A. Introduction

[1] Justice C.J. Brown granted the Plaintiff ProPurchaser.com Inc. an interim interlocutory injunction restraining the Defendants Wifidelity Inc. and Ethan Davis and Richard Williams, who are the principals of Wifidelity, from shutting down the website, Propurchaser.com pending the hearing of the motion to continue the interlocutory injunction until trial.

[2] The interim injunction was granted on terms that ProPurchaser would pay Wifidelity $48,264.84 per month pending the determination of the motion.[^1]

[3] For the reasons that follow, I dismiss the motion to continue the injunction on terms. The terms are: provided that ProPurchaser pays Wifidelity $48,264.84 per month, the injunction shall be vacated six months from the release of these Reasons for Decision.

B. Factual Background

[4] As will be seen in the following narrative of the factual background to this action, there are departures and radical differences between the parties about the events of their business relationship, but there is common ground at least about the origins of that relationship and that the parties signed a License Agreement that they all continue to rely on.

[5] In 2001, Rodney Sherkin, who is Mr. Williams’ uncle, along with Konverge Digital Solutions Corp., incorporated ProPurchaser. Mr. Sherkin, through a corporation, owned 2/3 of the shares. Konverge Digital subsequently sold its 1/3 interest to Charles Armstrong.

[6] ProPurchaser’s business was to operate a website, ProPurchaser.com, which provided businesses with pricing information about the cost of purchasing raw materials, supplies, goods, and services.

[7] Between 2001 and 2004, ProPurchaser used software developed by Konverge Digital. In 2004, Mr. Williams developed new software that replaced the existing software.

[8] Around 2006, for a second time, Mr. Williams promised to develop new software to replace the existing software. Mr. Williams deposed that he developed the software relying on his uncle’s assurances that, in due course, he would be adequately compensated for the work.

[9] In 2007, Mr. Williams and Mr. Davis incorporated Wifidelity. Wifidelity is a software developer that specializes in custom enterprise software to price commodities and to assist purchasers in negotiating with their suppliers. Wifidelity went ahead and developed the ProPurchaser.com software.

[10] In 2009, ProPurchaser and Wifidelity signed a License Agreement with a back-dated effective date of May 23, 2007. Under the License Agreement:

• Wifidelity grants to ProPurchaser a limited and non-exclusive license to use the software.

• Wifidelity retains the entire right, title, and interest in anything created or developed by Wifidelity for ProPurchaser, including all patents, copyrights, trade secrets, and other proprietary rights.

• All changes to the source code, database design or implementation of the software are the intellectual property of Wifidelity.

• ProPurchaser has no right to use the software except to the extent that Wifidelity chooses to license ProPurchaser to do so.

• ProPurchaser agrees to pay $6,000 per month for the license.

• Wifidelity agrees to provide support services, including software support, hosting services and additional customization of the software.

• With respect to the support services, Wifidelity agrees to invoice ProPurchaser monthly for work performed for maintenance and bug fixes of the software at a rate of $75 per hour and customization of the software will be billed on a task-by-task basis.

• The agreement contains an exclusive agreement clause.

• The agreement provides that any amendments would be made in writing and appended to the License Agreement.

• Under the agreement, either party may terminate: (a) without cause, by providing 14 days' written notice to the other party; or (b) with reasonable cause, effective immediately, by providing written notice to the other party.

[11] More or less from the outset of the License Agreement, ProPurchaser and Wifidelity deviated from the terms of the License Agreement including, in some instances, its term that any amendments be in writing.

[12] Notwithstanding the terms of the License Agreement, payments were never processed in accordance with the agreement. Wifidelity delivered monthly invoices but the invoices did not include a breakdown or itemization of the license fee or of the support services.

[13] Over the years, the payments made by ProPurchaser increased. From October 2, 2015 to June 2017, a global flat fee of $42,712.24 was paid monthly, again with undetailed invoices.

