Date: 20021129
Docket: T-35-96
Neutral citation: 2002 FCT 1245
BETWEEN:
BAYER AG and BAYER INC.
Applicants
- and -
APOTEX INC. and THE MINISTER OF
NATIONAL HEALTH AND WELFARE
Respondents
ASSESSMENT OF COSTS - REASONS
Charles E. Stinson
Assessment Officer
[1] A copy of these Reasons is filed today in Court file T-591-96 and applies there accordingly. The Applicants obtained an Order prohibiting the Respondent, the Minister of National Health and Welfare (hereafter, the "Minister"), from issuing a Notice of Compliance to the Respondent, Apotex Inc. (hereafter, the "Respondent"), for certain medicines (antibiotics) until after the expiration of two Canadian patents. The Supplementary Judgment awarded costs payable by the Respondent and directed that no costs were payable to or against the Minister. The Applicants subsequently moved under Rule 397 for clarification and for directions on assessment of costs including permission to exceed Tariff B or, in the alternative, for Column V costs and for authority for the assessment officer to allow pre-judgment and post-judgment interest on costs. The Court refused to entertain the motion, but gave leave to re-file the motion restricted to an application under Rule 403 for Column V costs. The motion was filed, but not heard immediately, because the parties became involved in extended settlement discussions. Eventually, on consent, the Court directed that the combined fees portion of costs for the two files be fixed at $45,225.00 and that an assessment of costs proceed for disbursements only. The Applicants' bill of costs for disbursements was presented at $426,226.35 inclusive of GST. Before me, the parties agreed that the only items in issue were photocopies ($46,749.50); bindery ($5,315.06); experts ($62,477.86), the expert component of agency fees ($66,082.28 of $181,076.04) plus GST, and that the balance of the bill of costs should be assessed at $48,458.00 plus GST = $51,850.00.
The Applicants' Position
[2] The Applicants noted that Robert Mitchell is not a lawyer, but a Canadian Patent Agent who addressed two of the three substantive issues in this litigation. He did not perform counsel work and, given that the Court accepted and followed his evidence, his expert charges of $29,289.81 are not counsel fees. For example, his April 28, 1998 invoice ($1,983.97) discloses preparation for his cross-examination not in the nature of counsel work. The Applicants noted that $100.00 could be removed from his January 31, 1996 invoice ($13,297.37) for execution in Mr. Mitchell's office, if that service is deemed to be counsel work, of the affidavit of Dr. James Wuest. The Applicants argued that Mr. Mitchell's contact, reflected in said invoice, with Marino Porzio also was not counsel work, but background work to prepare for the former's expert evidence.
[3] The Applicants argued generally that the magnitude and importance of this case, ie. sales of medicine for several hundred million dollars per year, justified the use of various experts, all of whose evidence the Court accepted. For Dr. Wuest ($29,929.60 for expert evidence addressing foreign patents), the Applicants argued that evidence at assessment from counsel appearing, who hired and supervised him, is acceptable confirmation that his work was that of an expert, but not as counsel. The Court accepted his evidence. The Applicants argued that Dr. Wuest never portrayed himself as the "Cadillac" of experts and his rates are not the most expensive in his field. Further, the Respondent's submissions do not specify which work in his invoices allegedly represents counsel work.
[4] The Applicants relied upon the invoice dated December 22, 1995 for US$1,000.00 by Dr. Lester Mitscher, a chemist, and the line entry in the law firm's accounting log dated 23/01/96 for his charge of $1,420.20. He did not ultimately file a report, but he did give relevant expert advice.
[5] The Applicants noted that its expert, Dr. Peter Bailly ($1,838.16), is a patent agent in the company's German operation and that not all of his time records could be located. Therefore, the $1,838.16 excludes charges for his time and addresses only his travel expenses. The Applicants characterized this amount as modest and obviously less than the actual charges for which documentation is incomplete.
[6] The Applicants noted that the US$20,480.70 in a USA law firm's invoice dated November 3, 1997 for Gerald Bjorge, under the heading of agency fees, represent an underpayment because payment was made in Canadian funds. It is unlikely that the invoice was not expressed in US dollars because, for example, airfare between Washington and New York City was not available for C$202.00. The Applicants asserted that the Respondent initiated US law as an issue in turn necessitating Mr. Bjorge's expert report, which the Court followed. The Applicants argued that there is evidence (invoice dated 31/12/97 by the solicitor of record) that a second invoice dated 15/12/97 ($8,997.17) billed for Mr. Bjorge's time even if that invoice is now missing. Subsequent to his appearance at assessment, counsel for the Applicants produced documentation confirming that this second amount was the Canadian dollar equivalent of the shortfall of American dollars caused by payment of the $20,480.70 in Canadian as opposed to American dollars.
