



COURT OF APPEAL FOR ONTARIO

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

DATE: 20150505

DOCKET: C58293

Doherty, Feldman and Blair JJ.A.

BETWEEN

Apotex Inc.

(Plaintiff) Appellant

and

Eli Lilly and Company and Eli Lilly Canada Inc.

(Defendants) Respondents

David D. Conklin and Nando De Luca, for the appellant

Patrick Smith and Todd J. Burke, for the respondents

Heard: September 10, 2014

On appeal from the judgment of Justice Lax, Justice Sachs
    and Justice Grace of the Divisional Court, dated September 19, 2013, with
    reasons reported at 2013 ONSC 5937.

Feldman J.A.:

Overview

[1]

Eli Lilly and Company and Eli Lilly Canada Inc. (Lilly) owned the
    patent relating to the use of atomoxetine hydrochloride in the treatment of
    Attention Deficit Hyperactivity Disorder. Lilly marketed its brand of this
    product under the name Strattera. Lilly used the process established by the
Patented
    Medicines (Notice of Compliance) Regulations
, SOR/93-133, enacted under the
Patent Act
, R.S.C. 1985, c. P-4 (the PMNOC regulations), to keep Apotexs
    generic version of atomoxetine hydrochloride out of the market for two years.
    Because Lillys patent was later invalidated, Apotex became entitled under the PMNOC
    regulations to recover the damages it suffered during the period it was
    excluded from the market.

[2]

The issue on this appeal is whether Apotex also has a claim against Lilly
    for unjust enrichment that would entitle it to disgorgement of the monopolistic
    profits Lilly made on sales of Strattera during the same two-year period, over
    and above what Apotex would have earned from sales of its generic drug at lower
    prices.

[3]

On a motion brought by Lilly under rule 21.01(1)(b) of the
Rules of
    Civil Procedure
, R.R.O. 1990, Reg. 194, the motion judge refused to strike Apotexs
    claim for unjust enrichment. The Divisional Court reversed the motion judges
    decision and struck the claim, finding that it was plain and obvious that it
    could not reasonably succeed.

[4]

For the reasons that follow, I would dismiss the appeal.

Background

[5]

As this appeal arises in the context of a Rule 21 motion, the facts as pleaded
    in the Statement of Claim are taken to be true for the purpose of analyzing
    whether it is plain and obvious that the impugned claim cannot reasonably succeed.

[6]

Lilly obtained Patent No. 2,209,735 (the 735 Patent) for the use of
    atomoxetine hydrochloride in the treatment of Attention Deficit Hyperactivity Disorder
    in March 2001. In December 2004, it obtained the required Notice of Compliance
    (NOC) under the PMNOC regulations for its brand, Strattera, and entered the
    market as sole supplier. Pursuant to the PMNOC regulations, it later listed its
    patent on the Patent Register.

[7]

On October 10, 2008, Apotexs formulation of atomoxetine hydrochloride,
    Apo-Atomoxetine, became approvable under the
Food and Drug Regulations
, C.R.C.,
    c. 870. In order to obtain its own NOC, Apotex first served a Notice of
    Allegation on Lilly, a procedure required by the PMNOC regulations when a patent
    is listed for the same drug. Apotex alleged that the 735 Patent was invalid on
    the grounds of,
inter alia
, anticipation, obviousness and inutility.

[8]

In response, Lilly commenced a prohibition proceeding against Apotex in
    the Federal Court for an order prohibiting the issuance of an NOC to Apotex, in
    accordance with s. 6 of the PMNOC regulations. The effect of the prohibition proceeding
    was to prevent Apotex from obtaining an NOC and gaining entry to the market for
    two years or until the disposition of the prohibition proceeding, whichever
    occurred earlier: PMNOC regulations, ss. 7(1), 7(2)(b).

[9]

Around the same time, another generic, Teva Canada Limited (then
    Novapharm Limited), began an action in Federal Court under s. 60(1) of the
Patent
    Act
, challenging the validity of Lillys 735 Patent directly. On September
    14, 2010, in the Teva action, the Federal Court declared the 735 Patent to be
    invalid, based on want of disclosure by Lilly in its original patent
    application:
Novopharm Ltd. v. Eli Lilly and Company
, 2010 FC 915, 87
    C.P.R. (4th) 301, at para. 120. That decision was upheld by the Federal Court
    of Appeal: 2011 FCA 220, 94 C.P.R. (4th) 95, leave to appeal refused, [2011]
    S.C.C.A. No. 362. On September 21, 2010, as a result of the declaration of invalidity
    of the 735 Patent in the Teva action, which was an
in rem
finding,
    Apotex received its NOC for Apo-Atomoxetine.

