COURT OF APPEAL FOR ONTARIO

CITATION: Actuate Canada Corporation v. Symcor Services Inc.,
    2016 ONCA 217

DATE: 20160318

DOCKET: C60073

Gillese, van Rensburg and Miller JJ.A.

BETWEEN

Actuate Canada Corporation and Actuate
    Corporation

Plaintiffs (Appellants)

and

Symcor Services Inc.

Defendant (Respondent)

Matthew P. Gottlieb, Daniel A. Schwartz and Laura M.
    Wagner, for the appellants

Daniel S. Murdoch, Patrick G. Duffy and Sean E. Gibson,
    for the respondent

Heard: October 6, 2015

On appeal from the judgment of Justice Michael A. Penny
    of the Superior Court of Justice, dated January 30, 2015, with reasons reported
    at 2015 ONSC 689 and from the costs order dated March 13, 2015, with reasons
    reported at 2015 ONSC 1667.

van Rensburg J.A.:

A.

Overview

[1]

The appeal and cross-appeal in this matter concern a software licensing
    dispute. Xenos IP Partnership (Xenos IP) was one of the original plaintiffs. Its
    interest in the litigation and its copyright in certain software referred to as
    d2e Software were transferred to the appellant Actuate Corporation.
[1]
Xenos IP and the appellant Actuate Canada Corporation
[2]
sued the licensee Symcor Services Inc. (Symcor) for breach of contract and
    infringement of Xenos IPs copyright in the d2e Software. The appellants were
    referred to in the court below and in our court as Xenos, and will be
    referred to in these reasons together as Xenos or the appellant.

[2]

The software was licensed in 2001, when Xenos and Symcor signed a
    Licence, Services and Support Agreement (the LSSA or the licence
    agreement). In an action commenced in February 2012, Xenos asserted that
    Symcor had violated the LSSA in three ways:

i)

by using the d2e Software on more than one production server and more
    than two non-production servers;

ii)

by employing the d2e Software on operating systems other than IBMs AIX
    (Advanced Interactive eXecutive) operating system;
[3]
and

iii)

by using the d2e Software in association with database systems other
    than IBMs CMOD (Content Manager OnDemand) system.

[3]

Symcor admitted that it had used d2e Software on multiple servers and on
    non-AIX operating systems. It asserted, however, that the LSSA did not restrict
    the number of servers on which it was entitled to deploy the software or limit
    its use of the software to AIX operating systems. Symcor acknowledged that it
    had used the d2e Software in association with non-CMOD database systems, but
    argued that this restriction was removed in 2003. Symcor also raised defences
    of estoppel and the expiry of limitation periods for all activity prior to
    January 25, 2010. It argued that Xenos knew of and consented to Symcors use of
    the d2e Software on non-AIX operating systems and with database systems other
    than CMOD because Xenoss employees actively supported the d2e Software in all
    of Symcors applications from 2004 to 2011.

[4]

Xenos moved for summary judgment on the liability issues and requested
    an order directing a reference or trial on damages.
[4]

[5]

The motion judge granted the motion in part. He rejected Xenoss
    argument that Symcor had breached the LSSA by using the software on multiple
    servers, concluding that the parties agreement did not restrict Symcors use
    to one server per licence. He concluded however that Symcor had breached the
    licence agreement by using the d2e Software on operating systems other than
    AIX, and with database systems other than CMOD. The motion judge found that
    these breaches of contract also constituted copyright infringement within the
    meaning of the
Copyright Act,
R.S.C. 1985, c. C-42.

[6]

The motion judge rejected Symcors defence of estoppel. He concluded
    that there was no evidence that any Xenos employees with knowledge,
    responsibility or authority over licensing matters had knowledge of Symcors
    unlicensed use of the software before 2011. He directed that the limitation
    period defence proceed as a component of the trial on damages.

[7]

The motion judge fixed Xenoss partial indemnity costs for the summary
    judgment motion at $280,000; however, he ordered that the determination of
    whether Xenos would be awarded such costs would await the determination of its
    success at the damages trial.

[8]

Xenos appeals, asserting that the motion judge erred in concluding that
    the LSSA permitted Symcor to use the d2e Software on more than one server per
    licence. Xenos also seeks leave to appeal the costs order and argues that the
    payment of its costs for succeeding in the summary judgment motion should not
    await the disposition of the damages trial.

[9]

Symcor cross-appeals. Symcor contends that the motion judge erred in
    concluding that the LSSA restricted its use of the d2e Software to AIX
    operating systems. Symcor further argues that the motion judge erred in dismissing
    its defence of estoppel in respect of such use on the evidence before him. Symcor
    also seeks to appeal the amount of the costs order. Symcor does not appeal the
    summary judgment with respect to its use of the software with database systems
    other than CMOD.

[10]

For
    the reasons that follow, I would dismiss Xenoss appeal and allow Symcors
    cross-appeal in part. Briefly, I would not interfere with the motion judges
    interpretation of the parties contract. His conclusions about the scope of
    Symcors licences and his interpretation of the LSSA are clear, carefully
    reasoned and reveal no error of law or principle. I would, however, set aside
    the dismissal of Symcors defence of estoppel in relation to the AIX
    restriction, and refer this issue to trial along with the limitation period defence
    and assessment of damages. There is evidence in the record to support the
    estoppel defence that the motion judge did not consider. Further, the estoppel
    defence raises questions of fact that overlap with the facts necessary to
    determine the limitation period defence. As such, this issue ought not to have
    been determined against Symcor in the summary judgment motion. Finally, because
    of Symcors success in this court in respect of the estoppel issue, I would remit
    the matter of costs of the motion to the motion judge for determination.

B.

Facts

[11]

The
    parties filed extensive affidavit and other evidence on the summary judgment
    motion. As the motion judge accurately observed, at paras. 54-55 of his
    reasons, the record contains certain basic facts, identification of documents
    and some objective evidence of surrounding circumstances, but also a good
    deal of argument, opinion, legal conclusion, speculation and subjective
    evidence of personal, corporate or imputed intention. Notably, none of the
    parties affiants were involved in any licensing functions in 2001 (when the
    LSSA was negotiated), with their current employers or otherwise.

[12]

The
    motion judge set out the relevant facts at paras. 12 to 38 of his reasons. They
    can be summarized as follows.

[13]

The
    d2e Software was developed by Xenos. It is used to transform bills and account
    statements from a paper to an electronic format such as a webpage or Adobe PDF
    file. Using the d2e Software, information can be extracted and output into an
    electronic file, which can then be stored in a database and indexed for later
    customer retrieval of the statement through a secure website.

[14]

Symcor,
    which is the largest financial processing outsourcing services provider in
    Canada, is in the business of processing cheque images, payments and financial
    statements, primarily for large banks and retail and telecommunications
    companies.

[15]

In
    2001, IBM marketed its CMOD database software and Xenoss d2e Software together
    as an integrated enterprise content management solution for large customers
    such as Symcor.

[16]

Symcor
    was interested in the d2e Software, but wanted to test it in its operations
    before making the financial commitment to acquire the software for use in a
    production environment. Symcors plan was to test the new system gradually by
    starting in a test, non-production environment before moving to a production
    environment.

[17]

Xenos
    prepared written quotations for IBM to present to Symcor as part of a package.
    The first, on June 19, 2001, provided pricing and terms for two non-production
    (also referred to as test or development) licences and one production
    licence to use specified components of the d2e Software. The quotation
    explicitly provided that the d2e Software was to be licensed for an AIX
    hardware system. The price quoted for the production licence was described as
    a one time charge licence per server.

[18]

The
    motion judge stated that this quotation was not pursued, however, as Symcor did
    not want to pay the licence fee of over $250,000 associated with the production
    licence until it had tested the software. Although the motion judge did not say
    so, the parties agreed at the hearing of the appeal that there was no evidence
    that the June 19
th
written quotation was ever provided to Symcor.

[19]

A
    written quotation from Xenos dated June 28, 2001 was provided to Symcor. This
    quote was for two test licences only, priced at 25% of the cost of a production
    licence. The quotation provided that the d2e Software was for use on an AIX
    hardware system with the CMOD database system. There was nothing in the quote
    about servers. The quote also offered a production licence at a specified
    price if acquired by December 15, 2001.

[20]

On
    June 29, 2001, Symcor entered into an agreement with IBM (the IBM Agreement)
    to acquire certain passport advantage products. On the same day, Symcor
    entered into the LSSA with Xenos.

[21]

The
    LSSA provides for both the licensing of software by Xenos to Symcor, and the
    supply of support services in respect of the software. The key terms and
    conditions of the LSSA that are relevant to this dispute are as follows.

[22]

Section
    2.1 sets out the grant of the licence. It provides for a non-exclusive,
    non-transferable, perpetual licence to use the Software at the
    Location(s):

Upon execution of this agreement by the Parties and in
    consideration of Customer agreeing to pay the Charges, Xenos grants to the
    Customer a non-exclusive, non-transferable, perpetual licence to use the
    Software at the Location(s) upon the terms and conditions of this Agreement.
    Xenos acknowledges that such use shall extend to the Customers (sic) wholly
    owned subsidiaries.

