeneca AB v. Novopharm Limited, 2003 FCA 57 with respect to the refusal of AstraZeneca's application for registration of a yellow tablet design as a trade-mark in respect of PLENDIL. This decision cast a long shadow over the pending redetermination of these appeals. Novopharm argues that because of the similarity in the evidence and issues in the yellow PLENDIL case to the evidence and issues in these appeals, its second February 12, 2003 offer to forego costs in this Court did contain a genuine element of compromise.
While at first glance an attractive argument, by June 9, 2003 when the second offer expired AstraZeneca had filed an application for leave to appeal the yellow PLENDIL decision to the Supreme Court of Canada. In my view, the interest of both Novopharm and AstraZeneca transcended the present two appeals. Both had a significant and overriding interest in the development of jurisprudence as to when, if at all, the shape and colour of a pill would be sufficient to support registration of a trade-mark.
I conclude, therefore, that the second offer was not made for the purpose of genuinely endeavouring to settle the pending appeals and it did not advance the purpose sought to be achieved by the offer to settle provision of the Rules. Rather, the offer was again made for the purpose of claiming double costs if the appeals were successful.
It follows that no direction will issue for double, or some other multiple, of costs....
that these factors surrounding the judgment dated October 17, 2003 in T-1470-99 and T-1471-99, reported at [2003] F.C.J. No. 1535 (F.C.) (hereafter "the Pink/Red-Brown Tablets Decision") are relevant:
(a) the Federal Court dismissed Novopharm Limited's appeals of two decisions dated June 14, 1999, by the Registrar of Trade-marks rejecting its opposition to two applications by AstraZeneca AB to register respective trade-marks for pink, round and biconvex pharmaceutical tablets and for red-brown, round and biconvex tablets;
(b) the Federal Court of Appeal allowed the subsequent appeals by Novopharm Limited and sent the matters back to the Federal Court for reconsideration in light of the appeal court's conclusions;
(c) the second hearing in the Federal Court resulted in the Pink/Red-Brown Tablets Decision, a review de novo, which relied almost entirely upon the Yellow Tablets Decision.
(d) AstraZeneca AB saw the yellow tablets litigation as an opportunity to resolve outstanding issues that it perceived in Novopharm Ltd. v. Bayer Inc., [2000] 2 F.C. 553 (F.C.T.D.), referred to paragraph [24] of the Yellow Tablets Decision;
(e) in the pink/red-brown tablets litigation, AstraZeneca AB's position in opposing double costs was much weaker relative to the second settlement offer under consideration in the face of the Yellow Tablets Decision of a higher court, yet the Pink/Red-Brown Tablets Costs Decision, which had not hesitated in rejecting the first settlement offer made prior to the Yellow Tablets Decision, still found in its favour.
In the circumstances here prior to the Yellow Tablets Decision, the Appellant was in a much stronger position and therefore Rule 420 doubling should not apply as the settlement offers relative to all tablets in these instances of litigation were comparable or perhaps indistinguishable.
[17] The Appellant argued that re-filing before the Registrar of Trade-marks was not a viable alternative in the face of the offer made some seven years after the initial filing given the considerable costs already expended by the Appellant for what it deemed an arguable position. The reference in the Yellow Tablets Decision to American law undercuts the Respondent's position because it simply followed existing jurisprudence. The Appellant argued that the Pink/Red-Brown Tablets Costs Decision is likely binding upon me, but if not, I should follow it. If I find that the offer did not represent a legitimate compromise, then I must reject the Respondent's suggestion below of a 1.5 or 1.33 factor in place of double costs.
The Respondent's Position
[18] The Respondent relied on Feherguard Products Ltd. v. Rocky's of B.C. Leisure Ltd., [1994] F.C.J. No. 2012 (T.O.) at paragraph [10] to assert that its unrevoked offer automatically entitles it to Rule 420 doubling and agreed that an element of compromise is essential in a settlement offer to preclude it from solely being an easy mechanism for double costs. The Respondent argued that the circumstances of the offer here are distinguishable from those in Canadian Olympic Assn., supra, in that although the settlement offer in the latter did terminate at the hearing and required discontinuance of the appeal, it sought payment of costs unlike the offer here which did not seek costs, but which required withdrawal of the trade-mark applications. The Respondent noted that the Appellant's position recognized that the obiter in Canadian Olympic Assn., supra, was simply an observation.
