Court File and Parties

CITATION: Propurchaser.com v. Wifidelity Inc., 2017 ONSC 4905

COURT FILE NO.: CV-17-579839

DATE: 2017-08-21

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Propurchaser.com, Plaintiff

AND:

Wifidelity Inc. et al., Defendants

BEFORE: Carole J. Brown, J.

COUNSEL: Charles Wagman, for the Plaintiff Anthony Prenol and Sarah O’Grady, for the Defendants

HEARD: August 11, 2017

ENDORSEMENT

[1] The moving party, Propurchaser.com, seeks an interim injunction enjoining the responding party, Wifidelity Inc. and its principals, Ethan Davis and Richard Williams, from shutting down the website, Propurchaser.com, pending hearing of the motion for an interlocutory injunction scheduled for November 28, 2017. It further seeks an order that the defendants pay their monthly licensing fee pursuant to the original licensing agreement of 2007, namely $6000 per month plus compensation for hourly work done by the individual defendants at the hourly rate of $97.75. I note that the original licensing agreement set forth an hourly rate of $75 per hour, although the plaintiff is prepared to pay an increased amount of $97.50.

[2] The parties entered into a licensing agreement on May 23, 2007 regarding a new software product developed by Wifidelity and used by the moving party. The software is for a website, Propurchaser.com, which provides services to purchasers assisting them in their negotiations with suppliers in order to reduce purchasing costs. The website service constitutes the moving party’s business.

[3] The licensing agreement provided, inter alia, that the moving party would pay a monthly licensing fee in the amount of $6000 per month and that the individual respondents, Messrs. Davis and Williams, would provide support services and continued development of the software at an hourly rate of $75.

[4] The agreement further provided that amendments would be made in writing and appended to the licensing agreement. Either party was able to terminate the agreement without cause on 14 days’ notice or with cause in certain defined circumstances, including default in payment of licensing fees. The agreement further contained an exclusive agreement clause. All disputes were to be resolved by mediation.

[5] Invoices were rendered monthly and, pursuant to the agreement, paid within 30 days. The invoices did not, from the beginning, include a breakdown or itemization as regards the invoiced amounts.

[6] It appears from the evidence that subsequent negotiations occurred to pay the individual respondents an increased hourly rate and, finally a fixed rate. It is the position of the moving party that there was never any discussion as to changing the amount of the monthly licensing fee. It is the position of the responding parties that the discussions also included changing the licensing fee, which was also increased. While no amendments were made in writing to the licensing agreement, as stipulated by the provisions of the agreement, it appears from the evidence that, over the years, the payments made by the moving party to the responding party on a monthly basis increased. From October 2, 2015 to June 2017, a global flat fee of $42,712.24 was paid monthly, again with undetailed invoices.

[7] By 2016, Propurchaser began to request an itemized invoice from Wifidelity, but the responding party did not comply, indicating essentially that invoicing had always been done on a global basis and would continue. An email from Mr. Davis dated October 3, 2016 indicated that for many years they had issued monthly invoices for fixed amounts for the license of the software on a month-to-month basis together with support, hosting and maintenance services in relation to the delivery of the software. He further indicated that should Propurchaser need to allocate the invoice services for internal purposes, the entire amount should be allocated to the software license “since that is far and away the bulk of the invoiced amount”. The position of Propurchaser is that the licensing fee had never been renegotiated and they believed that the bulk of the invoiced amounts were for the defendants’ labour.

[8] The plaintiff believed that the licensing fee had remained the same as in the licensing agreement, namely $6000. It further believed that individual defendants were working with Propurchaser full-time, which the defendants vigorously deny. As a result of the email from Mr Davis dated October 3, 2016 indicating that the bulk of the $42,712.24 plus tax monthly should be allocated to the licensing fee, the dispute as to the terms of the relationship between the parties arose.

