Sunsource v. University of Windsor, 2022 ONSC 6047

COURT FILE NO.: CV-13-20063

DATE: 20221028

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Sunsource Grids Inc.

Plaintiff

– and –

University of Windsor

Defendant

Hashim Syed, for the Plaintiff

Tom Serafimovski and Josephine Stark, for the Defendant

HEARD:

May 22, 23, 24, 25, 28, 29, 30, 31, 2018, June 1, 7, 8, 25, 26, 27, 2018,

October 9, 10, 11, 12, 16, 17, 18, 19, 2018,

December 10, 11, 12, 13, 14, 2018,

April 29, 30, 2019, May 1, 2, 3, 2019,

November 25, 26, 27, 2019,

December 10, 11, 12, 2019,

January 13, 14, 15, 2020,

September 30, 2020, October 1, 2, 2020

November 19, 20, 2020,

November 25, 30, 2021, December 2, 2021,

and Additional Written Submissions

REASONS FOR JUDGMENT

VERBEEM J.

I NATURE OF THE PROCEEDINGS

[1] The plaintiff, Sunsource Grids Inc. (“Sunsource”) brings this action for damages in the amount of $40 million for breach of contract, misrepresentation, and intentional unlawful interference with its economic relations ($14.5 - $15.6 million as compensatory damages and $25 million as punitive damages).

[2] The plaintiff’s claim primarily arises out of the University’s asserted non‑performance of, and other circumstances surrounding, a research agreement between the parties operable from May 1, 2012 to March 31, 2013, pursuant to which the University of Windsor (“the University”) agreed to carry out specified pre-commercialization, highly experimental, scientific research and development activities with respect to a project entitled “Power Point Tracking Based Smart Switch Development for Seamless Transfer Between Solar PV and Grid” (the “FedDev Project”), based on a seamless power switching concept.

[3] Sunsource’s principal, Marlon Hurst, specifically sought out the University to assist in specified, pre-commercialization research and development activities related to the switch concept.

[4] Prior to the term of the research agreement, the University and Mr. Hurst’s sole proprietorship business, Marcom Systems, were involved in a research project from November 1, 2011 to April 30, 2012, primarily funded through a Natural Sciences and Engineering Research Council of Canada (“NSERC”) grant, during which the University theoretically validated that the switch concept was scientifically viable.

[5] The parties agree that all the intellectual property (“IP”) developed during the NSERC project was owned exclusively by Sunsource. Sunsource applied for a provisional patent with respect to that IP in the United States.

[6] Prior to the conclusion of the NSERC project period, Mr. Hurst incorporated Sunsource. The provisional patent was assigned to it.

[7] Shortly before the expiry of the NSERC project, the parties successfully applied for $50,000 in grant funding from the Federal Economic Development Agency for Southwestern Ontario (“FedDev”) through its Applied Research and Commercialization Initiative (“ARC”) in relation to a new project by the parties that was intended to incrementally advance the University’s research and development activities related to the seamless solar PV switch concept (the FedDev funded project).

[8] On June 8, 2012, the parties executed a research agreement that governed the conduct of the new project and prescribed the parties respective performance obligations. The terms of the research agreement will be addressed in more detail throughout these reasons, but in broad terms, it prescribed:

• The term of the FedDev funded project was May 1, 2012 to March 31, 2013.

• The University would carry out and implement the “Power Point Tracking Based Smart Switch Development for Seamless Transfer Between Solar PV and Grid” and it would provide deliverables at the end of the project period, consisting of:

» a complete solar PV grid-mimicking hardware-based prototype (3 kW nominal throughput); and

» a novel control algorithm.

• Sunsource’s consideration under the contract was specified as in-kind contributions comprised of:

» 400 hours of labour services to support the project;

» Solar panels and racking materials and the installation of a 1.5 kW upgrade to a solar panel array at the University; and

» Materials and components required to carry out the project, which the parties agree included the components required by the University to build the hardware prototype.

• All IP developed during the project was jointly owned by the parties (a requirement of the FedDev ARC grant).

• An acknowledgment that Sunsource exclusively owned the IP arising from the NSERC project, which was expressly identified as pre-existing background IP that the University was permitted to “use” during the FedDev-funded project term.

[9] Owing to Sunsource’s concerns over the joint IP ownership prescribed by the research agreement, the parties also entered into a separate option agreement on June 8, 2012, that allowed Sunsource to acquire all of the University’s IP rights in the proposed switch technology for $300,000 and a time-limited royalty. The option agreement expired on March 31, 2013. It was not exercised.

[10] To be clear, the parties’ research agreement governed the conduct of the project that was funded by the FedDev grant. The agreement and the project had the same period (May 1, 2012 to March 31, 2013). Throughout these reasons, the terms “research agreement’s term” and “the FedDev project period” will be used interchangeably.

[11] Sunsource did not supply any of the equipment and materials it was ostensibly obligated to provide pursuant to the research agreement. It posits that it did not install the solar upgrade because: the parties made an oral agreement during the term of the research agreement to defer performance of that obligation until after the FedDev project period ended; and the upgrade was not necessary during the project period. It further posits that it did not provide the components required for the hardware prototype because the University never requested that it perform that obligation during the project period.

[12] The plaintiff alleges that the University did not perform any work of substance during the project period, no progress was made, and no incremental IP was developed.

[13] The University disputes the plaintiff’s positions identified above. It submits substantial progress was made during the project, a functional control algorithm capable of operating in a simulated setting was developed together with related IP. It acknowledges that it did not deliver a hardware-based prototype at the end of the project period, but submits it was unable to do so because the plaintiff did not provide the components to build the prototype, despite the parties’ periodic discussions about them.

[14] In the absence of the plaintiff’s performance of its contractual obligations, the University says it did its best to fulfill as much of its deliverables obligations as possible by providing the plaintiff with a CD at the end of the project period that contained the functional control algorithm, source code explanation, and the specifications of the components required for the hardware prototype.

[15] The University also disputes that an oral agreement was made to defer Sunsource’s obligations related to the solar upgrade, which the University asserts was necessarily required to be performed during the project period.

[16] The plaintiff’s action is premised, in part, on allegations that the University engaged in misconduct in the formation of the research agreement contract, its performance of the contract, and false representations it made to the plaintiff concerning its contractual performance. The plaintiff also alleges that the University engaged in intentional tortious conduct during the term of the contract and after its conclusion that was intended to and did, in fact, unlawfully interfere with the plaintiff’s economic relations. Specifically, Sunsource alleges that the University:

a) unduly and unfairly pressured it to execute the research agreement even though the plaintiff was not satisfied with the contract’s terms;

b) counselled it to falsely exaggerate the value of its proposed contributions in the parties’ grant proposal for funding through the FedDev ARC initiative, despite the plaintiff’s objections;

c) engaged in little, if any, of the research and development activities that the University was obligated to perform under the terms of the research agreement;

d) misallocated the federal grant proceeds that it received from the FedDev for the research agreement, to other unrelated University projects, in which the plaintiff was not involved;

e) falsified documents that it filed with the FedDev administrator concerning the identities of students who contributed to the project;

f) wrongfully denied the existence of the parties’ oral agreement and falsely asserted that the plaintiff’s failure to deliver its in-kind contributions during the term of the research agreement constituted a breach of the contract by the plaintiff;

g) consistently lied to the plaintiff about the status and results of the research project;

h) had an obligation under the research agreement to support the plaintiff’s application for a utility patent with respect to IP related to the switch concept that was developed before the parties entered into the research agreement and failed to do so;

i) had an obligation under the research agreement to support Sunsource’s efforts to obtain private sector investors and investments during the term of and after the research agreement and failed to do so;

j) failed to provide its contractually prescribed deliverables at the end of the research agreement’s term, including a functional control algorithm and hardware-based prototype of the switch technology.

[17] In addition to the University’s alleged contractual breaches, Sunsource alleges that relatively late in the research agreement’s term, the University realized that the switch concept had substantial commercial value and that the switch concept had attracted the interest of third parties, including General Electric (“GE”) and an entity known as Vengeance Power Incorporated (“Vengeance” or “VPI”).

[18] VPI was a privately held company in the process of developing an innovative waste heat generator system capable of producing electricity from waste heat expelled by commercial boilers. In February 2013, Mr. Hurst learned that VPI was preparing to field test a prototype of its generator system but required a seamless switch, before it would be allowed to connect its generator to the utility grid. The Sunsource switch concept offered VPI a potential solution. In April 2013, after the research agreement’s term ended, the University and Sunsource entered into a two-month period of negotiations with respect to a new development agreement for specific research and development activities related to a potential switch for use with the VPI waste heat generator (which differed in scale and scope from the subject matter of the research agreement).

[19] The plaintiff asserts that during that two month period, the University took active steps to: usurp the switch technology solely for its own benefit; undermine Sunsource’s utility patent application, with a plan to apply for its own patent, to the exclusion of Sunsource; withheld important IP information requested by Sunsource’s potential investor, which ultimately undermined Sunsource’s ability to attract investment financing; withheld important technical information from Sunsource in order to extract more favourable terms during the parties’ post-FedDev development agreement negotiations; and actively misrepresented IP ownership and Sunsource’s role in the project to VPI for the purpose of eliminating Sunsource from any further involvement in the VPI project.

[20] Sunsource alleges that the University’s negligent and/or fraudulent misrepresentations to VPI constitute “unlawful means”, through which the University intentionally interfered with Sunsource’s economic relations.

[21] The University denies that it engaged in any misconduct or malfeasance in its performance of the contract or otherwise. It denies the totality of the allegations set out above. It reasons that during the project period, several of its students, under the supervision of the project’s principal investigator, Dr. Narayan Kar, engaged in extensive research and development activities, and made substantial progress. A functional control algorithm was developed during the project period.

[22] The University acknowledges that it did not deliver a hardware-based prototype, but explains that it failed to do so because Sunsource did not meet its contractual obligation to provide the components required to build the anticipated prototype. Further, Sunsource did not meet its contractual obligations to deliver a 1.5 kW solar array upgrade during the research agreement term, that was required in order to develop a more reliable prototype.

[23] The University denies that it had an obligation to support Sunsource’s efforts to attract investors or to support Sunsource’s application for a utility patent arising out of IP that pre-dated the research agreement’s term and was exclusively owned by Sunsource.

[24] The University denies that it made any misrepresentations to members of VPI, or anyone else, and it did not intentionally interfere with Sunsource’s economic relations.

[25] The University also denies that it engaged in fraud in the manner that it allocated the proceeds of the FedDev ARC grant, or that it falsified records with respect to same. All of its FedDev filings were accurate and honestly made.

[26] The defendant counterclaims for the value of the equipment and material in‑kind contributions the plaintiff did not supply during the FedDev project period ($21,800).

[27] As a result of the University’s alleged misconduct, Sunsource submits that it lost commercial opportunities, lost investment opportunities, and ultimately lost the opportunity to commercialize the switch concept. It seeks compensatory damages in the amount of $14.5 - $15.6 million on account of the “total loss of the value” of its business at an assumed damage date of April 30, 2013, calculated as the present value of its discounted assumed annual future discretionary cash flow, in perpetuity.

[28] The University submits that the damages claimed by Sunsource are: too remote to be recoverable; alternatively, amount to “consequential damages” and are therefore excluded pursuant to an exclusive clause in the research agreement; and in any event are properly quantified as nil.

II THE PARTIES’ STATED ISSUES

[29] The parties frame the issues for determination quite differently.

[30] The plaintiff characterizes the issues in a broad manner, as follows:

1. Is the University liable to Sunsource for its attempts to usurp Sunsource’s intellectual property and for interfering with Sunsource’s attempts to negotiate financing or sales agreements with other parties?

2. If so, what are the damages arising from the University’s conduct?

3. Did the University request any “in-kind” contributions from Sunsource that it failed to provide?

[31] The Defendant frames the issues as follows:

1. Whether there was a breach of the Research Agreement entered into by the University and the Plaintiff on or about May 1, 2012?

2. If there was a breach of the Research Agreement by either party, what is the measure of damages, if any?

3. If the University breached the Research Agreement, did the Plaintiff fail to mitigate its damages?

4. Whether the University intentionally interfered with the economic interests of the Plaintiff?

5. Whether either party is liable for consequential damages given the exclusion clause in paragraph 17.1 of the Research Agreement?

6. Whether there was an oral agreement between the parties [with respect to deferring the Plaintiff’s obligation to provide the additional solar array until after the Fed Dev project period]?

7. Whether the University made any misrepresentations to the Plaintiff?

8. Whether there is a claim for loss of chance/opportunity by the Plaintiff?

9. Whether the court should draw an adverse inference from the Plaintiff’s failure to call witnesses.

[32] The defendant’s characterization of the issues is preferable in determining the parties’ respective claims. The plaintiff’s characterization of the issues is predicated on an assumption that the University did, in fact, attempt to usurp its IP and that it interfered with Sunsource’s attempts to negotiate financing and sales contracts. Those are heavily disputed allegations.

[33] Therefore, these reasons are generally structured in a manner that more closely accords with the defendant’s stated issues. Specifically, in determining the issues of liability and damages between the parties, I will employ the following structure:

A) Contextual Chronology and Evidence: I will set out the contextual chronology and substance of relevant events between the parties and identify the material conflicts in the available evidence that informs the factual determinations necessary to resolve the issues.

B) Credibility/Reliability Assessments: I will then assess the credibility of five key factual witnesses (Mr. Hurst, of Sunsource, and the following members of the University: Dr. Kar, Horst Schmidt, Heather Pratt, and Vesna Kaps), and the reliability of their respective evidence, and explain the evidence I accept and reject.

C) Key Factual Findings: I will set out the key factual determinations on disputed material events, based on the accepted evidence.

D) Liability Determinations: I will first determine the breach of contract (ie. the research agreement) allegations by interpreting the contract, determining the extent, if any, of either parties’ breach, and deciding whether the defendant breached its duty of honest performance of the contract. I will then determine whether the plaintiff has established the elements of the tort of intentional interference with economic relations. Ultimately, I will explain why I am not persuaded that the plaintiff has established that the University breached the contract, acted in bad faith, or committed the alleged tort. I will also explain my conclusion that Sunsource breached the contract.

E) Damages Determinations: Here, I will provisionally assess the plaintiff’s damages primarily on the assumption that the University’s failure to deliver a hardware prototype was a breach. In so doing, I will explain my reasons for concluding that Sunsource’s damages claim for VPI-related losses and for the value of the total loss of its business are too remote to be recoverable, in contract. I will detail and assess the expert evidence adduced by the parties on the solar PV/grid switch concept’s “commercial viability” and explain my reasons for concluding it was not commercially viable technology.

I will then assess the expert evidence adduced by the parties on damages quantification and explain my reasons for rejecting the plaintiff’s expert’s “conclusion as to damages” calculated at $14.5 - $15.6 million.

I will then interpret and provisionally apply the parties’ contractual exclusion for liability for “consequential damages”.

Next, I will provide a provisional damage assessment of the loss of value of the prototype as the measure of damages for the assumed breach. I will also offer provisional compensatory damage and punitive damage assessments in contract and tort, assuming all of the plaintiff’s allegations of the University’s improper and improperly motivated conduct are true.

Lastly, I will quantify the University’s damages in the counterclaim.

III SUMMARY OF DISPOSITION

[34] For the reasons that follow, I conclude that the plaintiff has failed to establish on a balance of probabilities that the University breached the research agreement or that the University committed the tort of unlawful interference with economic relations. As a result, I conclude that the action should be dismissed.

[35] In the event that I have erred in my determination of whether the University breached the contract, I will provisionally assume that the University’s breach was its failure to deliver a hardware-based prototype (despite not receiving the components required for same from the plaintiff), the value of which I have determined to be $30,000 based on the available evidence.

[36] I further conclude that the defendant has demonstrated that Sunsource breached the research agreement by failing to supply any of its required in-kind contributions, which are cumulatively valued at $21,800 in the research agreement.

[37] As a result, the action is dismissed. The counterclaim is allowed. Damages against Sunsource are assessed at $21,800.

[38] My reasons for the foregoing disposition follow. Before setting them out, I will briefly observe that these reasons follow a very lengthy trial that unfolded over the course of three and one-half years. The extended period over which the trial was conducted was a function of a number of factors, including: the parties significant underestimation of the time required for trial (six weeks) and the periodic need to schedule multiple additional weeks of trial time; my own involvement in several other lengthy proceedings while this trial was ongoing; counsel’s unavailability for several weeks of earlier trial times offered by the court; my inability to preside in court for two very lengthy periods of time owing to medical reasons; and the court’s COVID-19 related closures.

[39] I now turn to my reasons for judgment.

IV REASONS FOR JUDGMENT

A) CONTEXTUAL CHRONOLOGY AND EVIDENCE

[40] A significant volume of documentary and viva voce evidence was adduced in this lengthy 50-day trial. I do not purport to detail it all in these reasons. Rather, I will set out a narrative contextual background of the chronology and relevant events, disclosed by the evidence as a whole, that informs the parties’ disputed issues and I will highlight the evidentiary discrepancies on material issues that I will subsequently resolve later in these reasons.

(a) The Genesis of the Switch Concept

[41] Mr. Hurst incorporated Sunsource in 2011, with the intent that it engage in activities related to the development of “solar technologies”. Prior to incorporating Sunsource, Mr. Hurst operated a sole proprietorship, “Marcom Systems”, and carried on business as a solar panel system installer. Between 2008 and 2010, Marcom Systems installed between 200 to 300 solar power systems for customers operating under the provincial government’s “Feed-In-Tariff (FIT) Program” which was operable in Ontario at the time. Under the FIT program, individual power producers were able to sell solar PV generated power to utility grids at a fixed price. To do so, the individual power producers’ respective solar arrays were connected directly to the grid. Under FIT, none of the generated solar power was used by the individuals to power their own loads. The FIT program was exceptionally successful but eventually, was discontinued in the late 2010’s.

[42] The Sunsource switch concept was conceived during Mr. Hurst’s solar panel installation work. In 2010, one of his customers broadly described the solar/grid switch concept to Mr. Hurst. Mr. Hurst found merit in the idea and ultimately envisioned a “seamless’ switch that would allow an end-user to “alternate” between a solar PV source and the utility grid, in order to power their own facility’s power load. Unlike the FIT program, this would allow an “individual user” to directly use some of the potential energy generated by its own solar PV source to power its own load.

