COURT FILE NO.: 55541
DATE: 20131220
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DR. BERNARD WOLFE and DMW KILDEER INCORPORATED
Plaintiffs
- and -
WYETH and JAMES H. PICKAR and WYETH CORPORATIONS
Defendants
Earl Cherniak, Q.C., Peter Kryworuk, David Waites and Yola Ventresca, for the Plaintiffs
William Richardson and David Gadsden, for the Defendants
HEARD: September 25 and December 6, 2013
Grace J.
A. Procedural Background
[1] The plaintiffs seek declaratory and injunctive relief and damages in relation to the alleged receipt and misuse of confidential information in Canada and beyond.
[2] Although the action was commenced more than six years ago, it is still at the pleadings stage.
[3] Initially the defendants sought an order of the court dismissing or perpetually staying the action or alternatively, declining jurisdiction.
[4] The motion and subsequent appeal were dismissed on April 30, 2010[^1] and May 5, 2011 respectively.[^2]
[5] Several months later the plaintiffs advised the defendants that they wished to amend the statement of claim.[^3] Because the proposed amendments arguably involved “the addition, deletion or substitution of a party”, consent was sought even though the defendants had not – and still have not – served a statement of defence.[^4]
[6] Protracted discussions followed. No agreement was reached and the plaintiffs’ motion for leave to amend followed. It was originally returnable in January, 2013. Due to the estimated length of argument, the motion was adjourned to an April 17, 2013 special appointment date.
[7] On April 8, 2013, the defendants filed a motion of their own. Relying on rule 21.01(1) (b) of the Rules of Civil Procedure, they seek to strike the statement of claim without leave to amend on the ground that it discloses no reasonable cause of action.
[8] The motions were not argued on April 17, 2013. Instead they were adjourned and argued over parts of two days in September and December, 2013.
B. Factual Allegations
[9] As noted, pleadings have not closed. The affidavits filed in relation to the motion to amend addressed procedural matters only. Rule 21.01(2) (b) provides that no evidence is admissible on a motion to strike a pleading on the ground that it discloses no reasonable cause of action. Consequently, I do not intend to do anything more than summarize some of the factual allegations contained in the statement of claim.
[10] The genesis of the dispute is a licensing arrangement. Canadian Patent No. 1,240,927 (the “927 Patent”) had been obtained in relation to something the statement of claim described as the HRT invention: a method of hormonal treatment of menopausal and postmenopausal disorders using hormone replacement therapy.
[11] The co-inventors, Drs. Wolfe and Plunkett, had entered into a co-venture agreement relating to the development of the HRT invention. Later, they assigned their interests to two companies: Woco Investments Limited (“Woco”) in the case of Dr. Wolfe and Pre Jay Holdings Ltd. (“Pre Jay”)[^5] in the case of Dr. Plunkett.
[12] Dr. Wolfe entered into two licensing agreements with a company called American Home Products Corp. (“AHPC”) in 1992 which were amended and restated in 2000 (collectively the “license agreements”). One 1992 and one 2000 agreement related to the United States. The other agreement executed in each of those years was international in scope.
[13] According to the statement of claim, while the license agreements gave AHPC various rights, they also imposed restrictions and limitations.
[14] The plaintiffs allege that Dr. Wolfe later “conceived of and developed a low dose regimen of hormone replacement therapy”, that “was an improvement over the HRT invention” because it “significantly alleviated side effects encountered by some patients using the HRT invention, such as bleeding and breast tenderness.”[^6]
[15] The plaintiffs maintain that information relating to the low dose regimen was disclosed to officers or employees of AHPC and at least one other named entity (Wyeth Ayerst). They allege that the information was then used to develop, patent in Canada[^7] and the United States[^8] and then produce “the low dose regimen conceived by Wolfe” despite confidentiality and other terms contained in the license agreements.
[16] As noted, a wide range of relief is sought including $100 million in damages and $25 million for punitive damages.
C. The Motion to Amend
[17] The plaintiffs seek leave to make a number of amendments. Three are in issue:
a) First, the proposed naming of Wyeth-Ayerst Canada Inc. (“Wyeth Canada”) as a defendant;
b) Second, the proposed retention of Wyeth Corporations as a defendant; and
c) Third, the proposed deletion of certain words from paragraphs 17, 29 and 32 of the statement of claim.[^9]
[18] Certain requests are not controversial. For example, the plaintiffs seek an order dismissing the action against James H. Pickar on a without costs basis and deleting him from the title of proceedings. Further, they ask that “LLC” be added to the current reference to “Wyeth”.
[19] I turn to the three contested items.
i. The Proposed Addition of Wyeth-Ayerst Canada Inc.
[20] The applicable legal principles are not in dispute.
[21] Changes can be made to a pleading at any stage. Rules 26.01 and 26.02 of the Rules of Civil Procedure are broadly worded. They provide:
26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
26.02 A party may amend the party’s pleading,
(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action;
(b) on filing the consent of all parties and, where a person is to be added or substituted as a party, the person’s consent; or
(c) with leave of the court.