[9] As a result of the issues arising between the parties, the applicant ceased paying the monthly fee from the June 2017 invoice and paid only what was set forth in the original license agreement, namely $6000 . Counsel for Wifidelity wrote to counsel for Propurchaser dated May 29, 2017 indicating that unless Propurchaser continued to pay the monthly licensing fee, Wifidelity would discontinue Propurchaser’ s access to the Wifidelity software. Counsel for Propurchaser, in communication dated June 17, 2017, indicated that it would continue to pay the licensing fee “under protest”. Propurchaser proposed that the dispute be mediated, which was initially rejected by Wifidelity. Wifidelity proposed to resolve the dispute as follows: that Propurchaser purchase Wifidelity software in the amount of $1.3 million; that Propurchaser pay the increased monthly fee of $75,000 commencing January 1, 2018 or that, as at January 1, 2018, the parties go their separate ways and access to the software would terminate.

[10] Thereafter, on July 28, 2017, the plaintiff commenced this action and, in the context of the action, brought an application for an interlocutory injunction, which is scheduled to be heard November 28, 2017, and scheduled this motion for an interim injunction.

[11] At the hearing of this motion, I was advised that the parties had discussed attempting to resolve this matter by mediation following cross-examinations on affidavits. The plaintiff further indicated that it was prepared to pay the $6000 licensing fee to Wifidelity, with the balance of the monthly fee of $42,712.24 plus tax that has been paid since October 2, 2015 to be paid into a trust account or into court pending resolution of the dispute and that it would pay for any maintenance, hosting and labour costs to the individual defendants in the amount of $97.50.

[12] Wifidelity submits that this motion is unnecessary, given that they have already proposed that the amounts that have been paid over the last almost 2 years in the amount of $42,712.24 should continue to be paid and that software access will continue until the end of the year or until resolution of this matter by mediation or by determination of the injunction hearing on November 28.

The Law and Analysis

The Interim Interlocutory Injunction

[12] The tripartite test for injunctive relief is as set forth in RJR-McDonald Inc. v Canada (AG), 1994 117 (SCC), [1994] 1 SCR 311, as follows:

1. whether there is a serious issue to be tried;

2. whether the moving party will suffer irreparable harm if the injunction is not granted;

3. whether the balance of convenience favours one of the parties.

Serious issue

[13] The standard for the determination of the first portion of the tripartite test is whether there is a serious issue to be tried, rather than the higher standard of a strong prima facie case. In making this determination, the court must make a preliminary assessment of the merits of the case, and will not embark upon a prolonged examination of the merits. The threshold for this question is low. Where the court is satisfied that the application is neither frivolous nor vexatious, the motions judge should proceed to consider the second and third branches of the test.

[14] However, it held that where the injunction will amount to a final determination of the action, where a constitutional issue presents as a question of law alone, or where in a private law context, the factual record is largely settled, the plaintiff must show a strong prima facie case rather than a serious issue to be tried at the first step of the test (RJR-McDonald, supra, paragraphs 51 – 56).

[15] It is the position of the responding party that the higher test of strong prima facie case is applicable, as the plaintiff is essentially seeking a mandatory injunction to cause the individual defendants to continue working with Propurchaser during the interim injunction sought and is not simply a prohibitive injunction. It is the position of the responding party that this higher onus is not met. I will deal with that argument below.

[16] I have considered the case law relied upon by the parties in this regard, including Barton-Reid Canada Ltd. v Alfresh Beverages Canada Corp. 2002 34862 (ON SC), [2002] O.J.No. 4116 and 674834 Ontario Ltd. v Culligan of Canada Ltd. , 2007 CarswellOnt 1564. I adopt the proposition set forth by Pattillo J in 674834 Ontario Ltd., supra, as follows:

“In order to determine whether what is being sought is a mandatory order it is necessary to look at the factual matrix of the case. An order that establishes a new right never agreed to is mandatory, while an order requiring the parties to act in accordance with an agreement is prohibitive and not mandatory: see TDL Group Limited v 1060284 Ontario Ltd., [2001] O. J. No. 3614 (Div. Ct.)

[17] In this case, the Order sought is to enforce the original license agreement between the parties as regards the licensing fee to be charged. It does not seek to establish a new right never agreed to. Thus, it is a prohibitive order that is sought.

[18] Accordingly, the applicable test to be met regarding the first branch of the tripartite test is whether there is a serious issue to be tried.

[19] In this case, I am satisfied, on a preliminary assessment, that the application is neither frivolous nor vexatious. I am satisfied that there is a serious issue to be tried as regards the terms of the agreement regarding compensation for the licensing fee and support services.