(b) The Switch Concept

[43] In accordance with its conceptual design, an individual user utilizing the seamless switch concept will never benefit from all of the power that could potentially be generated by its solar PV system. Neither the real-time power demand of the user’s load or the real-time amount of potential energy available from a solar PV source remain static over time. Energy from a solar PV supply varies over time based on factors such as the time of day, the season and prevailing cloud cover. Invariably, there are times when a user’s power demand exceeds the potential energy that the solar PV system can generate, at that time. The switch concept envisions that when the solar PV source is capable of supplying power sufficient to completely “power the real time demand of the load”, the switch disconnects the load from the utility grid and connects it to the solar source. Conversely, when the power capable of being supplied from the solar source cannot completely power the load, the switch disconnects the load from the solar source and connects it to the utility grid. The load remains connected to the utility grid until the PV source is once again capable of completely powering the load.

[44] The Sunsource switch concept is premised on an “all or nothing” approach to an end user’s ability to utilize the power that is potentially available from their solar PV system. Conceptionally, the switch’s functional design allows the individual user to rely exclusively on the energy generated from the solar PV system to meet its load demand whenever the solar PV source is capable of producing energy that is equal to, or greater than, the end user’s current real-time load demand. However, in those circumstances, any solar PV generated energy in excess of the load’s current demand, is not used or stored. Instead, it is wasted. The end-user gains no benefit from any energy generated, in excess of the load’s demand.

[45] Conversely, when the solar PV source is not capable of supplying enough energy to completely power the end user’s current load demand, none of the power that could potentially be generated by the solar PV source is utilized or stored for future use. Instead it is wasted. Even in circumstances where the solar PV source is capable of generating energy that is capable of powering 95 percent or any other percentage that is less than 100 percent of the end user’s current load demand, none of that energy is actually used and the load remains connected to the grid.

[46] Despite the straightforward nature of the switch’s basic concept, it’s development and implementation posed several complex technical challenges related to: ensuring that power was never supplied to the utility grid itself; switching seamlessly with no power interruption or surge; and the development of proper synchronization, fault detection, monitoring, and protection schemes.[1]

[47] The switch concept design does not contemplate the use of batteries to store generated power for later use. Therefore, the use of a Sunsource switch concept in a designed solar PV system will always result in some wasted generated or potential generated solar PV energy except in the relatively rare instance where load demand is exactly equal to the potential solar PV energy available from the solar array. The switch’s design stands in contrast to other commercially available solar PV system designs and power arrangements that allow end-users to consistently derive a benefit from 100 percent of the energy capable of being produced by the solar PV system, in a manner that is less expensive than the proposed Sunsource switch.

[48] As I will detail later in these reasons, the expert evidence that I accept establishes that: the Sunsource solar PV switch’s “all or nothing” function (as envisioned by Mr. Hurst) constitutes a “fatal flaw” in its design; the switch concept, even if commercialized was not commercially viable in either grid-tie applications or off-grid applications; and the seamless switch envisioned by Sunsource was less efficient and more costly to end-users than other available products and power arrangements.

(c) The NSERC Project

[49] Mr. Hurst lacked the technical acumen to develop the switch concept on his own. During the period of 2011-2013, he received assistance with certain business development activities from Amanda Gellman, a member of a “business accelerator” program in Windsor. Marcom Systems eventually approached the University’s Faculty of Engineering in August 2011, to solicit the University’s assistance in conducting preliminary pre-commercialization research and development related to the switch concept.

[50] In early September 2011, Mr. Hurst met with Dr. Narayan Kar, a professional electrical engineer and a professor in the University’s electrical engineering department, and Dr. Kaushik Mukherjee, a professor of electrical engineering and a visiting professor at the University.

[51] Dr. Kar is exceptionally qualified. He holds a Masters degree and PhD in electrical engineering. His research focuses primarily on synchronous machines, electric machines and power electronics and controls. He was hired as an assistant professor at the University in 2003, became an associate professor in 2007, and a fully tenured professor in 2014. Eventually, he was appointed to a ten-year term as a Canada Research Chair. He is well published. Since 2003, he has continuously operated a research laboratory at the University, in which he and the many post-graduate students that he supervises, simultaneously engage in multiple research projects.

[52] As a result of their September 2011 meeting, Dr. Kar was willing to assist Mr. Hurst with research and development associated with the seamless switch concept. He advised Mr. Hurst about various grants that were potentially available for funding the anticipated research. Dr. Kar disclosed that neither he nor Dr. Mukherjee had prior experience in the solar power area. Dr. Kar did not view that as an impediment to conducting research associated with the switch concept because the project would focus on managing the energy after it was produced by the solar panels, which fell within his expertise.

[53] The research agreement primarily at issue in this action was not the first collaboration involving the switch concept. Marcom Systems and the University applied under the NSERC program in October 2011 for research funding in the amount of $25,000, for the purpose of partially funding the salaries of the research students contributing to the project and to purchase the requisite equipment to conduct the anticipated research. Under the terms of the NSERC grant, Marcom Systems, as an industry partner, was not required to provide any cash contribution towards the project. Instead, it committed to providing “in kind” contributions consisting of: materials and equipment deemed essential for the research project and valued at $2,800, including solar panels and installation; and additional in-kind labour contributions totalling ten hours per week (from Mr. Hurst) over a period of six months, valued at $77 per hour (a total value of $20,000).

[54] The parties’ NSERC grant application was approved on November 1, 2011. Their application contemplated that over a six-month project period (November 1, 2011 to April 30, 2012), the University, with Marcom Systems’ assistance would “design and develop” a PV-based controlled 3-phase 60 Hz AC supply system on a small laboratory scale, in order to demonstrate the effectiveness of the seamless power-transfer scheme between a utility grid‑based energy generation system and a solar PV-based energy generation system. The project was designed to: scientifically establish whether the design and implementation of such a system was possible; and if so, to ultimately design and implement the system at a much higher power and voltage level (ie. to “scale-up” the technology). The University’s “milestones and deliverables”, as proposed in the approved NSERC application were identified as:

1. A comprehensive grid mimicking hardware-based laboratory prototype (470 watts throughput nominal) with proper real-time control; and

2. A novel control algorithm to allow seamless power transfer between the developed PV-based grid mimicking prototype and the utility grid.

[55] Under the approved NSERC grant proposal, Marcom Systems’ obligations included providing Mr. Hurst’s in-kind labour and to supply the research team with the PV panels and inverter required to build the PV-based grid mimicking prototype. A task list and timeline were developed in that regard. The proposal indicated that block diagrams of the developed control scheme, detailed circuit diagrams, a write up of the development control algorithm and a work manual for the developed prototype would also be produced.

[56] During the NSERC project period, the University determined that a custom designed 70 kW semikron “inverter stack” capable of simulating solar panel functionality was necessary to further its “highly experimental” efforts to develop a solar switch prototype. Pending the design and procurement of the semikron, Marcom Systems was tasked with procuring a 10 kW 3‑phase Aurora inverter which would also assist in the development of the switch prototype by affording “hands on” inverter work experience to Dr. Kar’s students. The Aurora inverter was also required in the development of the switch, as it was intended to connect to the solar panels that Marcom Systems was required to provide, and convert solar PV generated DC power to alternating current AC power required by end-user loads.

[57] The NSERC milestones and deliverables were not achieved, and the majority of the task-related list was not completed before the expiry of the NSERC project, on April 30, 2012. The milestones and deliverables were not achieved, in part, because Marcom Systems did not install the requisite solar array or deliver the Aurora inverter until February and March of 2012, respectively (ie. approximately 1 - 2 months before the project’s termination date).

[58] In his evidence, Mr. Hurst acknowledges that the late timing of Marcom Systems’ provision of its in-kind contributions did not allow the University “much time” to produce the deliverables and milestones identified in the NSERC grant application. Mr. Hurst also testifies that he was generally satisfied with the work performed by the University’s students and professors during the NSERC project period. He had no complaints about the project, its timing, or the University’s efforts during the NSERC project. He shared a good relationship with Dr. Kar during that time.

[59] By April 30, 2012, the NSERC project period end date, the University had mathematically demonstrated that the technical challenges posed by the switch technology (including “seamless transfer”, without power interruption to the load) were theoretically capable of being resolved.

(d) Sunsource’s Provisional Patent

[60] The parties agree that pursuant to the terms of the NSERC grant, Marcom Systems owned 100 percent of the IP developed during the NSERC project. Prior to the conclusion of the NSERC project, Mr. Hurst incorporated Sunsource Grids Inc., which eventually applied for a provisional patent in the United States, with respect to the “solar switch technology”. There is a significant discrepancy in the evidence surrounding the circumstances leading to the patent application.

[61] Mr. Hurst testifies that in January 2012, he contacted a Windsor lawyer, Wissam Aoun, whom he had previously used to incorporate Sunsource to assist him in applying for a provisional patent. Mr. Aoun originally agreed to do so, but subsequently contacted Mr. Hurst and indicated that he had been advised by Heather Pratt, the University’s Director of Research and Innovation Services, that to do so would result in “a conflict of interest” because Mr. Aoun acted for the University in other patent matters that were unrelated to the Sunsource project or the switch technology. Mr. Hurst maintains that he then contacted Ms. Pratt, to gain a better understanding of the University’s position. Mr. Hurst testifies that Ms. Pratt advised him that Mr. Aoun worked for the University, and Mr. Hurst should find another lawyer. Mr. Hurst’s narrative is not confirmed by evidence from either Ms. Pratt or Mr. Aoun. Ms. Pratt denies the foregoing aspects of Mr. Hurst’s testimony. Mr. Aoun appeared as a witness at trial pursuant to a summons from the plaintiff, but he refused to provide fulsome testimony.

[62] Sunsource ultimately retained a Michigan-based patent attorney, Michael Raggio, to assist with its provisional patent application in the United States. Sunsource elected not to call Mr. Raggio as a witness at trial, and as a result, for reasons I will explain later, the court is left with a glaring absence of evidence from the plaintiff on critical issues in the determination of the plaintiff’s positions, both on liability and damages.

[63] There is no dispute that at Mr. Hurst’s request, Dr. Kar worked with Mr. Raggio to develop schematics that were used in Sunsource’s provisional patent application arising from the NSERC project.

[64] Mr. Hurst also testifies that in March 2012, he met with Dr. Kar, Horst Schmidt, who worked under Ms. Pratt in the University’s Office of Research Services (“ORS”), Dr. Mehrdad Saif, (the University’s Dean of Engineering), and the students who worked on the NSERC project. Mr. Schmidt was familiar with intellectual property issues and advised Mr. Hurst that the University personnel involved in the NSERC project would have to be identified as co-inventors on Sunsource’s provisional patent application. Mr. Hurst agreed, but he also believed that 100 percent of the IP created during the NSERC project was owned by his company. The University did not dispute that position at the time, or in the course of this trial. Mr. Hurst asserts that at the end of their meeting, Mr. Schmidt shook hands with everyone, except him.

[65] In his testimony, Mr. Schmidt confirms his understanding that the plaintiff’s predecessor, Marcom Systems, applied for a provisional patent with respect to the IP developed during the NSERC project. The University was not formally involved in the patent application process because it did not own any IP arising out of the NSERC project. He confirms that he attended a meeting with Mr. Hurst and others in March 2012, where he provided general information about the University’s policies surrounding IP and patents. He recalls Dr. Kar, Mr. Hurst, and a student were in attendance, but he does not believe that Dr. Saif was there. He agrees that he told the meeting participants that all inventors involved in “the invention” had to be named on the patent, which is required by patent office policy and is not a function of University policy. Mr. Hurst, Dr. Kar, Dr. Mukherjee, and three students (Dr. Iyer, Dr. Lu, and Ms. Kazerooni) were identified as “inventors” in Marcom Systems’ provisional patent application.

[66] Dr. Kar does not recall the meeting described by Mr. Hurst and Mr. Schmidt.

[67] On April 18, 2012, Mr. Raggio sent Mr. Hurst a draft of the provisional patent application for review and any necessary changes. The actual formal patent application that the plaintiff submitted was not adduced as evidence, although a draft of the application appears as “background IP” to the “research agreement” contract subsequently made between the parties. The draft application specifies that the “field of invention” of the IP developed under the NSERC grant “generally relates to a method and apparatus for a seamless power transfer system and more particularly relates to a method and apparatus between a solar photovoltaic grid, end-users and a power grid”. The field of invention does not expressly extend specifically to a seamless power transfer between end-users, a power grid, and an alternative energy source other than solar PV, such as a “waste heat generator”.

[68] Each of the University affiliated inventors executed an assignment of their rights as inventors to Sunsource. The assignments were recognized by the US patent office in July 2012. Mr. Hurst understood that once the inventors assigned their rights to Sunsource, Sunsource would exclusively own any patent resulting from the application.

[69] When Sunsource filed its provisional patent application in the United States on April 18, 2012, Mr. Hurst continued to believe that the switch concept was viable, but it needed to be refined through further research and development.

(e) The FedDev ARC Grant

[70] Towards the end of the NSERC project period, Dr. Kar advised Mr. Hurst that more funding was required in order to continue research and development of a prototype of the seamless switch. Mr. Hurst says he had many unsuccessful discussions with potential private investors to secure additional funding. Sunsource could not obtain any private-sector investment commitments and it did not have assets to fund further research efforts on its own.

[71] As a result, Dr. Kar advised Mr. Hurst about other potential grant sources to fund further research and development by the University, including the ARC Initiative funded through the FedDev. Unlike the NSERC grant, the terms of the ARC initiative required any IP developed during a FedDev funded project period to be owned jointly by the University and its participating industry partner, in this case Sunsource.

[72] Mr. Hurst says that he was initially reluctant to pursue funding through the FedDev for two reasons. First, he was concerned that it would be difficult to secure future private-sector investment in Sunsource if the IP developed under a FedDev funded research project was jointly owned with the University. Second, he asserts that as part of the FedDev grant application, Dr. Kar “coached him” to submit values for Sunsource’s proposed in-kind contributions that were fraudulently inflated.

[73] Despite his asserted reluctance, he says that Dr. Kar unfairly pressured him to proceed with a FedDev ARC grant application premised on fraudulently inflated in‑kind contribution values, by threatening that he would not appear at an April 27, 2012 media event about the switch concept. Mr. Hurst also says that Dr. Kar used the same threat to “rush” him into signing a new research agreement between the parties, made in accordance with the terms of the ARC program. He claims that it was only after he signed the agreement that Dr. Kar agreed to participate in the media event. Dr. Kar testifies that he attended the press conference on April 27, 2012 without preconditions or pressure being placed on Mr. Hurst.

[74] Curiously, despite Mr. Hurst’s evidence about the asserted pressure and tacit threats by Dr. Kar that rushed him to sign the research agreement, the face of the agreement reveals that Mr. Hurst did not execute it until June 8, 2012, which was over a month after the media event at the end of April.

[75] In early May 2012, the University and Sunsource submitted an application to the FedDev for an ARC funded grant in the amount of $50,000 (the maximum available under the program), which would primarily be used to fund student researchers. In order to qualify for that level of funding, Sunsource committed to providing in-kind contributions to the proposed research project ostensibly valued at $53,800. Sunsource did not commit to contributing cash.

[76] The potential grant amount and Sunsource’s corresponding in-kind contribution requirements were discussed by Dr. Kar and Mr. Hurst on April 25, 2012. Mr. Hurst testifies that he met with Dr. Kar and various students in his lab. Dr. Kar dismissed the students and when they were alone, he told Mr. Hurst to inflate the value of both his anticipated in-kind labour and equipment contributions.

[77] In his evidence, Dr. Kar agrees that he advised Mr. Hurst that the University required a letter from Sunsource outlining its anticipated contributions to the project in order to proceed with the application, but he did not provide proposed values for the material or equipment that Sunsource was proposing to contribute, as that is the responsibility of the industry partner. Dr. Kar emphatically denies that he coached Mr. Hurst to distort the value of Sunsource’s anticipated in-kind contributions. Instead he testifies that Mr. Hurst himself provided the values for Sunsource’s in-kind material and equipment contributions (including an upgrade to the solar array installed late in the NSERC project), which were within Sunsource’s expertise as the industry partner involved in the solar industry.

[78] Consistent with Dr. Kar’s evidence, he forwarded email correspondence to Mr. Hurst on April 25, 2012, confirming the requirement for documentation from Sunsource regarding its contributions and confirming the grant based on the amount they sought: Sunsource’s total contributions for time, materials and supplies should value no less than $50,000. Mr. Hurst responded, “sounds great!” Subsequently, he sent Dr. Kar an email proposing in-kind contributions by Sunsource as follows: 300 hours of labour at $100 per hour ($30,000); an additional 3-phase inverter ($6,000); an additional 1.5 kW solar grid and racking ($12,000), and sensors and communication equipment ($3,800).

[79] In response, Dr. Kar advised Mr. Hurst that under the provisions of the FedDev ARC Initiative, the maximum hourly rate for labour was $80 per hour. Then, in an email dated April 26, 2012, Mr. Hurst revised Sunsource’s proposed in-kind contributions as follows:

In-kind hours – 400 hours at $80 per hour - $32,000

Additional 3-phase inverter - $ 6,000

Additional 1.5 kW solar grid and racking - $12,000

Sensors and communication equipment - $ 3,800

[80] Mr. Hurst testifies that the values of the equipment stated above were inflated at Dr. Kar’s direction. He acknowledges that he did not express any contemporaneous concern in that regard, in writing. However, he maintains that he verbally expressed concerns, in person, during meetings with University personnel in the summer of 2012 (after the grant application was approved). I will address the evidence surrounding that assertion later below.

[81] Throughout his evidence, Dr. Kar consistently denied all suggestions that he directed Mr. Hurst to inflate the value of Sunsource’s proposed in-kind contributions and he consistently reiterated that he did not have knowledge about the cost of solar equipment or materials. Instead, he relied on Mr. Hurst and Sunsource as the industry partner, with experience in that regard.

[82] The FedDev ARC grant application was made using the values that Sunsource submitted. On May 15, 2012, the University was advised that the application for FedDev funding in the amount of $50,000 was approved, subject to the execution of a research agreement between Sunsource and the University. Dr. Kar informed Mr. Hurst of the approval. Mr. Hurst did not document any concerns with respect to inflated in-kind contribution values at that time, or any other time prior to this litigation.

(f) Initial Negotiations Over the Research Agreement Governing the FedDev Project

[83] Consistent with the FedDev’s requirement, on May 16, 2012, the University forwarded a draft research agreement to Mr. Hurst, which specified, among other things, that the University agreed to implement a project entitled “Power Point Tracking Based Smart Switch Development for Seamless Transfer Between Solar PV and Grid”. In that regard, Schedule A (Scope of Work and Deliverables) to the agreement states that a PV based grid mimicking prototype consisting of solar PV panels, solar optimum power point tracking based on DC-DC converters, inverters, magnetic, capacitors, battery and/or other forms of energy storage with proper controls will be initially developed. The terms of that schedule also identify a number of challenges to the development of the prototype.

