ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-06-CV-309643
DATE: 20151127
BETWEEN:
R. SHELDON DUFF
Plaintiff
– and –
GENESYS LABORATORIES CANADA INC.
Defendant
Self-represented
J. B. Simpson, for the Defendant
HEARD: March 10, 11, 12, 13, 16, 18, 19, 20, 23, 24, 26, 27, 2015
REASONS FOR JUDGMENT
JUSTICE W. MATHESON
1This trial arises from an agreement between the parties under which the plaintiff assisted the defendant in its effort to obtain financing for its business. Ultimately, one of the plaintiff’s contacts did bear fruit, but the defendant did not pay any fees to the plaintiff. It claims that the ultimate investor was not caught by the agreement with the plaintiff, and, in any event, that the agreement had expired by the time of the investment, along with any entitlements under it.
2The quantification of damages is not at issue. If the claim is successful, the compensation due is 4% of the financing, specifically US $400,000, plus tax.
3Only two witnesses testified at trial. The plaintiff testified, and the defendant called its now former CEO, Stuart Berkowitz. There was, as well, a considerable documentary record of the dealings between the parties.
Initial dealings between the parties
4The plaintiff is a financial consultant. He is a well-educated and able business person.
5In 2001, when the parties began their dealings with one another, the defendant corporation was called VoiceGenie Technologies Inc., and carried on the business of developing speech-enabled computer software.
6The plaintiff approached VoiceGenie after reading in The Globe and Mail that VoiceGenie was looking to raise money for its business. The plaintiff initially called Stuart Berkowitz, the founder and CEO of VoiceGenie, but ultimately connected with the chairman of VoiceGenie’s Board of Directors – Vahan Kololian. Prior to entering into an agreement with VoiceGenie, the plaintiff exchanged emails with and met with Mr. Berkowitz and Eric Jackson, VP, Marketing & Business Development. Mr. Jackson had a PhD in finance and had been hired by VoiceGenie about a year earlier.
7In June 2001, VoiceGenie checked the plaintiff’s references, the parties exchanged various drafts of a proposed agreement and, on July 26, 2001, an agreement was signed (the “Agreement”).
8The Agreement is styled as an agreement between the plaintiff, his business (Duff Capital Group) and the defendant, but there is no suggestion before me that any distinction should be drawn between the plaintiff and his business in this litigation. His business is not a separate legal entity.
9The Agreement recited that VoiceGenie wished to engage the plaintiff to act as a “Financing Agent/Consultant to solicit and procure external financing” for its business. The Agreement provided for the approval of prospective investors by VoiceGenie and provided for compensation if financing was obtained from an “approved” investor within a designated time period. It provided for a three-month term during which the plaintiff could approach potential investors that were approved by VoiceGenie, followed by an eighteen-month “tail period” during which consummated investments from approved investors could still give rise to compensation.
10Among other terms, the Agreement provided as follows:
Services. Upon acceptance of this proposal, [the plaintiff] will submit a list of prospective investors “Submitted Names” to [VoiceGenie], if approved by [VoiceGenie] the investors will be put on an “Approved List.” [VoiceGenie] will also submit a list of target investors at such time to [the plaintiff]. Any duplication shall remain on [VoiceGenie’s] list. The name of the prospect will be sufficient. From time to time [VoiceGenie] will approve names to be placed on the Approved List. Only those names on the Approved List will be protected as exclusive to [the plaintiff] for eighteen (18) months beyond the termination of this contract as outlined in point 6 below. During the term and any tail period, [the plaintiff] will use [his] best efforts on each accepted contact to get them to invest… Failure to adhere to these rules will result in forfeiture of the related fee. [VoiceGenie] acknowledges that although [the plaintiff] will use [his] best efforts to obtain financing for [VoiceGenie], but that there is no assurance that those efforts will be successful. The mandate will be considered fully successful if [VoiceGenie] accepts any funds, in whole or in part, raised as part of the Current Financing through [the plaintiff’s] efforts, but only from Approved Names. [The plaintiff] has the right to submit names of prospective investor at any point during the three-month term of the contract.
Term and Termination. This Agreement shall commence on the date signed below and shall expire in three (3) months. The prospective investor(s) Approved Names introduced by [the plaintiff] are considered exclusive to [the plaintiff] for eighteen (18) months whether they invest or not in the current financing. [VoiceGenie] shall not and can not transact with these parties, without the approval of [the plaintiff] within this eighteen- month period following the termination of this contract. If [VoiceGenie] wishes to accept a financing deal from these investors during this period the terms of this contract will apply. [The plaintiff] will only approach parties on the Approved List.
Amendment. This Agreement may be amended only by a written supplemental agreement agreed to by both parties in writing.
[VoiceGenie’s] Co-operation: [VoiceGenie] shall keep [the plaintiff] fully informed in a timely fashion as to its own initiatives in securing financing from all sources.
11The Agreement did not specify from whom the plaintiff was to obtain approval for the names of the potential investors that he was proposing to contact. Initially, Mr. Berkowitz gave approvals. However, shortly after the process began, Mr. Berkowitz directed the plaintiff to seek approvals from Mr. Jackson. Mr. Jackson then gave numerous approvals as reflected in emails between him and the plaintiff.
12Although there were discussions early on about having a relatively small number of approved names, that approach quickly fell by the wayside. Many names were approved for the plaintiff.
13The plaintiff was also provided with VoiceGenie’s own list of target investors, which were not eligible to be approved names for the plaintiff under the Agreement.
14The months immediately following the signing of the Agreement were months of high activity. The plaintiff drew VoiceGenie to the attention of numerous potential investors, followed by facilitating the exchange of information, conference calls and the possibility of meetings with investors that expressed an interest.
15One of the names proposed by the plaintiff, and approved by VoiceGenie, was “Insight Capital Partners”, approved by an exchange of email on September 26, 2001. Ultimately, financing was received from an Insight company. It is that financing that is the basis of claim in this lawsuit.
