Can-Auto Inspections Inc. v. Vascor, Ltd.

2011 BCSC 1644 Can-Auto Inspections Inc. v. Vascor, Ltd.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Can-Auto Inspections Inc. v. Vascor, Ltd., 2011 BCSC 1644 Date: 20111201 Docket: S073725 Registry: Vancouver Between: Can-Auto Inspections Inc. Can-Auto Services Inc. Plaintiffs And Vascor, Ltd. Defendant Before: The Honourable Mr. Justice Myers Corrected Judgment: The judgment was corrected on the cover page December 12, 2011 Reasons for Judgment Counsel for the Plaintiffs: Lianne I.W. Potter Arpal S. Dosanjh F. Wong A/S Counsel for the Defendant: Gordon C. Weatherill, Q.C. Kinji C. Bourchier Jude S. Popp Place and Date of Trial: Vancouver, B.C. October 3-7, 11-14, 17-21, 24-28, 2011 Place and Date of Judgment: Vancouver, B.C. December 1, 2011 I. Introduction [1] This case concerns the alleged unauthorised use of software, known as iSpect, which was developed and owned by the plaintiff Can-Auto Inspection Inc. ("Can-Auto"). The parties are involved in inspecting and tracking motor vehicles at the manufacturing, storage and transportation stages. iSpect was loaded onto handheld scanning units that were used for the collection of inspection data, which was then uploaded to other computer systems. [2] Can-Auto provided the defendant, Vascor, Ltd., with iSpect for its use in 1998. Can-Auto says that the parties orally agreed that Vascor's use of the software was restricted to specific locations and that Vascor was not entitled to

use iSpect for a category of activity known as yard management. Vascor says that there were no restrictions and it was entitled to use it in all its business operations. [3] In September 2000, the parties began to discuss a licensing agreement for the software. In July 2001, no agreement having been reached, Can-Auto gave notice withdrawing its authorisation for the use of iSpect, to be effective on November 1, 2001. After that date, the negotiations continued. Vascor says the parties reached a verbal agreement on November 8, 2001 and on that basis it continued to use iSpect until 2007. Can-Auto argues that no such agreement was reached because a contract was to be drawn up and signed and the parties had not agreed on the terms of that contract. Therefore any use beyond November 1, 2001 was unauthorised. [4] The legal basis for Can-Auto's claim prior to November 1, 2001 is breach of contract and conversion. For both that period and beyond, Can-Auto asserts claims for conversion and unjust enrichment. [5] Vascor says that Can-Auto was always aware of scope and timing of its use of iSpect. Based on that, Vascor raises waiver, acquiescence and laches. Further, it says that the limitation period has expired for part of Can-Auto's claims. [6] The claim of the other plaintiff, Can-Auto Services Inc., was for amounts owing for the performance of services for Vascor. During the trial,

Vascor advised it was no longer disputing that claim and I therefore do not deal with it in these reasons. [7] I had previously ordered that the issue of liability be tried separately from damages or other remedy. This judgment therefore deals only with the issues of liability. [8] In addition to the software that is in issue in this litigation, Vascor also used a related software package owned by Can-Auto - iSpect Batch. Notice of termination was also given for that, but its use ceased in accordance with the notice. iSpect Batch is not part of the claim and for the purposes of simplicity I have avoided referring to it in the factual narrative because I do not think it is of assistance in dealing with the issues. II. Facts A. The parties and their initial dealings [9] Both of the plaintiff companies are owned by Ted Truman who is their president. He was the sole witness called by them. [10] Mr. Truman has a BSc in civil engineering and an MBA. In 1974, after working for several years for Canadian Pacific Railway, Mr. Truman founded Canadian Logistics Systems Ltd., which was involved in the business of inspecting vehicles when they were off-loaded from ships and before and after they were transported by rail. Mr. Truman first partially and later wholly owned Northwest Logistics, a company that did similar work in the United States. [11] Vascor is a logistics company formed in

1987 to provide logistics support to the Toyota assembly plant in Georgetown, Kentucky, including managing Toyota's "just in time" delivery system. Vascor later began to inspect vehicles at that plant and then expanded to inspecting the 21 rail locations used by Toyota. Vascor is owed by American President Lines, Fujitrans and Toyota Tusho. [12] The president of Vascor during the relevant times to this litigation was (and still is) James Dunn. He obtained an MBA in 1969 and then a PhD in transportation and economic analysis. He and Mr. Truman had the discussions concerning the licensing agreement in 2001. [13] Mr. Lee Jones is currently Vascor's vice president of Information Technology. He began as a programmer at Vascor and dealt with Mr. Truman throughout Vascor's relationship with Can-Auto. [14] The initial link between Can-Auto and Vascor was Doug Saldivar. He had worked for Mr. Truman's company, Northwest Logistics, for six months in the 1980s and knew Mr. Truman from that. In 1991 he began work at Vascor as its national operations manager and later became general manager for inspections. Mr. Saldivar was involved in discussions with Mr. Truman throughout the relevant times of this litigation. [15] In late 1996 or early 1997, Chrysler was having quality problems. On a recommendation from Toyota, Chrysler approached Vascor about reducing vehicle damage in the supply chain

between its 15 North American assembly plants and the dealerships. Three of these were located in Canada, three in Mexico and nine in the United States. Vascor made a proposal to Chrysler which led to a request from Chrysler for Vascor to conduct a study to determine where the vehicles were sustaining the most damage. In a presentation to Chrysler, Mr. Saldivar recommended a system-wide program of inspecting all the vehicles in Chrysler's North American logistics system. [16] Chrysler asked Vascor to prepare a North America-wide supply chain proposal. At the time, Vascor did not have a presence in Canada. Mr. Saldivar had a chance meeting with Mr. Truman in the Portland, Oregon, airport in early 1997. Mr. Saldivar told Mr. Truman about the Chrysler project. Mr. Truman was interested in the possibility of doing the inspections in Canada. Mr. Truman does not recall the meeting, but he does recall reviewing the proposal which Mr. Saldivar sent to Chrysler. Sometime later Mr. Saldivar spoke to Truman about becoming Vascor's subcontractor in Canada for the Chrysler project. [17] Vascor's Chrysler proposal, prepared in March 1997, contained a list of Chrysler plants with a scheduled date for the commencement of inspections. Three locations were in Mexico, although not flagged as "Mexican" or "Mexico": Saltillo; Toluca; and Pantaco. The Canadian factories were identified as "2

