Apotex Inc. v. Canada

Apotex Inc. v. Canada
Court (s) Database
Federal Court of Appeal Decisions
Date
2017-04-06
Neutral citation
2017 FCA 73
File numbers
A-553-14, A-554-14
Decision Content
Date: 20170406
Dockets: A-553-14
A-554-14
Citation: 2017 FCA 73
CORAM:
DAWSON J.A.
RENNIE J.A.
WOODS J.A.
Docket: A-553-14
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
APOTEX INC.
Respondent
Docket: A-554-14
AND BETWEEN:
APOTEX INC.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on October 25 and 26, 2016.
Judgment delivered at Ottawa, Ontario, on April 6, 2017.
REASONS FOR JUDGMENT BY:
DAWSON J.A.
CONCURRED IN BY:
RENNIE J.A.
WOODS J.A.
Date: 20170406
Dockets: A-553-14
A-554-14
Citation: 2017 FCA 73
CORAM:
DAWSON J.A.
RENNIE J.A.
WOODS J.A.
Docket:A-553-14
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
APOTEX INC.
Respondent
Docket:A-554-14
AND BETWEEN:
APOTEX INC.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
DAWSON J.A.
Blank/En blanc
Para.
I. Factual Background
13
II. The Decision of the Federal Court
36
III. Standard of Review
43
IV. Misfeasance in a Public Office
44
A. The tort of misfeasance in a public office
45
B. Apotex’ appeal
51
(1) The Federal Court failed to consider liability arising apart from the settlement agreement
51
C. Health Canada’s appeal
59
(1) The asserted errors of fact
61
(a) The Health Protection Branch deliberately examined Apotex’ submission on the standard of identicality contrary to the settlement agreement
63
(b) Health Protection Branch officials knew that the Canadian and American Desyrel products were identical
66
(c) Health Protection Branch officials misled Apotex into believing that the Branch was willing to review further data
69
(d) Apotex submitted data in 1990 that demonstrated equivalence
75
(2) The asserted errors of law and mixed fact and law
84
(a) The Federal Court concluded that a breach of contract amounts to misfeasance
84
(b) The facts as found by the Federal Court do not amount to misfeasance
90
V. Negligence
94
A. The tort of negligence
95
B. Apotex’ appeal
104
(1) The Federal Court failed to consider liability arising apart from the settlement agreement
104
C. Health Canada’ appeal
124
(1) The settlement agreement did not create a relationship of proximity
126
(2) The Federal Court failed to negate a prima facie duty of care based on residual policy considerations
132
(3) The Federal Court made palpable and overriding errors that led it to conclude that the Health Protection Branch breached the settlement agreement
141
VI. Mitigation
150
A. The concept of mitigation
151
B. Apotex’ appeal
157
(1) The Federal Court erred in its appreciation of the onus of proof
157
VII. Contract
186
A. Apotex’claim in contract
186
B. Apotex’ appeal
188
C. Health Canada’s cross-appeal
192
VIII. Conclusion
193
[1] Trazodone, also referred to as trazadone, is an antidepressant drug. On January 25, 1988, Apotex Inc. filed a submission with the Health Protection Branch of Health Canada in which it sought approval to sell a generic version of trazodone in Canada. Apotex received approval seven years later, on February 28, 1995. By that time, two generic drug manufacturers, competitors of Apotex, had received approval to sell generic versions of trazodone in Canada.
[2] In October 1998, Apotex commenced an action in damages naming Her Majesty the Queen, as representative of the Minister of Health and officials within the Health Protection Branch of Health Canada, as defendant. In these reasons the defendant is referred to as Health Canada.
[3] In its action, Apotex alleged, among other things, that in the course of considering its drug submission officials of the Health Protection Branch committed misfeasance in a public office and also acted negligently. Apotex also alleged a breach of contract based on violation of a settlement agreement entered into between Apotex and Health Canada while Apotex’ submission was under consideration.
[4] Apotex’ action was bifurcated in the Federal Court. The action went to trial on the issue of liability. If required, the issue of damages was to be addressed by the Federal Court at a later date.