[10]

Lillys
    prohibition application against Apotex was dismissed on October 29, 2010, again
    based on the invalidation of the 735 Patent in the Teva action:
Eli Lilly
    Canada Inc. v. Apotex Inc.
, 2010 FC 1065, 89 C.P.R. (4th) 345. Apotex then
    became entitled to recover from Lilly, under s. 8(1) of the PMNOC regulations,
    the loss it suffered as a result of its exclusion from the market.

[11]

During
    the period when Apotex was prevented from entering the market, from October 10,
    2008 through September 21, 2010, Lilly made sales of Strattera at monopolistic
    prices, earning revenue totalling approximately $70,000,000. The Statement of
    Claim alleges that Lilly made those sales at Apotexs expense and deprived Apotex
    of the ability to earn its own revenues. Apotex also pleads that those sales came
    at the expense of the public, who were forced to pay monopolistic prices for
    Strattera.

[12]

Apotex
    claims four heads of relief in its Statement of Claim: (1) relief under the
    Ontario
Statute of Monopolies
, R.S.O. 1897, c. 323
[1]
,
    and the
Statute of Monopolies
, 1623

(U.K.), 21 Jac. 1, c. 3
[2]
;
    (2) relief under s. 8 of the PMNOC regulations; (3) relief under the
Trade-marks
    Act
, R.S.C. 1985, c. T-13; and (4) relief based on Lillys unjust
    enrichment. The only head of relief at issue on appeal is the unjust enrichment
    claim.

[13]

Section
    8(1) of the PMNOC regulations provides that where the application of the person
    relying on the patent (in this case Lilly) is dismissed, that person is liable
    to the person that was kept out of the market (in this case Apotex) for any
    loss suffered during the period commencing when the NOC would have been issued
    and ending on the date the application was withdrawn, discontinued, dismissed
    or reversed.

[14]

Apotex
    is therefore entitled under s. 8(1) of the PMNOC regulations to seek
    compensation from Lilly for the losses it suffered during the exclusion period.
    However, in its unjust enrichment claim, Apotex seeks to recover the
    monopolistic profits Lilly earned during that period as a result of Apotexs
    exclusion from the market, an amount that Apotex would never have earned selling
    its generic product.

[15]

To
    support its claim for unjust enrichment, Apotex pleads: (1) it suffered a
    deprivation by the delay in the issuance of the NOC for its generic product; (2)
    Lilly enjoyed a corresponding benefit by an extension of its market exclusivity
    equivalent to Apotexs delay, resulting in a windfall to Lilly; and (3) there
    is no juristic reason for Lilly to retain that windfall. Apotex alleges that
    the delay was caused by the fact that Lilly consciously took advantage of the
    PMNOC Regulations in listing the 735 Patent and in commencing and prosecuting
    the above-noted Prohibition Proceeding. Under the 
Trade-marks Act

    heading of its Statement of Claim, Apotex asserts that Lilly made materially
    false and misleading statements and representations in the context of the
    prohibition proceeding and in listing the 735 Patent on the Patent Register.

[16]

Finally,
    Apotex pleads that it is entitled to a remedy in unjust enrichment over and
    above its right to recovery of its losses under s. 8(1) of the PMNOC regulations
    because:

In the absence of a disgorgement of this unjust enrichment,
    every patentee would have an incentive to use the
PMNOC Regulations
in
    all cases to unjustly delay entry of every generic product at the expense of
    the Generic, in the knowledge that the revenues made by it would exceed the
    damages for which it will be liable for the delay caused to the Generic.

[17]

Lilly
    moved to strike a number of the claims in the Statement of Claim including the
    claim for unjust enrichment. The motion judge dismissed the motion to strike
    the
Trade-marks Act
claim and the unjust enrichment claim. The
Statute
    of Monopolies
claims are being heard separately. With regard to the unjust
    enrichment claim, the motion judge found that all three requirements for unjust
    enrichment had been pleaded by Apotex and that it was not plain and obvious
    that s. 8 of the PMNOC regulations operates as part of a complete code that limits
    plaintiffs from enforcing other existing rights or causes of action.

