CITATION: Apotex Inc. v. Richter Gedeon Vegyeszeti Gyar RT:  2010 ONSC 4070

                         COURT FILE NO.: 06-CV-312174

MOTION HEARD: 20100128

REASONS RELEASED: 20100622

 

SUPERIOR COURT OF JUSTICE – ONTARIO

 

BEFORE:            Master Donald E. Short

COUNSEL ON MOTION:

                           Karen Murdock  for the Plaintiff, Apotex Inc.:                                                                                                                           fax 416-979-1234

Timothy Lowman  for the Defendant,  Ercros Industrial S.A.:              fax 416-595-1163

HEARD:              January 28, 2010

 

REasons for Decision

I. Background

 

 

II. Motions

 

a)         an Order requiring the Plaintiff, to deliver a further and better Affidavit of Documents listing and describing all of the documents relevant to any Apotex's possession, control or power;

            b)         an Order requiring Apotex to deliver to the Defendant, Ercros copies of all documents relevant to any matter in issue in the action that are in Apotex's possession, control or power, other than those documents for which a valid claim for privilege is made; or

c)         in the alternative, an Order allowing Ercros to cross-examine the affiant, Bernard Sherman on the Apotex Affidavit of Documents on a date and time to be fixed by the Court.

 

III. Production Issues

 

            (a)       Apotex fails to list and describe in Schedule "A" any documents relating to Apotex's alleged damages;

            (b)       Apotex fails to list and describe in Schedule "A" relevant communications between Apotex and Atlantic Chemicals and relevant communications among Apotex Inc., Torpharrn, Apotex Corp. and Novex; and

            (c)       Schedule "B" of Apotex's Affidavit of Documents did not comply with Rule 30.03, and the authorities under that Rule, requiring documents over which privilege is asserted to be separately listed and described with sufficient particularity to enable the Court to determine the validity of a claim of privilege.

“The Initial Affidavit listed 56 documents - all of the documents in Apotex's power, possession or control with a semblance of relevance to the issues of liability in the within litigation.” [my emphasis]

The documents listed in FYSE's Schedule "A" lack the requisite specificity required to enable a party to unambiguously retrieve specific documents as needed. The documents are identified only by document type and labelled as, for example, "facsimile", "letter", "note", "assignment" and "application" with no further identifying details. As a result, it is impossible to know which specific documents are referenced in FYSE's Schedule "A".

 

IV. Statement of Claim

 

(a)       an inability to secure United States Food and Drug Administration ("FDA") approval in the United States for its generic famotidine product in April, 2001, with the alleged result that Apotex suffered loss of sales, and a permanent loss of the long- term market share;

            (b)       Ercros ceasing to supply famotidine without reasonable notice and withdrawing Apotex's access to Ercros' FDA Drug Master File (a "DMF"), with the alleged result that Apotex was not able to sell its famotidine tablets in the United States ; and

            (c)       injurious falsehood arising from an April 5th, 2002 letter from Ercros to the Hungarian National Institute of Pharmacy stating, among other things, that Apotex was not authorized to use the Ercros DMF for registration purposes in Hungary to register Apotex's famotidine products in Hungary.

"...with respect to any documentary production regarding damages sustained by Apotex, we propose that in these circumstances, the Action be bifurcated with a hearing on the quantification of damages to proceed following a determination on the threshold liability of the co-defendants".

 

V. Documents Sought: Damages

 

a)         relevant to the issues in the action;

b)         within the possession, power or control of Apotex;

c)         not privileged and should therefore be listed and described in Schedule "A" to Apotex's Affidavit of Documents.

(a)       Apotex famotidine products shipments, for each country;

(b)       Apotex revenues from famotidine products shipments for each country;

(c)       Apotex costs associated with manufacturing and selling the finished dosage form of famotidine (including fixed and variable costs and direct and overhead costs) for each country;

(d)       Apotex profits from famotidine products shipments (including gross profits, contribution profits, operating profits and net profits) for each country;

(e)       Apotex company income/profit and loss statements for each country, for the period Apotex is claiming damages;

(f)         Apotex supply agreements for famotidine API with third parties;

(g)       Apotex purchase documents for famotidine API from third parties;

(h)       Apotex product plans relating to famotidine products;

(i)         Apotex marketing plans relating to famotidine products;

(j)         Apotex strategic plans (also referred to as long range plans or business plans) relating to famotidine products;

(k)       Apotex sales training materials relating to famotidine products for each country;

(1)       Third party market research reports acquired by Apotex related to famotidine products market(s);

(m)       Internal and external consumer surveys by or on behalf of Apotex, relating to famotidine products;

(n)       Pharmaceutical industry data acquired by, or on behalf of, Apotex relating to famotidine and famotidine products shipments, revenues and prescriptions; and

(o)       Research conducted by, or on behalf of, Apotex related to the impact of timing of market entry on market share in the generic pharmaceutical market.

