Court File and Parties

Court File No.: CV-21-00664233 Date: 2021-06-29 Superior Court of Justice – Ontario

Re: Parnes Rothman LLP, Plaintiff/Moving Party And: DoProcess LP and Dye & Durham Limited, Defendants/Responding Parties

Before: Mr. Justice Chalmers

Counsel: J. Renihan, M. Law and J. Lachance, for the Plaintiff S. Campbell, for the Defendants

Heard: June 28, 2021, by videoconference

Endorsement

Overview

[1] The Plaintiff, Parnes Rothman LLP is a residential real estate law firm. It uses "Conveyancer" which is a software platform that facilitates the closing of real estate transactions. Conveyancer was developed by the Defendant, DoProcess LP. DoProcess licences the use of the software with an End User Licence Agreement (EULA). On June 15, 2021, DoProcess terminated the Plaintiff's access to the Conveyancer software effective immediately. Without access to the software, the Plaintiff was unable to close its real estate transactions. The Plaintiff brought a motion for an interlocutory injunction to enjoin the Defendants from terminating the Plaintiff's access to the Conveyancer software.

[2] For the reasons set out below, I allow the Plaintiff's motion and grant the relief sought.

BACKGROUND FACTS

[3] The Plaintiff has used the Conveyancer software for approximately 20 years. The software is described by DoProcess as being "mission critical" for a real estate law practice. The software allows the firm to automate its documentation and manage the entire real estate transaction process. Although the software has been updated over the years, DoProcess considers the software to be "very outdated". DoProcess plans to phase out Conveyancer and replace it with a new software called "Unity". It is expected that Unity will be fully implemented by December 31, 2021.

[4] In December 2020, DoProcess was acquired by Dye & Durham. Following the purchase, the fees for using the software increased from $25 per file to $129.

[5] The principals of the Plaintiff firm, Shayle Rothman and Eric Rabkin were of the view that Conveyancer had limitations. They formed iClose for the purpose of developing a new platform for real estate transactions. After the dramatic price increase for the use of the Conveyancer software in December 2020, they accelerated their efforts to develop the software. In January 2021, iClose provided notice to the profession announcing the software and advising of their intention to release iClose in the third quarter of 2021.

[6] In February 2021, DoProcess amended the EULA to provide a right to terminate the agreement at its discretion on ten business days' notice. Pursuant to the EULA, DoProcess had the right to unilaterally amend the agreement, as long as notice is provided to the users. Notice was provided through a "pop-up". The pop-up notification appeared when a user opened Conveyancer. The pop-up did not set out the nature of the amendment. The user had to click "OK" to continue using the software. If one of the lawyers or clerks in the firm using the software clicked OK, the pop-up would not reappear. The Plaintiff argues that it did not receive any meaningful notice of the change to the EULA.

[7] DoProcess states that it required the right to terminate the EULA to allow it to protect its intellectual property and to terminate the agreement once Conveyancer was retired and replaced with Unity. It is not clear in the evidence before me as to how the right to terminate protects the IP. Dye & Durham's COO, James Robinson states that in March 2021, he began to have concerns that iClose was leveraging its knowledge of the Conveyancer software to create a new software application. He does not state what led to those concerns. On March 25, 2021, DoProcess advised the Plaintiff that it would be terminating its access to Conveyancer because of iClose's development of competing software. The Plaintiff objected to the termination. The Defendants expressed interest in acquiring iClose. Rothman and Rabkin stated that they would not discuss a purchase of iClose until access to Conveyancer was restored.

[8] On April 21, 2021, Rothman and Rabkin met with Andrew Purnam of DoProcess. According to Rothman, Putnam committed that DoProcess would not terminate the access to Conveyancer so long as the Plaintiff migrated to iClose once able to do so and that they keep DoProcess advised of their progress. Although the Defendants deny that DoProcess made a commitment, no affidavit evidence was filed from Putnam disputing Rothman's evidence of what went on at the meeting. Robinson admits the discussion took place, but states that the commitment was "non-binding". He does not set out the source of his belief that the commitment was non-binding.

[9] On June 10, 2021, Robinson contacted Rothman and Rabkin and stated that he was under pressure to terminate the Plaintiff's access to Conveyancer. On June 11, 2021, Robinson asked Rabkin to propose a sale price for iClose. He requested the proposal by Monday, June 14, 2021. Rothman and Rabkin delivered a proposal on June 14, 2021. The Defendants disagreed with the amount proposed. The Defendants did not present a counterproposal. On June 15, 2021, at 9 a.m., DoProcess delivered notice that it was terminating the Plaintiff's access to Conveyancer effective immediately. As a result of the termination, the Plaintiff could not access client files or close any transactions. According to the Plaintiff the termination was made during one of the busiest periods in the firm's history. The Plaintiff asked for service to be restored. Robinson stated that service would be restored if Rothman and Rabkin agreed to sell iClose at a lower price than they proposed on June 14, 2021.