[19] The Appellant's position is untenable, ie. concerning the option for an appeal to the Supreme Court of Canada (which was ultimately refused), because a settlement offer by definition removes the possibility of appeal and therefore the Appellant's parameters preclude any offer from ever satisfying the compromise requirement of Rule 420. The Court recently in Elders Grain Co. v. M/V Ralph Misener (The), [2003] F.C.J. No. 1467 (F.C.) confirmed the application of Rule 420 in the circumstances of rejection of a settlement offer requiring each side to bear its own costs. As Rule 420(2) does not refer to the degree of difference between the offer to settle and the resulting failure of a plaintiff to "obtain judgment", the Appellant here should not have chosen to ignore the offer and must therefore bear the consequences of Rule 420(2).
[20] The Respondent argued that the element of compromise in the offer here meets the threshold of Monsanto Canada Inc., supra, and with the absence of a requirement to capitulate an arguable appeal, entitles the Respondent to double costs. The provision in the Monsanto offer for expiry one minute into the hearing is comparable to the two minute provision in the offer here. The Appellant's position on Monsanto Canada Inc. incorrectly interprets paragraph [13] in which the Court found the offer there clearly compliant: "...it is said it was revoked in accord within its terms. [I]t is true that the offer expired when it was not accepted but it remained open for acceptance until after commencement of the trial, and I agree...that the purpose of Rule 420(1) is to encourage settlement offers and avoid costs of a trial, a purpose that would have been served here had the plaintiffs' offer been accepted...". The Court in paragraph [14] then noted that "the offer appears to qualify within Rule 420(1)", but ruled against double costs for reasons unrelated to any circumstances of the offer. Unlike the situations in both Canadian Olympic Ass., supra, and the African Cape, supra, this conclusion that the offer qualified was not an obiter. The decision in paragraphs [28] - [33] for lump sum costs also was not obiter.
[21] The Respondent argued that the passages in the African Cape, supra, relied upon by the Appellant are clearly obiter, being a theoretical critique of Rule 420(2) in contrast to the majority opinion that the settlement offer was a relevant consideration under Rule 400(3) for the award of costs:
[25] Firstly, as he himself noted in regard to his determination of the amount of costs to which the respondent was entitled, the amount of damages obtained by the respondent as a result of the arbitration award falls dramatically short of the amount claimed in the Statement of Claim. Secondly, the offer of settlement made by the appellants was in excess of the amount ultimately recovered by the respondent. That offer was unequivocal and was made early on in the proceedings; had it been accepted by the respondent, the parties would not have incurred the substantial costs which were ultimately incurred. Thirdly, bearing in mind that the offer of settlement exceeded the arbitrator's award, it cannot be said that the respondent improved its position by proceeding to the arbitration hearing. In the end, the respondent would have been better off had it accepted the settlement offer.
[26] I am therefore of the view that on a proper consideration and weighing of all of the relevant factors, the appellants ought to have their costs. I might add that the effect of depriving the appellants of their costs, in the circumstances of this case, would render the offer to settle meaningless.
This represents the exact concern in Monsanto Canada Inc., supra, relative to Rule 420(1). That one of three judges in the "African Cape", supra, wanted to fix or change Rule 420 should not interfere with the Respondent's access to Rule 420 doubling as presently provided.
[22] The Respondent argued that the offer was timely per Kirgan Holding S.A. v. Panamax Leader (The), [2003] F.C.J. No. 124 (F.C.T.D.). It was made approximately seven months prior to the hearing giving the Appellant a realistic opportunity to evaluate it, regardless of its expiry provision, so as to preclude both sides from incurring further costs, ie. such as for the Memorandum of Fact and Law. A later expiry date would not have mattered. To conclude otherwise, ie. that the offer is deemed to be revoked, means that Rule 420 could never fulfill its purpose of encouraging settlement offers and avoiding hearing costs.