[23]

The
    LSSA contains various definitions which include the following:

·

Symcor is the Customer;

·

Location(s) is any Customer owned, occupied or controlled
    site;

·

Charges are the Licence Fees, Annual Support Fees, and the Consultancy
    Fees plus taxes;

·

Licence Fees are the charge specified in the Product
    Schedule(s) for the right to receive and use the Software;

·

Annual Support Fees are the aggregate annual charge specified
    in the Product Schedule(s) for the right to receive Support Services;

·

Consultancy Fees are charges for provision of the Consultancy
    Services... (which in turn are defined as the provision of  training and
    general consultancy services as specified in the Product Schedule(s));

·

Software is the object code or executable versions of the
    modules of the computer software listed in the Product Schedules; and

·

Product Schedule(s) is:

a written description of the Software to be licensed and
    Consultancy Services to be provided hereunder from time to time by agreement
    between the Parties and method of recording any other agreed changes to this
    Agreement.

[24]

Section
    2.3 provides that the Software may be used only: (i) to process the Bureau
    Clients (sic) data and (ii) for Customers own internal operations. Bureau
    Client(s) is defined as [a]ny entity for which Customer provides services in
    the ordinary course of its business. Further, Schedule A of the LSSA provides
    in part:

For clarification, Clause 2.3 shall be expanded to include the
    following:

The Software can be used on an enterprise wide basis by
    Customer without restriction on the number of copies but only in association
    with the IBM software product known as Content Manager / OnDemand or any IBM
    successor product(s) to Content Manager OnDemand.

[25]

Section
    4.2 deals with copying of the Software and provides in part:

The Customer agrees not to: (i) copy the whole or any part of
    the Software except for the creation of copies of the Software reasonably
    required for Customers enterprise wide use and for copies required for
    Customers reasonable archival purposes and in connection with reasonable
    disaster recovery plans.

[26]

Section
    9 states that Xenos is to provide prescribed Support Services in respect of the
    Software, subject to payment of the Annual Support Fees.

[27]

The
    parties executed Product Schedule No. 1 the same day as the LSSA. This schedule
    sets out the various elements of the d2e Software licensed for non-production
    purposes. It states that Xenos agrees to provide, subject to the terms of the
    LSSA, the Software hereinafter specified, and then sets out the following
    table:

Item No.

Quantity

Software Description

Location(s)

Hardware Platform

License Fees

Annual Fee 18%

A.

2 non-production

AFP Parser (AFPP)

AIX

As per IBM SOW

$2,025

B.

2 non-production

Metacode Parser (MEPP)

AIX

As per IBM SOW

$2,025

C.

2 non-production

PDF Generator (PDFG)

AIX

As per IBM SOW

$3,037

D.

2 non-production

IDC Document Control (IDC1)

AIX

As per IBM SOW

$6,075

E.

2 non-production

Template Merger (TEMG)

AIX

As per IBM SOW

$1,519

F.

2 non-production

REXX for AIX License

AIX

As per IBM SOW

$1,890

G.

2 non-production

Developers Studio (DST1)

AIX

As per IBM SOW

$675

Subtotal

$17,246

Plus taxes as per clause
            3.5

[28]

Symcor
    subsequently decided to purchase a production licence, as offered in the June
    28, 2001 quotation. On September 26 and 27, 2001, the parties signed Product
    Schedule No. 2. It states that Xenos agrees to provide, subject to the terms of
    the LSSA, the following specified Software:

Item No.

Quantity

Software Description

Location(s)

Hardware Platform

License Fees

Annual Fee 18%

A.

1

AFP Parser (AFPP)

AIX

As per IBM SOW

$5,250

B.

1

Metacode Parser (MEPP)

AIX

As per IBM SOW

$5,250

C.

1

PDF Generator (PDFG)

AIX

As per IBM SOW

$7,814

D.

1

IDC Document Control (IDC1)

AIX

As per IBM SOW

$15,705

E.

1

Template Merger (TEMG)

AIX

As per IBM SOW

$3,366

F.

1

REXX for AIX License

AIX

As per IBM SOW

$2,210

G.

1

Developers Studio (DST1)

AIX

As per IBM SOW

$500

H.

3 (2 non-production)

PCL Parser (PCLP)

AIX

*N/C

*N/C

Subtotal

$40,095

Plus taxes as per clause
            3.5

[29]

Product
    Schedule No. 2 further provides that Xenos allows Symcor to use the Xenos
    software in their current file server environment (non IBM Content Manager
    OnDemand) for a period of 9 months from the date of approval of this schedule.

[30]

In
    2003, the parties discussed an expansion of Symcors licences to remove the
    limitation for use only with IBMs CMOD database. Symcor also wanted to license
    a new component of the d2e Software called Print Generator. Xenos issued a
    quotation for both. In September 2003, Symcor paid $88,000 for the initial
    licence fee and first annual fee for one production and two test licences for
    the d2e Print Generator component. The parties signed Product Schedule No. 3
    that described the Quantity (1 production, 2 test licences), the Software
    (the print generators), and the Hardware Platform (AIX). There is no evidence
    that Symcor ever paid the $224,000 quoted for expansion of the d2e Software licence
    for use with non-CMOD databases or that any related Product Schedule was ever
    issued or signed.

[31]

Over
    the next several years, Xenos provided technical support to Symcor for the d2e
    Software. During this time, Symcor began using the software in production
    environments on multiple Windows servers and with databases other than CMOD.

[32]

In
    2007, after questions were raised internally about the status of the Xenos
    licenses, Symcor asked Xenos to provide details of its existing licences. Xenos
    confirmed that Symcor had one production and two non-production licences and
    that the licences were all on AIX. Xenos sent a quote and a draft Product
    Schedule No. 4, for Symcor to acquire a production licence to use various
    components of the d2e Software on servers running either the Linux or Solaris
    operating systems for a fee of $167,200. The quotation confirmed that Xenos was
    providing a discount based on existing license restriction usage with CMOD.
    Symcor did not purchase any additional licence rights and Product Schedule No.
    4 was never signed.

[33]

In
    2011, Symcor again made inquiries of Xenos about the terms and conditions of
    its licence. Symcor wanted to know whether its use of the d2e Software in a
    Windows environment and not in association with CMOD was covered by the LSSA.
    Xenos investigated and concluded that Symcor had been using the d2e Software in
    production environments on more than one server, on servers not running AIX,
    and in association with a database other than CMOD. Xenos ultimately brought its
    action for damages for breach of contract and copyright infringement.

C.

Issues

[34]

The
    following issues are raised in the appeal and cross-appeal:

i)

Did the motion judge err in interpreting the LSSA as not restricting
    Symcors use of the d2e Software to one server per licence?

ii)

Did the motion judge err in interpreting the LSSA as restricting
    Symcors use of the d2e Software to the AIX operating system?

iii)

Did the motion judge err in rejecting Symcors estoppel defence and not
    referring this issue to trial with the limitation period and damages issues?

iv)

Did the motion judge err in declining to award Xenos its costs of the
    completed liability phase of the action and in deferring the award of costs of
    the motion until after the damages trial?

v)

Did the motion judge err in fixing costs in favour of Xenos without
    regard to the divided success on the motion?

D.

Analysis

(1)

Contract interpretation and standard of review

[35]

As
    a preliminary matter, I note that, although Symcor originally took the position
    that the summary judgment motion was premature, by the time the motion was
    heard, both parties agreed that the interpretation of their contract was a
    matter that was properly determined by summary judgment.

[36]

Also,
    it is worth observing that no issue was taken by either party on appeal with
    respect to the relevant principles of contract interpretation that were
    identified by the motion judge. Rather, Xenos contends that the motion judge
    erred in the application of the relevant principles, and both parties allege
    palpable and overriding errors in certain of the motion judges findings of
    fact.

[37]

At
    paras. 46 to 53 of his reasons, the motion judge set out the relevant principles
    to guide his interpretation of the parties commercial contract. He noted that
    the contract was to be interpreted as a whole, in a manner that gives meaning
    to all of its terms and avoids an interpretation that would render one or more
    of its terms ineffective; by determining the intention of the parties in
    accordance with the language they have used; with regard to objective evidence
    of the factual matrix underlying the negotiation of the contract to the extent
    that there is any ambiguity in the contract; and in a fashion that accords with
    sound commercial principles and good business sense and that avoids a
    commercial absurdity:
Ventas, Inc. v. Sunrise Senior Living Real Estate
    Investment Trust
, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24.

[38]

Referring
    to
Sattva Capital Corp. v. Creston Moly Corp
.
, 2014 SCC 53, [2014]
    2 S.C.R. 633, at paras. 47, 57 and 58, the motion judge noted the need to read
    the contract as a whole, giving the words used their ordinary and grammatical
    meaning, consistent with the surrounding circumstances. He said that
    surrounding circumstances should consist of only objective evidence of the
    background facts at the time of execution of the contract and should never be
    allowed to overwhelm the words of the agreement.

[39]

Both
    parties acknowledge that the motion judges decision interpreting their
    contract is entitled to deference. Contract interpretation involves issues of
    mixed fact and law and as such is generally subject to a standard of palpable
    and overriding error. Appellate interference is also warranted where the motion
    judge has made an extricable error of law. Extricable errors of law include:
    (1) the application of an incorrect principle; (2) the failure to consider a required
    element of a legal test; and (3) the failure to consider a relevant factor:
Sattva
,
    at para. 53.