[18]

Lilly
    was granted leave to appeal to the Divisional Court only in respect of the
    unjust enrichment claim. The Divisional Court disagreed with the motion judges
    view of the operation of the PMNOC regulations. It found that the regulations
    do constitute a complete code of remedies arising out of their operation, though
    the court recognized that there could be another remedy for a cause of action
    that is totally independent of the regulatory regime. The court struck
    Apotexs 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

[19]

The
    issue on appeal is whether the Divisional Court was correct to strike Apotexs
    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:
R. v. Imperial
    Tobacco Canada Ltd.
, 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17.

[20]

In
    order to succeed in a claim for unjust enrichment, a plaintiff must prove three
    components: (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, [2011] 1 S.C.R.
    269, at para. 32.

[21]

Though
    Apotex has pleaded the constituent elements of unjust enrichment, these are
    legal conclusions and are therefore subject to examination on a Rule 21 motion
    to strike. The question is whether the facts as pleaded, assumed to be true,
    could support a successful unjust enrichment claim:
Imperial Tobacco
,

at para. 22.

Analysis

(a)

The parties positions on this appeal

[22]

This
    is not the first case in which Apotex has tried to claim unjust enrichment
    against an original patentee. Apotex has sought to make this same claim in a
    number of cases both in the Federal Court and in the Ontario Superior Court of
    Justice.
[3]
The two main issues that previous cases have focused on were: (1) whether the
    PMNOC regulations are a complete code that precludes generic companies,
    through common law or equitable causes of action, from recovering more than is
    provided for under s. 8; and (2) whether the provisions of the PMNOC regulations
    provide a juristic reason for the monopoly period that is granted to the
    patent claimant, making a claim for unjust enrichment unsustainable.

[23]

Lillys
    position is that the issues raised on this appeal are identical to those
    already decided by the Federal Court of Appeal and this court, where Apotexs
    identical or nearly identical unjust enrichment claims have been struck
    under Rule 21 or dismissed under Rule 20. It argues that this court should
    uphold the Divisional Courts decision to strike the unjust enrichment claim on
    the basis that the allegations arise from the PMNOC regulations, which
    constitute a complete statutory code regulating how drugs are brought to
    market, and a valid juristic reason for Lilly to retain, and not be obliged to
    disgorge, its profits.

[24]

Apotexs
    position is that its claim for unjust enrichment in this case arises outside
    the PMNOC regulations because, as alleged in its Statement of Claim, it is not
    based on the dismissal of the prohibition proceeding. Rather, the claim is
    based on misrepresentations Lilly made when it obtained and then listed the
    735 Patent, and on Lillys conscious decision to nevertheless rely on its
    patent to invoke the prohibition proceeding. It argues that Lilly is therefore disentitled
    from relying on and obtaining the advantage of the PMNOC regulatory scheme and the
    limited remedy under s. 8.

[25]

Further,
    Apotex argues that because this case is distinguishable on its facts from other
    decided cases as a result of the finding of patent invalidity and the
    allegations of misrepresentation, the PMNOC regulations cannot provide a valid
    juristic reason for Lilly to be immune from an unjust enrichment claim.

(b)

The two bases upon which other courts have decided the unjust enrichment
    issue

(i)

Complete code

[26]

The
    Federal Court of Appeal has dismissed Apotexs claim for unjust enrichment in
    nearly identical contexts. The reasoning related to the jurisdiction of the Federal
    Court to grant equitable relief under s. 20(2) of the
Federal Courts Act
,
    R.S.C. 1985, c. F-7, and the exercise of that jurisdiction in the face of s. 8
    of the PMNOC regulations. Section 20(2) provides:

20(2) The Federal Court has concurrent
    jurisdiction in all cases, other than those mentioned in subsection (1) [where
    it has exclusive jurisdiction], in which a remedy is sought under the authority
    of an Act of Parliament or at law or in equity respecting any patent of
    invention, copyright, trade-mark, industrial design or topography referred to
    in paragraph (1)(
a
).

