PreMD Inc. v. Ogilvy Renault LLP et al., (2013) 309 O.A.C. 139 (CA)

• Judge: Laskin, Blair and Epstein, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: October 05, 2012
• Jurisdiction: Ontario
• Citations: (2013), 309 O.A.C. 139 (CA);2013 ONCA 412

PreMD Inc. v. Ogilvy Renault LLP (2013), 309 O.A.C. 139 (CA)

MLB headnote and full text

Temp. Cite: [2013] O.A.C. TBEd. AU.003

PreMD Inc. (plaintiff/appellant/respondent by way of cross-appeal) v. Ogilvy Renault LLP, Swabey Ogilvy Renault S.E.N.C. and Robert Carrier (defendants/respondents/appellants by way of cross-appeal)

(C53264; 2013 ONCA 412)

Indexed As: PreMD Inc. v. Ogilvy Renault LLP et al.

Ontario Court of Appeal

Laskin, Blair and Epstein, JJ.A.

June 20, 2013.

Summary:

The defendant law firm failed to pay or make arrangements for the payment of the necessary fees to the United States Patent and Trademark Office to maintain two U.S. patents, owned by the plaintiff and, as a result, the patents were no longer valid in the United States. The defendant admitted that it had been negligent and had breached its contract with the plaintiff. At issue was the quantum of damages suffered by the plaintiff.

The Ontario Superior Court, in a decision reported at [2010] O.T.C. Uned. 7141, assessed damages at $1,063,069.

The Ontario Superior Court, in a decision reported at [2011] O.T.C. Uned. 1599, awarded the plaintiff costs of $675,000. The plaintiff appealed the dismissal of its claim for breach of fiduciary duty and the award of damages. The defendant cross-appealed the damage award and the costs award.

The Ontario Court of Appeal dismissed the appeal and the cross-appeal.

Barristers and Solicitors - Topic 2663

Negligence - Damages - Measure of - The defendant law firm admitted that it had been negligent and had breached its contract to maintain the plaintiff's two U.S. patents - The trial judge assessed damages - The plaintiff appealed, asserting that the judge erred by not awarding damages for the expenses it incurred in the period before the defendant was retained (patent fees, costs of clinical trials and related development and administrative expenses) - The plaintiff asserted that the judge awarded damages for one pre-contractual expense (the cost of acquiring the technology and related patent right) and, consistent with Anglia Television Ltd. v. Reed (Eng. C.A.), there was no reason in principle not to award its other pre-contractual expenses - The Ontario Court of Appeal rejected the argument - The trial judge awarded an amount equal to the plaintiff's costs of acquiring the technology as a way to compensate the plaintiff for its reliance losses in the period after it had retained the defendant (i.e., not as a pre-contractual expense) - It was unnecessary to decide whether to apply Anglia, because its requirement for an award of pre-contractual damages was not met - There was no evidence that the parties contemplated that the plaintiff's pre-contract expenses would be wasted if the defendant breached the contract - See paragraphs 71 to 78.

Barristers and Solicitors - Topic 2663

Negligence - Damages - Measure of - The defendant law firm admitted that it had been negligent and had breached its contract to maintain the plaintiff's two U.S. patents - The trial judge assessed damages, including $633,211.72 for the period from the defendant's retainer to the discovery of the lapse of the patents - The plaintiff appealed, asserting that the judge took too narrow of an approach in her assessment - The plaintiff sought reliance damages of approximately $6.1 million, largely representing the costs of clinical trials, the cost of seeking regulatory approvals in the U.S., and related development costs - The Ontario Court of Appeal rejected the argument - The plaintiff could only recover reliance damages for expenses that it would not have incurred but for the contract and thus were wasted (i.e., expenses that it would not have incurred had it known that its patents would not be maintained) - The evidence indicated that the plaintiff would have incurred the costs in question even if it had known that the patents would lapse after 4.5 years - None of the costs were incurred because of the contract - They were not truly wasted - Further, the plaintiff did not meet the second limitation on an award of reliance damages: it would not have been able to recover the costs even if the defendant had maintained the patents for their full term - The plaintiff's venture was unprofitable from the beginning - The lapse of the patents played no role in that unprofitability - A further award of reliance damages should not be awarded where it would put the plaintiff in a better position than it would have been in had the defendant performed the contract - See paragraphs 83 to 93.

Barristers and Solicitors - Topic 2663

Negligence - Damages - Measure of - The defendant law firm admitted that it had been negligent and had breached its contract to maintain the plaintiff's two U.S. patents - The trial judge assessed damages - The plaintiff appealed, asserting that the judge erred in not awarding reliance damages for the period from the discovery of the lapse of the patents to the final notification that the patents would not be reinstated - The plaintiff sought to recover $6.5 million for the period - The claim largely covered the costs of seeking U.S. regulatory approval and clinical trials - The Ontario Court of Appeal rejected the argument - The court accepted that the plaintiff tried to reinstate the patents and that it had contractual commitments to carry out certain clinical trials - However, the expenses incurred were incurred knowing that the patents had lapsed - They were not wasted expenses in the sense that they would not have been incurred but for the contract - They would have been incurred regardless of the contract - See paragraphs 94 to 97.