[14] From time to time, the parties agreed and the conduct of the parties reveals that the payments to Wifidelity were increased. It is about the increased payments to Wifidelity that the accounts, explanations, understandings, and evidence of the parties widely diverges.

[15] ProPurchaser’s explanation for the increase in payments under the Licence Agreement is that the parties agreed to maintain the $6,000 licence fee but orally agreed to increase the hourly rate for the support services. The underlying rationale was that the amount for support services should conform to the hours that were actually being performed.

[16] ProPurchaser’s evidence is that the license fee has never been renegotiated. Mr. Sherkin believed that the invoiced amounts reflected Wifidelity’s actual labour. Mr. Sherkin also believed that Mr. Williams and Mr. Davis were working full-time on the software, which they vigorously deny.

[17] Wifidelity’s explanation for the increase in payments under the License Agreement is that the license fee was also increased and it accounted for the greater portion of the invoice. Mr. Davis testified that Mr. Sherkin routinely asserted that ProPurchaser did not have the funds to pay for the actual number of hours performed but Wifidelity would respond that it was subsidizing ProPurchaser's business and push for higher monthly fees. Mr. Davis testified that the parties routinely orally agreed to higher monthly fees.

[18] Based on the conflicting evidence, it seems that the parties, much like ships passing on a foggy night, proceeded for several years unaware of the other’s different understanding about what was being charged by Wifidelity and paid for by ProPurchaser.

[19] Mr. Davis deposed that in late 2011 or early 2012, Mr. Sherkin advised Wifidelity that he was considering selling ProPurchaser and he prepared an agreement which was signed by ProPurchaser and Wifidelity on February 23, 2012 to set out a new fee structure. Under the 2012 Agreement, ProPurchaser agreed to pay a base fee of $290,000 per year, plus commissions and reimbursement for expenses (monthly $24,166.70 (plus tax) plus commissions and expenses).

[20] The 2012 Agreement was in force from January 2012 to April 2014, but Mr. Sherkin’s understanding remained that the license fee was $6,000 monthly and the balance of the charges were for support service labour.

[21] Mr. Davis deposed that in late 2013 and early 2014, Mr. Sherkin advised that a dispute had arisen with Mr. Armstrong and that he planned to buy out Mr. Armstrong's shares in ProPurchaser. Mr. Davis deposed that in the spring of 2014, Wifidelity and ProPurchaser engaged in further negotiations about the fees under the License Agreement, and the parties eventually agreed that: (a) $34,166.70 per month (plus tax) would be charged as a flat fee for the license and support services; and (b) ProPurchaser would cover certain expenses incurred by Wifidelity.

[22] The Agreement in 2014 appears to have been in effect from April 2014 to August 2015, but Mr. Sherkin’s understanding remained that the license fee was $6,000 monthly and the balance of the charges were for support services.

[23] Mr. Davis deposed that in the summer of 2015, Mr. Sherkin indicated that he was not going to be able to buy out Mr. Armstrong's shares. A series of meetings followed in which Mr. Sherkin attempted to negotiate a reduction in the fees and Wifidelity argued for an increase.

[24] Mr. Davis deposed that on August 4, 2015, Mr. Williams met with Mr. Sherkin and presented him with an invoice showing an increase of approximately 15% in the total fees; i.e. $42,712.25 (plus tax) per month. Mr. Sherkin requested that the increase be delayed until after ProPurchaser's fiscal year end on August 31. Wifidelity agreed.

[25] From October 2015 to May 2017, ProPurchaser paid the invoices of $42,712.25 (plus tax) per month without interruption. ProPurchaser, however, ceased paying the monthly fee from the June 2017 invoice and paid only what was set forth in the original License Agreement, namely $6,000.

[26] On May 29, 2017, Wifidelity’s lawyer wrote to ProPurchaser’s lawyer and stated that unless ProPurchaser continued to pay the monthly license fee, Wifidelity would discontinue ProPurchaser's access to the Wifidelity software.