"As a result [of Apotex's decision to proceed without bifurcation], we will be updating Apotex's Affidavit of Documents to list the documents in its possession, power or control relating to remedy. Given the summer period, we propose to do this by September 30. "

(a)          U.S., Canadian, Polish and Hungarian IMS data (Productions 57, 59, 60, 63, 64 and 67);

(b)        "Launch Scenario Forecasts" (Productions 58, 68, 69 and 70);

(c)        "Famotidine Sales Hungary" (Production 62)

(d)        "Standard Cost" 2001-2009 (Production 65); and

(e)        "Backorder Summary" 2001-2009 (Production 66).

 

VI. Documents Sought: Communications with Related Entities

 

 

VII. Deficiences asserted by Apotex  in Ercros Productions

 

18.      When the contents of the DVD are viewed, there are almost 1700 pdf files listed (each of which must be individually opened to view the document contained therein) and each is labelled with the prefix "ER00" and then a four digit identifying number.

19.      There appears to be no method to the manner in which these pdf documents are listed on the DVD and the method of naming these documents with the "EROO" prefix does not correspond to the numbering of the documents listed in FYSE's Schedule "A", all of which begin with the prefix "A#".

20.      For example, a pdf file is labelled: as "ER000057" on the DVD but there is no corresponding document labelled "ER000057" listed in Schedule "A" to FYSE's affidavit of documents. Once this pdf document is opened, it appears to be stamped with the label "A#01260", which apparently relates to a different numbering system included in Schedule "A" to FYSE's affidavit of documents.

21        FYSE included on this DVD a pdf file which contains a 42-page table of concordance, which appears to correlates these two numbering schemes. It lists the name of thepdf document on the DVD and then links this to the number of that document in its Schedule "A".

22        For example, this document begins. by listing "ER001504" corresponding to"A#00001", "ER001527" corresponding to "A#00002" and continues for 42 pages until the last entry, which is "ERC003224" corresponding to "Ercros A#01693".

For example, to review the 70 documents listed in FYSE's Schedule "A" which are dated in 1997 - numbers A#00055 through 1\#000125 - the 42-page concordance must be consulted 70 times to determine the names of each of these documents on the DVD. These documents must then be located amongst the hundreds listed on the DVD and individually opened to be reviewed.

 

VIII. Applicable Rules

 

                        (a)Contents of Affidavit

(1)        A party to an action shall ... serve on every other party an affidavit of documents ... disclosing to the full extent of the party’s knowledge, information and belief all documents relating to any matter in issue in the action that are or have been in the party’s possession, control or power.

Contents

(2)        The affidavit shall list and describe, in separate schedules, all documents relating to any matter in issue in the action,

(a)  that are in the party’s possession, control or power and that the party does not object to producing;

(b)   that are or were in the party’s possession, control or power and for which the party claims privilege, and the grounds for the claim; and

(c)  that were formerly in the party’s possession, control or power, but are no longer in the party’s possession, control or power, whether or not privilege is claimed for them, together with a statement of when and how the party lost possession or control of or power over them and their present location.

 (3) The affidavit shall also contain a statement that the party has never had in the party’s possession, control or power any document relating to any matter in issue in the action other than those listed in the affidavit. [emphasis added]

“30.06 Where the court is satisfied by any evidence that a relevant document in a party’s possession, control or power may have been omitted from the party’s affidavit of documents, or that a claim of privilege may have been improperly made, the court may,

(a)  order cross-examination on the affidavit of documents;

(b)   order service of a further and better affidavit of documents;....

 

(b)   Discovery Plan

(1)        Where a party to an action intends to obtain evidence under any of the following Rules, the parties to the action shall agree to a discovery plan in accordance with this rule:

1. Rule 30 (Discovery of Documents).

2. Rule 31 (Examination for Discovery)....

(3)        The discovery plan shall be in writing, and shall include,

(a) the intended scope of documentary discovery under rule 30.02, taking into account relevance, costs and the importance and complexity of the issues in the particular action;...

(c) information respecting the timing, costs and manner of the production of documents by the parties and any other persons;... and

(e) any other information intended to result in the expeditious and cost-effective completion of the discovery process in a manner that is proportionate to the importance and complexity of the action

 

                        (c)Proportionality

(a)       the time required for the party or other person to answer the question or produce the document would be unreasonable;

(b)       the expense associated with answering the question or producing the document would be unjustified;

(c)       requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;

(d)       requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and

(e)       the information or the document is readily available to the party requesting it from another source.