[40]

In
Sattva
, Rothstein J. warned that courts must be cautious in
    identifying questions of law in disputes over contractual interpretation, and
    careful to ensure that the proposed ground of appeal has been properly
    characterized. The close relationship between the selection and application of
    principles of contractual interpretation and the construction ultimately given
    to the instrument means that the circumstances in which a question of law can
    be extricated from the interpretation process will be rare:
Sattva
,
    at paras. 54-55.

[41]

Xenos
    seeks to characterize the motion judges interpretation of the LSSA as
    containing extricable errors in principle and palpable and overriding errors of
    fact. Symcor says that the motion judges interpretation of the LSSA should be
    subject to a standard of review of palpable and overriding error. As I will
    explain, there is no error in principle and any error of fact did not
    materially inform the motion judges decision about the scope of and
    restrictions to Symcors licences. I would therefore not interfere with the
    motion judges interpretation of the contract. I turn now to the specific
    contractual interpretation issues.

(2)

Is Symcors licence to use the d2e Software in a production environment restricted
    to one server?

[42]

Before
    the motion judge, Xenos relied on three points in support of its argument that
    each licence is restricted to use of the d2e Software on a single server:
    first, that the June 19, 2001 quotation refers to a price per licence per
    server (an argument not pursued on appeal); second, that the IBM Agreement makes
    reference to a licence per server for some components supplied by IBM that are
    used in conjunction with the d2e Software; and third, that the three Product Schedules
    issued under the LSSA refer to two non-production licences and one
    production licence.

[43]

The
    motion judge considered the broad terms of the LSSA, which contains no
    restriction on locations from which, or clients for whom, Symcor can use the
    Software, and Schedule A, which provides that Symcor can use any number of
    copies of the software on an enterprise-wide basis. He noted that the Product
    Schedules say nothing about servers, except for a reference in Product Schedule
    No. 2 allowing Symcor to use the software for nine months in their current
    file server environment (which was non-CMOD at the time).

[44]

The
    motion judge found the June 19, 2001 quotation unhelpful in determining whether
    there was a server restriction because it was never accepted and was superceded
    by the LSSA. He found the IBM Agreement similarly unhelpful because it provided
    for a separate agreement to be entered into between Symcor and Xenos.

[45]

As
    for Xenoss argument that the Product Schedules refer to one production licence
    and two non-production licences, and so the licences must be per server, the
    motion judge noted that there was no evidence that Symcor provided service to
    its clients on a server basis. He stated, at paras. 73 and 74:

Xenos relies on the principle that the specific excludes the
    general; that the specific of the product schedule excludes the general of
    the licence agreement. Xenos has, in my view, turned the argument on its head.
    On the question of servers (a term that is not defined in the licence
    agreement and the use and function of which was not the subject of any evidence
    put before me), the product schedule is absolutely silent and contains no
    specific words of limitation that would exclude the broad usage rights conferred
    under the language of the licence agreement
per se.

There are any number of reasons why Symcor may have wanted two
    development licences (which were Windows and PC-based). There is no room for an
    inference (as opposed to what amounts to the plaintiffs speculation) that the
    acquisition of two development licences meant they could be used on only two
    servers such that the acquisition of one production licence meant that it could
    only be used on one server.

[46]

On
    appeal, Xenos continues to assert that the fact that Symcor acquired two
    non-production licences leads to the necessary inference that its single
    production licence was limited to use on one server. Although approached from a
    number of angles, this is the key argument made by Xenos  that the purchase of
    two test licences when one would have been enough must mean that the licences
    were server-restricted.

[47]

Xenos
    says the motion judges interpretation contains reviewable errors.

[48]

It
    says that the motion judge made extricable errors in principle or errors of law:
    first, by failing to interpret the LSSA as a whole and to give meaning to the
    Quantity term in the Product Schedules; second, by failing to use the IBM
    Agreement as an important and relevant aid in interpreting the LSSA; and third,
    by failing to adopt a commercially reasonable interpretation of the parties
    agreement.

[49]

Further,
    Xenos says that the motion judge made palpable and overriding errors of fact in
    referring to the development (or non-production) licences as being Windows and
    PC-based, and in concluding that there were any number of reasons why Symcor
    may have wanted two development licences, when there was no evidence to support
    this conclusion.

[50]

I
    find none of these arguments persuasive.

(a)

Interpretation of the LSSA as a whole and the Quantity term

[51]

First,
    the motion judge clearly approached his interpretation of the contract by
    looking at the contract as a whole, seeking to give meaning to all of its terms
    and avoiding an interpretation that would render one or more terms ineffective:
Sattva
, at paras. 47 and 64. The LSSA contains terms that are
    inconsistent with any restriction on the number of servers on which the
    software can be deployed. To the contrary, it provides for use of the software
    at Locations (which include any customer owned, occupied or controlled site);
    to process data for [a]ny entity for which [Symcor] provides services in the
    ordinary course of its business; and on an enterprise-wide basis  without
    restriction on the number of copies.

[52]

As
    the motion judge observed, none of the schedules to the LSSA expressly or by
    necessary implication imports a server restriction. Schedule A states that it
expands
the licence and reiterates that it is for enterprise-wide use. It contains a
    restriction that the software is to be used with CMOD, but no server
    restriction. The Product Schedules, which list the components of the software
    being licensed, do not contain a server restriction. Xenos relies on the interpretive
    principle that a specific term in a contract modifies the general. This principle
    has no application here as there is no specific term in the LSSA, Schedule A,
    or any of the Product Schedules that imposes a server restriction.

[53]

Xenoss
    argument that the production licence is server-restricted rests almost entirely
    on the fact that Symcor acquired two non-production licences and one production
    licence. Xenos says it would be illogical for Symcor to have acquired two
    non-production licences when a single test licence would suffice if the software
    could be used on any number of servers for any number of customers.

[54]

The
    problem with this argument was identified by the motion judge. Apart from the
    fact that the terms of the LSSA were inconsistent with a server restriction, there
    was no evidence in the record that Symcor provided services to its customers on
    a server basis and there was no explanation as to the function and use of a
    server. The motion judge said that there was no room for an inference that the
    acquisition of two development licences meant that they could only be used on
    two servers.

[55]

Xenos
    attempts to extricate legal errors from this analysis. It says that the motion
    judge ignored the Quantity term in the Product Schedules. I disagree. He did
    not ignore the reference to Quantity; rather the motion judge rejected in the
    context of the evidence before him  including the express terms of the LSSA
    and its schedules  that the quantity of licences (two non-production and one
    production) referred to the quantity of servers on which Symcor or its
    customers could use the software, which was licensed for enterprise wide use.
    There was nothing in the parties agreement to tie the licences to use on
    individual servers. Xenoss interpretation that there was a server restriction
    is inconsistent with the express wording of the LSSA.

(b)

The impact of the IBM Agreement

[56]

Second,
    Xenos contends that the motion judge made an extricable error of law when he failed
    to consider the LSSA as part of a package sold with IBM products. Xenos
    contends that because certain of the IBM software to be used with the d2e Software
    was licensed on a per server basis, the Xenos Software must also have been
    licensed per server.

[57]

The
    motion judge considered the impact of the IBM Agreement and rejected Xenoss
    argument. He noted, at para. 19 of his reasons, that under the IBM agreement, [s]ome
    but not all, of [the] products are said to be licensed for one server. While
    referring to the d2e Software licence, the IBM Agreement does not indicate the
    basis (server or otherwise) on which the licences for the Xenos software were
    granted. Moreover, the IBM Agreement specifically states that the Xenos program
    is licensed under the terms provided by Xenos. The fact that certain of the IBM
    licences being acquired under the IBM Agreement were granted on a per server
    basis does not mean the licences for the d2e Software were granted on the same
    basis.

[58]

I
    see no error in the motion judges rejection of the IBM Agreement as importing a
    server restriction into the agreement between Xenos and Symcor. If anything,
    the fact that the IBM Agreement refers to certain elements of the IBM software
    as being licensed by server suggests that where software is intended to be
    licensed on a per server basis, this will be expressly provided for.

(c)

The motion judges interpretation was not commercially unreasonable

[59]

Third,
    I would reject the appellants argument that the motion judge adopted an interpretation
    of the parties agreement that is commercially unreasonable. As Goudge J.A.
    noted in
Kentucky Fried Chicken Canada v. Scotts Food Services Inc
.
(1998), 41 B.L.R. (2d) 42, 1998 CanLII 4427 (Ont. C.A.), at para.
27,
    in construing a contract a court should avoid an interpretation that would
    result in a commercial absurdity. He cautioned, however, that care must be
    taken to construe the document objectively, and not from the perspective of one
    contracting party or the other.

[60]

There
    is nothing commercially unreasonable in finding that the licences granted under
    the LSSA were, as specified by the LSSA, for use on an enterprise wide basis.
    The argument that anything other than a per server licence would be
    commercially unreasonable invites the court to draw speculative conclusions in
    the absence of evidence about the function of servers and how the software
    would be deployed.

(d)

The alleged palpable and overriding errors of fact

[61]

Xenos
    contends that the motion judge made two palpable and overriding errors of fact
    at para. 74 of his reasons when he said, [t]here are any number of reasons why
    Symcor may have wanted two development licences (which were Windows and
    PC-based).

[62]

First,
    the appellant says that the development licences were AIX-based and that the
    motion judge fundamentally misapprehended the evidence when he said they were
    Windows and PC-based.

