COURT OF APPEAL FOR ONTARIO

CITATION: Appleyard v. Zealand, 2019 ONCA 4

DATE: 20190104

DOCKET: C64298

Strathy C.J.O., Roberts and Zarnett JJ.A.

BETWEEN

Jo Anne Appleyard, Objector

Appellant

and

Janice Zealand, Applicant for Certificate of
    Appointment of Estate Trustee with a Will

Respondent

Jo Anne Appleyard, acting in
    person

M. Jasmine Sweatman, for the Respondent

Heard in writing: December 21, 2018

On appeal from the order of
    Justice Jennifer Woollcombe of the Superior Court of Justice, dated August 1,
    2017, and, pursuant to leave granted by the April 19, 2018 order of this court,
    on appeal from the order of Justice Dale Fitzpatrick of the Superior Court of
    Justice, dated March 15, 2017.

REASONS FOR DECISION

[1]

The appellant appeals from the August 1, 2017 order dismissing her
    motion to set aside or vary the March 15, 2017 order. The March 15, 2017 order,
    from which she also appeals, required the appellant to seek leave of the court
    before she could advance any claims against her deceased former husbands estate,
    failing which her claims would be dismissed. The parties agreed that the
    appeals would be heard in writing.

[2]

The appellant and her former spouse were divorced in 1996. He died in
    2013 leaving a will dividing his estate between his common-law partner and his
    two children. The appellant was not a named beneficiary under the will. The
    appellant filed two objections to the appointment of the respondent, Janice
    Zealand, as the estate trustee, and put forward claims for arrears in spousal
    support and ongoing spousal support, return of property and unjust enrichment.

[3]

On behalf of the estate, Ms. Zealand obtained the March 15, 2017 order
    that the appellant was required to bring an application for leave before the
    Superior Court of Justice pursuant to s. 140 of the
Courts of Justice Act
,
    R.S.O. 1990, c. C.43, before bringing any claim or motion, pursuant to the June
    5, 2008 order of C. Campbell J. made in the appellants bankruptcy proceedings.
    The March 15, 2017 order further stipulated that if the appellant failed to
    serve her leave application within 30 days of the order, her claims against the
    estate would be dismissed.

[4]

The appellants subsequent motion to set aside or vary the March 15,
    2017 order was dismissed on August 1, 2017, on the basis that she did not meet
    the criteria on which she relied under rr. 37.14(1)(b) and 59.06(2)(a) of the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194.

[5]

Turning first to the appeal of the August 1, 2017 order, we are not
    persuaded that the motion judge erred in dismissing the appellants motion to
    set aside or vary the March 15, 2017 order. Specifically, the appellants
    failure to appear on the motion before Fitzpatrick J. was not due to accident,
    mistake or insufficient notice under r. 37.14(1)(b), as the appellant alleged.
    Rather, as the motion judge correctly observed, in the light of the several
    prior adjournments at her request, the appellant took a calculated risk in failing
    to appear and requesting a further adjournment of a peremptory motion date for
    reasons that Fitzpatrick J. was entitled to reject as insufficient to excuse
    her absence.  Similarly, we see no error in the motion judges conclusion that
    there was no fraud as required under r. 59.06(2)(a) to permit the court to set
    aside or vary the March 15, 2017 order.

[6]

Accordingly, we dismiss the appeal from the August 1, 2017 order. The
    costs order remains in force.

[7]

With respect to the March 15, 2017 order, we agree that the motion judge
    erred in concluding that the June 5, 2008 order made in the bankruptcy proceedings
    applied to bar the appellant advancing her claim without first obtaining leave in
    the estate proceedings or any other proceedings unrelated to her bankruptcy.

[8]

Paragraph 5 of the June 5, 2008 order is the operative provision that
    underpins the March 15, 2017 order. It precludes and prohibits the appellant
    from bringing any further or other proceedings or seeking any other relief
    without leave of this Court until the appellant has complied with the $2,500
    costs order set out in para. 4 of the June 5, 2008 order and all other costs
    orders outstanding against the appellant relating to the appellants bankrupt
    estate.

[9]

It is common
    ground that there has been no order, including the June 5, 2008 and March 15,
    2017 orders, in which the appellant has been declared a vexatious litigant
    under section 140 of the
Courts of Justice Act
. Absent that declaration,
    it was unreasonable and incorrect for Fitzpatrick J. to expand the reach of the
    June 5, 2008 order beyond the bankruptcy proceedings in which it was made. It
    makes little sense that the appellant would be precluded from bringing a claim
    unrelated to the bankruptcy proceedings for failing to satisfy costs orders
    made in those proceedings. Nor was it reasonable or correct for him to impose a
    requirement on the appellant to obtain leave to bring further proceedings under
    section 140 of the
Courts of Justice Act
, a requirement that
    would properly apply only to someone found, under that section, to be a
    vexatious litigant.

[10]

As
    a result, we allow the appeal and set aside the March 15, 2017 order, including
    the costs order against the appellant, on terms.

[11]

Given
    the significant and protracted delay and incurrence of costs to-date in the
    estate proceedings, in our view, it is in the best interests of all parties to allow
    the appeal on terms that will serve to expedite the estate proceedings.
    Accordingly, we exercise our discretion under s. 134(1) of the
Courts of
    Justice Act
and make the following order:

Failing agreement,
within 30
    days of the release of these reasons, the estate trustee shall bring a motion
    for directions before a judge of the Superior Court to establish a timetable
    for the administration of the estate, including such steps as may be
    appropriate for the timely determination of the appellants claims
.

Disposition
:

[12]

Accordingly,
    the appeal from the August 1, 2017 order is dismissed. The appeal from the
    March 15, 2017 order is allowed on the terms specified above in para. 11 of
    these reasons.

[13]

There
    was mixed success on these appeals. We therefore make no order as to costs.

G.R. Strathy
    C.J.O.

L.B. Roberts
    J.A.

B. Zarnett J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23

DATE: 20190116

DOCKET: C64891

Strathy C.J.O., Benotto and Roberts JJ.A.

BETWEEN

Apotex Inc.

Plaintiff

(Respondent/Appellant by way of cross-appeal)

and

Nordion (Canada) Inc., Nordion Inc., Nordion (US)
    Inc.,
    MDS (Canada) Inc., MDS Inc., MDS Pharma Services
    and MDS Pharma Services (US) Inc.

Defendants

(Appellants/Respondents by way of cross-appeal)

John A. Campion, Antonio Di
    Domenico and Stephanie Clark, for the appellants/respondents by way of cross-appeal

Daniel S. Murdoch, Jordan
    S.A. Moss and Elizabeth (Libby) Nixon, for the respondent/appellant by way of cross-appeal

Heard: November 22, 2018

On appeal from the judgment of Justice Laurence A.
    Pattillo of the Superior Court of Justice, dated December 22, 2017, with
    reasons reported at 2017 ONSC 1323 and 2018 ONSC 2195.

Strathy C.J.O.:

[1]

The
    appellants (collectively, MDS) appeal a judgment in favour of the respondent
    (Apotex) awarding damages of approximately $11.3 million, plus prejudgment
    interest of approximately $3.4 million.

[2]

Apotex
    claimed damages for breach of contract and negligence in relation to MDSs performance
    of three bioequivalence studies to support Apotexs submissions to the United
    States Food and Drug Administration (FDA) for the approval of two generic
    drugs for sale in the United States.

[3]

The
    principal issue in MDSs appeal is whether the trial judge erred in finding that
    Apotexs action was commenced within the two-year limitation period. Apotex
    cross-appeals the trial judges award of damages.

[4]

These
    reasons explain why I would dismiss both the appeal and the cross-appeal.

[5]

The
    following summary of the facts will put the issues in context. Detail will be
    added in the Analysis section, as required, to address specific issues raised
    in the appeal and cross-appeal.

I.

Overview

[6]

Apotex
    is a well-known Canadian manufacturer of generic drugs. A generic drug is
    equivalent to a patented drug that has come off-patent, either because the
    patent has expired or because the patent has been found to be invalid.

[7]

In
    order to sell a generic drug in the United States, a manufacturer must submit
    an abbreviated new drug application (ANDA) to the FDA, to establish, among
    other things, that its generic drug is bioequivalent to the patented drug. In
    simple terms, bioequivalence means that the generic contains the same active
    ingredient as the patented drug and has the same efficacy. Bioequivalence is
    established through data generated in clinical trials of the drug.

[8]

MDS was
    a global life sciences company that, among other things, conducted clinical
    research trials for pharmaceutical companies to support their regulatory
    filings.
[1]
Since at least 1990, MDS and its predecessor had conducted bioequivalence
    studies for Apotex for a variety of generic drugs.

[9]

In
    May 1999, Apotex and MDSs predecessor entered into a Master Laboratory
    Services Agreement (MLSA). The MLSA set out general terms and conditions for
    research services provided by MDS to Apotex. Pursuant to the MLSA, Apotex
    entered into individual project agreements to conduct studies with respect to
    specific drugs that were the subject of ANDAs.

