Date: 20021008
Docket: 98-712-IT-G
BETWEEN:
GLAXO SMITHKLINE INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for order
Bowie J.
[1] On February 25, 2002, I made an Order under Rule 99(2) requiring Dr. Barry Sherman to attend and be examined for discovery by counsel for the Appellant. Dr. Sherman is the chief executive of Apotex Inc., a firm that manufactures generic drugs, and it was in that capacity the he was to be examined. My Order was made on consent of both the Respondent in the appeal and Dr. Sherman himself. The Order specified 16 areas of questioning that counsel might pursue, and it provided that Dr. Sherman might be asked to locate relevant documents and to return to answer further questions arising from those documents. It also provided that the examination was not to exceed two periods of two days each.
[2] Dr. Sherman did attend and was examined by counsel for the Appellant for less than one full day. During the course of that examination he was asked to produce certain documents which one would expect to find in the records of Apotex Inc. His responses to those requests may be summarized this way. Either the documents no longer existed, or they were stored in one of an unspecified number of storage facilities, unindexed, in circumstances which would make it difficult, time consuming, and therefore expensive to locate them. He therefore declined to cause a search to be made for them. The motion before me now arises out of that examination, and specifically Dr. Sherman's refusal to search for the documents in question, while at the same time unable to state unequivocally that they do not exist.
[3] The specific remedy which the Appellant's Notice of Motion requests is:
... an order under rules 86 and 99 and 110 directing Dr. Barry Sherman, as a representative of Apotex Inc. ("Apotex") to provide an affidavit confirming that the information and documentation described below is no longer available or, alternatively, if the information is available, to provide said information and documentation and be examined thereon:
1. All correspondence in Apotex's possession between Apotex and ranitidine HC1 manufacturers or their agents involving negotiations for the purchase of ranitidine HC1 during the years 1982 to 1995;
2. The number of persons employed by Apotex in each of the research and quality control departments from 1982 to 1993;
3. All certificates of analysis (prepared by Apotex and its suppliers) relating to batches of ranitidine HC1 acquired by Apotex during the years 1989 to 1993;
4. The wholesale prices for Apotex's ranitidine HC1 products for each year 1987 to 1995;
5. The value of the free goods and/or discounts provided by Apotex in relation to the sale of ranitidine HC1 products for each year 1985 to 1995;
6. All invoices for purchases of ranitidine HC1 by Apotex during 1989 to 1993;
7. All purchase orders for purchases of ranitidine HCl by Apotex from 1989 to 1993.
[4] Notice of this motion was served on Dr. Sherman. However, he chose not to appear, either personally or by counsel, but instead to rely on the submissions to be made by counsel for the Respondent. He did, however, arrange for Mr. Gordon Fahner, C.M.A. to attend. Mr. Fahner is a senior employee of Apotex, and has knowledge of the company's record-keeping. He volunteered to give evidence and, with leave, was examined before me. His evidence made a number of things clear. Apotex Inc. cooperated with Revenue Canada at the time of the audit of the Appellant. Mr. Fahner kept copies of all the documents supplied to Revenue Canada in or near his own office. At least a small part of the information which the Appellant seeks through this motion is to be found in certain working papers relating to the 1993 audit, and those are still in existence. As to some of the records sought, it would require a search of certain storage facilities maintained by Apotex to determine if they exist or not. As to some others, only Dr. Sherman would know whether they exist.
[5] Before dealing with the specific issue before me, it is necessary to give some context to the present motion. The Appellant is part of a multi-national corporate group which develops, manufactures and distributes pharmaceutical products. Its appeals before this Court are from reassessments for income tax for the taxation years 1990 to 1993 inclusive, and are based on the premise that during those years the Appellant paid an excessive price to a non-arms' length supplier for the pharmaceutical product ranitidine to be used in the manufacture of a prescription drug. During the same period, Apotex Inc. purchased ranitidine for its own use in the manufacture of a competing generic product. In assessing the Appellant, the officers of Revenue Canada, as it then was, obtained information from Apotex Inc. as to its purchases of ranitidine, and they relied on that information in raising the assessments that are under appeal. It is not disputed that the comparable uncontrolled price (CUP) method of establishing an arm's length price is at least an appropriate one, and indeed it may be the most appropriate one to be used in this case.[1] To apply that method, or alternatively, to establish that it is inappropriate in the circumstances of a particular case, requires having complete and accurate information relating not only to the price paid between an arm's length buyer and seller, but also to related costs that may affect the price. It was not suggested that the information which the Appellant seeks in the documents that are the subject of this motion is not relevant, but simply that it would be too onerous to require Apotex to either locate them or establish with some degree of certainty that they do not exist.
[6] I do not propose to recite at length the questions asked of Dr. Sherman and the answers given by him which gave rise to this motion. Two examples will suffice to show his reluctance to cooperate in this examination.
Q. Forty chemists and technicians in its laboratories?
A. Well, that would include quality control. So people involved in research may have been a total of five to ten people.
Q. Okay. Would you call research as the development of what we just discussed, the analytical method, the bioavailability, etc.?
A. Yes
Q. Whereas you would have 35 technicians and chemists involved in quality control?
A. I can't give you numbers today, but those might be in the right range.
Q. Can you undertake to confirm?
A. No
Q. Why not?
A. It would be too difficult. There would be no records I could readily access, if they exist at all.
...
Q. Apotex was employing about 40 technicians in the lab at that time. Does that sound about right?
A. I don't know. I don't know what you mean by the lab. Do you mean research or all labs?
...
Q. You don't seem to have a lot of documents left at Apotex dating back to those years. Is that about correct as a general statement? What is the retention policy?