[22] Rule 5.04 (2) of the Rules of Civil Procedure applies if the motion seeks to add, delete or substitute a party. It states:
At any stage of a proceeding, the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[23] An obvious limit is the expiry of a limitation period. Section 21(1) of the Limitations Act, 2002 specifically addresses that situation in these words:
If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.[^10]
[24] The defendants maintain that the plaintiffs are seeking to do that very thing: add a new party to the proceeding after the expiration of a limitation period.[^11]
[25] The plaintiffs accept that expiry of the applicable limitation period will bar inclusion of Wyeth Canada if the court finds that Wyeth Canada is being “added” as a party. However, they disagree with the defendants’ characterization. They maintain that their motion is of a curative nature. They rely on s. 21 (2) of the Limitations Act, 2002. It provides that expiry of a limitation period “does not prevent the correction of a misnaming or misdescription of a party.” Correction of a misnomer or misdescription does not “add” a party.[^12]
[26] In large part, the outcome of this aspect of the motion depends on the answer to this question: does the proposed amendment involve correcting the name of or adding a party?[^13]
[27] The applicable legal test is well settled. In Lloyd v. Clark, the Court of Appeal said at para. 4:
The case law amply supports the proposition that where there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made despite the passage of the limitation period to correct the misdescription or misnomer.[^14] [Citations omitted]
[28] The defendants say that principle explains why they take no issue with the substitution of “Wyeth LLC” for Wyeth. It is clear from the statement of claim that the plaintiffs intended to name the current incarnation of AHPC as a defendant. Wyeth LLC – not Wyeth - is the complete name of that entity.
[29] The explanation for the proposed inclusion of Wyeth Canada is not so simple. Currently, there is a second corporate defendant described as “Wyeth Corporations”. The proposed amendments involve no change to that name. In fact, if all of the proposed amendments are permitted, three corporate names will appear rather than two.
[30] Understandably one’s eyes turn to the plaintiffs to explain how it is possible to increase the number from two to three without “adding” a defendant. The plaintiffs’ explanation comes from an affidavit of one of its lawyers, Yola Ventresca. At para. 12 of her December 18, 2012 affidavit, Ms. Ventresca deposed:
When the Statement of Claim was issued, the Plaintiffs were uncertain which Wyeth companies were implicated in the action. As a result, the Plaintiffs named Wyeth, James H. Pickar and Wyeth Corporations. “Wyeth Corporations” was used as a John Doe placeholder, as the Plaintiffs were unaware of the possible entities of the Wyeth companies that may have had access to and/or used the confidential information which forms the basis of this action.
[31] Wyeth Corporations is described in para. 6 of the statement of claim as follows:
…Wyeth Corporations, constitutes one or more legal entities, including…any subsidiaries, assigns, affiliates, agents, contractors, shareholders, officers, employees or beneficiaries to whom Wyeth and/or Pickar have disclosed the confidential information relating to the low dose regimen and who have wrongfully used said information. The identity of these entities is unknown to the plaintiffs at this time but is within the knowledge of Wyeth and/or Pickar.
[32] According to Ms. Ventresca’s affidavit “at least one of the Wyeth Corporations in Canada is Wyeth-Ayerst Canada Inc.”[^15]
[33] When the identity of an intended defendant is unknown, a statement of claim will often use a fictitious name.[^16] That does not mean, however, that the court will always allow the substitution of the name of a real person.
[34] Dukoff v. Toronto General Hospital provides an illustration.[^17] A negligence action was commenced following the birth of a baby. Included in the list of defendants were two fictitious names. Each was alleged to belong to “a doctor of medicine” at the defendant hospital.
[35] At first instance the motion to substitute the names of a first year resident and two nurses for the fictitious names was successful. In allowing the appeal, Saunders J. wrote at para. 10:
In considering the statement of claim and the affidavit in support of the motion, I am unable to conclude that the insertion of the names John Doe and Jane Doe were mere misnomers. In any hospital, and particularly in a large hospital such as the defendant Toronto General Hospital, the reference to John Doe and Jane Doe in the statement of claim could apply to many persons. It turns out that there are only three persons, all female, one doctor and two nurses. There are no particulars in the pleadings alleging what John Doe and Jane Doe did or did not do. With the greatest of respect, I consider that the learned master was wrong to draw the inference that the defendant hospital would have no doubt as to the identity of John and Jane Doe.
[36] At para. 16 Saunders J. added:
There are, in my opinion, sound policy reasons for the result. If, as here, the technique of using fictitious names could be used with little indication of the persons referred to and no evidence of any effort to determine their identity, the protection afforded by the limitation periods would be lost. That would be an undesirable result. All persons…should be made aware of claims against them in a timely fashion and thereafter left in peace. [Citation omitted]
[37] In addressing the issue of misnomer, Saunders J. quoted statements made by Lord Devlin in Davies v. Elsby Brothers Ltd.[^18] Lord Devlin said:
In English law as a general principle the question is not what the writer of the document intended or meant, but what a reasonable man reading the document would understand it to mean; and that is the test which ought to be applied as a general rule in cases of misnomer…The test must be: How would a reasonable person receiving the document take it? If, in all the circumstances of the case and looking at the document as a whole, he would say to himself: “Of course it must mean me, but they have got my name wrong”, then there is a case of mere misnomer. If, on the other hand, he would say: “I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries”, then it seems to me that one is getting beyond the realm of misnomer.
[38] In Spirito v. Trillium Health Centre, the motion judge applied that test and allowed the plaintiffs to substitute two named physicians for ones previously described as Doctors AB and DC. In upholding the decision, Rosenberg J.A. wrote at para. 13:
The motion judge…looked at the statement of claim and particularly paragraphs 15 and 18, which refer to the surgical consult note and the administration of four pints of blood, and concluded that as the surgeons involved in the treatment of Mr. Spirito, the appellants would have known that their conduct was at issue. This was primarily a finding of fact that is entitled to deference in this court. I am satisfied that it was reasonably open to the motion judge to come to the conclusion she did.[^19]
[39] The misnomer test “has evolved a great deal since” Davies v. Elsby Brothers Ltd.[^20] The court now considers whether the person said to have been identified by the pseudonym or fictional name would have known upon receiving the claim that the “litigation finger” was being pointed at them.[^21]
[40] Knowledge may be direct or indirect through the intended litigant’s representatives.[^22]
[41] The parties referred to a number of other cases which have dealt with the issue. Like this decision they recite and attempt to apply principles rather than establish them. The exercise is largely fact driven.