[10]

In 2003 and 2004,
    Apotex entered into three project agreements with MDS to prepare bioequivalence
    studies to support submissions to the FDA for the approval of two generic
    drugs: (a) an agreement with respect to the drug Levo-Carb IR in May 2003; and
    (b) two agreements with respect to the drug Amoxi-Clav in May and August 2004.
[2]
As the trial judge identified at para. 57, the three project agreements
    followed a standard template and had many identical terms, including that the
    study was for FDA submission and the reports would be in a format known to
    be acceptable to regulatory bodies. MDSs studies in relation to these
    projects were delivered to Apotex in 2004 (Levo-Carb IR) and 2005 (Amoxi-Clav)
    for submission to the FDA as part of Apotexs ANDAs for the two drugs.

[11]

Testing and analysis
    for the studies was carried out by MDS at its research facility in Montreal
    (the Montreal Facility). Facilities that conduct bioequivalence studies for
    submission to the FDA are subject to inspection by the FDA to ensure compliance
    with regulatory requirements.

[12]

To preview the
    conclusion of this story, Apotex filed ANDAs for Levo-Carb IR and Amoxi-Clav,
    which were supported by MDSs studies. The FDA informed Apotex that it would
    not accept the MDS studies as a result of concerns about the integrity of tests
    and studies carried out by MDS at the Montreal Facility. In order to obtain FDA
    approval for the drugs, Apotex had to repeat the studies or obtain independent
    third party certification of the MDS studies, resulting in additional costs and
    lost profits due to the delay in its ability to sell the drugs in the US
    market.

[13]

In order to set the
    stage for the analysis of the limitation period issue, it is necessary to
    examine events both before and after MDS delivered the studies to Apotex. The
    issue is when Apotex discovered its claim within the meaning of s. 5(1)(a) of
    the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B (the
LA
    2002
). The trial judge found that although the first three requirements set
    out in ss. 5(1)(a)(i), (ii) and (iii) had been met on May 8, 2006, discovery
    was postponed by virtue of s. 5(1)(a)(iv) until Apotex knew that, having
    regard to the nature of the injury, loss or damage, a proceeding would be an
    appropriate means to seek to remedy it.

FDA inspections of the Montreal Facility

[14]

The events giving rise
    to this claim took place between approximately mid-2003, when Apotex entered into
    the first of the three project agreements with MDS, and early January 2007,
    when the FDA rejected MDSs studies, and required Apotex to repeat or certify
    the studies.

[15]

In July 2003, shortly
    after Apotex and MDS entered into the project agreement for the first of the
    three studies related to Levo-Carb IR, the FDA conducted an inspection of the
    Montreal Facility. The inspectors issued a notice called a Form 483 to MDS, expressing
    their concerns about potential contamination in the laboratory and about the
    storage and preservation of samples. A Form 483 may be issued by an FDA
    inspector to identify areas where the inspector believes the practices of the
    facility do not align with the FDAs regulatory framework. The Form 483 is
    solely the opinion of the inspector and may be subsequently endorsed by the FDA
    through the issuance of an Untitled Letter. While MDS responded to the Form
    483, further FDA inspections over the next eight months led to the issuance of additional
    Form 483s expressing more concerns about conditions at the Montreal Facility.

[16]

The trial judge found
    that there was no evidence that Apotex was aware of the FDA inspections or of
    the several Form 483s issued by the FDA between July 2003 and February 2004.

[17]

In the meantime, MDS
    was proceeding with the Levo-Carb IR study for Apotex. In late February and
    early March 2004, MDS delivered its reports concerning Levo-Carb IR to Apotex. On
    April 2, 2004, Apotex submitted its ANDA for Levo-Carb IR, supported by the MDS
    bioequivalence study, to the FDA.

The first Untitled Letter

[18]

A few weeks later, on
    April 26, 2004, the FDA issued an Untitled Letter concerning the Montreal
    Facility. An Untitled Letter is an endorsement of the opinion of an inspector
    contained in a Form 483. It provides the FDAs position on the inspectors observations
    and recommends corrective action. This letter, which was posted on the FDA website,
    was the first such letter that the Montreal Facility had received. It expressed
    concerns about the validity of bioequivalence data generated by MDS in light of
    the FDA inspectors observations about the inadequacy of MDSs policies and
    procedures to address contamination issues. MDS advised Apotex of the Untitled
    Letter and said that it was addressing the FDAs concerns through new standard
    operating procedures.

[19]

In the meantime, Apotex
    was moving forward with its ANDA for the second drug, Amoxi-Clav. On May 10,
    2004, Apotex and MDS entered into a project agreement for the first of two
    studies related to Amoxi-Clav (fed). A second project agreement concerning
    Amoxi-Clav (fasted) was signed in August 2004.

[20]

In May and June 2004, MDS
    assured Apotex that it was taking the necessary measures to address the FDAs
    concerns and to respond to the issues raised in the first Untitled Letter. MDS sent
    a formal response to the FDA on June 7, 2004.

[21]

The FDA continued to
    raise concerns. It inspected the Montreal Facility again between mid-September
    and October 1, 2004 and issued additional Form 483s. These Form 483s related to
    documentation of sample storage conditions, the reporting of data, and a
    storage issue with respect to certain samples. They also expressed concerns
    about issues previously raised by the FDA, including the completeness of MDSs
    investigations. MDS responded to these concerns in October and November and
    continued to assure Apotex that it had matters in hand.

The second Untitled Letter

[22]

On December 21, 2004,
    the FDA issued a second Untitled Letter, expressing continued concern about the
    validity of bioequivalency studies conducted by MDS. The letter recommended
    that MDS review the validity of studies that it had done to support FDA
    submissions in the previous five years.

[23]

On December 24, 2004,
    MDS wrote to Apotex regarding the second Untitled Letter, advising that it was
    having ongoing discussions with the FDA about the validity of its studies
    performed during 2000 to 2003 at the Montreal Facility. In this, and other
    correspondence with Apotex in December 2004 and January 2005, MDS stressed that
    it was working with the FDA to resolve the outstanding issues as soon as
    possible and to develop a five-year review plan (FYR) to confirm the validity
    of its previous studies.

[24]

On January 5, 2005,
    MDS issued its final report to Apotex concerning the Amoxi-Clav (fed) study.

[25]

In early February
    2005, MDS met with the FDA to discuss the FYR, which was to be a comprehensive
    review of bioequivalence studies conducted at the Montreal Facility. The FDA
    agreed with the overall approach of the FYR, subject to minor modifications
    agreed upon by MDS.

[26]

In the meantime, MDS had
    been proceeding with the Amoxi-Clav (fasted) study and on February 28, 2005,
    MDS issued its final report for that study. On March 31, 2005, Apotex submitted
    its Amoxi-Clav ANDAs to the FDA.

[27]

On May 20, 2005, at
    Apotexs request, MDS wrote to Apotex providing details of the FYR process. In
    this letter, MDS confirmed that the Levo-Carb IR and Amoxi-Clav studies were on
    the list of studies to be examined in the FYR.

[28]

In mid-August 2005, Apotex
    sent an audit team to the Montreal Facility to audit the studies MDS had
    performed for Apotex and to assess the risks to Apotexs approved and pending
    ANDAs supported by MDS studies. The audit report, completed in December 2005, advised
    that the Levo-Carb IR study should be considered moderate to high risk of negatively
    impacting the pending ANDA approval, but that more evaluation was needed. Due
    to time constraints, very little data were reviewed concerning the Amoxi-Clav
    studies and no risk assessment could be made.

[29]

During this time, the
    ANDAs for both drugs had been filed with the FDA, and Apotex had received
    deficiency notices from the FDA concerning the ANDAs which required, and
    received, responses from Apotex. These were routine notices, in the ordinary
    course, and were unrelated to concerns about the Montreal Facility or the
    integrity of MDSs studies.

[30]

On March 24, 2006, FDA
    inspectors issued another Form 483 to MDS, expressing concerns about, among
    other things, the implementation and reporting associated with the FYR. MDS
    advised Apotex of the issuance of the Form 483 on March 28, 2006

[31]

On April 1, 2006, MDS
    voluntarily closed the Montreal Facility, although it continued with the FYR.
    It issued a press release on March 31, 2006 explaining the decision and the
    FYR.

April 24, 2006 deficiency letter

[32]

The trial judge
    considered April 24, 2006 to be an important date. On that date, Apotex
    received a deficiency letter from the FDA relating to the Amoxi-Clav ANDAs,
    citing concerns about the studies conducted by MDS and advising that the
    application for approval could not proceed until the concerns were resolved.
    Although this letter related to the Amoxi-Clav ANDAs, Apotex expected that the
    FDAs position would apply to the Levo-Carb IR ANDA as well.

