Superior Court of Justice

Cour Superior de Justice File # SCC-11-1122

London Small Claims Court

BETWEEN

STEPHEN BAKER
Plaintiff

And

DESIGN NGN INC. and KENAN CEJVAN
Defendants

(heard April 13 and June 5, 2013)

D. J Medcalf, counsel for the plaintiff

Defendants represented by K. Cejvan

Reasons for Judgment

Introduction

The plaintiff Stephen Baker wanted to create a relatively inexpensive, web-based, paperless program to deliver mandatory continuing education training for nurses. The defendants agreed: "to deliver a functional, easy to navigate website that will accurately represent [the plaintiff] to its customers… using efficient and effective design to allow new and existing clients to interact with [the plaintiff’s] online accreditation and orientation courses." The plaintiff now brings action for recovery of the $20,000 he paid to the defendants.

Issues

Did the defendant deliver a functional web design within the time called for under the contract, or at all? Is the plaintiff entitled to recover the $20,000 he paid? In other words, did the plaintiff receive what he bargained for?

The contract

The defendant prepared the contract. The contract found at tab 41 of Exhibit 1 describes the purpose in the following terms:

Section 1. Project definition

PURPOSE

To deliver a functional, easy to navigate website that will accurately represent [plaintiff] to its customers. The site will present information using an efficient and effective design and will allow new and existing clients to interact with [plaintiff's] online accreditation and orientation courses.

The Design NGN solution includes a customized attention grabbing, yet functional web presence that includes company information, as well as full product detail. In essence, companies from around Canada and US will be able to interact with [plaintiff] 24 hours a day, seven days a week. The Design NGN solution includes a web-based business- to- end user portal to allow all participants 24/7 orientation, learning and accreditation capabilities.

In the future, staff from individual hospitals or similar organizations will be able to perform online accreditation, learning and orientation courses, while providing feedback to individuals responsible for such operation.

The website will give each business client complete control over their own course outline and content should they choose to alter it in any way.

SUCCESS CRITERIA

• Frequent and accurate communication between Design NGN Inc. and the plaintiff

• Timely implementation dependent on information exchange

ESTIMATED LAUNCH DATE

• Concept development – 3 weeks from signed Charter

• Website development – 75 days from chosen concept and information exchange

Background

Mr. Baker is a nurse with 25 years of work experience. At the time of the contract he was employed part time as an emergency staff nurse at the Woodstock General Hospital. At the time of trial he was employed full-time as clinical educator for critical care at the same hospital. He had been exposed to online training in his profession while in the United States. Although he became aware of other online training products in the market, Mr. Baker thought that he could develop an effective and much cheaper product for his hospital and others. A mutual friend, John Anderson introduced him to Mr. Cejvan.

The plaintiff and (at that time, his partner) John Anderson met the defendant Cejvan on or about June 8, 2009. The corporate defendant purported to prepare the contract which was signed on July 3, 2009. I shall address the issue of the status of the defendant Design NGN Inc. later in the judgment. The plaintiff created Peartree Learning but entered into the contract in his own name .

The defendant Cejvan is a software developer, the controlling mind and sole employee of the corporate defendant.

The plaintiff terminated the contract by letter dated April 27, 2011 – Exhibit 1 tab 36.

On June 23, 2011 the defendant terminated the contract using the following words found in Exhibit 1 tab 38: "the admin and user components will remain functional until mid-day today (06/23/2011) and after that I will limit the access to those areas only." As a result, the plaintiff has no access to the website.

The evidence

It was the plaintiff's evidence that he was anxious to proceed with the project and planned to have it developed sufficiently to start marketing the product in the Fall of 2009.

According to the plaintiff the contract required the defendant to create four components:

an administrator function;

a user function to be accessed by students

a "back end" monitoring and troubleshooting function for the plaintiff’s use; and

a corporate website for company information and product detail.

The plaintiff's evidence was that the contract wording under the title “Purpose” accurately reflects these four components. The plaintiff maintained that the defendant failed to deliver any of the four components.

The plaintiff maintained that the defendant did not produce the administrator function fundamental to the success of the product. The contract describes the administrator function as follows: “The website will give each business client complete control over their own course outline and content should they choose to alter it in any way.” Thus, in the administrator function, the plaintiff expected to be able to access the system to input content (”manuals”) and assignments, assign instructors and include a reporting feature to list those what assignments had been completed. His evidence was that as of the trial date the Administrator function was, at best, 60-70% complete. This Administrator function was essential.

In addition, the plaintiff maintained that the defendant failed to create the “back-end system” and failed to create, as well, a corporate webpage.

The user side was partly completed. It was possible for a student to log in. But there were no links developed to course lists and manuals (materials). The user side was effectively a blank.