[7] The Applicants noted that the second expert claimed under agency fees was Ramon Leiva, an experienced Chilean patent lawyer to address patent law in Chile as at 1980. He became unavailable for health reasons, but his charges ($5,305.16) were relevant as a function of the attachment of his affidavit to that of Santiago Larraguibel Zavala. The Court (August 21, 1998) struck Mr. Leiva's affidavit, but permitted Mr. Zavala's affidavit to stand. Before me, the Applicants advanced, but then withdrew, a claim of $6,171.10 for a previously missing invoice for Mr. Leiva's services.
[8] The Applicants noted that the third expert under agency fees, Mr. Zavala (US$10,000.00 = C$13,040.00 plus US$8,000.00 = C$10,520.00), addressed Chilean patent law and practice and other information relative to the Canadian context. The Applicants argued that, although the Leiva affidavit was an attachment, Mr. Zavala's affidavit additionally addressed reply issues. His charges include preparation for cross-examination.
[9] The Applicants noted that the fourth expert under agency fees, Ivan Vrsalovic (US$3,500.00), was Patent Office Commissioner with knowledge of Chilean patent file history. He reviewed Mr. Zavala's evidence for accuracy. The Applicants asserted that Mr. Vrsalovic's position precluded him from filing a report or testifying unless invited to do so by the government or the Court. He was made available for that purpose, but neither the Court nor the Respondent acted. For the fifth expert under agency fees, Canadian lawyer Paul Herbert ($3,129.75), the Applicants argued that, although he did not file a report, the charges for his opinion were prudent and are recoverable.
[10] The Applicants argued that, of the $46,749.50 billed for photocopies, the hearing record, hearing briefs to assist the Court in following argument and books of authorities accounted for $8,750.00, $1,050.00 and $3,150.00 respectively. As well, 21 preliminary motions account for $1,312.50. Of that, an amount of $499.80 ($0.25 per page x 5 copies x 50 pages) is associated with awards of costs for eight motions. The Applicants argued that the judgment of the trial judge authorizes recovery of the balance of the $1,312.50 relative to Orders silent as to costs (NOTE: there is no summary below of the Respondent's position on this last point because of my interjection to state that these reasons would provide a rationale for denial). The Applicants recalculated the amounts above to claim a total of $9,750.00 for their associated items plus the balance of the $46,749.50 addressing the running of litigation involving foreign clients, correspondence, research of cases and an every day movement forward of events throughout the litigation. The Applicants argued that this litigation was very significant for them and that counsel had to travel to New York to view 400 boxes of documents rather than having them photocopied. For comparison, the Applicants noted a sizeable solicitor-client award of costs in the Ontario Court (General Division) involving these litigants.
[11] The Applicants argued for bindery ($5,315.06) that each item of 354 items bound (spine, front and back covers) cost $15.00. Six copies of the Application Record represent 120 items. Copies of transcripts, including one for the client, represent 96 items. Copies of jurisprudence for the Court and five copies of the eight motion records resulting in awards of costs represent 24 and 40 items respectively. Case preparation accounts for the remaining 74 units.
[12] The Applicants requested item 26 counsel fees for this assessment of costs on the basis that the previous settlement of counsel fees could not have included or anticipated the settlement at assessment of a number of disbursement items. As well, considerable preparation was required to achieve said settlement.
The Respondent's Position
[13] Relative to Mr. Mitchell, the Respondent argued that examples in the January 31, 1996 invoice such as "considering Marino Porzio's letter; "review...draft Affidavit from Mary Sprigings" and "arranging for the execution of Dr. Wuest's Affidavit, arranging and finalization...Wuest's Affidavit, and sending copies thereof" confirm that he was effectively providing counsel work in case preparation, and not acting as an expert. As well, Mr. Mitchell's covering letter and invoice, both dated January 31, 1997, disclose activities such as review of affidavits by other people and arrangements for Dr. Wuest's signature, all beyond the role of an expert and which represent an elevated tier of counsel fees beyond the limits of the Tariff. The Respondent argued that Mr. Mitchell's invoices dated April 28, 1998 and October 31, 1997 represent the same difficulty. The Respondent argued that, given counsel fees were settled, only a small portion of his charges should be attributable to an expert's role. As well, his expert affidavit and the transcript of his cross-examination should be examined to determine the reasonableness of $29,289.81 for his services. The Respondent argued that the issue is not whether he was a lawyer or not, but whether his work equated to that of counsel for which indemnification is limited by the Tariff, as well as being already settled between the parties.