[27]

In
Apotex Inc. v. Eli Lilly Canada Inc.
[4]
,
    2011 FCA 358, 98 C.P.R. (4th) 323, leave to appeal denied, [2012] S.C.C.A. No.
    78, Noël J.A. refused to exercise the courts equitable jurisdiction to allow a
    remedy beyond s. 8 for a claim that was tied to the PMNOC regulations. He explained,
    at para. 18, that s. 8 reflects the decision of Parliament to strike a balance
    between the need for patent protection on the one hand and the timely entry of
    lower priced drugs on the market, on the other. The remedy available to a
    generic company in the event that its exclusion from the market is found to
    have been wrongful therefore represents a compromise. Further, Parliaments
    intention to limit a generic companys recovery to actual losses sustained was
    made explicit by the 2006 amendments to the PMNOC regulations, which removed
    the word profits from the available remedies under s. 8:
Regulations
    Amending the Patented Medicines (Notice of Compliance) Regulations
,
    SOR/2006-242. The accompanying explanation in the Regulatory Impact Analysis
    Statement (RIAS) confirmed that the purpose of the amendment was to preclude
    the argument that profits referred to the profits of the patentee. Noel J.A.
    reproduced, at para. 21, the relevant conclusion in the RIAS:

[T]he Government is aware of a number of ongoing section 8
    cases in which it is argued that in order for this provision to operate as a
    disincentive to improper use of the PM(NOC) Regulations by innovative
    companies, the term profits in this context must be understood to mean an
    accounting of the innovator's profits ... [T]he Government believes that this
    line of argument should no longer be open to generic companies that invoke
    section 8.

[28]

In
    various proceedings, Apotex has raised this very objection, namely, that the
    compromise struck under s. 8 does not sufficiently deter a patentee from
    wrongfully keeping a generic out of the market through the prohibition
    proceeding process  a process that allows the patentee to retain the
    monopolistic profits it earned during the exclusionary period.

[29]

Noël
    J.A. responded, at para. 23, that because Parliament had made a policy decision:

[W]hatever jurisdiction the Federal Court has under subsection
    20(2) of the
Federal Courts Act
to provide equitable relief, it cannot
    be used to grant a remedy which s. 8 was intended to exclude (compare
Radio
    Corp. of America v. Philco Corp. (Delaware)
(1966), 48 C.P.R. 128 (S.C.C.),
    at 136; see also
Zaidan Group Ltd. v. London (City)
(1990), 71 O.R. (2d)
    65 (Ont. C.A.), at 69, aff'd [1991] 3 S.C.R. 593 (S.C.C.)), unless a cause of
    action independent of the operation of s. 8 is alleged. Here, no such cause of
    action has been pled. The result is that Apotex claim for disgorgement of
    profits cannot possibly succeed.

[30]

The
    effect of this decision is that the Federal Court will not use its equitable
    jurisdiction to allow a generic to pursue a claim for disgorgement that arises
    out of the operation of the PMNOC regulations, because that would effectively
    thwart the intent of Parliament that the remedy under s. 8 is the exclusive
    remedy in the event of wrongful exclusion from the market under the regulations.
    However, the court did not close the door to an action for disgorgement that
    may arise independent of the PMNOC regulations.

[31]

The
    Divisional Court reached a similar conclusion in this case. It also rejected
    Apotexs submission that because Lilly made false and misleading statements
    in its patent application and its patent was found to be invalid, its claim is independent
    of the PMNOC regulations. To the contrary, because the impugned representations
    were made on forms prescribed under s. 4 of the PMNOC regulations, the
    Divisional Court concluded that the claim arose from the regulations.

[32]

The
    issue of whether s. 8 is a complete code that precludes the assertion of
    other remedies was also addressed by Smith J. in
Low v. Pfizer

Canada
    Inc.
, 2014 BCSC 1469
[5]
,
    in the context of a class action lawsuit involving the drug Viagra. The patent
    for Viagra had been declared invalid based on non-disclosure in a separate prohibition
    proceeding brought by Pfizer against the generic drug manufacturer, Teva, in
    response to Tevas application for an NOC.

[33]

In
Low
, the class plaintiffs are individuals who purchased Viagra during the
    period commencing when Teva filed its NOC application in 2006 and ending when
    the patent was declared invalid by the Supreme Court of Canada in 2012
[6]
.
    They assert, as Apotex asserts here, that the patentee wrongly obtained and
    relied on the patent, with the effect that the public paid an inflated price
    for the drug while Teva was excluded from the market. One of the causes of
    action asserted was unjust enrichment.

[34]

On
    a pre-certification motion, Pfizer argued that the
Patent Act
and the
    PMNOC regulations constitute a complete code and provide no remedy for members
    of the public. Smith J. rejected the complete code argument, at least in
    respect of the rights of consumers. He found, at para. 34, that although the
    legislation provides no right of action for consumers, neither does it expressly
    or implicitly bar a consumer action if the conduct that was in breach of
    statute is also relevant to a common law cause of action.

