Ontario Court Of Appeal Summaries (May 4 – 8, 2015)

Hello everyone. Below are summaries of this week's Ontario Court of Appeal civil decisions (non-criminal). Topics covered include intellectual property, police liability, wrongful dismissal, occupier's liability, and the oppression remedy under the Condominium Act. In Bienstock v Adenyo, the Court of Appeal applied the Supreme Court's 2006 decision in Pro Swing Inc v. Elta Golf Inc, which confirmed that non-monetary foreign judgments can be enforced in Canada.

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Apotex Inc. v. Eli Lily and Company, 2015 ONCA 305

[Doherty, Feldman and Blair JJ.A.]

Counsel: D. D. Conklin and N. D. Luca, for the appellant P. Smith and T. J. Burke, for the respondents

Keywords: Intellectual Property, Patent Law, Patented Medicines (Notice of Compliance) Regulations, Unjust Enrichment, Disgorgement of Profits, Motion to Strike, , Rules of Civil Procedure, Rule 21.01(1)(b)

Facts: The appellant, Apotex, is the generic manufacturer of a drug used to treat Attention Deficit Hyperactivity Disorder ("ADHD"). The respondents Eli Lily and Company and Eli Lilly Canada Inc. ("Lilly") are also brand name manufacturers of drug used to treat ADHD, for which they held a patent. Lilly's patent for the drug was subsequently declared invalid by the Federal Court. Apotex then became entitled to recover from Lilly, under s. 8(1) of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 ("PMNOC regulations"), the loss it suffered as a result of its two year exclusion from the market. During that two year period, Lilly earned about $70 million in sales of its patented drug, which it sold at monopolistic prices.

Apotex then brought an action against Lilly, including a claim for unjust enrichment, on the basis that it was entitled to recover all of the monopolistic profits Lilly earned during the time it was excluded from selling its generic drug in the market. Apotex was seeking a disgorgement of these profits, as the appropriate remedy. To support its claim for unjust enrichment, Apotex pleaded the following: (1) it suffered a deprivation by the delay in the issuance of the Notice of Compliance for its generic product; (2) Lilly enjoyed a corresponding benefit by an extension of its market exclusivity equivalent to Apotex's delay, resulting in a windfall to Lilly; and (3) there is no juristic reason for Lilly to retain that windfall. It should be noted that Apotex would never have earned the same amount of the profits Lilly earned during that time, as it sells a generic product at a lower price.

Apotex, appealed the decisions of the motion judge and the Divisional Court, both of which struck its claim for unjust enrichment against Lilly, pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure. The Divisional Court found that it was plain and obvious that Apotex's unjust enrichment claim had no reasonable prospect of success. Specifically, it found that while the PMNOC regulations constitute a complete code of remedies for pharmaceutical companies by virtue of their operation, it is possible for a party to obtain another remedy if can establish a cause of action that is "totally independent" of this regulatory regime. Applying this principle, it struck Apotex's claim for unjust enrichment on the basis that Apotex had not asserted an independent cause of action outside the ambit of the PMNOC regulations, as the impugned representations were made by Lilly on a form prescribed by the regulations.

Issue: (1) Did the Divisional Court err in striking Apotex's claim for unjust enrichment under rule 21.01(1)(b), on the basis that it was plain and obvious that it had no reasonable prospect of success?

Holding: The appeal was dismissed and costs fixed at the agreed-upon amount of $17,500 were awarded to Lilly. The parties have agreed that the costs below of $22,932.75 and $15,000 would also be payable to Lilly.

Reasoning: (1) No. The Divisional Court did not err in striking Apotex's claim for unjust enrichment. The Court of Appeal first reviewed the test for unjust enrichment, which requires a plaintiff to establish three things: (1) an enrichment of or benefit to the defendant; (2) a corresponding deprivation of the plaintiff; and (3) the absence of a juristic reason for the enrichment, Kerr v. Baranow, 2011 SCC 10. It also reviewed the test on a motion to strike- whether the facts as pleaded, assumed to be true, could support a successful unjust enrichment claim, Imperial Tobacco Canada Ltd., 2011 SCC 42.

