Lundbeck Canada Inc v Canada (Health), 2014 FC 1049

The issue in this case was how overlapping costs should be allocated among three parties who each sought a Notice of Compliance (NOC) for the same drug where the innovator relied on much the same expert evidence and therefore incurred much of the same costs for each proceeding but costs were not precisely monitored as between them. The assessment officer decided that the allocation of costs for the three files should be dealt with on an individual basis, and that, absent clear evidence, references to other files should be limited to circumstances when the services noticeably overlapped. [21]

Lundbeck Canada Inc. had successfully prohibited the Minister of Health from issuing a Notice of Compliance (NOC) to Cobalt Pharmaceuticals Inc. in respect of its escitalopram tablets. [1] The Cobalt proceeding was heard in conjunction with proceedings for Apotex and Genpharm/Mylan who had each similarly sought an NOC in respect of escitalporam. [6] Lundbeck chose to work on each of the three files with its experts concomitantly [5] but kept each file distinct with a protective order. [2] Where Lundbeck incurred costs that seemed to relate to each of the three files it split the costs among the three files in a “holistic manner”. [6] Lundbeck did not always take all steps to ensure that costs claimed against a particular party were in fact incurred in relation to that party’s proceeding, [30] and did not always establish that the amounts claimed in invoices were duly billed to the client or paid. [34]

Cobalt, who was the third of the generics to pursue an NOC, argued that since an important part of the work was done in the previous two proceedings, the amount of work done on its own file must have been reduced, and that it should not be subsidizing Genpharm/Mylan or Apotex. [11]

The assessment officer thought that since the files were served and filed only a few months apart, and since the hearings proceeded only a few weeks apart, “it was 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…” [21] As such, as a guiding principle, the assessment officer decided that the allocation of costs with regards to the three files will be dealt with when assessing each of the specific services and disbursements. [21] The assessment officer thought that, absent clear evidence, references to the other files in this costs assessment should be limited to circumstances when the services noticeably overlapped. [21]

The assessment officer acknowledged that the scale of this litigation can interfere with the precise monitoring of costs, but made clear that counsel for Lundbeck still had the responsibility to prove that disbursements claimed against Cobalt were in fact incurred in relation to Cobalt. [30] Lundbeck’s choice to handle the three files concomitantly “in a holistic way” and not keep consistent separate documentation should not penalize Cobalt. [30] The assessment officer reiterated that its role was to ensure that the successful party is not denied reasonable indemnification while the unsuccessful litigant is not burdened with unreasonable costs. [34]

The assessment officer then went on to review all of the invoices to ensure the “appropriateness and reasonableness of the disbursements claimed.” [34]

The assessment officer assessed the invoices of the work done by each of Lundbeck’s experts. Some costs which Lundbeck had claimed against Cobalt in an equal 33% split were reduced to a more accurate amount based on the actual work done by the experts on Cobalt’s file (e.g., 33% of 7 days cross-examination reduced to 2 out of 7 days). [58] Some costs which were only loosely substantiated as being legitimate expenses against Cobalt were disallowed. [58] Other work done by experts was determined to be shared equally among the relevant parties. [61, 65]

The assessment officer also assessed other disbursements such as hotel expenses and paperwork expenses and disallowed them where they were found to not relate to the Cobalt file. [91]

Commentary

This case demonstrates the importance of keeping clear and separate documentation for costing purposes even when working on overlapping proceedings that require the same expert evidence. In this case it was permissible in some instances to allocate one expert’s time equally among three separate files where the expert’s work would have been applicable to each of the overlapping proceedings. [e.g., 61, 65] However, expenses that can be demonstrated to not be related to one party (for example, cross-examination in another party’s case) should be excluded.