[35]

To
    summarize, the Divisional Court in this case and the Federal Court of Appeal
    have both held that the
Patent Act
and PMNOC regulations constitute a
    complete code with respect to available remedies for a breach of the
Patent
    Act
or its regulations. However, the British Columbia Court of Appeal in
Low
rejected that proposition, at least to the extent that it would preclude a potential
    common law right of action by consumers.

(ii)

Juristic reason

[36]

In
Apotex Inc. v
.
Abbott Laboratories Ltd.
, 2013 ONCA 555, this
    court considered whether the provisions of the PMNOC regulations provide a
    juristic reason for a patentee to retain its excess monopolistic profits and pay
    the generic only the amount of the loss it suffered during the period it was
    wrongly excluded from the market.

[37]

In
    upholding Quigley J.s decision to grant summary judgment to Abbott and dismiss
    Apotexs claim for unjust enrichment (2013 ONSC 356, 107 C.P.R. (4th) 332), this
    court held, at para. 6, that because the monopolistic profits earned by Abbott
    were due to the operation of the PMNOC regulations, which gave Abbott the right
    to be in the market to the exclusion of Apotex, [t]hose regulations constitute
    a valid juristic reason for [Abbotts] profits and revenues for the period in
    question. This precludes [Apotexs] claim for disgorgement. Apotex argues that
Abbott
is not determinative of the issue before this court, as it does
    not address whether the PMNOC regulations can provide a valid juristic reason
    for the enrichment of a patent holder that obtains and lists its patent through
    misrepresentation.

[38]

Smith
    J. accepted a similar argument in
Low
. In discussing whether the
Patent
    Act
and its regulations constituted a juristic reason that would negate a
    claim against Pfizer by consumers for unjust enrichment, he held that if, on
    the facts as proved, the patent was wrongfully obtained through knowing and
    deliberate non-disclosure, amounting to an abuse of the system, that may be
    sufficient to exclude the patent legislation as a sufficient juristic reason: at
    para. 85. Smith J. therefore found that the pleadings could disclose a cause of
    action in unjust enrichment.

(c)

Corresponding deprivation

[39]

Regardless
    of any potential merit of the complete code and juristic reason arguments
    on the facts as alleged by Apotex in this case, in my view there is a
    fundamental flaw in Apotexs claim for unjust enrichment that makes this
    doctrine unavailable to Apotex, irrespective of the nature of Lillys conduct
    that may be proved at a trial. The flaw is in the second requirement for a
    claim of unjust enrichment: a corresponding deprivation.

[40]

I
    acknowledge that this was not the basis of the Divisional Courts decision nor
    was it relied upon by the respondent in its factum or addressed by the
    respondent in oral argument. However, the court raised and discussed the issue
    with counsel for the appellant in oral argument, and it arises squarely as a
    legal issue on this appeal.
[7]

[41]

Put
    simply, Apotex was never deprived of the portion of Lillys revenues
    represented by its monopolistic profits because Apotex would never have earned
    those profits. This precludes reliance on unjust enrichment as a stand-alone cause
    of action, as it is pleaded in the Statement of Claim. Further, even if
    Apotexs pleadings could be read as also seeking unjust enrichment as a restitutionary
    remedy

for a tort committed against it, this is not a case in which the
    exceptional remedy of disgorgement would be available.

[42]

In
    the Statement of Claim, Apotex does not plead that it was deprived of Lillys
    monopolistic profits. Nor could it. In fact, Apotex pleads that Lillys sales
    came at the expense of Apotex who was kept off the market and thereby deprived
    of the ability to earn its own revenues, and also that those sales also came
    at the expense of the public who was forced to pay monopolistic prices for
    Strattera. In other words, the pleading itself makes a case for deprivation
of
    the public
of the difference between Apotexs prices and Lillys
    monopolistic prices. Though Apotex was clearly deprived of revenues and sales,
    the pleading does not allege that Apotex was deprived of those monopolistic profits.

[43]

The
    Supreme Court of Canada recently discussed the elements of unjust enrichment in
Professional Institute of the Public Service of Canada v. Canada (Attorney General)
,
    2012 SCC 71, [2012] 3 S.C.R. 660, at paras. 148-158. With respect to the first
    and second elements, the enrichment and the corresponding deprivation, the
    court explained, at para. 151, that they are the same thing from two different
    perspectives or two sides of the same coin. These elements are properly
    understood to connote a transfer of wealth: at para. 152. Since the purpose
    of the doctrine of unjust enrichment is to reverse unjust transfers of wealth,
    the first question the court asked in that case was whether the government was
    enriched at the plaintiffs expense. The court affirmed that the governments
    gain had to correspond to the plaintiffs loss for the unjust enrichment claim
    to succeed.