[42] The effort to substitute fictitious persons for real ones failed in Urie v. Peterborough Regional Health Centre because the statement of claim was “poorly drafted and devoid of specificity” and was described as “a wavering hand” above a “quivering pool of possible individuals.”[^23]
[43] In Freedom International Brokerage Co. v. Tullett Prebon Canada Ltd.,[^24] allegations were made that the corporate defendant and its employees had obtained and unlawfully used proprietary information belonging to Freedom International Brokerage Co. The statement of claim included one or more defendants described as “John Doe(s)”.
[44] Subsequently, leave was sought to substitute four current and one former employee of the corporate defendant. Permission to add four of the individuals was given. The motion judge concluded that those individuals were ones “working in the IT department, or responsible for that work” and “would have recognized that the litigating finger was pointing in their direction”.[^25]
[45] The defendants submit that the plaintiffs have not met the applicable test: that the statement of claim is overbroad. They say that it points “at everyone” and therefore “it points at no one.”[^26]
[46] For the reasons that follow, I disagree.
[47] First, the equivalent of “John Doe” in this case is “Wyeth Corporations”. Those words do not describe any known legal entity. The name is a fiction but, as evidenced by the use of the word “Wyeth”, it is a descriptive one.
[48] Second, the group of companies potentially caught by the words “Wyeth Corporations” is not limitless as the defendants contend. To the contrary, three criteria are set forth in paragraph 6 of the statement of claim. To constitute one of the “Wyeth Corporations”, each must be met. A corporation is included in the words Wyeth Corporations:
a) Whether or not a subsidiary or affiliate;
b) To whom Wyeth (defined earlier in the statement of claim as “formerly” AHPC) and/or James H. Pickar disclosed confidential information relating to the low dose regimen; and
c) Who have wrongfully used that information.
[49] As can be seen, application of each subparagraph reduces the number of potential corporate defendants.
[50] Wyeth Canada is alleged:
a) To be a wholly owned subsidiary of Wyeth LLC;
b) To have received confidential information relating to low dose therapy; and
c) To have made unauthorized use of confidential information relating to low dose therapy.
[51] Wyeth Canada fits each of the criteria set forth in the current statement of claim.
[52] Furthermore:
a) Wyeth Canada shares the Wyeth name;
b) Wyeth Canada’s name includes “Ayerst”. “Wyeth Ayerst” is identified in the current statement of claim as “another Wyeth predecessor company”.
[53] While Wyeth Canada and Wyeth Ayerst are not alleged to be the same entity, it is clear from the statement of claim that the plaintiffs intended to pursue anyone within the Wyeth corporate group who received and misused information relating to the low dose regimen. All entities in the group who did so would have known that the “litigation finger” was pointed squarely in their direction immediately upon reading the current statement of claim.[^27] In my view, misnomer applies. In time the court will determine whether the pointing of the litigation finger in that direction was appropriate.
[54] A finding of misnomer does not inevitably result in leave to amend. Residual discretion is retained to refuse to allow correction. Rule 26.01 uses mandatory language in relation to amendments. Different language is used in motions of this kind. As Cronk J.A. explained at para. 25 of Mazzuca v. Silvercreek Pharmacy Ltd.:
Under both rules, a pleadings amendment is not to be made if non-compensable prejudice would result. In contrast to rule 26.01, however, the language of subrule 5.04 (2) imports a discretionary power rather than a mandatory direction.[^28]
[55] The defendants submit that the plaintiffs have not earned the exercise of that discretion because the plaintiffs “sat on their hands for over three years before seeking to add Wyeth Canada as a party.”[^29] Delay may, indeed, be fatal.[^30] However, it is not necessarily so.[^31] The defendants rely on the Alberta Court of Appeal’s decision in Nagy v. Phillips. In that case, Heatherington J.A. explained the underlying concern in these terms:
…even in a case of misnomer, a judge should not grant an application to substitute a defendant for the defendant named, unless the applicant has been reasonably diligent in seeking to properly identify the desired defendant and to correct the misnomer. The reason for this is…so that the defendant will have timely notice of the claim, and will not be prejudiced in preparing a defence to it.[^32]
[56] That passage must be read with caution. Our own Court of Appeal has made it clear that the “correction of a misnomer does not involve the substitution of one defendant for another” but rather a correction.[^33]
[57] The balance of the paragraph suggests that the court should be mindful of two things: delay and prejudice. In this case, neither is of particular concern.
[58] I start with delay. While not entirely clear from the record, the parties proceeded on the basis the plaintiffs identified Wyeth Canada as a proper defendant during a September 26, 2008 cross-examination of one of its employees. The motion to amend was not filed until January 2, 2013.
[59] Admittedly, a long time passed. However, the surrounding circumstances are important.
[60] Upon receiving the statement of claim, the existing defendants moved to dismiss or perpetually stay the action on the basis of res judicata, a lack of jurisdiction and forums non conveniens. It was in the context of that motion that the September 26, 2008 cross-examination occurred.
[61] The motion was heard over a period of five days ending in mid-November, 2009. Rogin J.’s reasons were released April 30, 2010 and appealed. The Court of Appeal upheld the motion judge’s decision in reasons released May 5, 2011.
[62] Following the Court of Appeal decision, the defendants retained new counsel. According to Ms. Ventresca that occurred on August 5, 2011.
[63] From October 17, 2011 until August 21, 2012, a stream of letters passed between counsel concerning proposed amendments to the statement of claim. Draft motion materials were provided in late October, 2012. By late November, the impasse was clear. The plaintiffs’ motion record was filed approximately a month later.