[33]

Apotex contacted MDS
    to request a response to the FDAs deficiency notice. MDS replied that it had
    raised the Amoxi-Clav studies to high priority in the FYR. Apotex responded,
    on May 8, 2006, that it did not consider this response to be acceptable and
    asked MDS for a timeline to address the studies at issue. On May 8, 2006
[3]
in an internal email chain, Apotex noted that if MDS were able to respond to
    the deficiency notice by the end of May 2006, the internally projected approval
    date for Amoxi-Clav should be shifted from August to November 2006.

[34]

On June 20, 2006, MDS
    advised Apotex that its FYR investigation had concluded that the data for the
    Amoxi-Clav studies were valid and that its internal review board had confirmed
    the finding. MDS stated that it believed that it could have a response to the
    FDAs April 24, 2006 deficiency letter by the end of June. On July 7, 2006, MDS
    submitted a closure report to the FDA regarding the Amoxi-Clav studies,
    validating the studies in light of its review.

The third Untitled Letter

[35]

On August 31, 2006,
    the FDA issued a third Untitled Letter to MDS, stating, among other things, that
    MDS had failed to systematically investigate contamination and anomalous
    results, to conduct an effective review, and to demonstrate that the FYR was
    effective and capable of discriminating between valid and invalid studies. The
    issues raised in the letter were discussed between Apotex and MDS, and on
    September 13, 2006, MDS sent the FDA its response to the letter. It
    acknowledged that the FDAs inspections had identified deficiencies in its
    laboratory that raised questions about the validity of the bioequivalence data
    reported by MDS.

[36]

On September 29, 2006,
    the FDA contacted Apotex with questions concerning the dissolution
    specifications for Amoxi-Clav. A representative of Apotex testified that the
    FDA generally only issues feedback or questions on dissolution specifications
    after the completion of the bioequivalence review. Apotex took this to mean
    that the validity of MDSs Amoxi-Clav studies was no longer an issue for the
    ANDAs. Based on this understanding, and the existence of unrelated issues pertaining
    to labeling that could delay approval, Apotex anticipated that it would receive
    FDA approval for Amoxi-Clav in late November or early December of 2006.

[37]

On October 19, 2006, a
    meeting took place between MDS and the FDA at which time MDS provided information
    to support its position that the FYR had validated the studies that had been
    reviewed.

[38]

On November 15, 2006,
    Apotex was informed by the FDA, for the first time since the FDA had started
    its re-review of the Amoxi-Clav ANDAs, that the issues with MDS had not been
    fully resolved and the FDA had continued concerns with the Amoxi-Clav ANDAs.

December 11, 2006  FDA informs Apotex of its options

[39]

December 11, 2006 was
    another important date for the trial judges analysis. On this date, the FDA informed
    Apotex that in order to proceed with the approval of its ANDAs, it might be
    necessary for Apotex to repeat the studies done by MDS, re-analyze the samples,
    or have a third party auditor review and certify MDSs studies. Apotex
    immediately began investigating which of the three options was appropriate in
    respect of each product impacted.

January 10, 2007  FDA informs Apotex it cannot accept the MDS
    studies

[40]

On January 10, 2007,
    the FDA informed Apotex that it could not accept MDS studies completed in the
    Montreal Facility between 2000 and 2004, including the studies for Levo-Carb IR
    and Amoxi-Clav. It formally advised Apotex of its three options to either
    repeat the studies, re-analyze the samples, or seek third party certification
    of the studies.

[41]

Apotex repeated the
    studies for both drugs and obtained independent certification of the Amoxi-Clav
    studies. It ultimately amended or re-submitted its ANDAs for Levo-Carb IR and
    Amoxi-Clav, received FDA approvals for sale of the drugs in the US, and began
    to sell them in the US market until the FDA imposed an import ban unrelated to
    the MDS issues in early September 2009.

[42]

Apotex commenced this
    action against MDS on November 10, 2008, claiming damages for breach of
    contract and negligence arising from the delay in the FDAs approval of the
    drugs and for the costs incurred to repeat or certify the studies.

Trial

[43]

The trial took place
    over 16 days, in February, March, and May 2017. All the fact witnesses at trial
    were called by Apotex. MDS called no fact witnesses and relied on documents and
    the cross-examination of the Apotex witnesses. Both parties called expert
    evidence dealing primarily with damages. Judgment was reserved and was released
    on December 22, 2017. In a separate endorsement released April 26, 2018, the
    trial judge addressed the issue of the appropriate prejudgment interest rate:
    see 2018 ONSC 2195.

II.

The trial judges reasons

(1)

Breach of Contract and Negligence

[44]

The trial judge found that
    MDS had breached its contracts with Apotex, specifically s. 8.1 of the MLSA
    which provided that MDS would:

perform the Project in accordance with the current state of
    the laboratory research art and the Protocol. [MDS] will also comply with all
    applicable current government regulatory requirements, including United States
    standards of Good Laboratory or Clinical Practices as appropriate to the
    Project.

[45]

The trial judge
    rejected MDSs assertion that s. 8.1 applied solely to the performance of the
    individual studies and not to MDSs operations as a whole. He found that the
    wording of the provision was broad enough to extend to the operation of MDSs Montreal
    Facility.

[46]

The trial judge found
    that MDS breached s. 8.1 as a result of: (1) its failure to comply with US
    regulatory requirements as determined by the FDA at the Montreal Facility; (2) its
    failure to respond to the FDAs concerns in accordance with industry standards
    and good practices; and (3) its failure to comply with s. 8.1 in conducting the
    studies themselves.

[47]

The trial judge found MDS
    concurrently liable in negligence for breach of its duty of care in the
    performance of the studies.

(2)

MDSs Defences: Limitation Period

[48]

Two weeks before
    trial, MDS moved to amend its statement of defence to plead that the action had
    been commenced more than two years after the causes of action pleaded were
    discovered by the Plaintiff. As Apotex consented to the amendment, the trial
    judge granted leave to amend on the first day of trial.

[49]

The trial focused on
    contractual defences, Apotexs standing to assert the claims, the limitations
    argument, and damages. The trial judge rejected MDSs contractual defences and
    its argument that Apotex was not the corporate entity with standing to assert
    the claim.

[50]

On the limitations
    issue, the trial judge carried out a painstaking review of the evidence
    pertaining to the interactions between Apotex and MDS, the FDA and MDS, and the
    FDA and Apotex. He made extensive findings of fact concerning: (a) MDSs issues
    with the FDA (paras. 65-89); (b) the status, at various times, of Apotexs
    ANDAs for Levo-Carb IR and Amoxi-Clav (paras. 90-110); (c) MDSs communications
    with Apotex concerning its FDA issues (paras. 111-122); and (d) Apotexs
    responses to the FDAs issues with MDS (paras. 123-152). These findings were
    based on the uncontradicted evidence of Apotexs fact witnesses, which the
    trial judge accepted, as well as documents that formed part of the trial
    record. These core findings of fact are unchallenged in this appeal.

[51]

MDS argued that Apotex
    had knowledge of the breaches of contract and negligence, and of the adverse
    impacts flowing from them well before November 10, 2006, which marks two years
    before the action was commenced. MDS claimed that the limitation period began
    to run in early 2005, when the studies were delivered by MDS to Apotex or, at
    the latest, on April 24, 2006 when Apotex received the deficiency letter from
    the FDA regarding Amoxi-Clav.

[52]

The trial judge
    rejected both these dates. He found that, prior to April 24, 2006, although
    Apotex was aware that MDS had issues with the FDA concerning its Montreal Facility,
    it had no knowledge that those issues impacted the studies. Based on its
    communications with the FDA and what MDS was telling it, Apotex understood that
    the FDA's review of the ANDAs was proceeding as expected and within Apotex's
    time estimates for obtaining the approvals. The trial judge found, at para.
    215, that Apotex had every reason to believe, based on its communications with
    the FDA in respect of the ANDAs, what it understood about the MDS FDA issues
    and what MDS was telling it, that the Studies would pass the FYR and be
    accepted by the FDA.

[53]

However, the trial
    judge found that the FDA deficiency letter of April 24, 2006 caused Apotex to
    recognize that FDA approvals were at risk. This led Apotex to contact MDS
    demanding a response to the FDA notice. When MDS was unable to provide a
    satisfactory response, Apotex insisted that it do so.

[54]

The trial judge found
    that May 8, 2006 was a critical date. On that date, as referred to earlier in
    these reasons, Bernice Tao, the Head of US Regulatory Affairs at Apotex, noted
    in an internal email that if MDS was able to submit a response to the FDA
    notice by the end of May 2006, Apotexs projected approval date for Amoxi-Clav,
    then set for August 2006, should be moved to November 2006. The trial judge
    found that the elements of ss. 5(1)(a)(i), (ii) and (iii) of the
LA 2002
were met on May 8, 2006, because at that point, Apotex knew that the delay in approval
    of the drugs would result in lost profits. He summarized his conclusion, at
    para. 219:

Accordingly, as of May 8, 2006, I am satisfied that the three
    factors in s. 5(1)(a) (i)  (iii) of the Act were present for the first time:
    Apotex knew that damage has occurred (delay of approval = loss of profit); and
    that the delay had been caused by MDS' failure to comply with the FDA
    regulations.