Canadian locations to be commenced in 12 months", and "remainder Canadian location to be commenced in 14 months". Next to the Canadian entries were the initials "NWL" indicating that Northwest Logistics would do those inspections. Mr. Saldivar explained he simply put that down to note that a company owned by Truman would most likely end up doing the inspections and Northwest Logistics came to mind first because that is the company he had worked for. (Although only a draft of the proposal was tendered at trial I am convinced from the surrounding evidence that the version which Mr. Truman saw was in substantially the same terms and contained the references to the Mexican locations.) [18] Chrysler accepted Vascor's proposal for the inspection at all of Chrysler's North American plants. Implementation began at Chrysler's Dodge City plant in Warren, Michigan in September 1997. [19] In early 1998 Vascor and Mr. Truman orally agreed for Can-Auto, which was incorporated specifically for this purpose, to do the Chrysler inspections in Canada for Vascor. Vascor was Can-Auto's only client from 1998 to 2007. [20] The terms for doing the work were negotiated by Mr. Saldivar and Mr. Truman. Mr. Dunn prepared a draft "letter of agreement" for Mr. Truman but Mr. Truman did not respond to the draft, although its terms were consistent with his understanding of the agreement. From April 14, 1998

to 2007, Can-Auto performed the inspections at Chrysler's three Canadian plants, all in Ontario: Windsor Pilette; Windsor Walker Road; and Bramalea (also referred to as Brampton). B. The software [21] Prior to 1998, Vascor recorded the vehicle inspection data at Toyota plant locations manually. However, Chrysler required electronic data collection that could be uploaded to its own computer system through electronic data interchange (EDI). In response to these requirements, Mr. Jones developed software to collect data on handheld portable data terminals units (PDTs) made by a third company, Symbol, and software to collect the data and transmit it to Chrysler. The handheld programme was known as Vascor Data Collector, or VDC. There were severe time constraints in developing the software: it had to be done in two weeks. Mr. Jones referred to VDC as a "quick and dirty" solution. VDC was successfully implemented at Dodge City, the first of the 15 Chrysler plants to be "rolled out." [22] Vascor provided Can-Auto with hardware and trained Can-Auto employees on its VDC data collection software for its use in Canada, as per the agreement between Mr. Truman and Mr. Saldivar. [23] There were problems with VDC. It did not validate the information that was input by the user and if the PDT had a problem the data on it was lost. These problems resulted in substantial overtime hours for the

data collectors to manually validate the data before input into Vascor's enterprise system. [24] On March 30, 1998, prior to commencing inspections in Canada, Mr. Truman and two other people from Can-Auto travelled to Detroit to observe Vascor's inspection operations at some of the Chrysler plants. Mr. Saldivar also participated. Mr. Truman noted the problems with VDC and determined that he and his programmer, Dan Wilson, could write a better software package. This was to become iSpect. [25] Can-Auto's Chrysler inspections began at Bramalea on April 14, 1998. [26] In late May 1998, Mr. Truman sent a demonstration version of iSpect to Vascor so Vascor could "play with it and see if they liked it." Mr. Jones tested the demo and considered it a good solution for Vascor. [27] Can-Auto began performing inspections at Chrysler's Windsor Walker Road plant on June 15, 1998. C. Discussions regarding the use of iSpect [28] On June 17, 1998 Mr. Jones and Mr. Saldivar met with Mr. Truman and Can-Auto's programmer, Mr. Wilson, in Vancouver. [29] Mr. Truman recalls that on June 17, Mr. Saldivar expressed a mild interest in using iSpect. Since it was only 20% complete, Mr. Jones told Mr. Saldivar that they should discuss it once they had a working product. Mr. Truman denies discussing any terms for the use of iSpect with Mr. Saldivar. [30] The following day Mr. Jones and Mr. Truman did a

back-country drive in the Squamish area followed by a scenic flight. Mr. Jones testified that he and Mr. Truman had a meal in a pub or restaurant during which he asked Truman how much iSpect would cost. Mr. Truman told Mr. Jones that Vascor could use iSpect for as long as Can-Auto and Vascor had an ongoing business relationship. Mr. Jones stated: And I left Vancouver on that meeting knowing that it wasn't going to cost us anything and I left Vancouver knowing that it was a viable product that I could use so I could focus my attention elsewhere. So we weren't in a boardroom with flip charts and all kinds of things trying to line out this huge agreement. We were sitting after a very fun day having a very nice conversation and that was said. And that's what I remember Mr. Truman denies discussing the use of iSpect with Mr. Jones that day. [31] Mr. Jones said he had a particular recollection of the conversation for several reasons. He was young and entrepreneurial and was intrigued by Mr. Truman, an experienced businessman in his industry who had done very well for himself; when Truman said that Vascor would be able to use iSpect at no cost, it meant that Jones could direct his IT resources to the more pressing EDI issues; and Jones thought Truman was doing a smart job leveraging no-charge software development to build a partnership with Vascor for the profitable Canadian

subcontract. [32] On August 4, 1998 Can-Auto began inspections at the third Canadian Chrysler plant at Windsor Pilette. [33] Some time prior to August 4, 1998, Mr. Truman and Mr. Saldivar spoke on the telephone regarding the use of iSpect. Both of them remember the call, but differ as to the terms agreed. Truman said that he told Saldivar that the software belonged to Can-Auto but that Vascor could use it for $1.00 per year, that Can-Auto could terminate that use on 90 days' notice and that the use was limited to Chrysler plants in the United States. Saldivar recalls that they had a conversation and remembers the $1.00 per year and the 90-day termination discussion but said that Truman did not restrict the use of iSpect to Chrysler plants in the U.S. He testified that he would have remembered such a discussion, as it would have made no sense for Vascor to agree to such a restriction since the Chrysler inspection contract contemplated a standardized way to collect, evaluate and present data across Chrysler's North American logistics system, including Canada and Mexico. Saldivar testified that he would have remembered any such restriction had it been mentioned. [34] Mr. Truman says that when he mentioned the restriction of iSpect for use at Chrysler U.S. plants, Mr. Saldivar immediately asked for permission to use it at the port of Baltimore. Mr. Truman says he explained to Mr.

Saldivar that iSpect was not designed for use in a port facility, but that he agreed because Mr. Saldivar was anxious to use at iSpect there. [35] Mr. Saldivar says he and Mr. Truman did discuss Baltimore but in a subsequent call and not in the context of Mr. Saldivar asking for permission to use iSpect. Because of Baltimore being an export port the codes entered by the users into the handheld units had to be different from those used at the plants. Mr. Saldivar says he simply consulted Truman about those problems and Truman assisted in the resolution without complaint. [36] iSpect was installed for use at Vascor's U.S. inspection points for Chrysler - including Baltimore - during the month of August, 1998. Can-Auto assisted and billed Vascor for that service. [37] Mr. Truman said that in early December 1998 Mr. Saldivar called him to ask permission to use iSpect for Chrysler rail yard surveys in the United States. He says that the conversation followed a similar pattern as that regarding Baltimore. He explained to Mr. Truman that iSpect was not designed for destinations. However, because Mr. Saldivar was persistent he authorized iSpect's use for Chrysler rail destinations on the basis that it would be subject to the same terms as the use already agreed to. Mr. Saldivar denies asking permission to put iSpect to this use. iSpect was installed for use at Chrysler's Denver rail

destination just before the 1998 Christmas holiday. [38] Mr. Truman says that in late December 1998 or early January 1999 Mr. Saldivar telephoned him to say that Chrysler would probably want to have the inspection programme extended to its locations in Mexico. Mr. Saldivar was not anxious to do the work and asked if Mr. Truman was interested. Mr. Truman declined. Mr. Saldivar says that he would not have asked Mr. Truman if he was interested in doing the work because Vascor was required by Chrysler to use its existing contractor as Vascor's sub-contractor. [39] Mr. Truman says that in late spring 1999, Mr. Saldivar telephoned him to ask permission to use iSpect for Toyota marine and rail inspections in the United States. He granted that permission subject to the same terms as the other use; namely, the fee of $1.00 per year and the use terminable on 90 days' notice. Mr. Saldivar denies asking for permission and says Vascor simply used iSpect for Toyota because it had unrestricted permission to use iSpect. [40] The events now turn to Mexico. In May 1999, a Vascor team led by Mr. Saldivar, travelled to Mexico to implement Vascor's vehicle inspection at Chrysler's three Mexican plants. The team included Tom Western, who was or became Vascor's V.P. of Finished Vehicle Logistics and Robert Shaver who was a young programmer, fresh out of school. Vascor encountered difficulties