[84] Dr. Kar testifies that from a scientific perspective, the University’s deliverables under the research agreement were not “guaranteed”. The research associated with the switch concept was “highly experimental” and results could not be guaranteed. The deliverables set out in the research agreement represented “a plan” for the duration of the proposed FedDev funded project period (May 1, 2012 – March 31, 2013).

[85] The terms of a draft agreement and ultimately the research agreement that the parties executed on June 8, 2012 (attached as Appendix ‘A’ to these reasons) also provides, among other things that:

a) The project period would commence May 1, 2012, and be completed by March 31, 2013.

b) The University’s milestones and deliverables under the contract would consist of:

1. A complete PV‑based grid mimicking hardware-based prototype (3 kW nominal throughput) with proper real-time control; and

2. A novel control algorithm to affect seamless power transfer between a PV-based grid mimicking prototype and the utility grid.

c) Sunsource’s deliverables would include 400 hours of labour from Mr. Hurst and its provision of PV panels, power converters, sensors and other equipment required for the project. [The parties agree that this included the components required to build the prototype.]

d) A deemed acceptance of deliverables term as follows:

Unless the University is notified to the contrary by Company [Sunsource] within twenty-five (25) business days following receipt of the deliverable(s), the deliverable(s) will be deemed to be accepted by Company according to the terms and conditions of this agreement [section 3.1].

e) Dr. Kar was responsible for the technical content of the project.

f) A term specifying joint ownership of the IP developed during the agreement’s term [section 13.2].

g) A term requiring that all amendments to the agreement be in writing and signed by the parties [section 7.1].

h) A term excluding liability for consequential damages, as follows:

If the University or Company breaches or defaults under any term or conditions hereof, including if the University or Company fails to perform in accordance with any of the requirements of the Agreement or to make progress so as to endanger performance, either party, may upon thirty (30) days notice, if the other party within thirty (30) days has not cured the breach or default, terminate this Agreement. University and Company will have the right to damages under contract, tort (including negligence), strict liability or otherwise for damages except for consequential damages in the event of termination or breach by the other [section 17.1]. [Emphasis Added.]

i) A term indicating that the Agreement and documents referred to therein constitute the entire agreement between the parties and supersede all prior agreements, representations, warranties, statements, promises, information, arrangements, and understandings whether oral or written expressed or implied with respect to the subject matter the Agreement. [section 28.1]

j) A term specifying that none of the parties shall be bound by any oral or written agreements, representations, warranties, statements, promises, information, arrangements, or understandings that were not specifically set forth in the Agreement or in the documents and instruments to be delivered on or before the execution of the Agreement. [section 28.1]

k) A term confirming the parties’ acknowledgement that each had read, understood, and agreed with all the provisions of the Agreement and that each had the opportunity to obtain independent legal advice with respect to the Agreement. [section 29.1]

[86] Mr. Hurst’s initial response to the terms of the research agreement is not harmonious with his evidence that Dr. Kar pressured and rushed him into signing it. Instead, his response illustrates his efforts to find alternatives to the joint IP ownership term that was mandated by the FedDev ARC program. His efforts in that regard continued even after the parties’ FedDev grant application was approved.

[87] Specifically, Mr. Hurst responded to the proposed terms of the draft agreement by email dated May 21, 2012 (5 days after it was sent to him) and expressed concern with respect to the provision for joint ownership of IP developed under the research agreement prescribed by section 13.2 of its terms. He indicated that the term would not be acceptable to investors or himself and would be a “major roadblock” in securing investment in the future. He also represented that Sunsource would be “privately financed within the next ten days” and proposed that the parties explore other grants that would not impede their “forward progress”. He did not express any concerns about fraudulently inflated in-kind contribution values.

[88] Dr. Kar responded to Mr. Hurst on May 22, 2012, through email correspondence acknowledging Mr. Hurst’s stated concerns, but also observing that Mr. Hurst had been “desperately” trying to secure funding, but things had not “clicked”. He proposed that the terms of the research agreement could: expressly acknowledge the IP that was developed under the NSERC project; and confirm that that IP and the corresponding subject matter of Sunsource’s provisional patent were fully owned by Sunsource. Dr. Kar then reiterated that any new knowledge developed under the FedDev project would be jointly owned by the parties. He suggested an in-person meeting to discuss their respective concerns.

[89] Mr. Hurst testifies that he understood that Marcom Systems/Sunsource’s sole ownership of IP developed under the NSERC project could be confirmed in the terms of the research agreement. He agrees that sometime after May 22, 2012, he and Dr. Kar met in person, but he remained unwilling to execute the research agreement when they did so, owing to his concerns over joint IP ownership.

(g) The Simple Call Option Agreement

[90] Mr. Hurst further testifies that on June 2, 2012, he met with Dr. Kar, Ms. Pratt, Ms. Sliskovic (another member of the University’s ORS), Mr. Schmidt and Ms. Kaps (the University’s counsel in its ORS department) to further discuss his concerns with respect to the IP ownership terms of the research agreement. To address his concern about joint ownership of IP arising from the proposed research agreement, the parties agreed that Sunsource would have an option during the FedDev project period, to purchase the University’s IP rights and its interest in any associated patents arising from the FedDev project for the sum of $300,000 in cash and the payment of a 5 percent royalty for every commercialized unit of the switch sold over a period of five years.

[91] Mr. Hurst asserts that during this meeting, he also raised his concerns over the inflated value of the solar panel array forming part of Sunsource’s anticipated in-kind contribution. He did not confirm his concern in writing. He maintains that during the meeting, he said that he was concerned about defrauding the federal government. He states that in response to his stated concern, Ms. Pratt advised him that grant applications were a “numbers game” and that “no one every checked up on this sort of thing”.

[92] Ms. Pratt testifies that the option agreement was generated as a result of Mr. Hurst’s request. She further testifies that Mr. Hurst never stated that he was concerned that he was involved in defrauding the federal government or over the submitted values of Sunsource’s in-kind contributions. She denies making the statements above, that are attributed to her by Mr. Hurst and is steadfast that she would never say such things. In addition, she deposes that Mr. Hurst did not raise concerns about Sunsource’s obligation to provide 400 in-kind labour hours, or about the hourly labour rate submitted to the FedDev as part of the research agreement. She also confirms that the terms of the FedDev ARC program did not require that Mr. Hurst’s in-kind labour be performed at the University.

[93] In his evidence, Mr. Schmidt does not recall the June 2, 2012 meeting. He was not involved in any discussions regarding Sunsource’s in-kind contributions under the FedDev grant and only had a vague idea about what the grant entailed. He testifies that research projects are only concerned with the creation of IP. As a result, from his perspective at the time the FedDev agreement was being negotiated, the University was not concerned with the prospect of commercializing the proposed technology. It was only concerned with the creation of new ideas, concepts, and a broadening of academic understanding. Mr. Schmidt’s direct involvement in the FedDev process began when he received the copy of a proposed simple call option agreement. He believed the terms were “good” for the University.

[94] Mr. Schmidt never heard Mr. Hurst express concerns about inflated in-kind contribution costs or that he was involved in defrauding the federal government.

[95] Ms. Kaps testifies that she drafted both the research agreement and the simple call option agreement that the parties agreed to during their June 2, 2012 meeting, which Ms. Kaps attended. During the June 2, 2012 meeting, Ms. Kaps specifically asked Mr. Hurst if he required additional time to review the draft research agreement and whether he wanted his own lawyer to draft the option agreement. Mr. Hurst indicated he did not. Mr. Hurst did not raise any issue with respect to the value of solar panels and other in-kind contributions set out in the draft research agreement. After the meeting, she prepared a draft option agreement and sent it to Mr. Hurst on June 3, 2012.

[96] On behalf of Sunsource, Mr. Hurst executed the research agreement, in its proposed form, on June 8, 2012, and the parties executed the simple call option agreement at the same time. Both agreements expired on March 31, 2013.

[97] Mr. Hurst acknowledges that he had the opportunity to seek independent legal advice prior to executing the research agreement but did not do so during the 23-day period between the time he received the University’s initial draft agreement (May 16, 2012) and his ultimate execution of same. He agrees that during that 3-plus-week period, he had the opportunity to review the agreement and raise concerns with respect to the joint IP ownership terms, and to negotiate the terms of an option agreement to address those concerns. Notwithstanding the time that passed between his receipt of the research agreement and his execution of it, Mr. Hurst continued to assert that he was “rushed” into signing the agreement and he was pressured to do so because he wanted Dr. Kar to attend the April 27, 2012 press event. He did not explain how Dr. Kar’s attendance at the press event in April 2012 was used as leverage by the University to compel him to execute the research agreement six weeks after the event occurred.

[98] Through the option agreement, Sunsource had the ability to acquire exclusive ownership of all of the IP related to the solar switch concept and control algorithm developed during the FedDev funded project from the time the option agreement was executed in June 2012 to the end of the research agreement’s term (March 31, 2013). The option was never exercised and by its terms, expired on March 31, 2013.

(h) Mr. Hurst’s Early Communications with General Electric

[99] During the course of the NSERC project, Mr. Hurst contacted General Electric (“GE”) to gauge its potential interest in the proposed seamless solar PV switch concept and to develop contacts. Notwithstanding the University’s continued work on the project after the expiration of the NSERC project period at the end of April 2012 and the parties’ execution of the FedDev related research agreement and option agreement in June 2012, Mr. Hurst contacted GE in writing on July 9, 2012, and proposed that GE become involved in developing a prototype of the switch concept. He did not inform or involve the University in his proposal.

[100] Although he disclosed to GE that he was involved with the University in a federally funded project to develop the prototype, he stated that he felt that the switch “belonged with GE”. He advised GE that he owned 100 percent of the switch-related patent and technology and invited his contacts to “read between the lines and know that a patent like this belongs in the hands of GE and [he] would like to make this happen.”

[101] Despite Mr. Hurst’s efforts to the contrary, there is no evidence that GE took any meaningful steps to become involved in the development of a prototype of the switch or to acquire Sunsource’s switch related IP and/or its related provisional patent rights, at any time.

(i) The Parties Exploration of Grant Funding through the Ontario Centre of Excellence (“OCE”) in July – August 2012

[102] The parties agree that ostensibly, pursuant to the research agreement, Sunsource was required to provide in-kind contributions including 400 hours of labour by Mr. Hurst, together with a 3 kW inverter, 1.5 kW solar array (panels and racking) and the necessary hardware components to build the prototype. Although Dr. Kar served as the project’s “principal investigator”, the parties contemplated that the projects day-to-day research and technical activity would be primarily conducted by graduate students associated with Dr. Kar’s laboratory. The majority of the FedDev research grant proceeds were budgeted to finance salaries for students in Dr. Kar’s lab.

[103] The parties also agree that during the term of the research agreement, Sunsource did not, in fact, supply the in-kind materials it was ostensibly contractually obligated to supply to the University, including: an additional 1.5 kW solar array; and the components necessary to build a hardware-based prototype. In its counterclaim, the University asserts that by failing to do so, Sunsource breached the research agreement. In addition, Mr. Hurst testifies that he did not supply 400 hours of labour towards the project, as contemplated by the contract’s terms, estimating that he actually only contributed about 40 hours.

[104] Conversely, Sunsource denies that it breached the terms of the research agreement despite its admitted non-performance. In furtherance of that position, Mr. Hurst deposes that: the University never actually requested that Sunsource provide components to build a prototype; the University never scheduled him to work in Dr. Kar’s lab; and the University and Sunsource orally agreed to defer Sunsource’s obligation to procure the identified solar panel array until some time after the end of the research agreement’s term in order to leverage additional grant money from the OCE. In their respective evidence, Dr. Kar, Ms. Pratt, and Ms. Kaps all deny that such an agreement existed.

[105] Later in these reasons I will detail the evidence surrounding the parties’ involvement with the OCE in the summer of 2012 and the alleged oral agreement asserted by Mr. Hurst. The resolution of the discrepancies in the available evidence on that topic plays a central role in my unfavourable determination of Mr. Hurst’s overall credibility.

[106] The parties agree that during the summer of 2012, they explored the potential of leveraging a portion of Sunsource’s in-kind contributions to obtain additional grant funding for the solar switch project through the OCE. Mr. Hurst, Dr. Kar, Ms. Pratt, and Ms. Kaps met on various occasions during the summer of 2012 in that regard.

[107] Ms. Pratt testifies that in 2012, both the FedDev ARC Program and the OCE permitted leveraging of in-kind contributions for the purpose of obtaining additional grant funding for research projects. Dr. Kar, Ms. Pratt and Ms. Kaps all testified that in consultation with Steve Colbert, a representative of the OCE, the parties planned to leverage a combined cash contribution of $5,000 and in-kind contribution from Sunsource (in the form of the 1.5 kW solar array upgrade required by the research agreement) to obtain additional grant funding in the amount of $25,000 from the OCE, to be applied to the research and development activities contemplated by the research agreement. All of those witnesses, together with Mr. Hurst, testify that Ms. Kaps prepared a draft agreement to give effect to the plan.

[108] Dr. Kar, Ms. Pratt and Ms. Kaps testify that ultimately, an application to the OCE did not proceed in summer/fall 2012 because Sunsource was unable to make the requisite $5,000 cash contribution to the University to facilitate its direct purchase of the subject solar panels, which was a pre-condition to receiving OCE funding.

[109] Conversely, Mr. Hurst testifies that the parties were advised by Mr. Colbert that the OCE would not permit them to leverage Sunsource’s in-kind contributions under the research agreement, in order to obtain additional grant proceeds. Further, Mr. Hurst deposes that the OCE posited that it would not provide grant funding unless the solar panels were obtained after the FedDev funded research agreement expired. Mr. Hurst says because of that development, he and Ms. Pratt agreed, during a meeting in August 2012, that Sunsource’s research agreement obligation to provide the additional solar array components to the University would be deferred until some time after the FedDev Project ended on March 31, 2013, specifically in fall 2013.

[110] As I will explain later in these reasons, I find Mr. Hurst’s evidence surrounding the potential for the OCE leveraged grant funding during the FedDev project period and his evidence about the parties’ alleged oral agreement to defer Sunsource’s contractual obligations with respect to the provision of the solar array components, to be unbelievable and conclusively contradicted by both evidence of other witnesses, that I accept and by contemporaneous documentation between the parties (that they acknowledge as authentic). The latter includes Mr. Hurst’s own contemporaneous written assurances to Dr. Kar indicating that he was arranging to install the requisite solar array in fall 2012, which were sent after the date Mr. Hurst alleges the parties agreed to defer installation to fall 2013.

[111] Mr. Hurst also testifies that during the July and August 2012 OCE related meetings that he had with University personnel, he continued to raise concerns related to the alleged inflated value of the solar panel array set out in both the FedDev grant application and the research agreement. Each of Ms. Pratt, Dr. Kar and Ms. Kaps deny that Mr. Hurst raised such a concern during their OCE meetings, or at any other time. Further, Mr. Hurst exchanged several email communications with each of the witnesses above, in summer 2012. None of their communications referred to alleged inflated values. There is no contemporaneous documentation supporting Mr. Hurst’s evidence that he believed that the value of Sunsource’s in-kind contributions were inflated or that he believed the parties were actively defrauding the FedDev, as a result of the values attributed to Sunsource’s in-kind contributions in their grant proposal.

[112] Mr. Hurst also testifies that the additional solar panel array was not necessary during the FedDev project period in order to develop a hardware-based prototype of a 3 kW because the previously acquired semikron inverter was capable of simulating the solar PV output from a 3 kW solar array. Therefore, the additional panels that Sunsource was obligated to provide pursuant to the research agreement, were redundant and unnecessary.

[113] Dr. Kar testifies to the contrary. He deposes that the semikron inverter could not be used in place of an actual solar PV array, for the purpose of developing a hardware-based prototype. The hardware-based prototype would be equipped with an onboard inverter, which would have to undergo testing with power supplied by a real solar array, as opposed to a simulated one. In addition, he deposes that in order to develop a more reliable 3 kW hardware-based prototype, it was necessary to test it with a 3 kW solar array as opposed to the 1.5 kW array that existed at the beginning of the research agreement period. The solar array upgrade was required during, not after, the research agreement period.

[114] Dr. Kar testifies that he did not specifically request that Sunsource provide the solar panels during the FedDev Project period because Mr. Hurst had sent several emails over many months indicating his intent to provide and install them during fall 2012. When Sunsource failed to do so, Dr. Kar formed the view that it lacked the funds necessary to supply its equipment and materials in-kind contributions, including the panels and the components for a hardware-based prototype.

[115] Finally, Mr. Hurst effectively testifies and Sunsource posits that it was excused from its obligation to supply the components necessary to build a hardware-based prototype because the University did not expressly request performance in that regard. Mr. Hurst testifies that he was never asked for the components by the University.

[116] Dr. Kar testifies he did not expressly request the components for a hardware-based prototype from Sunsource during the FedDev period. His testimony with respect to his reasons for not doing so is varied and will be addressed later in these reasons. However, Dr. Kar is clear that he discussed the requisite prototype components with Mr. Hurst several times, and they are set out in schematics attached at Schedule ‘C’ of the research agreement. In his evidence, Dr. Iyer, a graduate student and one of the project leads on both the NSERC and FedDev projects, confirms that the requisite components were discussed with Mr. Hurst and he was, or should have been, aware of them.

[117] Dr. Kar testifies that in late 2012 he realized that despite Mr. Hurst’s repeated representations, Sunsource would not be providing the additional solar panels required by the agreement. He further testifies that by November 2012, Mr. Hurst had made several representations that Sunsource would be financed by private investors, which never materialized. As a result, Dr. Kar reasoned that Sunsource did not have the funding for the materials and equipment necessary for the development of a hardware-based prototype.

[118] Finally, there is no evidence that: Mr. Hurst, on behalf of Sunsource, ever made inquiries with respect to the specific components required for the prototype; or that Sunsource took any steps to supply the components and materials necessary to develop a hardware-based prototype. There is also no evidence that Sunsource made any inquiries with respect to the development of the hardware-based prototype, in 2013, before the FedDev project expired.

(j) The University’s Progress Under the Research Agreement

[119] Mr. Hurst testifies that little to no work was performed or progress made with respect to the solar PV switch development during the term of the research agreement. Conversely, Dr. Kar, Dr. Iyer, and Dr. Lu (another graduate student in Dr. Kar’s lab, at the time, and a co-lead on the Sunsource project) all testify that substantial work and progress was made. They all testify that a functional control algorithm for the switch was developed and coded during the FedDev project (capable of operating in accordance with the switch’s intended design in a simulated setting) and the physical components for a hardware-based prototype were identified in the simulated software prototype of the switch that was developed.