Barristers and Solicitors - Topic 2663

Negligence - Damages - Measure of - The defendant law firm admitted that it had been negligent and had breached its contract to maintain the plaintiff's two U.S. patents - The trial judge assessed damages, including an amount equal to the cost of acquiring the technology and related patent rights ($510,750) - On appeal, the defendant asserted that the judge should have apportioned the acquisition costs and awarded the plaintiff only half of the $510,750 as the United States accounted for only half of the plaintiff's market - The Ontario Court of Appeal rejected the argument - There was no evidence that the acquisition costs was allocated across markets or countries - The plaintiff paid one lump sum for all of the technology and patent rights - The trial judge chose to award the entire amount and it was her call to make - More importantly, the $510,750 served as a proxy to compensate the plaintiff for its overall loss and was not intended to reimburse it for its cost of acquisition - She viewed the acquisition costs and one additional cost of $122,461.72 as a "flexible and imaginative" measure of the plaintiff's net out-of-pocket costs in reliance on the contract for the period from the defendant's retainer to the discovery of the lapse of the patents - See paragraphs 98 to 102.

Contracts - Topic 4033

Remedies for breach - Damages - Negligent breach of contract - [See all Barristers and Solicitors - Topic 2663 ].

Damages - Topic 5702.1

Contracts - Breach of contract - Reliance damages - [See all Barristers and Solicitors - Topic 2663 ].

Damages - Topic 5702.1

Contracts - Breach of contract - Reliance damages - The Ontario Court of Appeal reviewed the law respecting reliance damages and their use in breach of contract cases - The court added that "A plaintiff's claim for reliance damages is limited in two important ways. First, it is entitled to recover only those expenses that were truly wasted - that would not have been incurred but for the contract. This is the essence of reliance damages. ... Second, a plaintiff is not entitled to recover expenses that would have been wasted regardless of the breach. ... This second limitation ensures that an award of reliance damages will not put an injured party in a better position than it would have been in had the contract been performed ... The defendant, however, bears the onus of showing that the injured party would not have recouped the expense even if the defendant had met its obligations under the contract. ..." - See paragraphs 65 to 70.

Damages - Topic 5703

Contracts - Breach of contract - Damages in reasonable contemplation of parties - [See first Barristers and Solicitors - Topic 2663 ].

Damages - Topic 5717

Contracts - Breach of contract - Negligent breach of contract - [See all Barristers and Solicitors - Topic 2663 ].

Practice - Topic 7243

Costs - Party and party costs - Offers to settle - Effect of failure to accept - The defendant law firm admitted that it had been negligent and had breached its contract to maintain the plaintiff's two U.S. patents - The trial judge assessed damages and awarded the plaintiff costs - The defendant appealed, asserting that because it had made an offer to settle that was so close to the amount of damages awarded, the judge should have invoked the cost consequences of rule 49.10 and ordered each party to bear their own costs - The defendant asserted that its offer to settle was within the "spirit" of rule 49.10 - The Ontario Court of Appeal rejected the argument - The plaintiff obtained a judgment more favourable than the offer - Therefore, invoking rule 49.10 would require a departure from its criteria - The judge concluded that, having regard to the importance of reasonable predictability and the even application of rule 49.10, the interests of justice did not warrant the imposition of the cost consequences of rule 49.10 - The court saw no reviewable error in that conclusion - See paragraphs 104 to 108.

Cases Noticed:

Pacific Playground Holdings Ltd. v. Endeavour Developments Ltd. et al., [2002] B.C.T.C. 126; 1 R.P.R.(4th) 280; 2002 BCSC 126, refd to. [para. 68].

Angoss II Partnership et al. v. Trifox, Inc. (1997), 46 O.T.C. 161 (Gen. Div.), affd. (1999), 126 O.A.C. 293 (C.A.), leave to appeal denied (2000), 261 N.R. 104 (S.C.C.), refd to. [para. 70].

Bowlay Logging Ltd. v. Domtar Ltd. (1978), 87 D.L.R.(3d) 325 (B.C.S.C.), affd. (1982), 37 B.C.L.R. 195; 135 D.L.R.(3d) 179 (C.A.), refd to. [para. 70].

Anglia Television Ltd. v. Reed, [1972] 1 Q.B. 60 (C.A.), refd to. [para. 72].

Penvidic Contracting Co. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267; 4 N.R. 1, refd to. [para. 83].

Niagara Structural Steel (St. Catharines) Ltd. v. LaFlamme (W.D.) Ltd. (1987), 19 O.A.C. 142; 58 O.R.(2d) 773 (C.A.), refd to. [para. 106].

Authors and Works Noticed:

Chitty on Contracts (31st Ed. 2012), Volume 1, paras. 26-019 to 26-021 [para. 66]; 26-022 to 26-031 [paras. 66, 77].

McCamus, John, The Law of Contracts (2005), pp. 832 to 837 [paras. 66, 77].

Waddams, S.M., The Law of Damages (2012 Looseleaf), paras. 5.210 [para. 70]; 15.290 [para. 63].

Counsel:

William G. Horton and Amandeep S. Dhillon, for the appellant/respondent by cross-appeal;

Alan J. Lenczner, Q.C., and Marguerite Ethier, for the respondents/appellants by cross-appeal.

This appeal was heard on October 5, 2012, by Laskin, Blair and Epstein, JJ.A., of the Ontario Court of Appeal. Laskin, J.A., released the following judgment for the court on June 20, 2013.