Harmony Consulting Ltd. v. G.A. Foss Transport Ltd.

Harmony Consulting Ltd. v. G.A. Foss Transport Ltd.
Court (s) Database
Federal Court Decisions
Date
2011-03-18
Neutral citation
2011 FC 340
File numbers
T-1269-05
Decision Content
Federal Court
Cour fédérale
Date: 20110318
Docket: T-1269-05
Citation: 2011 FC 340
Ottawa, Ontario, March 18, 2011
PRESENT: The Honourable Madam Justice Heneghan
BETWEEN:
HARMONY CONSULTING LTD.
Plaintiff
and
G.A. FOSS TRANSPORT LTD., GORDON A. FOSS,
AND JOE CRISTELLO
Defendants
REASONS FOR JUDGMENT AND JUDGMENT
INTRODUCTION
[1] This is an action about copyright in certain software computer programs. Harmony Consulting Ltd. (the “Plaintiff” or “Harmony”) claims to be the owner of the software programs and alleges that its copyright has been infringed by G.A. Foss Transport Ltd. (“Foss Transport”), Mr. Gordon A. Foss and Mr. Giuseppe (“Joe”) Cristello (sometimes referred to as the “Defendants”).
[2] The Plaintiff claims the following relief:
a) a declaration that copyright subsists in the software, that the Plaintiff is the owner of that copyright and that the copyright has been infringed by the Defendants;
b) a permanent injunction from further infringement;
c) an order requiring delivery of all copies of the software, permanent deletion of all electronic versions, and an audit to determine the extent of the infringement;
d) damages, an accounting of profits, and punitive damages; and
e) solicitor-client costs.
[3] Harmony is an Ontario registered corporation that specializes in computer programming and support services. It was incorporated on March 16, 2000 by its sole shareholder and director, Mr. Sushil Chari, a computer programmer. Mr. Chari is the undisputed author of the software in question, but is not a party to this action.
[4] Foss Transport is an Ontario registered corporation that conducts a truck haulage business. In early 2000, Foss Transport hauled three lines of products. The first was described as dry bulk, including plastic resin and dry bulk cement. The second was “light oil” products, including gasoline, diesel fuel, jet fuel and varsol. The third was “heavy oil”, that is asphalt, bunker oil and waste boat, that is used motor oil. It also operated self-serve card lock diesel fuel stations and conducted limited retail sales of petroleum products.
[5] Mr. Foss is the President and principal shareholder of Foss Transport. Mr. Cristello is the Vice-President and a minority shareholder of Foss Transport.
[6] In early 2000, Foss Transport contemplated the modernization of the dispatching and invoicing programs of its petroleum haulage business. In the process, Mr. Foss was introduced to Mr. Chari and Foss Transport engaged the Plaintiff to implement an electronic dispatch and invoicing system. Foss Transport continued to pay the Plaintiff to modify this software for Foss Transport’s purposes and to develop new applications.
[7] While the relationship between Foss Transport and Mr. Chari, and later Harmony, was initially positive and beneficial for all parties, it disintegrated in early 2004. It terminated after Mr. Chari planted two “time bombs” in the software of the Foss Transport computer system. In April 2004, the first time bomb prevented Foss Transport from invoicing its customers and, in May 2004 the second time bomb prevented it from dispatching products to its customers. These attacks negatively impacted on Foss Transport’s ability to conduct its business.
[8] Foss Transport remedied the time bombs, and made other modifications to the software after its relationship with Harmony ended. Foss Transport continued to use some of the software authored by Mr. Chari until 2007.
[9] Harmony commenced this action for copyright infringement on July 22, 2005. It alleges that Foss Transport violated Harmony’s copyright in the computer software that Foss Transport had obtained through Mr. Chari. The Plaintiff further claims that Mr. Foss and Mr. Cristello copied the Plaintiff’s software onto their personal computers, and that they directed and authorized Foss Transport to infringe the Plaintiff’s copyright.
The Evidence and Factual Findings
[10] The evidence in this case consists of the testimony of six witnesses, the Defendants’ answers to the Plaintiff’s interrogatories, and documentary exhibits, including one expert report. The parties also submitted read-ins of excerpts from the transcripts of discovery examinations of Mr. Chari, Mr. Foss, and Mr. Cristello in the Federal Court action, and read-ins from the transcript of the discovery examination of Mr. Foss in an action commenced by Foss Transport in the Ontario Superior Court of Justice. The excerpts from these discovery examinations were deemed to have been read into the Trial Record pursuant to Rule 288 of the Federal Courts Rules, SOR/98-106 (the “Rules”) and an Order was made in that regard.