[64] In my view, the passage of time is adequately, if not fully, explained. It would have made no sense for the plaintiffs to seek an amendment of the statement of claim when the very foundation for the Ontario action was under attack.
[65] Thereafter, the parties were engaged in active discussions concerning the issue that is now to be decided.
[66] Further, the defendants have not identified any prejudice. This action is hardly a surprise to Wyeth Canada. As evidenced by the cross-examination of one of its employees in 2008, it has known of the action for years.
[67] The argument there was a lack of due diligence has no greater appeal. Canadian Patent Application 2,402,983 (the “983 Application”) is, the plaintiffs allege, proof that confidential information imparted to one or more members of the Wyeth group was misused. The named applicant was “Wyeth Company, US”. Based on the record before me, it is not clear what the plaintiffs could or should have done to identify Wyeth Canada as a potential defendant earlier.[^34]
[68] The request for permission to correct the title of proceedings to refer to Wyeth Canada is granted.
ii. The Proposed Retention of Wyeth Corporations as a defendant
[69] The defendants submitted that if an order was made under rule 5.04 (2), the plaintiffs should not be permitted to retain “Wyeth Corporations” as a named defendant.
[70] I disagree. Pseudonyms and fictional names have been used in various ways. If adopted, the number of “placeholders” may range from one to many. On occasion the fictional name is capable of referring to more than one person. That is the situation here.
[71] I see nothing wrong with that approach. The plaintiffs should not be precluded from seeking to amend the title of proceedings on the basis of misnomer in the future. The outcome should not be predetermined now.
iii. The Proposed Deletion of Certain Words from Paragraphs 17, 29 and 32
[72] The defendants oppose three of the amendments the plaintiffs propose to make to the text of the statement of claim.
[73] Those in issue are:
a) The proposed deletion of the dates on which confidential information was allegedly disclosed by Dr. Wolfe;[^35]
b) The proposed deletion of references to one or more license agreements as the reason why confidential information was communicated by Dr. Wolfe.[^36]
[74] Noting that the defendants have not filed a statement of defence, the plaintiffs rely on rule 26.01 (a) of the Rules of Civil Procedure. As already mentioned, it states:
A party may amend the party’s pleading,
(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action…
[75] The defendants submit that rule 51.05, not 26.01, is applicable. It provides:
An admission…in a pleading may be withdrawn on consent or with leave of the court.
[76] Since the defendants do not consent, leave is required if that rule applies.
[77] A preliminary question arises. Do any or all of the amendments involve the withdrawal of an admission?
[78] In Canadian Premier Life Insurance Co. v. Sears Canada Inc., Newbould J. considered the issue in the context of an originating process. While acknowledging that admissions may be contained in any pleading, he concluded that they were rarely found in a statement of claim. He wrote:
What is an admission of the kind requiring court approval to withdraw? It has been said that it must be an unambiguous deliberate concession. In Griffiths v. Canaccord Capital Corp., 2005 ONSC 42485, [2005] O.J. No. 4897 Carnwath J. stated:
I adopt the statement of Master MacLeod in Hughes v. Toronto-Dominion Bank, [2002] O.J. No. 2145 (S.C.J.) at paras. 9-19:
I adopt the definition of an admission as being an unambiguous deliberate concession to the opposing party. Such an admission would be rare in a statement of claim...
Rule 51.05 includes deemed admissions arising from our specific pleading rules and from the rule concerning a request to admit facts and documents. There is nothing in the rule, however, which endorses the concept of an inadvertent admission. I adopt the definition of an admission as being an unambiguous deliberate concession to the opposing party. Such an admission would be rare in a statement of claim and I do not view the pleading in the case at bar as an admission which requires leave…
While it would be foolhardy to say that an admission or concession to a defendant could never be found in a statement of claim, I would be reluctant to find such an admission unless it was clearly stated. If the admission was said to arise by inference, in my view the inference would need to be compelling and not inconsistent with some part of the pleading.[^37]
[79] I am of the view that the proposed amendments do not involve the withdrawal of an admission. They remove particularity and description from the statement of claim – dates and a reason for the alleged disclosure of confidential information - not concessions.
[80] If I am wrong and the plaintiffs seek to withdraw one or more admissions would the result be different?
[81] The defendants argued that the plaintiffs have not satisfied the three requirements for leave. According to the defendants those elements are:
a) The proposed amendment must raise a triable issue;
b) The court must be satisfied that the admission was inadvertent, or the solicitor was wrongly instructed; and
c) Withdrawal of the admission must not result in prejudice to the adverse party not adequately addressed by a costs award.[^38]
[82] The first and third elements are correctly stated. The second is not.
[83] In Antipas v. Coroneos, Saunders J. found that the second element of the test was too restrictive. He wrote:
There are competing policy issues here. On one hand, in the interest of justice, the right of a party to have an issue tried should not be limited except in limited circumstances. On the other hand, in the interest of expedient and responsible litigation, a party should not be permitted to blow hot and cold even if the other party can be compensated in costs or by an adjournment. I am troubled by the narrowness of the test. The strict application of it could lead to injustice. It seems to me that the competing interests can be reconciled by providing that if there is a triable issue, a party should be able to withdraw an admission upon furnishing a reasonable explanation for the change of position.[^39]
[84] The restatement of the second element of the test has been adopted by the Court of Appeal.[^40] None of those cases were cited to me.
[85] I return to the test. First, the proposed amendments must raise a triable issue. As noted, the substance of the allegations remains unchanged. The plaintiffs maintain that confidential information was disclosed and misused. If the original language raised a reasonable cause of action before the amendments, it does so afterward. That question will be addressed in further detail in the context of the defendants’ motion to strike.
