Daniel Michael Cappe

The Court of Appeal for Ontario issued an endorsement regarding a request to vary a trial costs award.

Following a successful appeal and cross-appeal by the Respondents (plaintiffs/defendants by counterclaim), they sought to vary the trial costs award, arguing entitlement to a higher scale due to beating a Rule 49 settlement offer.

The Appellants (defendants/plaintiffs by counterclaim) opposed this request.

The Court declined to vary its decision, noting that the Respondents had not appealed or sought leave to appeal the trial costs, nor had they raised the issue in their notices of cross-appeal or in their submissions on costs.

The Court of Appeal dismissed appeals by two groups of appellants (Varma/Madra and Palihapitiya) and allowed a cross-appeal by the respondents.

The case involved corporate malfeasance, breach of fiduciary duty, breach of contract, knowing assistance, and conspiracy related to the establishment of a competing fund (Annex Fund) and the undervalued sale of a technology company (Xtreme Labs), including the concealment of an equity interest in Hatch Labs (Tinder).

The trial judge's findings of liability for damages and disgorgement were largely upheld, and the disgorgement amount was increased on cross-appeal to serve a stronger deterrent purpose.

The court affirmed that directors of a corporate general partner can owe fiduciary duties directly to a limited partnership.

The Ontario Superior Court of Justice ruled on the applicable exchange rate and prejudgment interest following a judgment where defendants were found to have breached fiduciary duties and conspired to conceal assets.

The court applied the default exchange rate under s. 121(1) of the Courts of Justice Act, which mandates conversion at the date of payment, rejecting the defendants' argument for an earlier transaction date.

The court found that a change in exchange rate alone does not constitute inequity to depart from the default rule.

Prejudgment interest was awarded on the damages and disgorgement amounts from the date the cause of action arose (August 15, 2012), at a rate of 1.3%, in accordance with s. 128(1) of the CJA, excluding punitive damages.

The defendants sought to schedule a further motion for summary judgment on the Monopolies Act issue, having previously failed on a Rule 21 motion concerning the same claim.

The court denied the request, emphasizing that partial summary judgment is rarely appropriate in complex litigation, especially when recent amendments to pleadings have re-opened other significant issues, such as patent validity.

The judge concluded that the case should proceed to a single trial on all issues to avoid fragmented litigation and multiple appeals, which would prolong the proceedings and consume vast judicial resources.

The defendants brought two motions to amend their pleadings in an action for "section 8" damages under the Patented Medicines (Notice of Compliance) Regulations.

The proposed amendments sought to introduce a defence based on the ex turpi causa doctrine, arguing that the plaintiff's alleged non-infringing alternative (NIA) would infringe a third-party patent, thus making hypothetical sales unlawful and precluding damages.

The plaintiff opposed, arguing the amendments were not tenable and would cause non-compensable prejudice.

The court, applying Rule 26.01, found the proposed amendments raised tenable legal arguments, distinguishing and interpreting relevant case law on NIAs and the ex turpi causa doctrine.

The court also found that any prejudice to the plaintiff could be compensated by costs or an adjournment.

The motions to amend the pleadings were granted.

The appellants (Sanofi-Aventis and Schering Corporation) appealed a motion judge's decision dismissing their motion to amend their statement of defence.

The appellants sought to plead that a 2009 Federal Court decision invalidating their patent for the drug Ramipril was based on wrong legal principles, specifically the "promise doctrine," which was subsequently struck down by the Supreme Court of Canada in 2017.

The motion judge had dismissed the motion on the basis of issue estoppel, finding no change in law justified departing from the doctrine.

The Court of Appeal allowed the appeal, holding that the Supreme Court's decision striking down the promise doctrine constituted a change in law that warranted exercising discretion not to apply issue estoppel, particularly given the centrality of the patent validity issue to the respondent's claim for damages.

The plaintiff brought a motion seeking an order to provide discovery documents, transcripts, and answers to its competition lawyers for the limited purpose of obtaining legal advice.

This advice was to determine whether to bring a further motion to seek leave of the Court to provide some or all of this material to the Competition Bureau, which was conducting an investigation into the defendant's fee structure.

The defendant opposed, arguing that the disclosure would breach the deemed undertaking rule and a confidentiality agreement.

The Master found that the deemed undertaking rule was not engaged because the purpose was to obtain legal advice for a potential further motion within the same proceeding, not for a collateral or ulterior purpose.

Even if the rule were engaged, relief would be granted due to the plaintiff's fundamental right to counsel of choice and the defendant's failure to demonstrate prejudice.

The Master also concluded that providing the documents to counsel for this limited purpose would not breach the confidentiality agreement.

The motion was granted.

This endorsement addresses three complex motions brought by the plaintiff Apotex Inc. and the defendants Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH, Sanofi-Aventis Canada Inc. (collectively "Sanofi"), and Schering Corporation ("Schering"), seeking to compel answers to undertakings and refusals in a long-running pharmaceutical patent litigation.

The motions involved approximately 480 questions, later narrowed to 101.

The Master applied principles of relevance and proportionality under the Rules of Civil Procedure, emphasizing the balance between extensive discovery requests and the significant damages claimed.

Many broad requests for documents and information were denied as disproportionate or overbroad, while narrower, more targeted requests were granted.

The court also addressed issues of solicitor-client privilege and the obligation to state legal positions.

The applicants moved to remove Davies Ward Phillips & Vineberg LLP as counsel for a corporation involved in a shareholder dispute.

The court considered whether a unanimous shareholders’ agreement required unanimous director approval for the law firm’s retainer and whether conflicts of interest existed under the Business Corporations Act and common law principles.

The court held that the applicant director was conflicted regarding the company’s defence of litigation he initiated and therefore unanimity was not required for that retainer.

However, the court found the law firm’s concurrent involvement in both litigation against the director and negotiations with a third party supplier created a practical and legal conflict affecting corporate advice.

The retainer relating to the negotiations was therefore improper.

The defendants moved to strike the plaintiff’s statement of claim or alternatively to stay the action pending the outcome of related Federal Court litigation concerning damages arising from delayed market entry of a generic pharmaceutical product.

Although the defendants ultimately focused their submissions on striking the claim, the court considered whether a temporary stay should be imposed under s. 106 of the Courts of Justice Act.

The court found substantial overlap between the Ontario action and the Federal Court proceedings, including factual background and issues related to calculation of damages arising from the delayed entry of the generic drug.

A stay would prevent duplication of judicial resources and reduce the risk of inconsistent findings, while causing no significant prejudice to the plaintiff beyond delay.

The court therefore exercised its discretion to stay the action pending the outcome of the appeal in the Federal Court proceedings and any further appeals.