Lundbeck Canada Inc. v. Canada (Health)

Lundbeck Canada Inc. v. Canada (Health)
Court (s) Database
Federal Court Decisions
Date
2014-11-06
Neutral citation
2014 FC 1049
File numbers
T-1395-07
Decision Content
Date: 20141106
Docket: T-1395-07
Citation: 2014 FC 1049
BETWEEN:
LUNDBECK CANADA INC.
Applicant
and
THE MINISTER OF HEALTH AND COBALT PHARMACEUTICALS INC.
Respondents
REASONS FOR ASSESSMENT OF COSTS
JOHANNE PARENT, Assessment Officer
[1] On February 12, 2009, the Court granted the Application by Lundbeck Canada Inc. [Lundbeck] pursuant to the Patented Medicines (Notice of Compliance) Regulations for an order in accordance with Section 6(1) thereof prohibiting the Minister of Health from issuing a Patented Medicines (Notice of Compliance) [PM (NOC)] to the Respondent Cobalt Pharmaceuticals Inc. [Cobalt] in respect of 5 mg., 10 mg., 15 mg. and 20 mg. escitalopram tablets until after the expiration of Canadian Patent No. 1,339,452. The Court also dismissed Lundbeck’s interlocutory Motion to adduce new evidence, the whole with costs, save that no costs were ordered in favour or against the Minister of Health.
[2] It is worthy to note that the PM (NOC) Application in this file was heard in conjunction with the applications in Court files T-372-07 (Lundbeck Canada Inc. v The Minister of Health and Genpharm ULC) and T-991-07 (Lundbeck Canada Inc. v The Minister of Health and Apotex Inc.). The Court explains at paragraph 19 of the Reasons for Order (2009 FC 146) that although these applications were heard consecutively in December 2008; they were distinct and were never joined. In fact, Lundbeck obtained a protective order in each proceeding which had the effect of keeping the three files separate and distinct. However, the Court further specified that considering the degree of commonality of the three files, only one set of Reasons was issued.
[3] Upon receipt of the Bill of Costs, a conference call was held with counsel for Lundbeck and counsel for Cobalt to determine the timetable for the cross-examinations and exchange of written materials. Written directions ensued. Further to the cross-examination and the filing of the parties written representations, a Notice of Appointment was issued. The hearing of the assessment of costs took place in Toronto, Ontario on June 4, 2014 with counsel for Lundbeck and Cobalt making representations. At hearing, counsel for Lundbeck filed a Re-Amended Bill of Costs, detailing a claim of $69,815.20 in assessable services and $182,601.65 in disbursements. At the beginning of the hearing, counsel for Lundbeck, referring to paragraphs 3 b), c) and e) of the Affidavit of Christian Leblanc sworn July 5, 2013 [the Leblanc Affidavit], further reviewed the amounts claimed. Despite these changes, the document attached to the Re-Amended Bill of Costs, to substantiate the disbursements claimed, showed a total of $284,142.63 with $120,245.63 for the experts and $163,897.00 for all other disbursements. On August 13, 2014, counsel for Lundbeck submitted a further amended document with regard to disbursements only, reflecting a total amount claimed of $182,596.48 ($119,410.45 in expert fees and $63,186.06 for all other disbursements).
I. Lundbeck’s arguments [4] The Leblanc Affidavit states that Lundbeck is a pharmaceutical company focusing on the treatment of disorders of the central nervous system and is the owner of Canadian Patent No. 1,339,452 entitled Enantiomers of Citalopram and Derivatives Thereof. It further specifies that Escitalopram is the S-enantiomer of the racemic drug citalopram, a product that accounts for a substantial share of Lundbeck’s revenue in Canada. Further to receiving the Notice of Allegation from Cobalt in respect of escitalopram, Lundbeck filed an application for an order in accordance with Section 6(1) of the PM (NOC) Regulations. The evidence in support of the Application was composed of the Affidavits of Klaus B. Bøgesø, Klaus Gundertofle, Christian K-Jensen, Stewart Montgomery, Brian Clark, Steven Davies, Marie Gagné and Peter Davies.
[5] At the hearing of the assessment, counsel for Lundbeck argued that the amounts claimed are reasonable when the overall substance of the file, the intensity of the work required in a relative short timeframe and the difficulty of dividing the invoices, considering that the work on the three files was done concomitantly, are taken into consideration.
