Hearsay is Inadmissible

Pfizer Canada Inc v Teva Canada Ltd 2016 FCA 161 Stratas JA: Ryer, Gleason JJA var’g 2014 FC 248 (here) and subsequent reasons re pre-judgment interest 2014 FC 634 (here) Zinn J
            1,248,540/ 2,199,778 / venlafaxine / EFFEXOR XR / NOC s 8 / Venlafaxine s8 FCA

As discussed in yesterday’s post, which dealt with the burden of proof in establishing causation, the FCA in Venlafaxine s8 held that in order to establish its compensable loss under s 8 of the PM(NOC) Regulations, Teva had to show that it “would and could” have supplied the market for venlafaxine. While Zinn J did not articulate the requirement in quite this way, he nonetheless applied the proper principles of causation in holding that Teva had established the necessary causal link [70]-[73], and in the result he awarded Teva almost $125m as compensation for having wrongly been kept off the market for venlafaxine [2]. However, the FCA held that Zinn J’s holding was vitiated by the fact that he improperly relied on hearsay evidence in coming to this conclusion [75]-[121], and the FCA therefore set aside Zinn J’s judgment and remitted the matter to him for redetermination [174]. At the same time, the FCA also affirmed Zinn J’s holdings with respect to the appropriate start date for the compensable period, on authorized generics in constructing the hypothetical world, and on the start date for assessing pre-judgment interest.

Teva’s position was that if it had received its NOC, its supplier, Alembic would have been able to supply adequate quantities of venlafaxine product at the relevant time [41]. While this was accepted by Zinn J, the only evidence on Alembic’s capacity was provided by Mr. Major, a former executive of Ratiopharm (now Teva) [36]. The difficulty is that almost all of Mr Major’s testimony was hearsay, sometimes double or even triple hearsay. Despite Pfizer’s objections, Zinn J admitted the hearsay evidence, saying the objection went to weight rather than admissibility [121]. The FCA disapproved, noting that

[83] Recently, some rules of evidence have been liberalized, allowing for more flexibility. Seduced by this trend towards flexibility, some judges in various jurisdictions have been tempted to rule all relevant evidence as admissible, subject to their later assessment of weight. But according to our Supreme Court, this is heresy. The trend towards flexibility has not undermined the need for judges to take a rigorous approach to admissibility, separating that analytical step from others, such as determining the weight to be given to evidence.

After reviewing the evidence in question, the FCA remarked that “All of the mischief associated with admitting hearsay evidence is present in this case” [119]. Because Zinn J had admitted evidence that should have been excluded, and that error might have affected the outcome of the case, the FCA set aside the Zinn J’s judgment [121]. I am not sufficiently familiar with evidentiary rulings in the Federal Courts to say whether Zinn J’s decision to admit hearsay evidence was unusual, or whether this FCA’s decision signals a course correction to the FC generally.

On the issue of the start date for the compensable period, Pfizer had argued that the appropriate date was the end of the 45 day waiting period under s 7(1)(d) during which the Minister is precluded from issuing an NOC. The waiting period starts at the time the generic serves an NOA and allows a patentee to seek a prohibition order. In effect, Pfizer argued that in the hypothetical world, it should be assumed that rather than seeking an order of prohibition, Pfizer would have done nothing at all, so that Teva’s NOC would have issued only after the expiry of the waiting period. Zinn J rejected this arugment (see here), and the FCA affirmed for substantially the same reasons, based on the plain meaning of the Regulations as well as the case law [126]-[133].

The FCA also reaffirmed its holding in Apotex Ramipril s. 8 FCA 2014 FCA 68 (see here) that entry of authorized generics should be considered as part of the hypothetical world [134]-[138]

Finally, the FCA also affirmed Zinn J’s holding that pre-judgment interest should be calculated from the date on which the cause of action arises, which is typically the start of the compensable period, and not on the date that the prohibition application is dismissed [145].