[5] For lengthy reasons cited as 2014 FC 1087, the Federal Court found Health Canada was liable in damages because its officials committed the torts of misfeasance in a public office and negligence. These conclusions were based on a finding that officials of Health Canada both deliberately and negligently failed to adhere to the terms of the settlement agreement referred to above. The Federal Court went on to find that Apotex’ damages should be reduced on the ground that Apotex had failed to mitigate its damages. The Federal Court dismissed the claim in contract because it found that the action was commenced outside the applicable limitation period.
[6] Two appeals and a cross-appeal are brought from the judgment of the Federal Court. For the purpose of this introduction, the following summary of the issues raised on the appeals is sufficient.
[7] In its appeal (A-554-14), Apotex asserts that the Federal Court erred by:
failing to consider whether Health Canada committed misfeasance in a public office and negligence for reasons apart from its treatment of the settlement agreement;
concluding that Apotex failed to mitigate its damages; and,
concluding that the claim in contract was statute barred.
[8] In its cross-appeal, Health Canada argues that the Federal Court erred by finding there was a breach of the settlement agreement.
[9] In its appeal (A-553-14), Health Canada submits that the Federal Court erred:
in law in finding that the settlement agreement created a relationship of proximity;
in law by failing to negate any prima facie duty of care based on residual policy considerations;
in the alternative, by making palpable and overriding errors of fact with respect to both the standard of care and misfeasance in a public office; and,
further and in the alternative, by finding misfeasance on the facts as found.
[10] These appeals were consolidated by order of the Court. In accordance with the consolidation order, a copy of these reasons shall be placed in each Court file.
[11] For the reasons which follow, I have concluded that the Federal Court committed a single error that warrants intervention by this Court: the Federal Court erred by concluding that Apotex failed to mitigate its loss. It follows that I would dismiss Health Canada’s appeal. I would allow Apotex’ appeal in part and vary paragraph one of the judgment of the Federal Court to read:
Apotex is entitled to damages to be assessed on the basis set out in the reasons of the Federal Court issued on November 18, 2014, with the exception that Apotex did not fail to mitigate its damages.
In all other respects I would dismiss Apotex’ appeal and Health Canada’s cross-appeal.
[12] I begin my analysis by briefly setting out the facts required to situate these appeals. I then review the decision of the Federal Court as it relates to the issues raised on these appeals and consider the standard of review to be applied to the decision of the Federal Court. Finally, I apply that standard to the issues raised in the appeals.
I. Factual Background
[13] The Minister of Health is responsible for ensuring that drugs sold in Canada are safe and effective for their intended purpose. Thus, no drug may be sold or distributed in Canada unless approved by the Minister through the issuance of a notice of compliance.
[14] The present appeals arise from events that took place between 1988 and 1995. During those years, if a research-based pharmaceutical company (also referred to as an innovator) sought approval to sell a new drug in Canada, the innovator was required to provide sufficient information and material to enable the Minister to assess the safety and effectiveness of the new drug.
[15] If, during the same period, a generic drug manufacturer wished to obtain approval to sell a generic version of a drug already available for sale in Canada, the generic manufacturer was required to establish that its product was bioequivalent to the innovator’s approved drug or to establish bioequivalence to a reference product that was known to be safe and effective. Two pharmaceutical products are bioequivalent if they are pharmaceutically equivalent and if their bioavailability can be expected to be essentially the same. Bioavailability refers generally to the rate and extent to which an active pharmaceutical ingredient is absorbed from the dosage form and becomes available in the body.
[16] For the purpose of assessing bioavailability, the guidelines published in 1981 by the Health Protection Branch stated that “generally” the bioavailability of a new generic drug product would be compared to that of an “acceptable standard”. The 1981 Guidelines did not define an “acceptable standard”.
[17] The Federal Court found the usual, but not invariable, practice from 1988 to 1995 was for a generic drug manufacturer to test its product against the innovator’s drug as approved in Canada (reasons, paragraph 26). Indeed, it was an admitted fact that during the relevant timeframe the Health Protection Branch approved six drug products on the basis of a foreign reference product.
[18] The Federal Court described the approval process as “tedious” and noted that a generic drug manufacturer could expect that it would take at least one to two years from the date its submission was filed for a notice of compliance to issue (reasons, paragraph 23).