[23] The Respondent argued that the circumstances underlying the Pink/Red-Brown Tablets Decision and the Yellow Tablets Decision were different and therefore the respective associated settlement offers must be considered differently. Relative to the former matter, Novopharm Limited lost before the Registrar of Trade-marks, but was ultimately successful in the second Federal Court hearing. However, relative to the latter matter, Novopharm Limited won before the Registrar of Trade-marks, the Federal Court and the Federal Court of Appeal. Paragraph [25] of the Yellow Tablets Decision makes it clear that the Appellant had to raise errors of law, but not evidentiary issues, which was therefore quite different from the pink/red-brown tablets threshold in the Federal Court. Therefore, the Appellant should have seriously considered the offer here because the threshold to meet for appeal on an error of law, ie. for the yellow tablets, is greater than for evidentiary issues, ie. for the pink/red-brown tablets, and because the Appellant's right to re-file for protection and to gain standing for the yellow tablets would not have been lost. The offer was made two weeks before the Respondent filed its factum. Rule 420 applies throughout because Novopharm Ltd. v. Bayer Inc., supra, decided two years prior to the offer and ultimately applied here in the Respondent's favour in the Yellow Tablets Decision, was good precedent at the time to encourage settlement. The references in the Pink/Red-Brown Tablets Costs Decision to passage of time, to expenses to date relative to the filing for trade-marks and to the pursuit of an appeal to the Supreme Court of Canada are irrelevant given the differing circumstances here.
[24] The Respondent argued that the $6,544.00 costs factor asserted by the Appellant is irrelevant because, at the time of the offer, neither side knew which would receive costs and how much. As well, it would gut the meaning of Rule 420 if a litigant, such as the Appellant, could assert that a trade-mark is so valuable to it that no settlement offer could ever constitute a compromise in turn precluding an adversarial litigant, such as the Respondent, from availing itself of Rule 420 and in turn, as well, precluding the control of the Court over its process as a function of a rule intended to encourage settlement. The reality is that the Appellant should have accepted the offer and its assertion of a lack of compromise therein should not work to its benefit.
[25] The Respondent asserted that the Yellow Tablets Decision saddled the Appellant with adverse precedent because it did not settle, and then the reliance in the Pink/Red-Brown Tablets Decision on the Yellow Tablets Decision resulted in even more adverse precedent. The reference in the Pink/Red-Brown Tablets Costs Decision to the potential effect of both the Yellow Tablets Decision rendered before the settlement offer there and of the interest of both sides in developing jurisprudence transcending the two appeals there stands in contrast to the offer here made before the adverse precedent created for the Appellant by the Yellow Tablets Decision and emphasizes the irrelevance of the Pink/Red-Brown Tablets Costs Decision. The real factor to weigh here is what did the Appellant have to lose by not settling the yellow tablets litigation, particularly given the existing adverse precedent of Novopharm Ltd. v. Bayer Inc., supra. The Respondent asserted that it could not read the minds of the Appellant's principals to discern what the latter perceived of the strength and weakness of its case and therefore what would have been a legitimate compromise. The Respondent argued that, if the Appellant's position on Rule 420 prevails, I should rule further to Monsanto Canada Inc., supra, that the Respondent is entitled to a 1.5 or 1.33 factor of costs in place of doubling.
Assessment
[26] The initial decision by the Prothonotary, reported at [2001] F.C.J. No. 1706 (F.C.T.D.), ultimately leading to the African Cape, supra, addressed Rule 400(1) and (3) issues of entitlement. The circumstances were that Francosteel Canada Inc. sued the "African Cape" et al. for $485,117.99 (cargo damage). The parties agreed to refer the issue of damages to an arbitrator, but with the issue of costs left to the Federal Court. The Defendants, early in the proceeding, offered to settle for the all-inclusive sum of $125,000.00. This offer was reiterated before arbitration began and was ultimately revoked on the fourth day of the arbitration proceeding. Francosteel Canada Inc. formally rejected the offer twice. Ultimately, the arbitrator awarded $85,879.44 + interest which resulted in a total of $108,887.75. The Prothonotary decided that lump sum costs of $40,000.00 should go to Francosteel Canada Inc. In so doing, his consideration of the operation of Rule 420 was, in my view, not obiter.
[27] The decision of the Federal Court addressing the Defendants' appeal of the Prothonotary's award of costs to Francosteel Canada Inc,, reported at [2001] F.C.J. No. 1866, dismissed the appeal and noted at paragraph [3] that the Defendants, "having abandoned their argument with regard to the interpretation of Rule 420...only argument that remains concerns the application of Rule 400". Accordingly, the majority opinion in the African Cape, supra, confined itself to Rule 400(1) considerations. I conclude that the concurring opinion was obiter because its consideration of the operation of Rule 420 could not intersect with consideration of Rule 400(3)(e) concerning an offer to settle as it affects the Court's discretion under Rule 400(1) to decide entitlement to costs. I think that said conclusion is reinforced by noting the observation in paragraph [9] of Kirgan Holding S.A., supra, that whether or not the consequences of Rule 420 are triggered, "it is open to the Court to take a written offer to settle into account in exercising its general discretion as to costs: rule 400(3)e)". In my view, the call in the concurring opinion for a review of the operation of Rule 420 implicitly concedes that the Rule remains in force.