[11] I will not refer to all of the evidence contained within the record. My conclusions are based upon that evidence which I found to be most relevant, credible and reliable. I have reviewed all of the evidence and have not ignored any evidence to which I do not explicitly refer.
Witnesses
[12] Two witnesses testified on behalf of the Plaintiff, Mr. Chari and Mr. Shawn Reynolds.
[13] As indicated, Mr. Chari is the sole officer, director and shareholder of Harmony. It is undisputed that he is the author of the software in question.
[14] Mr. Reynolds is a former employee of Roy Curran Transport Limited (“RCT”) and Foss Transport. He introduced Mr. Foss to Mr. Chari.
[15] The Defendants called four witnesses, Mr. Foss, Mr. Cristello, Mr. Kevin Lo and Ms. Lydia Warth.
[16] Mr. Foss is the President and primary shareholder of Foss Transport.
[17] Mr. Cristello is the Vice-President and a minority shareholder of Foss Transport. He was responsible for Foss Transport’s information technology (“IT”), card lock system, and the administrative staff, in short for “most everything that wasn't truck related”.
[18] Mr. Kevin Lo was presented as an expert in forensic software analysis. After being questioned about his qualifications, he was accepted as an expert witness, pursuant to the Rules.
[19] As a forensic analyst, Mr. Lo’s expertise was engaged in examining the software, for which the Plaintiff alleges a copyright infringement, that was on the Foss Transport system. He provided evidence about the amount of computer code, and the complexity and nature of the programming which was created in order to operate specific functions within the software in question.
[20] Ms. Lydia Warth is a computer programmer. She gave fact evidence about computer programs, database programming techniques and practices.
[21] When Mr. Chari was unavailable in 2003 and when the Foss Transport system was attacked, Mr. Foss employed Ms. Warth to perform custom computer programming on the software in question. She testified with respect to the modifications that she had made, both to disable the time bombs in the system, and to allow Foss Transport to carry on business.
Demonstrative Evidence
[22] Prior to commencing the cross-examination of Ms. Warth, the Plaintiff attempted to provide a laptop and a copy of the computer software to the witness, in order to have Ms. Warth demonstrate searches of the software she had conducted. The Plaintiff wanted to adduce this evidence in order to contradict a “very serious allegation” made by Mr. Cristello, namely that Mr. Chari fabricated evidence. In that regard, I refer to the documents at Tab 140 of the Trial Book of Documents, formally entered as Exhibit 1 on January 29, 2010. More will be said about those documents later.
[23] Pursuant to Rule 287 of the Rules, I declined to allow the introduction of this demonstrative evidence due to my concern with regard to the risks of receiving the evidence from a party’s computer. No independent computer was available. The evidence of Mr. Cristello on re-examination was available to be weighed and considered.
[24] In my opinion, there was a substantial risk in allowing the demonstration of the program since the machine upon which it would be run would not be available as an exhibit. Further, in my view, this demonstrative evidence is not relevant to any issue in this proceeding.
The Software
[25] The computer programs, which are the subject of this action, were all built upon the Microsoft Access database platform. Some of these programs were compilations of multiple modules organized according to function. The software in question consists of the following:
a. Petro Dispatch 2000: This was the primary software package that was
purchased by Foss Transport. It was used for order inputting, dispatching, post-order reconciliation, invoicing and forecasting delivery requirements. It included the following modules:
i. Main Dispatch Module;
ii. Post Order Module;
iii. Invoicing Module;
iv. Reporting Module; and
v. Dip Forecasting Module.
b. Card Lock Invoicing Program: Card lock facilities are fuelling depots for commercial vehicles, usually unmanned, and are accessed through a credit card and a PIN number. This program produced the invoices for the card lock customers.
c. Railmaster Program: This program had two distinct sections; rail car management and dispatch. The rail car management section tracked inventory in rail cars, invoiced for time on rail sidings and dispatched bulk products. The dispatch module was for the dispatch of cement, heavy oil products, asphalt and waste oil.