(k) The Potential for a Business Relationship with General Electric as Asserted by Sunsource

[120] In December 2012, Mr. Hurst arranged to make a presentation about the seamless switch concept to a representative of GE at a meeting to take place in January 2013. He asked the University to support his presentation. Pursuant to Mr. Hurst’s request, Dr. Lu and Mr. Schmidt, attended the meeting, which was held on January 8, 2013 at GE’s office, together with Mr. Hurst and Ms. Gellman. Bala Vinayagam attended on behalf of GE. During the meeting, Dr. Lu gave a detailed presentation of the technical aspects of the switching technology as developed by the University’s ongoing research efforts. Mr. Vinayagam was particularly impressed with Dr. Lu herself, and he subsequently made her an offer of employment.

[121] Mr. Hurst testifies that at the end of the meeting, Mr. Schmidt shook everyone’s hand except his, and further advised Mr. Vinayagam that he was the primary contact on the project. Mr. Hurst also testifies that Mr. Vinayagam subsequently told him that Mr. Schmidt was “quite rude”.

[122] Mr. Vinayagam was called as a witness by the plaintiff. He testifies that he does not recall meeting Mr. Schmidt during the parties’ January 2013 meeting with him, nor being told during the meeting to contact someone other than Mr. Hurst. He recalls during the January 2013 meeting that some students presented the technology, but he felt more details were required before GE would even consider taking the concept to the next stage. The “next stage” would involve an examination of the IP and a determination of the extent of other IP in the space, and an evaluation of whether GE wanted to become involved with the proposed technology. He deposes that GE’s “consideration” of Sunsource’s technology never reached the “next stage”.

[123] Mr. Schmidt testifies that he was not rude to Mr. Hurst during the GE meeting. He recalls that Mr. Vinayagam was curious about the presentation, but said that he was not the “right person” to deal with the proposed technology. Mr. Vinayagam advised the parties that he would pass the concept along to other individuals at GE to see if anyone else was interested. Mr. Schmidt had no further involvement with GE.

[124] Dr. Lu testifies that she does not recall anything unusual occurring between Mr. Hurst and Mr. Schmidt during the GE meeting. Ms. Gellman did not provide evidence confirming Mr. Hurst’s account.

[125] Dr. Lu persuasively testifies that she could not have made the GE presentation that she did, in January 2013, if she and other members of Dr. Kar’s lab had not conducted substantial research under the research agreement during 2012.

[126] Following the GE meeting, and at Mr. Hurst’s request, Dr. Kar prepared a one-page synopsis of the proposed switching technology which was contemporaneously forwarded to GE. Thereafter, Mr. Hurst attempted to contact Mr. Vinayagam, several times without receiving a meaningful response. GE never proactively initiated contact with Mr. Hurst concerning the switch technology, or GE’s potential interest in the technology. Mr. Hurst invited Mr. Vinayagam to attend a FedDev gala in March 2013. Mr. Vinayagam did not respond.

[127] Mr. Vinayagam attempted to determine if members of GE’s other lines of business were interested in the Sunsource technology by contacting three or four other GE representatives and providing particulars of the switch concept. He did not receive a positive response concerning the proposed technology from any of his internal GE contacts and he “dropped the matter” after that.

[128] Mr. Vinayagam felt that Mr. Hurst was very persistent in attempting to contact him during the early part of 2013. He believes that he talked to Mr. Hurst at some point after the January 2013 meeting, but he concedes that the Sunsource technology was not his “top priority”. Mr. Hurst called him a number of times, but he believes that he had subjectively “dropped” the Sunsource matter and, as a result, he did not return most of Mr. Hurst’s phone calls. Eventually, in June 2013, he provided Mr. Hurst with the contact information for two other people at GE as points of contact, in an effort to advise Mr. Hurst that he had moved to a new role within GE and Mr. Hurst “should probably contact someone else”.

[129] In June 2013, Mr. Hurst and Dr. Kar sent correspondence to the new contacts “identified” by Mr. Vinayagam, proposing a collaboration between the parties and GE on the switch technology. GE never responded to that correspondence or the collaboration proposal. Neither Sunsource nor the University has ever received any communication, or specific expression of interest, from GE to purchase, license, or collaboratively work towards developing the Sunsource switch technology or any aspect of the IP associated with that technology.

(l) The Vengeance Power Inc. (VPI) Waste Heat Recovery Generator Technology

[130] In February 2013, (approximately a month and a half before the end of the research agreement), Mr. Hurst was introduced to the executive members of a small company known as Vengeance Power Inc. (VPI): Tony Sleiman (President), Andre Laba (Secretary), and Jessie Laba (Vice-President). At the time, VPI was developing an alternative energy source for use in greenhouse applications, in the form of a waste heat recovery generator.

[131] The VPI generator system was designed to generate electricity by using the “waste heat” produced by boilers, which are commonly used in greenhouse operations, approximately seven months of the year. Conceptually, the boiler’s waste heat would be used to spin an engine and generate electricity that could then be used to power the greenhouse’s load. When the boilers were not active, the greenhouse’s load would be powered by the traditional utility grid.

[132] In February 2013, VPI was in the process of finalizing an agreement to field test and develop its waste heat recovery technology onsite with a greenhouse energy consultant and a greenhouse grower in Essex County. The greenhouse grower had a tight timeline and, as a result, VPI had what it described as a “small window of opportunity”. If the results of the testing favourably met predetermined benchmarks, the energy consultant would have become VPI’s exclusive agent for the sale of the VPI waste heat recovery generator system to Canadian greenhouse growers.

[133] At their initial meeting with Mr. Hurst, the members of VPI’s executive expressed potential interest in integrating a new version of the seamless switching concept that the parties were developing into its waste heat generator design. VPI’s field testing could not begin until its generator could connect to the grid. Hydro One would not permit the generator to connect to the grid, for testing purposes, without a switch that would prevent power from flowing from the generator to the grid.

[134] As of March 2012, VPI was aware that: the solar PV switch had not been fully developed; research with respect to the solar switch was still ongoing at the University under a FedDev grant; all IP developed during the FedDev Project period was jointly owned by Sunsource and the University; and a hardware prototype of the seamless solar switch had not yet been developed.

[135] VPI, which was still at a development stage with respect to its own technology, was principally financed by an investor, Joe Kozar, who would have to approve any financial commitment made by VPI to Sunsource in respect of the seamless switch that VPI sought.

[136] At Mr. Hurst’s request, Dr. Kar, his students, and Mr. Schmidt hosted members of VPI in Dr. Kar’s lab on two occasions in March 2013. Mr. Kozar attended at least one of those meetings. In the first meeting, Dr. Kar explained the technical aspects of the solar PV switch being developed and in the second meeting, he demonstrated the functionality of the complex control algorithm that the University developed during the research agreement term, through a computer simulation program. VPI advised the parties of its technical needs in respect of a switch to accompany its waste heat generator, a 100 kW switch system between VPI’s AC producing waste heat generator and the AC producing utility grid. The development of the switch that VPI sought represented an entirely new project.

[137] At the end of the second March 2013 lab meeting, Mr. Hurst and Mr. Schmidt engaged in a loud disagreement concerning which of them would serve as VPI’s point of contact for any further discussions with respect to a new project to develop a switch to be used with VPI’s waste heat recovery generator.

[138] Mr. Hurst testifies that immediately after the March 12, 2013 meeting, he was approached by Jessie Laba, Andre Laba, Mr. Sleiman and Mr. Kozar in the University’s parking lot. They asked Mr. Hurst about the status of the technology and inquired about Mr. Schmidt’s behaviour. They told Mr. Hurst that he needed to “correct the situation” with Mr. Schmidt and that VPI needed to know “what it was investing in” and “who owned the technology”. Conversely, in their respective evidence, none of Tony Sleiman, Andre Laba or Jessie Laba testify to this conversation or otherwise confirm this aspect of Mr. Hurst’s evidence. Mr. Kozar was not called as a witness.

[139] Sunsource was interested in pursuing a potential business relationship with VPI, as well as attempting to develop a switch that met VPI’s identified technical requirements. Mr. Hurst was also interested in attracting Mr. Kozar as an investor.

[140] Sunsource contemplated that the University, through Dr. Kar and his students, would be involved in the development of a prototype of a switch consistent with VPI’s requirements and that such development would occur in a project that was independent of and subsequent to the FedDev funded project. In that regard, the parties contemplated entering into a new “development” agreement for a prototype of the switch required by VPI. Sunsource planned that either VPI or Mr. Kozar would provide it with the necessary funds (which were substantial) that Sunsource would be required to pay to the University under the terms of any new development agreement between the parties.

[141] Sunsource and the University agreed that the University would prepare a proposed budget and scope of work for the research and development of an initial prototype of the generator-based switch that VPI sought, before the parties engaged in negotiations with respect to a new development agreement for the potential project. The parties and VPI expressly acknowledged that any work that the University would undertake in respect of the 100 kW switch project would be highly experimental in nature and that a successful outcome would not be guaranteed.

[142] The University prepared several iterations of a budget and scope of work, which was divided into two phases: a six-month period to develop a lab prototype of the switch generally in accordance with VPI’s specifications with an associated budget of $151,900; and a subsequent six-month period to develop a field‑installed commercial unit prototype with an associated budget of $165,200. Sunsource did not object to the scope of work or budget estimates proposed by the University. The parties began to negotiate the terms of a proposed development agreement and they continued to exchange draft development agreements during April and May 2013. Mr. Hurst regularly consulted with Mr. Kozar about the terms of the draft agreements, as the parties’ negotiations continued.

[143] During the parties’ negotiations, Sunsource eventually sent the University a draft development agreement between the University and an entity known as “Korona Group Ltd.”, which was a corporation said to be affiliated with and controlled by Mr. Kozar. In response, the University advised Sunsource that it would only enter into a new development agreement with Sunsource, itself.

[144] As the parties’ negotiations continued, VPI sought clarification of the nature and extent of Sunsource’s ownership of the IP associated with the seamless switch technology. Some brief context follows.

[145] There is no dispute that Sunsource owns 100 percent of the IP developed under the original NSERC grant and that Sunsource and the University jointly own the IP developed under the FedDev funded research agreement, in any event of the patentability of that IP. The University has never asserted that it owns any portion of the IP developed under the NSERC project.

[146] The parties dispute the nature and extent, if any, of the IP that was developed during the research agreement (FedDev project) term. In the context of this litigation, the plaintiff asserts that no IP was developed during the FedDev project and the University’s research never progressed beyond its state at the end of the NSERC project when a theoretical schematic diagram of the proposed switch and a “logic flowchart” for a control algorithm were developed.

[147] Conversely, Dr. Kar testifies that during the term of the research agreement, the “theoretical” control scheme was developed into a practical working control scheme that was demonstrated to be functional in a controlled laboratory/simulated setting. Through research, complex mathematical equations, component characteristic studies and detailed work through specialized computer software capable of simulating the performance of various electrical components required for a functional switch (all of which was undertaken during the term of the research agreement), the University developed and implemented a detailed control algorithm capable of carrying out the following requisite functions of the proposed seamless solar switch:

• real-time monitoring of the power demand of the load;

• real-time monitoring of the PV power available through a solar array system;

• conversion of direct current (DC) energy produced by the solar PV source to alternate a current (AC) power required by an end-user load;

• filtering of power supplied by the solar PV source, once it is converted to AC;

• synchronization of the cycle points of AC power ultimately derived from the PV power source and utility grid, respectively; and

• seamlessly switching (ie. without power interruption) between available power sources.

[148] Dr. Kar indicates that all of these functions were demonstrably achieved in a controlled laboratory environment, through a software-based prototype of the solar switch. All of the work resulting in the successful development of the functional control algorithm and software-based prototype was performed during the term of the research agreement. His evidence concerning the overall advancements in the University’s work during that time is confirmed by the evidence of Dr. Iyer and Dr. Lu.

[149] The University posits that the IP associated with the research activities set out above is jointly owned.

[150] Some time after the March 2013 lab meetings with VPI, members of VPI’s executive contacted Mr. Schmidt to inquire about the ownership of intellectual property related to the seamless switch technology. Mr. Schmidt and two of VPI’s executives had previously worked together at a company other than VPI and Mr. Schmidt had provided technical guidance to those individuals in the past.

[151] At the time VPI contacted Mr. Schmidt, its executive officers were aware that: the solar switch research project between Sunsource and the University was funded through the FedDev ARC Initiative; any IP developed under the FedDev Program was owned jointly by the parties; Sunsource held a provisional patent with respect to the IP developed during the NSERC project; and Sunsource owned 100 percent of the IP developed during the NSERC project period. VPI also had a copy of Sunsource’s provisional patent, which detailed the nature of the IP developed during the NSERC project.

[152] The context of the phone call is exceptionally important to the plaintiff’s “unlawful means” cause of action. There is conflicting evidence with respect to Mr. Schmidt’s response to VPI’s IP ownership inquiry, which I will detail and resolve later below. I make the following brief observations now. Specifically, Tony Sleiman, VPI’s president, testifies that during a phone call approximately one to two weeks after the second lab meeting in March 2013, Mr. Schmidt advised him that “the University owned all the IP because the University was doing all of the work”.

[153] Andre Laba, VPI’s Secretary, testifies that during the same call, Mr. Schmidt advised Mr. Laba that Sunsource’s provisional patent would soon lapse and the University would get the “new IP”.

[154] Mr. Schmidt denies that he said the things attributed to him by Mr. Sleiman and Mr. Laba. He acknowledges that he received a call from Mr. Sleiman and Mr. Laba within 48 hours of the second March 2013 laboratory meeting, during which Andre Laba asked him to provide exact specifics concerning IP ownership. Mr. Schmidt was not in the position to do so at the time because he did not know whether Sunsource had made additional patent filings after its provisional patent application. He had just become involved in assisting with budgeting on the potential new development agreement, and was not previously familiar with the extent of the IP developed under the FedDev project (research agreement), including whether anything patentable had been developed.

[155] Mr. Laba continued to press him for specifics and also sought Mr. Schmidt’s guidance with respect to the merits of a potential “business deal” between VPI and Sunsource. Mr. Schmidt declined to provide business advice to Mr. Laba and told him to read the documents, including Sunsource’s patent and make up his own mind about the merits of any proposed deal between VPI and Sunsource. Mr. Schmidt testifies that Mr. Sleiman then came on the phone and insisted that Mr. Schmidt provide the specific particulars of IP ownership associated with the solar switch. Mr. Schmidt advised Mr. Sleiman that he should read the documents that he had (including Sunsource’s patent materials) and he told Mr. Sleiman that he could not advise him any further because it was not his place to do.

[156] There is no contemporaneous documentation that confirms either version of the phone call. I will further detail the evidence surrounding this issue and resolve the foregoing evidentiary conflict later in these reasons. However even after the impugned phone call, VPI’s investor, Mr. Kozar, continued to indirectly participate in Sunsource’s ongoing negotiations with the University over a generator-related switch development agreement for nearly the next two months.

(m) Issues Surrounding the Development of a Budget for a New Project/Development Agreement Between the University and Sunsource

[157] On March 19, 2013, the University hosted a gala for the close-out of the FedDev ARC Initiative, which Mr. Hurst attended. VPI was also an industry participant in the ARC program. Its executive officers attended the gala but they did not speak to Mr. Hurst, at the event.

[158] The following day Mr. Hurst sent email correspondence to Ms. Pratt and Mr. Schmidt thanking the University for the event and requesting an update with respect to the status of budget numbers for the generator switch project. Mr. Schmidt advised Mr. Hurst by email, on March 22, 2013, that he was in the process of revising several numbers and he would circulate the budget after he completed the changes. He requested that Mr. Hurst provide him with the appropriate VPI recipient email addresses for circulation. Mr. Hurst did so and requested that he also be copied on the budget. On March 25, 2013, Mr. Schmidt circulated the proposed budget to Mr. Sleiman, Mr. Kozar and Mr. Hurst, in accordance with Mr. Hurst’s direction.

[159] The contemporaneous documentary evidence confirms the foregoing narrative, however, in his evidence, Mr. Hurst asserts that following the second laboratory meeting with VPI in March 2012, he became concerned because Mr. Schmidt did not provide him with “ongoing updates” on the University’s internal budget discussions. He testifies that as a result, he called Mr. Schmidt who advised him that Mr. Hurst was not part of the budget discussions because the project was only between the University and VPI. Mr. Hurst disagreed with that suggestion and requested that he receive budget updates. Mr. Hurst testifies that Mr. Schmidt’s statement and his general conduct with respect to the development of the budget for the potential VPI generator switch project demonstrates the University’s intent to “squeeze” Sunsource out of the project and usurp its rights in the solar switch technology.

[160] In his evidence, Mr. Schmidt denies that he ever told Mr. Hurst that the project was only between the University and VPI. He points out that he proactively contacted Mr. Hurst during the budget process to obtain VPI’s contact information directly from him, only days before the budget was released, and Mr. Hurst received the budget through the same email communication as VPI. Nothing was secreted from Sunsource. Mr. Hurst agrees that it would not have made sense for Mr. Schmidt to request the VPI contact information directly from him if the University was really attempting to “cut Sunsource out of the project”.

[161] Mr. Schmidt also provides uncontradicted evidence that he never initiated a call or discussion with VPI, at any time. He did not provide confidential information to VPI and he was not trying to squeeze Sunsource out of the potential project with VPI. There is no evidence that Mr. Schmidt or anyone connected with the University ever attempted to negotiate a development agreement directly with VPI or Mr. Kozar, to the exclusion of Sunsource, or at all.

[162] When Mr. Hurst proposed a draft version of a potential development agreement between Korona Group Inc. and the University, the University advised him that it would only enter into a development agreement with Sunsource. The University and Sunsource were consistently listed as the only parties on each draft development agreement prepared by the University. Ms. Pratt remained steadfast that the University would only enter into a development agreement with Sunsource.

[163] Sunsource posits that early draft internal (within the University) versions of the budget and scope of work that passed between Dr. Kar and Mr. Schmidt disclosed their intent to usurp the switch technology, because Sunsource was not expressly mentioned in the preamble that stated, “A 100 kW seamless power system will be developed at University of Windsor for Vengeance Power Inc.” These drafts do not expressly state that the University would exclusively engage in development activities without Sunsource’s involvement.