"The Rules of Civil Procedure should include, as an overarching principle of interpretation, that the court and the parties must deal with the case in a manner that is proportionate to what is involved, the jurisprudential importance of the case and the complexity of the proceeding."

General Principle

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

 

IX. Mega-case Production in the Twenty-first Century

 

9.         The sheer quantity of documents in many modern litigations demands a precise identification system for swift and certain retrieval of documents in examinations for discovery and trial. Such a system should also enable counsel to be certain that a document produced at trial has indeed been previously produced. It must enable counsel examining a collection of the opposite party's documents to be satisfied that he has the whole collection as described in Schedule A. A modern rule as to identifying documents cannot ignore the computer and its need for a unique identifier for every item to be retrieved. Unless very extensive details about each document are entered in Schedule A, an alpha-numeric or numeric identifier is necessary. The preparation of a Schedule A containing a detailed description of every document would be a truly monumental task in many lawsuits. It is not practical.

10       The logic of these practical requirements drives one inexorably to the proposition that proper identification demands numbering each document with a unique number. Such a number is far more valuable than a long-winded description of each document including its sender, addressee, date, etc. and the creation of a numeric system is far less costly when thousands of documents are involved.

11       The concept of numbering each document has a long history. Many of the old cases noted in Holmested and Langton, Ontario Judicature Act, 5th ed. (1940), at p. 1030, refer to numbering even to the extent of preferring it to lengthy descriptions of the documents. The practice described in this work was approved by Senior Master Conant and, on appeal, by Barlow J. in Fleishman v. Fleishman, [1951] O.W.N. 150 (H.C.J.), at p. 152.

“Nor need it be an overly expensive practice. Automatic numbering machines are readily and inexpensively available and clerical staff can do the numbering quite speedily.”

“Whatever the system, it must, as a minimum:

(1)           enable swift and sure retrieval at trial or discovery;

(2)           enable counsel examining the documents of another party to relate each document to its reference on Schedule A and to satisfy himself that all documents listed are actually in the collection he is examining;

(3)           enable counsel at trial to ascertain swiftly that a document which is tendered to become an exhibit is in fact a document produced in Schedule A;

(4)          be compatible with computer retrieval systems.

(5)          be implemented before copies of the documents are made, so that the copies in the hands of all parties bear the identifier.”

2. In any proceeding, the parties should ensure that steps taken in the discovery process are proportionate, taking into account (i) the nature and scope of the litigation, including the importance and complexity of the issues, interest and amounts at stake; (ii) the relevance of the available electronically stored information; (iii) its importance to the court’s adjudication in a given case; and (iv) the costs, burden and delay that may be imposed on the parties to deal with electronically stored information.

4. Counsel and parties should meet and confer as soon as practicable, and on an ongoing basis, regarding the identification, preservation, collection, review and production of electronically stored information.

5. The parties should be prepared to produce relevant electronically stored information that is reasonably accessible in terms of cost and burden.

8. Parties should agree as early as possible in the litigation process on the format in which electronically stored information will be produced. Parties should also agree on the format, content and organization of information to be exchanged in any required list of documents as part of the discovery process.

9. During the discovery process parties should agree to or, if necessary, seek judicial direction on measures to protect privileges, privacy, trade secrets and other confidential information relating to the production of electronic documents and data. [my emphasis]

 

X. The “Briefcase” Solution

 

The "Summation Briefcase" contains no more information than the DVD that was provided previously but is merely organized in a manner that facilitates its upload into the Summation document management software.

“1. The overall aim of my Inquiry is to improve access to justice by reducing the inequalities, cost, delay and complexity of civil litigation and to introduce greater certainty as to timescales and costs. My specific objectives are:

(a)  to provide appropriate and proportionate means of resolving disputes;

(b)  to establish "equality of arms" between the parties involved in civil  cases;

(c)  to assist the parties to resolve their disputes by agreement at the earliest possible date; and

(d)   to ensure that the limited resources available to the courts can be deployed in the most effective manner for the benefit of everyone involved in civil litigation.”