[55]

The trial judge
    observed that while ss. 5(1)(a)(i), (ii) and (iii) were met, it was
    nevertheless necessary to consider the application of s. 5(1)(a)(iv) of the
LA
    2002
. Section 5(1)(a)(iv) provides that the limitation period does not
    begun to run, until the plaintiff knows that
having
    regard to the nature of the injury, loss or damage, a proceeding would be an
    appropriate means to seek to remedy the injury, loss or damage.
Applying
    the principles set out by this court in
407 ETR Concession Company Limited
    v. Day
, 2016 ONCA 709, 133 O.R. (3d) 762, leave to appeal refused, [2016]
    S.C.C.A. No. 509, and
Presidential MSH Corporation v. Marr Foster & Co.
    LLP
, 2017 ONCA 325, 135 O.R. (3d) 321, the trial judge found that the
    limitation period did not begin to run until December 11, 2006, when a
    representative of Apotex spoke to the FDA and learned that it would not accept
    MDSs studies. It was at this point that s. 5(1)(a)(iv) was satisfied. Up to
    that time, Apotex was not in a position to assess whether the FDAs concerns
    directly impacted the studies such that they would not be accepted by the FDA.
    He set out his reasons, at paras. 225-227:

On the facts of this case, I am satisfied that it would not
    have been appropriate for Apotex to have commenced a proceeding against MDS as
    at May 8, 2006. Rather, given what it knew at that date, it was more
    appropriate for Apotex to await the FDA's response to results of MDS' review of
    the Studies. Apotex and MDS had a long standing relationship regarding MDS
    conducting bioanalytical studies. Although the Studies were part of the FYR,
    Apotex had no indication that they would not be accepted by the FDA. MDS had
    been assuring Apotex that its issues with the FDA did not involve the Studies.
    What needed to happen was for the regulatory process involving the FYR to be
    concluded. Further, Apotex needed MDS' assistance to enable it to respond to the
    April 26, 2006 deficiency notice. Commencing an action could have jeopardized
    that assistance.

As it turned out, on June 20, 2006, MDS advised Apotex that the
    Amoxi-Clav Studies had passed its FYR. MDS subsequently submitted its closure
    report for the Amoxi-Clav Studies to the FDA on July 7, 2006. Based on the
    results of MDS' review and Apotex's subsequent communications with the FDA
    concerning other issues arising from the FDA's review of the Amoxi-Clav ANDAs,
    Apotex understood that the MDS Studies were no longer an issue for the FDA in
    respect of its approvals and they were back on track.

All of which combine to establish, in my view, that it was not
    appropriate for Apotex to have commenced a proceeding against MDS in May 2006
    but rather to do as it did and await the outcome of MDS' review of the Studies
    and the FDA response.

[56]

The trial judge found
    that Apotex was not in a position to determine the impact of MDSs issues with the
    FDA on the ultimate acceptance of the Amoxi-Clav and Levo Carb IR studies until
    December 11, 2006. He concluded, at paras. 231, 233:

As a result, while the FDA's decision rejecting the MDS Studies
    was on January 10, 2007, based on the evidence, I find that while Apotex knew
    that the FDA still had issues with MDS in mid-November 2006, it was not until
    December 11, 2006 when Ms. Tao spoke to the FDA and learned that it was
    considering a number of options in respect of studies done by MDS, including repeating
    them, re-analyzing them or having them reviewed by a third party auditor that
    Apotex knew that the MDS Studies would not be accepted by the FDA, resulting in
    delay and damage.

Would a reasonable person with the abilities and circumstances
    of Apotex, have known about the issues concerning its claim earlier? For the
    reasons above noted, I conclude not. Although Apotex is a sophisticated and
    knowledgeable drug manufacturer who conducts its own bioequivalence studies, it
    was never in a position to assess whether the FDA's concerns involving the
    Montreal Facility directly impacted the Studies such that they would not be
    accepted by the FDA. The information it had from the FDA was from its Untitled
    Letters and the later Form 483s and what MDS told it which was that the Studies
    were not a problem and it was dealing with the FDA's concerns.

[57]

Accordingly, the trial
    judge dismissed MDSs limitations argument and found that the action had been
    brought within the applicable limitation period.

(3)

Damages and Prejudgment Interest

[58]

The trial judge
    awarded damages of approximately $8.3 million to Apotex for lost profits caused
    by the delay in approval of the drugs for sale in the US market. Apotex also
    claimed the costs of repeating and certifying the MDS studies. The trial judge
    awarded approximately $3 million under this head of damages.

[59]

The trial judge held
    that Apotex was entitled to prejudgment interest from the date of the
    commencement of the action until the date of judgment in accordance with the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43. Apotex submitted that the
    appropriate rate was 3.3 percent per annum, the bank rate in effect for the
    last quarter of 2008, which was the quarter in which the action was commenced.

[60]

MDS asked the trial
    judge to exercise his discretion under s. 130 of the
Courts of Justice Act
to fix a different rate than what the trial judge described as the presumptive
    rate under ss. 127 and 128. MDS noted that there had been a fluctuation in
    interest rates in the 9.25 years between the commencement of the action and
    judgment. Accordingly, MDS suggested that either the variable rate of interest
    over the period or the average rate would be more appropriate. The average rate
    over the 37 quarters was 1.15 percent and the variable rate was slightly lower.
    Interest rates over the period fell from a high of 3.3 percent in the last
    quarter of 2008 to 1 percent in the last quarter of 2017. Within that period,
    rates fluctuated from a high of 2.5 percent to a low of 0.5 percent.

[61]

In a supplementary
    endorsement, the trial judge applied the presumptive rate of 3.3 percent per annum
    from November 10, 2008 (the date the action was commenced) to the date of
    judgment, and awarded prejudgment interest in the amount of $3,438,888.92. The
    trial judge noted that fluctuation of interest rates is only one factor to be
    considered in deciding whether to depart from the presumptive rate, and its
    significance depends on the extent of the fluctuation. In the case at bar, he
    found the extent of the fluctuation was not sufficient on its own to justify a
    deviation from the presumptive rate.

[62]

The trial judge awarded
    interest from the date the action was commenced, rather than the date on which
    Apotex wrote a demand letter giving notice of its claim (January 8, 2007), to
    reflect what he considered to be a significant unexplained delay in commencing
    the action. He was not otherwise prepared to reduce the amount of interest,
    rejecting MDSs submission that the slow progress of the action from
    commencement to judgment (which amounted to nine years) justified a reduction
    in the prejudgment interest rate. He noted that the action was complex, and
    complex actions take time to complete. There was no evidence that Apotex
    delayed the action after it was commenced, or that an earlier production of
    Apotexs damage particulars would have shortened the time to trial. He also
    rejected MDSs submission that Apotexs failure to produce relevant
    documentation concerning its market share until the eve of trial should reduce
    the interest payable. He noted that this factor was accounted for in his
    assessment of the evidence concerning Apotexs market share for the purposes of
    damages for lost profits.

III.

issues on appeal

[63]

The significant issue
    raised on the appeal is whether the action, commenced on November 10, 2008, was
    statute-barred by s. 5(1) of the
LA 2002
.

[64]

MDS also asserts that
    the trial judge erred in finding a breach of contract, in rejecting its
    argument that Apotex failed to mitigate its damages, and in the calculation of
    prejudgment interest. As we did not ask the respondent to address these issues
    in oral argument, my reasons for dismissing those grounds of appeal will be
    brief.

[65]

By way of
    cross-appeal, Apotex contends that the trial judge erred in his assessment of
    the damages incurred by Apotex. We did not find it necessary to call on counsel
    for the respondent by way of cross-appeal to respond to this issue and again my
    reasons dismissing the cross-appeal will be brief.

IV.

analysis

(1)

The Limitations Issue

[66]

This action came to
    trial more than eight years after it began. Astonishingly, MDS did not plead
    the limitation period defence until the eve of trial.

[67]

One might well ask: if
    the plaintiff ought to have discovered the material facts on which to base a
    claim more than two years before the action was commenced in 2006, how is it
    that MDS and its lawyers only discovered that the action was time-barred some
    ten years later? I suspect that they assumed exactly what the trial judge
    concluded: the limitation period did not begin to run until December 11, 2006,
    at the earliest, when Apotex discovered that the FDA would not accept the MDS
    studies.

[68]

That being said, as I
    have noted, Apotex quite properly consented to the amendment of the statement
    of defence to allow MDS to plead the limitation period defence, and the trial
    judge allowed the amendment.

[69]

MDS submits, as it did
    at trial, that the limitation period began to run more than two years before
    the commencement of the action. Apotex submits that while the trial judges conclusion
    on the limitations issue is supportable on the basis of s. 5(1)(a)(iv) (i.e.,
    that it was not appropriate for Apotex to bring an action until December 11,
    2006), it was unnecessary to take that route. It submits that the trial judges
    conclusion that Apotex knew that it had suffered actual loss by May 8, 2006 is
    inconsistent with the evidentiary record and with the trial judges other
    findings of fact.