[19] On January 25, 1988, Apotex submitted to the Health Protection Branch a new drug submission seeking approval to sell its generic version of trazodone, Apo-Trazad (later referred to as Apo-Trazadone). In its submission, Apotex sought to demonstrate that its drug was safe and effective by submitting a bioavailability study that referenced a generic drug manufactured in the United States by Barr Laboratories, referred to as “Barr Trazodone”, instead of a Canadian drug. Barr Trazodone had been approved for sale in the United States on the basis of a bioavailability study comparing it with trazodone approved for sale in the United States under the brand name Desyrel. Desyrel was sold in the United States by the innovator drug company Mead Johnson and Company.
[20] With its drug submission Apotex also submitted a letter dated December 22, 1987, from Bristol Laboratories of Canada, the Canadian company approved to sell the Desyrel product in Canada, to a Canadian doctor, Dr. Rein. In the letter Bristol advised that the Canadian and American Desyrel products were identical (Joint Book of Documents, tab 24).
[21] Apotex stated that the American authorities had approved Barr Trazodone using the United States Desyrel product as a reference and that the Canadian and United States Desyrel products were identical. Therefore, Apotex submitted that because Apo-Trazadone was identical to Barr Trazodone Apotex should be permitted to use the same bioavailability studies relied upon by Barr in its American application. Put another way, Apotex submitted that if American and Canadian Desyrel were identical, the Health Protection Branch should accept the bioavailability study that demonstrated that Barr Trazodone and U.S. Desyrel were bioequivalent as proof that Apo-Trazadone and Canadian Desyrel were bioequivalent.
[22] The Health Protection Branch did not approve Apotex’ new drug submission. It advised Apotex that there was a “normal requirement” for a Canadian reference product and that Barr Trazodone was not an appropriate reference product unless it could be “conclusively proven” to be identical to “a product known to the Branch,” i.e. the “standard trazodone product marketed in Canada” (Joint Book of Documents, tabs 23 and 32).
[23] On February 1, 1990, the Health Protection Branch advised that it would not require a Canadian reference product if “incontrovertible and verifiable evidence can be provided to establish that the product in a foreign market is identical in all respects to the Canadian product” (Joint Book of Documents, tab 40). Thus, the Branch was prepared to accept proof that the Canadian Desyrel was identical to the American Desyrel.
[24] Apotex refused to comply. It rejected what the Health Protection Branch referred to as its “policy” that required a Canadian reference product. Apotex filed an application for judicial review on August 13, 1990, requesting an order directing that the Minister review its application without requiring that the reference product be purchased in Canada and further directing the Minister to issue a notice of compliance to Apotex (reasons, paragraph 49).
[25] This application for judicial review never proceeded to hearing because the parties reached a settlement in November 1990 and Apotex discontinued the application. The written settlement agreement is set out in full at paragraph 51 of the reasons of the Federal Court. In the settlement agreement the parties agreed that:
The review of Apotex’ new drug submission was continuing and had not been completed for the purpose of the then applicable Food and Drug Regulations (C.R.C. 1978, c. 870), (“Regulations”).
Existing and any further data provided by Apotex to establish that its product was chemically and therapeutically equivalent to a drug product sold in Canada would be considered. For the purpose of a comparative bioavailability study “the Health Protection Branch is prepared to consider evidence to establish equivalency between Canadian and non-Canadian reference standards” (emphasis added).
[26] As the Federal Court observed at paragraph 53 of its reasons, “[t]hings did not go well” after the settlement agreement was concluded. Apotex asserted that the Health Protection Branch failed to adhere to the terms of the settlement agreement. On July 17, 1991, Apotex filed a second application for judicial review in which it sought two orders of mandamus. First, Apotex sought an order directing the Health Protection Branch to review its submission and assess whether the submission adequately established the required safety and effectiveness of its drug “without regard to a condition precedent to such review that the reference product tested in the comparative bioavailability study be purchased in Canada or that there be a certification from the manufacturer of the Canadian reference product that it is identical to the non-Canadian reference product”. Second, Apotex sought an order directing the Health Protection Branch to issue a notice of compliance to it.