[164] Mr. Hurst testifies that those drafts evidence the University’s intention to contract directly with VPI and exclude Sunsource from the project entirely. Mr. Schmidt testifies to the contrary. He states that the preamble was poorly written and should have made clear that the requirements of the switch were for VPI’s generator product. He observes that the poor draftsmanship was an internal error that was corrected on the final version of the document that was sent to Sunsource, VPI and Mr. Kozar, and subsequently used in the draft developmental agreements. The University was not trying to “cut Sunsource out of the project”. Instead, before sending any version of the budget to VPI or Mr. Kozar, Mr. Schmidt communicated with Mr. Hurst to obtain their contact information and he contemporaneously copied Mr. Hurst with the budget and cover email that were sent to VPI and Mr. Kozar.

[165] Mr. Hurst also testifies that in late March 2013, he was advised by Mr. Laba that Mr. Schmidt had advised him that Sunsource did not own the switching technology and that going forward, the project was just between the University and VPI. Mr. Hurst deposes that he subsequently confronted Mr. Schmidt about Mr. Laba’s disclosure and Mr. Schmidt responded that “as far as he was concerned”, the University owned the technology because Mr. Hurst had not presented any patents. That evidence is not confirmed by any contemporaneous documentation, and it is expressly denied by Mr. Schmidt. Moreover, it does not appear to be consistent with the events that followed the alleged phone calls that Mr. Hurst describes, which are detailed below and include a near two-month period of continued negotiations between the parties for an agreement between them, related to the project that Mr. Hurst otherwise claims Sunsource was intended to be excluded from.

(n) The University’s Efforts to Determine IP Allocation Between the NSERC Project and the Research Agreement/FedDev Funded Project

[166] Notwithstanding Mr. Hurst’s evidence concerning what he perceived to be the University’s attempt to exclude Sunsource from a VPI-related project through its budget related conduct, and Mr. Schmidt’s alleged admission to him that the University intended to “squeeze Sunsource out”, Mr. Hurst responded to Mr. Schmidt’s March 25, 2013 correspondence, enclosing the budget, on March 28, 2013 in an email to Dr. Kar, Mr. Schmidt and Ms. Pratt, indicating that he spoke to Mr. Kozar about the budget and he “could make this happen” but he needed clarification on IP ownership.

[167] By email dated April 2, 2013, Ms. Pratt responded to Mr. Hurst’s March 28, 2013 email correspondence and indicated that: Mr. Schmidt was attempting to determine where the “IP stands on this project”; Mr. Schmidt would meet with Dr. Kar; and that she had asked Mr. Schmidt to schedule a meeting with all parties to discuss the project. In a same day reply, at 12:15 p.m., copied to Mr. Schmidt and Dr. Kar, Mr. Hurst indicated that VPI and Mr. Kozar should not be invited to the meeting.

[168] Mr. Hurst then sent an email to Dr. Kar at 2:14 p.m. on April 2, 2013 and represented that he had spoken with Ms. Pratt about IP that day and she told him that all of the IP related to the switch concept was owned by Sunsource and not the University, because Sunsource had previously filed a patent on its own and did not involve the University’s ORS. In his evidence, Mr. Hurst amplifies his asserted conversation with Ms. Pratt by stating that on April 2, 2013, he contacted Ms. Pratt in order to “move the Sunsource patent forward”, because its provisional patent was scheduled to expire at the end of the month. He states that Ms. Pratt advised him that: since Sunsource did not file its provisional patent application through her office, she was not responsible for providing updates for anything related to the patent; and as far as she was concerned, Mr. Hurst did not have a patent. She directed him to bring a copy of the patent to the meeting that Mr. Schmidt was arranging.

[169] Ms. Pratt’s evidence does not support that she advised Mr. Hurst, at any time, that the University conceded that Sunsource owned all IP developed up to the end of the FedDev project. She acknowledged that the IP developed under the NSERC project was owned solely by Marcom Systems/Sunsource and she had no concerns about the fact that Mr. Hurst had filed a provisional patent application with respect to same. She does not agree that she advised Mr. Hurst on April 2, 2013, that Sunsource owned all of the IP related to the technology.

[170] Similarly, Ms. Pratt does not concede that “no IP was developed during the FedDev/research agreement project” and, in that regard, she draws a distinction between “IP” and “patentable IP”. She also testifies that she did not view the laboratory meetings with VPI in March 2013 as a commercialization opportunity because no IP had been filed by the University during the FedDev project, so commercialization was not being discussed. If any patentable intellectual property was developed during the research agreement project, her department would have received an invention disclosure form from Dr. Kar outlining the novelty of the technology and associated IP. A disclosure form was not received, therefore, she assumed there was no patentable IP developed during the FedDev project, but there was IP developed. Consistent with the terms of the research agreement and the FedDev ARC requirements, Ms. Pratt states that any IP (whether patentable or not) developed during the research agreement was jointly owned.

[171] Ms. Pratt confirms that there were no patents filed by the University and there was no ownership question about anything developed prior to the research agreement period. The provisional patent filed by Marcom Systems arising from the NSERC project had already been assigned to Sunsource and was 100 percent owned by Sunsource. In her view, the University was not under any obligation to provide information or assistance to support that patent.

[172] As of the beginning of April 2013, Ms. Pratt did not know whether Sunsource had filed any new patent applications arising out of the incremental IP developed during the term of the research agreement. But if it had, any resulting patent would be jointly owned by the parties. Ms. Pratt’s confusion over whether Sunsource independently filed a patent application arising out of the FedDev project (research agreement) appears to have been shared by other members of the ORS, including Mr. Schmidt. In turn, their uncertainty appears to have complicated Mr. Schmidt’s attempts to clarify IP ownership.

[173] Mr. Hurst’s April 2, 2013 representation to Dr. Kar that Ms. Pratt had advised him that Sunsource owned 100 percent of all switch-related IP is not harmonious with a subsequent email exchange between Ms. Pratt and Mr. Hurst, later on the same day. Specifically, Mr. Hurst wrote a further email to Ms. Pratt at 2:37 p.m. on April 2, 2013, indicating that Mr. Kozar requested a letter from the University stating that the University did not own any IP associated with the seamless solar switch technology because the provisional patent was filed by Mr. Hurst’s lawyer and not through the University. Ms. Pratt responded in an email indicating that the parties should discuss the issue at their pending FedDev close-out meeting relating to the research agreement. She also wrote that she was unable to provide any documentation concerning IP because she was uncertain about what IP filings Sunsource may have made after the commencement of the FedDev project. Her response follows Mr. Hurst’s assertion to Dr. Kar that Ms. Pratt had conceded that Sunsource owned all the IP.

[174] Mr. Schmidt emailed Mr. Hurst, Ms. Pratt and Dr. Kar on April 2, 2013 at 3:25 p.m. confirming arrangements for a FedDev close-out meeting between the parties on April 5, 2013, and advised that Mr. Hurst would be provided with deliverables on the project (the research agreement). In his email, Mr. Schmidt also advised Mr. Hurst that he had reviewed the FedDev agreement (research agreement) and met with Dr. Kar and his students, who were preparing the FedDev close-out report and producing “copies of the deliverables for this project which will include the digital copy of the simulation algorithm complete with input control and provisions.” Mr. Schmidt reiterated that in accordance with the terms of the research agreement, any IP developed through the FedDev project was owned jointly with the University. He did not identify a hardware-based prototype as a deliverable that would be made.

[175] Mr. Hurst replied to Mr. Schmidt’s email indicating that he was looking forward to the meeting and confirmed that he was focused on working with the University and developing a long-lasting relationship. According to Mr. Hurst’s evidence, contextually he made those statements within days of being informed that Mr. Schmidt had disclosed an intent to oust Sunsource from involvement in a VPI-related development project.

[176] Mr. Schmidt acknowledges that he was aware that Mr. Hurst was attempting to delineate the IP developed under the NSERC project and FedDev project (research agreement) respectively. Mr. Schmidt testifies that the most significant difficulty in doing so at the time was that the University did not have a copy of any patent applications that Sunsource filed subsequent to the provisional patent application filing. Without that documentation, he could not make a determination about the IP dividing line. He was also generally aware that Sunsource’s provisional patent had, or was about to expire, and Sunsource would have to make a formal patent application, in which it would have outlined the IP it was claiming.

[177] Apparently, unbeknownst to Mr. Schmidt and Ms. Pratt, Sunsource had not made any additional patent filings after the provisional patent application.

[178] Indeed, Mr. Schmidt testifies he was not able to determine the dividing line between what was developed under the NSERC project and the FedDev project because he did not receive a copy of Sunsource’s patent application “under the FedDev”. He only had a copy of the NSERC-related provisional patent application and there was no formality to the document.

[179] In the absence of having all patent documentation, Mr. Schmidt states that he would have to complete a major dissection of the project to be in a position to provide more specific information than what was set out in the provisional patent. He did not have the time to do so immediately. His department was under-staffed, and he had other time sensitive matters in his portfolio that required his attention. He disagrees with the suggestion that the University was obligated to provide IP breakdown information to Mr. Hurst, on demand. He states that there is no allocation for “IP related costs” in the FedDev grant, and accordingly there is no “line item” under the FedDev grant to claim time spent by a University employee on IP related issues.

[180] In any event, he deposes that Sunsource did not require information related to the “IP dividing line” between the NSERC and FedDev projects to proceed with a utility patent application arising out of its provisional patent. Sunsource could not draw on or use any further innovation that was made after its provisional patent application was filed, in order to support a utility patent application related to the subject matter of the provisional patent. It is not possible to take something developed after a provisional patent application has been made and subsequently add it to the related utility patent application. The permissible content of the formal utility patent application is limited to the subject matter that was disclosed and available in the related provisional patent application. While it is possible to add “clarifying content” to the utility patent application, it is not possible to add to “new matters of substantive” content beyond what was originally disclosed in the provisional patent documentation. Developments of incremental IP or further innovation made under the subsequent FedDev project period (to which the research agreement applies) were, therefore, irrelevant to Sunsource’s ability to proceed with a utility patent application arising out of the NSERC provisional patent.

[181] Mr. Schmidt denies the suggestions that he did not provide a breakdown of the IP ownership in early April 2013 because: the University was trying to eliminate Sunsource from the VPI project; the University was waiting for the FedDev grant to expire before clarifying IP ownership in order to prevent Sunsource from exercising the option agreement; or, the University was waiting for Sunsource’s provisional patent to expire. Mr. Schmidt explained that the provisional patent had nothing to do with the University and that Sunsource was solely responsible for its management. He denied that the University withheld information that Sunsource could have used in its utility patent application. He also asserted that Mr. Hurst was “present for all research”; “directed” what the project’s end result would be; and directed the manner in which he wanted the switch to function.

[182] Prior to the end of the FedDev project period, Mr. Schmidt reviewed the simulated switch’s functional performance and as a result, he believed that IP had been developed during the FedDev project and that the University owned that IP jointly with Sunsource. The University was not concerned with commercialization at the time. The University only became concerned with commercialization if a research project resulted in IP that had commercial value. He did not believe that anything of substantial value existed at the end of the FedDev project.

(o) The Expiry of Sunsource’s Provisional Patent and Support for Its Utility Patent Application

[183] Sunsource’s litigated disputes about the University’s alleged conduct towards its utility patent application are not restricted to IP disclosure concerns, but also focus on the University’s alleged failure to support its utility patent application, which Sunsource posits is a breach of contract. Before dealing with the April 5, 2013 FedDev close-out meeting and the events that followed, I will briefly address the evidence concerning Sunsource’s asserted patent issues.

[184] Sunsource posits that it was unable to “elevate” its provisional patent to a utility patent because it did not receive any assistance from Dr. Kar and the University. The provisional patent’s expiration date was April 26, 2013, and Sunsource was required to apply for a utility patent prior to that date.

[185] Dr. Kar confirms that he received an email from Mr. Hurst on February 12, 2013, in which Mr. Hurst requested a meeting to obtain an update on the project, as well, as to update Dr. Kar and his students on certain events. Dr. Kar responded immediately and proposed a February 21, 2013 meeting date.

[186] On February 21, 2013, Mr. Hurst attended Dr. Kar’s lab and Dr. Kar and his students demonstrated the project’s progress to Mr. Hurst. They showed that an electric motor could be powered, using a simulated version of the switch, together with the control algorithm developed by the University during the FedDev project. In other words, the University demonstrated a functional control algorithm in a simulated setting.

[187] Following the meeting, Mr. Hurst sent email correspondence to Mr. Vinayagam at GE advising him:

Were [sic] able to power an electric motor through my software prototype using solar power and my built-in inverter/converter. We do not need our aurora inverter on-sight since my software has a built-in inverter…. [Emphasis Added.]

[188] Following that meeting, Mr. Hurst also sent email correspondence to Jessie Laba at VPI on the same day, indicating that:

Today I was at the University with Dr. Kar and engineering staff on the project. We were running an electric motor with our built-in inverter. Software will deliver everything we discussed and more…. [Emphasis Added.]

[189] Mr. Hurst also wrote to his patent attorney, Mr. Raggio, and advised him that:

Software is complete and technology/switch will be seamless transfer, built in inverter, synchronization of energy, and built in [surge]/spike management all in [one] unit. [Emphasis Added.]

[190] Mr. Hurst testifies that he emailed Dr. Kar about Sunsource’s anticipated utility patent application in February 2013. Mr. Hurst states that at that time, Dr. Kar was contractually required to address any IP “or anything else” developed during the FedDev project period that would be relevant to the utility patent application. While he did not express it in his email, Mr. Hurst would ultimately pursue what he called a “novelty report” from Dr. Kar. He asked to meet Dr. Kar on February 21, 2013 to address those issues. Mr. Hurst deposes that Dr. Kar subsequently sought permission from Mr. Schmidt to meet with Mr. Hurst. Mr. Hurst says Dr. Kar did not receive permission to meet and the meeting did not happen.

[191] Dr. Kar testifies that he also sent an email to Mr. Schmidt on February 21, 2013, to schedule a meeting the following week to discuss the issue of Sunsource’s patent application. He does not recall if that meeting happened. Dr. Kar confirms that he did not provide Mr. Hurst with an update for the purpose of his patent application at this point because Mr. Hurst was seeking particulars on IP developed under the FedDev project, which he understood to be jointly owned. As a result, he felt it was best if he left IP issues to the University’s ORS. He is clear that no one from the University advised him that he could not provide information to Mr. Hurst or that he could not speak with Mr. Hurst, at any time.

[192] Dr. Kar agrees that he received a subsequent email from Mr. Hurst on March 27, 2013, advising him that Sunsource’s provisional patent would expire on April 26, 2013. Mr. Hurst specifically requested an update on “the technology”. Dr. Kar did not understand this to be a request for a novelty report. Rather, he felt that Mr. Hurst was requesting an update on the research methodology and results that were undertaken during the FedDev project, including the University’s efforts to build the schematic concept of the algorithm developed under the NSERC project into a functional algorithm during the research period. Again, owing to joint IP ownership he felt that it would be best to let ORS, with whom Mr. Hurst was already directly dealing, respond to the request.

[193] Dr. Kar unequivocally denies that he was told by Mr. Schmidt or anyone else that he was not “allowed” to talk to Mr. Hurst. Conversely, Mr. Hurst testifies that sometime between March 12 and March 25, 2013 (i.e. between the second VPI lab meeting and the delivery of the budget for the proposed new development agreement), Dr. Kar advised him over the phone that he was waiting for permission to talk to Mr. Hurst about the patent issues, and he would get back to him. There is no contemporaneous documentation supporting that evidence. Further, Dr. Kar testifies that he never told Mr. Hurst that he was not allowed to speak to him about patent issues (or anything else), or that he was awaiting permission to do so. Dr. Kar also denies the suggestion that he failed to respond to Mr. Hurst’s request for “patent support” because Mr. Schmidt wanted to acquire all of the IP related to the solar switch technology for the University.

(p) The FedDev Close-out Meeting – April 5, 2013

[194] The parties’ close-out meeting for the FedDev project took place on April 5, 2013. Mr. Hurst testifies that prior to the meeting he was “curious” about what the University intended to deliver at the meeting because he believed that nothing had been developed during the FedDev project.

[195] Mr. Hurst, Dr. Kar, Mr. Schmidt, and Ms. Pratt attended Ms. Pratt’s office on April 5, 2013 for the close-out meeting. As of that time, Sunsource had not yet supplied the University with either the solar panel array upgrade or the components required to build a hardware-based prototype. The University did not deliver a hardware-based prototype of the solar PV grid mimicking switch (3 kW nominal throughput). Instead, Mr. Hurst was provided with a CD containing a software-based prototype of the switch with a functional control algorithm, capable of being run through Matlabs/Simulink computer software; an explanation of the source code on the CD, and a close-out report authored by Dr. Kar.

[196] Dr. Kar testifies that the University could not deliver a hardware-based prototype to Sunsource because Sunsource did not provide the necessary components to build one. He indicates that the CD provided to Mr. Hurst contains a schematic of the switch design, as developed, viewable through Matlabs/Simulink software, that identifies and specifies all of the components required to build a 3 kW hardware-based prototype. The software simulates the performance of the requisite identified hardware components. During the FedDev project, this software was used to verify the functionality of the control algorithm.

[197] Dr. Kar agrees that the “logic flowchart” for the control algorithm and the “technical schematic” of the switch was the same at the end of the FedDev project, as it was at the end of the previous NSERC project. This does not indicate that no work was done or progress made during the research agreement. Dr. Kar clarifies that at the end of NSERC project, the schematic and flow chart merely represented a blueprint or plan for the switch concept that had not yet been implemented. During the FedDev project, the University made the “plan” happen through the development of a functional control algorithm, and a software prototype that simulated the performance of the switch’s identified hardware components.

[198] Dr. Kar testifies that during the close-out meeting, he explained the source code that was included on the CD to Mr. Hurst.

[199] Mr. Hurst testifies that during the meeting, he asked the University why it had not delivered a hardware-based prototype. He says he was told that the University did not do so because Sunsource did not provide the solar panel array required under the terms of the FedDev research agreement. In his evidence, Mr. Hurst reaffirmed that he believed that the parties had previously orally agreed to defer the solar array upgrade until after the FedDev was completed and that the semikron inverter could have been used to simulate the function of the panels. In aspects of his evidence, Mr. Hurst testifies that he expected to receive a hardware prototype and he was surprised that he did not.

[200] Dr. Kar testifies that there was never an agreement to defer Sunsource’s obligation to provide the solar array upgrade, which was necessary to develop a more reliable hardware-based prototype. The semikron inverter was not an adequate substitute for an upgraded solar array, for the purpose of developing a functional hardware-based prototype. A hardware-based prototype would have to have a custom on-board inverter, built into the switch. Sunsource failed to provide such an inverter. Had it done so, the panels would have been required to test/develop the invertor. The additional panels were also required during the FedDev project period to scale the solar power available in the lab to 3 kW, which would have allowed the University to develop a more reliable control algorithm for the contemplated 3 kW hardware-based prototype.