[6] In fact, as each of the generic companies (Genpharm/Mylan, Apotex and Cobalt) contested the PM (NOC) Regulations applications, it is submitted that the end results was that Lundbeck had to pay legal fees and disbursements to make their case in the three files, not one over or before the other. It was also submitted that the work required was intense for all team members on these proceedings as Lundbeck had much to lose. Counsel further asserted that although the Notice of Compliance procedure in this file was dealt with concomitantly with Court files T-372-07 and T-991-07 and that the expert witnesses were practically the same for each file, the Leblanc Affidavit specifies that adjustments had to be made as the expert witnesses had to consider a different angle for each file as the Respondents’ evidence was different from one to the other with regard to the particularities of each generic. However, considering the nature of the protective orders in each file, the nature and extent of these adjustments cannot be disclosed. It was also contended that in consideration of the fact that the files were all related and that the work of the experts was done simultaneously on all files, most of the cross-examinations on the three files took place during the same period of time (April to September 2008), having counsel travelling to different countries/cities to deal with the cross-examinations of the same expert witnesses, resulting in an overlap of the experts’ invoices, the travel costs for experts and counsel, etc. In light of the above, counsel for Lundbeck explained that when it was not possible to confirm to which file the work invoiced on a particular file related, he split the invoice between the three files while considering the different allegations for each generic and taking into consideration that the experts worked on the three files concomitantly and prepared their invoices for the three files in a “holistic manner”. It was submitted that Cobalt cannot argue that the evidence was identical and as a result request a discount for being the third file. With regard to the hearing of this Application, it is contended that while the hearing in the other two files each lasted five days, the hearing in this file only lasted three days in consideration of the Court having already heard some of the technical and scientific arguments in the two other files.
[7] Counsel for Lundbeck further contended that they had attempted to negotiate the Bill of Costs with Cobalt, to no avail. Counsel submitted that because Cobalt did not respond to their communication and costs negotiation settlement attempts, Lundbeck did not file its Bill of Costs until six months after the Supreme Court of Canada decision. It was further argued that Lundbeck’s conduct in filing their Bill of Costs when they did, did not unnecessarily lengthen the duration of the proceeding, or cause supplementary expenses and that paragraph 400(3)(i) of the Rules refers to the main matter before the Court, not the costs assessment. Counsel for Lundbeck added that the different bills of costs previously sent to Cobalt’s counsel were submitted as drafts with the intent of negotiating a settlement. Those were privileged documents presented for negotiation and should not form part of Cobalt’s materials in this assessment of costs. Counsel further stated that the bills of costs regarding the files involving Apotex and Genpharm/Mylan were settled and that these settlement negotiations were to remain confidential.
[8] In discussing the complexity and amount of work required on this file, counsel for Lundbeck submitted that the upper end of Column III of Tariff B should be allowed throughout as it is justified by the numerous and particularly complex, legal and scientific questions requiring testimony from renowned experts. Paragraph 22 of the Leblanc’s Affidavit expands:
22. The evidence was complex and voluminous. The issues involved included inter alia:
a) Whether the claims of the ‘452 patent, which cover escitalopram, methods for the preparation of escitalopram and pharmaceuticals composition containing escitilopram, are infringed or not;
b) Whether the patent is invalid because anticipated, obvious, insufficient, and ambiguous or whether the claims are broader than the invention;
c) In particular, whether the ingestion of citalopram inevitably results in escitilopram;
d) Whether the methods for resolving enantiomers, including chiral columns, diastereomeric salts, covalently bound diastereomers, diol cyclization as well as the twp reactions schemes described in the patent were well known and in common use at the relevant date;
e) Whether the prior art discloses the superior benefits of escitalopram;
f) Whether the ‘452 patent is a selection patent;
g) Whether section 53 of the Patent Act has been breached.