[27] The application for judicial review was dismissed by the Federal Court on the basis that it was not patently unreasonable for the Health Protection Branch to require that a new drug submission compare the proposed generic drug against a Canadian reference product (Apotex Inc. v. Canada (Attorney General), [1993] F.C.J. No. 31, 59 F.T.R. 85). The Federal Court did, however, conclude that the Health Protection Branch’s refusal to consider Apotex’ full submission “because of a claimed policy that bioavailability studies be done only with reference to a Canadian product” was an unlawful fettering of discretion.
[28] The Federal Court also characterized the Health Protection Branch’s manner of dealing with Apotex “to have been maladroit, at times dissembling if not actually misleading.” This said, the Federal Court did not believe that the Branch “acted in bad faith or with malice.”
[29] Following the second application for judicial review, the Health Protection Branch re‑reviewed Apotex’ submissions, and on April 8, 1994, concluded that Apotex had not “adequately established the bioequivalence of Canadian and U.S. Desyrel drug products.”
[30] Apotex then provided further studies which were reviewed in June of 1994. Upon review of these further studies, the Health Protection Branch reviewer concluded in a “draft” report dated June 23, 1994, (Joint Book of Documents, tab 164) that:
In light of the acknowledgement of chemical equivalence, the nature of the drug substance, and the results of comparative dissolution analyses in a variety of media over the physiological pH range, I have no outstanding concerns regarding the potential inequivalence of U.S. and Canadian marketed Desyrel.
[31] On December 16, 1994, the Health Protection Branch reviewer signed a report which contained only slight revisions to the “draft report”. In it he concluded:
In light of the Crown’s acknowledgement of chemical equivalence, the nature of the drug substance, and the results of comparative dissolution analyses in a variety of media over the physiological pH range, I conclude that no basis remains for articulating concerns regarding the potential inequivalence of U.S. and Canadian marketed Desyrel.
[32] By January 3, 1995, one of the reviewer’s superiors had read the report. She sent a short note to the reviewer asking how the Health Protection Branch might “extricate” itself from the matter.
[33] Thereafter, a lawyer with the Department of Justice sent what the Federal Court characterized to be “a peculiar letter” to Apotex’ lawyers. The letter indicated that Health Canada was attempting to expedite the review of the drug submission. The letter also requested that Apotex sign a release, a copy of which was enclosed, releasing Her Majesty and others from “any and all manner of claims, actions, causes of action, debts”.
[34] Afterwards, senior counsel at the Department of Justice advised that Health Canada would not seek any agreement which would limit any recourse which Apotex might properly have against Health Canada.
[35] On February 28, 1995, Apotex received its notice of compliance. No explanation has been provided for the lengthy delay between the draft and final reports or the significant delay between the final report and the issuance of the notice of compliance.
II. The Decision of the Federal Court
[36] The Federal Court began by reviewing the process for obtaining drug approval in Canada during the period from 1988 to 1995, and the usual practices of Health Canada during that period. The Court then reviewed in some detail the dealings between the parties. Helpfully, the Court tabulated the more relevant documents and events in a 38-page schedule to the reasons.
[37] In the course of its reasons the Federal Court made a number of findings of fact, including the following which are relevant to the issues raised on these appeals:
There was, at the relevant time, a general understanding, at least within the Health Protection Branch, that a Canadian reference product was required to establish the bioavailability, and hence the bioequivalence of a generic drug. This understanding was not reduced to writing until 1989, after Apotex’ drug submission was received. This understanding was not an express requirement of either the Food and Drugs Act, R.S.C. 1985, c. F-27 or the Regulations (reasons, paragraphs 29 to 33).
There was little evidence to support the Health Protection Branch’s assertion that it had a “long-standing” policy of requiring a Canadian reference product. The Health Protection Branch was inconsistent in applying its “policy”. However, there was no evidence that the Branch discriminated against Apotex in this regard (reasons, paragraphs 26, 71).
