Sernova v. Shapiro, 2017 ONSC 5308
CITATION: Sernova v. Shapiro, 2017 ONSC 5308
COURT FILE NO.: 886/17 (London)
DATE: 20170908
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sernova Corp.
Applicant
– and –
James Shapiro, James Shapiro Professional Corporation and the Governors of the University of Alberta
Respondents/Moving Party
COUNSEL:
Peter E.J. Wells and Adam D.H. Chisholm, for the Applicant
Patrick S. Smith, for the Respondents/Moving Party
HEARD: August 30, 2017
Reasons for Decision
carey J.:
Background
[1] The applicant, a London based medical technologies company, hired Dr. Shapiro, a renowned diabetes researcher, to assist them in developing a product for treating diabetes by implanting donor cells. Sernova and Dr. Shapiro’s Professional Corporation entered into a Consulting Agreement for this purpose. That agreement earned the Shapiro Professional Corporation over $250,000. During the time the agreement was in place, the applicant company says Dr. Shapiro modified the product he was assisting Sernova develop and together with some of the other respondents, applied to patent that modified technology. Sernova’s application under rule 14.05(3)(d) and (g) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 requests this Court to interpret the contract and make declarations concerning the ownership of the patent applications concerning the allegedly modified product.
[2] The respondents assert that another agreement that all respondents were party to, a Clinical Trial Agreement (“CTA”) is applicable. That agreement relating to human clinical trials at the University of Alberta specifies Alberta as the forum for any dispute arising from the CTA.
[3] The applicant says that contract is irrelevant to this dispute and that they are only seeking relief under the Consulting Agreement.
[4] The respondents seek to stay Sernova’s application as more appropriately brought in Alberta. The applicant company asserts that Ontario law governs the contract by agreement of the parties and an application is the appropriate forum for interpretation of the parties’ rights. The opposing parties disagree as to which agreement should govern this dispute.
[5] There is a date upcoming in October for this application to be heard. All parties have requested a ruling on this jurisdictional issue on an expedited basis as there are approaching dates for the timelines established for the application.
[6] For the reasons set out, I have not been persuaded that the application should be stayed.
Analysis
[7] Sernova says they will be amending their application to eliminate any reference to the CTA. The Consultation Agreement’s interpretation will be the focus of this application. It was made under Ontario law relating to a product being developed in Ontario. That product is currently the subject of patent applications.
[8] Rule 14.05(3) permits a proceeding to be brought “where the relief claimed is . . . d) the determination of rights that depend on the interpretation of a . . . contract or other instrument . . .”. As well, pursuant to r. 14.05(3)(g), Sernova is seeking relief by way of a declaration relating to the ownership of patents that it says were based on a modification of their product.
[9] It is clear that r. 14.05 was designed for certain types of cases to proceed expeditiously:
An application proceeding will not be converted into an action unless there is good reason to do so, such as when the judge who will hear the matter cannot make a proper determination of the issues on the application record.
When issues of credibility are involved or when viva voce evidence is required, a matter should proceed as an action.[^1]
[10] The applicant in its application and in response to this motion relies centrally on a video posted on the internet where Dr. Shapiro, they say, admitted that his produce was a modification of Sernova’s product.
[11] Examinations have not been completed and the respondents dispute the applicant’s interpretation of the video. The respondents say that the cell implanting procedure that they have applied to patent was developed at the University of Alberta prior to and independent of information obtained by Dr. Shapiro pursuant to the Consulting Agreement.
[12] If that is the case, the applicant argues, then, the work in this regard should have been disclosed by the terms of the contract.
[13] Additionally, if there was research being done in that area by Dr. Shapiro at the same time as consulting with Sernova on the same issue, that created a conflict of interest that was not declared to them by Dr. Shapiro. They say that they would never have paid out over $250,000 in consultation fees had they known their consultant was also working on another system with the same objective – essentially a competitor to their technology.
[14] The dispute on these issues make this case unsuitable to be heard as an application say the respondents in their motion and rely on r. 14.05(3):
(h) [I]n respect of any matter where it is unlikely that there will be any material facts in dispute.
[15] In McKay, Steele J. dealt with the same argument:
On the jurisdictional issue, counsel for Kenneth McKay argued that the power given under all of the paragraphs in rule 14.05(3) should not be exercised where there were material facts in dispute. In my opinion, that would impose para. (h) as a condition to hear any matter under the preceding paragraphs. This would be clearly contrary to the disjunctive wording of subs. (3). I believe that the court has power to hear an application under paras. (a) to (g) inclusive, even if there are material facts in dispute. This does not mean that in an appropriate case the court may decide to direct the trial of an issue, or otherwise deal with the application.[^2]
[16] The Ontario Court of Appeal dismissed an appeal from this decision (reported together).
[17] This interpretation has stood for over a quarter of a century and is cited in Archibald, Killeen & Morton, OSC Rules of Practice, 2017, (Toronto: LexisNexis).
[18] At this stage in the application it is premature for this Court to determine whether the issues are suitable to be determined by application. The record is not complete. A more complete application record should be before the judge hearing the application scheduled for October. It is certainly not clear on this motion that some, if not all, of the issues could not be dealt with by application. It may be that it will at least be dispositive of a major issue with a concomitant savings of time, effort and expense.[^3]
[19] Similarly, the respondents’ arguments regarding the forum clause in the CTA and the forum non conveniens applicability cannot be determined in the absence of a complete application record. The CTA is being raised by the respondents but is dismissed as irrelevant by Sernova whose application this is.
[20] The procedure for disposition of an application is set out in rule 38.10.
[21] It may be that discovery of witnesses in Alberta will negate the need for witnesses to travel to Ontario.
[22] The presiding applications judge will be in the best position to determine if the applicant’s decision to proceed as it has was a prudent one. The respondents’ motion to stay is dismissed without prejudice to it being renewed on the return of the application in October.
[23] In the circumstances I conclude it is appropriate for costs to be reserved to the applications judge.
Original signed by Justice Thomas J. Carey
Thomas J. Carey
Justice
Released: September 8, 2017
CITATION: Sernova v. Shapiro, 2017 ONSC 5308
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sernova Corp.
Applicant
– and –
James Shapiro, James Shapiro Professional Corporation and the Governors of the University of Alberta
Respondents/Moving Party
REASONS ON MOTION
Carey J.
Released: September 8, 2017
[^1]: Collins v. Canada (A.G.) (2006), 2005 ONSC 28533, 76 O.R. (3d) 228, at paras. 29-30.
[^2]: McKay Estate v. Love, [1991] 6 O.R. (3d) (Ont. Gen. Div.), 511 at 514, aff’d [1991] 6 O.R. 511 at 519 (OCA).
[^3]: Bell Canada v. Ontario 2005 779 O.R. (3d) 142