[44]

In
    the family law context, courts have recognized that there need not be quantifiable
    equivalence between the enrichment and the deprivation. In
Pettkus v. Becker
,
    [1980] 2 S.C.R. 834, Dickson J. applied the doctrine of unjust enrichment to
    find that a constructive trust arose where unmarried spouses each contributed
    to the successful establishment of a bee-keeping business and the purchase of
    property. The court held that the elements of unjust enrichment that formed the
    basis for the constructive trust  enrichment and corresponding deprivation 
    were satisfied by Ms. Beckers contribution of unpaid labour over 19 years under
    the reasonable expectation that she had an interest in the farm. The court
    explained that a causal connection must exist between the enrichment and the
    deprivation. It stated, at p. 852:

For the unjust enrichment principle to apply it is obvious that
    some connection must be shown between the acquisition of property and
    corresponding deprivation. On the facts of this case, that test was met. The
    indirect contribution of money and the direct contribution of labour is clearly
    linked to the acquisition of property, the beneficial ownership of which is in
    dispute.

[45]

In
    Peter D. Maddaugh and John D. McCamus,
The Law of Restitution
,
    loose-leaf (2014-Rel. 14) (Toronto: Canada Law Book, 2004), the authors explain,
    at pp. 3-23 to 3-24, that [a]lthough there was no equivalence between the
    value of Ms. Beckers efforts and Mr. Pettkus benefits, those benefits did
    result from or, in the Courts words, there existed a causal connection
    between the services provided by the plaintiff and the benefits enjoyed by the
    defendant. Where that benefit should have accrued to the plaintiff, the
    corresponding deprivation factor will be met.

[46]

In
    the present case, Apotex cannot show that Lillys monopolistic profits should
    have accrued to it as a result of a legal entitlement or a contribution it made.
    The family law cases following
Pettkus
are therefore not applicable, nor
    are the traditional unjust enrichment cases involving transfers of wealth.

[47]

Apotex
    also points to some cases where a remedial claim for disgorgement of profits
    has been awarded despite the absence of any quantifiable loss to the plaintiff.
    These cases arise where a defendant has committed an underlying legal wrong
    against a plaintiff, and the ordinary damages remedy for the underlying wrong
    is inadequate. The wrong in these contexts typically consists of a breach of
    fiduciary duty or a breach of trust, and in some instances has involved
    criminal conduct, breach of contract or a tort committed against the plaintiff.
    Courts that have applied this restitutionary remedy in non-fiduciary contexts
    have explained that it is limited to exceptional cases, emphasizing that
    restitution damages are employed infrequently: see, e.g.,
Bank of America
    Canada v. Mutual Trust Co.
, 2002 SCC 43, [2002] S.C.R. 601, at para. 25,
    referred to by Winkler C.J.O. in
Cassano v. Toronto Dominion Bank
, 2007
    ONCA 781, 87 O.R. (3d) 401, at para. 27.

[48]

For
    example, in
Attorney General v. Blake
, [2000] UKHL 45, [2001] 1 A.C.
    268, a former member of the Secret Intelligence Service (SIS) of Great
    Britain disclosed valuable secrets to the Soviet Union. He was convicted of
    spying, and ultimately defected to the U.S.S.R. As an employee of the SIS, he
    had signed an undertaking not to divulge any official information that he acquired
    in the course of his employment. While living in the Soviet Union, he wrote a
    book disclosing former state secrets  although by then, much of the
    information was no longer secret. The Attorney General sued Blake for breach of
    contract and sought disgorgement of his profits.

[49]

The
    House of Lords ordered an accounting of profits. The court referred to this as
    an exceptional case of breach of contract, akin to a breach of fiduciary
    duty, where the normal remedies were inadequate and where deterrence of others
    was an important factor, thereby justifying the imposition in this case of the
    remedy of a full accounting of profit.

[50]

A
    similar approach was taken by the British Columbia Court of Appeal in
ICBC
    v. Lo,
2006 BCCA 584, 278 D.L.R. (4th) 148. In that case, a driving school
    owner and an employee of the British Columbia motor vehicle licensing agency
    conspired in a scheme where the driving school owner accepted bribes from
    unqualified students to obtain driving licenses, which were then issued by the licensing
    agency employee for a fee. The court held that both the licensing agency
    employee and the driving school owner were required to disgorge and account to the
    Insurance Corporation of British Columbia (ICBC) for all the monies they
    received in the illegal scheme.