installing iSpect on the three computers that had been purchased in Mexico for the project and, after eliminating some diagnostic options, turned to Can-Auto for help troubleshooting the problem. [41] Mr. Saldivar testified that he discussed the problems with Mr. Truman on the telephone. Mr. Truman did not object to Vascor's use of iSpect in Mexico. Mr. Shaver testified that he had planned to be in Mexico for only five days but stayed for close to four weeks due to the implementation problems Vascor was having with iSpect. Shaver recalls talking to Truman at least three times about the problems installing iSpect. Shaver told Truman that he had to get iSpect into production so he could be done with the project and go home. His recollection of the discussion stands out in his mind because it was his first job and he found the process intimidating and he was anxious to get home to his family. [42] Mr. Truman says that he initially spoke to Mr. Shaver, who was rude. Truman asked for Saldivar to come to the phone. Truman asked Saldivar what was going on and Saldivar replied that what they were doing was a marketing demonstration or pilot project. Mr. Truman assisted with the problem. He says he did not complain about the use of iSpect because it was just a pilot project, it had no revenue attached to it and "Doug was always doing marketing projects". [43] The work that Vascor did in

Mexico was not, in fact, a pilot project and Mr. Saldivar testified he never said it was. Vascor had set up a Mexican subsidiary to carry out the work. Saldivar pointed out that it would not have made sense for APL to purchase equipment for a demo when a demo could be run on a laptop without the need for three computers. [44] On May 21, 1999 Mr. Jones emailed Mr. Truman a document requesting changes to iSpect. The document included the following: Overview Due to the continued expansion of the Vascor inspection business additional data collection needs are required from the iSpect program. These changes will slightly effect the plant operations but are mainly needed to support rail and marine inspections. Changes to Upload/Download Process By now I am sure you are fully aware of the problems that occurred in Mexico with the program load functionality of the iSpect program. I would like to request the following changes to the Upload/Download process. [45] This prompted an email from Mr. Wilson (Can-Auto's programmer) to Mr. Truman on May 21, 1999, which included the following: iSpect as a free "as is" product Will iSpect continue to be a free product, provided "as is"? Providing it "free" + "as is" has had some costs associated with it. Thus, we seem to have got ourselves into the role of providing free technical support to Vascor inspection locations. And the recent start-up in

Mexico has put us into an unexpected (and unfavourable) position. Mexico Mexico provides an example of how our projects can be readily diverted, and now Vascor's problem can become our problem. He's the basic scenario. and: How do you want to proceed? In the final analysis, I think that Lee's specific requests for system changes raises the broader issue of "how do you want to proceed in your relationship with Vascor". The idea of providing something "for free" and "as is" doesn't seem to be working. There are costs to you, both in real dollars and in opportunity costs. Providing something "for fee" could be even more problematic, or it could become very profitable, with a lot of caveats some of which we're only now learning about. [46] On June 7, 1999 Mr. Saldivar emailed Mr. Truman and Mr. Jones clarifying that Vascor expected to pay for the changes it was requesting. [47] On July 7, 1999 Messrs. Truman, Wilson and Jones met in Vancouver to discuss the changes. Another Vascor employee, Sam Tentison, was also present. Mr. Truman said that Mr. Jones had made an implied threat that if the software was not changed Can-Auto would lose the inspection business. Mr. Truman said that at the meeting they discussed rail and marine inspections. [48] Can-Auto developed changes to the software, which became iSpect 2.2; those changes allowed its use to be very flexible. The changes involved

the addition of customized fields which allowed iSpect 2.2 to be used in a variety of different applications and for any manufacturer as well as for inspections at plants, rail locations (origin or destination) or marine locations. This was done through the use of a file installed on the handhelds called an iscodes.txt file that was designed so that it could be easily changed by the user. [49] On October 14, 1999 Truman wrote to Saldivar, Jones and Western to advise that iSpect 2.2 would be ready for release the following week. Truman provided iSpect 2.2 to Vascor. [50] Mr. Truman testified that shortly after August 18, 1999 he had a telephone call with Mr. Saldivar and explained to him that testing of iSpect 2.2 had been completed and they had to agree to discuss licensing of iSpect 2.2. The terms would be the same as version 1, namely: a. licence fee of $1.00 per year; b. termination on 90 days' notice by either side; and c. use at: i. Chrysler plants, ii. rail inspections in the United States, iii. Toyota rail and marine inspections in the United States, iv. Baltimore. He said that Mr. Saldivar was anxious to get the product and agreed. [51] Mr. Saldivar testified that Mr. Truman simply reiterated that Vascor could use the new version, as before, for $1 per year and that such use could be terminated on 90 days' notice. While he could not recall the conversation precisely he

says he would have remembered if any restrictions were placed on the use of iSpect as it would have changed the dynamics of their mutually beneficial relationship. [52] On May 30, 2000 Mr. Truman emailed Mr. Saldivar noting that Can-Auto was thinking of a further revision of iSpect and requesting a list of locations at which it was being used by Vascor along with the version numbers. On June 28, 2000 Mr. Stephens of Vascor emailed the list to Mr. Truman, copying Mr. Saldivar. It did not contain the Mexican locations and Mr. Truman said the list did not cause him any concern. Mr. Saldivar said the only explanation for him not having noted this gap was through inattention. [53] Although this is out of chronological sequence, it is a convenient time to deal with further facts that are relevant to the issue of whether Mr. Truman was aware that Vascor was using iSpect in Mexico. In 2001, Vascor was having difficulty using iSpect at the port of Veracruz, Mexico. On April 20, 2001, Saldivar forwarded a chain email to Truman. The subject of the email was "Mexico Issues". The email made reference to multiple manufacturers. Mr. Truman's evidence on direct examination was that he did not read the subject line of this email and did not read the body of the email because he had a practice with Vascor's chain emails to only read what he was required to respond to. [54] On May 21, 2001 Mr.