[9] Counsel argued that in the three files, the respondents alleged that the “escitalopram” patent at issue was a selection patent while Lundbeck asserted that it was not. As per the Leblanc Affidavit, the other arguments raised by the Notice of Allegation and responded to by Lundbeck in this matter revolved around the anticipation and obviousness of escitalopram, the ambiguity of the patent, the insufficiency of its disclosure and the anticipation of the molecule. Lundbeck was successful before the Federal Court and the Federal Court of Appeal while Cobalt’s application for leave to appeal to the Supreme Court was denied. In light of the decision in Interactive Sports Technologies Inc. v Canada (Attorney General), 2012 FCA 78, counsel submitted that with no further directions from the Court, the assessment officer cannot depart from Column III of Tariff B. However, counsel inferred that the costs in this matter are justified at the upper end of Column III due to the fact that in another matter before this Court, involving Lundbeck and Apotex, regarding the validity of the escitalopram patent, the Court directed that costs were awarded at the upper end of Column IV.
[10] With regard to the sufficiency of evidence that payments on the invoices were tendered, counsel argued that the evidence in the Leblanc Affidavit presents all the invoices and affirms that they have been paid. It is contended that saying otherwise would be maintaining that Lundbeck did not pay its bills. Counsel for Lundbeck argued that “Tariff B requires that disbursements be supported by satisfactory evidence” and that all evidence does not need the proof of a receipt from the payee. As per F-C Research Institute Ltd. v Canada, 95 DTC 5583 (F-C Research), Carlile v Canada, 97 DTC 5284 (Carlile) and Teledyne Industries v Lido Industries, (1981) 56 C.P.R. (2d) 93 (Teledyne), it was contended that the assessment officer can accept affidavit evidence that the amounts were incurred and paid. Counsel further argued that the discretion of the assessment officer should concentrate on finding what is more or less probative: the fact that it is not specifically mentioned that an invoice has been paid does not mean that it has not been paid. Counsel submitted that the invoices are attached to the Leblanc Affidavit, the amounts are reasonable and have most likely been paid by Lundbeck. Counsel concluded that believing the contrary would lead to an absurd result. The assessment officer does not need an absolute proof but a satisfactory proof to set in motion the necessary discretion to determine what was reasonable and necessary in the circumstances. Referring to the decision in Merck & Co. v Canada (Minister of Health), 2007 FC 312 (Merck) at paragraph 69, counsel for Lundbeck finally contended that as in that case, the assessment officer can allow disbursements even when the affidavit in support of the bill of costs does not contain specific details.
II. Cobalt’s arguments [11] In response, counsel for Cobalt corroborated that Cobalt was the third generic company to pursue a Notice of Compliance for escitalopram and that the hearing of this third PM (NOC) Application took place in December 2008 after the hearings in Court files T-372-07 and T-991-07. During the assessment hearing, it was contended that, as a result of going last, an important part of the work done in Court files T-372-07 and T-991-07 reduced the work on this file with the most work having been done on the first file. Counsel for Cobalt argued that there is insufficient documentation in the record making it “really difficult to find out what is a fair amount that Cobalt should pay given the lack of details”. However, she added that Cobalt should not be subsidizing Genpharm/Mylan or Apotex. It was argued that the fact that Lundbeck chose “what they called a holistic approach” with the work on the three files being completed at the same time and billed together, did not prevent Lundbeck from keeping adequate documentation separating the three files and that Cobalt should not be penalized for Lundbeck’s way of proceeding. In Cobalt’s Responding Record and verbal arguments, it was submitted that the work on the three files was done simultaneously, that the cross-examinations on the three files took place around the same time in the summer and early fall of 2008, that the evidence of Lundbeck’s witnesses was substantially the same in each of the three files, and that “considerably less work was done on the Cobalt file when the documents are just looked at on their face”. Counsel asserted that when questioned on the issue whether Lundbeck filed affidavits from the same fact and expert witnesses in the three files, Christian Leblanc, in cross-examination on his Affidavit, stated that he was “not sure if there was some slight differences” and that he would have to verify the other files, keeping in mind the protective orders issued by the Court. Counsel submitted that when asked if the evidence of the witnesses was substantially the same, Mr. Leblanc added that it was “difficult to qualify, but I would say substantially the same but there were some adjustments to be made in each file”. Considering the language used in the cross-examination of Mr. Leblanc, counsel for Cobalt submitted that the evidence put by the witnesses was the same or very similar with only some adjustments needing to be made and that in consideration of the protective orders, Cobalt was not informed concerning the nature of these adjustments. Counsel for Cobalt contended that considering the protective orders in place, it is Lundbeck’s burden to substantiate the quantum of costs and document the required information.