[63]

It
    is correct that the development or non-production licences were, according to
    Product Schedule No. 1, to be used on an AIX hardware platform, and in this
    respect the motion judges statement is inaccurate. That said, there was
    considerable evidence about how the d2e Software was to be used during the
    development phase. One element, Developers Studio (DST1), according to the
    evidence, is an interactive development tool that is run on individual desktop
    computers running the Microsoft Windows operating system. DST1 allows a person
    to develop and test scripts before they are deployed to servers. Xenoss
    deponents referred repeatedly to the use of the d2e Software on Windows in a
    non-production environment, only at times qualifying the reference to DST1. On
    a number of occasions in his reasons the motion judge described the
    non-production licences as AIX-based: see paras. 28, 32, 34, 76 and 78. In the
    circumstances, his reference to the non-production licences being Windows and
    PC-based did not reveal a misapprehension of the evidence, and in any event
    was not significant in his analysis.

[64]

As
    a second alleged error, Xenos says that the motion judge found that there were
    any number of reasons for more than one non-production licence to have been
    granted. Xenos says there was simply no foundation in the evidence for this
    finding. There was no evidence as to why two development licences were
    purchased; to the contrary, Xenos claims that Symcors witness under
    cross-examination, Craig Smith, admitted that if a licence permitted multiple
    server access there was no reason to purchase multiple licences.

[65]

I
    reject this submission. First, I address what Xenos characterizes as an
    admission. Mr. Smith had no involvement in licensing the d2e Software, nor was
    he an expert in licence agreements. He was explaining his general understanding
    of enterprise wide use as being contradictory to a server restriction.
    Counsel challenged him, So, you would never need a second license, on your
    interpretation; correct? Mr. Smith responded, Correct. It is clear that this
    was not an admission that there was in fact
no
reason for Symcor to
    have acquired multiple licences unless they were in fact server-restricted, but
    simply a response to an argument put forward by examining counsel.

[66]

Further,
    and more importantly, when the motion judge noted that [t]here are any number
    of reasons he was simply observing that there was not a necessary logical
    connection between the appellants argument and the conclusion it was asking
    the court to draw. As the motion judge observed, server is not defined in the
    LSSA and the use and function of servers was not in evidence. The relevance of
    a server restriction was not apparent.

[67]

Before
    this court Symcor attempted to advance in argument an explanation for why two
    non-production licences were acquired, having to do with the fact that the DST1
    component (which is Windows-based and used on individual PCs) would translate
    into multiple seats, permitting multiple users to engage with the software at
    the same time.

[68]

Whether
    or not that is the explanation, it was not necessary for the motion judge to
    determine the reason why more than one test licence was acquired before he
    rejected Xenoss one licence equals one server argument. The motion judge was
    not prepared to accept the inference that the acquisition of two non-production
    licences meant that the licences had to be server-restricted. And while Symcors
    initial use of the Software may have been for a single customer, there is
    nothing in the record indicating that individual customers are tied to
    individual servers or for that matter suggesting that a single server would be
    used to service one customer.

[69]

In
    all the circumstances, I do not find any extricable error of law or palpable
    and overriding error of fact in the motion judges interpretation of the LSSA as
    not containing a server restriction. The inferences that Xenos asked the court
    to draw were not clearly available on the record and were, as the motion judge
    observed, too thin a reed to justify the server restriction Xenos advocated.

(3)

Is Symcors licence to use the d2e Software restricted to use on the AIX
    operating system?

[70]

The
    motion judge accepted that Symcors licence to use the d2e Software was
    restricted to use on the AIX operating system. As such, its use on other operating
    systems in a production environment was in breach of contract and constituted
    copyright infringement within the meaning of the
Copyright Act
.

[71]

Before
    the motion judge, Xenos relied on the fact that all three of the Product Schedules
    under the LSSA describe the d2e Software as being licensed for use on an AIX
    hardware platform.

[72]

Symcor
    argued that the reference to AIX under the column Hardware Platform in the Product
    Schedules was descriptive only, telling the user what the d2e Software was
    designed to work on rather than constituting a limitation on its licence. The
    motion judge rejected this argument at para. 78 of his reasons, stating:

This argument, in my view, misconceives the purpose of the
    product schedule. The product schedule is not, properly construed, merely
    explaining what the d2e software was designed to work on, as if it was a
    warranty or representation. The product schedule, under the licence agreement,
    constitutes the definition of the software to be licensed. In that context,
    the software that was licensed was code or modules for use on the AIX platform.
    Symcors use on another platform was not within the use contemplated under the
    2001 licence agreement.

[73]

The
    motion judge then considered post-contract conduct as confirmatory of the
    conclusion he reached on the plain wording of the contract. In the 2007
    discussions about the scope of Symcors licence, Xenos confirmed that the d2e
    licence was all on AIX and provided a quote for the purchase of a licence for
    use of the software on other operating systems.

[74]

Symcor
    contends that the motion judge made a palpable and overriding error in finding
    that its licence to use the d2e Software was restricted to use on the AIX operating
    system. Symcor makes three main submissions.

[75]

First,
    Symcor repeats its argument before the motion judge that the reference to the
    Hardware Platform AIX in the Product Schedules is merely descriptive, and not
    a usage restriction. Symcor says that a Product Schedule merely describes the
    software being supplied, and that any usage restriction must be contained in
    the licence agreement. Symcor contends that the reference to AIX is a
    description of the functionality of the software being provided (that it
    functions on the AIX operating system) and does not by implication amount to a
    restriction on use.

[76]

I
    would not give effect to this argument. Contrary to Symcors assertion, the
    Product Schedules are an integral part of the licence agreement and define or
    specify the software to be licensed. The motion judge observed that, pursuant
    to the LSSA, the Product Schedules constitute the definition of the Software
    to be licensed, and thus the terms of the Product Schedules, such as Hardware
    Platform AIX, properly construed, are not merely explanations of how the
    software will work, but limitations on the scope of Symcors licensed use. The Hardware
    Platform is specified for each element of the software, and as such is an
    integral part of the definition of the software being licensed.

[77]

Further,
    the evidence of the parties affiants was consistent on the question of the d2e
    Software being platform and operating system dependent. Xenoss affiant said that
    there are different versions of the d2e Software, created to run on computers
    running different operating systems. The d2e Software is platform and operating
    system dependent, and as such, is licensed for individual operating systems and
    platforms. Symcors witness agreed that the d2e Software is platform and operating
    system dependent, and that different versions are engineered to work on
    different operating systems, such as AIX, Solaris/Linux and Microsoft Windows.

[78]

Symcors
    second argument is that the motion judge erred by relying on Product Schedules
    No. 1 and No. 2 as they contain an obvious error and were not prepared with any
    care. The error is the listing of AIX in the Hardware Platform column associated
    with DST1, which everyone agrees is run on Windows.

[79]

The
    fact that the Product Schedules contain this admitted error is of no moment. It
    was open to the motion judge to conclude that the Hardware Platform column in
    the Product Schedules prescribed the hardware platform in respect of which the
    software was licensed, even if there was a mistake in one of the items listed
    in the column. Whether or not a Product Schedule was prepared with care, the function
    of the Product Schedules was to describe the licensed software, including
    relevant terms and limitations on its use.

[80]

Symcors
    third argument (that was apparently made in passing before the motion judge,
    but is not referred to in his reasons) is based on the Disabling Event
    provisions of the LSSA. Section 9.3 of the LSSA provides that Symcor will be
    invoiced for additional fees for Consultancy Services if an error or defect in the
    Software is due to a Disabling Event, which includes use of the Software other
    than with the Hardware. Symcor argues that the use of d2e Software other than
    on the described hardware is specifically contemplated by the LSSA. As such,
    using d2e Software outside AIX is merely a Disabling Event, and not a breach of
    Symcors licence.

[81]

I
    disagree. The fact that Symcor is required to pay for technical support required
    as a result of the softwares unintended use does not mean that Xenos granted a
    licence for such use. In fact, this provision supports the argument that the
    software was licensed for use with particular hardware. When used as
    contemplated, technical support is included in the specified Annual Support Fees.
    When used otherwise, additional fees are required for extra-contractual
    Consultancy Services. Each of the events listed as Disabling Events (and
    there are many in addition to use of the Software other than with the Hardware)
    represents a use of the Software in a manner in which it is not intended to be
    used under the LSSA. The Disabling Event provisions of the LSSA therefore do
    not assist Symcor in avoiding the AIX restriction contained in the Product
    Schedules.

[82]

Finally,
    Symcor argues that the motion judge, in considering confirmatory evidence,
    ignored certain other evidence, including the fact that senior management at
    Xenos was aware of Symcors use of d2e Software on Windows in a production
    environment. I do not find any error in the motion judges reference to confirmatory
    evidence, which, in any event, he said was confirmatory, rather than
    dispositive, of the conclusions reached on the plain words of the contract. It
    was reasonable and appropriate for the motion judge to have regard to the
    parties specific communications about the scope of the licence and whether it
    was limited to use on AIX. To the extent that senior management were aware of
    the use of the software on other operating systems, this is relevant to the
    issue of estoppel (and will be addressed in more detail below).

