Friday, June 6, 2014

Punitive and Exemplary Damages Not Available under S 8 of the NOC Regulations

Teva Canada Ltd v Pfizer Canada Inc, 2014 FCA 138 Mainville J: Sharlow, Gauthier JJ aff’g 2014 FC 69 de Montigny J aff’g Aronovitch J 20 Aug 2013
            2,163,446 / sildenafil / VIAGRA

In this brief decision the FCA has affirmed that punitive and exemplary damages not available in an action under s 8 of the NOC Regulations. Aronovitch J had struck those portions of Teva’s statement of claim seeking such damages, and this decision was affirmed first by de Montigny J and now by the FCA. It is difficult to comment on the substance of the FCA’s reasoning, as Mainville J affirmed “substantially for the reasons expressed by Justice de Montigny at paragraphs 28 to 37 of his order, which I adopt” [6]. Unfortunately, de Montigny J’s reasons are not yet available on the FC website.

Mainville J did add some “brief comments” [6]. He emphasized that the issue is one of statutory interpretation [9], and he noted that s 8(1) provides for compensation “for any loss suffered” (his emphasis). He noted further that the FCA has consistently held that “this wording allows compensation for losses actually incurred by a second person by reason of the operation of the statutory stay contemplated by the NOC Regulations, but it does not allow for other types of relief, such as disgorgement of profits or punitive damages” [10]. The leading cases are Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187, [89]-[91], [101]-[102] and Apotex Inc v Eli Lilly Canada Inc. / raloxifene (NOC) 2011 FCA 358, [22]-[23], though it must be said that both of these were primarily concerned with holding that a disgorgement of profits was not available, not with the availability of punitive damages. The distinction is significant because a key aspect of the reasoning in those decisions was the legislative history of the regulations, in which the word “profits” was removed, and the RIAS stated that this was done to foreclose an accounting of profits remedy: see the raloxifene decision, blogged here. While this is a very powerful argument with respect to the exclusion of an accounting, it does not have quite the same force with respect to punitive damages.

The key authority with respect to punitive damages is the statement in the alendronate decision at [89] that “A contextual reading of section 8 of the PM(NOC) Regulations indicates that ‘compensation’ for the loss resulting from the operation of the automatic stay is to be computed by reference to the loss suffered by the second person by reason of the stay or the profits that it would have made during the period when it was prevented from going to the market.” This makes the point that not only is an accounting excluded, the s 8 remedy is purely compensatory, which rules out punitive or exemplary damages as well. This is supported by the consistent references to “compensate” and “compensation” throughout the section, as well as the reference to “any loss” noted by Mainville J in this decision. So, while there is certainly a good basis in the text of the statute for the holding that punitive damages are excluded, this holding does clarify the prior case law, which specifically focused on an accounting, in affirming the more general principle that s 8 is purely compensatory in nature. A fuller analysis of the decision will have to await the release of de Montigny J’s reasons.

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