 

XI. Cases Considered

 

1. Bow Helicopters v. Textron Canada Ltd. (1981) 23 C.P.C. 212 (Ont. Master)

2. Liebmann v. Canada (Minister of National Defence) (1994) 87 F.T.R. 154 (Fed. Ct.)

3. Grossman et al v. Toronto General Hospital et al. (1983) 1983 CanLII 1975 (ON SC), 41 O.R. (2d) 457 (Ont. H.C.)

4. Havana House Cigar & Tobacco Merchants Ltd. v. Naeini (1998) 1998 CanLII 7605 (FC), 147 F.T.R. 189 (Fed. Ct.)

5. Apotex Inc. v. Wellcome Foundation Ltd. (2003) 2003 FC 1229 (CanLII), 241 F.T.R. 174 (Fed. Ct.)

6. Les Caisse Impact Cases Inc. v. Hardigg Cases (2002), 2002 CanLII 53231 (ON SC), 22 C.P.R. (4th) 244 (Ont. Master)

7. RCP Inc. v. Wilding (2002) A.C.W.S. (3d) 33 (Ont. Master)

8. Bates Construction Co. v. Baker Energy Resources Corp. (1988), 25 F.T.R. 226 (Fed. Ct.)

 

19       The courts are clear that it is not always appropriate to require the parties to commence examinations for discoveries before moving for further production. Given the importance of documentary discovery in the litigation process, it is only fair for counsel to have a full set of documents to consider in preparing for examinations for discovery....

 

20       The courts are also clear that the test of relevance is not a matter of an exercise of discretion, but is rather a matter of law. The principle for determining whether a document properly relates to the matters in issue in the action is that it must be one which might reasonably be supposed to contain information which may directly or indirectly enable the party requiring production to advance his own case or to damage the case of his adversary, or which might fairly lead him to a train of inquiry that could have either of these consequences. ( see Apotex Inc. [supra]at para. 16)

 

XII.  Affidavit issues

 

“2.       I have conducted a diligent search of Apotex’s records and have made appropriate  inquiries of others to inform myself  in order to make this affidavit.

3.         This affidavit discloses ,to the full extent of my knowledge, information and belief, all of the documents relevant to any matter in issue in the action that are in  Apotex's possession, power or control; that were but are no longer in Apotex's possession, power or control or that  I believe are in the possession power or control of a person who is not a party  to the: action.

4. I have listed and described in. Schedule “A” all of the relevant documents, or bundles of relevant documents, that are in Apotex's possession, power or control and for which no privilege is claimed        

5.         I have listed and described in Schedule "B" all of the relevant documents that are or were  in Apotex's possession. power or control and for which privilege is claimed and have stated in that Schedule the grounds for each claim of privilege.

6.         I have listed and described in Schedule "C" all of the relevant documents that were but are no longer in Apotex’s possession. power or control and for which no privilege is claimed and have described in that Schedule how possession, power or control of any document or bundle of documents was lost and their current location, so far as I can determine.

7.         I am not aware of any other relevant document other than those that are listed in this affidavit or that are: or were only in the possession, power or control of another party in the action.” [my emphasis]

 (1)  A party to an action shall, within ten days after the close of pleadings, serve on every other party an affidavit of documents (Form 30A or 30B) disclosing to the full extent of the party’s knowledge, information and belief all documents relating to any matter in issue in the action that are or have been in the party’s possession, control or power.

“(4)         Where the party is represented by a lawyer, the lawyer shall certify on the affidavit that he or she has explained to the deponent,

(a) the necessity of making full disclosure of all documents relating to any matter in issue in the action; and

(b) what kinds of documents are likely to be relevant to the allegations made in the pleadings.” [emphasis added]

 

XIII. Schedule “A” Issues

.

“...at the commencement of the litigation counsel requested that Apotex forward all documents related to the issues of liability in the within litigation. All such documents received from Apotex which have a semblance of relevance to issues of liability were included in Apotex’s initial affidavit of documents...

[following complaints re alleged deficiencies]...specific requests were made for further relevant documents and additional searches were conducted. Apart from documents related to remedy, no further documents were located....” [my emphasis]

39.      FYSE takes issue with this production and points to the various types of documents that were relied on by the Federal Court when Apotex's profits were calculated in Wellcome Foundation Lld. v. Apotex Inc. (1998). FYSE argues that all of these types of documents must be produced in the within litigation, without regard to whether they in fact exist.

40       In Apotex's respectful submission, what documents or issues may or may not have been relevant to the calculation of damages in another proceeding are of no relevance to the damages calculations in the current dispute. In addition, FYSE's demand for such additional production on the issue of damages is premature in advance of the discoveries in this action. Questions relating to the existence and content of any additional documents which FYSE alleges may be relevant to a damages claim may be asked at discovery. It is inappropriate for FYSE to guess as to the basis of this claim in advance of that process.[my emphasis]

“11       In Bow Helicopters v. Textron Canada Ltd. [1981] O.J. No. 2165 (Ont. Master) cited with approval in Greymac Trust Company et. al. v. Burnett et. al. (1987), 1987 CanLII 4397 (ON SC), 59 O.R. (2d) 50 (H.C.J.) Master Sandler held that it was inappropriate to order a further and better affidavit of documents on the basis of speculation as to what documents might exist and whether or not they are relevant. The case at bar illustrates the wisdom of that approach. Questions relating to the existence and content of documents may be asked at discovery and if it then appears there is a need for a supplementary affidavit of documents, such a motion will likely succeed. It goes without saying that there is a serious obligation on each party to produce all documents which may have a semblance of relevance to the issues in dispute. I am not prepared to assume that either party has not fulfilled this obligation at this stage in the proceeding.”