[70]

To preview my
    conclusions, I agree with the trial judge that the action was not time-barred. I
    do not, however, agree with the manner in which the trial judge reached his
    conclusion and, in particular, his resort to s. 5(1)(a)(iv).

[71]

I accept Apotexs
    submission that the trial judge erred in holding that the requirements in ss.
    5(1)(a)(i), (ii) and (iii) were met on May 8, 2006. The trial judge failed to
    give full effect to the requirements of s. 5(1)(a) of the
LA 2002
. As
    I will explain, on the correct interpretation of the statute, and when all of
    the trial judges findings of fact about Apotexs knowledge of the material
    facts are related to the elements of s. 5(1)(a), the claim was not discovered
    within the meaning of ss. 5(1)(a)(i), (ii) and (iii) until December 11, 2006. It
    was, therefore, unnecessary for the trial judge to apply s. 5(1)(a)(iv) to arrive
    at that conclusion.

[72]

I will begin by
    setting out the relevant provisions of the
LA 2002
. I will then
    explain how those provisions apply to a breach of contract case. Finally, I
    will demonstrate how those provisions apply to the facts of this case.

The
Limitations Act, 2002

[73]

After many years of
    attempts at reform, the
LA 2002
brought about a sea- change in the law
    of limitation periods in Ontario. That change has spread to other Canadian
    jurisdictions and its impacts are still being felt as its implications are
    clarified. The statute replaced a complex, obscure and confusing regime of
    multiple limitation periods with a simple and comprehensive scheme: see
Independence
    Plaza 1 Associates, L.L.C. v. Figliolini
, 2017 ONCA 44, 136 O.R. (3d) 202,
    at para. 29;
msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd.
,
    2013 ONCA 550, 310 O.A.C. 282, at para. 61. It did away with a patchwork of
    different limitation periods, of various lengths, and put in place a uniform
    and considerably shorter limitation period of two years for most actions. It
    also codified the common law discoverability principle as the trigger for the
    commencement of the limitation period.

[74]

The
LA 2002
applies
    to claims pursued in court proceedings other than those enumerated in s.
    2(1). A claim is defined in s. 1 as: a claim to remedy an injury, loss or
    damage that occurred as a result of an act or omission.

[75]

Section 4 sets out the
    general two-year limitation period:

Unless this Act provides otherwise, a proceeding shall not be
    commenced in respect of a claim after the second anniversary of the day on
    which the claim was discovered.

[76]

Thus, under the
LA
    2002
, the limitation period runs when the claim is discovered.

[77]

Section 5(1) provides
    that a claim is discovered on the earlier of,

(a) the day on which the person with the claim first
    knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by
    or contributed to by an act or omission,

(iii) that the act or omission was that of the
    person against whom the claim is made, and

(iv) that, having regard to the nature of the
    injury, loss or damage, a proceeding would be an appropriate means to seek to
    remedy it; and

(b) the day on which a reasonable person with the
    abilities and in the circumstances of the person with the claim first ought to
    have known of the matters referred to in clause (a).

[78]

As this court observed
    in
Longo v. MacLaren Art Centre Inc.
, 2014 ONCA 526, 323 O.A.C. 246, at
    para. 41, the
items listed in s. 5(1)(a) are
    conjunctive
:

The limitation period does not begin to run until the putative
    plaintiff is actually aware of all of those matters or until a reasonable
    person, with the abilities and in the circumstances of the plaintiff, first
    ought to know of all of those matters.

See also
Crombie Property Holdings Ltd. v.
    McColl-Frontenac Inc.
, 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 35,
    leave to appeal refused, [2017] S.C.C.A. No. 85.

[79]

To state an obvious
    point of importance in this case, the effect of ss. 5(1)(a)(i), (ii) and (iii)
    is that it is not sufficient that the plaintiff knows that he or she has
    suffered damage. The plaintiff must also know that the damage was
caused
by an
act or omission
of the defendant.

[80]

Subsection 5(1)(a)(iv)
    adds an additional requirement not found in the former legislation: the person
    with the claim must know that, having regard to the nature of the injury, loss
    or damage, a proceeding would be an appropriate means to seek to remedy it.

[81]

Subsection 5(1)(a) has
    been described as a subjective test, because it looks to the claimants
    subjective knowledge. On the other hand, s. 5(1)(b) has been described as a
    modified objective test because it looks to what a reasonable person with the
    abilities and in the circumstances of the plaintiff ought to have known: see
Independence
    Plaza
, at para. 74;
Ferrera v. Lorenzetti, Wolfe Barristers and
    Solicitors
, 2012 ONCA 851, 113 O.R. (3d) 401, at para. 70;
Presidential
,
    at para. 18.

[82]

Section 5(2) creates a
    statutory presumption that a claim is discovered on the day the relevant act or
    omission took place:

A person with a claim shall be presumed to have known of the
    matters referred to in clause (1) (a) on the day the act or omission on which
    the claim is based took place, unless the contrary is proved.

[83]

To overcome this
    presumption, the plaintiff may point to evidence to establish that the claim
    was discovered on a date other than the date on which the act or omission
    took place. As this court observed in
Morrison v. Barzo
, 2018 ONCA 979,
    at para. 31: The presumption is displaced by the courts finding as to when
    the plaintiff subjectively knew he had a claim against the defendants.

Commencement of the limitation
    period for breach of contract

[84]

Before the reform of
    limitations law brought about by the
LA 2002
, the previous statute, the
Limitations Act
, R.S.O. 1990, c. L.15, looked to when the cause of
    action arose (an expression not used in the
LA 2002
) to determine the
    commencement of the limitation period. The cause of action for breach of
    contract accrued on the date of the breach and the limitation period began to
    run on that date: see Graeme Mew, Debra Rolph & Daniel Zacks,
The Law
    of Limitations
, 3d ed. (Toronto: LexisNexis, 2016) at §9.6;
Robert
    Simpson Co. Ltd. et al v. Foundation Co. of Canada Ltd. et al
(1982), 36
    O.R. (2d) 97 (C.A.), at p. 105;
Schwebel v. Telekes
, [1967] 1 O.R. 541
    (C.A.), at p. 544.

[85]

This was the case
    whether or not damages had yet been incurred. Damages are not an essential
    element of the cause of action for breach of contract:
Mars Canada Inc. v.
    Bemco Cash & Carry Inc.
, 2018 ONCA 239, 140 O.R. (3d) 81, at para. 32.

[86]

Under the
LA 2002
,
    the limitation period for breach of contract does not necessarily run from the
    date of the breach. As I have observed, in contrast to the former statute, the
    date of the act or omission  the breach of contract itself  is not the only
    factor to be considered in determining when a claim is discovered under the
LA
    2002
. Instead, the date on which the plaintiff knew of the occurrence of
    the act or omission is only
one
factor to be
    determined. In addition to that factor, the person with the claim must also
    know that the injury, loss or damage had
occurred

    (s. 5(1)(a)(i)), that it was
caused or contributed to
by the act or omission (the breach of contract) (s. 5(i)(a)(ii)), and that the
    act or omission was
that of the defendant
(s.
    5(1)(a)(iii)).

[87]

As a result of the
    presumption under s. 5(2), the limitation period begins to run on the date of
    the breach (being the date of the act or omission), unless it is proven that
    the person with the claim did not know of one or more of the matters set out in
    s. 5(1)(a), and that a reasonable person would not have known of those matters.

[88]

A plaintiff with a
    claim for breach of contract may displace the presumption in s. 5(2) if, for
    example, they establish that they did not know that the injury, loss or
    damage had occurred or, if it had occurred, they did not know that it was caused
    by an act or omission of the defendant  the breach of contract. But it is
    well-settled that the person need not know the extent of the injury, loss or
    damage to trigger the commencement of the limitation period. It is enough that
    they know that
some damage
has occurred. In
Hamilton
    (City) v. Metcalfe & Mansfield Capital Corp.
, 2012 ONCA 156, 290
    O.A.C. 42, at paras. 59-61, this court adopted the common law rule expressed in
Peixeiro v. Haberman
, [1997] 3 S.C.R. 549, at para. 18, that some
    damage is sufficient to start the running of the limitation period.

[89]

To summarize, under
    the
LA 2002
, the limitation period does not begin to run until
all
of the factors enumerated in s. 5(1)(a) have been
    satisfied, unless a reasonable person ought to have known of their existence at
    an earlier date (s. 5(1)(b)). In breach of contract cases, those factors
    include knowledge that some injury, loss or damage was caused by or contributed
    to by the act or omission that is the breach of contract.

[90]

I make two concluding
    observations before turning to the circumstances of this case.

