Double Costs under Rule 420 in Respect of Counterclaim

Eli Lilly Co. v. Apotex Inc. / cefaclor, 2011 FC 1143 Gauthier J (Costs)

This is a decision on costs related to 2009 FC 991 aff’d 2010 FCA 240, in which Gauthier J held in favour of Lilly in an infringement action against Apotex, and against Apotex in its Competition Act counterclaim against Lilly and Shionogi.

Gauthier J dealt with costs in the main action and the counterclaim separately. With respect to costs in favour of Shionogi on the counterclaim, the main question whether particular settlement offers triggered doubling of costs under Rule 420. Gauthier J affirmed that Rule 420 as amended requires only that the offer remain open until the start of the trial or hearing [25]-[36], and not until the matter is taken under advisement or judgment is rendered. Note that an offer that does not trigger Rule 420 may nonetheless be considered under the general Rule 400(3)(e).

Further, in an apparently novel point of general interest, Gauthier J held that “although there was only one scheduling order issued for the trial of the various proceedings in T-1321-97, the main action and the Competition Counterclaim were two completely distinct proceedings.” Consequently, a settlement offer in respect of the Competition Counterclaim had to remain open not just until the start of the trial as a whole, but until the start of the portion of the trial dealing with the counterclaim [27].

On the facts, one settlement offer made by Shionogi triggered Rule 420. Gauthier J declined to exercise her discretion to lower the amount payable under that Rule. She noted that Apotex had added Shionogi as a defendant two years after instituting the Competition Counterclaim against Lilly, and it had apparently done so primarily to get evidence from Shionogi [40]. Gauthier J stated that

[41] The Court should not be taken as condoning the practice of suing a party solely to facilitate the acquisition of evidence or to put pressure on a third party. There are more appropriate means to obtain evidence from a non-party, including a foreign company.

Gauthier J also noted that the Shionogi evidence was ultimately not particularly helpful [42], and while Apotex was entitled to “insist on the strict application of the rules of evidence with respect to the filing of documents,” and to obtain a procedural advantage in order to settle its Competition Counterclaim with Shionogi,” such decisions might have costs consequences: “it cannot expect to impose its choices on Shionogi or Eli Lilly” [49].

On the main action, Gauthier J was not able to assess whether Rule 420 was triggered. Rule 420 turns on a comparison between the offer and amount awarded, and at this point it remained too difficult to estimate the quantum [65]. Gauthier J noted that “in the context of bifurcated action, the application of Rule 420 can be difficult and will require more judicial consideration” [66].