d. Payroll Module: This module was intended to perform payroll based on type of driver, type of load and buying agreements. While data entry of drivers’ names and details were input, the module was never fully customized for Foss Transport, nor did Mr. Chari make the program operational for Foss Transport. In the end Foss Transport never used this program for payroll.
e. Modifications: There were numerous modifications and “add-ons” to enable the software to function for Foss Transport. Many involved very minor changes to the program in order to make it work better for the Foss Transport administrative staff. Modifications included amending rates, and method of charging, to conform to the Foss Transport business model and industry practices. Regardless of the size or type of modification, the Plaintiff has asserted that these modifications would be covered under a new licensing agreement and would be independently copyrighted.
[26] Mr. Chari personally programmed each of these pieces of software. He programmed the first four modules of Petro Dispatch 2000 before his involvement with Foss Transport, and he authored the remainder of the software at the request of Foss Transport. There is no dispute that Mr. Chari is the author of the software of which the copyright is alleged to be infringed.
[27] In 1998, Mr. Chari began development of Petro Dispatch 2000 (“Petro Dispatch”) for use by RCT. Mr. Chari’s primary contact at RCT was Mr. Reynolds.
[28] Invoices for the development of Petro Dispatch were billed to RCT by Atrimed Medical Supply Inc. (“Atrimed”). Atrimed is an Ontario registered corporation that was incorporated on December 2, 1994. The shareholders of Atrimed are Mr. Chari and his brother Mr. Santosh Chari. The first director was Mr. Swaroop Chari, another relative.
[29] In February or March of 2000, Mr. Foss was introduced to Mr. Chari by Mr. Reynolds. Mr. Reynolds contacted Mr. Foss and invited him to the RCT offices to see a demonstration of Petro Dispatch. Mr. Foss testified that Mr. Reynolds was “really proud of it” and that he had been talking about Petro Dispatch for about a year.
[30] In the demonstration shown to Mr. Foss, Petro Dispatch performed dispatch, post-order and invoicing.
[31] Mr. Foss testified that he was told that Atrimed was developing the software. He also testified that he was told, by Mr. Chari, that Petro Dispatch would handle all of the Foss Transport haulage products, not just the light oil products. He testified that he was buying a system that could dispatch, post-order and invoice all of his trucks for all of his products. At the time of the demonstration and introduction, the three lines of haulage were each roughly equal in business. They provided 50 percent of the Foss Transport revenue. The other 50 percent was derived from card lock petroleum sales.
[32] On the balance of probabilities, I find that Mr. Foss was in fact told that Petro Dispatch, when installed at Foss Transport, would handle the range of products that were transported by Foss Transport.
[33] The Petro Dispatch that was created for RCT was the same as that which was initially provided to Foss Transport. It was built around the RCT business which did not reflect the industry standard practices or the products that Foss Transport delivered. RCT did not deliver heavy oil products or dry bulk products. It also did not invoice customers a differential on gasoline or diesel. Further, RCT did not invoice for split loads. As well, RCT did not work in corrected litres, as was the industry standard. RCT used measured litres rather than corrected litres.
[34] A subsequent meeting was held between Mr. Chari and Mr. Foss to discuss the changes necessary to make the Petro Dispatch function in accordance with requirements of Foss Transport and industry standards. Among the differences discussed were minimum loads, split loads, and small drop rates.
[35] On March 16, 2000, Harmony was incorporated. Mr. Chari testified that upon the incorporation of Harmony he made a mental assignment of the copyright in Petro Dispatch to Harmony. His evidence in that regard, upon cross-examination, is found at pages 197 and 198 of the transcript as follows:
Q. You have given the answers that you have given to me about Atrimed. We can take it, then, that you didn't have any kind of document executed to transfer any copyright in this product, in this software, from Atrimed to Harmony?
A. No.
Q. The only one we have seen transferring an interest from you to Harmony is the one that we looked at this morning, the one that
is –
…
is a company I own wholly. Obviously I made that transfer in my mind because it was executed by Harmony, not Sushil Chari. Obviously, back in 2000 I would have made that transfer in my mind, if I can say it like that.
[36] The first “Software License Agreement” (“SLA”) between Harmony and Foss Transport was signed on March 29, 2000. This agreement was for a perpetual license in Petro Dispatch. The agreement included a license for five users. There was no discussion as to whether the license would be for five concurrent users or specifically named users.