[14] The Respondent conceded Dr. Wuest's role as an expert, but argued that it is unacceptable to have to rely upon statements at assessment by counsel in place of direct evidence of this expert's charges. The vagueness in Mr. Mitchell's invoices leaves it unclear as to the basis for Dr. Wuest's charges. The Respondent argued that certain of Dr. Wuest's invoices disclose advisory work outside an expert's role, ie. re-reading and correction of transcript of examination of the Respondent's expert, Dr. Robert McClelland. The Respondent argued that his expert report does not justify a claim of $29,929.69 and that, per Apotex Inc. v. Syntex Pharmaceuticals International Ltd. [1999] F.C.J. No. 1465 (F.C.T.D.) at para. 20, if "a party chooses to hire a "Cadillac" of experts, the unsuccessful opposing party will not be responsible to compensate for extravagance."
[15] The Respondent asserted that it knew nothing of Dr. Mitscher's involvement until this assessment of costs and that the jurisprudence holds that expert charges are not assessable in the absence of an expert report. The Respondent argued, per Arnusch v. Saskatchewan School Division No. 4, [1998] S.J. No. 10 (Q.B.), Abate (Litigation Guardian of) v. Borges (1992), 12 C.P.C. (3d) 391 (Ont. Gen. Div.), Apotex Inc. v. Wellcome Foundation Ltd., (1998) 84 C.P.R. (3d) 303,and Apotex v. Syntex Pharmaceuticals International Ltd. supra, that the absence of details in his invoice does not meet the threshold for establishing reasonable necessity, relevance, preclusion of duplication, reasonableness of the charges and preclusion of unjust enrichment. The Respondent argued that charges for a corporate employee, Dr. Bailly, are not recoverable in party and party costs.
[16] The Respondent asserted that Mr. Bjorge's work was not important for the outcome of this litigation because the Court ignored the American law factor and relied upon other considerations. The Respondent argued that the evidence for his charges is confusing, ie. the November 3, 1997 invoice appears to extend until completion of his cross examination, yet the description for his missing invoice (computer log entry dated 15/12/97 for $8,997.17) has separate charges for preparation of and attendance on cross-examination. Total charges of approximately $30,000.00 for this expert are excessive in any event.
[17] The Respondent asserted that the Court's reasons dated August 20, 1998, do not support the Applicants' position concerning Mr. Leiva and cited the August 21, 1998 Order striking his affidavit to argue that no costs should be allowed for Mr. Leiva, his work having served no purpose in this litigation. The Respondent argued that Mr. Zavala's evidence was not very useful at trial and that the Court found that he had overstated his qualifications. The Respondent argued that the absence of details in his two invoices makes it difficult to assess reasonableness particularly given that his affidavit was a replacement document involving repetition of Mr. Leiva's work.
[18] The Respondent argued that the absence of an Order requiring or requesting Mr. Vrsalovic's testimony reinforces the absence of justification for his charges in party and party costs. The Respondent argued that Mr. Herbert was not qualified as an expert in this matter and the cost of an unsuccessful recruitment of an expert is not justifiable in party and party costs.
[19] The Respondent argued that five copies of material (three for the Court and two for the litigants) but not seven copies, are sufficient and therefore a general reduction of 25 percent for photocopies should occur. Based on $0.25 per page and excluding those costs above specifically identified for eight motions, hearing briefs and hearing record, the claim for photocopies is high thereby indicating extra costs associated with interlocutory orders silent on costs and with unnecessary copies for clients and second counsel. The Respondent suggested $8,000.00 total for photocopies which still represents a significant number and takes into account the several motions silent on costs. If clients instructed their counsel to spare no expense in pursuing litigation, that is a matter of accounting between them, but full recovery of the additional costs, in the absence of proof of necessity, is unreasonable in party and party costs.