[51]

The
    court reasoned, at paras. 59-60, that because the driving school owner had
    knowingly assisted a breach of trust against ICBC, and his assistance was
    essential to the bribery scheme, there was a clear causal connection
    between the wrongdoing to ICBC and the enrichment of both defendants. The driving
    school owner  although not in a trust relationship with ICBC  exposed ICBC
    to a substantial risk of loss through accidents caused by unqualified drivers:
    at para. 63. The court found that it would be equally inequitable to allow the
    driving school owner to profit from the illegal scheme as it would the licensing
    agency employee. Therefore, the court concluded that there was a proper
    foundation for a claim of unjust enrichment against him.

[52]

Academic
    commentators have taken different approaches to try to reconcile the two forms
    of unjust enrichment  the traditional transfer of wealth cases and the
    remedial profiting from wrong cases  within a coherent conceptual framework.
    Kevin McGuinness, in C. Graham, ed.,
Halsburys Laws of Canada  Restitution
,
    (Toronto: LexisNexis, 2012), at p. 645, differentiates between substantive and
    remedial restitution. Where disgorgement of profit is sought as a
remedy
for an independent legal wrong rather than asserted as a cause of action for
    unjust enrichment, the three components of unjust enrichment, including the corresponding
    deprivation factor, need not be met: McGuinness, at p. 606. On the other hand,
    Maddaugh and McCamus view the two categories of unjust enrichment  unearned
    windfall (classic unjust enrichment) and recovery of the profits of
    wrongdoing (remedial disgorgement)  as two rationales within a single broad
    principle: at pp. 3-4 to 3-6. In the second category, the corresponding
    deprivation factor is satisfied because the wrongdoers gain was made
    possible through the infliction of an injury upon or the infringement of an
    interest of the plaintiff and therefore the enrichment was at the plaintiffs
    expense: at p. 3-7.

[53]

In
    my view, cases relied upon by Apotex involving disgorgement of the profits of
    wrongdoing, such as
Blake
and
ICBC
, are not applicable in Apotexs
    case. First, Apotex has pleaded unjust enrichment as a distinct cause of action
    based on the windfall earned by Lilly due to the operation of the PMNOC regulations.
    However, the portion of the windfall that is not compensable under s. 8 of the
    PMNOC regulations, the monopolistic profit, was not in any way transferred from
    Apotex or lost by Apotex. Therefore, the unjust enrichment claim as a stand-alone
    cause of action must fail on the ground that there is no corresponding
    deprivation.

[54]

Second,
    even if it could be argued that Apotex has pleaded the elements of an
    underlying legal wrong  such as misrepresentation or abuse of process  and is
    seeking restitutionary unjust enrichment as a remedy, this is not a case where
    the extraordinary remedy of disgorgement of profits to Apotex is available.

[55]

This
    is not a bilateral context where Apotex is the only party that has been wronged
    by Lilly. Effectively, Apotex is asking the court to designate it as the
de
    facto
beneficiary of the wrongfully-obtained monopolistic profits despite
    recognizing in its pleadings that it was the public that suffered actual
    deprivation as a result of the monopolistic pricing. Unlike the plaintiffs in
    the profiting from wrong cases discussed above, Apotex is not positioned as
    the sole party with a legitimate right to enforce or deter the underlying
    wrong. The pecuniary interests of consumers, and potentially other generic
    companies, are also implicated. Lilly did not owe Apotex an equitable duty, nor
    is this case akin to the exceptional breach of contract cases where courts
    award restitution damages to a plaintiff in order to prevent a defendant from
    exploiting a bilateral agreement to its advantage.

[56]

Further, remedial unjust enrichment is an exceptional remedy that
    should not be invoked unless other available remedies are inadequate. The
    remedial unjust enrichment cases cited by Apotex all involve contexts where the
    ordinary remedies were insufficient to address the injury committed against the
    plaintiffs interest. In contrast, generic companies can be made whole through
    the process established under s. 8 of the PMNOC regulations, which requires
    significant compensation to be made by patent holders in the event of wrongful
    market exclusion.