37.      As a result, all of the documents in Apotex's power, possession or control with a semblance of relevance to the within litigation have been listed in its Initial Affidavit and its Supplementary Affidavit.          In Apotex's respectful submission, FYSE is simply engaging in speculation and guesswork when it alleges that further documents exist and should be produced. Apotex simply cannot produce additional documents that it does not have.

 

38       If the account of profits is to be determined by assessing actual profits earned, Apotex urges that costs to be deducted from revenues should include the full costs incurred in earning the revenues, including an allocation of a portion of the defendant's full fixed costs. That method was described at the hearing as the absorption method. It is said the absorption method has been accepted by the Supreme Court of the United States as the basis for determining profits. It is urged that is the appropriate method in this case, if an accounting is to be undertaken, since there is no dispute that Apotex, by its research and development, its acquisition of a Notice of Compliance to permit marketing its drug, its manufacturing and its sales promotion, was responsible for significant value added to the material cost, and thus for the revenues earned from sales of Apo-Sulfatrim.

39       Dr. Sherman, now Chairman of Apotex, testified in cross-examination that the costs of materials for Apo-Sulfatrim, its testing cost, and the costs of manufacturing, packaging and distribution were higher than the average cost for the company's products. He acknowledged that invoices and accounting records for costs incurred for the development and marketing of Apo-Sulfatrim were not available, but his testimony, based on his experience, was that costs related to that product were higher than the average cost of other products. Moreover, in the early years here in question, Apo-Sulfatrim was a very significant product for Apotex and the company "incurred all kinds of new expenses. We hired additional sales people because of the potential for selling Sulfatrim. We expanded our factory. Certainly there were additional automobile expenses as a result of selling Sulfatrim.... In his view, certain expenses, for research, for advertising and sales promotion were substantially increased in the early years as a result of development of Apo-Sulfatrim, and would have constituted a significant portion of Apotex' general costs for such activities in the first two years and less in later years. Dr. Sherman also testified that Apotex did not keep its financial records on a basis that allocates costs and revenues by product. Rather its records were maintained on a general basis for its operations, and invoices and other specific documents were not retained and thus were not generally available to provide a basis for determining variable or fixed costs incurred directly in relation to Apo-Sulfatrim. [my emphasis]

....

49     For Apotex it is urged that there is no dispute that Apotex had to incur costs to earn revenues from infringing activity, and here some evidence of costs has been adduced. The defendant urges that the Court, as in an assessment of damages, must do the best it can, on the basis of evidence adduced, to assess the profits earned by Apotex. To do as the plaintiffs urge, to ignore whatever evidence there is of costs and to consider all revenues to be profits would result in unjust enrichment of the plaintiffs, in the view of the defendant. In cross-examination, Mr. Yule, the plaintiffs' accounting expert, acknowledged that expense must have been incurred by Apotex to earn the revenues to be accounted for, but there was no direct evidence of costs incurred except the late-produced invoice records for TMP purchases in 1980 to 1984.

50     In my opinion, in the circumstances of this case, on the evidence adduced the following costs should be deducted as expenses from the revenues earned by Apotex from infringement.

(1)         The direct variable material cost of the infringing

 TMP and SMX is to be deducted --- calculated for

 (i) TMP on the basis of the records produced by Apotex for purchases for the years 1980 to 1984, and thereafter on the costs of TMP for 1985 to 1990 based on the figures produced by Mr. Rosen from the audit records in files of his firm, and production records of Apotex;

(ii) SMX on the basis that the cost per kg of SMX was half the cost per kg of TMP, and the ratio of 1 kg of TMP to 5 kg of SMX was used in the combination drug Apo-Sulfatrim.

(iii) No other material costs are established or allowed.

(2)           The direct costs of production, including only a portion of the annual labour and factory overhead costs from Apotex' annual financial statements. The portion to be allocated shall be determined by calculating the proportion that total production units of infringing Sulfatrim product bears to total production units of all products of Apotex. The total production for all products is provided by Mr. Rosen's calculations, but the annual production of infringing TMP will have to be calculated. An allocation on this basis is a revision of the proposal by Mr. Rosen on behalf of Apotex, as part of his proposal for total absorption of costs. In my view, that basis provides a fair allocation of labour and factory overhead costs when related only to production of Apo-Sulfatrim containing infringing TMP as a proportion of total production units of Apotex.