Jones again emailed Mr. Truman. The subject of the email was "iscodes of Vera Cruz". Mr. Truman does not deny that he received this email - which had further references to Vascor using iSpect in Mexico. However, he says he only read Jones's question about tracking the version of the file and he referred it to Mr. Wilson. [55] On May 22, 2001 Mr. Truman forwarded the email string to Mr. Wilson. Wilson responded, providing suggestions as to how Vascor might keep track of its iscodes.txt files. An iscodes.txt file is generally required for each location. D. The negotiations with respect to a formal licence agreement beginning in September 2000 and the yard management business [56] Returning to chronological sequence, the narrative now moves to the negotiations for a formal licence agreement beginning in September 2000 and the concurrent development of the yard management business and use of iSpect for that. [57] In 2000 Mr. Truman received a call from Mr. Saldivar in which Mr. Saldivar relayed that in view of Vascor's extensive use of iSpect Mr. Dunn was concerned about the lack of a formalized agreement. Mr. Saldivar arranged a meeting between himself, Mr. Dunn, Mr. Western and Mr. Truman at the Detroit airport lounge. Mr. Truman said that Mr. Dunn relayed that iSpect was being widely used by Vascor and he would like to have a more formal agreement. He mentioned a licence fee of

$7,500. It was left that Mr. Truman would prepare points he wished to have included in the agreement. Dunn's and Saldivar's evidence was similar. [58] On October 6, 2000 Truman sent a document entitled "Suggestions for Agreement". The email to which it was attached said: The attached is a suggested starting point for a software agreement This said, in part: Can-Auto would agree to: -Allow Vascor to use iSpect in any of it's [sic] operations including sub-contracted operations in Mexico. -Make changes to iSpect as requested by Vascor. -Maintain a copy of the current source code for iSpect at the office of the company's lawyers, Taylor Wray -Give to Vascor the option to purchase access to the current source code for iSpect held at Taylor Wray. The disks containing the current source code for iSpect would be released to Vascor by Taylor Wray on receipt of the previously agreed upon payment. Vascor would agree to: -Pay a monthly fee of $US ------ (plus applicable taxes) for the use of iSpect until either Vascor purchases iSpect or until Vascor no longer uses iSpect. -Pay for modification of iSpect as follows: a) No charge if the modifications are consistent with Can-Auto's development strategy for iSpect. b) The cost of modification of iSpect if the changes are not covered in a). The charges will be for the time taken to make the changes and billed at current commercial programming

rates in the Vancouver area. -Pay to Can-Auto $US ------ (plus applicable taxes) if Vascor elects to purchase iSpect. The purchase would be for the non-exclusive right to use iSpect for Vascor's own purposes and would be subject to the usual software liability disclaimers. -Sign a confidentiality agreement acceptable to Can-Auto that would restrict the use of iSpect to Vascor's own operations and would restrict disclosure of iSpect to outsiders unless prior approval was given by Can-Auto. [59] On October 12, 2000, Dunn responded to Mr. Truman's draft: I think what you've laid out is fine. and: let's agree on a fair licensing fee and move forward. [60] Around December 18, 2000 Mr. Truman spoke to Mr. Saldivar on the telephone and told him that it had cost $100,000 to develop iSpect and that $7,500 was not going to be a satisfactory licensing fee. Truman did not mention anything other than money. [61] On January 5, 2001, Mr. Truman sent an email to Mr. Saldivar saying that iSpect had been used in 24 locations the prior year. (It is not clear where this came from as the list sent to him from Mr. Stephens on June 28, 2000 contained 26 locations.) He then went on to say that Can-Auto had spent over $100,000 on the development of iSpect, noted that software is normally written off over the course of five years, and provided a figure of $3,042.19/month as the cost of financing a

$100,000 asset for 36 months. He concluded: Why don't we work out a cost sharing arrangement that recognizes both past use and anticipated future use? Perhaps we could start with a total period of 4 or 5 years as a basis for our calculations. [62] On January 10, 2001 Vascor submitted a proposal to Chrysler to provide yard management for its vehicle inventory. In essence, this meant that that Vascor would act as a warehouseman for the cars, by providing outdoor storage space and tracking the inventory in and out of the yard. Once again, this was to be for all of Chrysler's operations and Mr. Saldivar thought that Can-Auto might want to do the Canadian work. [63] On January 15, 2001, Mr. Saldivar emailed Mr. Truman and offered $7,500 for the licensing fee and said: I believe this would be the only change we would need on the current agreement. If there are additional conditions or changes on your part - please let us know. He went on to mention the possibility of Can-Auto participating in the Canadian yard management work. [64] Later in January Mr. Western sent Mr. Truman the first draft of the yard management planning document. It stated: Vascor will employ portable data terminals and a proprietary yard management system. [65] In early February 2001 Vascor gave Can-Auto the opportunity to participate in yard management. On February 23, 2001 Chrysler accepted Vascor's proposal to

provide yard management services. Shortly thereafter an oral contract was entered into between Vascor and Can-Auto. On April 1, 2001 Vascor began providing yard management services to Chrysler. On April 6, 2001 Can-Auto began its yard management services for Vascor at the Exact yard in Ontario. All of the required computer equipment was provided to Can-Auto by Vascor, including PDTs loaded with iSpect. [66] On May 15, 2001 Mr. Truman went to Auburn Hills Michigan to meet with Vascor personnel regarding the yard management work. They visited a storage facility which had been set up by Vascor in the parking lot at a large sports stadium - the Silverdome. The Vascor group included Mr. Western but not Mr Saldivar. Mr. Truman acknowledges he saw iSpect being used there. He said he did not raise an objection at the time because he thought the most appropriate person to do that with was Mr. Saldivar. [67] The volume of vehicles which had to be handled as part of the yard management business was more than anyone expected. The dollar value of the business was significant both to Vascor and Can-Auto; although Mr. Truman was reluctant to acknowledge this in his evidence. On June 26 to 27, 2001 Mr. Truman met with various people from Vascor in Georgetown to discuss the handling of the yard management work. Mr. Truman wanted to create a tag for each vehicle with a separate barcode; Mr.

Jones disagreed. It was clear at the meetings that Vascor was using iSpect for yard management business. Mr. Truman made no objection to that. [68] At, and following the meeting, there were further discussions and emails with respect to the licence fee, which I will not detail. [69] On July 3, 2001 Mr Truman spoke with Mr. Saldivar and said he was terminating Vascor's use of iSpect effective 90 days forward. He said that he wanted to remove the friction of the licence negotiations from their business relationship. On July 27 Mr. Truman confirmed the termination in an email to Mr. Saldivar who, in turn, replied "understood". [70] Jones, Saldivar and Dunn felt that the notice of termination was a negotiating tactic. They viewed the termination as a target and not an absolute deadline. This was because they had determined they would pull all of Can-Auto's work if Can-Auto terminated the use of the software before Vascor had a replacement. [71] On August 23, 2001 Mr. Jones received a quote for the development of a replacement to iSpect and some three weeks later received a first draft of its specifications from the prospective developer. [72] On October 17, 2001 Mr. Truman sent Mr. Dunn an email stating: Vascor's permission to use the DOS version of iSpect ends on November 1st. No arrangements have been made for continuing use of iSpect. What do you want me to do? Mr. Dunn

replied: As far as I know we are going to need to continue using iSpect beyond November 1. Same is probably true for RF at Sterling Heights beyond October 21st Let's make Doug your 'official' contact on these two issues .if you don't hear from him in the next day or so, you will deffinitely (sic) hear from him by Monday. I would appreciate it if the system didn't 'shut itself down' in the meantime. Truman responded: I'm looking forward to working with Doug. I'm sure he will be able to come up with an arrangement that will be satisfactory to both parties. The October 21st expiry on the RF system will be disabled today. [73] During the period October 22-26, 2001, Saldivar and Truman had several telephone calls regarding a licensing fee for the continued use of iSpect after November 1, 2001. They did not reach an agreement. On October 31, 2001 Mr. Truman initiated a mediation process with the British Columbia International Commercial Arbitration Centre, or BCICAC. The purpose was not to mediate a legal dispute; rather, it was to seek assistance in negotiating an agreement and the only part of an agreement it sought to "mediate" was the licence fee. The application to mediate included this statement: As things now stand Vascor's permission to use iSpect has ended and Vascor has not developed an alternative way of collecting inspection data. [74] The following day, Mr. Truman