16On October 10, 2001, Mr. Jackson emailed, asking the plaintiff to provide a complete list of all names that had been approved. The plaintiff did so. “Insight Capital Partners” was on that list. No reply was received after the list was provided. There is no dispute in this lawsuit that “Insight Capital Partners” was on the Approved List.
17The high level of activity continued in October 2001. Under the terms of the Agreement, its three-month term was coming to an end on October 26, 2001. Given that upcoming date, the plaintiff spoke to Mr. Berkowitz about extending the Agreement. They discussed it by phone on October 16, 2001. The plaintiff asked Mr. Berkowitz if he was going to extend the term. Mr. Berkowitz agreed to do so. Mr. Berkowitz said he was happy with what the plaintiff had done thus far and said, “let’s keep going” or words to that effect. After the call, the plaintiff made a note on his calendar, “Stuart Extends”.
18Mr. Berkowitz testified that he did not remember a call on October 16, 2001, and disputed the suggestion that he had agreed to extend the term.
19I accept the plaintiff’s account of the October 16, 2001 telephone conversation. Whenever the evidence of the plaintiff and Mr. Berkowitz differ regarding dealings between them, I accept the evidence of the plaintiff. I found the plaintiff to be a straightforward, responsive and conscientious witness, who worked hard to be fair to the documentary record and his recollection, and also admitted to mistakes where appropriate. In contrast, Mr. Berkowitz was argumentative, unresponsive and frequently gave answers that showed little or no regard for the facts as he should know them or as clearly set out in historical documents. Both at the time of events in question and in his trial testimony, Mr. Berkowitz made allegations without regard for the facts. In final argument, even the defendant did not ascribe to Mr. Berkowitz’s testimony on certain key matters. It is easy to see why the plaintiff got frustrated with the course of events once things began to go off track with VoiceGenie, given some of the things that Mr. Berkowitz decided to say and do.
20After the October 16, 2001 phone call, the plaintiff continued to do his work for VoiceGenie on the understanding that the three month period had been extended. There was no fixed deadline for the extension. At that point, the relationship with VoiceGenie was positive. The plaintiff did not ask for the extension to be documented in a written agreement.
21In November 2001, the plaintiff’s efforts on behalf of VoiceGenie continued at a high level of activity, including numerous emails involving prospects and arrangements for conference calls. Both Mr. Berkowitz and Mr. Jackson were involved. The plaintiff’s efforts included introductions to at least one new prospect, which was approved after the original three month time period. There would be no point to those steps unless the plaintiff had an agreement for compensation from VoiceGenie that covered an extended time period.
22After the plaintiff got approval for Insight, he made the introduction. In turn, on November 27, 2001, Frank Leonard of Insight contacted Mr. Berkowitz by email. His email indicated that he had received VoiceGenie’s business plan from the plaintiff and wanted to touch base to learn more about VoiceGenie’s business. Mr. Leonard’s email address referred to “insightpartners.com” and his mailing address was shown at “Insight Venture Partners.” He attached a PowerPoint presentation giving a “Company Overview” that showed a group of entities including Insight Capital Partners IV LP, which was part of the capital base for Insight Venture Partners’ investments.
23In response to Mr. Leonard’s email, there was a flurry of activity regarding this potential investor, involving the plaintiff, Mr. Berkowitz and Mr. Jackson as well as Mr. Leonard. In the course of the dealings with Insight, Mr. Berkowitz chastised the plaintiff because he regarded Mr. Leonard as too junior a contact person at Insight, despite information that he was the right person to deal with at that stage. However, no one suggested that the inquiry from Mr. Leonard was not an approved name for the plaintiff.
24Steady activity on this and other contacts continued into December 2001. On December 6, 2001, Insight indicated that it was not going to pursue an investment. Activity continued with other prospects into January of 2002, including meetings involving the plaintiff, Mr. Berkowitz and Mr. Jackson.
25By the end of January of 2002, some of the prospects that had been developing well decided against investing. Activity with other prospects continued into February of 2002. The plaintiff continued to work with Mr. Berkowitz and Mr. Jackson.
26The plaintiff was working hard to develop financing opportunities for VoiceGenie. Given the degree of difficulty he had encountered, he decided to ask for a better deal. In February 2002, the plaintiff emailed Mr. Kololian indicating that he would like to propose a revised deal and attaching a proposal that incorporated substantially better financial terms.
27There was then a series of emails with the plaintiff and internally at VoiceGenie. On February 20, Mr. Berkowitz emailed the plaintiff saying that since they could not agree, maybe the best thing to do was to let the plaintiff have the “tail fee” and expect no further involvement from him. This was consistent with the telephone call the past October when Mr. Berkowitz agreed to extend the term. The next day, Mr. Kololian emailed the plaintiff confirming that VoiceGenie had decided not to renew.
28The plaintiff testified that through this dialogue he became aware that Messrs. Kololian and Jackson did not know about the extension given orally by Mr. Berkowitz. The plaintiff therefore had a phone call with Mr. Berkowitz on February 21, 2002. On that call, Mr. Berkowitz indicated that the plaintiff’s new financial terms were unacceptable and he did not intend to make any more offers. On that call, Mr. Berkowitz also said that he thought VoiceGenie had exposure because of the oral agreement made the prior year, which he confirmed. They discussed what future date would become the new termination date, because it had been left open in their October telephone conversation. They agreed that Mr. Berkowitz would set the new expiry date, and confirm it in a letter to the plaintiff. Again, at trial Mr. Berkowitz disputed the plaintiff’s account of this telephone call, but for the reasons stated above I accept the plaintiff’s testimony.