(4)

The estoppel defence

[83]

In
    its Amended Statement of Defence, Symcor asserted that, if the various uses of
    the d2e Software complained of by Xenos in the action constituted a breach of
    the LSSA, Xenos through its post-contractual conduct consented to the use of
    the d2e Software in a Windows platform and/or in a non-CMOD environment[and] is
    estopped from alleging a breach of the [LSSA].

[84]

Symcor
    also asserted that, to the extent that Xenoss claim refers to damages suffered
    prior to January 25, 2010, Xenoss claims are statute barred pursuant to the
Limitations
    Act, 2002
,
S.O. 2002, c. 24, Sched. B
as well as
    section 43.1 of the
Copyright Act
.

[85]

The
    motion judge declined to dismiss Xenoss motion for summary judgment on the
    basis of the estoppel defence, and ordered the limitation defence to proceed as
    part of the damages trial.

[86]

In
    respect of both defences, Symcor relied on evidence that Xenos employees who
    provided technical support for the d2e Software knew that Symcor was using the
    software on both AIX and Windows (and thus, by inference, without CMOD) in a
    production environment from 2004 onwards and continued to provide support for
    this usage without objection. Symcor argued that this evidence gave rise to the
    defence of estoppel and to a limitation defence. Symcor also pointed to the
    fact that Xenos had the ability under the LSSA to monitor and audit the use of
    its licences and had failed to do so.

[87]

The
    motion judge considered evidence from three individuals at Xenos who had worked
    in its customer and professional services and support groups. They deposed that
    neither they nor anyone in technical support roles working with or under them
    knew about, or were responsible for knowing or ensuring compliance with, the
    terms and conditions of Xenoss customers product licences. The motion judge
    noted that there was no serious challenge to this evidence.

[88]

The
    motion judge also stated that the mere fact that a party does not strictly
    police and vigilantly enforce its legal rights does not necessarily mean that
    it has amended the contract or lost those rights through estoppel. He referred
    to the non-waiver provision in the LSSA as well as the requirement that any
    amendment or variation to the LSSA be in writing and signed by each of the
    parties.

[89]

He
    noted that there is a significant evidentiary burden on a party seeking to
    establish estoppel by conduct. He said it was at least necessary for the
    relevant employee who was said to have knowledge of the alleged breach to have knowledge
    of the terms of the licence, responsibility for ensuring compliance and
    apparent authority to effect a change in licence-related legal relations. The
    motion judge stated that there was simply no evidence that the technical
    support workers had such knowledge, responsibility or apparent legal authority.
    Nor was there any evidence that Symcors contravening use of the d2e Software
    ever came to the attention of anyone at Xenos who did have knowledge,
    responsibility or authority over licensing matters before 2011.

[90]

Symcor
    also argued before the motion judge that it would be premature to determine its
    defences in the summary judgment motion because the evidentiary record to
    advance the defences was incomplete. Documentary production from Xenos was
    deficient and, although there were cross-examinations on affidavits, examinations
    for discovery had not taken place.

[91]

The
    motion judge rejected Symcors argument that the determination of its defences
    was premature because it needed to examine more employees or former employees
    to explore the limits of their authority or to require Xenos to produce more
    documents. He stated that it was incumbent on Symcor to seek to obtain such
    additional evidence in advance of the motion, including if necessary taking
    steps to obtain more documents or to examine more potential witnesses.

[92]

The
    motion judge therefore concluded that on the record before him there was no
    genuine issue requiring a trial on the estoppel defence. He declined to dismiss
    the motion for summary judgment on that basis.

[93]

The
    motion judge noted that Symcors limitation defence relies on the same facts
    and suffers from the same frailties as the estoppel defence. However, he stated
    that the limitation issue is, to a significant extent, premature because there
    will necessarily have to be a trial on damages in any event. The licence
    breaches are ongoing. The limitation defence would, at best, reduce the number
    of years for which Xenos could seek damages.

[94]

For
    those reasons, the motion judge declined to dismiss the motion for summary
    judgment on the basis of the limitation period defence. He stated, however,
    that the limitation period defence would be a component of the damages hearing
    and for that reason the appropriate order was for a trial on the issue of
    damages rather than a reference.

[95]

Whether
    there is a genuine issue requiring a trial is a question of mixed fact and law.
    Absent any palpable and overriding error or extricable error in principle, the
    exercise by a summary judgement motion judge of his fact-finding powers under rule
    20.04(2.1) should not be overturned:
Hryniak v. Mauldin
, 2014 SCC 7, [2014]
    1 S.C.R. 87, at para. 81.

[96]

Symcor
    asserts that the motion judge made reviewable errors in disposing of its
    estoppel defence with respect to the AIX hardware restriction in Xenoss
    summary judgment motion.

[97]

First,
    Symcor asserts that the motion judge made a palpable and overriding error in
    stating that there was no evidence that anyone at Xenos with knowledge,
    responsibility or authority over licensing matters knew of the breaches before
    2011. Second, Symcor contends that it was illogical for the motion judge to
    dismiss the estoppel defence while allowing the limitation defence, which
    depends on the same facts, to proceed to trial. Symcor also asserts that it was
    not proportional and just for the motion judge to determine the estoppel
    defence at a summary judgment motion, when it did not have the opportunity to
    obtain full production from Xenos and conduct examinations for discovery.

[98]

I
    would give effect to Symcors first two arguments on this issue.

[99]

For
    the purpose of its cross-appeal, Symcor does not quarrel with the motion
    judges conclusion that an estoppel could only arise if the conduct relied upon
    was that of Xenos personnel with knowledge of and responsibility for the licences
    and apparent authority to effect a change in licence-related legal relations.
    The motion judge, however, stated that there was
no evidence
that
    anyone with such authority at Xenos knew of the breaches before 2011.

[100]

There was in
    fact evidence in the record of communications within Xenos that included the
    responsible account managers in 2005 and 2007, where it was apparent that
    Symcor was using the d2e Software on the Windows operating system. In 2005, an
    account manager was forwarded a support ticket from service personnel that
    showed Symcor was using a component of the d2e Software on Windows. The account
    manager was asked to follow up with Symcor on the issue. In 2007, an account
    manager received an email from an application developer at Symcor who stated
    that [w]e currently have d2e platform in use on Windows and AIX. A September
    2007 email to a different account manager from a Symcor project manager stated
    that their current installation of d2e Software ran only on AIX and Windows. According
    to Xenoss affiants, the account managers would have been familiar with
    Symcors licensed usage.

[101]

Xenos offers a
    different interpretation of the latter two emails: that they may have been
    understood by the responsible account manager as referring only to the use of
    the DST1 element (which was licensed for use on Windows), and that they are
    ambiguous as to whether the Software was being used in a production or test
    environment. Whether or not that is the case, I agree with Symcor that this
    evidence is material and undermines the motion judges conclusions about
    estoppel. His dismissal of the estoppel defence was not based on a rejection of
    Symcors evidence that Xenoss support representatives knew that Symcor used
    d2e Software on Windows. Recall that Xenoss position was that no one at Xenos
    knew of the unlicensed use because the service personnel did not have
    responsibility for or knowledge of the licence restrictions. In dismissing the
    estoppel defence, the motion judge relied heavily on his finding that there was
no evidence
that anyone other than support personnel were aware of the
    use of the Software outside the scope of the licence. This finding, in the
    circumstances, was a palpable and overriding error.

[102]

Xenos argues
    that, even if the motion judge did not consider certain evidence, the
    non-waiver provision in the LSSA would preclude Symcors reliance on an estoppel
    defence. Although mentioned in his reasons, the motion judge did not give any
    detailed consideration to the effect of the non-waiver provision in the LSSA. Estoppel
    can operate to prevent a party from relying on its contractual rights. As such,
    a non-waiver provision in a contract is not necessarily a bar to the application
    of estoppel. Rather, it is one factor, and often an important factor, to be
    considered: see
D.L.G. & Associates Ltd. v. Minto Properties Inc.
,
    2015 ONCA 705, 391 D.L.R. (4th) 505, at para. 45; see also
Manitoba Pool
    Elevators v. Gorrell
(1998), 127 Man. R. (2d) 4 (Q.B.). The motion judge
    did not base his rejection of the estoppel defence on the non-waiver provision,
    and, at this stage, neither would I.

[103]

As such, I am
    unable to accept the motion judges conclusion that there was no genuine issue
    requiring a trial with respect to Symcors estoppel defence. While this is
    sufficient to allow this aspect of the cross-appeal, I also accept Symcors
    argument that if, as the motion judge observed, both defences rely on the same
    facts (it is probably more accurate to say that some of the same evidence will
    be relevant to each of these issues), it would make sense for the estoppel
    issue to proceed to trial together with the limitation issue. Accordingly, this
    issue should proceed to trial for a determination of whether Xenos is estopped
    from asserting that Symcors use of the d2e Software on Windows constituted a
    breach of the parties agreement, and accordingly its copyright. The limitation
    defence and the determination of damages should be dealt with at the same
    trial.

[104]

Symcor also argues
    that the motion judge failed to consider the overall proportionality and
    justness of determining Symcors estoppel defence in the summary judgment
    motion. In responding to the motion, Symcor had to build a defence based on
    information and documentation that was in Xenoss possession, without the
    benefit of discovery. Additional examinations of Xenos personnel and motions
    for production (which the motion judge suggested were necessary for Symcor to
    put its best foot forward), would only have prolonged the summary judgment proceedings,
    and where a lengthy trial on damages was necessary in any event, Symcor says
    that was not a reasonable approach. While I have considerable sympathy for this
    submission, I find it unnecessary to deal with it, as I have concluded that the
    estoppel issue should proceed to trial because of the evidence that was not
    considered by the motion judge.