[12] It is Cobalt’s position that costs should be reduced considering that Lundbeck does not deny that the evidence was substantially the same, cannot substantiate the amounts and, in light of the protective orders, cannot answer specific questions to clarify these issues. In response to the disbursements claimed, counsel for Cobalt referred in her Representations in Response to subsection 1(4) of Tariff B of the Rules. At paragraph 122, she indicated:
122. In this case, counsel for Lundbeck admitted that it is claiming not those amounts that were paid or are payable by its client but amounts that it has picked and chose based on a mandate and its “client’s advice”. Counsel for Lundbeck further admitted that it has not provided a full record of the disbursements it claims.
[13] Counsel for Cobalt argued per IBM Canada Ltd. v Xerox of Canada Ltd., [1976] FCJ No. 124 that an assessment officer should not accept an affidavit at face value, but examine the quality of the proof submitted. Referring to the cross-examination of C. Leblanc, she contended that with the exception of certain amounts, the proof that the disbursements claimed were actually paid or are payable is missing from Lundbeck’s evidence. She claimed that it is particularly important since, according to the Leblanc Affidavit, all work on the three files (Cobalt, Genpharm/Mylen and Apotex) was done simultaneously and “no attempt was made at the time to keep disbursements separate”. Per Advance Magazine Publishers Inc. v Farleyco Marketing Inc., [2010] FCJ No. 844 and Hoffman-La Roche Ltd. v Apotex Inc. [2013] FCJ No. 1370, she argued that “the less evidence a party claiming costs provides, the more it is dependent on the assessment officer’s discretion, the exercise of which should be conservative, with a view to the sense of austerity which should pervade costs, to preclude prejudice to the payer of costs”. Counsel for Cobalt specified that they do not dispute the jurisprudence that says that receipts need not be attached for every single item “if you have an affidavit from a lawyer who sets out the fact that amounts have been paid”. She further pointed out that the Leblanc Affidavit states that expenses have been incurred, but that there is no mention in the Affidavit that the client has been charged or that the amounts have been paid. Counsel submitted that paragraph 3 of the Leblanc Affidavit states: “I attach the following exhibits to this affidavit in support of the amended bill of costs” and that this statement is followed by a list of the exhibits attaching receipts and invoices. She further contended that paragraph 3 g) and subsequent of the Affidavit mentions: “Receipts showing expenses incurred by counsel for Lundbeck…” While paragraph 3 m) and n) specify “…expenses billed to Lundbeck…” She argued that exhibit 15 to the Affidavit introduces a report compiling all disbursements incurred by the law firm in the course of this matter and that further to a review of the individual listings, the report contains numerous claims that do not relate to Cobalt. Counsel argued that there is no evidence showing that these disbursements specifically relate to Cobalt and questioned whether the “matter” referred to in the Affidavit is a reference to the “escitalopram matter”. She further contended that the breakdown of these numbers should have been done in the Leblanc Affidavit and not given by counsel during the cross-examination of Mr. Leblanc or during the assessment hearing. Counsel for Cobalt further argued that considering the lack of evidence and the amounts that Lundbeck have already recovered from Genpharm/Mylan and Apotex, Cobalt should not be prejudiced and have to pay costs incurred in the Genpharm/Mylan and Apotex matters. She argued that to the extent that evidence is not provided that the specific costs and disbursements relate to Cobalt, they do not.
[14] In response to the argument that Cobalt ignored Lundbeck’s settlement proposals on costs, counsel for Cobalt contended that there is no evidence on record of unreturned telephone calls and all written correspondences had been responded to, making it inappropriate for Lundbeck to infer that all other parties except Cobalt agreed to negotiate. Counsel added that Cobalt had no knowledge of the amount of costs demanded by, or paid to Lundbeck in the two other files. On the persistence in advancing the Bill of Costs, Cobalt referred to the decision in Urbandale Realty Corp. v Canada, 2008 FCA 167, at paragraph 21. It was further argued in their Written Representations that Lundbeck’s counsel sent Cobalt different versions of their bills of costs on January 19, 2010, March 16, 2012, April 16, 2013 and July 5, 2013, reducing the costs claimed each time. From Cobalt’s standpoint, these documents were not confidential or without prejudice since they were not indicated as such or were not subject to an agreement of confidentiality between the parties. Counsel concluded that at paragraph 150 of the Reasons for Order, the Court held that Lundbeck was entitled to one set of costs in each of the three applications, not specifying if they have to be equal and it is Cobalt’s position that the assessment officer, in accordance with Rule 400(1) and the decision in Shotclose v Stoney First Nation, 2011 FC 1051, who has full discretionary powers to sort out the amounts claimed.