[37] The price for Petro Dispatch was $40,000. The SLA that was presented to Mr. Foss divided the price into individual modules.
[38] The software was installed by Mr. Chari on the Foss Transport computer system. This system consisted of a Citrix server and external computers. A Citrix server is a central processor where all computer programs are stored and where they are run. External computers did not contain copies of the software; rather, external computers sent commands to the Citrix server and “watched” the software as it ran on the central server.
[39] Although installed in early 2000, Foss Transport did not begin using Petro Dispatch until February 2001. Substantial modifications were necessary to the software before it could be used within the Foss Transport business model and according to industry standard practices.
[40] Petro Dispatch replaced a largely paper-based dispatching, post-order and invoicing system. However, Petro Dispatch did not allow Foss Transport to carry out any business that it was not conducting before purchase and installation.
[41] Mr. Foss later introduced Mr. Chari to Mr. Cristello. Mr. Cristello was responsible for, among other things, Foss Transport’s computer systems. Mr. Foss introduced Mr. Chari to Mr. Cristello in order to determine if he, Mr. Chari, could address the outstanding issues with the pre-existing Foss Transport card lock program and the rail car management software. As software fell within Mr. Cristello’s duties, he became the primary contact between Foss Transport and Mr. Chari.
[42] Foss Transport had an existing program to invoice card lock customers. However, it was not Y2K compliant. Foss Transport also had a rail car management program under development that had never been completed, due to the untimely death of the programmer.
[43] Mr. Chari started work on the Card Lock Invoicing program in May 2000. It was operational in the summer of 2000. Foss Transport paid $6,800 plus GST for this program.
[44] Following the development of the Card Lock Invoicing program, Mr. Chari was engaged to develop a rail car management program, later known as Railmaster. This software was completed, installed and operational in August 2000. Foss Transport paid $32,400 for this program including $15,400 for “extras”.
[45] Notwithstanding that the Card Lock Invoicing and Railmaster programs were completed, installed and operational in the summer of 2000, and that Harmony had been paid in full, Mr. Chari did not approach Foss Transport with the SLAs for these two programs until March 26, 2001.
[46] As with the SLA for Petro Dispatch, the SLAs for the Card Lock Invoicing and Railmaster programs granted Foss Transport perpetual licenses to use those software programs. The SLAs contemplated additional license fees in the event that Foss Transport and Harmony executed an addendum to one of the SLAs. No evidence was presented of an addendum to any of the SLAs.
[47] Clause 11 of each SLA is an identical termination clause. It provided that an SLA would terminate if Foss Transport failed to pay licensing fees, if either party committed a material breach of the SLA that was not remedied within 60 days of the other party providing notice, or if Foss Transport became bankrupt.
[48] There is no dispute that Foss Transport paid the specified licensing fees for Petro Dispatch, Card Lock Invoicing and Railmaster set out in the respective SLAs. The Plaintiff provided no evidence that Foss Transport went into bankruptcy, or that the Plaintiff provided notice to Foss Transport that the former was terminating an SLA due to a breach by the latter. As a result, I find that none of the three SLAs was terminated in accordance with clause 11.
[49] Each SLA indicated that the price for “Product Support and Maintenance” was “TBD”. Clause 7 of each SLA stated that if Foss Transport paid the applicable “Product Support, Maintenance or Subscription Fee”, Harmony agreed to provide Foss Transport with “all new releases, corrections, and enhancements and improvements” made to the software. Clause 7 also stipulated that new software products, or modifications not attributable to problems with the software, were to be sold separately.
[50] As of June 18, 2001 Foss Transport and Harmony entered into a weekly agreement whereby Foss Transport paid Harmony a fee of $1000 per week (the “weekly agreement”). While operating under the weekly agreement, Mr. Chari made a number of fixes to Petro Dispatch, Card Lock Invoicing and Railmaster, made modifications to that software to conform to Foss Transport’s business model, and created new modules for dip forecasting, demurrage, fuel surcharges, and payroll. The weekly agreement was in place between June 2001 and early 2004.
[51] The nature of the weekly agreement, and its impact on the subsistence of copyright in the fixes, modifications and new modules, is a central point of contention between the parties.