[201] The impact of Sunsource’s failure to deliver the requisite panels during the term of the research agreement is set out in Dr. Kar’s closing report, dated April 5, 2013, which provides a summary of the work undertaken during the FedDev project:

The milestones and deliverables of this project were to develop a 3 kW PV based grid mimicking system with proper real-time control. The novelty of this project is the developed control strategy which can take care of seamless power transfer between the developed PV-based grid mimicking prototype and the utility grid. The above deliverables have been successfully met on a downsized 1.5 kW system as the industrial partner was unable to support the University of Windsor team with six additional solar panels which would have resulted in a 3 kW system as stated in the initial project proposal.

[202] Dr. Kar testifies that during the meeting, Mr. Hurst did not complain about the deliverables he received. Similarly, Mr. Schmidt testifies that Mr. Hurst accepted the “cyber prototype” delivered by the University without objection or complaint. Ms. Pratt testifies that Mr. Hurst did not raise any concerns that he had not performed the 400 in-kind hours of service that Sunsource was required to provide pursuant to the agreement, nor did he raise any concerns about the stated value of materials and equipment Sunsource was obligated to provide during the term of the agreement.

[203] The University posits that Sunsource is deemed to have accepted the deliverables that it provided in accordance with s. 3.1. There is no evidence that Sunsource notified the University within 25 business days following its receipt of the deliverables that it did not accept the deliverables that were provided at the April 5, 2013 meeting.

[204] Mr. Hurst testifies that he was told during the meeting that if he downloaded the information on the CD it would allow him to build a 3 kW prototype. Two weeks after the meeting, he provided the CD to Matthew Sewell, an electrical engineer. Mr. Hurst says that Mr. Sewell advised him that the CD did “nothing”. Subsequently, Sunsource retained Mr. Sewell to provide an expert opinion for the purpose of this litigation concerning, among the potential commercial viability of the solar PV seamless switch technology.

[205] Mr. Sewell testified at trial, but he does not confirm this aspect of Mr. Hurst’s testimony. He does acknowledge receiving, as part of the materials he reviewed prior to producing his initial expert report on June 3, 2015, a CD entitled “April 5, 2013”, which Mr. Hurst identified as the disc given to him by the defendant. He indicates that among other things, the disc contained a detailed description of the source code and that part of the CD contained an application that was required to be run through Matlabs/Simulink software. Unfortunately, Mr. Sewell did not have access to that software and as a result, he did not view that portion of the CD.

[206] During the balance of the April 5, 2013 meeting, the participants discussed the potential for next steps between the University and Sunsource. Particularly, as it related to a potential development agreement between them concerning a switch prototype to be used with VPI’s waste heat generator.

[207] Mr. Hurst testifies that during the April 5, 2013 meeting, the participants also discussed issues centered around Sunsource’s pending utility patent application. Mr. Hurst says he showed Ms. Pratt and Mr. Schmidt a copy of Sunsource’s provisional patent and once he did so, Ms. Pratt chastised Dr. Kar and then expressly prohibited Mr. Hurst from communicating with Dr. Kar, insisting that all future communications go through her office.

[208] Ms. Pratt and Dr. Kar both deny that those events and discussions occurred. Dr. Kar adamantly states that he enjoys academic freedom at the University, and he is always free to speak to whomever he chooses.

[209] Contrary to Mr. Hurst’s evidence, Mr. Schmidt indicates that Mr. Hurst did not bring a copy of Sunsource’s utility patent filing to the meeting and he was never provided with the utility patent application.

[210] There is also no evidence that Mr. Hurst raised Mr. Laba’s alleged utterance that Mr. Schmidt had disclosed to him that the University intended to proceed with a VPI related project without Sunsource’s involvement.

(q) The Post-FedDev Development Agreement Negotiations – April 2013

[211] Following the close-out meeting, Ms. Pratt sent Mr. Hurst a draft development agreement between the University and Sunsource, by email correspondence on April 5, 2013. In turn, Mr. Hurst immediately forwarded a copy of the agreement to Mr. Kozar, and also confirmed his receipt of the algorithm stating, “Joe, I have a copy of simulated algorithm from the University, it is in Matlabs/Simulink.”

[212] On April 6, 2013, Mr. Hurst and Mr. Kozar exchanged email correspondence about their respective concerns over certain aspects of the draft agreement, including a provision with respect to royalties payable to the University in the event of a sale to a third party. Mr. Hurst suggested they negotiate a buy-out option agreement similar to one that he had in place during the FedDev period. Mr. Kozar agreed, and asked to review Sunsource’s patent application.

[213] By email communication dated April 11, 2013, Mr. Hurst advised Ms. Pratt and Dr. Kar that Sunsource’s “investor”, Mr. Kozar, had concerns with respect to patent information and IP ownership. He also confirmed that Mr. Kozar remained interested in funding Sunsource’s anticipated financial obligations under a future development agreement. Mr. Hurst asked to meet in order to discuss IP concerns. Ms. Pratt responded the same day and requested that Sunsource provide its feedback with respect to the draft development agreement terms that she had previously forwarded to Mr. Hurst, which she identified as a “starting point for discussion and further negotiation”. She also advised Mr. Hurst that if the parties entered into a development agreement, the manner in which Sunsource financed the contract would solely be a function of Sunsource’s own business decision. She requested Sunsource’s proposed development agreement at its earliest convenience.

[214] After collaborating with Mr. Kozar, Mr. Hurst forwarded a draft development agreement between Sunsource and the University to Ms. Pratt on April 14, 2013 proposing among other things, that:

1. The University provide correspondence confirming that the provisional patent filed on April 26, 2012 was owned exclusively by Sunsource.

2. All patents developed under the anticipated development agreement for a switch compatible with the VPI waste heat generator would be owned exclusively by Sunsource.

3. Sunsource would enjoy an option, exercisable at any time over a four-year period, to purchase jointly owned IP developed under any new development agreement as well as “what had been developed during the FedDev project” for $300,000.

4. In the event that Sunsource was sold, the University would enjoy a 5 percent royalty, capped at $1,000,000.

5. Third parties would not be required to pay a royalty to the University in the event of a sale of the business.

[215] Mr. Hurst testifies that on April 16, 2013, he called Mr. Schmidt in order to “mend their relationship”. Notwithstanding the parties’ ongoing negotiation of a development agreement between them (ie. the University and Sunsource) with respect to research and development associated with a generator-based switch, Mr. Hurst testifies that during their call Mr. Schmidt told him that: the University owned the patent related to the switch technology; going forward, Mr. Hurst’s role would be very limited; and the VPI project would be dealt with by the University. Mr. Hurst and Mr. Schmidt proceeded to argue, and Mr. Hurst asked Mr. Schmidt “why [Mr. Schmidt] was doing this to [him]”. Mr. Schmidt responded, “Oh, is it because you’re black? Is that what you’re getting at? Oh, you’re black”.

[216] Mr. Schmidt expressly denies the foregoing aspects of Mr. Hurst’s evidence. Instead, Mr. Schmidt testifies that after the budget and scope of work for the proposed development agreement was drafted, Mr. Hurst called him several times, requesting that the University relinquish whatever IP it controlled to Sunsource, so that Sunsource could control all the background IP to the proposed new development agreement. Mr. Hurst also asked him for “a document of novelty” with respect to the switch technology and he pressed him for a letter from the University stating that it had no claim to the technology. Mr. Schmidt repeatedly refused to concede to Mr. Hurst’s demands. He testifies that Mr. Hurst continued badgering him to say that the University did not own any of the IP associated with the switch concept. Mr. Schmidt continued to refuse. He does not recall insulting Mr. Hurst.

[217] On April 16, 2013, Mr. Hurst emailed Ms. Pratt indicating that he had “a very disturbing conversation” with Mr. Schmidt that day and he requested a meeting with Ms. Pratt and possibly the University’s president. He wrote that he was concerned that he might lose his investor and he acknowledged that Dr. Kar’s students had worked very hard on the switch project. He felt he was “constantly...insulted on every front” by Mr. Schmidt. He expressed his desire to continue to work to reach a development agreement. Ms. Pratt responded by email indicating that she would call Mr. Hurst the following day.

[218] In his evidence, Mr. Schmidt acknowledges that Mr. Hurst’s April 16, 2013 email likely resulted from one of the many telephone conversations they had, in which he refused to agree to Mr. Hurst’s demands. Mr. Schmidt could not recall a specific conversation because there were many. He states that the University could not agree to Mr. Hurst’s request that it relinquish any claim to the technology or state that it had no claim to the technology, nor could it provide a “document of novelty”. Mr. Schmidt believed that Mr. Hurst was looking for “a novelty report”, which is a document that the University had never previously provided to any of its industry partners, whether the industry partner owned 100 percent of the IP subject to a patent or otherwise. He states that under the terms of the FedDev research agreement, the University had no obligation to provide a novelty report to Sunsource with respect to pre-existing background IP to the research agreement. Finally, he observed that although a novelty report was not part of the University’s “research vocabulary”, Dr. Kar attempted to provide one to Mr. Hurst in May 2013.

[219] Mr. Hurst testifies that he spoke with Ms. Pratt on April 17, 2013 and advised her that Mr. Schmidt had represented to both himself and members of VPI that the University owned the provisional patent arising from the NSERC project. He asked that Mr. Schmidt be removed from the current project and he requested the University assist him with “upgrading” Sunsource’s provisional patent to a utility patent. He states Ms. Pratt advised him that Ms. Kaps, from her office, would assume Mr. Schmidt’s role in Sunsource-related matters.

[220] Ms. Pratt confirms that she spoke with Mr. Hurst on April 17, 2013 regarding his concerns that Mr. Schmidt had treated him “disrespectfully”. She does not confirm that Mr. Hurst told her that Mr. Schmidt asserted that the University owned the provisional patent or that Sunsource would be excluded from the potential VPI project. She testifies that she advised Mr. Hurst that Mr. Schmidt would be removed from any further direct contact with him, but she did not advise that Mr. Schmidt would not have any involvement in the project, whatsoever, on a go‑forward basis. Ms. Pratt testifies that she subsequently instructed Mr. Schmidt not to have direct contact with Mr. Hurst. On specific questioning, she also testified that she had no authority to tell Dr. Kar not to talk to Mr. Hurst and that she never instructed Dr. Kar, or any of his students, to refrain from direct contact with Mr. Hurst.

[221] Mr. Schmidt testifies that following the April 16, 2013 conservation with Mr. Hurst, he requested that Ms. Pratt remove him from the “front line” of the Sunsource portfolio. He no longer wanted to work directly with Mr. Hurst. He continued to work “behind the scenes” in order to ensure the University’s rights were protected, evaluate the technology and potential for commercialization, and move things forward. He acknowledges that Mr. Hurst also requested that he be removed from the project, but he also requested that he be removed from direct contact so that he would not have to deal with Mr. Hurst anymore. He characterized his behaviour towards Mr. Hurst as “defending the University’s position”.

[222] In her evidence, Ms. Pratt confirmed that the University did not provide novelty reports to industry partners. She recalls that at some point there were discussions with Mr. Hurst about a novelty report. However, there was also a substantial amount of confusion, from Mr. Hurst, about who had filed the original provisional patent application under the NSERC project and whether Mr. Hurst had actually proceeded to file a utility patent application in respect of the NSERC-related IP. If there was any intellectual property that was capable of being patented arising from the FedDev project, her department would have received an invention disclosure form from Dr. Kar outlining the novelty of the technology and the associated IP. No form was received.

[223] Mr. Schmidt agrees that a patent application was never filed by the University. He also explains that it could not have been filed according to the University’s policies because the ORS did not receive an invention disclosure form from Dr. Kar, which was a prerequisite for the University to engage in the patent process.

[224] On April 17, 2013, Mr. Kozar forwarded Mr. Hurst another version of a draft development agreement that he wanted Mr. Hurst to send to the University.

[225] On April 20, 2013, Ms. Pratt sent email correspondence to Mr. Hurst confirming that when they had spoken earlier in the week, she had advised him that in order for the University to discuss the “next steps”, it required Sunsource to make a counter-proposal to the draft development agreement provided by the University on April 5, 2013. She stated that once the University received Sunsource’s proposed changes to the agreement, a meeting could be scheduled with Dr. Kar “to discuss”. Mr. Hurst testifies that he interpreted Ms. Pratt’s email to suggest that Sunsource was required to enter a development agreement with the University before she would schedule a meeting with Dr. Kar to discuss the patent assistance that Mr. Hurst requested. However, the content of the email does not express a requirement that Sunsource enter into an agreement with the University, nor does it refer to Sunsource’s provisional patent, or any patent, or patent application, at all.

[226] On April 24, 2013 and in response to Ms. Pratt’s April 20, 2013 email correspondence, Mr. Hurst delivered a draft development agreement ostensibly between the University and Korona Group Ltd. As set out above, the University immediately advised Mr. Hurst that the agreement had to be between the University and Sunsource, not Korona Group Ltd. Mr. Hurst then told the University that his investor wanted an explanation from the University for that position. Ms. Pratt responded on April 25, 2013, indicating that Ms. Kaps was in the process of reviewing the proposed agreement and once she was finished, the University would be in touch.

[227] Mr. Hurst also testifies that from his perspective, the University’s discussions with him throughout April 2013 appeared to be designed to frustrate him and cause him to lose Mr. Kozar as an investor. He repeatedly testifies that the University intentionally withheld his access to Dr. Kar and his students in order to ensure that Sunsource could not “upgrade” its provisional patent to a utility patent. He also testifies that the University’s actions in spring 2013 were also designed to secure more lucrative terms under the potential new development agreement between the parties.

(r) Sunsource’s Utility Patent Application – April 2013

[228] Mr. Hurst testifies that in the absence of access to Dr. Kar and his students, he was not able to “update” his patent application with information from a novelty report. He states that a novelty report prepared by Dr. Kar and his students would have explained what had been developed over the course of the last year on the project (ie. after the provisional patent application and during the research agreement) and what differentiated the Sunsource technology from other similar technologies in the market.

[229] Ultimately, Sunsource relied on the same information that it used in its provisional patent application to support its utility patent filing in April 2013. Mr. Hurst viewed the patent filing as very weak.

[230] Mr. Hurst concedes that Sunsource received the CD with the Matlabs/Simulink program before his utility patent application was due. Sunsource did not reference that material in its application.

[231] Ultimately, Sunsource’s utility patent application was rejected several years later in 2016. Mr. Hurst does not admit that it was rejected on the basis of lack of novelty and inventiveness. He testifies that the application was denied because the University would not assist him. In cross-examination, he softened his evidence to the proposition that the University’s assistance may have helped Sunsource obtain the utility patent.

[232] He concedes, however, that the patent board in the United States requested that Sunsource address patent claims with respect to two other technologies, one made by an entity called “Deng”, and another by an entity called “Pan”, were identical to Sunsource’s technology. He agrees that Sunsource did not attempt to do so. Mr. Hurst testifies that the initial rejection of Sunsource’s utility patent application was a common practice, and a lot of utility patent applications do not “go through” the first time. He deposes that both he and Sunsource lacked the financial resources to address the competing claims identified by the patent board. He estimates that it would have cost “tens or even hundreds of thousands of dollars” to do so and all of his resources were already devoted to litigating this action. Therefore, he could not afford to demonstrate how his technology differed from the other identified technology.

[233] Notwithstanding Mr. Hurst’s evidence about the potential to distinguish the subject of Sunsource’s application, it remains that no cogent evidence from a qualified source was adduced identifying the specific content that could have permissively been included in a “novelty report” and that would have altered the disposition of Sunsource’s utility patent application. Further, Mr. Schmidt provided uncontradicted evidence that Sunsource could not have relied on any incremental IP or additional innovations developed during the FedDev project period to support its utility patent application arising out of the NSERC project, because that IP was developed after the NSERC provisional patent application was made. Each of Dr. Kar, Mr. Schmidt, Ms. Pratt, and Ms. Kaps testified that the provisional patent was owned by Sunsource and there was nothing the University could provide to Sunsource that had not already been provided to it, in order to elevate the provisional patent to a utility patent.

[234] Sunsource did not call any evidence, including evidence from its patent attorney, Mr. Raggio, to support Mr. Hurst’s conclusionary evidence that the quality of Sunsource’s utility patent was markedly affected because the University did not provide a “novelty report” for use in the application. There is no evidence that explains, with specificity, how a novelty report would have meaningfully influenced the result of the patent application in this instance.

[235] When he was questioned about issues related to the utility patent application in cross-examination, Mr. Hurst deferred, at times, to the anticipated evidence of Mr. Raggio. He indicated, among other things, that Mr. Raggio would testify to the reasons the utility patent was not granted. Ultimately, after being informed that the University sought to challenge solicitor-client privilege in the event Mr. Raggio gave evidence, Sunsource elected not to call him as a witness. Owing to the plaintiff’s failure to call Mr. Raggio, the University requests that an adverse inference be drawn against Sunsource that the reason the utility patent was not granted was its lack of inventiveness and novelty, not the University’s alleged failure to provide patent assistance to Sunsource.

[236] In addition, Mr. Hurst did not reconcile his evidence that a novelty report prepared by Dr. Kar concerning the developments made over the course of the research agreement would have assisted Sunsource in its utility patent application, with his evidence that even before the FedDev close-out meeting on April 5, 2013, he knew that nothing had been developed during the FedDev and that he had not seen any progress being made on the technology over the course of the research agreement’s term.

(s) New Development Agreement Negotiations – May 2013

[237] On April 30, 2013, Mr. Hurst emailed Ms. Pratt and asked if “[things] are … moving in the right direction”. Ms. Pratt advised him that Ms. Kaps was finalizing a responding draft development agreement to the agreement Sunsource delivered on April 24, 2013 (the Korona agreement), which he would receive the following day.

[238] On May 1, 2013, Ms. Kaps provided Mr. Hurst with the University’s revisions to Sunsource’s latest draft development agreement, which included the following changes:

a) Korona Group Ltd. was removed as a party and Sunsource was reinstated as a party.

b) The inclusion of cost overrun provisions.

c) Deletion of the proposed provision that any IP developed during the project would not be owned outright by Sunsource. Instead, the University proposed that: any IP developed exclusively by the University would be owned in accordance with the University’s policies; any IP developed exclusively by Sunsource would be owned by Sunsource; and any IP developed by Sunsource and the University working jointly would be owned by the parties jointly.

d) Sunsource would be the commercialization agent for all jointly owned IP and would be responsible for all costs associated with commercialization ,including all costs of IP protection.

e) Sunsource would not have the right to assign its interest in the technology to VPI or QDAC Inc. (another Kozar company) without the University’s consent.

f) Sunsource’s obligation to pay the University a 5 percent royalty on all sales of products and services in connection with the technology (not limited to an outright sale of the technology itself), without any cap, was reinstated.