emailed Mr. Dunn informing him of the application to mediate. He made no demand that Vascor cease using iSpect. Mr. Dunn replied on the same day and said he was not interested in "arbitration" and that he was willing to speak to Mr. Truman to try to resolve the matter. Mr. Truman sent an email back apologising, noting there had been a lot of delays and suggesting he and Mr. Dunn get together to settle the matter. E. The November 8th call and subsequent events [75] After a prior call that did not result in an agreement, Mr. Truman and Mr. Dunn spoke again on November 8. The call was 12 minutes long. This is the call that Vascor said resulted in an agreement. [76] In his direct evidence, Mr. Truman gave his version of the telephone call: A Well, I said to him that so far we had been -- seemed to have been stuck on price and only price and price was the only thing we talked about. I said why don't we try this concept, and then I repeated the $25,000 for past use, the $5,000 a year for ongoing maintenance and licensing and he jumped on it right away and said he would make the maintenance and licensing retroactive to October of 2000. So that brought us up to the famous $35,000. Q And was anything further said? A Yes. I said to him so in order to get some terms in this -- to discuss terms what I'm asking you to do is to prepare a draft, and in that draft Vascor can put any concepts

that they want to include in this agreement. And then I will review the draft and decide if it needs changes, and if I agree with the draft I'll indicate that and if I don't well, I'll reject it or ask for modifications. And at that point he said he would have his attorney prepare a draft for my review. And he said he would have that done as a matter of some urgency. Q And how did you end the November 8th, 2001conversation? A Well, I said that I was looking forward to seeing the draft and I said, let's see what it all looks like in writing. I neglected to mention one thing. Before we hung up I had suggested to Jim that one of the things Vascor might want to include in the draft was some provision for changes to the software because I knew their IT people wanted that ability. And he was also aware of that need and said that yes, they would definitely include that as one of their terms. [77] Mr. Dunn's recollection, in direct, was: On November the 8th, I offered a one time licensing fee of 25 thousand dollars. I remember mentioning to Truman that I thought that was more than fair because we had just purchased some accounting software to run our entire company. So I thought $25,000 as I said was more than fair. I offered a 5 thousand dollars a year maintenance fee as a gesture of good will I told him that this thing had been going on for a long time and we'd be willing to pay the

maintenance fee going back a year, back to October of 2000. Q And by this thing going on a long time what were you -- A This inability to come to some agreement on the fee for using iSpect. Truman said he felt that that was fine. I remember he brought it to me that there was a new version of iSpect coming out, and that would be available to us. I offered to have a written agreement done by our in house counsel Ann Hasse to set this in writing. Q So set what in writing? A To set the details of the software agreement. Q The details after what? A The details of software agreement. Q What software agreement? A Well, we had agreed on a -- the financial arrangement for the use of iSpect. I wanted Ann Hasse to write that up, what we had agreed to and so we could all sign it. [78] In a portion from his examination from discovery which was read in, Mr. Dunn stated: I knew, as I said, when we hung up that we had an agreement to -- licensing agreement with iSpect. I also knew that we would send this to our attorney and they would write up a formal agreement for everyone to take a look at. [79] On November 8, 2001, Mr. Dunn confirmed the agreement in an email to Mr. Truman: First, let me say I appreciate your counter-offer. I think we are both approaching this from the perspective of a partnership and what is 'fair' for both of our companies, which is the way it should be. To recap our

conversation today, VASCOR agrees to pay you $25,000 US for the use of your software application ISPECT. We also agree to pay an annual maintenance fee of $5,000, beginning on October 1, 2000 and payable each year on October 1. Upon the signing of a licensing agreement, VASCOR will pay you a total of $35,000 for the software application and maintenance fees for the years 2000 and 2001. We will prepare a draft of a licensing agreement for your review. We will also prepare a "Services" contract between VASCOR and CanAuto which covers the plant inspection and yard management services you currently providing (sic). I can't commit for our General Counsel but I would hope to have this matter completed by the end of this month. [80] On November 27, 2001 Mr. Jones forwarded his Nov. 8 email to Ms. Haase and asked her to prepare an agreement: Ann, Per our conversation today: · Vascor needs a software agreement between Can-Auto and Vascor for the use of iSpect 2 ver. 2.2. · Vascor is planning on discontinuing the use of this software on or before October 1, 2002. Due to this fact I believe that a short, simple contract (agreement?, letter?) will be sufficient. There is no need to put the iSpect source code in escrow. [81] On November 29, 2001, three weeks later, Dunn followed up with the following email to Truman: Ann Hasse, VASCOR general counsel, is working on both a software agreement

and a standard operating agreement between VASCOR and CanAuto for Inspections and yard management. Per our discussion the software agreement calls for a payment of $25k up front and $5k per year due on October 1, beginning with October 1, 2000. Upon completion of the agreement VASCOR will remit $35,000 to you, which includes the license fee for 2000 and 2001. I told her I would very much like to get this concluded before year end and Ann is usually pretty responsive when I need her to be. In the past 2 days I have recieved (sic) both a fax and a letter from the BC Commercial Arbitration Centre. I am assuming that this is in response to your original request to them, prior to our phone conversation, and that I should ignore. Please advise. [82] Mr. Truman responded on December 4: Jim, I just wanted to follow up on the agreement we reached regarding iSpect. In addition to the points you made, we agreed that as enhancements were made Can-Auto would supply updated versions to Vascor. We have developed a Windows 2000 version that is much more reliable running under Windows 2000 than was the Windows 98 version. We are just finishing up some related enhancements and should have a CD ready for you sometime next week. Also when we originally spoke about an agreement I had suggested a mechanism to provide for changes considered necessary by Vascor. I've enclosed the draft that I sent you

last fall just in case you want to pass it on to Ann. I thought we had told the BC Commercial Arbitration people that we had come to a satisfactory agreement with Vascor. I don't know who dropped the ball on this one but I called them today to confirm that their involvement was unnecessary. Sorry for the nuisance. We'll keep this moving on our end! Ted The draft referred to in the second paragraph was Mr. Truman's October 6, 2000 draft "Suggestions for Agreement" (above, para 58). [83] On December 5, 2001 Mr. Dunn emailed Mr. Truman referring to the "Suggestions for Agreement" as follows: You and I agreed to an annual license fee of $5,000, payable on October 1 of each year. However, in the attached you reference 'a monthly fee of ____.' Is this the same thing or is this something different? Mr. Truman responded the same day: The monthly fee was in the initial draft. There is no particular significance to it. The annual arrangement that you proposed is fine. [84] On December 11, 2001 Mr. Dunn emailed Mr. Truman a draft of the formal agreement that had been drawn up by Vascor's in-house counsel. His email said: Attached is our proposed Licensing agreement for iSpect. I belive [sic] this covers all the points that have been discussed. If you are Ok with this I will sign two originals and send both to you. As soon as I receive one of the originals back with your signiture [sic] I