29On February 22, 2002, the plaintiff wrote to all concerned saying, among other things, the following:
From my perspective we need to mutually agree on how this plays out with those parties still in discussion with you and those parties protected. …given I have acted in good faith beyond the expiry of the contract and we are still in real discussion with my contacts I believe that my 18 month protection period does not begin until we formally end conversations with those parties or you accept a deal from those parties, in which case the 18 months starts, for all protected parties, on the day after the closing of a deal. … I would appreciate a letter from you agreeing to this arrangement. … I must state I am confused and disappointed by your decision given your stated approval of my involvement and the positive position we find ourselves in. …” [Emphasis added.]
30In his testimony, the plaintiff indicated that his use of the phrase “beyond expiry” was sloppy in that he intended to say beyond the original Agreement.
31On February 26, 2002, Mr. Kololian emailed Mr. Jackson, asking him to send him the “shorter” list of approved names and his interpretation of the expiry dates in the Agreement. The reference to a “shorter” list was not explained at trial, but the list forwarded by Mr. Jackson was certainly incomplete. Mr. Kololian forwarded Mr. Jackson’s email to the plaintiff. It recited the dates in the original Agreement, and provided the “shorter” list.
32The plaintiff wrote back the next day, pointing out that Mr. Berkowitz: “…verbally stated to me the last time we spoke earlier this week that he will extend my [contract] so my protection for fees does not end in October 2001 and neither should my 18 months protection…”.
33Mr. Berkowitz wrote back a few days later by letter, sent by fax of March 1, 2002. He confirmed the agreement to a new termination date and tail period:
VoiceGenie recognizes that you have worked extremely hard over the past 7 months. Therefore, we agree to set the cutoff date to February 1, 2002, when your 18 month protection period begins as described in the agreement. That means that your 18 month period of protection for the firms outlined above ends on August 1, 2003. [Emphasis added.]
34This letter is consistent with the telephone call on February 21, 2002, when it was agreed that Mr. Berkowitz would send the plaintiff the new cutoff date by letter. The plaintiff concluded that the cutoff date had been set at February 1, 2002. He did not dispute it – he had agreed that Mr. Berkowitz would fix the date.
35In the litigation, the defendant produced an unsigned version of the March 1, 2002 letter that has a “sign back” section on the bottom. Under the place for Mr. Berkowitz’s signature, that version says “Acknowledged and Agreed” and has a place for the plaintiff’s signature. There was a dispute about whether a letter in this form was ever signed or sent to the plaintiff.
36Mr. Berkowitz testified that he had seen a draft of the letter earlier on the day he signed it, and that he was on the phone when he actually signed it. He said that Mr. Jackson told him to sign the letter, and he did. He testified that Mr. Jackson took the signed letter away, and he did not know what happened to it. The defendant has not been able to produce the original signed letter.
37Mr. Berkowitz testified that he would have given the letter more attention if it was a written contract amendment. Contradicting himself, he also testified that he thought that the version of the letter he signed had the “sign back” section on it and was a written offer to be signed back if accepted by the plaintiff. In other words, he was attempting to suggest that the letter was a proposed contract amendment after all.
38By the conclusion of the trial, it was no longer contested that the fax received by the plaintiff had no “sign back” section on the bottom of the letter. The plaintiff has the original fax that he received. I do not accept Mr. Berkowitz’s suggestion that the letter he signed had a “sign back” section on it. On the evidence at trial, it did not. Further, it is notable that the defendant did not call Mr. Jackson, who was a key player with respect to the letter, as a trial witness. I draw an adverse inference and conclude that Mr. Jackson’s evidence would not have been helpful to the defendant.
39I find that the March 1, 2002 letter was, as described by the plaintiff, the letter that set the end date under which the plaintiff could approach new approved names, and in turn set the tail period during which the plaintiff was entitled to compensation. It was not an “offer” that called for acceptance or rejection. Thus, the extension of the original dates in the Agreement was not only the subject of an oral agreement but also in writing through the above email exchange and the March 1, 2002 letter.
40The plaintiff considered the dates set out in the letter final and took steps on that understanding.
41Along with dealing with the new agreed termination date, the March 1, 2002 letter provided a list of approved names under the Agreement. That list was not accurate based on the evidence at trial, although it did include “Insight Capital Partners”.
42At the time, it was apparent to the plaintiff that the list was incomplete. Upon receipt of the fax, he immediately began a dialogue about the list of names. VoiceGenie began to take a new position about which names should be on the list, saying that it should only include names that VoiceGenie had some direct contact with after the plaintiff made the introduction. Not surprisingly, the plaintiff disagreed. That had never been the agreement. At this point, the dialogue became heated on both sides.
43Dealings between the parties settled down long enough for there to be another dialogue about the approved list, and further attempts to negotiate a new written agreement on new financial terms. This carried forward to the end of June.
44On June 25, 2002, Mr. Jackson sent the plaintiff an email about the Approved List. The email is more than surprising given the course of events up until that time. It stated as follows:
Between July 2001 and October 2001, you submitted a number of names of venture capital firms that you wished to contact on VoiceGenie’s behalf, as per the agreement dated July 26, 2001 between you and VoiceGenie. Each time you presented the list of firms to me, I told you that some of these firms we had already contacted and, therefore, you should not; for other firms, I indicated that you should proceed with contacting them. However, at no time did I have the authority on behalf of VoiceGenie to state which of these venture capital firms should go on to an “Approved List” as described in your agreement with VoiceGenie dated July 26, 2002 [sic]. According to this agreement, only Stuart Berkowitz has the authority on behalf of VoiceGenie to bind the corporation and, therefore, approve the list of “Approved” firms. It is my understanding that you never submitted an “Approved List” to Stuart. You should do so immediately, so that there is no disagreement about which firms should be on the “Approved List.”
