A-1271-84
Cutter (Canada), Ltd. (Appellant)
v.
Baxter Travenol Laboratories of Canada, Limited:
Travenol Laboratories Inc., and Baxter Travenol
Laboratories, Inc. (Respondents)
INDEXED AS: BAXTER TRAVENOL LABORATORIES OF CANADA,
LTD. v. CUTTER (CANADA), LTD.
Court of Appeal, Urie, Stone and MacGuigan
JJ.—Ottawa, February 17 and March 3, 1987.
Practice — Contempt of court — Quantum of fine —
Appellant disposing of infringing goods rather than destroying
or delivering up as directed in reasons for judgment — Acting
on counsel's advice reasons for judgment not effective until
formal judgment pronounced — Criminal contempt proceeding
— That conduct non-contumacious cannot be raised as
defence — Mitigating factor as to penalty — Judgment varied
— Fine reduced from $100,000 to $50,000 — Federal Court
Rules, C.R.C., c. 663, R. 355.
This is an appeal against the quantum of a fine imposed on
the appellant Cutter as a result of a finding of contempt of
court made by Dubé J. in October 1984. Cutter, acting on the
advice of its counsel that reasons for judgment do not become
effective until after pronouncement of the formal judgment,
disposed of its inventory of infringing blood bags contrary to
the reasons for judgment directing it to either destroy them or
deliver them up to Baxter. The Trial Judge imposed a fine of
$100,000 or 10 percent of the value of the infringing goods, i.e.
$1 million. The Supreme Court of Canada, in a decision
rendered in 1983, held that Cutter's conduct was not in breach
of the injunction but could constitute contempt by reason of an
"interference with the orderly administration of justice and an
impairment of the ... dignity of the Court". Cutter submits
that its conduct was not contumacious and that therefore it did
not deserve such a severe punishment. The question is whether
the Trial Judge had regard to all the circumstances which
should be taken into consideration when imposing a fine in a
contempt proceeding.
Held, judgment should be varied by reducing the penalty to
$50,000.
This is a criminal contempt proceeding for impeding the
orderly administration of justice and for impairing the dignity
of the Court, not a civil contempt case as believed by the Trial
Judge. The fact that a party is entitled to be fully compensated
for damages sustained as a result of the sale of infringing
products is irrelevant. It is the gravity of the contempt that is
the relevant factor.
The Trial Judge did not err in using a percentage of the value
of the goods not delivered up as a guide for measuring the
penalty. In imposing penalties in criminal contempt cases, it is
proper to take into account "the severity of the law and the
temperance of justice", as established by the authorities cited
by the appellant.
The presence or absence of good faith on the part of Cutter
in relying on the advice of its counsel is not relevant in
determining whether or not there was an act of contempt. It is
relevant only as a mitigating factor in considering the penalty
to be imposed. In the present case, the reasons for judgment
indicate that the Trial Judge was well aware that non-contuma
cious conduct is not a defence to a finding of contempt per se.
However, the reasons also show that he failed to consider that
non-contumacious conduct—reliance by Cutter on the legal
advice it received—can be a mitigating factor where penalty is
concerned. His understanding of the mandate of the Supreme
Court of Canada, as disclosed in his reasons, indicate that he
failed to appreciate the differences between the two aspects of
the defence. The Supreme Court, in referring the matter back
to the Trial Division, had in mind only the issue of the existence
or non-existence of contempt, not the issue of the penalty to be
imposed in the Trial Division. In view of the appellant's reli
ance on erroneous legal advice justice would be served if the
penalty were reduced to $50,000.
CASE JUDICIALLY CONSIDERED
CONSIDERED:
Re Mileage Conference Group of the Tyre Manu
facturers' Conference, Ltd.'s Agreement (1966), 2 All
E.R. 349 (R.P.C.).
COUNSEL:
George E. Fisk for appellant.
No one appearing for respondents.
Barbara Mcisaac for Attorney General of
Canada.
SOLICITORS:
Gowling & Henderson, Ottawa, for appellant.
Fasken & Calvin, Toronto, for respondents.
Deputy Attorney General of Canada for
Attorney General of Canada.
The following are the reasons for judgment
rendered in English by
URIE J.: The litigation out of which the judg
ment of the Trial Division [ [ 1986] 1 F.C. 497]
which is the subject of this appeal arose has been
lengthy and complex. A brief review thereof will
bring into focus the sole issue in this appeal.