[91]

First, to determine
    when a claim is discovered in a breach of contract case, it is necessary to
    examine the terms of the contract and the nature of the alleged breach (the
    act or omission) on which the claim is based: see Mew, Rolph & Zacks,

at §9.5, citing to
NFC Acquisition L.P. v. Centennial 2000 Inc.
,
    2010 ONSC 733, 67 B.L.R. 218, at paras. 29-30, affirmed in 2011 ONCA 43, 78
    B.L.R. (4th) 11;
Hopkins v. Stockman
, 2013 SKCA 118, 427 Sask. R. 4,
    at para. 10. As van Rensburg J.A. noted in
Morrison v. Barzo,
at
    paras. 33, 49, the application of the test in s. 5(1)(a) requires the
    identification or definition of the claims at issue. This is a necessary
    starting point.

[92]

Second, in many cases,
    the act or omission, causation, and the injury, loss or damage will occur
    simultaneously, and will be discovered simultaneously. But this will not always
    be the case. In some cases, discovery of the act or omission will not start
    the limitation period running unless injury, loss or damage has occurred and
    has been discovered (s. 5(1)(a)(i)).

Application to this case

[93]

I now turn to the
    application of s. 5(1)(a) of the
LA 2002
to the circumstances of this
    appeal.

[94]

There is no issue in
    this case that the person against whom the claim is made, being MDS, was the
    person responsible for the plaintiffs injury. The focus in this case is on ss.
    5(1)(a)(i), (ii), and (iv) of the
LA 2002
.

[95]

The commencement of
    the limitation period in this case must be analyzed by reference to the nature
    of the contract, the manner of its performance, and the nature of the breach.
    The contract between Apotex and MDS was not a simple contract for the purchase
    of goods or services. Nor, as the trial judge found, was it simply a contract
    for the delivery of a written study. It was a contract for the delivery of a
    study conducted under conditions that met the requirements of the FDA, and that
    was in conformity with the requirements of the FDA.

[96]

Moreover, this was a
    case in which manner of performance of the contract was required to be to the
    satisfaction of a third party  the FDA. The MLSA and the project agreements
    contemplated that MDSs studies would be submitted to the FDA to support
    approval of Apotexs ANDAs.

[97]

The occurrence of a
    breach, and Apotexs knowledge of a breach, must be considered in light of
    these circumstances. They must also be considered in the context of the
    information Apotex was receiving from MDS, from the FDA, and from its own
    investigations into MDSs issues with the FDA.

The act or omission

[98]

As I note above, in
    order to determine the act or omission in a breach of contract case, it is
    necessary to examine the terms of the contract and the breach alleged to be the
    basis of the claim. Here, the nature of the breach was a matter of dispute at
    trial.

[99]

MDS argued that the
    delivery of the studies to Apotex brought its contractual obligations to an end
    and that the breach occurred on that date. The trial judge quite correctly
    rejected that argument. At the time the studies were delivered, Apotex did not
    know and could not have known that they were not compliant with FDA
    requirements.

[100]

The trial judge found
    that the MLSA was the governing contractual document and that the relevant act
    or omission was MDSs breaches of s. 8.1 of the MLSA by:

·

failing to comply with FDA regulatory requirements at the
    Montreal Facility (para. 160);

·

failing to comply with US industry standards and good practices in
    the way it handled the FDAs concerns (paras. 160, 164); and

·

failing to conduct the studies for Levo-Carb IR and Amoxi-Clav in
    compliance with US regulatory standards (paras. 167-169).

[101]

These
    conclusions were based on the trial judges interpretation of the contract in
    the context of the factual matrix and MDS has failed to demonstrate a palpable
    and overriding error in the trial judges analysis:
Creston Moly Corp. v.
    Sattva Capital Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50,
Ledcor
    Construction Ltd. v. Northbridge Indemnity Insurance Corp.
, 2016 SCC 37,
    [2016] 2 S.C.R. 23, at para. 21.

[102]

The complex
    issue in this case is determining
when
the breach
    of contract occurred. This was not a simple case of a party failing to perform
    by an agreed date or patently breaching the contract by refusing to perform.

[103]

MDSs
    difficulties with the FDA preceded the completion of the studies. In fact,
    those difficulties preceded the project agreements for Amoxi-Clav and were
    ongoing right up to January 2007.

[104]

The process of
    obtaining FDA approval of an ANDA is protracted in the best of circumstances. As
    noted by the trial judge at para. 33, it is a dynamic process that typically
    involves a degree of back-and-forth between the pharmaceutical company and the FDA
    to address the latters concerns with the submission. Communications of this
    nature occurred between Apotex and the FDA in relation to Levo-Carb IR and
    Amoxi-Clav in this case, as outlined by the trial judge, at paras. 90-93,
    99-100.

[105]

The FDAs role
    as the regulatory body to which the studies were to be submitted is important
    to the assessment of contractual performance, and any breach thereof. The FDAs
    acceptance of the bioequivalence studies prepared by MDS was key to whether MDS
    had satisfied its contractual obligations to prepare studies acceptable for
    submission to the FDA. Moreover, throughout the process, not surprisingly, MDS
    was disputing the FDAs concerns and, as the trial judge found, was re-assuring
    Apotex that its issues with the FDA did not involve the studies, and that it
    was working with the FDA to address its concerns.

Causation

[106]

The trial judge
    found that MDSs breaches (the relevant acts or omissions) were causative of
    Apotexs damages because:

·

the results of the FYR were not accepted by the FDA and
    eventually led to the requirement that pharmaceutical clients of MDS, including
    Apotex, were required to remediate the bioequivalency studies conducted at the
    Montreal Facility from 2000 to 2004 (para. 163);

·

MDSs mishandling of the FDAs concerns over the course of their
    dealings led to the FDAs January 2007 requirements that the studies be
    repeated or certified, and which directly impacted Apotex (para. 164); and

·

Apotex determined in January 2007, following the FDAs letter,
    that the Levo-Carb IR study and the Amoxi-Clav studies done by MDS would not be
    accepted by the FDA and would have to be repeated or certified in order to
    proceed with the ANDAs (paras. 168-169).

[107]

Significantly,
none of these causative events were known to Apotex before
    December 11, 2006
. As well, the consequences of MDSs act or omission
    only manifested themselves once the FDA had communicated to Apotex that the
    studies were not acceptable due to the regulatory compliance issues at the
    Montreal Facility.

Injury, loss or damage

[108]

In determining
    when Apotex first knew that injury, loss or damage had occurred (s. 5(1)(a)(i)),
    the trial judge identified as significant Apotexs recognition, on May 8, 2006 that
    its projected approval date for Amoxi-Clav would have to be extended from
    August 2006 to November 2006 if MDS were able to submit a response to the FDAs
    April 26, 2006 deficiency notice by the end of May 2006. He concluded that, at
    that point, Apotex knew that damage had occurred within the meaning of s.
    5(1)(a)(i). In particular, he stated: delay of approval = loss of profit. He
    found that Apotex also knew on this date that the delay had been caused by
    MDS failure to comply with the FDA regulations: at para. 219.

[109]

A trial judges
    factual findings in relation to the commencement of the limitation period are
    entitled to deference on appeal: see
Tapak v. Non-Marine Underwriters,
    Lloyds of London
, 2018 ONCA 168, 76 C.C.L.I. (5th) 197, at para. 11, leave
    to appeal refused, [2018] S.C.C.A. No. 157. As I will explain, however, while I
    accept the trial judges findings of fact, his conclusion that the limitation
    period began to run on May 8, 2006 is inconsistent with his findings of fact.
    This led to an error in his analysis of ss. 5(1)(a)(i), (ii) and (iii).

[110]

In my view, the
    trial judge erred in the interpretation of the
LA 2002
, in concluding
    that the factors in ss. 5(1)(a)(i), (ii) and (iii) were met on May 8, 2006
    because the delay in approval was caused by MDSs failure to comply with the
    FDA regulations.

[111]

There are two
    reasons why the trial judges conclusion cannot stand. First, as I have noted, the
    determination of when injury, loss or damage occurs calls for an examination of
    the terms of the contract and the performance required under the contract. The
    trial judge erred in finding that extension of Apotexs internal approval
    date was evidence of its knowledge of damage caused by an act or omission (being
    the failure of MDS to comply with the FDA regulations). The approval date was
    simply Apotexs internal estimate of when the ANDAs would be approved by the
    FDA. It was not a term of Apotexs contract with MDS, nor was it tied to any
    part of the FDA regulatory process. Apotex could extend its internal projected
    approval date for any number of reasons, having nothing to do with the actions
    of MDS  for example, a decision by Apotex to amend the ANDA (as, in fact,
    occurred) or a request by the FDA to Apotex for additional information
    unrelated to the MDS studies.

[112]

Second, Apotex
    did not know on May 8, 2006 that the delay was caused by MDSs failure to
    comply with the FDA regulations. The May 8, 2006 email indicated that MDS was
    still investigating its response to the FDA and it was taking the position that
    its studies were compliant with FDA requirements. The FDA had not yet taken a
    firm position on the issue of whether the studies complied with its
    requirements, and it did not do so for another six months.