In January 1989, early in the process, the Director of the Bureau of Human Prescription Drugs, Dr. G. Johnson, sent a memorandum to the Director General of the Drugs Directorate “which clearly draws the lines that [were] followed throughout the history of this matter” (reasons, paragraph 39). The Director of the Bureau wrote:
Therefore, on the basis of science alone, I am inclined to accept the arguments advanced by Apotex. However, we should also examine the possibility that we may be establishing a precedent if we follow this course of action that could see us forced to accept similar arguments from around the world. What is to prevent, for example, Apotex from commissioning a bioavailability study comparing the French brand of a product as the standard? If we accept the arguments advanced in this particular case, we could have a difficult time not allowing this type of study. This could be the start of a process that would see us lose control over the generic submissions.
[Emphasis added]
The Health Protection Branch knew that the American reference product Apotex relied upon was identical to its Canadian counterpart, because the Branch had approved the Canadian innovator’s drug using data provided from the innovator’s U.S. product. However, Health Protection Branch officials refused to look at the Canadian innovator’s file because of an unwritten internal policy which directed that officials not look at the data submitted by the innovator for the purpose of evaluating the submission of a generic who subsequently sought approval to sell the same drug. Thus, the Health Protection Branch required Apotex to prove to the Branch that which it already knew to be true (reasons, paragraphs 46 and 25).
At the time the settlement agreement was concluded the only outstanding issue between the parties was that of bioavailability. Apotex believed that it could demonstrate bioavailability by equivalency, whereas the Health Protection Branch required identicality. The settlement agreement “clearly” stated that the Health Protection Branch would look at the matter from the point of view of equivalency (reasons, paragraph 54).
Thereafter, the Health Protection Branch did not follow the terms of the settlement agreement. The Branch “stayed on a path whereby they were insisting upon identicality.” The Branch was “less than full and forthright in its dealings with Apotex.” There was a deliberate attempt by the Branch “to stick to its position as to identicality while conveying to Apotex a sense that it was willing to be flexible, which it was not” (reasons, paragraph 55).
Apotex was led to believe that if it submitted “a bit more data” to the Health Protection Branch, particularly with respect to dissolution rates, this would be sufficient to satisfy the Branch (reasons, paragraph 56).
Despite asserting to Apotex that it was prepared to accept evidence as to the equivalency of the American and Canadian reference products, the Health Protection Branch was only prepared to consider evidence as to bioavailability with reference to a Canadian reference product (reasons, paragraph 71).
The Health Protection Branch unlawfully fettered its discretion by refusing to consider Apotex’ full submissions on the basis that a Canadian reference product was required (reasons, paragraph 71).
The Health Protection Branch misled Apotex into the belief that the Branch was willing to receive further data and review it on the basis of equivalency when the Branch was not willing to do so (reasons, paragraph 71).
The Health Protection Branch made a deliberate attempt to frustrate Apotex’ submission for a notice of compliance. There appeared to have been “endless circling around the internal idea that a Canadian reference product must be used, and the insistence that Apotex must prove the impossible – identicality” (reasons, paragraph 95).
Apotex wished to make its Apo-Trazadone submission a test case about whether a non-Canadian drug product could be used as a reference. “In no way was Apotex the victim that it purports to be” (reasons, paragraphs 105, 107).
While the words “careless and unconcerned about accuracy” could be applied to the testimony of Mr. Rowsell, the then Director of the Bureau of Pharmaceutical Surveillance, all of the remaining fact witnesses called on behalf of the Health Protection Branch “tried their best to be honest, but somewhat embarrassed, about the facts and evidence as to what went on some twenty to twenty-eight years ago” (reasons, paragraph 106).
The Health Protection Branch “was inefficient, hopelessly bureaucratic, dissembling and clumsy” (reasons, paragraph 108).
[38] The Federal Court went on to conclude that officials of the Health Protection Branch committed the tort of misfeasance in a public office. Officials were aware, since the date of the settlement agreement, that the Branch was to consider Apotex’ submission on the basis of equivalency - yet the Branch ignored this requirement. Further, there was an effort to conceal this from Apotex. This constituted bad faith. Further, the Health Protection Branch was aware that its conduct would likely injure Apotex (reasons, paragraphs 117-119).