[86] Second, the moving party must provide a reasonable explanation for the change in position. None of the affidavits address this point. However, years have passed since the claim was issued. In the interim, there has been one long and hard fought motion. Affidavits were exchanged and at least one cross-examination was conducted. A desire to refine the pleading upon completion of that process provides the reasonable explanation required.
[87] Third, the withdrawal of the admissions must occasion prejudice that cannot be adequately addressed by a costs order. At issue before the amendments was the disclosure and use of confidential information relating to low dose therapy. That has not changed.
[88] The action is in its infancy. No statement of defence has been filed. There have been no productions or discovery.
[89] The defendants maintain that the pleading in its current form was relied upon by Rogin J. and then by the Court of Appeal on the res judicata, jurisdiction and forum motion.
[90] I disagree. The Court of Appeal concluded that the res judicata issue was “better described as issue estoppel”. Resolution depended on whether an order made in the state of Pennsylvania had any impact on this action. At para. 37 Goudge J.A. concluded it did not. He wrote:
In short the Pennsylvania court did not decide the question that the appellants put before the Ontario court in this action. It did not decide that the Ontario court should find that Pennsylvania law applies and, as a consequence, find the respondents’ claims to be time barred.[^41]
[91] The portions of the paragraphs the plaintiffs seek to delete played no role in the analysis.
[92] The same can be said of the other issues considered. The Court of Appeal concluded that Wyeth and Dr. Pickar had attorned to Ontario’s jurisdiction. While the decision contained additional commentary, that conclusion was dispositive. Attornment related to actions taken by the defendants in response to the statement of claim. The contents of the pleading were not important.
[93] The result of the earlier motion would have been the same even if the defendants’ characterization of the proposed amendments is the correct one.
[94] For these reasons, the relief sought in paragraphs (a) through (d) of the plaintiffs’ notice of motion is granted subject to this clarification: the word “substituting” in paragraph (c) should read “amending”.
D. The Motion to Strike
[95] The defendants seek to strike the plaintiffs’ pleading, without leave to amend, on the ground that it discloses no reasonable cause of action.[^42] They rely on rule 21.01(1) (b) of the Rules of Civil Procedure.
[96] Both parties filed some of the documents referred to in the amended amended statement of claim (the “amended claim”): the license agreements in the defendants’ and the 983 Application and an agreement between Dr. Wolfe and DMW Kildeer Incorporated (“DMW”) in the plaintiffs’ case.[^43]
[97] While neither party objected, their inclusion caused me concern. No evidence is admissible on a motion under rule 21.01(1) (b).[^44]
[98] On occasion, looking beyond a pleading is permitted. Rule 25.06 (7) provides in part:
The effect of a document…if material shall be pleaded as briefly as possible, but the precise words of the document…need not be pleaded unless those words are themselves material.
[99] The court may review contractual language notwithstanding the prohibition in rule 21.01(1) (b) if it is not possible to adequately understand and assess an allegation without it. That occurred in Montreal Trust Co. of Canada v. Toronto-Dominion Bank.[^45] The statement of claim referred to terms contained in two agreements but did not set out the precise wording. Borins J. (as he then was) held at p. 395:
In my view, the two agreements were sufficiently pleaded within the meaning of r. 25.06(7) and therefore form an integral part of the statement of claim. They constitute documents upon which each plaintiff must rely to establish its claim.
[100] Leave was given to refer to certain sections of each agreement. They did not constitute “evidence” but rather aided the court in understanding and assessing the pleading. The contractual provisions “simply illuminate[d] the substance of the pleadings.”[^46]
[101] Mere mention of a document in the statement of claim is not enough to justify the court’s review. In Sauer v. Canada (Attorney General), Master MacLeod concluded that documents “to which casual or passing reference is made” are not to be provided to the court on motions to strike. Rather:
The document must be central to the claim so as to form an essential element of the claim itself. [^47]
[102] Given the lack of objection, I have proceeded on the basis that the parties agree that all of the documents produced meet that test.
[103] The applicable test on a motion to strike is well known and often stated. Most recently in Rausch v. The Corporation of the City of Pickering, Epstein J.A. expressed it in these words:
There is no dispute as to the test and associated principles that apply to a motion to strike pleadings for not disclosing a reasonable cause of action. The test is stringent, and the moving party must satisfy a very high threshold in order to succeed…Unless it is “plain and obvious” that there is no chance of success, a claim, even a novel one, ought to be allowed to proceed…The motion proceeds on the basis that the facts pleaded are true unless they are manifestly incapable of being proven…While the facts pleaded are the basis upon which the possibility of success must be evaluated, the pleading must be read as generously as possible, erring on the side of permitting an arguable claim to proceed to trial.[^48] [Citations omitted]
[104] While the defendants challenge the claim on other bases, their primary one relates to the status of either plaintiff to maintain the action. They say these alleged facts are fatal:
a) On an unspecified date sometime after June 13, 1984, Dr. Wolfe and the co-inventor assigned their rights in the HRT invention to Woco and Pre Jay respectively;
b) The license agreements were entered into by Dr. Wolfe on behalf of Pre Jay and Woco in 1992 and 2000;
c) Low dose therapy was described in the statement of claim as an “improvement” to the HRT invention.[^49]
[105] Based on those allegations, they submit that Dr. Wolfe has no personal claim relating to the low dose regimen. Pre Jay and Woco are the proper claimants but they have not sued and can no longer do so because of the expiry of the applicable limitation period. [^50]
[106] In any event, the defendants note that Dr. Wolfe assigned his rights in the low dose regimen to DMW in 2002, making it beyond doubt that he has no personal right to sue.
[107] For four reasons it is not plain or obvious to me that the plaintiffs lack capacity.