[28] The concurring opinion does not speculate on the appropriate form of a rule but, given that it is a serious concern raised by an appellate court, I think it advisable to at least examine the potential impact of the Ontario Rule, viewed positively in the concurring opinion, in the circumstances facing me. The initial claim by Francosteel Canada Inc., subsequently reduced to $485,117.99, was in excess of $5,000,000.00. The essential thrust of that litigation was to recover certain dollars tied to a specific incident. As such, in sharp contrast to the case before me or even many judicial review proceedings for which Rule 419 also brings into play the operation of Rule 420, there were numerous compromise possibilities for damages as a function of dollar amounts along the continuum of the amount claimed, the amount proffered as settlement and the amount ultimately awarded. The Ontario Rule 49.10 at play there could have promoted serious considerations of settlement. The specific exclusion in the offer here of costs as a settlement requirement emphasizes even more the differing circumstances. That is, I think that, unlike the circumstances in the African Cape, supra, there was no potential here for numerous compromise possibilities, but only the extremes of the parties' respective positions: continue or do not continue. In my experience, I would make the same comment for some judicial reviews.
[29] The offer here meets the criteria of the Ontario Rule 49.10(2)(a), (b) and (c), ie. more than seven days in advance, not withdrawn and expiring before commencement of hearing (if I set aside for the sake of discussion its provision for expiry two minutes into the hearing) and not accepted. The Appellant here opted to continue and lost. The Ontario Rule, if it had been applied to the African Cape, supra, would have been attractive as a tool to encourage settlement because of the shadings of compromise possible as a function of the varying potential dollar amounts that could be or were raised there. Those shadings were properly factors in the majority opinion there addressing Rule 400(1) and (3)(e) considerations of entitlement: see paragraph [25].
[30] With respect and in contrast, I find it difficult to appreciate how the Ontario Rule could assist or work better, to induce settlement, than Rule 420 in the circumstances before me. The criterion in the Ontario Rule different from Rule 420(2)(a) is that a plaintiff obtains "a judgment as favourable... than the terms of the offer to settle". That is irrelevant because the concurring opinion in the African Cape, supra, addressed Rule 420(2)(a), but here the Appellant did not obtain judgment. Rather, the Appellant failed to obtain judgment within the meaning of Rule 420(2)(b). Regardless, the reality of this litigation, unlike the circumstances in the African Cape, supra, is that there were no apparent intermediate shades of compromise between these litigants. That is, it seems to me that, apart from the factor of costs which was off the table in the offer, there was only one result which the Appellant would have deemed as favourable as the offer and which the litigants would likely have thought as possible as a function of the Federal Court of Appeal's jurisdiction per the Federal Courts Act, s. 52(b)(i), ie. allow the appeal and substitute the finding, contrary to that in paragraph [19] of the Federal Court decision, reported at [2001] F.C.J. No. 1606, that the colour yellow and shape round does distinguish AstraZeneca AB's felodipine tablets meaning that the Registrar's decision was unreasonable. It was all or nothing, apart from the obvious potential impact relative to market share of the sale of pharmaceuticals for years to come, in sharp contrast to the African Cape litigation in which a dollar amount was sought for a single incident of cargo damage at a specific point in the past. The same could be said of decisions for judicial reviews which sometimes seek judicial guidance for future events. My analysis is not intended to diminish the serious concerns for the operation of Rule 420 raised in the concurring opinion in the African Cape, supra, but simply to respectfully note that said opinion does not assist me in the circumstances here.
[31] In Canadian Olympic Assn, supra, the Court had already disposed of Rule 400(1) considerations of entitlement to costs and was addressing several heads of directions to the assessment officer, including the doubling of costs. Said decision was not an obiter. It notes circumstances in which an element of compromise is not an essential part of a settlement offer, but goes on to decide that the circumstances of an appeal from a decision of the Registrar of Trade-marks awarding two trade-mark registrations should not permit doubling of costs in the absence of an element of compromise in a settlement offer. The Court there in paragraph [14] observed that the termination of the settlement offer at the commencement of hearing was inconsistent with the requirement of Rule 420 that an offer not be revoked. I think that the circumstances of Canadian Olympic Assn., supra, differ from here both with regard in the former to the presence of a costs factor and the absence of intermediate points for compromise possible in the context of the offer here. As well, the offer reproduced in Canadian Olympic Ass., supra, at paragraph [4], appears to distinguish between the concepts of lapse of an offer versus revocation of an offer by stating that the "offer is open until the Hearing of this matter or unless revoked earlier by Olymel...." With respect, it appears that the Court in paragraph [14] did not carry forward that distinction, ie. in its assumption that the commencement of the hearing was effectively revocation of the offer, in turn precluding the operation of Rule 420. Again, with respect and consistent with my analysis below, I do not think that a time limit in a settlement offer equates to revocation within the meaning of Rule 420.