45Given the course of events that had actually occurred, this email suggests a lack of good faith on the part of VoiceGenie. To begin with, the Agreement did not require that Mr. Berkowitz say which names would go on the Approved List. Further, it was Mr. Berkowitz who authorized Mr. Jackson, also an officer, to deal with approvals. In addition, at Mr. Jackson’s request the plaintiff had previously provided a list of the names that had been approved, without any rejoinder. Further, the course of conduct of both Mr. Berkowitz and Mr. Jackson in 2001, which is amply documented in emails, belied the suggestion that VoiceGenie could back away from the approvals that had already been given by Mr. Jackson.
46In his trial testimony, Mr. Berkowitz attempted to justify this email on the basis that the approval of names was a contract amendment and Mr. Jackson had limited contract signing authority. Repeatedly during his testimony, Mr. Berkowitz said that to approve a name required a written amendment to the Agreement. He said both that he would have to sign to do an amendment and also that he would have to go to the Board of Directors. He described the emails between the plaintiff and Mr. Jackson as a private, informal conversation. He also tried to say that Mr. Jackson was too young and inexperienced; yet it was Mr. Berkowitz who gave Mr. Jackson the authority to proceed as he did, and Mr. Berkowitz was aware of the process that was being followed. Mr. Berkowitz’s evidence was plainly contrary to the terms of the Agreement itself, the documents and the course of conduct that he approved of and was aware of before this time.
47I find that the email was an ill-founded attempt to avoid responsibility for steps properly taken by Mr. Jackson with Mr. Berkowitz’s full authority and no other authority required.
48What did occur on receipt of this email, not surprisingly, is that the plaintiff became suspicious. He called Mr. Berkowitz and left a message, which was not returned. Negotiations of a new agreement on new financial terms, which had been ongoing at least intermittently, did not continue after June 2002. The plaintiff believed that any compensation he might receive would be based on the agreed dates set out in the March 1, 2002 letter from Mr. Berkowitz. Under the effective dates in that letter, he was no longer entitled to introduce VoiceGenie to new approved names in any event. He was only entitled to compensation if financing was received in the tail period, specifically by August 1, 2003.
49Unbeknownst to the plaintiff, Insight surfaced again and showed renewed interest in providing financing to VoiceGenie. Significant activity with Insight began in January 2003, led by another contact from Frank Leonard, the very person that had been involved after the plaintiff’s introduction in 2001. The contact was instigated by Insight, and moved quickly to calls and meetings. Although Mr. Leonard was the primary contact in this period, others became part of the dialogue including Mr. Jeff Horing, a senior person at Insight. Mr. Leonard had the same email address and corporate designation as he had in 2001, referencing “insightpartners.com” and “Insight Venture Partners”, as did Mr. Horing.
50Shortly after VoiceGenie heard from Mr. Leonard and after many months of no contact with the plaintiff, VoiceGenie contacted the plaintiff asking for a meeting. The plaintiff met with Mr. Berkowitz and Mr. Jackson on January 21, 2003. Mr. Berkowitz did not volunteer any information about the contact from Insight. The plaintiff was left with the impression that they wanted to discuss engaging his services again. Quite the contrary, I find on the trial evidence that the meeting was requested because of Insight, and VoiceGenie was not forthright with the plaintiff. As became apparent later on, VoiceGenie was concerned about its exposure to the plaintiff and was, indirectly, attempting to settle with him.
51The dialogue between VoiceGenie and Insight continued. On March 20, 2003, Insight put forward the first draft of a letter of intent. The draft letter of intent came from “Insight Venture Management, LLC”.
52The parties began to negotiate the contents of the letter of intent. Shortly thereafter, on March 25, 2003, Mr. Berkowitz emailed the plaintiff asking: “When was our tail obligation up with you? Do you have signed documents?” The plaintiff called Mr. Berkowitz and asked why he was asking these questions. Mr. Berkowitz would not answer.
53In further reply to Mr. Berkowitz, on March 27, 2003, the plaintiff faxed Mr. Berkowitz a copy of the March 1, 2002 letter. He also proposed that he be re-engaged by VoiceGenie.
54In reply, again on March 27, 2003, Mr. Berkowitz wrote:
I’m getting an offer from someone whose name is not on your list. But I’ll consider involving you to a maximum of $100k, subject to board approval. Only this one, no other. Just answer yes [or] no today by 6pm. No talk.
55Mr. Berkowitz called the plaintiff the next day. This was the first of three phone calls that the plaintiff recorded. Mr Berkowitz said that VoiceGenie “might like to employ [the plaintiff’s] services” to a maximum of $100,000, and repeated that it was a different company and not a name on the plaintiff’s list.
56Activity regarding the Insight letter of intent continued. On April 2, 2003, VoiceGenie had a board meeting about the potential financing. At that meeting, Mr. Berkowitz told the Board that he was trying to negotiate with the plaintiff, who was not returning his calls. He further reported that they had included one Insight company on the plaintiff’s “tail list” but not the one they were dealing with. He indicated that the plaintiff’s fee, “if avoided”, would be US$400,000.
57Mr. Berkowitz also reported to the Board that the plaintiff did not introduce them to Insight, but another person, Ken Rotman, did. The trial evidence showed that Mr. Rotman had emailed Mr. Horing about VoiceGenie in May 2001, and there was also dialogue in later 2002. The evidence of Mr. Rotman’s involvement is scant and does not demonstrate that he caused the investment to be made. In contrast, on all of the trial evidence, the Insight investment was made at least in part as a result of the plaintiff’s efforts.
58On April 3, 2003, the plaintiff called Mr. Berkowitz, who finally said that the party they were negotiating with was called “Insight” and said that it was not the same party that had been approved for the plaintiff. At that point, he said he was offering the plaintiff $100,000 because the plaintiff was a “nice guy.”
59On April 3, 2003, after the phone call, Mr. Berkowitz sent the plaintiff an email said to express his personal point of view. He referred to the dates for entitlement under the Agreement having passed, and referred to their “amendment” of the dates in 2002. He referred to “Insight Capital Partners” “whom we are not planning on doing business with during the tail period.” He wrongly suggested that the plaintiff had not been working as expected due to illness and inattention. He asked the plaintiff to reply if he disagreed with the details. Not surprisingly, the plaintiff contacted Mr. Berkowitz and expressed his disagreement with Mr. Berkowitz’s position.