III. Decision [15] Upon my reading of paragraph 6 of the Reasons for Order in this Court file (2009 FC 146), the main issues before the Court were the validity of the patent and whether or not the Minister should be prohibited from issuing a Notice of Compliance to Cobalt, or the other respondents. These proceedings did not serve to determine the issue of infringement. Relying on the factors set in rule 400(3) of the Federal Courts Rules, counsel for Cobalt argues that this litigation was not complex, a repeat of the litigations with regards to the two other generic companies involved with escitalopram. On the other hand, counsel for Lundbeck claims that the three files were important and involved complex PM (NOC) proceedings that raised complex legal and factual issues and that this file was of significant importance, hence the claim at the upper-end of Column III for all taxable services. Both parties agree that the assessment officer may consider the factors set at Rule 400(3) of the Federal Courts Rules to assess costs. The Court granted Lundbeck’s PM (NOC) Applications with costs on each file. Lundbeck having not moved the Court for specific directions to the assessment officer (Rule 403), the assessment officer in assessing Lundbeck’s costs can only exercise her discretion using the number of units imposed under Column III of the Table to Tariff B while referring to Rule 409 which allows the assessment officer to consider the factors listed at Rule 400(3).
[16] The premise behind Lundbeck’s argument for claiming the maximum number of units for each service demanded under Tariff B is that they were completely successful in the conduct of the litigations before the Federal Court and the Federal Court of Appeal. Reading the Courts’ decisions in both Courts as well as the documents on file and counsel’s arguments, there is no doubt that this matter was extremely important to all parties involved and raised some complex scientific issues. However, I am of the opinion that, although the validity of the Patent was attacked on several fronts, this was not the most complex of patent cases. On the other hand, upon reviewing the file, along with the cross-examinations, it is obvious that this matter required a significant amount of work but it did not exceed that of an average patent proceeding.
[17] Counsel for Cobalt raised the issue of apportionment of liability (Rule 403(d)) insisting that the amount of work required and relevant to the Cobalt file was diminished when one considers that Cobalt was the third of three consecutive PM(NOC) cases prepared and argued with respect to escitalopram. On that issue, Lundbeck’s arguments and the evidence (Affidavit of Christian Leblanc) were not successful in convincing me that the work performed in the Cobalt file was a great deal different from the work in the Apotex and Genpharm/Mylan cases. Counsel for Cobalt further argued that some or all of the costs claimed against Cobalt in the Bill of Costs have already been covered by Apotex and Genpharm/Mylan. She contended, referring to the cross-examination of C. Leblanc and Lundbeck’s arguments regarding the “slight differences” between the expert witnesses’ reports in the three files, that the privilege attached to the costs settlements between Lundbeck and Apotex, and Genpharm/Mylan should be waived from the Protective Orders issued on these files to prevent Lundbeck from being overcompensated (Dos Santos v Sun Life Assurance Co. of Canada, 2005 BCCA 4 at paras. 37 & 39 (Dos Santos)). Counsel for Lundbeck argued the legitimacy of the Protective Order on file, adding further in his Written Representations that “settlement agreements are privileged and thus are neither admissible as evidence nor relevant to the present matter and, consequently, no adverse inference can be drawn by the assessment officer in that respect”.
[18] I am mindful that settlement agreements are usually covered by solicitor-client privilege. In addition, the Protective Orders signed by the Court in Court files T-1395-07, T-372-07 and T-991-07 along with my reading of paragraph 24 of the Protective Order in this Court file, lead me to understand that the Order remains in effect as it reads that the “provisions of this Order shall continue after the final disposition of these proceedings and this Court shall retain jurisdiction to deal with any issues relating to this Order, including without limitation, its enforcement”. The Court further adds at paragraph 25:
The terms and conditions of the use of Confidential Information and the maintenance of the confidentiality thereof during any hearing of this proceeding shall be matters in the discretion of the Court seized of this matter.