(3)       The direct costs of selling, including only an allocation of the following expenses, from Apotex' financial statements as classified within operating expenses in Mr. Rosen's report, relating to

 advertising and promotion

 bad debts

 freight out

 salesmen's salaries & commissions

 telephone, telegraph and fax

 travel

The annual allocation of the total of these expenses of selling should be based on a refinement of Mr. Rosen's proposal for a wider range of costs

 

XIV. Schedule “B”  Issues

 

SCHEDULE ‘B'

Documents that are or were in the corporation's possession, control or: power that it objects to producing on the grounds of privilege.

1.         Solicitor and client communications between the Plaintiffs and their solicitors for the purposes of legal advice.

2.         Correspondence and documents prepared in contemplation of or during the course of litigation.

3.         Correspondence and documents relating to the potential settlement of this action.

1. Documents, including but not limited to reports, notes, memoranda and letters, prepared by Apotex in circumstance of confidence, and by solicitors for Apotex in circumstances of confidence, for the purpose of obtaining and giving legal advice. Solicitor-client privilege is claimed in respect of these documents.

2. Documents, including but not limited to reports, notes, memoranda and letters, prepared by Apotex for the dominant purpose of assisting counsel in preparing for and prosecuting this action. Litigation privilege is claimed in respect of these documents.

 3. Documents, including but not limited to reports, notes, memoranda and letters, prepared by solicitors for Apotex for the dominant purpose of the preparation for, or for the prosecution of, this action. Litigation privilege is claimed in respect of these documents.

“LEGAL ADVICE/SOLICITOR AND CLIENT PRIVILEGE

1. Documents prepared by the solicitors for [ERCROS] for the purpose of communicating legal advice and opinions to [ERCROS] on the subject matter of this action, following May 29; 2006, in circumstances of confidence that such solicitor/client communications would not be disclosed. Legal Advice Privilege, also known as solicitor and client privilege, is claimed with respect to these documents.

2. Documents prepared by [ERCROS] in order to obtain legal advice or in order to provide information for use by its solicitors in this action, following May 29, 2006, in circumstances of confidence that such solicitor/client communications would not be disclosed .' Legal Advice Privilege, also known as .solicitor and client privilege, is claimed with respect to these documents.

3. Documents prepared by the' solicitors for [ERCROS] for the purpose of communicating legal. advice and opinions to [ERCROS]· on the subject matter of Federal Court of Canada Action No. T- 1818-99 and US District Court for the Eastern District of New York, Action No, 01-453-1,in circumstances of confidence that such solicitor/client communications would not be disclosed. Legal Advice Privilege, also known as solicitor and client privilege, is claimed with respect to these documents.

4. Documents prepared by [ERCROS] in order to obtain legal advice in order to provide' information for use by its solicitors in Federal Court of Canada Action No. T-1818-99 and US District Court for the Eastern District of New York, Action No. 01-453-1 in circumstances of confidence that such  solicitor/client communications would not be disclosed. Legal Advice. Privilege, also known as solicitor and client privilege, is claimed with respect to these documents.’

 

 

XV. Schedule “C” issues.

 

“From Schedule A, it is apparent that certain documents of which only copies are held by the Corporation or sent by the Corporation to others or that copies of certain documents were obtained by the Corporation from others, and it is assumed that the originals of those documents are in the possession of those other persons.”

 

XVI. Other Entities 

 

“At least part of FYSE's complaint appears to be based on the fact that Apotex has failed to list in either of its affidavits of documents some 33 documents (or sets of documents), dated between 1997 and 2001, which FYSE has attached to the affidavit ... sworn in support of its motion. Apotex is shown as being copied on less than 5 of these documents and Torpharm Inc. (a related company) is shown as the being copied or receiving approximately 15 letters or faxes in this subset. All of this documentation appears to relate to the use of FYSE's Drug Master File when seeking market approval from the US. Food and Drug Administration (the "FDA") for Apotex's proposed famotidine product.”

In addition, while, like Apotex, FYSE is mentioned in or shown as being copied on many (if not most) of this subset of documents, FYSE has admitted that it obtained copies of most of these documents from a third party, Atlantic Chemicals, "following the commencement of this action". In Apotex's submission, the implication of this admission is that FYSE was in the same position as Apotex before it received copies of these documents from Atlantic, in that it had not retained copies of many of these documents. As a result, Apotex questions how FYSE can complain about the sufficiency of Apotex's productions since it too would have lacked these documents but for a third-party.

 

XVII. Turnabout

 

“2.           On appeal from the decision of the Prothonotary, can the court consider the pleadings and affidavits used in the parallel cases, notwithstanding that a prothonotary had only the decision before him when considering the motion currently under appeal?