[113]

Moreover, six
    weeks after the May 8, 2006 email, as the trial judge observed, at para. 236,
    Apotexs approvals for the drugs were back on track:

As it turned out, on June 20, 2006, MDS advised Apotex that the
    Amoxi-Clav Studies had passed its FYR. MDS subsequently submitted its closure
    report for the Amoxi-Clav Studies to the FDA on July 7, 2006. Based on the
    results of MDS' review and Apotex's subsequent communications with the FDA
    concerning other issues arising from the FDA's review of the Amoxi-Clav ANDAs,
    Apotex understood that the MDS Studies were no longer an issue for the FDA in
    respect of its approvals and they were back on track.

[114]

The trial
    judges determination that s. 5(1)(a)(iv) applied and that the limitation
    period did not begin to run until December 11, 2006 is inconsistent with his
    conclusion that the other provisions of s. 5(1)(a) were satisfied by May 8,
    2006. Specifically, the findings of fact made by the trial judge in his analysis
    of s. 5(1)(a)(iv) lend support to the conclusion that Apotex did not have the
    requisite knowledge underpinning ss. 5(1)(a)(i), (ii) and (iii) on May 8, 2006.
    The trial judge found, at para. 225, that it would not have been appropriate
    for Apotex to have commenced a proceeding against MDS on May 8, 2006 because
    Apotex had no indication on that date that the studies would not be accepted by
    the FDA. He said, at para. 225:

On the facts of this case, I am satisfied that it would not
    have been appropriate for Apotex to have commenced a proceeding against MDS as
    at May 8, 2006. Rather, given what it knew at that date, it was more
    appropriate for Apotex to await the FDA's response to results of MDS' review of
    the Studies. Apotex and MDS had a long standing relationship regarding MDS
    conducting bioanalytical studies. Although the Studies were part of the FYR,
Apotex had no indication that they would not be accepted by the
    FDA
. MDS had been assuring Apotex that its issues with the FDA did not
    involve the Studies. What needed to happen was for the regulatory process
    involving the FYR to be concluded. Further, Apotex needed MDS' assistance to
    enable it to respond to the April 26, 2006 deficiency notice. Commencing an
    action could have jeopardized that assistance. [Emphasis added.]

[115]

It was not until
    January 7, 2007 that the FDA rejected the MDS studies, although the trial judge
    found that Apotex knew on December 11, 2006 that the studies would not be
    accepted based on direct communication between the FDA and Apotex.

[116]

The
    inconsistency between the findings of fact and the conclusion on the s. 5(1)(a)
    analysis is to be found in paras. 231 and 233 of the trial judges reasons
    which address Apotexs knowledge of the impact of MDSs issues with the FDA on
    the studies for Levo-Carb IR and Amoxi-Clav:

As a result, while the FDA's decision rejecting the MDS Studies
    was on January 10, 2007, based on the evidence, I find that
while Apotex knew that the FDA still had issues with MDS in
    mid-November 2006, it was not until December 11, 2006 when Ms. Tao spoke to the
    FDA and learned that it was considering a number of options in respect of
    studies done by MDS, including repeating them, re-analyzing them or having them
    reviewed by a third party auditor that Apotex knew that the MDS Studies would
    not be accepted by the FDA, resulting in delay and damage
.

Would a reasonable person with the abilities and circumstances
    of Apotex, have known about the issues concerning its claim earlier? For the
    reasons above noted, I conclude not.
Although Apotex is a
    sophisticated and knowledgeable drug manufacturer who conducts its own
    bioequivalence studies, it was never in a position to assess whether the FDA's
    concerns involving the Montreal Facility directly impacted the Studies such
    that they would not be accepted by the FDA. The information it had from the FDA
    was from its Untitled Letters and the later Form 483s and what MDS told it
    which was that the Studies were not a problem and it was dealing with the FDA's
    concerns
. [Emphasis added.]

[117]

In my view, the trial
    judges findings of fact made at paras. 231 and 233 can only lead to the
    conclusion that the factors set out in ss. 5(1)(a)(i), (ii) and (iii) of the
LA
    2002
were
not
met until December 11, 2006. As
    the trial judge found, until that date Apotex did not know that the MDS
    Studies would not be accepted by the FDA, resulting in delay and damage.

[118]

The trial
    judges finding, at para. 219, that the limitation period had begun to run on
    May 8, 2006, under ss. 5(1)(a)(i), (ii) and (iii)
[4]
,
    is inconsistent with his conclusion, at para. 231, that Apotex did not know
    until December 11, 2006 that the MDS studies would not be accepted by the FDA,
    resulting in delay and damage. It is also inconsistent with the trial judges
    finding, at para. 226, that by July 7, 2006, Apotex understood, based on MDSs
    review of the Amoxi-Clav studies and Apotexs subsequent communications with
    the FDA that the MDS Studies were no longer an issue for the FDA in respect of
    its approvals and they were back on track. Finally, it is inconsistent with
    the finding, at para. 233, that before December 11, 2006, Apotex was never in
    a position to assess whether the FDAs concerns involving the Montreal Facility
    directly impacted the Studies such that they would not be accepted by the FDA.

[119]

It is true that
    the FDAs concerns about the validity of the studies caused delays in what
    Apotex had targeted as an estimated FDA approval date. As of May 8, 2006,
    Apotex knew that it was
possible
that the FDA
    would not approve the studies by its estimated target date. But it did not know
    that the delay had been caused by a breach of contract, as opposed to the
    stalling of the ANDA process while the FDA and MDS sorted out their
    disagreement about whether the issues at the Montreal Facility impacted the
    integrity of studies conducted by MDS. As the trial judge found, at para. 233,
    Apotex was never in a position to assess whether the FDA's concerns involving
    the Montreal Facility directly impacted the Studies such that they would not be
    accepted by the FDA. That determination could only be made by the FDA, and
    Apotexs knowledge of this was necessarily contingent on communication from the
    FDA. While MDS failed to conduct the studies in compliance with US regulatory
    standards thereby breaching s. 8.1 of the MLSA, the breach did not cause Apotex
    injury, loss or damage until the FDA refused to accept the studies.

[120]

To conclude, based
    on the trial judges own findings, it was only on December 11, 2006 that Apotex
    knew and ought reasonably to have known
all
of the
    following:

(a) an
act or omission
, being a
    breach of contract, had occurred because the studies were unacceptable to the
    FDA for reasons related to conditions at the Montreal Facility where the
    studies were performed; and

(b) the act or omission had
caused injury,
    loss or damage
because the studies would have to be repeated or
    re-certified and the launch of the drugs in the US market would be delayed.

[121]

While Apotex
    knew before December 11, 2006 that its projected launch date would be extended
    (delay of approval = loss of profit, to use the trial judges words), it did
    not yet know that an actionable breach of contract had occurred or that the
    delay had been caused by that breach. At the date identified by the trial
    judge, May 8, 2006, Apotex simply knew that the launch had been delayed, but it
    did not know that the delay had been caused by a breach of contract as opposed
    to the usual interplay between the FDA, the proponent, and FDA regulated laboratory
    facilities. As of May 8, 2006, FDA approval of the ANDAs with the original MDS
    studies was still possible.

[122]

I turn to the
    remaining grounds of appeal and the cross-appeal.

(2)

Breach of Contract and Mitigation

[123]

MDS submitted in
    its factum, as it did at trial, that Apotex failed to establish that the
    studies were invalid or not compliant with the MLSA. MDS contends that it did
    not warrant that its studies would be accepted by the FDA.

[124]

This objection
    is answered by the trial judges interpretation of s. 8.1 of the MLSA, which
    was reasonable and is entitled to deference. It is also answered by the trial
    judges meticulous analysis of the breach of contract issue, at paras. 154-176
    of his reasons. While MDS is correct in stating that it did not warrant that
    the
results
of its studies would be accepted by
    the FDA, it did warrant that it would produce studies that would be acceptable
    for submission to the FDA. This required, as s. 8.1 recognized, that the
    studies be conducted in compliance with FDA regulations, and in a facility that
    was compliant with FDA regulations. Apotex did not have to show that the
    studies themselves were invalid to establish the breach. Rather, the FDA could
    not get to the stage of assessing ultimate validity because the threshold
    requirements for establishing validity were compromised. There was overwhelming
    evidence of serious deficiencies in MDSs facilities that compromised the
    integrity of MDSs clinical studies for Apotex, causing the FDA to conclude that
    the studies were not acceptable to support Apotexs ANDAs.

[125]

Apotex also
    adduced factual and expert evidence that MDS failed to adequately respond to
    the FDAs concerns. On this issue, the trial judge accepted, in its entirety
    the evidence of Apotexs expert witness on the US regulatory framework for
    generic drugs. He found that MDS breached s. 8.1 of the MLSA in respect of each
    of the three projects. He observed, at para. 160:

I am satisfied from the evidence that, as a result of its
    issues with the FDA, MDS breached s. 8.1 of the MLSA in respect of each of the
    three Project Agreements. The evidence of Ms. Crain, which as I've noted, I
    accept in its entirety, was that MDS failed to comply with U.S. regulatory
    requirements as determined by the FDA at the Montreal Facility; that the lack
    of compliance was serious in nature; and MDS ought to have foreseen that its
    lack of compliance had the potential to cause damage to its customers including
    Apotex. Further, MDS failed to comply with U.S. industry standards and good
    practices in the manner in which it handled the FDA's concerns during the
    period.