[108] First, a generous reading of the amended claim reveals the basis for the plaintiffs’ claims. On its face, the assignment to Pre Jay and Woco related to the HRT invention, not the low dose regimen which appears to have been developed later.[^51] In the amended claim, Dr. Wolfe is described as the “true inventor” of the low dose regimen and, along with DMW, a “true” owner of the subject of the 983 Application,[^52] a person to whom a duty of confidentiality was owed[^53] and a person who sustained damage by reason of its breach.[^54]
[109] Second, it is clear from the almost identically worded license agreements that Dr. Wolfe was contracting on behalf of Pre Jay, Woco and himself. I offer these examples:
a) The preamble refers to Dr. Bernard M.J. Wolfe as a contracting party;
b) The word “Wolfe” is defined twice: in the preamble after the reference to Dr. Wolfe and later in the recitals in relation to “the interests of both Pre Jay and Woco”;
c) “Wolfe” does not always describe the same person(s). The reference depends on the context. For example, in articles 2.04 and 3.01(vi), the license agreements refer to “clinical purposes”. Article 5.04 preserved “the right to publish the results of his scientific studies using the Invention”. The warranties contained in article 15 refer to “he” and “his”. All such references seem purposeful and limited to Dr. Wolfe.
[110] Third, I do not read para. 3 of the amended claim as broadly as the defendants. That paragraph stated that Wolfe “assigned his rights in the know-how relating to the low dose regimen and any inventions, patent applications and patents arising from such know-how to DMW.” While broad, it is not clear from the pleading that Dr. Wolfe’s assignment was unlimited as to time or subject matter.
[111] Fourth, the amended claim specifically pleads that the plaintiffs have rights of ownership. Para. 26 of the amended claim, alleges that:
Wolfe is the true inventor of the low dose regimen disclosed and claimed in the 983 Application. The plaintiffs have not assigned any rights to the 983 Application to the defendants. Accordingly, the plaintiffs are the true owners of the invention now claimed to be owned by Wyeth.
[112] While perhaps capable of more clear expression, the amended claim, as illuminated by the included documents, asserts claims which are not plainly or obviously those of Woco and Pre Jay.
[113] The defendants argued that even if the plaintiffs had status it was plain and obvious from the license agreements that the claim was bound to fail. They pointed me to various provisions in the agreements in support of their argument that the defendants had the right to receive and to use information “pertaining to the Invention and any improvement thereon”.[^55]
[114] With respect, the submission misconceives the limited role of a judge hearing a motion to strike under rule 21.01(1) (b). My function is not to make factual determinations. Insofar as the license agreements are concerned, my task is simply to determine whether the pleading raises an interpretive issue which requires determination. It does. Interpretation must await another day. As Doherty J.A. wrote in Dumbrell v. Regional Group of Companies Inc.:
A conclusion as to the meaning of words used in a written contract can only be properly reached if the contract is considered in the context in which it is made.[^56]
[115] Context requires evidence. Thus far, there is none.
[116] The defendants contend that deficiencies in the amended claim fatally affect every cause of action: breach of contract, confidence and fiduciary duty and unjust enrichment.
[117] The conclusions I have reached so far result in the rejection of that submission in relation to causes of action based on breach of contract, breach of confidence and unjust enrichment.
[118] Privies to the license agreements and their assigns can maintain an action for breach of contract.
[119] It is alleged in the amended claim that Dr. Wolfe developed the lose dose regimen, that the information was confidential, disclosed in confidence, misused and that he owns the invention described in the 983 Application. The elements of a breach of confidence have been pleaded.
[120] The elements of unjust enrichment are well known: enrichment, a corresponding deprivation and the absence of a juristic reason for the enrichment.[^57] It is not plain and obvious that those elements cannot be satisfied. The premise underlying the 983 Application is the development of something warranting the protection of a patent. The alleged “enrichment” and “deprivation” are clearly identified. The defendants rely on the terms of the license agreements as the “juristic reason” for any enrichment.[^58] As mentioned, the interpretation of those agreements is not a task to be undertaken now. It is not plain or obvious that the claim will fail.
[121] That leaves breach of fiduciary duty.
[122] The defendants submit that the plaintiffs cannot maintain an action for breach of fiduciary duty because they have not alleged sufficient facts to meet the legal test. They maintain that a finding of a fiduciary obligation is confined to relationships having three characteristics delineated by Wilson J. in dissent in Frame v. Smith: scope for the exercise of some discretion or power, the ability to exercise that discretion or power unilaterally so as to affect the other party’s legal or practical interest and the beneficiary of the duty being peculiarly vulnerable to or at the mercy of the fiduciary.[^59]
[123] Those characteristics are not, however, immutable. Sopinka and McLachlin JJ. summarized the state of the law in their dissenting reasons in Hodgkinson v. Simms when they wrote at para. 117:
…And although Wilson J. wrote in dissent, this list of the characteristics of a fiduciary relationship was adopted by the majority of this Court, per Sopinka J., in Lac Minerals…Sopinka J. cautioned that the list was a description, not an absolute legal test and stated at p. 599: “It is possible for a fiduciary relationship to be found although not all of these characteristics are present, nor will the presence of these ingredients invariably identify the existence of a fiduciary relationship.” Sopinka J., however, identified vulnerability as “[t]he one feature…which is considered to be indispensable to the existence of the relationship”…[^60]
[124] The defendants argue that the requisite characteristics cannot be found in this relationship. Paras. 37-39 of the defendants’ factum explained the argument in these terms:
The Court has consistently expressed the view that the policy objectives underlying fiduciary relationships do not generally apply to business entities dealing at arm’s length.
