SUPERIOR COURT OF JUSTICE - ONTARIO
RE: BIE Health Products o/b 2037839 Ontario Ltd. v. the Attorney General of Canada on behalf of Her Majesty the Queen in Right of Canada, Jim Daskalopoulos, Canwest Global Communications Corp., the Canadian Press, Torstar Corporation, CTV Inc., CNW Group Ltd., The Attorney General of Ontario on behalf of Her Majesty in Right of the Province of Ontario, Google Canada Corporation, Yahoo! Canada Co., Brunswick News Inc., Mediresource Inc., the National Association of Pharmacy Regulatory Authorities, the Alberta College of Pharmacists, Rogers Publishing Limited, Healthwatcher.Net Inc., Dr. Terry Polevoy, MD, Webby Inc., Metroland Printing and Publishing & Distributing Ltd.;
BEFORE: MASTER C. WIEBE
COUNSEL: Paul H. Starkman for BIE Health Products o/b 2037839 Ontario Ltd. (“BIE”); Liz Tinker for the Attorney General of Canada on behalf of Her Majesty the Queen in Right of Canada and Jim Daskalopoulos (together the “AG”);
Thomas Arndt as agent for Timothy Flannery counsel for Dr. Terry Polevoy, MD, and Healthwatcher.Net Inc. (“Healthwatcher”).
HEARD: March 20, 2018.
REASONS FOR DECISION
INTRODUCTION
1When the argument began, there were two motions scheduled to be determined by me. The first motion is by BIE for an order striking the Amended Statement of Defence of Dr. Polevoy and Healthwatcher or, in the alternative, requiring that they answer the undertakings given and the questions refused at Dr. Polevoy’s examination for discovery on June 13, 2017 in seven days, and that Dr. Polevoy re-attend at his own expense at a further discovery to answer questions arising from these answers.
2In the course of the argument, and after Mr. Arndt provided Mr. Starkman with a further affidavit executed by Dr. Polevoy, I was advised that this aspect of the motion was withdrawn on the basis that Dr. Polevoy will re-attend within 90 days of March 20, 2018 to be examined further for discovery on the Amended Statement of Defence of Dr. Polevoy and Healthwatcher and on the answers to the undertakings that Dr. Polevoy had given. I so ordered. The only issue in this motion that I have to determine is costs. I granted the parties to this motion leave up to and including March 30, 2018 to serve and file costs outlines. On that basis, I excused Mr. Arndt.
3The BIE motion also seeks an order that Yves Aubin, a representative of the AG, properly answer an undertaking given at his discovery on June 5, 2017. The AG purported to answer the undertaking, but BIE argues that the answer is insufficient. I have to determine this issue.
4The second motion is by the AG for an order requiring Richard Beemer, the representative of BIE, to answer a question he refused at his discovery on June 1, 2017, and requiring that Mr. Beemer properly answer four undertakings which the AG alleges were not property answered. This motion also seeks directions as to the “temporal scope” of this action and as to the role of BIE Industrial Limited (“BIE Industrial”) in this action. BIE Industrial is related to BIE, as both are owned by Mr. Beemer.
5During the course of the argument, I ruled orally on two issues in the AG motion. First, I ruled on the refusal issue. During his discovery, Mr. Beemer stated in answer to a question about the harm BIE suffered because of the press release from Health Canada, that he had a “sales graph” dating from the time of the incorporation of BIE in December, 2003 which showed that the company expected to make “exponential” profits from the sale of GHR-15. He added that “once the interference started by everyone, we just fell right off the cliff.” Ms. Tinker asked for a copy of this graph. After taking the question under advisement, Mr. Starkman refused, arguing that the document was not relevant and was privileged. The ground of privilege was abandoned. In oral argument, Mr. Starkman argued that BIE would not be relying on this graph as the BIE expert had relied upon “real” sales data. I ruled that it did not matter what BIE would or would not rely on as long as the document was relevant. I found that, based on Mr. Beemer’s testimony, it was relevant to the issue of BIE’s alleged lost profits, and I ordered that it be produced.
6Second, concerning the two scope issues Ms. Tinker raised, I found that these issues had merit. Concerning the temporal scope of the action, the issue was the time period of the impugned government actions. As pleaded, the impugned actions span the period 2002 to 2005. At his discovery, on the other hand, Mr. Beemer suddenly stated that the impugned actions of the government are “ongoing.” Later in correspondence, Mr. Starkman reaffirmed this evidence by stating that the offending conduct “continues.” In oral argument, it came out that there may have been GHR-15 seizures after 2005. Mr. Starkman, however, did not believe that his client wanted to open up the litigation to this latter period, as that would involve another, yet unexplored, dimension to this case. I concluded that this issue needed clarification.