The appellant ("Cutter") was the defendant in a
patent action brought in the Trial Division by the
respondents ("Baxter"). After a trial in November
1980, Mr. Justice Gibson delivered his reasons for
judgment on December 11, 1980 [(1981), 52
C.P.R. (2d) 163] in which he found that the patent
in suit was valid and had been infringed by Cutter.
He further held [at page 172] that Baxter was
"entitled to judgment against Cutter, declaring,
ordering and adjudging as follows". There fol
lowed seven specific paragraphs which, inter alia,
enjoined Cutter from "manufacturing, offering for
sale, selling or distributing multiple blood-bag
sets" [at page 172] and ordering Cutter to destroy
or deliver up to Baxter all infringing goods in its
"possession, custody or control" [at page 173]. He
then directed counsel to "prepare in both official
languages an appropriate judgment to implement
the foregoing conclusions and may move for judg
ment in accordance with Rule 337(2)(b)". Formal
judgment was settled by Gibson J. and entered,
after submissions by counsel, on December 18,
1980.
Having been advised by its counsel that under
the Federal Court Rules [C.R.C., c. 663], as he
understood them, reasons for judgment did not
become effective until after pronouncement of the
formal judgment, Cutter proceeded with alacrity
and efficiency to dispose of its inventory of infring
ing blood bags between December 11 and Decem-
ber 18, 1980 rather than destroying them or deliv
ering them up as Gibson J.'s reasons for judgment
directed.
As a result on January 12, 1981 Baxter obtained
from the Trial Division an ex parte show cause
order why Cutter should not be condemned for
contempt of court for (a) breach of the injunction
granted by Gibson J. and (b) acting in such a way
as to interfere with the "orderly administration of
justice or to impair the authority or dignity of the
Court by entering, after the commencement of the
trial herein, into an arrangement out of the ordi
nary course of trade" for the disposal of the
infringing blood bag sets.
On February 3, 1981, Cattanach J. [(1981), 54
C.P.R. (2d) 145] held that the acts complained of
could not be in breach of the judgment of Gibson
J. which had not been pronounced on December 11
but only on December 18, 1980. His judgment was
affirmed on appeal to this Court [(1981), 54
C.P.R. (2d) 152]. The Supreme Court of Canada,
on November 3, 1983 [[1983] 2 S.C.R. 388]
agreed that the acts complained of were not in
breach of the injunction. However, those acts, it
was held [at page 398], could constitute contempt
... between December 11 and December 18, 1980 by reason of
an interference with the orderly administration of justice and
an impairment of the order or dignity of the Court (Rule 355).
It would be covered by paragraph (b) of the show cause order.
Since this question arose as a preliminary objection [before
Cattanach J.], there has never been a finding of fact that
Cutter and/or Maxwell [President of Baxter], with knowledge
of their existence, did contravene the prohibitions contained in
Gibson J.'s December 11 reasons for decision. Such a determi
nation cannot be made in this Court; it would require a
reconvened hearing before the Federal Court, Trial Division.
On July 16, 1984, Baxter obtained a second
show cause order, ex parte, from Strayer J. in the
Trial Division. Its purpose, Dubé J. said [at page
501], was "to clarify the foundation upon which
evidence would be adduced in the hearing of the
first show cause order" which had been remitted to
the Trial Division by the Supreme Court of
Canada. An appeal from the second order was
dismissed by this Court. Both show cause orders
were made returnable before Dubé J. who, on
October 26, 1984 found that Cutter knew of the
prohibitions contained in the reasons for judgment
of Gibson J. and had contravened those prohibi
tions by failing either to destroy the infringing
goods or to deliver them up to Baxter and, more
over, had disposed of them by sale or otherwise
during the period December 11 to December 18,
1980. Cutter was thus in contempt because there
was [at page 510] "interference with the orderly
administration of justice and an impairment of the
order or dignity of the Court". As a consequence,
he imposed on Cutter [at page 510] "a fine of
$100,000 plus party-and-party costs and the plain
tiffs' costs on a solicitor-and-client basis". It is
from that judgment in so far as it relates to the
quantum of the fine and not to the finding of
contempt, that this appeal is brought.
It should also be pointed out that after Dubé J.'s
judgment was rendered Baxter and Cutter settled
their differences. Cutter paid to Baxter damages
for all sales made by it between December 11 and
December 18, 1980 as well as their costs of the
contempt proceedings.