[239] Mr. Hurst states that at this point, his investor was growing impatient because he wanted a better understanding of the status of the joint IP developed under the FedDev project, but Ms. Pratt was constantly “stone-walling” on that issue.

[240] Mr. Hurst testifies that at this point, the University was “erroneously” holding out that some form of IP had been developed during the FedDev project, when no IP had been developed. He also felt that Ms. Pratt was adding new terms to the University’s proposed development agreements without addressing any of the concerns held by his investor, which was causing more frustration.

[241] On May 2, 2013, Mr. Hurst sent email correspondence to Ms. Pratt advising her that Sunsource was about to lose its investor unless the parties could come to an agreement on a few key issues. He requested a meeting the following day. In reply, Ms. Pratt advised Mr. Hurst that she was involved in the University’s “collective agreement” negotiations for the next few months and that Ms. Kaps would assume the lead in development agreement negotiations. She also emphasized that the University needed to ensure that the IP of all inventors was protected, which she believed was achieved in the University’s latest draft agreement.

[242] Mr. Hurst and Ms. Kaps subsequently arranged to meet on May 3, 2013 at the University. Their meeting proceeded, with Ms. Sharon Hayes-Racicot of the University’s ORS, also in attendance. Mr. Hurst and Ms. Kaps discussed the contentious terms of the proposed development agreement. Ms. Kaps testifies that during the meeting, Mr. Hurst exhibited “aggressiveness” which she interpreted as a “physical threat” to her safety. Mr. Hurst denies engaging in any aggressive or threatening conduct. I will address this aspect of the evidence in more detail later in these reasons, and explain my reasons for concluding that Ms. Kaps’ evidence about Mr. Hurst’s stated aggressiveness, is not credible.

[243] Following the May 3, 2013 meeting, Ms. Kaps forwarded an email to Mr. Hurst outlining five outstanding issues for which Sunsource wanted the University’s position by May 8, 2013.[2]

[244] Despite the timely scheduling of the May 3, 2013 meeting that Mr. Hurst requested on May 2, 2013, Mr Hurst contacted the University’s President on the evening of May 2, 2013 and again the afternoon of May 3, 2013, with complaints about Ms. Pratt’s approach during the parties’ on-going development agreement negotiations. Mr. Hurst would later describe his complaints to Mr. Kozar as a tactical method to obtain the results he and Mr. Kozar wanted to achieve in relation to the proposed development agreement.

[245] By email dated May 3, 2013, Ms. Pratt expressed concern to Mr. Hurst that he had launched complaints to the University President which she characterized as “counter-productive in their negotiations”. She confirmed that she had full authority to negotiate the development agreement. She outlined her understanding of Sunsource’s current position with respect to certain terms in the proposed development agreement. She reiterated that the development agreement would be between the University and Sunsource. She reiterated that the manner in which Sunsource financed the project was Sunsource’s business decision and should not have a bearing on the parties’ discussions about the agreement’s terms.

[246] In response, on May 5, 2013, Mr. Hurst emailed Ms. Pratt and apologized for contacting the president’s office and provided a lengthy explanation as to why he did so. This included his issues with Mr. Schmidt and a perceived lack of the University’s support for Sunsource’s utility patent application. Mr. Hurst then sent email communication to Mr. Kozar on May 5, 2013 in which he described his contact with the University’s president as his “method” of getting “the desired result of the development agreement”, as well as, indicating that now that he had “everyone’s attention” he was requesting changes to the development agreement in accordance with “his most recent conversation with [Mr. Kozar]”. Finally, he disclosed that tactically he involved the University’s President in order to secure Ms. Pratt’s approval of Sunsource’s proposed development agreement as soon as possible.

[247] Mr. Hurst then requested a novelty report from Dr. Kar on May 5, 2013. Even though Sunsource already filed its utility patent application, Mr. Hurst wanted the novelty report for Mr. Kozar. On May 8, 2013, Dr. Kar produced his first attempt at a novelty report. Dr. Kar testifies that he had never been involved in a patent process before the Sunsource project nor had he ever written or been requested to write a novelty report in support of a patent application. Mr. Hurst was not satisfied with the report Dr. Kar prepared.

[248] On May 11, 2013, Mr. Hurst emailed Dr. Kar and directed him about the content to include and exclude from the report. He advised Dr. Kar that he needed to highlight the project as “a smart algorithm/software” that is able to control and combine: (i) seamless transfer; (ii) surge management; (iii) current synchronization; and (iv) built-in inverter and scalability, all in one technology. He expressed that, “We are taking technology that has been around for years and making it better through our software/algorithm IP, this is the novelty of the technology”. Ms. Pratt was copied on the email. Ms. Pratt responded to Mr. Hurst on May 13, 2013 suggesting that Sunsource should respond to the latest draft development agreement proposal made by the University after the May 3, 2013 meeting and emphasized that once the business terms of the agreement were finalized, the parties could move forward on technical discussions with respect to the project.

[249] Mr. Hurst responded by email to Ms. Pratt on May 13, 2013, indicating that he had attempted to keep the project on track and his investor had the right to know what he was buying before making a final purchase. He felt the novelty report that he requested was straight-forward and “roadblocks” kept the parties from moving forward. He contended that he may lose his investor before the end of the week. Dr. Kar was copied on the email. Mr. Hurst also specifically asked Dr. Kar if they could discuss building a smaller 10 kW solar PV prototype switch because he was going to be speaking with another individual the following day who may be interested in a smaller project. That individual did not testify at trial.

[250] Ms. Pratt responded to Mr. Hurst, expressing her appreciation of Sunsource’s “timelines”, and confirming that she had already sent Mr. Hurst the novelty report that Dr. Kar previously provided to her. She also attached another copy of the latest version of the proposed development agreement and requested that Sunsource review it with its lawyer and provide a response. She expressed that it was important for the parties to agree to the business terms of the project before proceeding any further with technical discussions and if that was not acceptable to Sunsource, then the University would not be able to pursue the project. She reaffirmed the University interest, but it was of the utmost importance to ensure that the parties could agree to business terms that were fair to all of them.

[251] Mr. Hurst responded to Ms. Pratt and contended that Dr. Kar’s novelty report was not “proper”, or in accordance with the guidelines that Mr. Hurst had previously provided to Dr. Kar. A copy of those guidelines was not adduced as evidence. Mr. Hurst indicated that with the University’s cooperation, his lawyer would draft the proposed development agreement.

[252] In a subsequent email on May 13, 2013, Ms. Pratt proposed that Mr. Hurst meet with her, Dr. Kar and Ms. Kaps the following day. She disclosed that she felt that there may be some misunderstanding between the parties on important details, and she proposed that they discuss them in order to determine if the parties were able to move forward on the project. Mr. Hurst responded indicating that there had been no misunderstanding on his part and queried “why this is happening”. In her response, Ms. Pratt indicated that she had been attempting to “differentiate” between Mr. Hurst’s request for a novelty report to support Sunsource’s patent filing and a novelty report for the purpose of a development agreement. She expressed her belief that this is where the parties’ misunderstanding had occurred. Finally, she expressed that the University was also content if Sunsource wished to proceed with the new project with parties other than the University. She did not suggest the University would proceed with the project, in the absence of Sunsource’s participation.

(t) The Parties’ May 14, 2013 Meeting

[253] Mr. Hurst met with Dr. Kar, Ms. Pratt, and Amy Davie (of the president’s office) on May 14, 2013.

[254] During the meeting, the parties specifically discussed the novelty report requested by Mr. Hurst. Dr. Kar expressed confusion over Mr. Hurst’s dissatisfaction with the report he provided on May 8, 2013. Mr. Hurst explained that the investor wanted to understand what was unique about “the switch” technology. The parties reviewed a second draft of the requested novelty report that Dr. Kar forwarded to Mr. Hurst on May 13, 2013. Ultimately, Mr. Hurst indicated that he would be satisfied with the report if an identified six-line passage dealing with VPI and the greenhouse generator project was removed.

[255] During the meeting, Ms. Pratt expressly indicated that her office would not be involved in the novelty report, and it was up to Dr. Kar to determine if he wanted to be involved. She did not prohibit Dr. Kar from communicating with Mr. Hurst. Mr. Hurst did not suggest that the University was contractually obligated to provide a novelty report or to support his patent filing.

[256] Ms. Pratt confirmed that the provisional patent that was originally filed by Sunsource related to the NSERC project and that the patent belonged exclusively to Sunsource, and not the University. Mr. Hurst stated that Sunsource had filed its utility patent application at the end of April 2013, which was based off of its previous provisional patent filing. He contended that he could not “update” his utility patent filing because he was not able to talk to Dr. Kar. Ms. Pratt pointed out that the parties met at the end of the FedDev project and Dr. Kar was present at that time. Dr. Kar then observed that he provided Sunsource with a “soft-copy” prototype and a user guide during the FedDev close-out meeting. Mr. Hurst disclosed that his lawyer did not understand the “soft copy” because it was “just algorithms”. Mr. Raggio did not testify to confirm that assertion. Ms. Pratt repeatedly requested a copy of the new patent filing and indicated that any IP developed after the NSERC project should be filed as separate IP in a joint IP filing.

[257] Ms. Pratt then turned to the University’s role with Sunsource’s potential investors. She confirmed that the FedDev funded project governed by the research agreement and the potential generator switch project contemplated by the proposed development agreement were two distinct projects. She reiterated that the University would only sign the proposed development agreement with Sunsource and not its investor and that Sunsource’s business dealings ought not to be connected to the University.

[258] Mr. Hurst also expressed concern that he may have lost VPI as an investor because “the grower” involved in VPI proposed “field testing” had found a similar product.

[259] The meeting’s participants addressed the contentious terms of the proposed development agreement as follows:

a) Equipment - Sunsource will be required to purchase the equipment set out in the development agreement budget and it would retain ownership of any equipment that left the lab for field testing. Sunsource would also own a field unit prototype of the same or better quality than the unit owned by the University.

b) Payment – the University required a cheque for half the total amount set out in the budget on execution of the development agreement and the other half before phase two commenced. Ms. Pratt was concerned with Mr. Hurst’s revelation during the meeting that “no one knew” if his investor actually had money or not, and as a result, she posited that the agreement had to provide for payment of funds prior to the commencement of the project.

c) Buy-out Terms – the parties agreed that for a period ending eight months after the end of the term of the development agreement, Sunsource would have the ability to enter into a further agreement with the University to take full ownership of the technology, on terms acceptable to the University (buy-out price was not specified).

d) Royalty Terms – the parties discussed a net 5 percent royalty on all units sold to be paid to the technology’s inventors (not the University) without a cap. In the event the technology was sold to a third party, 5 percent of the profit from the sale would be returned to the University.

e) Project Start and End Dates – the timing of the project required further input from Dr. Kar. Terms of a formal agreement had to be negotiated and executed before work could begin.

[260] The parties agreed to a go-forward plan pursuant to which Ms. Kaps would make changes to the draft development agreement and forward a copy to Mr. Hurst.

[261] The minutes of the parties’ May 14, 2013 meeting were reduced to writing and in his evidence, Mr. Hurst agrees that they are substantially accurate. The minutes disclose the content of the meeting set out above. Despite that, Mr. Hurst testifies that nothing was accomplished at the May 14, 2013 meeting and the parties’ discussions about the development agreement continued to go “back and forth” until May 30, 2013, when Sunsource lost Mr. Kozar as an investor. However, the record does not include any documentation, correspondence or draft agreements passing between the parties in the period from May 16, 2013 (the date the University sent its last draft development agreement to Sunsource) to May 30, 2013. Nor is there any evidence from the University witnesses that the parties continued to “go back and forth” during that time.

[262] On May 16, 2013, Ms. Kaps provided Mr. Hurst with a copy of a revised draft development agreement that was consistent with the changes discussed at the parties’ May 14, 2013 meeting. Sunsource did not respond with a further counter-proposal or a request for further changes to the development agreement.

[263] Ultimately, a development agreement with respect to a generator-related switch was never completed or executed between the parties.

[264] On May 30, 2013, Mr. Hurst sent email correspondence to Ms. Pratt, Ms. Kaps, Dr. Kar, and Ms. Davie, from the office of the University’s President, advising them that he had lost his investor “due to all of the back and forth bickering between the University and [Sunsource]”. Mr. Kozar did not testify, and as a result, there is no evidence from him concerning his reasons for his decision not to invest in or be involved with Sunsource any further.

(u) Sunsource’s Complaints and the Parties June 4, 2013 Meeting

[265] In his evidence, Mr. Hurst consistently asserted that Ms. Pratt’s various email correspondence in April and May 2013 demonstrate the University’s refusal to provide a novelty report and details with respect to the intellectual property developed during the FedDev project, until Sunsource executed a development agreement with the University that provided the University with compensation substantially in excess of what its entitlement was under the terms of the prior research agreement.

[266] Mr. Hurst testifies that he requested a simple statement about what made the switch technology “stand out” against competing technology, in the form of a novelty report, in order to “upgrade” his utility patent and for use by his potential investor. He infers that Dr. Kar did not attempt to write such a report until Mr. Hurst escalated the matter to the President’s office in early May. Even so, Mr. Hurst believes that he was still prohibited from speaking with Dr. Kar and Ms. Pratt continued to insist that the parties come to an agreement on business terms before “moving forward” on the technical discussions of the project. He agrees that Dr. Kar delivered a form of novelty report on May 16, 2013 that was sufficient for the purpose of his investor.

[267] Mr. Hurst deposes that by the time the parties met on May 14, 2013, VPI was “playing hardball” with him and he was at risk of losing Mr. Kozar as an investor. He states his investor was “getting sick of all the bickering at the University”.

[268] Mr. Hurst requested a meeting to discuss his perceived mistreatment by the University. He explains that while he was frustrated by his inability to secure information for his utility patent application and the loss of Mr. Kozar as an investor, he also wanted to continue his relationship with the University in order to pursue the commercial opportunity he perceived Sunsource had with GE. As a result, a meeting between Mr. Hurst, Dr. Kar, Ms. Pratt, Ms. Davie, Dr. Siu (the University’s Vice-President of Research) and Dr. Saif (the University’s Dean of Engineering) occurred at the University on June 4, 2013.

[269] The meeting opened with Ms. Pratt providing a summary of the relevant events and email communications between the parties. Mr. Hurst then outlined the relevant chronology from his perspective, observing that “IP and compensation to the University” only became issues after he agreed to proceed under the FedDev project terms. Ms. Pratt observed that the terms of the FedDev initiative required joint ownership of IP arising out of FedDev funded projects. Mr. Hurst also disclosed that he “brought in” Joe Kozar, a key investor with VPI at a time when VPI was involved in on-going litigation with the University. Mr. Kozar was “hesitant” to become involved because of the litigation, but he continued to engage in discussions about investing in Sunsource.

[270] During the balance of the meeting:

• Mr. Hurst complained about Mr. Schmidt, with whom he acknowledged he did not get along. He felt Mr. Schmidt treated him poorly, wanted to withhold documentation from him because he felt the University’s relationship with Sunsource ended on March 31, 2013, leaked information to Sunsource’s potential investor which resulted in the loss of the investor, and posited that a VPI contract would be between the University and VPI, not Sunsource, because he felt Sunsource did not “own anything”.

• Mr. Hurst alleged that he attended a meeting with Ms. Pratt and Dr. Kar in which Ms. Pratt chastised Dr. Kar for assigning the provisional patent without involving her and she then prohibited them from speaking.

• Dr. Kar disputed a suggestion by Mr. Hurst that the University’s FedDev deliverable in the form of a “software prototype” did not function. He offered to demonstrate its functionality in his lab. Mr. Hurst then asserted that the University’s deliverables were not provided, because the CD was not proved. He wanted a working switch with an authenticated algorithm as a prototype. Mr. Hurst also agreed that Sunsource did not provide its deliverables under the FedDev, but suggested that it did not do so because the University treated his investor poorly and the investor ultimately backed out. He did not explain why Sunsource did not supply its in-kind contributions in the 10-month project period that pre-dated Mr. Kozar’s involvement as he first attended the lab three weeks before the FedDev project ended.

• Mr. Hurst repeated that he wanted a physical prototype that he could demonstrate. Dr. Kar advised that it was not easy to provide a physical prototype, but he could display the functionality of the algorithm in his lab. Dr. Siu advised Mr. Hurst that the University was not responsible for providing Sunsource’s potential investor with anything and Mr. Hurst could not expect the University to deliver when Sunsource did not deliver under the FedDev. Mr. Hurst then posited that his in-kind contributions under the NSERC ought to have satisfied Sunsource’s subsequent obligations under the FedDev. Dr. Siu clarified that the NSERC and FedDev projects were distinct projects, and further observed Dr. Kar was in the best position to determine whether Sunsource had provided adequate in-kind support under the FedDev.

• Mr. Hurst disclosed that he owed his patent attorney $11,000, which he did not want to pay. Dr. Siu advised him that Sunsource could not file a patent without advising the University’s ORS and then expect the University to pay the associated fees. Ms. Pratt advised Mr. Hurst that had Sunsource involved the University in patent filings arising from the FedDev project, the University would have paid 100 percent of the patent costs related to joint IP, which it would have potentially recovered from royalties, in the event of commercialization.

• Mr. Hurst confirmed that he still wanted Sunsource to move forward with the University. He wanted a working prototype that could be shown. Dr. Saif confirmed that if the University moved forward with Sunsource, the University would be Sunsource’s partner. He observed that Dr. Kar had worked with Mr. Hurst over a prolonged period of time, during which Dr. Kar invited Mr. Hurst to treat his lab like his own, and he allowed Mr. Hurst to bring in potential investors to show them the project.

• Dr. Kar advised the meeting attendees that his lab was committed to a number of other projects, but he was willing to continue to work with Sunsource to develop a physical prototype. However, materials had to be ordered. Mr. Hurst disclosed that he did not have any funds to purchase materials. Dr. Saif and Ms. Pratt generally discussed potential grant funding options, but Ms. Pratt cautioned that the University would have to have a stake in the IP developed on a go-forward basis, to which Mr. Hurst agreed. The parties agreed to explore grant funding to move ahead with the development of a 1.5 kW physical prototype.

