Date: 20001123
Docket: A-684-99
CORAM: STRAYER J.A.
LINDEN J.A.
MALONE J.A.
BETWEEN:
THE MINISTER OF NATIONAL HEALTH AND WELFARE
Appellant
- and -
APOTEX INC.
Respondent
Heard at Ottawa, Ontario, on Wednesday, November 8, 2000.
Judgment delivered at Ottawa, Ontario, on Thursday, November 23, 2000.
REASONS FOR JUDGMENT BY: MALONE J.A.
CONCURRED IN BY: STRAYER J.A.
LINDEN J.A.
Date: 20001123
Docket: A-684-99
CORAM: STRAYER, J.A.
LINDEN, J.A.
MALONE, J.A.
BETWEEN:
THE MINISTER OF NATIONAL HEALTH AND WELFARE
Appellant
- and -
APOTEX INC.
Respondent
REASONS FOR JUDGMENT
MALONE J.A.
[1] This is an appeal from an order of the Trial Division rendered on September 29, 1999 granting Apotex's motion to dismiss the within application as moot. Costs were also awarded against the Appellant on a solicitor-client basis due to the Minister's delay in issuing a Notice of Compliance ("NOC"); a delay which compelled the Respondent to commence this proceeding. Only the order for solicitor-client costs is now under appeal.
[2] Several errors of law are alleged. The first is that there is no evidence of reprehensible, scandalous or outrageous conduct on the part of the Minister in connection with the litigation itself. Further, the Motions Judge is said to have erred in interpreting the provisions of Rule 400 of the Federal Court Rules, 19981 as well as basing the decision on irrelevant considerations.
FACTUAL BACKGROUND
| [3] A brief recital of the relevant facts is necessary to resolve this appeal: |
a) In October of 1995, Ortho-McNeil Inc. ("Ortho") commenced a prohibition proceeding in the Federal Court, Trial Division pursuant to the Patented Medicines (Notice of Compliance) Regulations2 for an order prohibiting the Minister of Health from issuing an NOC to the Respondent Apotex Inc. for its ofloxacin tablets.
b) The Respondent filed the affidavits of two expert witnesses, Doctors Hendrikson and McClelland, in which they expressed the opinion that the Apotex process to make ofloxacin was not infringing of the claims to make ofloxacin set out in the Ortho patent.
c) On receipt of the affidavits, Ortho brought a motion seeking production of the New Drug Submission ("NDS") respecting ofloxacin which had been made by the Respondent to the Minister. Ortho wished to confirm that the process relied upon by the Respondent in the prohibition proceeding was the same process that had been set out in the NDS. Pursuant to a protective order binding the Minister and the parties, the Appellant reviewed materials which were proprietary and confidential to Apotex and confirmed to Ortho that the processes in issue were the same. This protective order bound the Minister to keep such information confidential even after the termination of the prohibition proceedings.3
d) Ortho and the Respondent executed Terms of Settlement in April 1997, whereby they agreed to settle the prohibition proceeding. The Appellant did not agree to, nor did he sign the Terms of Settlement, although he was a party to the proceeding. Counsel for Apotex, writing to counsel for Ortho, remarked as follows:
| The Terms of Settlement are agreeable to us. However, we cannot speak for the Minister, and particularly, whether the Minister will agree to the obligation imposed on him in paragraph 4. We take the position that . . . Apotex and your clients have nonetheless settled the matter.4 |
e) Paragraph 4 of the Terms of Settlement would have bound the Minister to report to Ortho in writing within 10 days if he became aware of any change to the Apotex process for the manufacture of ofloxacin.