60The letter of intent between VoiceGenie and Insight was signed on April 4, 2003. The parties moved forward to the due diligence stage.
61By emails dated April 11, 2003, the plaintiff wrote to Mr. Berkowitz further to Mr. Berkowitz’s April 3, 2003 email. The plaintiff asked that Mr. Berkowitz look at his letter of March 1, 2002, and the agreed time periods in that letter. He spoke about the conduct of the parties, and the work he had done in time periods that made no sense under the original time periods in the Agreement. He asked again for information about the party that VoiceGenie was dealing with, and asked specifically if Mr. Leonard was involved. He asked again about the offer of $100,000. In reply, Mr. Berkowitz wrote that the $100,000 was available if there were mutual releases and if the plaintiff supported him in negotiations and due diligence, and agreed to be paid on closing. Mr. Berkowitz indicated that the plaintiff should agree by the next day.
62There then followed a dialogue about Mr. Berkowitz’s $100,000 offer. Understandably, the plaintiff had some questions. In answering some of those questions by email, Mr. Berkowitz acknowledged the amendment of the original Agreement.
63The plaintiff taped a telephone conversation with Mr. Berkowitz on April 14, 2003. On that telephone call, the parties had a discussion about whether or not the investor was on the plaintiff’s list. It was a long and acrimonious call. Mr. Berkowitz was aggressive and attempted to deflect responsibility for the March 1, 2002 letter on to Mr. Jackson. He blamed Mr. Jackson for “inventing” the concept of a tail period even though that terminology is right in the Agreement. He accused the plaintiff of “conning” Mr. Jackson to “bastardize” the Agreement, which, on the trial evidence, did not occur. He also said that he was sure that the plaintiff and Mr. Jackson “colluded to write that amendment and to get me to sign it without looking at it”. This was not only false but preposterous given what had actually occurred. Mr. Berkowitz also claimed not to know information about the prospective investment that he obviously did know, having already negotiated and signed the letter of intent.
64On the call, Mr. Berkowitz said that he could either pay the plaintiff nothing or they could settle the matter in a “nice gentlemanly way”. I find on the trial evidence that settlement of a claim from the plaintiff was the purpose of the $100,000 offer from the outset, and was misrepresented to the plaintiff in the early communications. It was a failed attempt to settle because VoiceGenie knew that the plaintiff had introduced it to Insight and there was exposure under the Agreement, as amended. Indeed, in his trial testimony, Mr. Berkowitz admitted that the Board of Directors had said that the plaintiff could make trouble for the company and suggested that they try to settle with him. The $100,000 offer was to “buy peace.” On the call, Mr. Berkowitz referred to VoiceGenie’s lawyer, and said that because there were ambiguities in the contract with the plaintiff, they would like to do something for the plaintiff. He repeatedly referred to the March 1, 2002 letter as an amendment.
65Over a month later, on a May 23, 2003 call, Mr. Berkowitz took a different approach. This time he characterized his March 1, 2002 letter as an offer and said that the plaintiff had rejected it. However, at the end of the call, he said that although he did not know if that offer was still on the table, if the plaintiff re-offered it to him he might consider it. As a result, the plaintiff sought some legal advice and by fax dated May 29, 2003 wrote a letter indicating that he accepted the offer made by the March 1, 2002 letter. He testified that he sent this letter as an insurance policy in case the March 1, 2002 letter was an offer, even though he did not understand it to be an offer at the time. He thought it would be helpful in case he was wrong.
66The defendant sought to rely on the May 29, 2003 letter as an admission that the March 1, 2002 letter was an offer. As set out above, I have concluded on the trial evidence that it was not an offer.
67The plaintiff continued to make various attempts to engage VoiceGenie bearing in mind the history of the matter and the commitment made in the March 1, 2002 letter. The deal with Insight also moved forward, and a Share Subscription Agreement was executed as of June 27, 2003.
68Ironically in the circumstances, Mr. Berkowitz took steps to pay a 1% introduction fee to Mr. Rotman, because Mr. Rotman felt he had introduced the parties and deserved a fee.
69The financing by Insight was the subject of a press release. It came to the plaintiff’s attention, and by fax dated July 28, 2003, the plaintiff requested his fee in the amount of US $400,000 plus tax. Mr. Berkowitz refused to pay.
70Mr. Berkowitz testified that his tenure as CEO of VoiceGenie ended in January 2005 because the Chair wanted more sales focus and hired a new CEO. There were subsequent corporate steps taken, without his involvement, resulting in the business becoming part of Genesys Laboratories Canada, Inc.
Issues
71The main cause of action advanced by the plaintiff is breach of contract. The contract relied upon is the Agreement, as allegedly extended.
72The Agreement includes these elements among others:
(i) it provides a process through which the plaintiff was to submit names of potential investors for approval by the defendant (Clause 2);
(ii) it limits the plaintiff to approaching only approved investors (Clauses 2 and 6);
(iii) it requires that the plaintiff use his best efforts to get approved investors to actually invest during the term of the contract and the tail period (Clause 2);
(iv) it provides that success was achieved if VoiceGenie accepted funds that, in whole or in part, were raised from an approved investor through the plaintiff’s efforts (Clause 2); and,
(v) it provides that the plaintiff be compensated by receiving 4% of the funding received in the first financing that the defendant received during the term or tail period (Clauses 1, 2, 4, 6 and Schedule A).
73As to the term of the Agreement, it provides for a three-month term, followed by an eighteen-month tail period during which the plaintiff could still receive compensation (Clauses 2 and 6). It further provides that it can be amended only by written supplemental agreement agreed to by both parties in writing (Clause 10).