[27] On June 17, 2017, ProPurchaser’s lawyer responded that ProPurchaser would continue to pay the license fee under protest.

[28] Wifidelity then proposed to resolve the dispute by selling the software to ProPurchaser for $1.3 million and by ProPurchaser agreeing to pay a 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.

[29] Mr. Davis deposed that ProPurchaser would need, at most, five months to obtain replacement software with similar functionality to the software developed by Wifidelity. He said that new software containing the core features of the old software could be developed in approximately two to three months and that new software containing most of the enhanced functionality of the old software could be developed in approximately five months.

[30] On July 28, 2017, ProPurchaser commenced this action. On notice, it brought a motion for an interim interlocutory injunction, which was scheduled for August 11, 2017 and it brought a motion for an interlocutory injunction until trial, which was scheduled for November 28, 2017.

[31] Mr. Sherkin deposed that ProPurchaser never agreed in writing or otherwise to increase the license fee from $6,000 per month. He said that Wifidelity unilaterally and secretly increased the license fee and that it was only around the fall of 2016, that ProPurchaser learnt that Messrs. Williams and Davis were not working full time and that the monthly fee being charged was not for hours worked, but rather, for the license of the software.

On August 21, 2017, Justice Brown issued an endorsement requiring ProPurchaser to continue paying to Wifidelity the fee of $48,264.84 (including tax) per month until further determination of the court.

C. Discussion and Analysis

[32] An injunction is a remedy to enforce, or to protect the enforcement of, existing legal, equitable or statutory rights.[^2] Under the RJR-MacDonald Inc. v. Canada (Attorney General)[^3] test for an interlocutory injunction, the court considers three factors: (1) whether the plaintiff has presented a serious issue to be tried or, in a narrow band of cases, a strong prima facie case; (2) whether the plaintiff would suffer irreparable harm if the remedy for the defendant’s misconduct were left to be granted at trial; and (3) where does the balance of convenience or inconvenience lie in the granting or the refusing to grant an interlocutory injunction.

[33] In the case at bar, notwithstanding the Defendants’ arguments to the contrary, I am satisfied that ProPurchaser has satisfied the first branch of the RJR-MacDonald Inc. test. There are serious issues to be tried about whether: (a) the Defendants unilaterally and secretly increased the license fee or otherwise overcharged for services provided or not provided under the License Agreement; (b) the parties agreed to new payment terms; (c) the parties waived some or all of the terms of the License Agreement; and (d) any of the provisions of the License Agreement were unenforceable exculpatory provisions.

[34] Given that ProPurchaser satisfies the threshold factor (serious issue to be tried), the second factor is whether the plaintiff would suffer “irreparable harm” if the remedies for the defendant’s misconduct were left to be granted at trial.

[35] To satisfy the irreparable harm factor, the plaintiff must provide clear and not speculative evidence that harm not compensable in damages will result if the interlocutory injunction is not granted.[^4] If damages granted after a hearing would be adequate, it follows that the extraordinary equitable remedy of an interlocutory injunction is unnecessary.[^5] If, however, damages or some other trial remedy would come too late or be inadequate to repair the harm or to do justice, then the harm may be said to be irreparable. The irreparable harm analysis means the court will consider whether damages awarded after a trial will provide the plaintiff or applicant with an adequate remedy without the need for an interlocutory remedy.[^6] The onus is on the plaintiff or applicant to show that if made to wait for a hearing where damages are awarded, then he or she will suffer irreparable harm. Irreparable harm is not made out simply because damages may be difficult to quantify.[^7]

[36] Irreparable harm refers to the nature of the harm, not its magnitude.[^8] Irreparable harm may include harm that cannot be quantified in monetary terms. Examples of irreparable harm noted in the RJR-MacDonald judgment included: the plaintiff being put out of business, the plaintiff suffering a permanent injury to its business reputation, the plaintiff suffering a permanent loss of market share, and the plaintiff’s property being permanently depleted.