The first submission, advanced by Cutter's
counsel was that the fine levied by Dubé J. in this
case was grossly excessive having regard to the
fact that, so far as he could ascertain, it was the
largest fine for contempt ever ordered by a court in
Canada until that time although since then there
have been at least two larger fines assessed, one of
which was by the Trial Division in a judgment
which is under appeal at this time. Counsel cited
many cases in which lesser fines were levied in
different circumstances. Other than their use to
illustrate the factors which traditionally are taken
into account by courts in contempt cases in deter
mining the appropriate penalties, I find the cases
to be of only peripheral interest in determining the
issue in this case. Attention should more properly
be directed to ascertaining whether the learned
Trial Judge had regard to all of the circumstances
which he should take into consideration when
imposing a fine in a contempt proceeding.
Coupled with the foregoing submission counsel
argued that Dubé J. had failed to take into
account the low degree of Cutter's contumacity as
disclosed by the evidence. This, it was said, led him
to the excessive penalty. Rather, in counsel's view,
he had focussed his attention on the amount of
money in issue in the action. In doing so he
overlooked the fact that Baxter was entitled, by
the judgment of Gibson J., to be fully compensated
for all damages arising from sales of the infringing
products. This fact when taken together with the
absence of wilfullness in Cutter's disobedience of
the Court's order, should have led the Trial Judge
to impose only a modest or token fine.
I do not agree. In my view, the fact that Baxter
would be entitled to recovery of the damages
sustained by the unlawful sale of the infringing
products overlooks the fact that this is a criminal
contempt proceeding for impeding the orderly
administration of justice and for impairing the
order or dignity of the Court. It was not at that
stage a case of civil contempt although the Trial
Judge, wrongly I think, seemed to believe that it
was. The fact of a party's entitlement to recovery
of damages is, therefore, irrelevant. What is rele
vant is the gravity of the contempt in the context
of the particular circumstances of the case as they
pertain to the administration of justice. The
learned Trial Judge clearly discerned this at pages
509-510 of his reasons:
Under the circumstances of this case, I do not believe it
would be fitting to apply the full rigours of the law and to
impose imprisonment. However, there has been, in my view,
interference with the orderly administration of justice and an
impairment of the order or dignity of the Court. There is
obviously considerable public interest in maintaining the au
thority of justice in this country, so the penalty must be severe
enough to suit the gravity of the contraventions.
The defendant has failed to deliver up to the plaintiffs, or to
destroy, infringing goods of the value of about $1 million. A
fine of ten per cent of that amount would appear to me to be
appropriate to indicate the severity of the law and yet suf
ficiently moderate to show the temperance of justice.
The fact that in calculating the fine Dubé J.
employed as a yardstick the application of a per
centage to the approximate value of the goods not
delivered up or destroyed does not, in my view,
constitute an error in law when the calculation in
the quotation above is viewed in the context of the
sentences and phrases preceding and following it.
There is no authority of which I am aware which
fixes any particular percentage as appropriate in
such circumstances nor do I think that the use of a
percentage is a device which can or should always
be employed. In the circumstances of this case it
was a tool used by the Trial Judge "to be appropri
ate to indicate the severity of the law and yet
sufficiently moderate to show the temperance of
justice". Those are among the considerations
shown by the cases cited by the appellant to be
properly taken into account in imposing penalties
in criminal contempt cases. Viewed in that light no
error was made by utilizing a percentage as a
guide for measuring the penalty.
The only attack by Cutter's counsel on the
quantum of penalty which has any merit, as I see
it, was that since Cutter's conduct was not con
tumacious in its view, it ought not to have been
severely punished, if at all. It had prudently relied
on the advice of its able counsel who was
experienced in Federal Court practice. His view of
the law as it existed at that time had been vin
dicated in the Trial Division, in this Court and in
the Supreme Court of Canada. His only error was
that he had not foreseen that the Supreme Court
might find that notwithstanding that there had
been no breach of the injunction because that
injunction did not exist until formal judgment had
been pronounced, Cutter had interfered with the
orderly administration of justice and had impaired
the order or dignity of the Court by ignoring the
directions of Gibson J. in his reasons for judgment
in a manner contemplated by Rule 355 of the
General Rules and Orders of the Federal Court.'