[20] The Respondent argued that Ontario Cruisemarine Ltd. v. Canada [1991] F.C.J. No. 1077 (T.O.) held that bindery charges are not appropriate. The Respondent asserted that a paperclip would suffice and that this is an overhead issue, ie. if a lawyer runs out of pens, they do not charge the clients for replacements. The Respondent argued that nothing should be assessed for item 26 because the result at assessment will be much lower than claimed.
Assessment
[21] I apply my principles and approach outlined in Merck & Co. Inc. et al. v. Apotex Inc. 2002 FCT 842 (A.O.), affirmed by 2002 FCT 1037 (F.C.T.D.), to the experts' accounts in this litigation. I am concerned that Robert Mitchell's work may have strayed into areas attributable to counsel and associated partial indemnity. The concession for removal of $100.00 for arranging execution of Dr. Wuest's affidavit does not assuage my concern. For example, the January 31, 1997 invoice includes work to revise Dr. Wuest's affidavit. Although such costs were likely prudent and warranted as between solicitor and own client, the record does not satisfy me that they are appropriate in party and party costs, ie. my concern being that his work with other experts may have supplanted work properly falling to supervising counsel and for whom recoverable costs are limited by partial indemnity. The act of reviewing or revising companion experts is different work than the gauging of the potential impact of opposing experts, this latter work being indemnifiable, in my opinion. I allow $19,000.00. The accounts for Dr. Wuest do not acknowledge contact with Mr. Mitchell, and I remain somewhat uncomfortable with that linkage between experts in these circumstances, particularly from the perspective of duplication of effort. I allow $25,500.00 for Dr. Wuest.
[22] The summary of the work performed in Dr. Mitscher's invoice reads "services rendered". Relative to circumstances resulting in supervising counsel having to shift from using this expert to using another, the record does not justify any allowance for his costs. Dr. Bailly swore an affidavit in support of the motion for prohibition. The Court in Wellcome Foundation Ltd. v. Apotex Inc. 2001 FCT 174 at paragraph [19] held that the costs of employees are not indemnifiable, thereby precluding indemnification for his salaried time. The Court in Wellcome Foundation Ltd. supra, specifically addressed travel costs for an expert employee, ie. an in-house patent agent, and stated that, unless circumstances warrant an exception to this principle, "costs incurred by a party to assist in presentation of its case are generally to be borne by the party". Therefore, I allow nothing for Dr. Bailly.
[23] The trial judge, at paragraphs [38]- [40] inclusive of his reasons dated November 3, 1998, addressed the concerns by both sides for the credibility and competence of the experts. Other than the observation noted above concerning the overstatement by one of the Applicants' experts of his qualifications relative to Chilean patent law, the Court did not comment negatively on any of the experts. The trial judge spent little time addressing American jurisprudence in his reasons, but that does not mean that the Applicants should have addressed that factor superficially. In James L. Ferguson v. Arctic Transportation Ltd. et al. (Docket T-1941-93 on July 29, 1999), I concluded that the time of foreign counsel, within the partial indemnity limitations of party and party costs, may be indemnified in full for legal expertise beyond the professional standards of Canadian lawyers licensed by Canadian law societies to practice Canadian law. The explanation, subsequent to his appearance at assessment, by counsel for the Applicants of the basis for the second payment of $8,997.17 for Mr. Bjorge addresses the concern for overlap of work caused by the computer log entry dated 15/12/97. This claim of $29,477.87 stands out somewhat relative to an issue ultimately not pivotal in the Court's decision, but counsel was prudent in pursuing it. The use of agents sometimes costing considerable dollars is a reality in litigation: I allow $29,477.87 as presented.
[24] Relative to Ramon Leiva and Santiago Larraguibel Zavala, the Court's reasons dated August 21, 1998, outlined the difficulties caused by Mr. Leiva's unavailability for cross-examination and characterized those difficulties, at paragraphs [8] and [10], as flowing from an "innocent misrepresentation". Although I agree there was not any hint of impropriety, I feel the Respondent should not have to bear the entire burden of the inadvertent and extra expenditure, regardless of the fact that it occurred solely as a function of this litigation. I allow $20,500.00 in total for Mr. Leiva and Mr. Zavala together.
[25] Relative to Ivan Vrsalovic, I think that rapidly changing or developing bodies of opinion in given fields of expertise might warrant independent verification by experts. The record does not satisfy me that such costs are warranted here. Patent protection schemes are generally stable. Mr. Vrsalovic may have been the best choice available but for his employment status. However, given the information on the record concerning Mr. Leiva and Mr. Zavala, he was not the only choice. I allow nothing for him.