7Concerning BIE Industrial, this was a company that Mr. Beemer owned and that produced other products. As part of its productions, BIE nevertheless produced tax returns for both BIE and BIA Industrial. The tax return for the first fiscal year of BIE’s existence, December, 18, 2003 to August 31, 2004, describes BIE as “dormant” during this period. The tax return for BIE Industrial for the fiscal period, May 31, 2003 to April 30, 2004, shows BIE Industrial as being active and generating revenue during this period. At discovery, Mr. Beemer described BIE as an “offshoot” of BIE Industrial. When asked by Ms. Tinker whether BIE was claiming damages for BIE Industrial, Mr. Beemer stated at discovery that BIE was not. Yet, the BIE expert report on damages dated November 20, 2017 (the report of Valuation Support Partners Inc.) refers to GHR-15 sales during the period 2000 to 2004, and in its schedule entitled, “Statement of Income Summary,” indicates that its source for information for 2002, 2003 and 2004 was BIE Industrial. This obviously creates uncertainty as to whether BIE is claiming losses for BIE Industrial. I found that this needed clarification.
8During oral argument, it became clear that BIE intends to amend its pleading to increase the quantum of its damages claim. To resolve the scope issues, and after a discussion, I ordered that BIE produce a further amendment to its Amended Fresh As Amended Statement of Claim that amended the quantum of damages being claimed, and that clarified, with sufficient particularity, that the impugned government actions spanned only the period 2002 to 2005 and that BIE was not claiming losses or damages suffered by BIE Industrial. The particularity must make these points about the scope clear. I ordered that BIE deliver a consent to such an amendment plus draft pleadings within 60 days from March 20, 2018.
AUBIN UNDERTAKING
9The AG produced seven pieces of correspondence involving the U.S. Federal Trade Commission (“the FTC”), which is a U. S. regulator of food products. Some of these documents have redactions. It should be noted that GHR-15 was originally produced and distributed in the U.S., and that the U.S. regulators consider GHR-15 to be food product, whereas Health Canada considers it be a “drug.” BIE has pleaded that, because the U.S. regulates GHR-15 as a food product, Canada should do the same. The AG denies this allegation. But it does plead that Health Canada consulted with U.S. regulators to “confirm facts” about the manufacture and exportation of GHR by American companies for the purpose enhancing enforcement action within Health Canada’s jurisdiction.
10At the discovery of Yves Aubin on June 5, 2017, Ms. Tinker undertook to check the correspondence between Health Canada and the U. S. regulators to determine “whether we have disclosed all relevant communication” concerning GHR. Mr. Starkman subsequently provided Ms. Tinker with an undertakings chart. Ms. Tinker answered the undertaking as follows: “To the best of Health Canada’s knowledge, it has disclosed all relevant communication with the U.S. F.T.C. and Food and Drug Administration.”
11Mr. Starkman argued that this response was inadequate. He showed me a letter written to a representative of BIE, Trueman Tuck, by the U.S. FTC on November 21, 2011. This letter indicates that in 2011 BIE made a Freedom of Information Act (“FOIA”) request to the U.S. FTC as follows: “all investigative records, including but not limited to, emails, notes, messages, correspondence, minutes of meeting, reports and compliance communications concerning BIE.” According to the letter, in response, the FTC found “approximately 1,000 pages of responsive records,” but disclosed only those records that did not pertain to ongoing enforcement proceedings pertaining to BIE. Mr. Starkman argued that I should draw the inference from this that the seven pieces of correspondence produced by the AG cannot be the full scope of the correspondence Health Canada has with the U.S. regulators about GHR-15.
12I disagree. First, the FTC letter does not indicate what, if any, part of the “1,000 pages of responsive records” includes correspondence with Health Canada. For all I know, there may be no such correspondence. Second, the FTC letter makes it clear that the withheld documentation concerns the FTC’s investigation of BIE’s advertising practices in the U.S, as, according to the letter, BIE was making unsubstantiated claims about its product in the U.S. I was not advised of any reason the FTC would communicate with Health Canada about such an investigation. Third, BIE has disclosed none of the documentation it did receive from the FTC, which gives rise to the inference that this documentation does not pertain to Health Canada.
13Other AG answers to undertaking indicate that the amount of Health Canada correspondence with U.S. regulators was limited. For instance, the AG admitted that Heath Canada contacted the FTC on April 2, 2003 because one Russell Beemer of BIE’s American company was advertising GHR-15 in Canada. But this contact did not go anywhere as Russell Beemer eventually agreed to cooperate with Health Canada.
14There was an issue about the absence of Health Canada correspondence with the U.S. Food and Drug Administration (“FDA”). In answer to other undertakings, the AG indicated that it requested information from the FDA in August, 2004 as part of its due diligence for the Health Canada’s health hazard evaluation (“HHE”) of GHR-15. The response was delayed and did not come until the FDA made a phone call to Health Canada on March 3, 2005, by which time Health Canada had completed the HHE.