3.            In this case, should Prothonotary Lafrenière have followed the decision of Prothonotary Aronovitch in Apotex Inc. v. Merck & Co. Inc., T-411-01, given the near identical nature of the two cases and the principle of judicial comity?”

 

8         In this case, Prothonotary Lafrenière applied the wrong principle when he concluded that the plaintiff had failed to provide compelling evidence that relevant documents existed and had not been disclosed. The requirement of compelling evidence, in my view, raises the barrier too high. An order for further production will be warranted where the requesting party produces sufficient or persuasive evidence that documents exist and have not been disclosed (Bow Helicopters v. Textron Canada Ltd. (1982), 23 C.P.C. 212 ; Liebmann v. Canada (1994), 87 F.T.R. 154.)

                                                                     ...

10       It has been established that no new evidence should be admitted by the Court when hearing an appeal from a Prothonotary (James River Corp. of Virginia v. Hallmark Cards, Inc., 1997 CanLII 4863 (FC), [1997] F.C.J. No. 152 at paras. 31-32). However, I do not think that this prevents the Court from taking into consideration documents that are part of the public record. In this case both the pleadings and the affidavits are public documents. Consequently they can be taken into consideration by this Court.

11       In Merck, discussed above, the plaintiff sought damages allegedly caused by unsuccessful prohibition proceedings brought against it by the defendants pursuant to the Regulations. The basis to the motion heard by Prothonotary  Aronovitch was that the defendants, a foreign parent company and its Canadian subsidiary, had failed to disclose internal documentation related to their corporate relationship. In addition, it was alleged that the defendants had failed to disclose their communications with the government regarding the scope and applicability of the Regulations to the drug in question. Prothonotary Aronovitch ordered the defendants to produce further and better affidavits of documents which addressed these two deficiencies. No reasons were provided in her judgment.

12       The near identical nature of the Merck case and this case is striking. This case also involves an application for damages due to unsuccessful prohibition proceedings. The plaintiff has brought a motion for further disclosure of documents relating to the relationship of a parent and subsidiary company. In addition, there exists the possibility that the defendants have been in communication with the government regarding the applicability of the Regulations to the drug acyclovir. ....

13       Prothonotary Aronovitch's order required the defendants in the Merck case to disclose the following documents in their possession, custody or control related to their corporate relationship for the years 1993-1998:

a)            SEC 10K filings

b)            an organizational chart outlining the reporting lines between the defendants with respect to sales, manufacturing and administration

c)            any documents exchanged by the defendants with respect to an application for an NOC for the drug in question,

d)            any arrangement to produce or acquire the drug in question,....

She also ordered that the defendants disclose any relevant communication between themselves and government officials regarding the scope and applicability of Section 8 of the Regulations.

14       Although Prothonotary Aronovitch did not provide reasons in her judgment, it is safe to infer that:

a)            she found that the applicants had made out a sufficient case for further particulars,

b)            she felt that the documents requested were relevant to the case in issue and should be produced....

15       In this case, the defendants, through an affidavit of its corporate counsel and in argument before this Court, allege that all relevant documents have been filed. The defendants have not denied that such documents may exist, only that any outstanding documents are irrelevant to the proceedings.

16       In Bates & Reading Construction Company v. Bates Energy Resources Corp. (1988), 25 F.T.R. 226 at 229, Mr. Justice McNair set out the following test for the relevancy of documents:

The test as to what documents are required to be produced is simply relevance. The test of relevance is not a matter for the exercise of discretion. What documents parties are entitled to is a matter of Law, not a matter of discretion. The principle for determining what document properly relates to the matters in issue is that it must be one which might reasonably be supposed to contain information which may directly or indirectly enable the party requiring production to advance his own case or to damage the case of his adversary, or which might fairly lead him to a train of inquiry that could have either of these consequences: Trigg v. MI Movers International (1987), 13 C.P.C. (2d) 150 (On. H.C.); Canex Placer Ltd. v. A-G. B.C. (1976) 1975 CanLII 950 (BC SC), 63 D.L.R. (3d) 282 (B.C.S.C.); and Compagnie Financière et Commerciale du Pacifique v. Peruvian Guano Co. (1882), 11 Q.B.D. 55 (C.A.)

Documents which may allow an adversary to advance its case must be listed as a matter of Law. [my emphasis]

17 Common business practice suggests that the defendants have failed to disclose the existence of all documents regarding their relationship which are relevant to these proceedings. In their statement of defence, the defendants admit that the Wellcome Foundation is the owner of the patents relevant to these proceedings. However, it was Burroughs Wellcome Inc., the predecessor company of GlaxoSmithKline, which filed the patent list for registration on the Patent Register. It stands to reason that a corporate relationship existed between the companies during times material to these proceedings and that disclosure of documentation related to this relationship will either advance the case of the plaintiff or damage the case of the defendants. For reasons of consistency, predictability and judicial comity, the order issued by Prothonotary Aronovitch is equally applicable in this case as it was in Merck and should be followed....