Applying these legal tests, it was held that Apotex's unjust enrichment claim (as a stand-alone cause of action) should be struck because it was unable to establish that it suffered a corresponding deprivation. Specifically, Apotex was never deprived of the portion of Lilly's revenues, as represented by its monopolistic profits, because Apotex is a generic drug manufacturer and would never have earned those profits. Furthermore, applying the "transfer of wealth" principle outlined in Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, it was held that the monopolistic profit was not in any way transferred from Apotex to Lilly, or lost by Apotex. The court did address the fact that Apotex's pleadings expressly mentioned that public consumers were harmed by virtue of paying higher prices for Lilly's drug when Apotex would have otherwise been able to sell its generic version of the drug. On this point, the court held that the public (and not Apotex) may have actually suffered a corresponding deprivation as a result of Lilly's monopolistic pricing for two years, when Apotex was barred from the market. However, this loss is not something that Apotex can recover for the public.

The court further held that even if Apotex's pleadings could be interpreted as also seeking unjust enrichment as a restitutionary remedyfor a tort committed against it, such as misrepresentation or abuse of process, this was not a case in which the exceptional remedy of disgorgement would be available. Finally, the Court of Appeal noted that remedial unjust enrichment is an exceptional remedy that should not be invoked unless other available remedies are inadequate. In this case, it was held that section 8 of the PMNOC regulations allow generic drug manufacturers like Apotex to be made whole, as Lilly is obligated to pay Apotex for the profits Apotex would have earned had it not been wrongfully excluded from the market. Therefore, remedial unjust enrichment was not available to Apotex.

The Canada Trust Company v. Potomski, 2015 ONCA 324

[Pardu J.A. (In Chambers)]

Counsel: R. J. Potomski, acting in person J. Kukla, for the respondent

Keywords: Real Estate Law, Mortgages, Costs of Enforcement of Mortgage, Stay of Enforcement of Mortgage, Extension of Time to Perfect Appeal

Facts: This was a motion for a stay of enforcement of a writ of possession granted in a mortgage action and for an extension of time to perfect an appeal.

The appellant granted a mortgage to the respondent on January 20, 1992. Under the terms of the mortgage agreement, the respondent was entitled to recover costs associated with the mortgage, such as fees and disbursements incurred in enforcement proceedings, from the appellant.

On April 27, 2011, the appellant entered a mortgage renewal agreement with the respondent. This agreement provided that the "Property Tax Payment amount will be adjusted annually in accordance with our procedures". These "procedures" permitted the respondent to increase or decrease the monthly Property Tax Payment in order to reimburse the respondent for amounts debited to the "Tax Account" for the appellant's benefit. The Tax Account is an account on the respondent's books in relation to the mortgage. Such adjustments would change the quantum of the appellant's monthly mortgage payments.

Following the appellant's November 2008 default, the respondent issued a notice of sale and eventually obtained summary judgment, including costs on a substantial indemnity basis. Although the respondent did not exercise its power of sale and the mortgage was ultimately renewed, a $13,278.20 deficit was added to the appellant's Tax Account in July 2011. This was the amount claimed by the respondent for its costs on the summary judgment proceedings. The appellant's monthly mortgage payments were increased to reflect the $13,278.20 costs award.

The appellant again defaulted on the mortgage on October 17, 2011.

In December 2011, after attempting to make a mortgage payment, the appellant was informed that the quantum of his monthly mortgage payment had increased by about 25%. After making multiple inquiries, he was told that his monthly payments had been increased to account for the $13,278.20 deficit in his Tax Account. The appellant claimed he did not know what liability the deficit represented.

The respondent brought a motion for summary judgment before Justice Platana seeking payment in the amount of $51,732.74 plus interest, possession of the mortgaged property, leave to obtain a writ of possession for the property, and post-judgment interest.

The appellant argued that he was not required to make his monthly mortgage payments because the respondent did not respond to his repeated inquiries into why the monthly amount had increased and what the deficit in the Tax Account represented.

Justice Platana found that this was not a defence to the appellant's default. The mortgage agreement was clear that costs incurred by the respondent in enforcing the mortgage would be charged to the appellant. Justice Platana also found that there was "clear evidence" the appellant was aware of the $13,278.20 cost award against him and that this had not been paid. Justice Platana found the appellant was in default on the mortgage and granted the respondent's motion for summary judgment on October 14, 2014.

The respondent...

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