[10] The Plaintiff brought a motion for an urgent interim injunction. The matter came before Justice Vermette on a case conference on June 16, 2021. The injunction hearing was scheduled for June 28, 2021. The Defendants were not prepared to agree to interim terms pending the hearing of the injunction motion. Justice Vermette ordered the Defendants to provide to the Plaintiff the same access to Conveyancer the Plaintiff had prior to June 15, 2021 pending the hearing of the injunction.

[11] The injunction was argued before me on June 28, 2021. During argument, counsel advised that there were "with prejudice" offers exchanged by the parties on June 27, 2021. The Defendants offered to restore access to Conveyancer to the Plaintiff until September 1, 2021 at 6 p.m. The Plaintiff offered to settle the matter on the basis that access to Conveyancer would be until October 1, 2021 at 6 p.m. The parties agree that the primary difference between the offers was the period the Plaintiff would have access to Conveyancer.

ANALYSIS

[12] Section 101 of the Courts of Justice Act, R.S.O. c. C.43, provides that an interlocutory injunction may be granted where it appears to the judge to be just or convenient to do so.

[13] The test for granting an injunction is not in dispute. The test consists of three parts:

a. there is a serious issue to be tried;

b. the moving party will suffer irreparable harm if the relief is not granted; and

c. the balance of convenience favours granting the injunction: RJR MacDonald Inc. v. Canada (Attorney General) 1994 117 (SCC), [1994] 1 SCR 311.

[14] The test is to be considered as a whole. Strength in one part of the test can make up for a weakness in another. The court is to consider, in light of the three-part test whether the injunctive relief is appropriate: Struik v. Dixie Lee Food System Ltd. 2006 27574 (ONSC) at para. 35-36.

Serious Issue to be Tried

[15] The Plaintiff is seeking an order enjoining the Defendants from terminating access to the Conveyancer software. An order to restrain the Defendants' conduct and prohibit a breach of the EULA is not a mandatory order. I am satisfied that the proper test is whether there is a serious issue to be tried: R. v. Canadian Broadcasting Corp. 2018 SCC 5, at para. 16.

[16] The Plaintiff states that the evidence is uncontroverted and that at the meeting on April 21, 2021, DoProcess agreed to not terminate the Plaintiff's access to the Conveyancer program until the Plaintiff can transition to iClose. The Plaintiff states that it relied on this statement and continued with its real estate practice without taking steps to transition to another software provider. The Plaintiff also argues that DoProcess breached its duty of good faith and honest performance. The Plaintiff states that the termination of the EULA was not for a legitimate purpose but instead was designed to put pressure on Othman and Rabkin to sell iClose at a reduced price.

[17] The Defendants argue that it had the right, pursuant to the EULA, to amend the agreement as long as notice was provided. It amended the agreement to allow it to unilaterally terminate the agreement. It provided notice to the Plaintiff through the "pop up". It then terminated the EULA as it had a legal right to do so. The Defendants argue that the termination was because of concerns that the Plaintiff was using information through their use of the Conveyancer program to create the new iClose software. Counsel for the Defendants conceded in argument that the Plaintiff had been developing the iClose software since at least January 2021. There was nothing that changed on June 15, 2021 to bring about the termination. Counsel argued that the termination was not in bad faith and that the timing of the termination on June 15, 2021 was not related to Rothman and Rabkin's offer to sell iClose on June 14, 2021.

[18] It is my view that whether there was a binding commitment to not terminate the EULA, there is a serious issue to be tried. The allegation that the Defendants breached their duty of good faith dealings is also a serious issue to be tried. Counsel for the Defendants did not strongly disagree that the consequences of the April 2021 meeting is a serious issue to be tried.

Irreparable Harm

[19] The Plaintiff argues that it will suffer irreparable harm if the injunction is not granted. There will be an inability to close real estate transactions. Third parties could suffer losses which may result in litigation. The Plaintiff's reputation may be harmed. The Plaintiff also states that the EULA includes a limitation of liability under the agreement to $500. The Plaintiff states that the limit of liability presents a risk to the recovery of damages and results in irreparable harm: Thales Rail Signaling Solutions v. TTC, 2009 21766 (ONSC) at para. 31.