For a commercial relationship to derive fiduciary protection there must be evidence of a mutual understanding that one party has relinquished its own self-interest and agreed to act solely on behalf of the other party. In the context of a commercial contract, no fiduciary duties arise were (sic) both parties act in their own self-interest in the course of their relationship.
The relationship at issue is not one that gives rise to fiduciary obligations. The parties, all sophisticated corporate entities, were in a commercial relationship. At all times, the parties acted in their own self-interest. [Citations omitted]
[125] However, fiduciary and contractual/commercial relationships are not necessarily mutually exclusive.[^61]
[126] The defendants argue that no facts are alleged to support the plaintiffs’ theory. I disagree.
[127] The plaintiffs have alleged disclosure of confidential information relating to the low dose regimen subsequent to the execution of the license agreements trusting that the defendants would respect the basis on which it was communicated. They have alleged that sophisticated defendants received that information knowing that improper use would cause serious damage to the plaintiffs. They have also alleged peculiar vulnerability because of the defendants’ ability to produce and manufacture the low dose regimen.[^62]
[128] In all but one of the cases cited by the defendants, a trial was required in order for the court to assess whether the evidence supported the existence and breach of the alleged fiduciary duty. As La Forest J. wrote at para. 37 of Hodgkinson v. Simms:
…the precise legal or equitable duties the law will enforce in any given relationship are tailored by the legal and practical incidents of a particular relationship. To repeat a phrase used by Lord Scarman, “[t]here is no substitute in this branch of the law for a meticulous examination of the facts”; see National Westminster Bank plc v. Morgan, [1985] 1 All E.R. 821 (H.L.) , at p. 831.
[129] That does not occur at the stage of a motion to strike. Once again, the analysis requires evidence. It is not plain and obvious that the claim based on the alleged existence and breach of a fiduciary duty will fail.[^63]
[130] For the reasons given, the motion to strike is dismissed.
[131] Even if the defendants’ motion to strike had been successful, I would have granted leave to amend. Permission to do so should be withheld sparingly.[^64] All of the alleged deficiencies may have been cured by a reformulated pleading.
E. Summary, Costs and One other matter
[132] For the reasons given:
a) The relief sought in paras. (a), (b), (c) and (d) of the plaintiffs’ notice of motion is granted subject to the amendment set forth in para. 94 of these reasons;
b) The defendants’ motion is dismissed.
[133] Counsel agreed that an all-inclusive cost award of $20,000 is appropriate for each motion payable to the successful party. Consequently, the defendants shall pay to the plaintiffs the all-inclusive sum of $40,000 within thirty (30) days.
[134] As noted, this action is over six (6) year’s old and still at the pleadings stage. Counsel for the defendants assured me the action was going to prolonged, hard fought and expensive. I agree. It should, however, move forward in an orderly and expeditious manner. In that regard, I noticed that the defendants did not comply with rule 21.02. Rule 21.01 motions “shall be made promptly”. This one was not.
[135] Given the apparent procedural and substantive complexity, the parties should consider requesting a designation under rule 37.15 of the Rules of Civil Procedure. That request may be directed to the Regional Senior Justice of the Southwest Region.
“Justice A. D. Grace”
Justice A. D. Grace
Released: December 20, 2013
COURT FILE NO.: 55541
DATE: 20131220
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DR. BERNARD WOLFE and DMW KILDEER INCORPORATED
Plaintiffs
- and –
WYETH and JAMES H. PICKAR and WYETH CORPORATIONS
Defendants
REASONS FOR DECISION
Grace J.
Released: December 20, 2013
[^1]: Rogin J.’s reasons are reported at 2010 ONSC 2368 (S.C.J.). [^2]: The reasons of the Court of Appeal are reported at 2011 ONCA 347. [^3]: The statement of claim had already been amended on November 16, 2007 pursuant to rule 26.02 (a) of the Rules of Civil Procedure. For simplicity I have referred to the amended statement of claim as the “statement of claim”. [^4]: See rule 26.02 (a) of the Rules of Civil Procedure. [^5]: Described as Pre-Jay Holdings in the statement of claim but as Pre Jay in the various licensing agreements. [^6]: Those excerpts are drawn from paragraph 9 of the statement of claim. [^7]: According to the statement of claim, Wyeth filed Canadian Patent Application No. 2,402,983 on September 12, 2002. [^8]: According to the statement of claim, PCT Patent Application No. US 2001/04302 was filed on March 16, 2001 and published on September 27, 2001. [^9]: In the Amended Amended Statement of Claim those paragraphs appear as 18, 31 and 34. [^10]: S.O. 2002, c. 24, Sch. B. See, too, Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3, [2008] O.J. No. 17 (C.A.) at para. 9. [^11]: Streamline Foods Ltd. v. Jantz Canada Corp., 2012 ONCA 174; Limitations Act, S.O. 2002, c. 24, Sch. B, s. 21 (1). [^12]: Kitcher v. Queensway General Hospital (1977), 1997 ONCA 1931, 44 O.R. (3d) 589 (C.A.) at p. 591; Spirito v. Trillium Health Care (2008), 2008 ONCA 762, 69 C.P.C. (6th) 36 (Ont. C.A.) at paras. 