[126]

In my view, the
    trial judges findings of fact on this issue are fully supported by the
    evidence and are unassailable.

[127]

As to
    mitigation, there was also substantial evidence, which the trial judge
    reviewed, concerning Apotexs response to the issues raised by the FDA, in the
    face of MDSs assurance that those issues were being resolved. The trial judge
    adequately addressed the mitigation argument put to him at trial. He found that
    it was reasonable for Apotex to allow MDS to address the FDAs concerns and to
    take steps to repeat or certify the studies once it learned that the FDA was
    not satisfied with MDSs efforts. MDS has not identified a palpable and
    overriding error in the trial judges assessment of the evidence of mitigation.

(3)

Prejudgment Interest

[128]

As the trial
    judge noted, s. 130 of the
Courts of Justice Act
gives the court broad
    discretion to award interest at a rate other than the presumptive rate pursuant
    to ss. 127 and 128, where it is just to do so. In declining to exercise that
    discretion, the trial judge considered the factors set out in s. 130 and the
    submissions of MDS. The trial judge was well-positioned to consider the factors
    set out in s. 130, including the circumstances of the case and other relevant
    considerations. MDS has identified no error in principle in the exercise of
    that discretion and I would dismiss this ground of appeal.

(4)

The Cross-Appeal: Damages

[129]

The focus of the
    cross-appeal is Apotexs claim for lost profits. It asserts that the trial
    judge erred in fixing those damages at $8.3 million, rather than approximately
    $12.6 million, based on the trial judges determination of the delay period.

[130]

The
    determination of lost profits required a calculation of two variables. First,
    the period during which Apotex would have sold the two drugs in the US market
    but for the delay caused by MDSs breaches  i.e. the delay period. Second,
    the net revenue Apotex would have earned during the delay period, based on its
    projected sales less its projected costs of manufacturing and distribution.

[131]

The
    determination of projected sales depended, in part, on Apotexs estimated
    market share for the drugs in the generic market. The greater its market share,
    the higher the estimated sales during the delay period, and the greater the
    damages.

[132]

The issue on the
    cross-appeal is the trial judges finding concerning Apotexs prospective
    market share.

[133]

Both parties
    called expert evidence to establish the but for world. Apotex adduced
    evidence of its sales of the drugs in the US market after they were approved by
    the FDA until sales ended due to the FDAs unrelated ban on imports of Apotex
    drugs in September 2009.

[134]

Each party called
    an expert in business valuation and damages quantification who prepared a
    report explaining the quantification of Apotexs loss. Both experts followed
    the same methodology to determine Apotexs net revenues, but disagreed on Apotexs
    estimated market share for the drugs. MDS also called an expert witness who was
    qualified as an expert on the marketing and sales of pharmaceutical products,
    including generic drugs. He prepared an expert report on Apotexs estimated
    market share and critiqued the methodology used by Apotexs damages expert (who
    was not a pharmaceutical expert) to determine market share.

[135]

MDSs damages
    quantification expert considered that the best predictor of Apotexs market
    share in the but for world was its actual market performance. He determined
    market share by calculating a weighted average based on the actual market share
    achieved by Apotex for each drug. Apotexs expert estimated market share based
    on the average and median market share achieved by comparator drugs manufactured
    by Apotex, and exercised his professional judgment to create a smooth ramp up
    of market share over the delay period.

[136]

The trial judge
    preferred the evidence and approach of both of MDSs experts, which was based
    on the actual market share Apotex achieved during the period it sold Levo-Carb
    IR and Amoxi-Clav in the US market. Relying on the evidence of MDSs
    pharmaceutical sales and marketing expert, the trial judge rejected the
    approach to market share used by Apotexs damages expert. The trial judge
    further found that Apotex was not open and transparent prior to trial
    concerning its estimated market share at the time it entered the US market.
    Apotex failed to produce any documents concerning estimates for market share
    during discovery. It was only on the eve of trial that it produced a few
    documents pertaining to Amoxi-Clav market share.

[137]

Apotex
    acknowledges the high level of deference given to a trial judges award of
    damages, particularly in a case involving inherently difficult projections
    based on the assessment of conflicting expert evidence. In
Naylor Group
    Inc. v. Ellis-Don Construction Ltd.
, 2001 SCC 58, [2001] 2 S.C.R. 943, Binnie
    J., speaking for the court, observed, at para. 80:

It is common ground that the Court of Appeal was not entitled
    to substitute its own view of a proper award unless it could be shown that the
    trial judge had made an error of principle of law, or misapprehended the
    evidence, or it could be shown there was no evidence on which the trial judge
    could have reached his or her conclusion, or the trial judge failed to consider
    relevant factors in the assessment of damages, or considered irrelevant
    factors, or otherwise, in the result, made "a palpably incorrect" or
    "wholly erroneous" assessment of the damages. Where one or more of
    these conditions are met, however, the appellate court is obliged to interfere.
    [Citations omitted.]

[138]

In this case,
    the trial judge saw and heard the expert witnesses on both sides and observed
    their responses to the opposing partys criticism of their methodologies and
    conclusions. He rejected the evidence of Apotexs expert and gave cogent
    reasons for doing so, including his acceptance of the evidence of MDSs expert
    who had relevant expertise in matters of pharmaceutical sales and marketing
    expertise that Apotexs expert did not have.

[139]

The palpable
    and overriding error standard of review applies to a trial judges assessment
    of conflicting expert evidence. Apotex invites us to prefer the evidence of its
    expert based on our own assessment of the evidence. I would not accept that
    invitation. The trial judges analysis of the damages evidence was thorough and
    compelling, and no palpable and overriding error has been demonstrated.

V.

order

[140]

For these
    reasons, I would dismiss the appeal and the cross-appeal. I would award costs as
    agreed by the parties: $70,000 to the respondent on the appeal and $30,000 to
    the respondent on the cross-appeal, both amounts inclusive of disbursements and
    all applicable taxes.

Released: GS  JAN 16  2019

George R. Strathy C.J.O.

I agree. M.L. Benotto J.A.

I agree. L.B. Roberts J.A.

[1]
In 2010, MDS was subsumed by Nordion.

[2]
One Amoxi-Clav study was described as fed, because the subjects took the drug
    after a meal. The other was described as fasted, because the drug was taken
    before eating.

[3]

The trial judge identified the date of the email as May 8, 2006.
    The record suggests it may have been May 9, 2006. Nothing turns on the
    difference.

[4]
Apotex knew that damage has occurred (delay of approval = loss of profit); and
    that the delay had been caused by MDS failure to comply with the FDA
    regulations: at para. 219.


COURT OF APPEAL FOR ONTARIO

CITATION: Barkley v. Tier 1 Capital Management Inc., 2019
    ONCA 54

DATE: 20190125

DOCKET: C65312

Strathy C.J.O., Pepall and Fairburn JJ.A.

BETWEEN

Valerie Barkley
and Ronald
    Beaupre

Plaintiff
s
/Appellants

and

Tier 1 Capital Management Inc., Dowarka Persaud,
    T1CM Principal
Secured Mortgages Inc., Preeya Persaud, Patrick W. Jackson, John Lally,
John G. Simmonds, J. Paul Fletcher, Fletcher & Crichlow LLP, Olympia Trust
    Company, KMJ & Associates Ltd., Robert W. Gowdy, Mondville Holdings Ltd.,
    Nicholas Dookhie, Diane Chetram, John Doe and Jane Doe

Defendants/Respondents

Mitchell Wine, for the appellants

Ryan Morris and Daniel Szirmak, for the respondent Olympia
    Trust Company

Murray Stieber and Chris Afonso, for the respondents KMJ
    & Associates Ltd. and Robert W. Gowdy

Heard: January 24, 2019

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated March 26, 2018.

APPEAL BOOK ENDORSEMENT

[1]

This is an appeal from a decision refusing to certify a class action
    against the three respondents and dismissing the claims against them on the
    basis that the claims disclose no reasonable cause of action under s. 5(1)(a)
    of the
Class Proceedings Act
, 1992.

[2]

The appellants concede that the motion judge made no error in law. Their
    complaint lies in his application of the principles relating to the duty of
    care to the facts of this case and, in particular, the facts as they relate to
    the respondents.

[3]

The motion judge gave thorough reasons justifying his conclusions
    reasons which we find correct. It is plain and obvious that the appellants have
    pleaded no reasonable cause of action against the respondents.

[4]

We are not satisfied that the motion judge made any error in principle
    in his assessment of costs, or that the award was plainly wrong.

[5]

For these reasons, the appeal is dismissed.

[6]

Costs to the respondents each in the amount of $10,000, inclusive of
    disbursements and all applicable taxes.