[52] In the list of programming completed during the weekly agreement, Mr. Chari included software that was the subject of two of the three SLAs between Foss Transport and Harmony. In this regard, I refer to the Card Lock Invoicing and Railmaster programs. In his direct examination, Mr. Chari stated that rail car management, including demurrage, dry bulk products and heavy oil products, that is the primary functions of Railmaster, and invoicing for card lock customers, which is the sole function of Card Lock Invoicing, were additional programming completed during the weekly agreement.
[53] Mr. Chari testified that changes were necessary to the software during the weekly agreement, in order to comply with the Foss Transport business model. His examples included rate differentials, minimum loads, split loads, flat rates, products delivered by Foss Transport that were not included in the original RCT modules, rail car management, and Card Lock Invoicing. He also testified that he added demurrage, fuel surcharge, electronic file retrieval, dip forecasting and Payroll Modules. As well, he said that he did custom programming to fix the flaws within his programs.
[54] Mr. Chari, on behalf of the Plaintiff, characterized the weekly agreement as an “Application Service Provider” agreement (“ASP”). According to him, this meant that the Plaintiff would provide additional software to Foss Transport on a rental basis. It also included, he explained, unlimited users on the existing software. He also testified that the $1000 per week was a “break” for Foss Transport until business picked up, at which point the amount of weekly rental fees would be $2000.
[55] Mr. Chari explained the consequences if the weekly agreement referred to as the ASP agreement were terminated, as follows at page 67 of the transcript:
Q. What was your understanding of the ASP agreement? What would happen if Foss decided to terminate the ASP agreement at some point? What would happen to their right to use your software?
A. They would not have the right to use any of the software created during the ASP period. They would not have the unlimited user seats for the original License Agreement. Essentially they would be scaled back to using the March 2000 and March 2001 software described in the License Agreements and scaled back to that number of users. We would just go back to March 2001.
[56] According to this evidence, the Plaintiff took the position that if the ASP agreement were terminated, then Foss Transport would have to return to using the software as it existed before the weekly agreement commenced.
[57] I acknowledge that Mr. Chari was confident that he could restore the software to its pre-weekly agreement state. However, his assertion is not believable in light of the evidence of Mr. Lo and Ms. Warth that Microsoft Access does not have that type of auditing or tracking function. Once a modification was made it became integrated into the original. The Defendants would simply have to take Mr. Chari’s word that the program had been restored and I so find.
[58] Mr. Chari kept no record of any changes and additions he made to the software during the weekly agreement. When the Defendants requested a copy of the software as it existed before the weekly agreement commenced, the Plaintiff was unable to produce the source code as it existed at that time.
[59] Further, Mr. Chari did not execute SLAs with respect to the fixes, modifications or additions made pursuant to the weekly agreement.
[60] The Plaintiff argued that its interpretation of the weekly agreement is supported by a “To Whom it May Concern” letter of April 9, 2002 and by the wording of the invoices which Harmony produced and that Foss Transport paid. Both the letter and the invoices refer to Harmony providing “Licensing and Professional Fees”.
[61] I find that the wording of the “To Whom it May Concern Letter” was provided to Foss Transport by Mr. Chari. This letter is no more than confirmation of income. I also note that it was written one year after the agreement began. As such, I give that letter little weight as evidence of the terms of an agreement between the Plaintiff and the corporate Defendant.
[62] I also note that while the invoicing was for “Licensing and Professional Fees”, the invoices were created by Mr. Chari. Further, the invoices were entered in the Foss Transport accounts as professional fees. As such, I find that the wording of the invoices does little to clarify the meaning and purpose of the weekly agreement.
[63] The Defendants argued that the weekly agreement must be interpreted in a way that is consistent with the three SLAs, in which Harmony granted perpetual licenses to Foss Transport to use Petro Dispatch, Card Lock Invoicing, and Railmaster, including fixes and modifications made to that software.
[64] The Defendants’ evidence, provided by Mr. Foss and Mr. Cristello, was that the $1000 weekly fee was for support including necessary modifications, updates and fixes. They testified that there were still substantial flaws in Petro Dispatch, Card Lock Invoicing and Railmaster and the support was necessary so that the programs they had purchased would operate as promised. Mr. Chari remedied a number of problems with the software on an ongoing basis, although some issues were never resolved.