[39] Next, the Federal Court considered the tort of negligence. It found that the settlement agreement transformed the relationship between the Health Protection Branch and Apotex such that the Branch owed Apotex a duty of care. But for the settlement agreement, no duty of care would have been owed to Apotex. The Federal Court further found that no residual policy concerns, particularly concerns about indeterminate liability and the discretionary nature of the Branch’s decisions, negated the existence of the duty of care. Finally, the Federal Court found that the actions of the Health Protection Branch breached the requisite standard of care. The breach occurred when officials insisted on assessing Apotex’ submission on the standard of identicality, rather than the agreed-upon standard of equivalency (reasons, paragraphs 123-131).
[40] Next, the Federal Court determined that Apotex’ claim for breach of contract failed because it was brought outside the applicable six year limitation period. The action was commenced on October 9, 1998. Thus, in order to be within the limitation period any breach of contract must have taken place after October 9, 1992. However, the Federal Court found that by April or July 1991, Apotex was aware of, and possessed knowledge of, sufficient facts to be aware that the Branch had breached the terms of the settlement agreement. Thus, the action was commenced outside the applicable limitation period (reasons, paragraphs 136-138).
[41] Finally, the Federal Court considered the issue of mitigation. The Federal Court first considered when Apotex’ damages began to accrue. The Federal Court inferred that Apotex ought to have received its notice of compliance on November 26, 1991, one year after the settlement agreement was entered into. Therefore the Court found that Apotex’ damages began to accrue as of that date.
[42] The Federal Court went on to conclude that Apotex’ damages ought to be reduced because it did not take reasonable steps to avoid its loss. Specifically, the Federal Court found that a reasonable person would have taken steps to mitigate their damages by July 2, 1991. This was the date on which the Federal Court found that Apotex wrote to the Health Protection Branch advising that it would mitigate its damages for another drug (Apo-Zidovudine) by testing that drug against a Canadian reference product. As of that date, Apotex should have re-tested Apo-Trazadone using a Canadian reference standard. Had it done so, Apotex “may have received” its notice of compliance between 15 to 18 months later. It followed that in assessing damages, the starting date was November 26, 1991, but the termination date was mid-November 1992 (reasons, paragraphs 147-163).
III. Standard of Review
[43] The standards of review applicable to the issues raised on these appeals are as described by the Supreme Court in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. The standard of review to be applied to questions of law is correctness. Findings of fact and inferences of fact are to be reviewed on the basis of palpable and overriding error. Findings of mixed fact and law are to be reviewed on the same deferential standard unless an extricable legal error can be demonstrated, in which event such error is reviewed on the correctness standard.
IV. Misfeasance in a Public Office
[44] I begin by setting out the legal principles relevant to the tort of misfeasance and then turn to the errors asserted by both Apotex and Health Canada.
A. The tort of misfeasance in a public office
[45] As neither party asserts any error in the Federal Court’s articulation of the elements of this tort, as set out at paragraph 113 of its reasons, a brief description of the constituent elements of the tort is sufficient.
[46] The leading authority in Canada is Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263. The Supreme Court explained that the tort is based on the rationale that the rule of law requires that executive or administrative powers “‘may be exercised only for the public good’ and not for ulterior and improper purposes” (paragraph 26).
[47] There are two constituent elements to the tort. First, there must be deliberate, unlawful conduct in the exercise of public functions. Second, there must be awareness on the part of the official that his or her conduct is unlawful and is likely to injure the plaintiff (paragraph 32). The requirement that the official must be aware that his or her conduct is unlawful is a reflection of the principle that misfeasance in a public office requires an element of bad faith or dishonesty (paragraph 28).
[48] The tort may arise in one of two ways. First, it may arise out of the conduct of a public office that is specifically intended to injure a person, or a class of persons. Second, it may arise out of the conduct of a public officer who acts knowing both that the officer has no power to do the act complained of and that the act is likely to injure the plaintiff. In either instance, a plaintiff must prove each of the tort’s constituent elements (paragraph 22).
[49] Common to each element of the tort is the requirement that a public officer must have engaged in deliberate and unlawful conduct in his or her capacity as a public officer (paragraph 23). An act may be unlawful because an official acted in breach of a statutory provision, or in excess of the powers granted, or for an improper purpose (paragraph 24).
[50] I now turn to consider Apotex’ appeal.