[57]

In
Apotex Inc. v. Sanofi-Aventis
, 2014 FCA 68, 125 C.P.R. (4th) 403, affd, 2015 SCC 20,
the
    Federal Court of Appeal concluded, at para. 107, that s. 8 of the PMNOC
    regulations should be applied in a way that strives to compensate adequately
    and fairly the generic manufacturers, while avoiding windfalls. The court
    cited
Ratych v. Bloomer
, [1990] 1 S.C.R. 940, at p. 962, for the
    proposition that it is a fundamental principle of tort law that an injured
    person should be compensated for the full amount of its loss, but no more: at
    para. 109. This line of reasoning, recently affirmed by the Supreme Court, not
    only suggests that adequate compensation can be achieved by s. 8, but also that
    overcompensation should be avoided in this regulatory context.

[58]

Apotex
    argues that restricting a generic companys remedy to its actual losses under
    s. 8 creates an incentive for patentees to misuse the PMNOC regulations in
    order to make and retain windfall profits. While this argument raises important
    policy concerns, there are at least two answers to it.

[59]

First,
    there may be other potential mechanisms to ameliorate the alleged disincentive,
    such as disgorgement to the parties who actually suffered the loss equivalent
    to the windfall  namely, the members of the public who purchased the drug
    during the monopoly period. The class action in
Low
is an example.

[60]

Second,
    unlike in the profiting from wrong cases discussed above, there is a
    legislatively-enacted incentive structure that forms the context of this
    dispute. As the Federal Court of Appeal has observed, the s. 8 scheme was
    developed by Parliament as a compromise between the interests of the public in
    encouraging research and development of new patentable drugs and in encouraging
    generics to market drugs at lower prices. Parliament has considered whether
    generic companies should be entitled to the disgorgement of first persons
    profits in the circumstances contemplated by section 8, and has excluded this
    remedy ... This is a legislative policy issue with respect to which the will of
    Parliament is paramount:
Apotex Inc. v. Eli Lilly Canada Inc.
, 2011 FCA
    358, 98 C.P.R. (4th) 323, at para. 22, leave to appeal refused, [2012] S.C.C.A.
    No. 77 and No. 78. If the legislative balance is flawed, it is open to
    Parliament to reconsider the incentive structure, taking into account all
    relevant factors including any competing public policy concerns.

Conclusion

[61]

I
    would dismiss the appeal with costs of the appeal and the leave motion to
    Lilly, fixed at the agreed-upon amount of $17,500 inclusive of disbursements
    and HST. The parties have agreed that the costs below of $22,932.75 and $15,000
    would follow.

Released: DD MAY 5, 2015

K. Feldman J.A.

I agree. Doherty
    J.A.

I agree. R.A. Blair
    J.A.





[1]

An Act concerning Monopolies, and Dispensation with penal laws, etc.
,
    R.S.O. 1897, c. 323



[2]
An
    Act concerning Monopolies, and Dispensation with Penal Laws, and the
    Forfeitures thereof, 1623
(U.K.), 21 Jac. 1, c. 3.



[3]
See, e.g.,
Apotex Inc. v. Abbott Laboratories Ltd.
, 2013 ONSC 356,
    affd, 2013 ONCA 555;
Apotex Inc. v. Eli Lilly Canada Inc.
,

2009
    FC 693, 76 C.P.R. (4th) 361 (Prothonotary Tabib), affd, 2011 CarswellNat 6086,
    (18 April 2011), Ottawa, T-656-09 (F.C.) (Heneghan J.), affd, 2011 FCA 358,
    leave to appeal refused, [2012] S.C.C.A. No. 78;
Apotex Inc. v. Nycomed
    Canada Inc. and Nycomed GmbH
, (18 April 2011), Ottawa, T-1786-08 (F.C.)
    (Heneghan J.), affd, 2011 FCA 358, leave to appeal refused, [2012] S.C.C.A.
    No. 77.



[4]

This appeal also disposed of another matter,
Apotex Inc. v.
    Nycomed Canada Inc. and Nycomed GmbH
(A-173-11), affirming
Apotex Inc.
    v. Nycomed Canada Inc. and Nycomed GmbH
(18 April 2011), Ottawa,
    T-1786-08 (F.C.) (Heneghan J.)
. The appeals were heard
    together but not consolidated. Leave to appeal was also refused:
[2012]
    S.C.C.A. No. 77.



[5]
This decision has been appealed to the British Columbia Court of Appeal, and
    the hearing of the appeal is scheduled for September 2015.



[6]

Pfizer Canada Inc. v. Novopharm Ltd.
, 2012 SCC 60, [2012] 3 S.C.R. 625.



[7]
Paragraphs 30 and 31 of the reasons of the motion judge suggest that this argument
    was raised by Lilly on the motion and rejected by the motion judge.