Therefore, in his submission the wrong but not
unreasonable view upon which the then counsel
had based his advice and which had been accepted
by Cutter, did not constitute conduct of the wilful
' Rule 355. (1) Anyone is guilty of contempt of court who
disobeys any process or order of the Court or a judge thereof,
or who acts in such a way as to interfere with the orderly
administration of justice, or to impair the authority or dignity
of the Court. In particular, any officer of justice who fails to do
his duty, and any sheriff or bailiff who does not execute a writ
forthwith or does not make a return thereof or, in executing it,
infringes any rule the violation whereof renders him liable to a
penalty, is guilty of contempt of court.
(2) Except where otherwise provided, anyone who is guilty
of contempt of court is liable to a fine, which in the case of an
individual shall not exceed $5,000, or to imprisonment for a
period not exceeding one year. Imprisonment, and in the case of
a corporation a fine, for refusal to obey any process or order
may be repeatedly inflicted until the person condemned obeys.
(3) Anyone who is guilty of contempt of court in the pres
ence of the judge in the exercise of his functions may be
condemned at once, provided that he has been called upon to
justify his behaviour.
and deliberate nature to be deserving of more than
a token penalty. Put another way, reliance on the
advice of counsel did not demonstrate the lack of
good faith in its actions necessary to establish
contumacious conduct of a serious nature.
Having said that, counsel conceded, correctly I
think, that the presence or absence of good faith
on the part of an alleged contemnor is not relevant
in the determination of whether or not there was
an act of contempt. It is relevant only in consider
ing the penalty to be imposed, as a mitigating
factor. The following excerpts from the decision of
the English Restrictive Trade Practices Court in
Re Mileage Conference Group of the Tyre Manu
facturers' Conference, Ltd.'s Agreement 2 are
apposite in respect of this submission and correctly
reflect the prevailing law thereon:
(Continued from previous page)
(4) No one may be condemned for contempt of court com
mitted out of the presence of the judge, unless he has been
served with a show cause order ordering him to appear before
the Court, on the day and at the hour fixed to hear proof of the
acts with which he is charged and to urge any grounds of
defence that he may have. The show cause order issued by the
judge of his own motion or on application must be served
personally, unless for valid reasons another mode of service is
authorized. The application for the issuance of the show cause
order may be presented without its being necessary to have it
served.
(5) The procedure set out in paragraph (4) is without preju
dice to an application for committal under Division I of Part
VII. The two methods of proceeding are alternatives and when
one has been acted on, the other cannot be invoked. The other
provisions in this Rule are without prejudice to the inherent
powers of the Court; and both this Rule and the inherent
powers can be invoked on any appropriate occasion.
2 (1966), 2 All E.R. 349, at pp. 862-863.
In Re Agreement between Newspaper Proprietors' Associa
tion, Ltd., and National Federation of Retail Newsagents,
Booksellers and Stationers ([1961] 3 All E.R. 428 at p. 445;
(1961), L.R. 2 R.P. 453 at pp. 499, 500), the court, in a
judgment which was also delivered by DIPLOCK, J., went
further. In relation to the special facts of that case, the court
said:
... I also desire to make it crystal clear, since the object is
plain, that the court will not regard as a mitigating circum
stance the fact that any such person has acted on the advice
of lawyers, solicitors or counsel, and that, if the advice which
they have received is wrong and they are in fact in breach of
the injunction, the fact that they were wrongly advised that
their attempt to evade the provisions of the act was lawful
will not be regarded as a mitigating circumstance ...
While this statement does not, of course, mean that bona fide
legal advice can never be a mitigating circumstance, it lends
force to the view which we hold that reliance on legal advice
certainly cannot be relied on, as a matter of course, as complete
mitigation.
Supposing, then, that the respondents had acted throughout
the period of the rate notification agreement in the reasonable,
though mistaken, belief, because of the legal advice which they
had received and the absence of changed advice, that no breach
of their undertakings was involved, that fact would not amount
to full mitigation of their contempt. It might be a mitigating
factor, but no more than that.
We still have to consider, therefore, to what extent the
respondents' reliance on the advice was reasonable throughout
this period, as bearing on mitigation.
The next question then is, did the learned Trial
Judge here consider the reliance by Cutter on the
legal advice it received as a mitigating factor in
the imposition of the $100,000 fine which he levied
on it? Before directing my inquiry to that question,
I should point out that Mr. Justice Dubé dealt first
with the defence that the act of the appellant was
not contumacious as part of the issue of contempt
per se. At pages 506-508 of his reasons he had the
following to say:
The evidence is overwhelming. I am convinced beyond a
reasonable doubt, firstly that the defendant knew of the exist
ence of the prohibitions contained in the reasons for judgment
of Gibson J., and, secondly, that the defendant contravened the
prohibitions by failing to destroy the goods, or delivering up the
goods to the plaintiff, and most specially be disposing of the
goods by sale and otherwise during the relevant period. That
ought to settle the issues referred to this Court by the Supreme
Court of Canada. However, serious points of law were raised
and they deserve consideration.