(5)

Costs appeal and cross-appeal

[105]

The motion judge
    determined that Xenos was entitled to partial indemnity costs fixed at $280,000
    (inclusive of disbursements and applicable taxes), but directed that whether Xenos
    should actually be awarded those costs shall await the determination of its
    success at the damages trial. The motion judge noted that a deferral of the
    costs award was appropriate because Symcor had made an offer (which was not
    disclosed) to settle the entire action. Immediate payment of costs to Xenos
    would be inappropriate given Symcors outstanding Rule 49 offer, the effect of
    which could not be determined until damages were established at trial. If
    entitlement to costs of the motion was decided immediately, Symcor would be
    deprived of the right under rule 49.10(2) of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194, to seek the cost consequences benefit of having made a
    monetary offer to settle the entire action.

[106]

The motion judge
    noted that the only reason the issue came up at all was because Xenos chose to
    bifurcate the issues of liability and damages by bringing a motion for summary
    judgment on liability alone.

[107]

Xenos contends
    that it was an error in principle for the motion judge to depart from the
    general rule that costs of a contested motion are fixed and payable within 30
    days, on the basis of Symcors undisclosed offer to settle.

[108]

I would not give
    effect to this ground of appeal. There was no error in the motion judges
    approach to the issue of costs, which was sensible. The motion judge was
    dealing with a summary judgment motion on liability only. Xenos chose to bring
    the matter forward on that basis. Rule 57.03(1) provides for costs of a
    contested motion to be fixed (or in an exceptional case referred for
    assessment) and ordered paid within 30 days unless the court is satisfied that
    a different order would be more just. The motion judge exercised his
    discretion in making such an order when he fixed the costs in favour of Xenos
    but left the determination of whether Xenos should be awarded its costs to the
    trial judge. This order permits the necessary flexibility in the event that
    Xenos, after trial, is awarded no damages or damages less than are provided for
    in Symcors outstanding offer.

[109]

As for Symcors
    argument that the amount of Xenoss costs ought to have been reduced because of
    divided success on the motion, I would not interfere with the motion judges
    assessment, based on the outcome of the motion as he decided it, that Xenos was
    substantially successful on the motion, and was entitled to its costs subject
    to the outcome of the trial.

[110]

While I would
    not give effect to either partys argument with respect to the motion judges
    disposition of costs of the summary judgment motion, I would nevertheless set
    aside the costs order in light of Symcors partial success on its cross-appeal.

E.

Disposition

[111]

For these
    reasons, I would dismiss the appeal and allow Symcors cross-appeal in part. I
    would direct that the issue of whether Xenos is estopped from asserting that
    Symcors use of the d2e Software on a non-AIX operating system constituted a
    breach of the LSSA and its copyright, shall proceed to trial together with the limitation
    defence and damages. I would also remit the matter of costs of the motion to
    the motion judge for reconsideration in light of these reasons.

[112]

The parties
    agreed to costs of the appeal and cross-appeal in the sum of $70,000 inclusive of
    applicable taxes and disbursements to the successful party. Since success was
    divided before this court, I encourage the parties to reach an agreement
    respecting costs of the appeal and cross-appeal. If the parties are unable to
    resolve the matter of costs of the appeal and cross-appeal, they may file with
    the court written submissions limited to five pages each, exclusive of their
    costs outlines, within 15 days of the date of release of these reasons.

Released: EEG March 18, 2016

K. van Rensburg JJ.A.

I agree E.E. Gillese
    J.A.

I agree B.W. Miller
    J.A.

[1]
The motion judge granted the appellants request for an order transferring and
    transmitting Xenos IPs interest in this action to Actuate Corporation and
    amending the title of proceedings to substitute Actuate Corporation as a
    plaintiff in place of Xenos IP.

[2]
Xenos Group, Inc. was authorized to sub-license the use of the d2e Software in
    Canada. It became Actuate Canada Corporation through a series of amalgamations
    in 2010.

[3]
AIX is referred to as an operating system, a hardware platform, and a
    hardware system in the motion judges reasons and in the evidence that was
    before him. In these reasons, AIX will be referred to as an operating system except
    where quoting verbatim from a document.

[4]
Other relief was sought in the motion which was not ordered by the motion judge
    and is not material to this appeal.


COURT OF APPEAL FOR ONTARIO

CITATION: Arcelormittal Dofasco Inc. v. Industrial Alliance
    Insurance and Financial Services Inc., 2016 ONCA 224

DATE: 20160323

DOCKET: C60904

Laskin, MacFarland and Roberts JJ.A.

BETWEEN

Arcelormittal Dofasco Inc.

Plaintiff (Appellant)

and

Industrial Alliance Insurance and Financial
    Services Inc.

Defendant (Respondent)

Geoffrey D.E. Adair, Q.C. and Gordon McGuire, for the
    appellant

Barry A. Percival, Q.C. and Grant D. Bodnaryk, for the
    respondent

Heard: March 2, 2016

On appeal from the judgment of Justice Grant R. Dow of
    the Superior Court of Justice, dated July 21, 2015, with reasons reported at
    2015 ONSC 3099.

MacFarland J.A.:

[1]

D.C. has a rare life-threatening blood disease. In late September 2009, her
    hematologist prescribed the drug Soliris to manage her condition. The drug is
    very expensive, costing approximately $25,000 per month.

[2]

D.C. promptly applied to the respondent Industrial Alliance (IA), her
    employers group benefits insurer, for pre-approval for the expected cost of
    the drug. The IA policy provided for reimbursement of ninety percent of certain
    prescription drug payments.

[3]

IA denied D.C.s claim. A note on the first page of D.C.s application
    form reads N/E (Hosp. drug) K 2-10-09. As it turned out, IA erroneously
    thought that Soliris was administered in a hospital setting and therefore
    excluded under the terms of its policy. This despite the letter from D.C.s hematologist
    that accompanied her application, which stated that the medication would be
    administered in a private medical clinic.

[4]

Fortunately for D.C., her retired husband had a benefit plan through his
    former employment. This plan was underwritten by the appellant, Arcelormittal
    Dofasco Inc. (Arcel), and managed on Arcels behalf by Great West Life (GWL).
    GWL accepted D.C.s claim and began payment in October 2009.

[5]

It is undisputed that where IAs policy provides coverage, it is the
    primary payor and is required to reimburse D.C. ninety percent of the cost of
    her medication in accordance with the terms of the policy. Arcel is secondary
    payor and provides coverage where the primary insurer does not. The Arcel
    policy covers the full cost of prescription drugs.

GWL begins inquiries

[6]

In October 2010, GWL on behalf of Arcel, after paying benefits for a
    year, began to inquire into why IA denied D.C.s claim. It is unnecessary to
    review the entire lengthy correspondence between the parties  it suffices to
    say that the record clearly demonstrates that IA was stonewalling GWLs
    efforts to understand the basis for IAs decision to deny coverage.

[7]

What is crystal clear in the record is that IA knew at least by December
    15, 2010 that its denial of coverage was inappropriate. In an email dated
    December 15, 2010, Keith Bullock, a Senior Consultant with IA, wrote to his superiors:

Sheila came to me in regards to a claim for Soliris which will
    be approximately $470,000/year (and ongoing). We had originally denied it and
    GW picked it up under their plan as the claimant is the spouse of a member
    covered by GW. After paying for a year GW has now come back to us on our denial
    and which we have now determined was inappropriate. Therefore Sheila was [
sic
]
    asked me to look at and to see if there were was [
sic
] a way to
    continue the denial under the terms of the contract (same [as] I did last year
    with the $600,000 drug claim).

[]

Since we are paying this drug in Montreal it is possibly going
    to create difficulty for us in Toronto in regards to finding a way if possible
    to deny it (and leave it with GW). Please note that failure to do so could
    possibly result in GW coming back against us in regards to the $ they have paid
    out for the drug on the claimant.

[8]

IA also repeatedly ignored or refused requests from GWL and D.C. for the
    wording of the policy. By email dated June 14, 2011, GWL again wrote to IA to
    inquire about the basis for IAs denial of coverage. In her email, Ms. Wilson
    of GWL wrote:

If we do not hear from you shortly, we will be discussing this
    matter further with our Senior Management and Law Dept. with a view to
    escalating the issue with your organization.

[9]

Finally, in a letter dated September 19, 2011, IA provided a copy of its
    policy to D.C.

IA continues to refuse coverage

[10]

In
    the meantime, IA continued to refuse to cover Soliris for D.C. It sent her
    letters in January and February 2011 confirming that Soliris was not eligible
    for benefits. In the February 2011 letter, IA told D.C. that they would not pay
    her claim because expenses which are free of charge and payable by the
    Ontario Government were ineligible for coverage under the IA policy. D.C. was
    directed to apply to Ontario for payment. She did so and was told that she was
    ineligible to receive benefits under the Ontario Drug Benefit program. She
    conveyed this information to IA by letter dated September 19, 2011.