[65] With respect to the modifications necessary to conform the software to Foss Transport’s business model, namely to account for rate differentials, minimum loads, split loads, and flat rates, Mr. Cristello testified that billing for these items was done before the introduction of Petro Dispatch. Mr. Foss and Mr. Cristello testified that these practices were the industry standard practices.
[66] Mr. Foss stated that the modifications to conform to the Foss Transport business model were discussed with Mr. Chari before Foss Transport purchased Petro Dispatch. Mr. Cristello also testified that rate differentials, minimum loads, split loads, and flat rates were included in Petro Dispatch before Foss Transport began using it in February 2001.
[67] The evidence of Mr. Foss and Mr. Cristello in this regard was consistent.
[68] Mr. Cristello testified that during the weekly agreement period, Mr. Cristello requested Mr. Chari to add functions to the existing software, namely dip forecasting, electronic file retrieval, demurrage, fuel surcharges, and payroll functions.
[69] According to Mr. Foss and Mr. Cristello, there was no “rental agreement” for these additions. Mr. Cristello testified that, during the course of the weekly agreement, there was no discussion of licensing fees, a rental agreement, or an ASP. He testified that Foss Transport was paying Harmony $1000 a week so that Mr. Chari would fix software problems as they arose. As Mr. Cristello stated at page 809 of the transcript, Mr. Chari would do “any minor little things that we might have missed along the way that had to be done”.
[70] The Defendants point to the expert report and testimony of Mr. Lo, who characterized the modifications and additions as relatively minor alterations to the pre-existing software code.
[71] I do not accept the Plaintiff’s interpretation of the weekly agreement. The Plaintiff has not proven that the weekly agreement was a “rental agreement” of all programming completed under the weekly agreement. In my opinion, Mr. Chari was simply trying to find an interpretation that is most favourable to the Plaintiff.
[72] I accept the submissions of the Defendants that the weekly agreement must be read in a manner that is consistent with the SLAs.
[73] As discussed, the Plaintiff argued that the primary functions of Card Lock Invoicing and Railmaster were programmed during the weekly agreement period. These programs were each the subject of an SLA between the Plaintiff and Foss Transport. These programs cannot be both additional programming under the weekly agreement and licensed by the Card Lock Invoicing and Railmaster SLAs. I find that these programs were included in the respective SLAs and were not additional programming.
[74] I note that for two years following the commencement of the weekly arrangement, Harmony, in the person of Mr. Chari, provided support in a manner consistent with the Defendants’ understanding. This support included all additions, updates and modifications that were required.
[75] The Plaintiff’s position is untenable when one considers the fact that a number of the problems, which Mr. Chari remedied, were inherent in the original program that he licensed to Foss Transport. Mr. Chari suggests that he would be entitled to “unfix” his own mistakes in the software he had programmed. In effect, he would be able to provide Foss Transport a non-functional product in violation of the original software agreements.
[76] Further, the SLAs contemplate the payment of a “Product Support and Maintenance” fee at a rate “TBD”, and clause 7 of the SLAs obligates Harmony to deliver corrections and enhancements where such a fee is paid. In my opinion, the weekly agreement was such a payment, requiring Harmony to make corrections to the software, and granting Foss Transport a perpetual license to use the software as corrected.
[77] With respect to the modifications made to ensure the software functioned in accordance with Foss Transport’s business model, I do not accept that Foss Transport, in purchasing Petro Dispatch, intended to cease billing in the same advantageous manner as it had before purchasing that program, that is in accordance with its business model and the industry standard practices. Further, I do not accept that the Defendants would purchase software for $40,000 that could not bill in this manner.
[78] As such, I find that rate differentials, minimum loads, split loads, and flat rates were included in the Petro Dispatch modules before the commencement of the weekly agreement. As a result, Foss Transport had a perpetual license to use these modifications under the Petro Dispatch SLA.
[79] As discussed above, both parties testified that Mr. Chari added functionality to the software at the request of Mr. Crisello, namely the Dip Forecasting Module, Petro Dispatch demurrage, electronic file retrieval, fuel surcharges, and the Payroll Module, during the weekly agreement period.
[80] In the context of clause 7 of the SLAs, these additions may be viewed as “enhancements and improvements to the Software”, or as “new software products or options sold separately by Harmony”.