will have Jinny send you a check for $35,000. Please advise. [85] The agreement contained provisions dealing with the following: · a perpetual licence for iSpect 2.2 and subsequent enhancements · a one-time fee of $25,000 payable on signing the agreement · a $5,000 annual maintenance fee commencing on October 1, 2000 · an obligation for Can-Auto to put the source code in escrow · Can-Auto was to provide further enhancements on request at a fee to be agreed upon · A recognition that Can-Auto owned the software. [86] The same day, Mr. Dunn forwarded a copy of the draft to Jones, Saldivar and Western and asked them not to discuss licensing with Mr. Truman; Mr. Dunn wanted to be the sole point person for any further discussions. [87] On December 13, 2001 Mr. Truman responded to Mr. Dunn's email: Jim, I received the agreement and have passed it on to our lawyer. I'm travelling the next couple of days but I have asked that the lawyers be in a position to discuss this in detail early next week." Ted However, in his direct evidence, Mr. Truman said that he was "horrified" by the draft because it contained provisions that had never been discussed and that he had not sent it to his lawyer. He said that after receiving the draft agreement he concluded that "iSpect was off the table" and "that was the end of it ". He said that he chose the words of his email to convey to Mr. Dunn that they

did not have an agreement. [88] Mr. Dunn said that he twice called Mr. Truman to follow up on the agreement, and was told it was still in the hands of Can-Auto's lawyers. Mr. Truman denied those calls. [89] Vascor set up an accounting reserve of $50,000 for the iSpect licensing. That was reversed in August 2003 by Mr. Truman because he thought the auditors would question it given the length of time it had been outstanding. [90] Mr. Dunn testified, and I accept, that had he not thought an agreement had been reached, Vascor would have terminated its existing business with Can-Auto. Based on the November 8 discussions and following emails, Mr. Jones abandoned ceased dealing with another software developer to develop a replacement for iSpect. F. Post 2001 events [91] Vascor carried on using iSpect. It did not make any payments to Can-Auto. [92] Between January 2002 and May 2003 there were emails between Mr. Richardson, a junior programmer at Can-Auto, and Mr. Jones with respect to the development of a new version of iSpect. The exchange was initiated by Mr. Richardson informing of work on the new version and requesting information on Vascor's use of iSpect to assist him in developing the new version. Mr. Jones was open about the use of iSpect. One of Mr. Jones's emails was forwarded to David Dancy, Can-Auto's operations manager. [93] In April 2006, Chrysler told Vascor that it

wanted to change the way Vascor was remunerated for yard management and the change would result in a reduction of the current fee. Vascor felt it had no choice but to accept or lose the work. It therefore told Truman that Can-Auto's remuneration had to be based on the same formula. Mr. Truman did not want to accept a reduced fee and Can-Auto ceased doing yard management work for Vascor-Chrysler in July, 2006. [94] On February 19, 2007, Mr. Truman telephoned Mr. Dunn and advised that he was going to cease performing vehicle inspections effective July 2007. As well, Mr. Truman complained that he had "never been paid" for iSpect or the $2,500 administration fee for yard management. During the phone call, Truman asked Dunn whether Vascor had used iSpect for customers other than Chrysler. On April 4, 2007, Mr. Truman emailed Mr. Truman and advised him that, in fact, iSpect was used at locations other than Chrysler. He also said: The second attachment is a response I sent to you regarding your initial letter. In that response I proposed that VASCOR would pay an initial licensing fee of $25,000 and a yearly maintenance fee of $5,000, commencing on October I, 2000 and payable each October I thereafter for as long as VASCOR used iSpect.. You and I discussed this several times and each time I was told you were thinking about it or you wanted to talk to your attorney. you never did

respond, either in writing or verbally, that you either accepted or rejected this offer. Nevertheless, there is no question that VASCOR benefited from the use of iSpect. Consequently, I am prepared to pay you for the use of iSpect per the terms of my original offer." [95] The plaintiffs launched this action on May 31, 2007 and inspections by them ceased shortly afterwards. Vascor stopped using iSpect after that. III. Analysis [96] As I stated in the introduction to these reasons, for the period prior to November 1, 2001 Can-Auto says that the agreement between the parties provided for a restricted use of iSpect, which did not include Mexico, yard management business, or manufacturers other than Chrysler, except for Toyota marine and rail inspections. Can-Auto claims breach of contract and conversion. Vascor does not deny there was a contract; however, it says the contract allowed for unrestricted use of iSpect. [97] For the period subsequent to that the parties' positions are reversed with respect to the existence of a contract. Can-Auto says it terminated the existing agreement, no new agreement was reached and, therefore, the use of iSpect by Vascor after November 1, 2001 was completely unauthorised. It claims conversion and unjust enrichment. Vascor relies on the agreement it says was reached in November 2008. [98] This case hinges on whether agreements were reached in

several relatively casual discussions that took place over 13 years ago (for the initial use) and 10 years ago (the 2001 discussions). Both parties relied on surrounding documentation and subsequent behaviour to support their positions. And, of course, Mr. Truman, Mr. Dunn and Mr. Saldivar were closely cross-examined on their recollection of the crucial conversations and their companies' subsequent correspondence and conduct. It is not surprising that every piece of evidence does not fit perfectly through the sieve of either party's argument. [99] I think it is wise to approach the task I have with some degree of pragmatism and realism. First, people cannot be expected to have perfect recollection of well-aged conversations. Second, business people do not write every email as if it were a statute or a contractual document. And, it is worth noting that neither Mr. Dunn nor Mr. Truman said that they placed particular importance on what was being discussed between them. Can-Auto's main line of business was not software development, and for Vascor new vehicle inspection business represented less than 15% of its total revenue. [100] Both parties acknowledge that the conduct of the parties subsequent to the alleged agreements is significant. (In fact, this evidence occupied the vast majority of the trial time.) As Madam Justice Dickson said in Le Soleil Hotel & Suites Ltd. v. Le

Soleil Management Inc., 2009 BCSC 1303 at para. 328: If the alleged agreement has not been reduced to writing, the Court must consider what the parties said and did and assess objectively whether, in context, their words and actions establish an intention to be bound . . . In order to determine whether a binding contract was created the Court may consider both the parties' conduct leading up to and following conclusion of the alleged agreement. . . . However, the subjective understanding of the parties as to whether an agreement was reached or the terms of that agreement is not the governing factor; rather, it is how an objective observer would construe the matter. A. The breach of contract claim for the use of iSpect prior to November 1, 2001 [101] I prefer the evidence of Mr. Saldivar and Mr. Jones to that of Mr. Truman and conclude that Mr. Truman did not specify any limits to the use of iSpect. [102] First, I accept Mr. Saldivar's evidence that it would have not made commercial sense to operate different systems in different locations to do the Chrysler work, since that work contemplated a standardised way to collect, evaluate and present data for all of Chrysler's North American operations. Had a restriction been brought up by Mr. Truman, Mr. Saldivar would have noted it and discussed it. [103] Second, there would have been little need for Mr. Truman to specify that the