[11]

By
    letter dated November 28, 2011, IA informed D.C. that they would pre-approve
    Soliris as an eligible drug for her under their group plan on an exception
    basis and that coverage would begin January 24, 2011. The letter was
    misleading in a number of ways and did not anywhere indicate that their
    original denial of her claim had been inappropriate, as Mr. Bullock had
    pointed out in the email to his superiors at IA on December 15, 2010. IA
    refused to reimburse GWL/Arcel for any monies it had paid for the cost of
    Soliris.

[12]

The
    Statement of Claim was issued April 4, 2012. Arcel sought reimbursement from IA
    for Soliris payments from October 8, 2009 to November 4, 2011 in the sum of
    $1,280,163.95, representing 90 percent of its payout of $1,422,404.40.

The summary judgment motion

[13]

Arcel
    moved for summary judgment before Dow J. on May 5, 2015. At the outset of the
    argument before the motion judge, the respondent conceded its obligation to pay
    from January 24, 2011, which had the effect of reducing the amount in dispute
    by $488,396.30. Prior to this admission, IA had taken the position that
    although it had approved claims going forward from January 24, 2011:

Even if any of these claims were incurred after January 24,
    2011, Great West Life has already paid them in full. If [Ms. C.] has already
    been fully reimbursed for her claims, she does not have an expense to submit
    under our group policy.

[14]

So,
    even though IA conceded its policy covered the claim, it would only pay D.C. on
    a go forward basis from January 24, 2011. If GWL had already paid any of those
    claims, IA would not reimburse Arcel/GWL for them.

[15]

When
    the motion was argued, the claims that remained in dispute were those incurred
    and paid for by GWL from October 2009 through January 24, 2011.

[16]

In
    setting out his summary of the facts, at para. 2(f), the motion judge said:

The plaintiff reviewed and accepted DCs application and began
    paying the $24,666.48 per month expense. It is important to note GreatWest Life
    was also aware of Industrial Alliances obligation to pay and denial of the
    benefit as of sometime in October, 2009.

And further, at para. 8:

[T]he plaintiff acknowledges, through its agent, GreatWest
    Life, that it was aware of the defendants obligation to pay and rejection of [D.C.s]
    claim as of October, 2009.

The motion judge concluded, at para. 9:

[T]he possible claim against the defendant was discovered by
    the plaintiff as of October, 2009 and the Statement of Claim issued April 4,
    2012 is beyond the time permitted under section 22 of the
Limitations Act
Thus, the defendant is responsible to reimburse the plaintiff for claims going
    back to April 4, 2010 or two years before this action was issued.

[17]

In
    summary, he disallowed any reimbursement claim from October 2009 through April
    4, 2010 but required IA to reimburse the appellant for 90 percent of all
    amounts from April 4, 2010 going forward. Those claims amounted to $609,995.52
    and 90 percent of that amount for which the respondent is responsible amounts
    to $548,995.97.

Appeal on the merits

[18]

In
    this court, the appellant raises two grounds of appeal and seeks leave to
    appeal on the costs disposition made by the motion judge.

[19]

The
    appellant submits:

1.

The motion judges finding of fact that Arcels agent GWL was aware of
    IAs obligation to pay as of October 2009 is a palpable and overriding error.

2.

On the whole of the record Arcel clearly established that its agent GWL
    acting reasonably could not have discovered its claim until on or after April
    4, 2010.

[20]

Counsel
    for the appellant concedes that his client sat on its hands for a year. It
    paid the claim and made no inquiries why IA declined the claim.

[21]

In
    my view, the appellant acted properly in the face of the respondents denial of
    coverage. It accepted the claim and began payment for this drug. This was not a
    claim for aspirin  this was an extraordinarily expensive drug. However, a
    reasonable second paying insurer, while accepting the claim for payment, would
    have begun immediate inquiries as to the basis for the primary insurers denial
    of coverage. There is a corresponding obligation on the primary insurer to
    respond to any such inquiry promptly and in a meaningful way.

[22]

The
    record discloses that the appellant began its inquiries in October 2010 but it
    was not until September 2011 that IA, after repeated requests, finally produced
    a copy of its policy. It produced the policy not to the appellant but to D.C.

[23]

The
    appellant argues that there is no evidence to support the motion judges
    finding that Arcel/GWL  was aware of the defendants obligation to pay  as
    of October, 2009.

[24]

I
    agree. In my view, it is clear that in October 2009 all the appellant knew was
    that IA, the primary insurer, had refused to pay D.C.s claim on the basis that
    there was no coverage under its policy. As second payor, the appellant accepted
    the claim and began payment.

[25]

In
    late October 2010, when the appellant made its initial inquiry as to the basis
    for the denial of the coverage, IA responded:

Kathie we have declined the prior auth drug Soliris back in
    Oct. 2009 as our PBM has this drug listed as a hospital drug and we dont cover
    based on that information.

[26]

On
    November 1, 2010, the appellant asked for the contract wording which supports
    the Soliris decline. Despite follow up emails from the appellant, IA did not
    respond until December 14, 2010  but did not provide the policy wording
    requested. IA indicated it was investigating the matter and would let the
    appellant know the result. The appellant next wrote to IA by email dated
    January 13, 2011 by way of follow up and said in part:

Our records show this drug is being administered in a private
    clinic which means that it may be eligible for reimbursement under your plan.
    We have been contacted by a patient advocate for Soliris who we are reluctant
    to speak with until we resolve the coverage issue under your plan. This matter
    is now becoming critical and we would like to resolve it as soon as possible.

[27]

At
    this point in time, IA knew that the basis upon which it had declined coverage
    was inappropriate yet it refused to provide the policy wording either to the
    appellant or to D.C. for another eight months. The appellant could not confirm
    the basis for IAs denial of coverage until it had an opportunity to review the
    policy wording.

[28]

While
    I accept that the appellant was anything but diligent in initiating its
    inquiries about the basis for IAs decision to decline coverage, I am satisfied
    on this record the appellant could not reasonably have known that it had a
    claim against the respondent until it had the opportunity to review the policy
    wording. Further, I am persuaded that even if it had begun its inquiries in
    October 2009, based on the respondents conduct after October 2010, it is
    highly unlikely it would have received the policy wording before September of
    2010.

[29]

Accordingly,
    I would conclude that, contrary to the motion judges finding, the appellant did
    not know and could not reasonably have known it had a claim until after
    September 19, 2011, which was the date that the policy was disclosed to D.C.
    The finding of the motion judge is not supported by the evidentiary record and
    is a palpable and overriding error. The appellants action was therefore
    commenced within two years of its discovery of its claim and accordingly none
    of the claims for which it sought reimbursement from the respondent are
    statute-barred.

[30]

I
    would set aside the judgment below and in its place judgment shall issue
    requiring that the respondent pay the appellant the sum of $1,280,163.95 which
    is 90 percent of $1,422,404.40 and represents reimbursement to the appellant
    back to October 2009. Counsel have indicated they will be able to agree on the
    necessary calculations for prejudgment interest to be added to the principal
    amount.

Costs appeal

[31]

The
    appellant seeks leave to appeal the costs disposition made by the motion judge.
    In view of the fact that the judgment below is, as the result of this decision,
    set aside, so too is the costs disposition made in relation to that judgment
    and leave to appeal is not required.

[32]

The
    motion judge awarded the appellant $50,000 inclusive of fees, disbursements and
    HST for the costs of the action including the summary judgment motion.

[33]

The
    appellant had claimed $102,709.87 on a partial indemnity basis and $166,301.75
    on a full indemnity basis. Both numbers take into account and give credit for a
    $5,000 costs award made by Myers J. on April 1, 2015 as the result of a last
    minute adjournment request by the respondent. The appellant's disbursements
    total $12,276.85.

[34]

While
    it is for this court to consider the costs of the action afresh, in light of
    the appellant's success on appeal, in the circumstances of this case, where
    there was partial success below, the costs disposition made by the motion judge
    will be a relevant factor.

[35]

In
    this court, the appellant submits that the motion judge considered only the
    partial success and that the respondents bill of costs was for a much lower
    amount than the appellant's and failed to consider other relevant factors in
    making his costs award. The respondent's full account for the services of its
    counsel totalled $67,366.96.

[36]

In
    his reasons dealing with costs, the motion judge noted at para 14:

...the time and amounts claimed by the plaintiff is excessive,
    particularly the lack of complete success on the part of the plaintiff...

So it appears there were three factors that influenced
    the motion judge's decision  excessive time, excessive amounts and the lack of
    complete success.

[37]

It
    is reasonable to infer that had the appellant achieved full success below the
    costs awarded would have been in a higher amount. The only question is how much
    higher the award should be.

[38]

The
    appellant had carriage of the matter as plaintiff and accordingly the
    obligation, to borrow the words of counsel, "to carry the ball".
    Pleadings were exchanged, significant  though not voluminous  documentary
    production was made, examinations for discovery were held and there were a
    number of scheduled motions in addition to the motion for summary judgment. The
    judgment amount is almost $1.3 million.

[39]

The
    appellant's claim was based on equitable contribution and fraudulent
    concealment. The motion judge allowed the claim in part on the basis of
    equitable contribution and in relation to the claim of fraudulent concealment
    said, at para. 10:

[W]hile the conduct of the defendant was clearly substandard,
    the defendant did eventually acknowledge its responsibility as set out in its
    letter of January 11, 2012 without litigation having commenced and, as such,
    its conduct does not equate to the requisite fraudulent concealment[.]