f) The second recital of the Terms of Settlement confirmed that "a specific process for manufacturing ofloxacin" was disclosed by Apotex in the affidavits filed in court. The third recital stipulated that Ortho had received confirmation from the Minister "that this is the only process for manufacturing ofloxacin in the Apotex' NDS." The fourth recital confirmed that Ortho was "prepared to accept that the allegation [of non-infringement of Ortho's patent] is justified with respect to the disclosed process for manufacturing ofloxacin but to no other process."5
| g) On April 29, 1997, an order in the prohibition proceeding issued as follows: |
| 1. The Applicants are hereby permitted to withdraw and hereby do withdraw this proceeding in reliance on the undertakings of Apotex Inc. referred to and given in the Terms of Settlement. Furthermore, the Minister is hereby directed that he is not prohibited by virtue of the Patented Medicines (Notice of Compliance) Regulations from issuing a notice of compliance to Apotex for its version of ofloxacin, so long as it is based on the process which was disclosed by Apotex in this proceeding and no other. |
h) By June 11, 1997, Apotex had satisfied all of the Minister's enquiries, and the Minister was in a position to issue an NOC. On September 29th 1997, the Director General of the Therapeutics Directorate of Health Canada wrote to the Respondent to advise that the substitution of the reagent ethanol for methanol in the isolation step by Apotex was a change to the process reported initially in the NDS and, from the understanding of Health Canada, the process presented to the court. The letter stated that if Apotex wished to pursue the change, then the Minister would be bound by the court order of April 29, 1997 and could not issue the requested NOC.
i) The Respondent made three written representations to the Minister in October 1997 objecting to the decision and urging reconsideration. On October 24, 1997, in the absence of any response, Apotex commenced an application for an order directing the Minister to issue a NOC in respect of its new drug ofloxacin.
j) On February 3rd 1998, the Minister without explanation issued the requested NOC. On August 9th 1999, the Respondent moved for an order dismissing the application on the ground that it had become moot by reason of the Minister issuing the necessary NOC. The Respondent also sought its costs of the application on a solicitor-and-client basis. On September 29, 1999 the motion was granted.
k) The relevant paragraphs from the Motions Judge's decision are reproduced below:
| [para 10] I do not propose to refer to the jurisprudence that has been cited to me, which states that solicitor-client costs are awarded when the Court wishes to show its disapproval of conduct that is offensive or contumelious. Rule 400(1) now provides that the Court "should have full discretionary power over the amount and the allocation of costs and the determination of by whom they are to be paid." In exercising that discretion the Court is authorised, by Rule 400(3), to consider "whether any step in the proceeding was . . . improper, vexatious or unnecessary, or . . . taken through negligence, mistake or excessive caution." |
| [para 11] In the present case, the interpretation that the Minister seeks to put on the April 29, 1997, order is not a tenable one. The order refers to "the process which was disclosed by Apotex in this proceeding and no other." . . . [I]f the Minister truly had doubts about the scope of the process in issue . . . he could have contacted either Ortho or Apotex and expressed his concerns before issuing the September 29, 1997, refusal letter. After he received Apotex's October 2nd, 10th and 20th, 1997 letters, apparently, he still did not respond by giving the matter serious consideration, and then, took until February 3, 1998 before the mistake that had been made was acknowledged and corrected. In these circumstances, I think the applicant is entitled to full indemnity for costs 6 [Emphasis Added] |
STANDARD OF REVIEW
[4] Rule 400 clearly permits the award of solicitor-client costs in the discretion of the Motions Judge. In Reza v. Canada7, the Supreme Court of Canada set out the standard for reviewing judicial discretion:
| The test for appellate review of the exercise of judicial discretion is whether the judge at first instance has given sufficient weight to all relevant considerations: Friends of the Oldman Riever Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3 at pages 76-77, per La Forest J. |
[5] The analysis by LaForest J. is derived from the following statement of Viscount Simon L.C. in Charles Osenton & Co. v. Johnston:8
| The law as to the reversal by a court of appeal of an order made by the judge below in the exercise of his discretion is well-established . . . appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion . . . in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant consideration . . . then the reversal of the order on appeal may be justified. |
ANALYSIS
[6] With respect, two very relevant considerations were omitted by the learned Motions Judge. The first was in failing to consider the existing jurisprudence on the basis that the new Rule 400(1)9 as found in the 1998 revised Rules now speaks in terms of full discretion. The second consideration of importance that was overlooked was the confidentiality obligations which bound the Minister under the privilege order.