[37] In the case at bar, for several reasons, ProPurchaser does not satisfy the irreparable harm factor for an interlocutory injunction.

[38] In the case at bar, damages awarded at trial are not only adequate to provide ProPurchaser with a remedy for the harm suffered, damages are the only remedy that would be available to it.

[39] ProPurchaser seeks to keep alive the License Agreement, which includes a right to terminate, pending the trial of its claim that Wifidelity overcharged for the license and for services, and thus ProPurchaser’s only remedy available at trial is damages. Damages for the overpayments are capable of calculation, but ProPurchaser cannot assert that it will suffer irreparable harm from the termination of the license because the right to terminate is a right afforded to either party under the License Agreement.

[40] In relying on the withdrawal of the license as causing irreparable harm or in asking that the court maintain the status quo until trial ProPurchaser is on the horns of a dilemma. The status quo is a contract under which both contracting parties contracted for a unilateral right to terminate. Wifidelity lawfully exercised that right before the litigation commenced. ProPurchaser can point to no right to renew the license or any right to extend the contract.

[41] Put somewhat differently, there is no harm caused by Wifidelity’s alleged fraud or its alleged breach of contract that cannot be compensated for in damages at trial; hence no irreparable harm. And given the admittedly valid termination clause, there is no basis to grant an interlocutory or permanent injunction and provide ProPurchaser more than the parties bargained for. The harm caused by Wifidelity’s alleged misconduct is compensable only in damages.

[42] Although the conclusion that ProPurchaser has not satisfied the irreparable harm factor is dispositive of this motion, I shall move on to consider the balance of convenience factor.

[43] Where doubt exists as to the adequacy of the remedies available to either party (damages for the plaintiff, the undertaking as to damages for the defendant), regard is had to where the balance of convenience lies.[^9] This branch of the test involves a determination of which of the two parties will suffer the greater harm from the granting or the refusal to grant an interlocutory injunction pending a decision on the merits.[^10] The factors that the court may consider in assessing the balance of convenience and the weight to be given to them are indeterminate and will vary from case to case.[^11]

[44] In the case at bar, in my opinion, assuming that ProPurchaser would suffer irreparable harm from the granting of an interlocutory injunction, I regard the balance of convenience as favoring not granting the injunction because granting an injunction would be unfair, contrary to the License Agreement, and unmanageable.

[45] In the circumstances of this case, an interlocutory injunction until trial would be unfair and unmanageable because, practically speaking, an interlocutory injunction would be the equivalent of ordering specific performance of a contract for personal services, which courts are loath to do.[^12] In the circumstances of the immediate case, an injunction is akin to granting specific performance of a contract not amenable to an order of specific performance, and in the immediate case, restraining Wifidelity would be the equivalent of ordering specific performance where damages are an adequate remedy, which courts are also loath to do.

[46] Thus, I conclude that ProPurchaser also fails on the third branch of the RJR-MacDonald Inc. test.

D. Conclusion

[47] For the above reasons, I dismiss ProPurchaser’s motion.

[48] Rule 37.13 (1) provides that on a motion, a judge may, among other things, dismiss the motion, in whole or in part with terms. Since the action shall be continuing, I propose to dismiss ProPurchaser’s motion on terms that are fair to both parties and that will allow the claim for damages to go forward.

[49] I, therefore, shall continue Justice Brown’s interim injunction order for six months from the release of these Reasons for Decision provided that ProPurchaser pays Wifidelity $48,264.84 per month. The injunction shall in any event be vacated six months from the release of these Reasons for Decision.

[50] I appreciate that extending the injunction for six months seems inconsistent with my reasons for not extending the interim injunction to trial but I have the jurisdiction to impose terms, and it obviously would be unfair to put ProPurchaser out of business before its claim for damages can be determined, and, most importantly, Wifidelity more or less offered ProPurchaser six months to find replacement software.

[51] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the Defendants’ submissions within 20 days from the release of these Reasons for Decision followed by ProPurchaser’s submissions within a further 20 days.