[32] The Court in Monsanto Canada Inc., supra, confirmed at paragraph [9] the entitlement under Rule 420 to double costs as a function of an unrevoked settlement offer. The Court in Monsanto Canada Inc., supra, was faced with circumstances, unlike here, in which several intermediate points of compromise were available and in addressing the factor of compromise, referred to Canadian Olympic Assn., supra, and several other cases. Of more significance is that the Court there, aware of Canadian Olympic Assn., supra, and faced with an offer that expired when it was not accepted, but which remained open for acceptance until after the commencement of trial, decided at paragraph [13] that it agreed "with the plaintiffs that the purpose of Rule 420(1) is to encourage settlement offers and avoid costs of a trial, a purpose that would have been served here had the plaintiffs' offer been accepted". This conclusion was not obiter and, with respect, implicitly recognizes, in my view, a reality of litigation that litigants, often for reasons of strategy, do not want offers on the table as a hearing unfolds and that, if said strategy was not available, they might be less inclined to bother making offers at all. My view is reinforced, I think, by the fact that the Court at paragraphs [14] and [15] of Monsanto Canada Inc., supra, declined doubling of costs as a function of evidentiary issues unrelated to the settlement offer, but did award a 1.33 factor for costs while observing that said result "recognizes the principal result of Rule 420(1), to benefit a party that makes a serious offer to settle an action before trial, but at a level less than that suggested in Rule 420(1), a level this Court considers more appropriate in this case".
[33] My inclination to the Court's conclusions in Monsanto Canada Inc., supra, is reinforced by my observations in Milliken & Company et al. v. Interface Flooring Systems (Canada)Inc., [2003] F.C.J. No. 1586 (A.O.) and Caricline Ventures Ltd. v. ZZTY Holdings Limited et al. [2002] F.C.J. 1524 (A.O.) and my examination of a number of authorities using the search parameters expire or expiration, offer, revoke or revocation, and settle or settlement. The results for the latter exercise indicate that an expiry provision in a settlement offer is not effectively revocation of an offer. For example, Halsbury's Laws of England, Fourth Edition Reissue, Butterworths, 1998, Volume 9(1), at paragraph 643 (page 382) concerning duration and termination of an offer, distinguishes between revocation by the offeror and lapse of time and then addresses them respectively in paragraphs 644 and 646 in a manner reinforcing that distinction. I take the sense of Halsbury's, supra, Butterworths, 1993, Volume 20, at paragraph 113 (page 66), concerning revocation of an offer, as holding that revocation is an active step by an offeror distinct from a notice in the offer that it is open for a specified time. Halsbury's, supra, Butterworths 2001, Volume 37, at paragraphs 210-250 (page 77) refers to a requirement that an offer to settle before commencement of proceedings must be expressed to be open for at least 21 days after the date it was made. That is, a time limit is acceptable. At paragraph 810 (pages 237-38), the sense of distinction between a lapsed offer versus a revoked offer is emphasized by the discussion on one hand concerning an express requirement for a stated time limit for acceptance and on the other hand concerning an offer withdrawn as not permitting the specified consequences.