[19] Considering the wording of the Protective Orders found in the three files, I am of the view that the exception to costs settlement negotiations “privilege” in this Court file as well as in T-372-07 and T-991-07 would have needed to be recognized by the Court as the assessment officer, not being a Court member, is powerless regarding the disclosure of any of the information regarding these files. Referring back to the decision in Dos Santos (supra) and the exception to the “blanket privilege” regarding settlement, I recognize that full disclosure on settlement negotiations could have been relevant. However, I am not convinced, had the Court been moved to subtract the settlement negotiations from the realm of the Protective Orders in Court files T-372-07 and T-991-07, that it was absolutely necessary in the circumstances of this case.
[20] Determining the reasonableness of the services and disbursements claimed in Lundbeck’s Bill of Costs will involve the exercise of a substantial degree of discretion. In Merck & Co. v Apotex Inc., 2008 FCA 371, the Federal Court of Appeal plainly pointed out the considerable discretion vested with assessment officers:
[14] In view of the limited material available to assessment officers, determining what expenses are “reasonable” is often likely to do no more than rough justice between the parties and inevitably involves the exercise of a substantial degree of discretion on the part of assessment officers. Like officers in other recent cases, the Assessment Officer in this complex case, involving very large sums of money, gave full reasons on the basis of a careful consideration of the evidence before him and the general principles of the applicable law.
[21] In this matter, I am mindful that some duplication in the provision of legal services involving the Genpharm/Mylan and Apotex files was certainly inevitable. During his cross-examination on Affidavit, C. Leblanc, when questioned about the substantial similarity of the witnesses evidence on the three files, stated at page 14 that it was “difficult to qualify, but I would say substantially the same but there was some adjustments to be made in each file”. Although, I share Cobalt’s concern regarding repetitive work and possible duplication from one matter to the other, I am of the opinion that Lundbeck’s counsel could not assume the experts’ work and positions on each matter and of the specifics that could be transplanted from one file to the other. The Court in the Reasons for Order suggests that substantial case preparation was required for all three matters and while the Court addresses similar findings in his assessment of Canadian Patent No. 1,339,452 not being a selective patent, it also dealt with allegations and other issues, justified or not, that were not common to each. Considering that the applications on these files were served and filed a few months apart from each other while the hearings proceeded a few weeks apart, I agree with counsel for Lundbeck that in consideration of the short and very similar timeframe of these proceedings, it is almost impossible to know which of the three files were dealt with first, second or third and to which extent it should be considered a factor to take into consideration as I clearly do not think that one generic company should assume the burden for the two others. This being said, the allegations argued in each PM (NOC) applications were not put in evidence before me and considering the timeframe of the three files, I am satisfied that the cross-examinations and the hearing related to the Cobalt file progressing within the same timeframe or a few weeks after the Genpharm/Mylan and Apotex matters did necessitate a thorough preparation on behalf of counsel for Lundbeck. Therefore, the issue of the allocation of the costs claimed with regards to the three files will explicitly be dealt with when assessing the specific services and disbursements on this matter. The Court awarded separate costs on each file and absent clear evidence; references to the other files in this costs assessment should be limited to circumstances when the services noticeably overlapped.
[22] As far as the matter of costs is concerned, I do not believe that Lundbeck’s conduct in this Court file resulted in unnecessarily lengthening the proceedings. At the outset, the Federal Courts Act or Rules do not set any timeframe for the filing of a party’s bill of costs. Further, I do not believe that for Lundbeck to have waited for the Supreme Court of Canada decision on the leave to appeal from the Federal Court of Appeal decision constitutes the type of conduct that unnecessarily lengthened the proceedings. The filing of Lundbeck’s initial Bill of Costs four years after the Federal Court decision but months after the Supreme Court of Canada decision on the leave to appeal is not what I would consider a long delay. Further, I find no ill conduct in the manner Lundbeck proposed the opposing party amended bills of costs all through the process. I rather see that as a negotiation tactic between counsel and I do not think that in the case at bar, it severally impaired the process or unnecessarily lengthen the process. Therefore, Lundbeck’s decision to proceed with their Bill of Costs four and a half years after the Federal Court issued its decision should not have any impact on the costs assessment.