74The quantification of damages is not at issue. If the claim is successful, the compensation due is 4% of the financing, specifically US $400,000, plus tax.
75As of final argument, there were two issues between the parties regarding the breach of contract claim:
(1) whether the term of the Agreement and its tail period had already expired before the Insight investment, or whether those time periods were effectively extended; and,
(2) even if the time periods were extended, whether the approval of the name “Insight Capital Partners” covered the actual financing received by VoiceGenie, giving rise to a right to remuneration.
76I have interpreted the Agreement following the fairly recent synopsis of contractual interpretation principles set out by the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. Sattva, at para. 47, calls for me to read the Agreement “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”. As mandated by Sattva, I have taken a practical, common sense approach not dominated by technical rules of construction, with due regard for proper evidence of surrounding circumstances.
Issue 1: Term of the Agreement
77The first issue is whether the term of the Agreement and its tail period had already expired before the Insight investment, or whether those time periods were effectively extended. The Agreement was effective on July 26, 2001. As a result, the term of the Agreement ended on October 26, 2001 and the tail period ended on June 26, 2003. This is not at issue. The plaintiff submits that those dates were effectively extended by an oral agreement made between him and Mr. Berkowitz on October 16, 2001, as later confirmed both in a follow-up telephone conversation and in writing. In that regard, the plaintiff relies on certain documents in early 2002, especially Mr. Berkowitz’s letter of March 1, 2002.
78I have found that the parties reached an oral agreement to extend the term of the Agreement in the telephone call on October 16, 2001. The plaintiff continued to take steps on behalf of VoiceGenie after the original three-month period as a result of that agreement, including approaches to new approved investors that would have been a breach of the Agreement in the absence of an extension. This was all done to the knowledge of and with the involvement of VoiceGenie. The oral agreement was confirmed in another telephone conversation with Mr. Berkowitz in February 2002. However, Clause 10 of the Agreement requires that the Agreement may be amended only by a written supplemental agreement agreed to by both parties in writing.
79At trial, the plaintiff submitted that the Agreement was effectively amended, relying heavily on the March 1, 2002 letter from Mr. Berkowitz. However, he also argued that the oral agreement was a new agreement separate from the Agreement and therefore not subject to Clause 10, or that it was open to the court to decline to enforce Clause 10 of the Agreement.
80At trial, the defendant challenged the alleged oral agreement, but submitted that, in any event, it failed to meet the requirements of Clause 10 and Clause 10 should be enforced. The defendant submitted that even an exchange of emails was sufficient to comply with Clause 10, acknowledging that Clause 10 did not require a signed written agreement. With respect to the March 1, 2002 letter, the defendant’s position was that the March 1 letter was an offer, which was rejected because the plaintiff contested the list of approved names contained in that letter.
81A significant amount of trial time was spent on the March 1, 2002 letter. It is an important document. The defendant failed to prove that a version of that letter with a “sign back” section was ever sent to the plaintiff, or even signed by Mr. Berkowitz. And as is apparent on the face of the letter itself, it was not an offer. The defendant’s position that it was an offer that was rejected by counter-offer therefore fails on the facts.
82There is no question that the plaintiff did not accept the list of approved names in that letter. However, the letter did not set out a proposed new approach to the previously agreed process of approving names as set out in the Agreement. It purported to be a statement of what had been approved under the Agreement, and it was wrong. Pointing out that it was wrong is not a counter-offer.
83The defendant also relied on some isolated phrases used by the plaintiff from the many emails that provide some support for its position that the Agreement had expired on its terms, and the activity in February and March 2002 was really an unsuccessful renegotiation. There is no question that both sides used many different phrases to describe their dealings with one another from time to time. Just as the defendant can point to some phrases that support its position, the plaintiff can point to numerous occasions when Mr. Berkowitz described what he had done as amending the Agreement.
84I have considered all of the evidence including the extensive documentary record and the testimony of both the plaintiff and Mr. Berkowitz. I conclude that while neither side was rigorous in the way they described their dealings from time to time, there were two different activities going on in the spring of 2002. The first related to the extension of the time periods in the Agreement, and the second was a series of failed attempts by the plaintiff to negotiate a new deal with materially improved financial terms. These two activities, which overlapped in time, contributed to challenges with the parties’ terminology from time to time. I conclude that the phrases extricated by the defendant do not determine the question of whether there was an effective extension of the time periods in the Agreement.
85I will now deal with the plaintiff’s primary position, which is that the steps taken did effectively amend the Agreement. Clause 10 requires that an amendment be agreed to by both parties in writing. The defendant concedes that an exchange of email would have been sufficient. No signed document was required.
86Under Clause 10, the oral agreement reached in October 2001 alone is insufficient, as is the handwritten note that the plaintiff wrote on his calendar after his call, saying “Stuart Extends”. A plain reading of Clause 10 requires something in writing from both sides. I note that the introduction of the plaintiff’s documentary evidence at trial was cumbersome and difficult. The plaintiff was self-represented. Although I accept that the plaintiff made an effort to introduce his documents, as a practical matter they were introduced out of sequence and they were voluminous. However, a review of the trial exhibits in chronological sequence shows that there was a written exchange between the parties.
87On February 26, 2002, Mr. Jackson sent an email to the plaintiff putting forward the original term and tail period set out in the Agreement. By reply email, the plaintiff indicated that Mr. Berkowitz had agreed to extend the term and tail period beyond the original deadlines in the Agreement. Shortly after that email came the March 1, 2002 letter from Mr. Berkowitz, the CEO of the defendant, saying:
…we agree to set the cutoff date to February 1, 2002, when your 18 month protection period begins as described in the agreement. That means your 18 month period of protection for the firms outlined above ends on August 1, 2003.
88Taking a practical, common sense approach to the interpretation of Clause 10, I conclude that this email exchange and letter satisfy the requirements of Clause 10. I conclude that the Agreement was effectively amended, extending its term and the tail period as set out in Mr. Berkowitz’s own letter of March 1, 2002.