[40]

While
    the appellant raised the issue of fraudulent concealment in this court, it was
    not pressed. Without endorsing the motion judge's finding on this issue, the
    point made earlier in these reasons bears repeating on the issue of costs. The
    appellant did nothing for a year after it accepted this claim as second payor.
    However, once it began to make inquiries, the obligation of the respondent was
    to immediately respond to those inquiries in a meaningful way and provide the
    basis for its denial of the claim. Instead it delayed, ignored and obfuscated
    in relation to the legitimate requests of the appellant. It is the sort of
    conduct that attracts the court's disapproval and of a type not to be
    encouraged among insurers. That said, it is a factor but only that, absent a
    finding of fraud.

[41]

It
    is also important to bear in mind that it was not until the argument on the
    summary judgment motion was about to begin that the respondent acknowledged and
    conceded its liability to reimburse the appellant for the amounts it had paid
    to D.C. after January 24, 2011. The concession came too late for any costs
    savings to the appellant.

[42]

The
    discrepancy in the hours spent between the appellant and the respondent is
    significant even allowing for the fact that the appellant had carriage of the
    matter  approximately 400 hours for the appellant compared to approximately
    180 for the respondent. While the appellant's office involved some eight
    lawyers on the file, the respondent's had only two. There is no explanation why
    the appellant needed the involvement of eight lawyers. Partial indemnity hourly
    rates claimed were $360 for appellant's senior counsel and $400 for the
    respondent's. It would appear from this brief comparison that time is the
    overriding factor that accounts for the discrepancy between the accounts.

[43]

Accepting
    that the appellant has had complete success on the appeal and taking all other
    factors into account, I would award the appellant $90,000 for all costs of the
    action. This figure is inclusive of disbursements and HST.

Disposition

[44]

In
    the result, the appeal is allowed and the judgment below is varied in
    accordance with these reasons.

[45]

Costs
    of the appeal to the appellant in the agreed sum of $10,000 inclusive of
    disbursements and HST.

Released: March 23, 2016 JMacF

J.
    MacFarland J.A.

I
    agree John Laskin J.A.

I
    agree L.B. Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Arsenault v. Nunavut, 2016 ONCA 207

DATE: 20160314

DOCKET: C60865

LaForme, Pardu and Roberts JJ.A.

BETWEEN

Susan Arsenault

Plaintiff (Appellant)

and

Government of Nunavut

Defendant (Respondent)

Michael D. Marin and David Quayat, for the appellant

Jock C. Climie, for the respondent

Heard: March 10, 2016

On appeal from the judgment of Justice Heidi S. Levenson Polowin
    of the Superior Court of Justice, dated July 3, 2015.

ENDORSEMENT

[1]

The appellant sued the Government of Nunavut for wrongful dismissal. The
    motion judge concluded that there was no real and substantial connection
    between the cause of action and Ontario, and that Nunavut had established that
    Nunavut was clearly the more appropriate forum. The appellant does not
    challenge these conclusions on appeal, but submits that the motion judge erred
    in failing to conclude that Ontario was a forum of necessity, because the
    appellant suffers from mental health difficulties, and says she would be
    re-traumatized if her action had to proceed in Nunavut. The appellant made no
    submissions on this issue before the motion judge.

[2]

The appellant stated in her affidavit that harassment by her employer
    caused her to develop severe mental illness. She has filed a report from a
    psychological associate who indicates that a return to Iqaluit could trigger
    symptoms, particularly, if required for legal proceedings. An occupational
    therapist filed a report to the same effect.

[3]

The motion judge dealt with this issue at paras. 84 and 85 of her
    reasons:

The Forum of Necessity Doctrine was briefly referred to in the
    Factum of Ms. Arsenault but her counsel made no further submissions in the oral
    argument of the motion. In
Van Breda
, the Ontario Court of Appeal
    recognized that, in exceptional cases where it is necessary to ensure access to
    justice, a court may assume jurisdiction even in the absence of a real and
    substantial connection to the forum. The Court of Appeal stated that the forum
    of necessity doctrine applies [where] there is no other forum in which the
    plaintiff can reasonably seek relief  (see
Van Breda v. Village Resorts
    Ltd
, 2010 ONCA 84, 98 O.R. (3d) 721 at para. 100). In
West Van Inc. v.
    Daisley
, 2014 ONCA 232, 318 O.A.C. 299, the Ontario Court of Appeal
    reaffirmed the reasonableness test but accepted that reasonableness must be
    strictly construed and that the forum of necessity doctrine is reserved for
    exceptional cases. The Court noted such examples as, the breakdown of
    diplomatic or commercial relations with a foreign State, the need to protect a
    political refugee or the existence of a serious physical threat if the case
    were to be undertaken before a foreign court. The Court stated the doctrine is
    designed for cases like
Bouzari v. Bahremani
, [2011] O.J. No. 5009
    (Ont. Sup. Ct.) [Bouzari]. In
Bouzari
, the Court assumed jurisdiction
    based on the forum of necessity doctrine because it was unreasonable to expect
    the plaintiff, who suffered torture in Iran, to bring his claim in that
    country.

The case at hand is not one of those exceptional cases. While
    Ms. Arsenault has mental health challenges, they do not rise to the level
    contemplated by this doctrine.

[4]

The decision of the motion judge is owed deference. As observed in
Ibrahim
    v. Robinson
, 2015 ONCA 21:

To interfere with the motion judges discretionary decision in
    this case, the court would have to be satisfied that the motion judge
    misdirected himself, gave no or insufficient weight to relevant considerations,
    or came to a decision that is so clearly wrong that it amounts to an injustice
Penner
    v. (Niagara Regional Police Services Board)
, 2013 SCC 19, [2013] 2 S.C.R.
    125, at para. 27.

[5]

We see no error in the motions judges reasons.

[6]

The evidence of the psychological associate was that there was a risk of
    traumatic activation, that it was not advisable for the appellant to return to
    Iqaluit, and that it would be especially challenging for the appellant to
    return to Iqaluit for a legal proceeding. She did not say the appellant could
    not return.

[7]

We note that the respondent is prepared to examine the plaintiff for
    discovery in Ontario. Her counsel noted in his affidavit that examination of a
    trial witness may take place by affidavit or telephone, with leave of the
    court. Should the appellant make the case by admissible evidence on a motion
    before a Nunavut court that her condition requires that she be able to give
    evidence from a remote location, there is no reason to believe that the
    appellants request could not be accommodated.

[8]

Accordingly, the appeal is dismissed with costs to the respondent in the
    agreed sum of $5,000, inclusive of disbursements and applicable taxes.

H.S. LaForme J.A.

G. Pardu J.A.

L.B. Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
    Canada (Attorney General) v. Mgbolu, 2016 ONCA 216

DATE: 20160316

DOCKET: C60965

Doherty, Simmons and van Rensburg JJ.A.

IN THE MATTER
    OF an application for judicial review pursuant to s. 57 of the Extradition Act,
    S.C. 1999, c. 18

BETWEEN

Minister of Justice for Canada

Respondent

and

Alex Mgbolu

Applicant (Appellant)

Laurence Cohen, for the appellant

Nancy Dennison, for the respondent

Heard:  March 14, 2016

On application for judicial review of the surrender order
    of the Minister of Justice, dated August 27, 2015.

APPEAL BOOK ENDORSEMENT

[1]

There are two issues.

The Disclosure Issue

[2]

The Minister refused the request for disclosure of any correspondence in
    the possession of the Attorney General (Ontario) or the Attorney General
    (Canada) referable to the decision to terminate the Ontario prosecution and
    support extradition.

[3]

The applicant is not entitled as of right to that disclosure, but must
    show some air of reality to the argument that the disclosure may support a
    claim that extradition would violate the applicants
Charter
right.

[4]

The Minister found no basis to question the decision to terminate the Ontario
    prosecution.  We agree.  Specifically, we see no air of reality to the claim
    that the affidavit filed in support of the Crown request for an adjournment was
    somehow misleading and part of a scheme to permit the appellants extradition.
    We note that the request was for an adjournment to October.  Had the request
    been granted, the trial would have proceeded in October, two months before the
    extradition request was made.

The
Cotroni
Assessment

[5]

We see no factual error in the Ministers assessment of the
Cotroni
factors.  Having regard to those factors, his assessment is not unreasonable.

[6]

The application is dismissed.


COURT OF APPEAL FOR ONTARIO

CITATION: Chand v. Qureshi, 2016 ONCA 231

DATE: 20160329

DOCKET: C61304

Feldman, Gillese and Brown JJ.A.

BETWEEN

Hem Chand

Appellant (Plaintiff)

and

Fazila Qureshi and Waqar Alam

Respondents (Defendants)

Hem Chand, in person

Fazila Qureshi, in person

Waqar Alam, in person

Heard: March 23, 2016

On appeal from the order of Justice E. Belobaba of the Superior
    Court of Justice, dated November 16, 2015.

APPEAL BOOK ENDORSEMENT

[1]

On the plaintiffs motion for summary judgment, the motion judge
    dismissed the motion and reserved costs to the trial judge.  This order is interlocutory
    and any appeal lies with leave to the Divisional Court under s. 19(1)(b) of the
Courts of Justice Act
and not to this court.

[2]

The appeal is therefore quashed.  No costs are requested.