[23] In assessing disbursements, the assessment officer’s role is to determine if costs were incurred, and once this has been established, whether the costs were reasonable and necessary. Section 1(4) of Tariff B states that “No disbursements, others than fees paid to the Registry, shall be assessed or allowed under this Tariff unless it is reasonable and it is established by affidavit or by the solicitor appearing on the assessment that the disbursement was made or is payable to the party.” This rule is unambiguous: only the fact that disbursements were made or are payable can be established by way of affidavit or by solicitors appearing, not their reasonableness. It is once the assessment officer is satisfied that the costs were incurred, that can be determined their reasonableness and necessity.
[24] As pointed out at the beginning of these Reasons and by counsel for Cobalt in her representations, the amounts claimed in Lundbeck’s original and re-amended Bills of Costs vary substantially. With regard to disbursements, counsel further pointed out in her Written Representations:
16. In the Amended Bill of Costs dated July 5, 2013 and the Leblanc Affidavit, counsel for Lundbeck set out the amounts it claims for disbursements as 14 separate Items. However, on cross-examination, counsel for Lundbeck acknowledged that in many instances, the amounts claimed in its Amended Bill of Costs do not match the amounts documented in the Exhibits to the Leblanc Affidavit. Counsel for Lundbeck indicated that in instances where it has not provided any documentary evidence in support of a claimed amount, it is not, in fact, claiming that amount.
It can also be read from the transcript of the examination of Christian Leblanc on his Affidavit at pages 20-21:
Mrs. Heather E.A. Watts
Q. Ok, and we just talked about briefly before, some of the documents in this list are included in the affidavit and some aren’t.
A. Uh-huh.
Q. So am I correct in assuming that the total that you get at the end, where you said it’s 285, I believe.
281.
Me Hilal Elayoubi
231
Mrs. Heather E.A. Watts
Q. $235,601.79. And then the amount you’re claiming is less than that, $194,705.
A. $194,705.92, it’s gonna change with the corrections that Me Elayoubi did.
Q. Sure
A. …but roughly yes.
Q. Ok, so am I right in assuming that in this chart, where there’s a document that’s not attached in the affidavit that’s a document the amount for which you’re not including in the total?
A. Yes
And at pages 67-68:
Mrs. Heather E.A. Watts
Q. Ok, and I think I asked you this before but I just want to be sure of the answer. So to the extent that there are documents listed in here that are not included in the affidavit, those are amounts that you’re not claiming, is that correct? So for example, where we see the fourth entry down to B, Alain Leclerc, that document does not appear in any of the exhibits, so is that an amount that’s not being claimed?
A. Yes
Q. That’s correct?
A. Yes, that’s correct.
[25] The prima facie evidence of the disbursements incurred in this matter as presented in the Leblanc Affidavit was challenged by counsel for Cobalt during the cross-examination of Mr. Leblanc held on December 17, 2013. The lack of sufficient and accurate details as pointed out by counsel for Cobalt makes it more complicated to secure the absolute proof sought out. In support of their contention regarding quality and insufficiency of the evidence, counsel for Cobalt referred to IBM Canada Ltd. v Xerox of Canada Ltd., [1976] F.C.J. No. 124, Advance Magazine Publishers Inc. v Farleyco Marketing Inc., 2010 FCA 143 and Hoffman-La Roche Ltd. v Apotex Inc., 2013 FC 1265.