[81] As discussed above, the Defendants understood that they were paying Harmony $1000 a week to provide software support, and to add functionality that they had previously overlooked. The parties did not discuss licenses to these new functions while the weekly agreement was in effect, and Mr. Chari did not suggest that the new functions ought to be subject to an additional SLA. Taken with Mr. Lo’s characterization of these functions as requiring relatively little programming vis-à-vis the existing programs, it is my opinion that these new functions are best characterized as enhancements and improvements rather than entirely new software.
[82] Given that the SLAs contemplated that Harmony would provide enhancements and improvements in the software to Foss Transport so long as the latter paid a “Product Support and Maintenance” fee, I find that the perpetual licenses to Petro Dispatch, Card Lock Invoicing and Railmaster granted in the SLAs extend to those programs as enhanced and improved during the weekly agreement.
[83] The most important modification provided during the weekly agreement was the Dip Forecasting Module of Petro Dispatch. This modification was made at the request of Foss Transport in order to fulfill a requirement of a request for proposals (“RFP”) issued by Suncor (“Sunoco”) in November 2002.
[84] The RFP presentation meeting was held on December 12, 2002. At this meeting, Foss Transport was represented by Mr. Foss, Mr. Cristello, Mr. Chari, Mr. Reynolds and Mr. Eddie Pagliaro. There was conflicting evidence as to whether or not Mr. Chari demonstrated his software to Sunoco during this meeting.
[85] Mr. Reynolds and Mr. Chari testified that a demonstration was made. Mr. Foss and Mr. Cristello testified that no demonstration was made. In my opinion, whether or not a demonstration was made is irrelevant to the determination of this action.
[86] Mr. Chari asserted that his Dip Forecasting Module of Petro Dispatch was the critical reason why Foss Transport won the Sunoco contract. However, in his testimony he acknowledged that this software was not created until after the contract was awarded. In my view, since it did not yet exist, the Dip Forecasting Module was not a contributing factor in the award of the Sunoco contract to Foss Transport.
[87] The Plaintiff further argued that the Petro Dispatch program, in general, was key to the award of the Sunoco contract to Foss Transport. In my opinion, this position is unfounded. The Plaintiff has failed to acknowledge the importance of the long working relationship between Foss Transport and Sunoco, of road safety records, and of the ability to transport and deliver the fuel.
[88] Further, the suggestion by the Plaintiff that the entire compensation derived from the contract should be attributed to the use of the Petro Dispatch software fails to consider the basic facts.
[89] Simply put, the compensation provided for performance of the contract would not have been made without the delivery of fuel to Sunoco gas stations. Petro Dispatch did not deliver the fuel. There were drivers, administrative staff, yard staff, and operations staff involved in ensuring that the fuel was delivered. If Petro Dispatch were responsible for any advantage, I find that it was only in the improved accuracy of the accounting processes in the Foss Transport office. I also find that this was only a nominal financial advantage.
[90] Gradually the support provided by Harmony decreased and by the spring of 2003 the support was effectively non-existent.
[91] When Foss Transport required support in 2003 to keep the software functioning, Mr. Chari authorized Foss Transport to have the support provided by another programmer. Mr. Foss approached Ms. Warth to provide this support. She sub-contracted the support to Mr. Bill Benton, of BiLd Solutions.
[92] In early 2003, Mr. Chari became the owner of RCT. He then sought a merger between RCT and Foss Transport. He attempted to do so through two agreements, an Operational Services Agreement (“OSA”) and an Administrative Services Agreement (“ASA”). For various reasons, this merger did not occur. However, I find that the failure to conclude these agreements, in early 2004, was the catalyst for the breakdown in the relationship between Mr. Chari and the Defendants. That fact is highly relevant.
[93] Foss Transport continued to pay the Plaintiff $1000 per week until March 23, 2004.
[94] On April 14, 2004, after the breakdown of the negotiations for the ASA, Mr. Chari sent a letter to Mr. Foss as President of Foss Transport. In this letter he alleged that Foss Transport was in arrears totalling $17,762, including interest, from December 29, 2003 to April 19, 2004, and he demanded payment of the same. As well, he unilaterally changed the weekly fee from $1000 per week to $2000 per week. Included in the April 14 letter were invoices for the alleged period of arrears.