[20] I am of the view that the issue of what the current terms of the licencing agreement are as between the parties is a serious issue to be tried, and this aspect of the test has been met.

Irreparable Harm

[21] In determining whether the moving party will suffer irreparable harm if the injunction is not granted, it is the nature of the harm suffered which is to be considered rather than its magnitude, as was recognized in Morguard Corp. v InnVest Properties Ottawa GP Limited, 2012 ONSC 80. As stated in RJR MacDonald, irreparable harm is harm that "cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other… The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration": RJR MacDonald, supra.

[22] Examples of the former include instances where one party will be put out of business by the court’s decision (R. L. Crain Inc. v Hendry (1988), 1988 5042 (SK QB), 48 D.L.R.(4th) 228); where one party will suffer permanent market loss or irrevocable damage to its business reputation: RJR McDonald Inc. v Canada, supra., American Cyanamid v Ethicon 1975 2598 (FC), [1975] A.C. 396.

[23] I find that the applicant would suffer irreparable harm not compensable by damages were an interim injunction not granted. In the circumstances of this case, as the applicant’s business is solely dependent on the Wifidelity software, termination of access to the said software would mean the termination of the applicant’s business, thus losing revenues, profits, market share and also goodwill and reputation. As recognized in RJR McDonald Inc. v Canada, supra, an instance where a party will be put out of business were the injunction not issued is recognized as irreparable harm.

[24] I am satisfied that the plaintiff has established a real risk of irreparable harm based on all of the evidence before me, and that damages after trial would not be an adequate remedy.

Balance of Convenience

[25] In determining the third leg of the tripartite test, balance of convenience, consideration must be had for the relative impact on the parties of granting or withholding an injunction. This Court must determine whether the harm suffered by the moving party if an Order were not granted would outweigh any harm suffered by the responding party if an Order were granted.

[26] I am satisfied, based on all of the foregoing that in the circumstances of this case, the balance of convenience favours the moving party.

[27] As regards the plaintiff’s request that the Court order that Propurchaser pay the amounts it has been paying, but into court and not to Wifidelity, paying Wifidelity only the amount originally paid in the licensing agreement, namely $6000 plus a small amount which it has stipulated to be $1500 for support services monthly, I am of the view that this would essentially predetermine one of the seminal issues which is to be determined at the interlocutory injunction hearing on November 28, 2017. This Court is not prepared on the basis of the record before it to make a determination as to which of the parties is correct in its position regarding the terms of the agreement concerning quantum of payment.

[28] As has been recognized in the jurisprudence in Canada, the proper purpose of an interlocutory injunction is to preserve or restore the status quo, not to give a party its remedy until trial: Bailey v Medeiros, 2015 ONSC 6733 at para 33. Interlocutory injunctions are meant to protect plaintiffs who might suffer irreparable harm before a trial, and be left with a meaningless remedy thereafter. They are granted with a view to preserving the status quo, ensuring that the subject matter of the litigation is not destroyed or irreversibly altered before trial, protecting the right of the plaintiff from being defeated by some pretrial act of the defendant: S. Cohen Inc. v FD Apparel Limited, 2017 ONSC 2734 at para 6, 2017 CarswellOnt 6700; Chitel v Rothbart (1982), 1982 1956 (ON CA), 39 O.R.(2d) 513 (Ont. C.A.); Third Chandris Shipping Co. v Unimarine SA [1979] 2 All E.R. 972 at 978.

[29] Since October 2, 2015, the moving party has paid to the responding party a flat fee in the amount of $48,264.84, inclusive of tax. I am not prepared at this juncture to, in essence, pre-determine the dispute as regards the actual amount which should be paid monthly for the licensing fee and support. That will be done on a full record on November 28, 2017. In the interim, I order that the status quo continue and that the moving party plaintiff continue to pay the responding party defendants the amount of $48,264.84 all inclusive monthly until the hearing of the interlocutory injunction on November 28, 26 2017.

Conclusion

[30] I grant an interim injunction to be in force until November 28, 2017 on the following terms:

1. the defendants are enjoined from shutting down the Propurchaser.com website by denying access to the software;

2. the plaintiff will maintain the status quo and continue paying Wifidelity $48,264.84 per month until further determination of the amounts to be paid and any overpayment which may have been made.

Carole J. Brown, J.

Date: August 21, 2017