89I therefore need not deal with the plaintiff’s alternative legal arguments. The plaintiff put forward cases that illustrate situations where courts have been prepared to find an oral agreement enforceable despite limiting clauses in a prior written agreement or have otherwise not enforced limiting clauses: e.g., Shelanu v. Print Three Franchising Corporation (2003), 2003 52151 (ON CA), 64 O.R. (3d) 533 (C.A.); Prosser v. Planit Search Inc., 2012 ONSC 935. Waiver was not raised by the parties and has therefore not been addressed, although it may also arise on the facts.
90I also need not deal with the additional causes of action that were asserted just before trial, specifically unjust enrichment, misrepresentation and a failure to act in good faith. However, I do find on the facts that VoiceGenie did not deal with the plaintiff in good faith in the period commencing in 2002. There are numerous examples of VoiceGenie either attempting to resile from its own commitments or failing to be honest with the plaintiff. The email saying that Mr. Jackson had no authority is one example. The course of dealings with the plaintiff after Insight resurfaced in 2003 was characterized by evasion at best and deception at worst. The telephone conversation between the plaintiff and Mr. Berkowitz on April 4, 2003 regarding his March 1, 2002 letter is a further indication of the lack of good faith.
91In conclusion, the Insight investment fell within the amended time periods under the Agreement, closing before the end of the extended tail period on August 1, 2003.
Issue 2: Insight as an approved name
92The second issue is whether the approval of the name “Insight Capital Partners” covered the actual financing received by VoiceGenie, giving rise to a right to remuneration.
93Despite all the back and forth between the parties about the “Approved List” and the process to get on that list, there is no issue that “Insight Capital Partners” was an approved name for the plaintiff. It appeared on VoiceGenie’s “shorter” list set out in the March 1, 2002 letter.
94However, the party with which VoiceGenie signed a letter of intent was “Insight Venture Management, LLC” and the party that actually invested the money was “Insight VG SARL”. The latter company was a new specific-purpose company, incorporated to make the investment in VoiceGenie. The other significant name that arose in the trial evidence was “Insight Venture Partners”, which was the business name that appeared under Mr. Leonard’s name in his emails and on the PowerPoint presentation he sent to VoiceGenie in his first email.
95The plaintiff agrees that the above specific names do not appear on the Approved List. His position is that the name that does appear on the list, Insight Capital Partners, is the same business and the investment is therefore covered under the Agreement.
96The defendant’s position has changed since its pleading. It originally took the position that the Approved List would have to include the new corporation – Insight VG SARL – in order for the plaintiff to be entitled to compensation. That position would mean that an investor need only incorporate a new company for VoiceGenie to avoid its obligations. That interpretation would undermine the very purpose of the Agreement and, if it had been pursued at trial, would have been unsuccessful.
97However, in final argument the defendant conceded that it was not necessary to have “Insight VG SARL” on the Approved List. It submitted that if “Insight Venture Partners” had been on the Approved List, that would have been sufficient, but it was not. It agreed that an exact match was not necessary. Indeed, the only common word between those two names – “Insight VG SARL” and “Insight Venture Partners” – is “Insight”. This is consistent with the trial evidence, which demonstrated this venture capital business used different business names, with the common element being “Insight”.
98The defendant also noted that the Agreement does not contain a clause that expressly included parents, subsidiaries and affiliates into approved names. Lastly, the defendant submitted that the plaintiff had insufficient evidence to prove that the Insight Venture Partners was also used to describe Insight Capital Partners. Essentially, the defendant said that the plaintiff had not met his burden of proof.
99Again, the starting point is the words of the Agreement. It refers to a list of “prospective investors” and refers to approved names being placed on the Approved List. It also uses other terminology, including reference to an “accepted contact” and prescribes that the plaintiff will only approach “parties” on the Approved List.
100The defendant conceded that an exact match is not required, which I find consistent with the words of the Agreement. The Agreement is not formalistic in that it uses varying terminology to describe the prospective investors that, if approved, the plaintiff could approach. It also does not expressly require that each approved name be a separate legal entity. Nor does it include the above-mentioned clause expressly referring to parents, subsidiaries and affiliates of a corporate entity.
101This lack of formality in the Agreement was mirrored in the approval process that took place between the parties using the process set out in the Agreement. VoiceGenie, in giving approvals, did not ask the plaintiff to specify the full legal names of the potential investors he was seeking approval for. Taking the name at issue for example, there was no reason to assume that “Insight Capital Partners” was a corporation, rather than a partnership, or simply a business name or the name of a group of businesses. The approval was given without requiring additional specificity. As demonstrated by the deal that VoiceGenie did with Insight, there may be multiple legal entities that together comprise a single business.
102This non-formal approach is also shown by VoiceGenie’s own list of excluded names, which very generally referred to large businesses without specifying legal entities.
103The defendant’s position in final argument was that the ultimate investor’s name need not exactly match an approved name, but the approval of a name was also not an unlimited inclusion of all potentially related companies. The defendant submitted that the scope of an approval under the Agreement was not unlimited.
104Again focusing on the words in the Agreement, it does include an important limitation. It gives VoiceGenie the sole power to say what it will approve. It was open to VoiceGenie to say no, which it did from time to time. It was open to VoiceGenie to withhold approval unless an otherwise broad business contact was narrowed down to its satisfaction. VoiceGenie had, under the Agreement, complete authority to narrow any approval as it saw fit.
105Reading the Agreement as a whole and giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract, I conclude that the approval process allowed for approval of both specific and more general names. Where a general business name was put forward, it was up to VoiceGenie to rein it in if it was not prepared to give broad approval.