15In argument, Ms. Tinker pointed out that, to answer the undertaking, she communicated by phone with Health Canada, had them conduct a further review of their documentation, and included their response in the answer to the undertaking. Based on the evidence presented, I am satisfied the answer is adequate, and I dismiss this part of the BIE motion. This is without prejudice to the issue being revisited should evidence subsequently come to light that relevant correspondence was not disclosed.
BEEMER UNDERTAKINGS
16The remainder of the AG’s motion concerns three undertakings Richard Beemer gave at his discovery on June 1, 2017. The three undertakings can be summarized as follows:
a) identify the quantum of the general damages being claimed, explain how it was derived, and provide the relevant documents on that issue;
b) advise as to how BIE derived the $1 million claim for special and/or pecuniary damages; and
c) identify the out-of-pocket expenses BIE is claiming and provide any relevant documents on that issue.
17In his response, Mr. Starkman simply stated that these issues would be clarified by the BIE expert report on damages. BIE eventually delivered a report authored by Valuation Support Partners Inc. that is dated November 20, 2017. This report concerns only the claim for general damages, and does not even attempt to deal with undertakings (b) and (c) above. Therefore, these two undertakings, (b) and (c), remain outstanding and must be complied with.
18Concerning (a), namely the undertaking about general damages, the expert report deals only with the claim for lost profits, and concludes that this claim could range from $27,300,000 to $31,010,000. Ms. Tinker argues that her client is now entitled to the production of the “foundation information” on which the report is based and that was not disclosed by the report.
19It is now well established law that if a party intends to call an expert witness, the party must disclose the information on which the expert report is based; see Moore v. Getahun, 2015 ONCA 55, at paragraph 75 (OCA). This “foundation information” has been found to include the information sent to the expert; see Aherne v. Chang, 2011 ONSC at paragraph 85(a). It has been found to include the documents read by the expert and the facts that were disclosed to the expert; see Aherne v. Chang, supra at paragraphs 85(b) and 85(c). It has been found to include the notes, raw data and records of the expert; see Award Developments (Ontario) Ltd. v. Novoco Enterprises Ltd.. (in trust) 1992 7587 Ont. Crt. Gen. Div.) at page 5. It has been found to include the books and journals researched by the expert; see Allen v. Oulahen, 1992 ONSC at page 8.
20In paragraph 34 of her factum and in argument, Ms. Tinker made a long list of the foundation documentation for the BIE expert report that her client requires. It includes information given to the expert, documents read by the expert, and documents used by the expert. In response, Mr. Starkman did not deny the AG’s entitlement to this documentation. He complained about the fact that Ms. Tinker had not provided an updated undertakings and refusals chart. Ms. Tinker made it clear in correspondence that she would update the disclosed information in her factum and at the argument of the motion. During the argument, she handed up a chart she had made summarizing the state of disclosure. Mr. Starkman objected to the filing of this chart, alleging that he was being “bushwhacked” with this “late disclosure.” In looking at the chart, I became satisfied that the chart was just an aid that summarized the state of disclosed information and that did not prejudice BIE. I admitted the chart.
21Mr. Starkman made another point in oral argument, namely that this AG foundational information request were just a “follow-up” question that should be the subject matter of another round of discoveries. I do not agree. Mr. Beemer answered his undertaking by relying on the BIE expert report. The undertaking expressly referred to the production of the relevant documents concerning general damages. Therefore, it is a part of the undertaking to disclose the foundational information on which the expert report is based.
22I, therefore, find and order that BIE must provide the AG with the foundational information described in paragraph 34 of the AG’s factum dated March 8, 2018 in the AG motion. Given the breadth of the plaintiff’s legal obligation to disclose foundational information, I will put no further limit on this order.
COSTS
23At the end of the argument, I asked for costs outlines. Ms. Tinker submitted one for the AG. Mr. Starkman had not prepared one. After a discussion, I gave the AG and BIE the same deadline for serving and filing their Costs Outlines as I gave to BIE and Dr. Polevoy and Healthwatcher concerning the Polevoy motion, namely March 30, 2018. On that basis, I handed Ms. Tinker’s costs outline back to her.
24On March 29, 2018, Mr. Starkman and Ms. Tinker submitted their respective costs outlines. Concerning the BIE motion against Dr. Polevoy and Healthwatcher, the BIE costs outline shows an amount of $8,347.34. Mr. Arndt has not delivered a costs outline.
25Concerning the BIE motion against the AG, the BIE costs outline shows an amount of $7,727.62. The AG costs outline shows an amount of $1,432.22.
26Concerning the AG motion against BIE, the AG costs outline shows an amount of $17,969.38. The BIE costs outline shows an amount of $5,190.49.
27If the parties cannot reach an agreement on costs, all those seeking costs in light of the result must make written submissions in this regard of no more than two (2) pages. Those seeking costs must deliver their submissions on or before April 13, 2018. Responding submissions must be delivered on or before April 24, 2018. Reply submissions must be delivered on or before April 27, 2018.
DATE: April 3, 2018 __________________________
MASTER C. WIEBE