A. There's no specific policy. People keep whatever they think is - needs to be kept, and the company has grown enormously. A lot of documents have been moved into storage. They're hard to find. If there are any, I don't know what there would be that would be relevant but ...
Q. Did you keep Certificates of Analyses?
A. No.
Q. For ranitidine? No, for ranitidine?
A. I wouldn't think so. Not going back that far. Not going back ten years, no.
Q. Can you confirm that, that you don't have the Certificates of Analysis for the 1990 to - 1987 to '93 period?
A. I don't know how one would confirm. They may be in boxes in storage somewhere. We have had so many staff changes and so many location changes. We have warehouses with different records in them and no one even knows what's there, and we do have to start throwing things out that are in storage that have not been thrown out. There may be records in there, but I couldn't really tell you.
Q. As a policy, you normally keep Certificates of Analyses, I suppose?
A. No. Only as long as necessary to keep them. That means as long as the product to which they relate has not expired. Once the products have expired, there's no need to keep Certificates of Analyses, no requirement to keep them.
Q. Once what has expired?
A. The product in which the raw materials are used.
Q. In terms of shelf life?
A. Yes. Expiry date.
[7] The evidence before me on the motion makes it quite clear that Apotex has been cooperative with the Revenue Canada auditor, and with the Respondent in this appeal. Dr. Sherman consented to the original Order that he be examined, but the parts of the transcript that are before me demonstrate some reluctance on his part to be of any more than minimal assistance to the Appellant. He did not attend and oppose this motion, but the Attorney General has done so enthusiastically for him. In my view, the Appellant cannot have a fair trial without being assured that it has access to all of the relevant records of Apotex relating to the comparative pricing of ranitidine that exist, as well as some assurance that any others that may have existed at one time have been destroyed or are otherwise irretrievably lost. It was demonstrated before me on the motion that at least one piece of relevant information pertaining to the number of technicians and chemists working for Apotex in quality control is available, although Dr. Sherman, probably inadvertently, indicated otherwise during the examination. Many of his other answers lead me to believe that there may be other relevant documents and information that he has been asked for that have not been, but could be, produced by him. To grant a remedy in precisely the terms sought by the Appellant in its Notice of Motion would not be effective, as it would not ensure that the records of Apotex Inc. are properly searched with a view to locating all the relevant documents that exist. I am therefore ordering that Dr. Sherman cause a search to be made of the records of Apotex Inc. for the purpose of locating the documents and information named in the Notice of Motion, following which he is to furnish to counsel for the Appellant, copies of all the documents located, and then re-attend to be examined as to the efforts that have been made to find the documents and information, and the results of those efforts, and in relation to whatever documents and information are located by that search. The examination is not to exceed two days, and will be conducted at a time suitable to Dr. Sherman. Costs of this motion will be in the cause.
Signed at Ottawa, Canada, this 8th day of October, 2002.
|
"E.A. Bowie" |
J.T.C.C.
COURT FILE NO.: 98-712(IT)G
STYLE OF CAUSE: Glaxo Smithkline Inc. and
Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: September 19, 2001
REASONS FOR ORDER BY: The Honourable Judge E.A. Bowie
DATE OF ORDER: October 8, 2002
APPEARANCES:
Counsel for the Appellant: Sebastien Rheault and Zoltan Ambrus
Counsel for the Respondent: Karen Janke
COUNSEL OF RECORD:
For the Appellant:
Name: Sebastien Rheault and Zoltan Ambrus
Firm: Barsalou Lawson
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
98-712(IT)G
BETWEEN:
GLAXO SMITHKLINE INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion heard on September 19, 2002, at Toronto, Ontario, by
the Honourable Judge E.A. Bowie
Appearances
Counsel for the Appellant: Sebastien Rheault and Zoltan Ambrus
Counsel for the Respondent: Karen Janke
ORDER
UPON motion brought by the Appellant, and upon reading the material filed and hearing the evidence given before me by Mr. Gordon Fahner, C.M.A.;
AND UPON hearing counsel for the parties;
IT IS HEREBY ORDERED THAT:
1. Dr. Barry Sherman shall cause a search to be made of the records of Apotex Inc. for the purpose of locating the following documents and information;
i. All correspondence in Apotex's possession between Apotex and ranitidine HC1 manufacturers or their agents involving negotiations for the purchase of ranitidine HC1 during the years 1982 to 1995;
ii. The number of persons employed by Apotex in each of the research and quality control departments from 1982 to 1993;
iii. All certificates of analysis (prepared by Apotex and its suppliers) relating to batches of ranitidine HC1 acquired by Apotex during the years 1989 to 1993;
iv. The wholesale prices for Apotex's ranitidine HC1 products for each year 1987 to 1995;
v. The value of the free goods and/or discounts provided by Apotex in relation to the sale of ranitidine HC1 products for each year 1985 to 1995;
vi. All invoices for purchases of ranitidine HC1 by Apotex during 1989 to 1993;
vii. All purchase orders for purchases of ranitidine HCl by Apotex from 1989 to 1993.
2. Dr. Sherman shall forthwith furnish copies of any of these documents that are located by that search to counsel for the Appellant.
3. Thereafter, at a time to be agreed upon, Dr. Barry Sherman shall attend to be further examined for discovery as to the efforts that have been made to locate the documents and information noted in paragraph 1 above, as to the results of those efforts, and in relation to such documents and information as have been located by those efforts. The examination will take place at a time suitable to Dr. Sherman, and is not to exceed two days.
4. The costs of this motion will be in the cause.
Signed at Ottawa, Ontario, on the 8th day of October, 2002.
|
"E.A. Bowie" |
J.T.C.C.