15-17. [^13]: The court has a residual discretion to refuse to permit the amendment even if curative in nature: Ormerod v. Strathroy Middlesex General Hospital (2009), 2009 ONCA 697, 97 O.R. (3d) 321 (C.A.) at paras. 28-29; O’Sullivan v. Hamilton Health Sciences Corp., 2011 ONCA 507 at paras. 3-4. [^14]: (2008), 2008 ONCA 343, 52 C.P.C. (6th) 41 (C.A.). [^15]: That excerpt is taken from paragraph 14 of Ms. Ventresca’s December 18, 2012 affidavit. [^16]: Dukoff v. Toronto General Hospital (1986), 1986 ONSC 2648, 54 O.R. (2d) 58 (H.C.J.); Freedom International Brokerage Co. v. Tullett Prebon Canada Ltd., [2012] O.J. No. 4768 (S.C.J.). [^17]: Dukoff, supra note 16. [^18]: [1960] 3 All E.R. 672 (C.A.). [^19]: Supra, note 12. [^20]: Ormerod, supra note 13 at para. 21. [^21]: Ibid. at para. 24. [^22]: Ibid. [^23]: 2010 ONSC 4226, [2010] O.J. No. 3962 (S.C.J.) at paras. 114, 116 and 117. [^24]: [2012] O.J. No. 4768 (S.C.J.) [^25]: Ibid. at para. 37. [^26]: Ibid. at para. 22. [^27]: Ormerod, supra note 13 at paras. 24-25; Freedom, supra note 16 at paras. 18 and 23-24. [^28]: (2001), 2001 ONCA 8620, 56 O.R. (3d) 768 (C.A.). [^29]: The excerpt is drawn from para. 76 of the defendants’ factum on the motion to amend. [^30]: O’Sullivan v. Hamilton Health Sciences Corp., supra note 13; Urie, supra note 23. [^31]: Ormerod, supra note 13. [^32]: (1996), 1996 ABCA 280, 137 D.L.R. (4th) 715 (Alta. C.A.). [^33]: Ormerod, supra note 13 at para. 27. [^34]: The underlying facts are not the same as in Urie, supra note 23 or Holder v. Wiazowski, [2011] O.J. No. 4152 (Master) on which the defendants rely. [^35]: That amendment relates to paras. 17 of the current and 18 of the draft amended statement of claim. [^36]: Those amendments relate to paras. 29 and 32 of the old and 31 and 34 of the proposed amended statement of claim. [^37]: 2011 ONSC 1670 (S.C.J.) at paras. 18-19 and 22. See, too, Iroquois Falls v. Jacobs Canada, 2009 ONCA 517 and Petrasovic Estate v. 1496348 Ontario Ltd., [2012] O.J. No. 6358 (S.C.J.). [^38]: The elements are set forth in para. 82 of the defendants’ factum. They rely on Sampson & McNaughton Ltd. v. Nicholson, [1984] O.J. No. 3210 (H.C.J.) and Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 1995 ONSC 7105, 25 O.R. (3d) 106 (Gen. Div.). [^39]: (1988), 1988 ONSC 10348, 26 C.P.C. (2d) 63 (Ont. H.C.J.) at p. 68. [^40]: Szelazek Investments Ltd. v. Orzech (1995), 44 C.P.C. (3d) 102 (C.A.); 147619 Canada Inc. v. Chartrand, [2006] O.J. No. 1877 (C.A.). [^41]: Supra, note 2. [^42]: Given my disposition of the first motion, all references are to the Amended Amended Statement of Claim. [^43]: For simplicity I will refer to the Amended Amended Statement of Claim as the “amended claim”. [^44]: Rule 21.01(2) (b). [^45]: (1996), 40 C.P.C. (3d) 389 (Ont. Gen. Div.) [^46]: Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2 S.C.R. 699 at para. 39. [^47]: (2005), 19 C.P.C. (6th) 298 (Ont. Master) at para. 7. To the same effect see Web Offset Publications Ltd. v. Vickery (1998), 1998 ONSC 14858, 40 O.R. (3d) 526 (Gen. Div.) aff’d (1999), 1999 ONCA 4462, 43 O.R. (3d) 802 (C.A.), leave to appeal denied. [^48]: 2013 ONCA 740 at para. 34. See, too, McCreight v. Canada (Attorney General), 2013 ONCA 483 at para. 39. [^49]: Those allegations are found in paras. 8, 9 and 11 of the amended claim. [^50]: The defendants relied on a host of authorities for the basic proposition that an individual cannot seek damages on behalf a company even if the individual is the sole shareholder: Carnegie v. Rasmussen Starr Ruddy (1994), 1994 ONSC 7283, 19 O.R. (3d) 272 (Gen. Div.) at para. 31: Kosmopoulos v. Constitution Insurance Co. of Canada, 1987 SCC 75, [1987] 1 S.C.R. 2 at paras. 12-14. The plaintiffs argued that the defendants should have relied on rule 21.01(3) (b) to the extent that the plaintiffs’ capacity to sue was in issue. [^51]: See paras. 8 and 9 of the amended claim. [^52]: See para. 26 of the amended claim. [^53]: See para. 28 of the amended claim. [^54]: By way of example, see paras. 20, 34, 41 and 45 of the amended claim. [^55]: The excerpt is drawn from article 1.03 of the license agreements. [^56]: (2007), 2007 ONCA 59, 85 O.R. (3d) 616 (C.A.) at para. 54. [^57]: Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629. [^58]: Ibid. at para. 44. [^59]: 1987 SCC 74, [1987] S.C.J. No. 49 at para. 63. [^60]: 1994 SCC 70, [1994] 3 S.C.R. 377. [^61]: Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 SCC 34, [1989] 2 S.C.R. 574. [^62]: I have attempted to paraphrase paras. 27-32 of the amended claim. [^63]: Fehringer v. Sun Media Corp., [2002] O.J. No. 2919 (C.A.). [^64]: South Holly Holdings Ltd. v. Toronto-Dominion Bank, 2007 ONCA 456, [2007] O.J. No. 2445 (C.A.) at para. 6; Piedra v. Copper Mesa Mining Corp., 2011 ONCA 191, [2011] O.J. No. 1041 (C.A.) at para. 94.