Perell, J.

Released: December 7, 2017

CITATION: ProPurchaser.com Inc. v. Wifidelity Inc., 2017 ONSC 7307

COURT FILE NO.:CV-17-579839

DATE: 20171207

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PROPURCHASER.COM INC.

Plaintiff

– and –

WIFIDELITY INC., ETHAN DAVIS and RICHARD WILLIAMS aka RICH WILLIAMS

Defendants

REASONS FOR DECISION

PERELL J.

Released: December 7, 2017

[^1]: Propurchaser.com v. Wifidelity Inc., 2017 O.J. No. 4905. [^2]: Ash v. Lloyd’s Corp. (1992), 1992 7659 (ON CA), 9 O.R. (3d) 755 (C.A.); Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc. (1995), 1995 10638 (ON SC), 23 O.R. (3d) 766 (Div. Ct.); Hudon v. Geos Language Corp. (1997), 1997 16250 (ON SC), 34 O.R. (3d) 14 (Div. Ct.). [^3]: 1994 117 (SCC), [1994] 1 S.C.R. 311. [^4]: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311 at para. 64; Airport Limousine Drivers Assn. v. Greater Toronto Airports Authority, [2005] O.J. No. 3509 (S.C.J.) at paras. 132 and 135; Barton-Reid Canada Ltd. v. A/fresh Beverages Canada Corp., 2002 34862 (ON SC), [2002] O.J. No. 4116 (S.C.J.) at para. 18; Curran Farm Equipment Ltd. v. John Deere Ltd., 2011 ONSC 3791 at para 16. [^5]: International Relief Fund for the Afflicted and Needy (Canada) v. Canadian Imperial Bank of Commerce, 2013 ONSC 4612 at paras. 1 and 31. [^6]: Traynor v. Unum Life Insurance Co. of America (2003), 2003 40149 (ON SCDC), 65 O.R. (3d) 7 (Div. Ct.); Paddington Press Ltd. v. Champ, 1979 4566 (ON SC), [1979] O.J. No. 796 (H.C.J.); Evans Marshall & Co. Ltd. v. Bertola S.A., [1973] 1 All E.R. 992 (C.A.). [^7]: Barton-Reid Canada Ltd. v. A/fresh Beverages Canada Corp., 2002 34862 (ON SC), [2002] O.J. No. 4116 (S.C.J.) at para. 18. [^8]: Rexdale Mews Associations Partnership v. Kaiser, [1999] O.J. No. 1916 (S.C.J.). [^9]: American Cyanamid Co. v. Ethicon Ltd., 1975 2598 (FC), [1975] A.C. 396 (H.L.); Jostens Canada Ltd. v. Gendron, [1993] O.J. No. 2791 (Gen. Div.). [^10]: American Cyanamid Co. v. Ethicon Ltd., 1975 2598 (FC), [1975] A.C. 396 (H.L.); Synergism Arithmetically Compounded Inc. v. 1130163 Ontario Inc., 1997 12381 (ON SC), [1997] O.J. No. 4271 (Gen. Div.). [^11]: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311 (S.C.C.). [^12]: International Relief Fund for the Afflicted and Needy (Canada) v. Canadian Imperial Bank of Commerce, 2013 ONSC 4612 at paras. 1 and 31; Sharma v. London Life Insurance Co., [2005] O.J. No. 3266 (S.C.J.) at paras. 1, 22-24; Health Body Services Inc. v. Muscletech Research & Development Inc., [2001] O.J. No. 3257 (S.C.J.); Co-operative Insurance Society Ltd. v. Argyll Stores (Holdings Ltd.), [1997] 3 All E.R. 297 (H.L.).

ProPurchaser.com Inc. v. Wifidelity Inc., 2017 ONSC 7307

Case Summary

A. Introduction

B. Factual Background

C. Discussion and Analysis

D. Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 1

Legal Tests 1