B. Apotex’ appeal
(1) The Federal Court failed to consider liability arising apart from the settlement agreement
[51] Apotex asserts that the Federal Court erred in law by confining its analysis to Health Canada’s conduct following the conclusion of the settlement agreement. Apotex further asserts that the Health Protection Branch engaged in three related acts of misfeasance prior to the settlement agreement. These acts are said to be the Health Protection Branch’s:
insistence on a Canadian reference product when there was no such statutory or regulatory requirement;
assertion of a long-standing policy that prohibited reliance on a foreign reference product when no such policy existed; and
insistence that Apotex prove the Canadian and American Desyrel products were identical, notwithstanding that the Branch had already reached this conclusion.
[52] I begin by rejecting the assertion that the Federal Court erred in law by confining its analysis to conduct subsequent to the conclusion of the settlement agreement.
[53] The reasons of the Federal Court were structured so that from paragraphs 7 to 101 the Court reviewed the entire history of the dealings between the parties, culminating with the issuance of the notice of compliance on February 28, 1995. At paragraphs 102 to 108 the Court set out its “overall view” of the circumstances of the case.
[54] As part of its overall view, the Court concluded that the Health Protection Branch was, particularly during the years up to 1993, an inefficient, badly run bureaucracy. The bureaucracy possessed unwritten policies such as those respecting the use of non-Canadian reference drugs and those respecting whether third-party files could be accessed in order to confirm information contained in those files. No one wanted to make a decision and consultation took place without end (reasons, paragraph 103). This view of the Health Protection Branch was consistent with the Court’s finding, at paragraph 71 (on page 38), that while the Health Protection Branch “was inconsistent in applying its ‘policy’ with respect to insistence upon a Canadian reference product. […] there is no evidence that Apotex was subject to discrimination in that regard.”
[55] The Court then moved to consider misfeasance, holding that since the date of the settlement agreement the Health Protection Branch knew that it was to consider Apotex’ submission on the basis of equivalency and further holding that “[u]pon entering into the Settlement Agreement with Apotex, [the Health Protection Branch] acted in bad faith” (reasons, paragraphs 117 and 118).
[56] This was a finding that it was only after Health Canada entered into the settlement agreement that its conduct rose to the level of deliberate, unlawful conduct in the exercise of public functions. The Federal Court did not err in law by failing to consider pre-settlement agreement conduct. On the whole of the evidence it only found bad faith to arise after completion of the settlement agreement.
[57] With respect to the pre-settlement conduct that Apotex asserts constitutes misfeasance, as explained in Odhavji, the tort of misfeasance requires an element of bad faith or dishonesty. A public officer must engage in deliberate and unlawful conduct in that capacity. The Federal Court declined to find bad faith or dishonesty prior to the conclusion of the settlement agreement. It found that the Health Protection Branch’s insistence on a Canadian reference product prior to the settlement agreement did not constitute discrimination. Accordingly, it could not be said that the Health Protection Branch’s insistence was deliberate and unlawful conduct in the exercise of public functions. Rather, as evidenced in the Johnson memorandum quoted above at paragraph 37 (iii), the Health Protection Branch was concerned about the policy ramifications that would flow from accepting non-Canadian reference products. Acting on that concern was in accordance with the proper exercise of the Branch’s powers.
[58] Apotex has failed to show a palpable and overriding error on the part of the Federal Court in its appreciation of the evidence surrounding the conduct and intent of the Health Protection Branch prior to the settlement agreement.
C. Health Canada’s appeal
[59] On its appeal, Health Canada asserts four palpable and overriding errors of fact, one error of law and one error of mixed fact and law. During oral argument counsel for Health Canada advised that it withdrew the argument contained in its memorandum of fact and law that misfeasance must, as a matter of law, arise from a breach of a specific statutory duty.
[60] For the following reasons I reject the argument that the Federal Court erred in fact, in law or in mixed fact and law.
(1) The asserted errors of fact
[61] The four alleged errors of fact are said to be the Court’s findings that:
The Health Protection Branch deliberately examined Apotex’ submission on the standard of identicality contrary to the settlement agreement.
Health Protection Branch officials knew that the Canadian and American Desyrel products were identical.
Health Protection Branch officials misled Apotex into believing that the Branch was willing to review further data.