[34] The Compact Edition of the Oxford English Dictionary, Oxford University Press, 1987, Volume II: P-Z at page 2532, defines revoke with the active sense of "...4. To... repeal, rescind, cancel, ...retract, withdraw....". In Volume I: A-O at page 931, expire is defined as "...6... Of a condition (in a bond or the like), a law, patent, truce, etc. appointed for a limited time: To become void through lapse of time, to reach its term....". The definition of expire in Words and Phrases Legally Defined, Third Edition, Butterworths, 1989, Volume 2: D-J at page 203, suggests the passage of time as its primary meaning, but only a limited sense of termination via an individual's active step. The definition of expiration in Stroud's Judicial Dictionary of Words and Phrases, Sixth Edition, Sweet & Maxwell, 2000, Volume 1: A-F at page 881, suggests a lapse "by effluxion of time or otherwise in due course, as distinguished from being forcibly put an end to - e.g. by forfeiture, or surrender". For revocation, Stroud's, supra, Volume 3: Q-Z at page 2319, suggests an active step in the nature of "...calling back...rescindment, renunciation...". The definitions of revocation in Mozley & Whiteley's Law Dictionary, Eleventh Edition, Butterworths, 1993, at page 241 and in Jowitt's Dictionary of English Law, Second Edition, Sweet & Maxwell Limited, 1977, Volume 2: L-Z at pages 1578-79, carry a similar sense of an active step as opposed to a passive lapse. The definitions of offer in Jowitt's, supra, at page 1277 and in Osborn's Concise Law Dictionary, Ninth Edition, Sweet & Maxwell, 2001, at page 272, imply that its revocation or withdrawal is distinct from its lapse by the effluxion of time. To summarize, a time limit for acceptance of a settlement offer does not appear to carry the additional meaning of revocation. For context, I note that the Ontario Rule 49.10(2)(b) distinguishes between the concepts of withdrawal and expiry.
[35] I think the conclusion in the Pink/Red-Brown Tablets Costs Decision at page 5, that the interest of both sides "transcended the present two appeals" with both having "a significant and overriding interest in the development of jurisprudence", could also be applied to various types of intellectual property litigation over the years. However, I do not think that Rule 420 as promulgated was intended or should be interpreted so as to permit avoidance of its consequences as a function of such factors. While I concede that an important part of the formulation or analysis of a settlement offer is the gauging, relative to the potential for success, of not only the strengths and weaknesses of one's own case, but also that of one's adversary, I do not think that Rule 420, as presently written, should be generally taken as precluding application of its consequences to a litigant so rigidly committed to a position that there is or was never any possibility of compromise. The factor of double costs by itself may not induce litigants such as the Appellant and the Respondent respectively here to accept or make settlement offers, but should Rule 420 be interpreted so as to preclude its application to a certain class of settlement offers, ie. those subject to serious speculation as to their motive? That is, if Rule 420 is to be a neutral mechanism originating within the case management mind-set of a court to induce early disposition, is it consistent or should it be that there is a general exception to its application originating outside the court's mind-set, ie. within a litigant's rigid commitment to its particular position, that permits said litigant to escape the consequences of Rule 420?
[36] A different perspective is that a litigant, such as the Appellant here, should not shrink by reason of apprehension of extraordinary and unintended adverse costs consequences as a function of rules promoting settlement, from pursuing its right for judicial disposition of what it deems to be serious issues. However, relative to the circumstances here, should the Respondent have known that the Appellant, ably represented by experienced counsel with particular expertise in intellectual property litigation, was so committed to pursuing this appeal that any settlement offer was futile and therefore the Respondent could never qualify for double costs despite meeting the requirements of Rule 420 on its surface? With respect, I am not sure that an element of compromise can be an absolute requirement in all circumstances of settlement offers.
[37] The Respondent shall have access to doubling of costs. However, the Appellant's position concerning items 25 and 26 is correct. Doubling shall not apply to those items because each addresses a discrete event occurring after the final event addressed by Rule 420(2), ie. the final judgment. I note also that the Respondent's materials concede February 4, 2003, the date of judgment herein, as the end point for doubling of costs. It was not necessary for me to address the Respondent's argument concerning a 1.5 or 1.33 factor for costs, but I note that the authority for that result is reserved to the Court and is therefore beyond my jurisdiction.
[38] The Respondent's bill of costs, presented at $11,571.15, is assessed and allowed at $6,081.40.
(Sgd.) "Charles E. Stinson"
Assessment Officer
Vancouver, BC
July 12, 2004
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-668-01
STYLE OF CAUSE: ASTRAZENECA AB
v. NOVOPHARM LIMITED et al.
PLACE OF HEARING: Toronto, ON
DATE OF HEARING: March 17, 2004
REASONS FOR ASSESSMENT OF COSTS: CHARLES E. STINSON
DATED: July 12, 2004
APPEARANCES:
Nancy P. Pei for Appellant
Paula Bremner for Respondent
Novopharm Limited
SOLICITORS OF RECORD:
Smart & Biggar for Appellant
Toronto, ON
Hitchman & Sprigings for Respondent
Toronto, ON Novopharm Limited