[95] In reviewing these invoices, and the evidence of Mr. Cristello, I conclude that the Plaintiff had never before sent these invoices to Foss Transport. I note that all of these invoices contain the same typographical error, an error that does not appear on any previous invoice. I conclude that the so-called “arrears” invoices were created at the same time, that is on or about April 14, 2004.
[96] The evidence of Mr. Cristello was that the Foss Transport accounting system showed that these invoices had not been previously received but rather arrived in a package with the April 14, 2004 letter. His evidence, found at pages 888 to 892 of the transcript, is as follows:
Q. If you go down to the third entry from the bottom of that page, there are two with invoice dates of February 1, 2004 and one of February 9, 2004. Do you know to what invoices those relate?
A. Yes, I do. These are the three invoices that Mr. Chari was waiting upon when he bombed us. Two of these invoices are dated February 1. Given that they arrived on March 23, I would have closed out my January accounting period and had to apply them to the next open period which would be February 1.
The transactions again are all sequential, 68, 69, and 70, indicating to me that they were all delivered at the same time and all posted that way.
…
Q. There is a series of invoices there. Can you identify any of those invoices as being reflected in tab 126?
A. The first invoice, No.
4-0112F, is identified as transaction No. 139868, invoice input date is February 1, 2004. I explained why I couldn't input January 12. The dollar amount is $2,140, and this was posted on March 23.
Q. Would you go to the next invoice dated 26, 2004. Can you identify from these records when that one was received?
A. It is Invoice No. 4-0126F. The transaction number is 139869. The invoice entry date is February 1, 2004. The posting date is March 23, and it is input for the amount of $2,140.
Q. There is another invoice on the next page dated February 9, 2004. From your records can you identify when that was received?
A. Yes, I can. This one is also showing the date of February 9, 2004. The Invoice number is 4-0209F. It was posted on March 23. The dollar amount is $2,140.
Q. There are five other invoices at that tab 86. Were any of those posted?
A. These have never been posted.
Q. Do you know why?
A. They arrived in a package sometime while I was in Florida. Upon my return from Florida on April 24 -- I was gone that week -- the bomb had hit the system and I didn't enter them.
Q. Just to clean something up, at tab 126, the first three pages, you indicated that the date posted is not something that is normally in this report.
A. That's correct.
Q. Did you add it to the report?
A. Yes, I did.
Q. Based on what?
A. Based on the Business Vision entry that I get from the General Ledger entry, 44405, where all the Harmony invoices are coded to.
Q. Is that the entries we looked at on those screens?
A. Yes, they are.
Q. Mr. Cristello, would you turn to tab 104, please. This is a copy of a letter dated April 14 from Harmony Consulting to G.A. Foss Transport. Did you become aware of this letter at some point?
A. At some point.
Q. Do you have any idea when in relation to April 14, 2004?
A. I would say after April 23 or 24 when I returned from Florida. Gord probably would have shown me the letter.
Q. Do you know if Foss ever received another invoice from Harmony Consulting after that time?
A. No, we did not receive one.
[97] I also note that the period for which Mr. Chari alleges arrears included future billing periods. The evidence was that Foss Transport operates on a 30 - 60 day accounts payable and receivable. Since the invoices had never been produced, the time had not yet passed and the period for payment of accounts payable had not come about, I find that Mr. Chari fabricated these arrears for the purpose of justifying his attacks on Foss Transport.
[98] There is no evidence that Harmony sent any more invoices to Foss Transport after the demand letter of April 14, 2004.
[99] On April 18, 2004, the invoicing module in Petro Dispatch stopped working. Every attempt to open the module resulted in the program simply closing or shutting down. Foss Transport employees attempted to contact Mr. Chari to fix the system but were unsuccessful in establishing contact.
[100] Furthermore, Mr. Cristello telephoned Mr. Chari in order to get this problem fixed. Mr. Chari refused to fix the problem.
[101] In light of the breakdown in the relationship with Mr. Chari, Mr. Foss contacted Ms. Warth for assistance. Ms. Warth went into the Foss Transport offices on April 24, 2004, in response to the call from Mr. Foss regarding the problems with the invoicing module.
[102] In reviewing the Petro Dispatch invoicing module, Ms. Warth examined the invoicing .mdb file, that is the database file. In that file she found code that prevented the program from running if the current date was after April 18, 2004. In essence, if the program were started after April 18, 2004 then this cod