Apotex submitted data in 1990 that demonstrated equivalence.
[62] I begin my analysis by observing that considerable deference is owed to findings of fact made by a trial judge. Thus, findings of fact are reviewed on the standard of palpable and overriding error. A palpable error is one that is plainly seen. An overriding error is one that affects the judge’s assessment of the facts. It is difficult to establish palpable and overriding error. Thus, it has been said that it is not enough to pull at leaves and branches but to leave the tree standing. Rather, the tree must fall (Canada v. South Yukon Forest Corporation, 2012 FCA 165, 431 N.R. 286, at paragraph 46).
(a) The Health Protection Branch deliberately examined Apotex’ submission on the standard of identicality contrary to the settlement agreement
[63] Health Canada complains that the Federal Court failed to identify the evidence relied upon to make this finding and failed to indicate that it considered the evidence to the contrary. However, a Court is not required to extensively catalogue the evidence before it. A Court’s mere reliance upon the evidence of some witnesses over others by itself does not form the basis of a reasonable belief that the Court forgot, ignored or misconceived the evidence in a way that influenced its conclusions (Housen, paragraph 46).
[64] In the present case, there was ample evidence to support the finding of the Federal Court that the Health Protection Branch examined Apotex’ submission on the standard of identicality. Some of the evidence is referred to at paragraphs 53-59 and 71 of the Court’s reasons. To illustrate:
On November 5, 1990, Apotex submitted additional data to show the equivalence of Canadian and American Desyrel (Joint Book of Documents, tab 53). The additional data was reviewed by Dr. Cheriyan, a Chemistry Specialist with the Health Protection Branch. This was agreed by the parties to be the only review of the data which was conducted prior to Health Canada’s letter of December 20, 1990.This letter advised Apotex that the data it submitted was not sufficient to establish the equivalency of the Canadian and non-Canadian reference standards (Agreed Statement of Facts, paragraph 15). In the memorandum prepared by Dr. Cheriyan which outlined the result of his review, he concluded that the data “does not unambiguously prove that the two formulations are identical and I recommend that Apotex be advised accordingly.” His memorandum goes on to make numerous references to identicality (Joint Book of Documents, tab 63).
In cross-examination, Mr. Rowsell confirmed that he understood Dr. Cheriyan to have applied the identicality standard to his review of Apotex’ data (transcript October 27, 2014, page 902, line 26).
Apotex’ expert, Dr. Kibbe, understood from his review of the relevant documents that Dr. Cheriyan had applied the standard of identicality to his review of the data (transcript October 22, 2014, page 495, line 10 to page 496, line 16).
[65] No palpable and overriding error of fact has been demonstrated on the record before the Federal Court.
(b) Health Protection Branch officials knew that the Canadian and American Desyrel products were identical
[66] Health Canada argues that this conclusion was reached “in the total absence of evidentiary support, and by failing to address evidence to the contrary” (memorandum of fact and law, paragraph 84).
[67] Again, I find there was ample evidence to support the finding of the Federal Court:
In his memorandum of January 20, 1989, Dr. Johnson wrote that it was not “illogical” to conclude that the bioavailability study provided by Apotex with its new drug submission “is applicable to the Apotex and Bristol products marketed in Canada” (Joint Book of Documents, tab 21) He went on to state:
This point is further strengthened by the fact that the Mead Johnson product, in addition to being identical to the Bristol product, was in fact the product mainly used in carrying out pivotal studies performed in the U.S., which [studies] were also submitted in support of the Canadian NDS for Desyrel. [Emphasis added]
At trial, Mr. Rowsell confirmed that Dr. Johnson had reviewed the Desyrel new drug submission in order to learn what data had been provided in support of the submission (transcript October 27, 2014, page 831, lines 24 to 28).
Apotex had provided with its new drug submission a letter from Bristol Laboratories, the company that markets Desyrel in Canada, confirming that the Canadian and American Desyrel products were identical. At trial, Mr. Rowsell admitted that the Health Protection Branch could have confirmed the reliability of the letter’s contents directly with Bristol Laboratories (transcript October 27, 2014, page 835, line 22 to page 836, line 24).
[68] No palpable and overriding error has been show