[26] The 2002 Canadian Law List confirms Paul Herbert's call to the bar in 1974. His specialty is intellectual property law. His invoice dated March 12, 1996, appears to be counsel work addressed by the partial indemnity items in Tariff B. I do not think the claim for Mr. Herbert qualifies for the exception from partial indemnity, ie. legal expertise beyond the professional standards of Canadian lawyers licensed by Canadian law societies to practice Canadian law, noted in Ferguson v. Arctic Transportation Ltd. et al. supra. It is irrelevant whether or not the Applicants' solicitor of record had Mr. Herbert's particular capability in intellectual property litigation. The record does not justify recovery for the time of this additional lawyer beyond the ordinary limits of partial indemnity imposed by Tariff B and beyond the settled amount for counsel fees. I allow nothing for Mr. Herbert.
[27] I recognize the difficulties associated with accounting for the relevance of every photocopy. To his credit, the Respondent's counsel was practical in accepting this as a reality in litigation. I have considered the photocopy charges claimed at $46,749.50 consistent with my considerations of threshold of proof in Carlile v. The Queen, 97 D.T.C. 5284 and in Local 4004, Airline Division of Canadian Union of Public Employees v. Air Canada (Docket T-323-98 on March 25, 1999). I endorse the sentiment (addressing counsel fees) concerning the practical approach to costs of Lord Justice Russell in Re Eastwood (deceased) (1974) 3 All E.R. 603 at 608:
... In our view, the system of direct application of the approach to taxation of an independent solicitor's bill to a case such as this has relative simplicity greatly to recommend it, and it seems to have worked without it being thought for many years to lead to significant injustice in the field of taxation where justice is in any event rough justice, in the sense of being compounded of much sensible approximation...
[My emphasis]
and allow $31,000.00. Copies for the client and orders silent as to costs were considerations in this reduced allowance for photocopies. The definition of assessment officer in Rule 2 and the constitution of the Court outlined in section 5 of the Federal Court Act preclude me from exercising jurisdiction under Rule 400(1). Rule 400(1) requires that the Court visibly exercise its discretion for costs. The Court did not do so in 13 interlocutory orders silent as to costs, and I have no jurisdiction to interfere with those dispositions by allowing associated costs. I have routinely allowed bindery charges because they address a one-time service attributable to specific litigation and which surely aids efficiency in dealing with materials. However, charges associated with personal materials for the client are not indemnifiable. I allow a reduced amount of $4,650.00 taking that into consideration.
[28] The record discloses a bill of costs for fees stamped settled and includes a statement that the "Bill of Costs regarding Fees for this matter has now been settled". It contains entries no higher than item 24 from the listed counsel services in Tariff B. In addition to item 26 (assessment of costs), the Applicants could have pursued indemnification for item 25 (services after judgment) or item 27 (services not otherwise addressed in the Tariff). Their omission may have been inadvertent, or deliberate. A common practice in bills of costs is to not specify the fee claimed for assessment of costs on the basis that it, unlike other counsel fee items, addresses indemnification for a future event and cannot reasonably be gauged until the difficulties particular to the assessment have unfolded. Here, I think that a difficult and protracted settlement of fees resulted in item 26, and others, being overlooked. I will not interfere with the terms of settlement nor the direction of the Court above fixing fees at $45,225.00.
[29] My allowances above for those items subject to GST are inclusive of said GST. The bill of costs of the Applicants for disbursements only, presented at $426,226.35, is assessed and allowed at $181,977.87.
(Sgd.) "Charles E. Stinson
Assessment Officer
DATED at Vancouver, British Columbia, this 29th day of November, 2002.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-35-96
STYLE OF CAUSE: BAYER AG et al. v. APOTEX INC. et al.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: May 1, 2002
ASSESSMENT OF COSTS - REASONS: Charles E. Stinson
DATED: November 29, 2002
APPEARANCES:
Neil Belmore for Applicants
Andrew Brodkin for Respondent Apotex Inc.
Jerry Topulski
SOLICITORS OF RECORD:
Gowling Lafleur Henderson LLP for Applicants
Toronto, Ontario
Goodmans LLP for Respondent Apotex Inc.
Toronto Ontario
Morris Rosenberg
Deputy Attorney General of Canada for Respondent Minister of National Health and Welfare