use of the software would be limited to Chrysler plants in the United States: a. At the time that iSpect's use was being discussed, Can-Auto was doing the Chrysler inspection work in Canada. Truman could not have been concerned about the prospect of Vascor terminating Can-Auto and using iSpect itself in Canada because the use of iSpect by Vascor was terminable on 90 days' notice. b. Mr. Truman said he did not notice that the Chrysler proposal contained locations in Mexico because the names of the locations were not specifically denoted as being Mexican, in contrast to the specific reference to Canadian locations. If that was the case, there would have been no reason to be concerned about prohibiting iSpect's use outside of the U.S. [104] Third, the charge of the nominal $1.00 per year - which was meant simply as recognition by Vascor that Can-Auto owned the software - is inconsistent with a wish to charge according to the amount of use. It is of note that that charge remained the same even though, on Mr. Truman's version of the events, the authorised use iSpect was gradually increased. Further, in his January 5, 2001 email (above para. 61), Mr. Truman based a proposed fee on a capital cost analysis. That being so, once again there would be no utility to restricting the use of iSpect. [105] Subsequent events relating to Vascor's use of iSpect in Mexico and yard management work

also support a non-restrictive use. [106] Dealing first with Mexico, I accept that Mexico was not discussed in December 1998 or January 1999. Further, I do not accept Mr. Truman's evidence that in May 1999 he was told by Saldivar that the project was only a pilot. It was not a pilot and unless Vascor was intentionally trying to hide the use - which I do not find - there would be no reason for Mr. Saldivar to have said that. Further, the fact that three computers were being used would or should have flagged to Mr. Truman that iSpect was being used for actual contract work. [107] In addition to what I set out above, and starting at para. 53, there were several other communications that brought the use in Mexico to Mr. Truman's attention: · On May 28, 1999, Mr. Wilson wrote to Mr. Truman raising the issue of the future of iSpect for Can-Auto (above para. 45). He stated, in part, The recent start-up in Mexico has put us into an unexpected (and unfavourable) position. · On June 7, 1999, Truman wrote to Jones in response to his request to changes to iSpect: I do share your concern about the recent problems in Mexico and ongoing unsuitability of iSpect for use in Baltimore. I do not accept Mr Truman's evidence that he missed the references to Mexico because he only read parts of the various communications. [108] I conclude that from May 1999 Mr. Truman and Can-Auto were aware of

Vascor's use of iSpect in Mexico for its contract work - in other words, not as a pilot project. Mr. Truman made no objection to that use. That is consistent with no restriction having been placed on iSpect's use. I have not ignored the list of locations sent by Vascor to Can-Auto in June 2000 which did not refer to the Mexican locations. I accept that that was an innocent omission. Nevertheless, the use of iSpect in Mexico by Vascor was nevertheless plain and obvious to Mr. Truman. [109] Turning to the use of iSpect by Vascor for yard management work, Mr. Truman admits that he learned of this in May 2001 at the Silverdome meeting (para. 66). His explanation that he did not raise an objection because Mr. Saldivar was not present is not credible. First, Mr. Western, a person of authority from Vascor was present. Second, the simple fact is that Mr. Truman did not contact Mr. Saldivar after the meeting. Moreover, on June 26 and 27, 2001 Mr. Truman was again directly confronted with Vascor's use of iSpect for yard management and made no objection. [110] Once again, Mr. Truman's lack of objection to the use of iSpect for yard management is consistent with him having agreed to a non-restricted use of the programme. [111] Finally, an arrangement for unrestricted use of iSpect makes more commercial sense than (as alleged by Mr. Truman) a gradually increasing use for no additional

fee. [112] I therefore conclude that there was no restriction placed on Vascor's use of iSpect and that there has been no breach of contract. I will deal with conversion in the next section. B. The use of iSpect after November 2001 - factual findings [113] Mr. Truman testified that he thought "it was highly likely" that Vascor had ceased using iSpect by December 4, 2001 because they had been given sufficient notice of termination. That, however, is belied by the evidence and is not credible. For example, in his response to Mr. Truman's October 17, 2001 email, Mr. Dunn told him that Vascor would need to use iSpect beyond November 1. In his mediation application, Mr. Truman noted that Vascor had not yet developed an alternative system. Mr. Truman had to have known that would take some time. (Both sides have sought to rely on different portions of the mediation application. However, I do not think, nor was it argued, that Can-Auto can use it for the purposes of bolstering Mr. Truman's evidence since that would be an impermissible use of a prior consistent statement.) In April, 2003 Mr. Saldivar spoke to Mr. Truman about doing business with General Motors and how to do that work using a component of iSpect - the iscodes.txt file. [114] At para. 92 I refer to the email exchanges between Mr. Jones and Mr. Richardson. Mr. Truman said he was unaware of them and that Mr. Richardson had

a tendency to go off on his own direction. But Can-Auto was a small company and Mr. Richardson was devoting his resources over a significant period of time to the project and getting information from Vascor. I think it is more likely that Mr. Truman knew of it. Furthermore, Can-Auto's operations manager, Mr. Dancy, was copied on one of the emails and that is sufficient to bring knowledge home to the corporation. [115] Mr. Truman did not act in a creditable (or credible) manner when he informed Mr. Dunn in his December 13 email (above, para. 87) that he had sent the agreement to his lawyer for review, when, in fact, he had not done so and was supposedly "horrified" by the draft and had determined that "iSpect was off the table". While Mr. Truman testified that he chose the words of the email to convey to Mr. Dunn that they did not have an agreement, that evidence is disingenuous because the email does not come close to conveying that. One would have reasonably expected Mr. Truman to tell Mr. Dunn that he had no intention of proceeding further. Further, it is difficult to conceive how Mr. Truman could have been "horrified" with the draft when it was largely in line with the terms proposed by him. [116] I conclude that Can-Auto corporately, and Mr. Truman personally, were aware of Vascor's use of iSpect throughout, and the full extent of that use. I also find that Mr. Truman was

content to allow Vascor to use the software without a written agreement. For one reason or another he had concluded that he was not willing to sign the agreement forwarded to him on December 11, 2001 but he did not want to raise that with Vascor because of the continuing business relationship which was generating significant revenue for Can-Auto. It is no coincidence that, after November 1, Mr. Truman only sought to foreclose Vascor's use of iSpect when the yard management business ended because Vascor was unwilling to accept the change in pricing by Chrysler. [117] Vascor made no attempt to hide the use of iSpect. Dunn, Jones and Saldivar (and therefore Vascor) all justifiably assumed that Mr. Truman was aware of Vascor's continued use of iSpect and that he was content with that. This was precisely the intention which Mr. Truman wished to convey to Vascor. (I am mindful of the email from Mr. Saldivar in February 2005 where he said he did not want to talk to Mr. Truman about licensing. I accept his evidence that this was because he had been told by Mr. Dunn that that was to be left to Dunn alone and it does not detract from my conclusion that Mr. Truman was aware of Vascor's use of iSpect.) [118] In view of those factual conclusions I will now go on to consider the causes of action advanced by Can-Auto for Vascor's use of iSpect subsequent to November 2001. It will be seen that

these facts drive to the same result in unjust enrichment, conversion and the defence of acquiescence. C. Unjust enrichment [119] A plaintiff must show three elements in order to succeed in an unjust enrichment claim: a benefit received by the defendant; a corresponding deprivation of the plaintiff; and a lack of juridical reason for the benefit. I will focus my analysis on the juristic reason issue because I think it is dispositive of the unjust enrichment claim. [120] In Kerr v. Baranow, 2011 SCC 10, the Supreme Court of Canada reiterated the analysis to be applied to the juristic reason issue set out by the court in Garland v. Consumers' Gas Co., 2004 SCC 25, [2004] 1 S.C.R.