106I move then to the evidence regarding “Insight Venture Partners” and “Insight Capital Partners” and whether there is any meaningful distinction between them. I find the most compelling evidence to be the information provided by Mr. Leonard in his first email, specifically the PowerPoint presentation entitled “Company Overview” and the course of dealings between Mr. Leonard and VoiceGenie when Mr. Leonard responded to the introduction by the plaintiff. The cover of the PowerPoint presentation and every following page is marked with the business name “Insight Venture Partners”. The overview shows that Insight Venture Partners’ business included a group of entities, one of which was Insight Capital Partners IV LP. In turn, at no time during the first round of dealings with Mr. Leonard, did anyone at VoiceGenie suggest that the business represented by Mr. Leonard was not a name approved for the plaintiff. This is especially significant since, under the Agreement, the plaintiff was only permitted to approach parties on the Approved List. Thus, VoiceGenie itself conducted itself on the basis that there was no significant distinction between “Insight Venture Partners” and “Insight Capital Partners”. It was not until 2003, when the relationship with the plaintiff had broken down, that Mr. Berkowitz began to suggest that there was a difference.
107The plaintiff also attempted to assemble evidence from a number of different public sources to support his position. Among other things, he relied on two printouts from the internet that show press releases that support his position. First, there is a printout of a press release dated May 30, 2001, reporting on the closing of a transaction by “Insight Capital Partners” noting that the firm was co-founded by Jeff Horing and giving information about the firm. Mr. Horing appears in numerous documents in evidence at trial, including Mr. Leonard’s PowerPoint, and was personally involved in the Insight investment in VoiceGenie. The second document is a printout of a press release that the plaintiff obtained from his then counsel. That press release, dated July 20, 2001, is entitled “Insight Capital Partners Changes to Insight Venture Partners” and says that “Insight Capital Partners” decided to change its name to “Insight Venture Partners”, going on to describe its venture capital business.
108The defendant submitted that these documents are hearsay and not reliable, having been printed off the internet. As well, the second document is truncated on the right side, a common problem with internet printouts. Reviewing the document, I do not find that the truncation creates an unfairness given the issue at hand.
109In support of its position, the defendant relied on some trademark cases, most significantly ITV Technologies Inc. v. WIC Television Ltd, 2003 FC 1056, 239 F.T.R. 203. In that case, extensive evidence from the internet was advanced at trial, including demonstrations and document retrieval. The trial judge discussed internet evidence, finding that official websites developed and maintained by the organization itself provided more reliable information than unofficial websites maintained by private businesses or individuals. A very high standard of proof is articulated for what are described as unofficial websites. This case reflects a somewhat dated view of information obtained on the internet, which is understandable given its timing. However, I agree that reliability must be considered and in some cases could be a major issue. Here, the documents before me are press releases, a type of document that was not at issue in ITV.
110The plaintiff’s press releases are printed from a search website called www.findarticles.com and the news section of a website called www.digitalchild.com. At trial, the plaintiff did not appear to understand what could have been done to more directly prove these press releases and the information in them. Being self-represented does not relieve him of that responsibility. However, there is corroboration of much of the information in the press releases from the PowerPoint provided by Mr. Leonard, the contact and website information shown in numerous emails between Insight and VoiceGenie, and the involvement of Mr. Horing. The printout of the press release regarding the VoiceGenie investment, the contents of which are not challenged, references the same website for company information about Insight Venture Partners as is referenced in all the emails and in these press releases. There is also a conference notice showing Mr. Horing under the name Insight Capital Partners. There are many other documents that are also consistent with the information in these press releases.
111Bearing all factors in mind, I have taken the press releases into account although I do not put as much weight on them as the other evidence.
112The plaintiff also brought forward other evidence from public sources. He demonstrated that all the Insight entities at issue had the same business address in New York. He introduced corporate searches from the United States and Europe. These searches are consistent with other evidence that various different legal entities were used by Insight, but the search information is not detailed enough to be determinative.
113There was therefore considerable evidence before me on this issue. Weighing all of the trial evidence, I conclude that there is no meaningful distinction between “Insight Capital Partners” and “Insight Venture Partners” in this case. In turn, the approval of the former name included “Insight Venture Partners”, which name the defendant accepts as sufficient to catch the actual investment that was made.
114The defendant did not call any witness from Insight then or now. Although my finding is not premised on this omission, I conclude that such evidence would not have been helpful to the defendant.
115There is no issue that the plaintiff used his best efforts to get Insight to invest as he was obliged to do under the Agreement. When Insight first expressed an interest, he was actively involved. Obviously, he was unable to do so at the later stage since VoiceGenie chose not to tell him about the renewed interest, contrary to VoiceGenie’s own obligations under the Agreement. In final argument, it was not suggested that the plaintiff was precluded from compensation for this reason. This and certain other matters that formed part of the amended statement of defence were not advanced at the end of the trial.
116VoiceGenie therefore breached the Agreement, as amended, by refusing to pay the required fee when the plaintiff rendered his invoice in 2003. The plaintiff is entitled to his compensation.
Decision
117The defendant shall pay the plaintiff the amount of US $400,000.
118With respect to the obligation to pay tax, the Agreement speaks of GST. The parties did not focus on how to now address tax in their final submissions. As well, there are the issues of pre-judgment interest and costs.
119If the parties are unable to agree on taxes, pre-judgment interest or costs, the plaintiff shall make his submissions by delivering brief written submissions together with a bill of costs by December 30, 2015. Obviously, the plaintiff should have regard for the law on to what extent a self-represented person may claim costs. The defendant may respond by delivering brief written submissions by January 22, 2016. The parties may change this timetable on consent provided that I am notified of the new schedule no later than December 14, 2015.
Justice W. Matheson
Released: November 27, 2015
COURT FILE NO.: CV-06-CV-309643
DATE: 20151127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
R. SHELDON DUFF
Plaintiff
– and –
GENESYS LABORATORIES CANADA INC.
Defendant
JUDGMENT
Justice W. Matheson
Released: November 27, 2015