Borrie and Lowe's Law of Contempt, 2nd ed., considers the
requirement for mens rea in chapter 13, titled Civil Contempt.
The answer is clearly "that it is not necessary to show that the
defendant is intentionally contumacious or that he intends to
interfere with the administration of justice". The authors, at
page 400, quote Sachs L.J. in Knight v. Clifton as follows:
... when an injunction prohibits an act, the prohibition is
absolute and is not to be related to intent unless otherwise
stated on the face of the order.
The authors quote Warrington J. in Stancomb v. Trowbridge
Urban Council who said that if a person "in fact does the act,
and it is no answer to say that the act was not contumacious
" In Re Agreement of Mileage, contempt was held to have
been established even though the acts were done "reasonably
and despite all due care and attention, in the belief based on
legal advice, that they were not breaches."
Finally, the mandate of the Supreme Court of Canada to this
Court is crystal clear: two matters only are to be established:
firstly, was there a knowledge of Gibson J.'s reasons for judg
ment and, secondly, was there a contravention of that judg
ment. Neither the good faith of the defendant nor its error in
law are factors to be considered. The Supreme Court, of course,
was fully aware of the defendant's legal position on contraven
tions of Gibson J.'s reasons for judgment and yet did not
include that factor in its directions to this Court.
It is clear from the foregoing that the Trial
Judge was well aware of the unavailability of the
defence of lack of contumacity in respect of the
contempt per se. However, it may be that he did
not consider that non-contumacious conduct can
be a mitigating factor on the question of penalty.
The passage from his reasons which I quoted
earlier appears to support this view. For ease of
reference I repeat it hereunder.
Under the circumstances of this case, I do not believe it
would be fitting to apply the full rigours of the law and to
impose imprisonment. However, there has been, in my view,
interference with the orderly administration of justice and an
impairment of the order or dignity of the Court. There is
obviously considerable public interest in maintaining the au
thority of justice in this country, so the penalty must be severe
enough to suit the gravity of the contraventions.
The defendant has failed to deliver up to the plaintiffs, or to
destroy, infringing goods of the value of about $1 million. A
fine of ten per cent of that amount would appear to me to be
appropriate to indicate the severity of the law and yet sufficent-
ly moderate to show the temperance of justice.
Clearly, the sentence of imprisonment was not
available in this case since the appellant, as a
corporation, could not be imprisoned. As to the
rest of the first sentence, obviously one of "the
circumstances of this case" was the undisputed
evidence of reliance on the opinion of Cutter's
solicitor for the actions they took during the period
December 11 to December 18, 1980. The question
then is, was this mitigating factor taken into
account in the imposition of the penalty? I think
that it is doubtful because the clear finding that
non-contumacious conduct is not a defence to a
finding of contempt per se contrasts sharply with
any recognition that it can be a mitigating factor
in the determination of the penalty to be imposed.
That he did not appreciate the differences between
the two aspects of the defence seems to me to be
clear from what he understood to be the mandate
of the Supreme Court of Canada as disclosed in
the above quotation. Undoubtedly, that Court, in
referring the matter back, had in mind only the
issue of the existence or non-existence of contempt
and not the issue of the penalty to be imposed in
the Trial Division if it found the appellant to be in
contempt.
To what extent then should the mitigating factor
have influenced the quantum of the penalty
imposed? I cannot, of course, know to what extent,
if any, the Trial Judge would have taken it into
account had he recognized that it was a proper
consideration. However, this Court is entitled to do
what he ought to have done. Therefore, applying
my best judgment to that fact and to the other
circumstances of the case, I am of the view that
justice would be served if the judgment in issue
were to be varied by reducing the penalty to
$50,000 because of the appellant's reliance on the
faulty legal advice, as a mitigating factor. To
reduce it further or to levy only a token fine would,
in my view, be inconsistent with the gravity of the
contraventions and might serve to encourage
others to flout the law if it is to their financial
advantage to do so. In all other respects I would
affirm the judgment of the Trial Division.
The parties have agreed that there will be no
costs of the appeal.
STONE J.: I agree.
MACGUIGAN J.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.