[7] While Rule 400(1) speaks in terms of full discretion with the power to consider any other relevant matters, and paragraph 400(3)(k)(i) deals with improper, vexatious or unnecessary conduct, both are in substance the same as the former Rule 344(3)(m)(i) as amended in 1987.10 In my opinion, the new Rule 400(1) does not confer unfettered discretion. Existing jurisprudence must still be considered including the Supreme Court of Canada's recent decision in Baker11 which applied the traditional principle namely:
| Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. |
[8] As well, this Court established a similar rule in its 1986 decision in Amway Corporation v. The Queen12 where Mahoney, J.A. stated:
| Costs as between solicitor and client are exceptional and generally to be awarded only on the ground of misconduct connected with the litigation. |
[9] Nor should the learned Motions Judge have ignored the Crown's confidentiality obligations under the privilege order of December 18, 1995. The Minister could not, as was suggested by the Motions Judge, have embarked on a course of dialogue with Ortho to resolve his doubts in the face of the privilege order.13
[10] The decision of the Motions Judge to award solicitor-client costs was clearly in reaction to the explanations of the Minister as to his interpretation of the April 29, 1997 order as well as the delay in issuing the NOC. The suggestion by the Motions Judge that the Minister took until February 3, 1998 before the mistake that was made was acknowledged and corrected is not supported by the record. In fact, the NOC was issued on February 3, 1998 without explanation or acknowledgment of any kind.
[11] The strength or weakness of the Minister's explanation is no basis for awarding solicitor-client costs.14 Rather the conduct of the Minister prior to this October 24, 1997 application to compel production of an NOC may be relevant in any damages action commenced by Apotex against the Crown. Apotex's solicitor and client costs can be included in the prayer for special damages in that action. In any event, it is not clear that the Minister was obliged under the April 29, 1997 order to issue an NOC. The order simply stated that the Minister was not prohibited from issuing an NOC. The issuance of an NOC is discretionary under the Regulations.15
[12] In my view the award of costs on a solicitor and client basis was not justified by any misconduct during the conduct of the litigation. Furthermore, the reasons of the Motions Judge fail to disclose any exceptional conduct prior to the litigation that is so improper and closely connected to the October 24, 1997 proceedings so as to warrant such an award. As stated by Pratte J.A. in the Bland decision:16
| The courts must render justice; their function is not to reform the public service. |
[13] I would allow the appeal, vacate the Motions Judge's order as it related to solicitor-client costs and award the Respondent its costs below on a party and party basis. I would not award costs on this appeal to either party.
(B. Malone)
J.A.
I agree
B.L. Strayer
J.A.
I agree
A.M. Linden
J.A.
__________________
1. SOR/98-106
2. SOR/93-133.
3. Appeal Book , p. 59.
4. Appeal Book, p. 46.
5. Appeal Book, tab 5, pp. 47-49.
6. Appeal Book, pp. 11-12.
7. [1994] 2 S.C.R. 394.
8. [1942] A.C. 130 (H.L.) at p. 138.
9. Rules 400(1) and (3)(k) read as follows:
| Awarding of Costs Between Parties | Adjudication des dépens entre parties |
| 400. (1) Discretionary powers of Court --The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid. | 400. (1) Pouvoir discrétionnaire de la Cour -- La Cour a entière discrétion pour déterminer le montant des dépens, les répartir et désigner les personnes qui doivent les payer. |
| (3) Factors in awarding costs -- In exercising its discretion under subsection (1), the Court may consider | (3) Facteurs à prendre en compte -- Dans l'exercice de son pouvoir discrétionnaire en application du paragraphe (1), la Cour peut tenir compte de l'un or l'autre des facteurs suivants : |
| (k) whether any step in the proceeding was | k) la question de savoir si une mesure prise au cours de l'instance, selon le cas : |
| (i) improper, vexatious or unnecessary, or | i) était inappropriée, vexatoire ou inutile, |
| (ii) taken through negligence, mistake or excessive caution; | ii) a été entreprise de manière négligente, par erreur ou avec trop de circonspection; |
10. SOR 87/221.
11. Baker v. Minister of Citizenship and Immigration et al, [1999] 2 S.C.R. 817 at p. 864.
12. [1986] 2 C.T.C. 339 (F.C.A.) at pages 340-341.
13.. Paragraph 10 of the privilege order reads as follow:
This Court orders that the termination of proceedings . . . shall not relieve any person to whom this Order from the obligation of maintaining the confidentiality of such information in accordance with the provisions of this Order.
14. Young v. Young supra, [1993] 4 S.C.R. 3 at p. 134.
15. Supra at endnote 2.
16. National Capital Commission v. Mary Bland, [1993] I.C.F. 541 (F.C.A.) at p. 544.