629. The first question to be asked is whether the juristic reason to deny recovery falls into a previously recognised category. Previously recognised categories are the intention to bestow a gift, a contract, a disposition of law and other valid common law, equitable or statutory obligations. The burden at this step is on the plaintiff to show the negative, namely that the case does not fall into a previously recognised category. If the juristic reason to deny recovery does not fall into one of the categories, then the plaintiff has made out a prima facie case for the lack of juristic reason. That is not the end of the analysis, however, because the defendant can still show that there is a reason for it to maintain the benefit. As stated in Garland at paras. 45-46: This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery. As part of the defendant's attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. It may be that when these factors are considered, the court will find that a new category of juristic reason is established. In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular

circumstances of a case which does not give rise to a new category of juristic reason that should be applied in other factual circumstances. In a third group of cases, a consideration of these factors will yield a determination that there was no juristic reason for the enrichment. In the latter cases, recovery should be allowed. The point here is that this area is an evolving one and that further cases will add additional refinements and developments. [121] Vascor argues that an agreement was reached on November 8 and that the juridical reason for the benefit was the contract. While Vascor recognises that the parties contemplated that a written agreement would be signed, it says that the written agreement was only to enshrine the terms of the previously agreed-to terms. It relies on the following principle stated by Parker J. in Hatzfeldt-Wildenburg v. Alexander, [1912] 1 Ch. 284 at 288-9, 81 L.J. Ch. 184: It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there

is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored. [122] The terms of the alleged agreement are set out in Vascor`s written argument: On November 8, 2001 Dunn and Truman agreed that Vascor would be able to continue to use the iSpect software in its business operations in consideration for: (a) a $25,000 (US) one time license fee; and (b) a $5,000 (US) annual maintenance fee, payable retroactively for 2000 and 2001. These terms were supplemented by Truman's email of December 4, 2001 in which he reminded Dunn that they had also discussed and agreed: (c) "that as enhancements were made Can-Auto would supply updated versions to Vascor" There were no other material terms discussed or to be discussed. [123] I do not agree. The agreement advocated by Vascor contains no provision for the term of the licence or how it may be terminated. As such, it does not provide any further protection to Vascor than the preceding arrangement and it was Vascor that wanted a licence agreement. And, what Vascor wanted was a written agreement. This is why Mr. Dunn wrote Mr. Truman the next day stating that Vascor would pay $35,000 only after a written agreement was signed. [124] I have also considered

the possibility that on November 8, an agreement may have been reached on the terms set out in Mr. Truman's "Suggestions for Agreement", although this was not a position advanced by Vascor. Mr. Dunn had told Mr. Truman that those terms were fine and on November 8 the fees were agreed to. However, that provides no terms for the escrow conditions - in other words, it was left completely open as to what would trigger the release of the source code to Vascor. Further, this possibility bumps up against Mr. Dunn confirming that that fees would be paid only after a written agreement was signed. [125] On either analysis, I conclude that the parties did not reach a complete agreement. A written contract was contemplated and that was not merely a mechanism by which a prior agreement was to be carried out. There is therefore no established category of juridical reason for Vascor to maintain the benefit and I now turn to the possibility of a residual rationale. [126] I found above (at para. 115 and following) that Vascor's use of iSpect beyond November 2001 was done with the full knowledge of Mr. Truman and Can-Auto and that Mr. Truman was content to allow this use up to the point that the business relationship between Can-Auto and Vascor ended. This is tantamount to an implied authorisation for the use of the software without a revised agreement and therefore without an increased fee.

That is a closely analogous ground to a contract for iSpect's use and therefore is a sufficient juridical reason for Vascor to retain any benefit it received as a result of the use of iSpect. [127] On a more general level, as Cromwell J. explained in Kerr v. Baranow, at para. 40, absence of juristic reason " means that there is no reason in law or justice for the defendant's retention of the benefit conferred by the plaintiff, making its retention "unjust" in the circumstances of the case...". And, at para. 44, he noted although the legal principles remain constant, they must be applied in a manner that is appropriate to the factual and social context of the claim. The case at bar is, of course, a commercial one. It is hard to see how it would be fair to provide a remedy to Can-Auto when it intended to convey the impression to Vascor that it approved the ongoing use of iSpect and this was the result that was achieved. Although my conclusion does not hinge on this, the result of concluding otherwise would be that Can-Auto might be better off as a result of its stonewalling and misrepresenting its intent with respect to a written agreement than it would be had it had signed an agreement. D. Conversion [128] Conversion involves a wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner's right of

possession. An authorised use of the goods is not conversion. 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81 at paras. 8-9. [129] Since I have concluded that the use of iSpect was authorised for all uses to which it was put by Vascor, both before and after November 2001, there can be no claim for conversion. It is therefore unnecessary for me to deal with the issue as to whether an unauthorised use of software can amount to a conversion, as opposed to a breach of copyright, or breach of a licence agreement. E. Defences of waiver, acquiescence, laches and limitations [130] I concluded that the plaintiff has not made out a claim for unjust enrichment, conversion or breach of contract and it is therefore not necessary for me to deal with Vascor's affirmative defences. However, the factual conclusions I have already made also underpin the analysis with respect to acquiescence and the limitation issues and the analysis with respect to acquiescence on these facts is virtually identical to that concerning juridical reason. I will therefore state my conclusions on these defences. [131] Acquiescence is neatly described by Morton: Although not strictly speaking of a limitation on an action, acquiescence is a defence based upon delay. Since a legal or equitable right may be lost by acquiescence, the doctrine will be considered here. Acquiescence is no more than an

instance of law of estoppel by words or conduct: If a person having a right, and seeing another person about to commit, or in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act. James C. Morton, Limitation of Civil Actions (Toronto: Carswell, 1988) at 45 [132] Can-Auto knew of Vascor's ongoing use of iSpect; it chose to remain silent in order to maintain its business relationship with Vascor; Vascor relied on that silence and it acted to its detriment in not developing a replacement. The elements of the defence of acquiescence are made out, both for the use prior to November 1, 2001 and after. [133] With respect to the limitation defence, the parties are in agreement that the applicable limitation period for breach of contract, conversion and unjust enrichment is six years, pursuant to s. 3(5) of the Limitation Act, R.S.B.C. 1996, c.

266. Can-Auto did not commence its action until May 31, 2007 and Vascor says that Can-Auto's claims in respect of Vascor's use of iSpect prior to May 31, 2001, are statute-barred. Can-Auto, in turn, argues that s. 6(3)(e) of the Limitation Act applies. This section provided for the postponement of the running of the limitation period where there has been wilful concealment of material facts. Can-Auto's knowledge of the use of iSpect and Vascor having made no attempt to hide such use make this argument untenable. [134] Finally, with respect to its breach of contract claim, Can-Auto argues that the concept of discoverability applies. That argument founders on two grounds. The first is that it is undercut by the facts. The second is that it involves an argument that the Court of Appeal's decision in Bera v. Marr, [1986] B.C.J. No. 222, 27 D.L.R. (4th) 161 was wrongly decided. IV. Conclusion [135] I was advised in the course of the trial that the claim for unpaid yard management fees was not being contested. I have therefore not dealt with it in these reasons. Judgment will be given for that claim. [136] The balance of the action is dismissed. [137] If necessary, costs may be spoken to or addressed in writing. "E.M. MYERS, J."