Regarding completion of the web design or, more properly, the failure to complete one only has to look at Exhibit 1, tabs 32 and 33. Tab 33 is an email on December 13, 2010 from the plaintiff which starts: “Kenan, I have not heard from you since our meeting on Oct. 27th.” Tab 32 is an email dated a month earlier from the plaintiff with a detailed list of required changes more than two pages in length.

Much of the trial focused upon the long delay between July 2009 and its termination on April 27, 2011. Each party blames the other.

The contract under clause 7 (1) requires "both parties shall promptly meet to discuss Design NGN Inc.'s alleged failure to perform….” The thrust of the plaintiff's evidence is that he made repeated efforts to contact Cejvan but, for the most part, his many e-mails were ignored. He also tried to arrange meetings with the same result. The plaintiff complained about his inability to use the program and offered suggestions for changes. He asked the defendant to complete the project and received promises that completion was imminent. The book of documents, Exhibit 1, consists almost entirely of plaintiff’s e-mails to defendant regarding development, changes and improvements to the program and urging completion.

In contrast, the defendant argues vigorously there were only three components: a website for the plaintiff; an administrator function; and a user function. He argues, too, that the plaintiff was primarily at fault for delay.

In his evidence, Cejvan explained that he had already developed a website called EZlunch and intended to develop the plaintiff’s using the same logic. He was very supportive of the concept of paperless learning as proposed by the plaintiff. He knew that the initial design would evolve in phases. He agreed that this technology would save hospitals a great deal of money and was a good business opportunity which would yield benefits for the plaintiff and himself. He admitted that the 75 days outlined in his contract was a little optimistic. The defendant evidently felt that EZlunch provided to him a platform so that the short timeline would not be unrealistic. It was, after all, Cejvan who proposed the 75 day timeline notwithstanding his acknowledgment that his workload would increase that September when operating EZlunch.

Cejvan argues that he did deliver a usable Administrator function but its failure to perform is the fault of the plaintiff. He maintained strongly that he never agreed to the “back-end” monitoring function. In the end, it is not necessary to decide about the “back-end” function because the other promised elements were not delivered.

The fault for the delay until January 2011, according to Cejvan, lies predominantly with the plaintiff. The plaintiff was at fault because (1) the plaintiff failed to upload the information/content into the website, (2) the plaintiff created for test purposes stupid fictional characters and a ridiculous hospital name, (3) the plaintiff made new demands which were very complicated to develop, (4) the plaintiff constantly required minor tweaking changes, (5) the plaintiff failed to meet with him.

It is noteworthy that Cejvan concedes that the corporate website he constructed was of poor quality and little, if any, value. He made no efforts to remedy those defects.

I find that the plaintiff gave his evidence in a clear, logical and straightforward manner. His evidence as to his many unsuccessful attempts to contact Cejvan are fully supported in the documents contained in Exhibit 1. The evidence of the defendant Cejvan was far from compelling. The manner in which he gave his evidence was frequently confusing. He seemed disinclined to answer clear questions preferring, instead, to give convoluted explanations. I do not accept his assertions that he made several attempts to contact the plaintiff. He provided no independent support for these assertions. It is significant that the Cejvan sent the plaintiff an e-mail on March 9, 2011 which reads: “Steve. You have to get me the emails from Nov. 4 to Dec. 13th so I can review them. Please forward them asap. Reply all (kccejvan@gmail.com) as well) just to make sure that I get them. Cheers, Kenan.” Cejvan ignored the plaintiff for long periods of time – notwithstanding the short timelines in the contract. Nor do I accept his assertions that he called the plaintiff several times in the three months from November to January, 2011.

Where the evidence of the plaintiff differs from or is in conflict with the evidence of Cejvan, I prefer and will rely on the evidence of the plaintiff.

Liability of the corporate defendant

The defendant Cejvan purported to sign as Project Manager for the corporate defendant. I find, as a fact, that Design NGN Inc. had been canceled effective January 3, 2009 by the federal Corporations Tax Branch. The corporation ceased to exist six months before the contract was made. I accept the evidence of Cejvan that he has not revived the Corporation. The plaintiff delivered nine personal cheques as payment under the contract. Cejvan negotiated all of the nine cheques made out to the corporate defendant. Accordingly, Cejvan accepted personally both the risk and benefits of creating the website under the terms of the contract he had prepared.

Analysis

Do the defendant’s complaints address the fundamental issue? Did Cejvan deliver a functional website containing the four elements listed above? Secondly, did he complete the work within a reasonable time?

I find that the terms of the contract anticipate delivery to the plaintiff of a marketable product with four components. It is not disputed by Cejvan that he did not create an appropriate marketable corporate website for Peartree. I do not accept Cejvan's argument that it would have taken little work to improve the corporate website to a marketable standard. He never took that step. I do not accept Cejvan's argument that it was up to the plaintiff to secure and register a domain name in order that he could have access to data detailing how his website was being utilized – the “back-end”. Cejvan did not prepare a back-end to the system (the fourth requirement).