[26] In reply, counsel for Lundbeck referred to F-C Research (supra), Carlile (supra) and Teledyne (supra). The assessment officer concerned with the lack of sufficiency of evidence to justify the expenditures stated in F-C Research:
12 In my opinion, the simple delineation of expenditures generally described in a Bill and supported only by the scant statement that they were reasonable and necessary fails to provide sufficient information upon which a taxing officer can discharge the responsibility of being satisfied that the costs claimed were essential to the conduct of the proceedings, that they were prudently incurred, or that the quantity or rate applied, as the case may be, was reasonable in the circumstances. In arriving at that conclusion, I am guided as well by the principles established by this Court in Alladin Industries Inc. v. Canadian Thermos Products Ltd. [1973] F.C. 942, 12 C.P.R. (2d) 24 (T.D.); Red Owl Foods (Alta.) Ltd. v. Red Owl Stores Inc. (1971) 12 C.P.R. (2d) 266 (Fed. T.D.); Teledyne Industries v. Lido Industries (1981) 56 C.P.R. (2d) 93; and Diversified Products Corporation v. Tye-Sil Corporation Limited, Court file no. T-1565-85, unreported, November 22, 1990, the Honourable Mr. Justice Teitelbaum, from which decisions I derive that, firstly, it would be improper not to question disbursements, even, I would add, in the absence of any apparent opposition on the part of other interested parties. Secondly, disbursements must be supported by evidence which satisfactorily demonstrates that the costs claimed meet the twofold test of reasonableness and necessity. The Defendants have fallen well short of that challenge in the present taxation and the disbursements claimed under Tariff B 3 must therefore be disallowed.
[27] In Carlile, the assessment officer notes that work had clearly been done but the assignment of appropriate quantum for indemnification was made difficult, if not impossible considering the lack of proper proof explaining all the entries. He further added:
Taxing Officers are often faced with less than exhaustive proof and must be careful, while ensuring that unsuccessful litigants are not burdened with unnecessary or unreasonable costs, to not penalize successful litigants by denial of indemnification when it is apparent that real costs were indeed incurred. This presumes a subjective role for the Taxing Officer in the process of taxation. My Reasons dated November 2, 1994, in T-1422-90: Youssef Hanna Dableh v. Ontario Hydro cite, [1994] F.C.J. No. 1810, at page 4, a series of Reasons for Taxation shaping the approach to taxation of costs. Dableh was appealed but the appeal was dismissed with Reasons by the Associate Chief Justice dated April 7, 1995, [1995] F.C.J. No. 551. I have considered disbursements in these Bills of Costs in a manner consistent with these various decisions. Further, Phipson on Evidence, Fourteenth Edition (London: Sweet & Maxwell, 1990) at page 78, paragraph 4-38 states that the "standard of proof required in civil cases is generally expressed as proof on the balance of probabilities". Accordingly, the onset of taxation should not generate a leap upwards to some absolute threshold. If the proof is less than absolute for the full amount claimed and the Taxing Officer, faced with uncontradicted evidence, albeit scanty, that real dollars were indeed expended to drive the litigation, the Taxing Officer has not properly discharged a quasi-judicial function by taxing at zero dollars as the only alternative to the full amount. Litigation such as this does not unfold solely due to the charitable donations of disinterested third persons. On a balance of probabilities, a result of zero dollars at taxation would be absurd.
Of note the comment about the standard of proof and the subjective role of the assessment officer in making sure that the claiming party is appropriately reimbursed for the expenses incurred while the opposing party is not burdened with inappropriate expenses.
[28] The Court decision in Teledyne confirms the authority of the assessment officer while further stating that not all expenditures need to be supported by a receipt:
23 In the taxation of a party-and-party bill of costs acceptance without inquiry of the propriety of a disbursement is wrong in principle and should be reviewed: vide IBM v. Xerox, supra at p. 186. Of course, all disbursements, even when properly expended, should be proved to the satisfaction of the Taxing Officer. But it does not follow that all items of expenditure should rigorously be supported by a receipt from the payee. There are other ways to prove that a bill has been paid. In my view, the prothonotary was perfectly right in allowing those costs as they were obviously incurred, and properly so, in connection with the various examinations for discovery. The entire amount is therefore taxable.
[29] In Abbott Laboratories v Canada, 2008 FC 693 (Abbott-2), the assessment officer summarized the position faced by assessment officers in circumstances like this one:
However, that is not to suggest that litigants can get by without any evidence by relying on the discretion and experience of the assessment officer. The proof here was less than absolute, but I think there is sufficient material in the respective records of the Federal Court and the Federal Court of Appeal for me to gauge the effort and associated costs required to reasonably and adequately litigate Apotex’s position. A lack of details makes it difficult to confirm whether the most efficient approach was indeed used or that there were no errors in instructions, as for example occurred in Halford, requiring remedial work. A paucity of evidence for the circumstances underlying each expenditure make it difficult for the respondent on the assessment of costs and the assessment officer to be satisfied that each expenditure was incurred f