[20] The Defendants made a "with prejudice" offer that the Plaintiff will continue to have access to Conveyancer until September 1, 2021. The Defendants argue that there is no irreparable harm to terminate access on September 1, 2021 rather than October 1, 2021. The Defendants argue that September 1, 2021 is a reasonable date to terminate. They note that the Plaintiff intended to start iClose in the summer of 2021 and in its press release in January 2021 the software will be available in Q3 of 2021. If iClose is not available by September 1, 2021, there are other software products available such as RealtyWeb. The Defendants concede that it may be inconvenient for the Plaintiff to convert to a different software, but states that the inconvenience does nor reach the degree of irreparable harm required for an injunction.

[21] I am satisfied that if the Plaintiff's access to Conveyancer is terminated before the Plaintiff can transition to iClose, the Plaintiff will suffer irreparable harm. It will be unable to close transactions and face exposure if transactions cannot close. If iClose is not available by September 1, 2021, the Plaintiff will be required to transition to a different software program quickly, and then transfer to iClose when that software program is ready. The cost and work involved in multiple transfers to different software programs is significant given the Plaintiff's very busy real estate practice.

Balance of Convenience

[22] Counsel for the Plaintiff argues that it is "overwhelmingly clear" that the balance of convenience supports a finding that it is just to grant the injunction in this case. He states that there is no evidence of harm to DoProcess if the injunction is granted. DoProcess will continue to receive payment from the Plaintiff for each transaction. On the other side, the Plaintiff will be highly inconvenienced by having to transition to a different software program.

[23] The Defendants made a "with prejudice" offer to settle the motion on the basis that the Plaintiff's access to Conveyancer will not be terminated before September 1, 2021. Counsel for the Defendants argue that it is reasonable to terminate as of September 1, 2021 because it provides enough time to allow the Plaintiff to transition to a different software. Counsel for the Defendants state that access until October 1, 2021 was unreasonable because the extra month will give the Plaintiff more time to learn about the Conveyancer program. I do not accept this argument. The Plaintiff has been using Conveyancer for 20 years and has been developing the iClose product since at least January 2021. I am satisfied that the extra month will not result in the Plaintiff obtaining any more information about the software.

[24] It is my view that as between the termination of the Plaintiff's access to the Conveyancer software as of September 1, 2021 and termination of access as of October 1, 2021, the balance of convenience favours the Plaintiff. The transition to a new software before iClose is ready will result in significant costs and inconvenience to the Plaintiff. On the other hand, the only effect on the Defendants in allowing access to October 1, 2021 is that the Defendants will continue to collect fees from the Plaintiff for each transaction.

Conclusion

[25] I am satisfied that in considering the test as a whole, it is just and convenient to grant the injunction. The Plaintiff has established each component to the three-part test for an injunction. The Defendants made a "with prejudice" offer to not terminate the Plaintiff's access to the Conveyancer program until September 1, 2021. The Defendants take the position that allowing access to October 1, 2021 is unreasonable. No valid reason was provided as to how the Defendants will be affected if the injunction is granted for an extra month.

[26] The Plaintiff intends to transition to the iClose software as soon as it is available. I am of the view that the balance of convenience favours allowing the Plaintiff to have access to the Conveyancer software until iClose is ready. However, this cannot be open-ended. As argued by counsel for the Defendants this may result in a disincentive for the Plaintiff to move to the iClose software. In addition, the Defendants are phasing out the Conveyancer software. It is expected the software will be "retired" as of December 31, 2021.

DISPOSITION

[27] I grant the Plaintiff an interlocutory injunction preventing the Defendants from interfering with the Plaintiff's full access to the Conveyancer software platform until the date the Plaintiff transfers to the iClose software, or December 31, 2021, whichever is earlier.

[28] The Plaintiff is successful on the motion and is presumptively entitled to its costs. After argument, I asked both parties to provide their Bill of Costs. The Plaintiff's Bill of Costs is in the amount of $47,708.47 on a partial indemnity basis inclusive of counsel fee, disbursement and HST. The Defendants' Bill of Costs is in the amount of $48,363.53 on a partial indemnity bases inclusive of counsel fee, disbursement and HST. If the parties are unable to agree on costs, the Plaintiff may make written submissions of no more than 3 pages in length excluding caselaw within 10 days of the date of this endorsement. The Defendants may provide their reply on the same basis within 10 days of receiving the Plaintiff's submissions.

DATE: JUNE 29, 2021