 

XVIII. Analysis

 

"It would be bizarre indeed if the level of proof required to grant relief on a production motion was so high that the only way to obtain it was to get possession of the documents themselves."

 

"If a more efficient solution exists, without creating unfairness to either of the parties, the costs and delay inherent in successive rounds of examinations and production should be avoided."

 

XIX.  Is a Cross-Examination Required?

 

“The plaintiffs delivered their notice to produce on the Bank under the old Rules in April, 1984. The Bank did not comply, although it should have by the end of June, 1984. It has not delivered an affidavit of documents under the new Rules. The plaintiffs received a notice to produce in June of 1984 under the old Rules, and have delivered an affidavit of documents under the new Rules....

In his reasons, the Master found that he was satisfied that relevant documents were in fact omitted, and he then stated:

... Thus, the precondition to the making of an Order under Rule 30.06 has been made. The next question is what remedy should be granted? Sub (c) and (d) are inapplicable. The only choices are 30.06(a) or (b). In this case, it is clear that many documents have been omitted but specificity by the Court is impossible. Thus, an Order for a Further and Better Affidavit, when it is not absolutely clear what documents or class of documents have been omitted, is not appropriate. I am satisfied that the "new" remedy of cross-examination in the Affidavit of Documents under (Rule) 30.06(a) is called for in this case and I so order. ...

The order for cross-examination under Rule 30.06 is a new power that was open to the Master to exercise. It is part of the approach under the new Rules for full and early disclosure, as well as continuing disclosure as new material becomes known or available.”

 

 

While I might not have ordered cross-examination, I cannot say that the Master erred in principle. Cases should be decided by Masters on their individual merits until a body of decisions is built up. At that time, principles may evolve in practice that should be followed. No such principles are clear at the present time. The appeal on this motion is therefore dismissed....

 

14       Rule 30.06 does not detract from the governing principle that the onus for reviewing documents to determine their relevance rests, in the first instance, with the party bearing the obligation to produce. Nonetheless, a motion under Rule 30.06 requires evidence, as opposed to mere speculation, that potentially relevant undisclosed documents exist. However, the level of proof required should take into account the fact that one party has access to the documents and the other does not: RCP Inc. v. Wilding, [2002] O.J. No. 2752 (Master), para. 12. When dealing with categories of documents it may not be possible to determine the extent or depth of required production until preliminary questions have been asked, or a preliminary level of production of a category of documents has been made: RCP Inc., supra.

 

 

XX.  Disposition

 

 

XXI.  Costs

 

(a)       Apotex progressed the action only under threat of having it dismissed for delay;

(b)       a Scheduling Order has been made by the Court which was intended to ensure timely progress of the action;

(c)       Apotex failed to comply with the Scheduling Order by serving a deficient Affidavit of Documents;

(d)       Apotex failed to rectify the deficiencies in its Affidavit of Documents despite multiple reasonable requests to do so;

(e)       Apotex delivered copies of the documents listed in Schedule A of its purported Affidavit of Documents on November 17th, two months after Ercros' demand;

(f)         Apotex's Supplemental Affidavit of Documents delivered November 13th, fails to fully rectify the deficiencies; and

(g)       Under the Scheduling Order, the first round of examinations for the discovery was to be completed by November 2009,

 

 

 

XXII. ORDER

 

            (a)       requiring the Plaintiff, Apotex Inc. to deliver a further. and better Affidavit of Documents listing and describing all of the documents relevant to any matter in issue in the action that are, or have been, in Apotex's possession, control or power;

            (b)       requiring Apotex to deliver to Ercros electronic copies of all documents relevant to any matter in issue in the action that are in Apotex's possession, control or power, other than those documents for which a valid claim for privilege is made;

(c)       dismissing the Apotex Motion seeking a further. and better Affidavit of Documents without costs;

(d)       confirming that any further documents furnished are subject to the confidentiality order in this matter made by Master Glustein on August 20, 2009;

(e)        directing the re-sealing of the materials opened for the purposes on the court’s review for the purposes of this motion; 

 (d)       amending the Scheduling Order of April 3, 2009, as per a timetable to be agreed upon by the parties and filed with my Registrar, within thirty days; and

 (e)       requiring the Plaintiff to pay Ercros' costs of its motion on a partial indemnity basis within 60 days.

 

 

 

 

 

______________________

                                                                                Master D. E. Short

DATE: June 22, 2010

DS/ R27