The third element, the “user function” was also not completed and did not function.

The principal argument repeatedly advanced by Cejvan in his defense is that the basic, web design required under the contract was developed before the end of October 2009. I do not accept that assertion. Three out of four design elements were never “functional”. It is noteworthy that Cejvan in correspondence he created before June 2011 never asserted that he had completed the contract according to its terms.

In my view, the defense was founded on the belief that construction of the administrator function alone would satisfy the contract. I disagree.

In his evidence Cejvan argued that it was the obligation of the plaintiff to get the “manuals” online and give the users ability to access those manuals. He stated that he urged on the plaintiff every time they met that he, the plaintiff, must get content into the test site. I accept the plaintiff's evidence that he had difficulty entering information into the website and that effective October 27, 2010 the website was only 60% completed. In consequence, I do not accept the assertion by Cejvan in cross-examination "the project we agreed to was done". As I have said, three of the elements were never completed and the most important element was only 60% completed.

On that basis alone, Cejvan failed to provide three of the four elements to the web design which the contract called for. It follows, then, that the defendant failed to complete the website in the terms specified under the contract.

The plaintiff bargained for a website which he could sell to his and other hospitals at a much lower price than other similar software products. He entered into a contract which promised to deliver a marketable product in short order. The defendant promised to deliver a marketable website “75 days from chosen concept and information exchange". None of the evidence adduced satisfies me as to how to interpret these terms and, therefore, to determine the date the web design was to be "launched". A plain reading of the number of days supports the plaintiff's belief that the web design would be ready for use by the end of October, 2009. As the plaintiff's position is that he could not use the new website 18 moths later -- as late as April 27, 2011 -- he was fully justified in terminating the contract.

As a subsidiary issue, the defendant argue strenuously that there was a failure to communicate as required in the contract. He urged that he could not reach the plaintiff by telephone and therefore could not communicate. I accept the plaintiff's evidence in cross-examination which I quote "the best and most efficient way to contact Cejvan was by e-mail. Phone calls generally were not successful." The plaintiff sent numerous e-mails to the defendant and tried very hard to communicate. The defendant on the other hand responded infrequently. In my view, any failure to communicate and any failure to meet to discuss ongoing issues was caused by the defendant Cejvan.

Lastly the plaintiff complains that the creation of his website was stalled to such an extent by the defendant’s many delays that it was rendered useless to him. In other words, because of the delay, the plaintiff lost his business opportunity. The contract provided for delivery of the program 75 days after “chosen concept and information exchange”. I have found that this required delivery by late fall of 2009. I have found that the program was far from complete 18 months after the fall of 2009 and was never delivered to the plaintiff in any event. On this ground, as well, the plaintiff was entitled to terminate the contract.

Can Cejvan escape liability, though, under section 7? Section 7 (1) is entitled Performance Guarantee. I have found that Cejvan was responsible for not meeting in the summer or fall of 2010. Likewise he failed to meet in response to the plaintiff’s termination letter of April 27, 2011. He rebuffed the plaintiff's overtures. This clause does not limit the defendant’s liability.

The second clause, section 7 (5), is entitled: Damage or Loss. Cejvan rightly conceded that the second half of this clause addressing indirect, special, consequential or incidental damages is not applicable. The first sentence of s. 7 (5) limits damages to the amounts paid under this agreement. The plaintiff abandoned any claim advanced for consequential damages arising from the breach of the contract. Again, this clause does not insulate the defendant from liability to repay the $20,000 claimed.

But is it reasonable that the defendant should bear 100% of the risk under this contract? I accept that he devoted many hours of work designing the web design. He also purchased third party data programs which he incorporated into the functionality of the web design. The plaintiff invested $20,000. But was there any certainty that his product would generate any sales? I think not.

In my view, the plaintiff did much to pursue his dream. He was not computer savvy. He properly relied on the defendant’s expertise. It was the defendant who failed to deliver.

It is reasonable to attribute to the plaintiff 20% of the risk. Accordingly Baker may recover only 80% of the monies he paid the defendant.

Conclusion

For the reasons outlined, the plaintiff Stephen Baker is entitled to judgment against both defendants for $16,000.00 for breach of the contract, as claimed. The plaintiff is entitled to pre-judgment and post-judgment interest on the amount of the judgment at the rate prescribed under the Courts of Justice Act from and after June 16, 2011.

The plaintiff is also entitled to his costs of the action fixed at $3750.00 plus his assessed disbursements.

Dated at London, Ontario this 26th day of June, 2013.

S.R.R. Davies, Deputy Judge