[271] Despite Mr. Hurst’s assertion in the June 4, 2013 meeting that Sunsource lost its investor because Mr. Schmidt leaked confidential information to him, there is no evidence that Mr. Schmidt ever had any contact with Mr. Kozar or any members of VPI after he emailed the draft budget and scope of work related to the parties’ potential new development agreement on March 25, 2013. Shortly thereafter, Mr. Schmidt was removed from the front-line of the project. The parties’ negotiations for a potential development agreement, in which Mr. Kozar was indirectly involved, continued for quite some time after Mr. Schmidt’s exit from the project.

[272] Mr. Hurst testifies that at the beginning of the June 4, 2013 meeting, he was uncertain about whether he wanted to continue working with the University. By the end of the meeting, he was satisfied with continuing their collaboration. Following the meeting, Mr. Hurst thanked all of the participants by email, and expressed that the parties had made very positive gains towards the completion of the technology.

[273] On June 7, 2013, Mr. Hurst emailed Dr. Saif and thanked him for his efforts at the parties’ recent meeting, which Mr. Hurst stated resulted in “very positive gains”. In his email, Mr. Hurst characterized Dr. Saif and Dr. Kar as very fine engineers and very fine individuals.

[274] On June 10, 2013, Mr. Hurst emailed Mr. Vinayagam at GE and represented that he and the University had “reached an agreement” to build a 1.5 kW prototype (although the balance of the evidence supports that the parties had not yet negotiated the terms of such an agreement or executed any agreement). A meeting was scheduled for June 13, 2013 to discuss timelines, but Mr. Hurst expected that a working prototype would be developed within four months. Sunsource decided not to partner with VPI because “it was too complicated to work with that company”. Mr. Hurst wanted a response from GE indicating whether it was interested in the switch technology. In response, Mr. Vinayagam provided Mr. Hurst with the contact information for two other GE employees and recommended that Mr. Hurst send those individuals a letter of introduction and a brief description of the technology.

(v) The Parties Negotiating to Develop a 1.5 kW Hardware-Based Prototype of a Solar PV Switch – June 2013

[275] Dr. Kar, Ms. Kaps and Mr. Hurst met on June 13, 2013 to discuss the manner in which the parties would approach the recently identified contacts at GE, and funding for the 1.5 kW prototype. Dr. Kar agreed to write a brief letter of introduction to the potential GE contacts. Dr. Kar reiterated to Mr. Hurst that a hardware-based prototype was not previously built because Sunsource did not fulfill its obligation under the research agreement to supply the necessary components. Dr. Kar estimated that a contribution of $5,000 was required from Sunsource to purchase the necessary components. Mr. Hurst and Ms. Kaps testify that Dr. Kar also estimated that a four-month period was required to assemble and test a physical prototype. Dr. Kar testifies that the four-month time estimate was consistent with Mr. Hurst’s requested timeline, but he did not feel that it was necessarily reasonable. Mr. Hurst was uncertain if he could provide $5,000 in funding. Dr. Kar requested that Ms. Kaps query the University’s funding sources. She agreed. She also indicated that she would draft an agreement between the University and Sunsource with respect to the development of a 1.5 kW prototype once a funding source was provided. Mr. Hurst stated that he wanted the agreement to include the same buy-out and royalty terms that were included in the draft development agreements related to the proposed generator switch project. The University made no commitment in that regard.

[276] By June 21, 2013, Dr. Kar prepared a draft letter of introduction to the newly identified GE contacts. Mr. Hurst reviewed it and requested additional changes that stated that the prototype would be based on “our successful simulation of our algorithm” and that “we had made gains since our last meeting in January”. Each of these suggestions is inconsistent with Mr. Hurst’s evidence that even as of March 31, 2013, he believed that no meaningful work had been done on the FedDev project.

[277] Dr. Kar incorporated Mr. Hurst’s requested changes in the draft correspondence, which was then executed by Mr. Hurst and Dr. Kar on June 26, 2013. The newly identified individuals at GE were invited to attend at Dr. Kar’s lab for a demonstration of the technology or alternatively, the parties offered to make another presentation at GE. No one from GE ever responded to the June 26, 2013 correspondence. Representatives from GE never requested or attended any further presentations or demonstrations of the technology. GE has never proactively contacted the University or Sunsource with respect to the switch technology.

[278] On June 27, 2013, Mr. Hurst sent email correspondence to Ms. Pratt, Ms. Kaps and Dr. Kar and advised them that he had spoken to another potential investor. He suggested that it would be “a deal breaker” unless the investor knew what the University would require in the event that he invested in Sunsource. This individual did not testify at trial. Mr. Hurst proposed meeting, to discuss the terms of an agreement. Ms. Kaps scheduled a meeting with Mr. Hurst and Amy Davie on July 5, 2013.

[279] Prior to the July 5, 2013 meeting, Ms. Kaps and Mr. Schmidt met with Dr. Kar on July 3, 2013 to discuss the terms of the potential 1.5 kW prototype development agreement with Sunsource. Ms. Kaps testifies that they provided Dr. Kar with a number of options concerning potential terms of the agreement, and he identified his preferences as follows: there would be no term permitting Sunsource to buyout the University’s IP developed under the proposed development agreement; the University would be the IP agent and responsible for all potential patent filings related to IP developed during the term of the development agreement; the University would be the assigned owner of the IP as the IP agent, and Sunsource would receive its ownership rights through a license.

[280] Ms. Kaps also testifies that during the July 3, 2013 meeting, she and Mr. Schmidt generally discussed IP with Dr. Kar and advised him that any new patentable IP developed during the FedDev project should be submitted to the ORS through a disclosure form. She provided Dr. Kar with a disclosure form that day which was never completed.

[281] Dr. Kar testifies that he recalled the July 3, 2013 meeting, but he does not recall its content.

[282] Ms. Kaps and Ms. Davie met with Mr. Hurst on July 5, 2013. Mr. Hurst testifies that he requested the University provide him with a letter that he could provide to potential investors disclosing the specifics of IP ownership related to the switch technology. Mr. Hurst testifies that instead of addressing his request, Ms. Kaps “dismantled” the framework of the agreement to build a 1.5 kW prototype that the parties had reached during the June 4, 2013 meeting. Specifically, Ms. Kaps presented a five-point agenda addressing:

1. IP/commercialization agents

2. Ownership structure

3. Payment of IP protection

4. Payment of prototype building and testing, and

5. Royalty rates.

[283] During the meeting, Ms. Kaps again confirmed that the patent Sunsource had already filed arose out of the NSERC project and belonged exclusively to Sunsource. She posited that any future IP filings would be made by the University and Sunsource would be invoiced for 50 percent of the cost. Mr. Hurst objected.

[284] Ms. Kaps then proposed that in the event of commercialization, the University would be paid a royalty of 5 percent and there would be no term permitting Sunsource to buy-out the University’s IP ownership. Mr. Hurst characterized the later position as a “deal breaker” and advised her that he would take legal action against the University and go to the press.

[285] In order to move forward with the University, Mr. Hurst proposed:

a) A 5 percent buy-out provision be included in the agreement to ensure that Sunsource had the opportunity to become the sole owner of all IP.

b) Sunsource would retain the ability to file its own patents.

c) Sunsource would pay for the IP developed under the FedDev project.

d) Sunsource would fund $5,000 for the development of a 1.5 kW prototype to be built within four to five months, and Dr. Kar would attempt to leverage that funding through grant applications.

[286] Ms. Kaps posited that any new IP developed under a new development agreement would be owned by the University, and licensed back to Sunsource for a 5 percent royalty rate to the University on commercialization.

[287] Ms. Kaps followed up the meeting with an email to Mr. Hurst on July 5, 2013, proposing the following terms:

a) Any new IP generated from the FedDev project would be jointly owned by Sunsource and the University. IP filings would be carried out by the University and the associated costs would be carried by the University and recouped on the sale of the first unit.

b) Sunsource would contribute $5,000 to the production and testing of a 1.5 kW prototype. Dr. Kar would attempt to leverage the funds through grants. The estimated development time was four to five months.

c) Sunsource would pay a net royalty of 5 percent on the sale of any commercialized units.

d) In the event of a sale of the Sunsource company, there would be a structured sale agreement in which any patents jointly owned by the University and Sunsource would be outlined and priced separately. The University would not share in any of the sale revenue of the remainder of Sunsource’s assets including any patents that Sunsource currently held, exclusive of the University. The University would share, on a 50/50 basis, the revenue generated by the sale of any patents jointly owned by the parties. On payment of its 50 percent share, the University would relinquish its right to a 5 percent royalty on the sale of individual commercialized units, while retaining the right to utilize the associated IP for research and educational purposes.

[288] Mr. Hurst quickly responded by email and indicated that he would never agree to a 50 percent royalty on the sale of IP to a third party, because the parties have always discussed a 5 percent royalty, and a 50 percent royalty on the sale of the IP would make it impossible to attract an investor. He advised that he was going to seek legal counsel. He commended Dr. Kar for “doing his best to keep things on track”.

(w) The End of the Parties’ Relationship – July 9, 2013

[289] Following Mr. Hurst’s response, the University, through its in-house legal counsel Richard Taylor, forwarded two pieces of correspondence to Sunsource dated July 9, 2013, in which:

a) The University confirmed that there was currently no agreement between Sunsource and the University to develop any IP and all prior offers in that regard were rescinded.

b) Confirming that the research agreement related to the FedDev funded project expired on March 31, 2013 and that Sunsource had not provided its agreed upon “in-kind” support, specifically $21,800 worth of materials and supplies.

(x) Sunsource’s Post-Relationship Complaints About the University to the FedDev

[290] The parties did not have any further direct contact after the University’s July 9, 2013 correspondence, apart from this litigation.

[291] However, on July 30, 2013, Mr. Hurst left a message for Craig McClelland, a FedDev economic development officer, to discuss the ARC Project outcome.

[292] Mr. McClelland testified at trial. He confirms he received Mr. Hurst’s message. Prior to contacting Mr. Hurst, Mr. McClelland reviewed the collaboration completion report that had previously filed by the University, at the end of the FedDev project period. In its report, the University disclosed that a comprehensive control algorithm was developed and tested in a lab environment during the project. It further disclosed that a hardware-based prototype could not be built because the University did not receive the in-kind contributions from Sunsource required to do so.

[293] Mr. Hurst did not see a copy of the University’s collaboration completion report until some time after this litigation was commenced. He not only disputes the foregoing assertions, but most of the balance of the report’s content concerning among other things, the extent to which IP was developed during the project. Conversely, Dr. Kar testifies to the accuracy and truthfulness of the collaboration completion report.

[294] Following Mr. Hurst’s telephone call, and his review of the collaboration report, Mr. McClelland spoke with Ms. Pratt on July 31, 2013 about an $18,000 matching shortfall in Sunsource’s in-kind contributions, which the report disclosed. Mr. McClelland advised her that the University’s payment claim under the FedDev program would not be reduced as a result of the in-kind shortfall, as long as the University could substantiate that it provided support to the project valued at $18,000 above the amount it received under the grant. He confirmed that the University’s additional support could be identified through its own additional labour contributions, facility usage and equipment usage.

[295] Dr. Kar identified additional students and a visiting professor who had worked on, or contributed to, the FedDev-funded project, (apart from those students who had already been allocated funds from the grant), together with the nature of their work and contributions. That information was submitted to Mr. McClelland through a labour attestation form executed by Ms. Pratt. Dr. Kar testifies to the truth of the content of the attestation form.

[296] Mr. McClelland testifies that he was satisfied that the University’s additional in-kind contribution claim was valid. Nonetheless, Mr. Hurst posits, in his evidence, that the content of the attestation form is fraudulent because no students other than Dr. Iyer and Dr. Lu worked on the project during the FedDev project.

[297] Further, in the context of this litigation, the University provided an accounting of the distribution of the proceeds of the FedDev grant funds that were earmarked for student and research associate payments (totalling $48,500). The accounting includes the identities of the students and researchers that were paid through the grant and the specific amounts they received. Mr. Hurst testifies that every student and research associate, apart from Dr. Iyer and Dr. Lu who received funds through the FedDev grant, did so fraudulently because in his view, none of them worked on, or contributed to, the project. Conversely, Mr. McClelland testifies that he had no concerns with respect to fraud or impropriety as it relates to the disposition of the proceeds of the FedDev grant related to the Sunsource project, and he did not feel an audit was warranted. The FedDev had no further concerns with respect to the accuracy and propriety of the University’s claims and representations with respect to the Sunsource project or the disposition of grant funds related thereto.

[298] Mr. Hurst’s assertions of “fraud” resulted in extensive and detailed evidence from Dr. Kar concerning the role each of the identified students, professors, and research associates performed in relation to the Sunsource project during the FedDev project period, the manner in which he determined the value of that respective work and the nature of academic research in general.

[299] In addition, the University called evidence from almost every student, and research associate, including Dr. Iyer and Dr. Lu, who either received some portion of the FedDev grant proceeds, or who were identified as providing additional project-related work or contribution in the subsequent attestation form.

[300] In my view, the totality of that evidence, considered in the context of the evidence as a whole, confirms Dr. Kar’s assertion that a significant number of students other than Dr. Iyer and Dr. Lu contributed to and added value to the Sunsource project during the term of the FedDev-funded research project. I will review that evidence in more detail in the dispositive portion of these reasons and explain my reasons for concluding the allegations of fraud and falsified documents made by Sunsource are without merit.

[301] The resolution of the material conflicts in the evidence is a function of the credibility of the key fact witnesses called by the parties (Mr. Hurst, Dr. Kar, Ms. Pratt, Mr. Schmidt, and Ms. Kaps) and the reliability of their respective evidence to which I now turn.

2) ASSESSMENT OF THE CREDIBILITY OF KEY FACT WITNESSES and THE RELIABILITY OF THEIR RESPECTIVE EVIDENCE

[302] Prior to determining the issues of liability and damages raised by the parties, I will determine the credibility of key factual witnesses and the reliability of aspects of the evidentiary record.

[303] Credibility relates to sincerity and honesty and whether the witness testified to what they believe. Reliability relates to the accuracy of the witness’ evidence, and it is often assessed based on the witness’ ability to observe, recall, and recount events as they occurred.

[304] Inconsistencies in a witness’ evidence will vary in nature and importance. For example, some may relate to material issues and others to peripheral issues. Where an inconsistency involves a material matter about which an honest witness is unlikely to be mistaken, the inconsistency can demonstrate a carelessness with respect to the truth. Then, the trier of fact must determine whether it can rely on the testimony of a witness who has demonstrated a carelessness for the truth.

[305] In assessing the evidence, the court may accept all, some, or none of the evidence of a particular witness.

[306] In assessing the credibility of an interested witness, the court must “reasonably subject his story to an examination of its consistency with the probabilities which surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.” See Faryna v. Chorny, 1951 CanLII 252 (BC CA), [1952] 2 D.L.R. 354 (B.C.C.A.), at para. 11, per O’Halloran J.A.

(a) Credibility and Reliability Findings With Respect to Mr. Hurst

[307] When Mr. Hurst’s evidence is considered in the context of the evidence as a whole, it leaves me with significant concerns over his credibility, as well as the reliability of aspects of his evidence. As a result, I am generally not persuaded by Mr. Hurst’s evidence. When his evidence conflicts with the evidence of other witnesses, unless I expressly state otherwise, I prefer the evidence of other witnesses over the evidence of Mr. Hurst. I will explain.

[308] I had the opportunity to listen to and observe Mr. Hurst testify over the course of several days. Although he is exceptionably personable and passionate, when considered in the context of the evidence as a whole, I find that aspects of his evidence amount to incredible after the fact re‑characterizations of narrative events, that are designed to place Sunsource (and himself) in the best possible position and the University, in general, and Dr. Kar, Ms. Pratt and Mr. Schmidt, in particular, in the worst possible position.

[309] During closing submissions, counsel for Sunsource posited that Mr. Hurst’s factual narrative was consistently supported by contemporaneous documentation, which, in turn, bolstered his credibility. Yet several important aspects of this evidence find no contemporaneous documentary support, including: his asserted concern that the University encouraged and directed him to submit allegedly fraudulently inflated values for Sunsource’s proposed in-kind contributions as part of the parties’ FedDev grant application; the University supplied him with the specific inflated values to submit; and the existence of an oral agreement between the parties to defer Sunsource’s contractual obligation to supply and install an additional 1.5 kW solar array until sometime after the term of the research agreement ended. As I will set out below, the contemporaneous documentation explicitly contradicts the latter aspect of his evidence.

[310] In addition, there are material aspects of Mr. Hurst’s evidence on matters of substance that are inconsistent with and contradicted by contemporaneous documentation that he (or Sunsource) created.

[311] For example, Mr. Hurst adamantly testifies that none of Dr. Kar’s students, other than Dr. Lu and Dr. Iyer worked on the Sunsource project during the term of the research agreement. In turn, his evidence in that regard founds his assertion that the University engaged in fraud and it created falsified documents relating to both the distribution of FedDev grant proceeds (to students other than Dr. Lu and Dr. Iyer) and the content of the labour attestation form the University eventually produced to the FedDev.

[312] Despite his unequivocal testimony that “no other students worked on the project” during the FedDev period, Mr. Hurst sent email correspondence to Dr. Kar, dated January 8, 2013 (approximately eight months into the research agreement term), thanking Dr. Kar for his brilliant dedication to [his] students, Xiaomin [Dr. Lu] and Iyer and other students who have worked on [his] project to date. In addition, Mr. Hurst acknowledged during cross-examination that Sunsource’s own business plans specifically acknowledges that Dr. Kar’s student, Matthew Hurajt, worked on the switch project. Despite the content of those documents, Mr. Hurst continued to assert, throughout his testimony, that only Dr. Iyer and Dr. Lu made contributions to the FedDev project. He explains the inconsistencies as “errors in the documents that should never had occurred.”

[313] Similarly, Mr. Hurst unequivocally testifies that the University made very little, if any, research and development progress during the FedDev project period. Yet, in contemporaneous documentation he wrote during the term of the research agreement, he expressly acknowledges that satisfactory progress was achieved. Specifically, after attending the laboratory and speaking to “one of [Dr. Kar’s] students” in October 2012, Mr. Hurst sent email correspondence to Dr. Kar stating that he was “very pleased with the progress in the lab”.

[314] Similarly, in February 2013, Mr. Hurst attended a demonstration of the functional control algorithm that was developed during the FedDev project period. The results were favourable. Following the meeting, Mr. Hurst advised Mr. Vinayagam at GE, through email correspondence, about the progress of the development of the switch technology and specifically, indicated that a “software prototype had been developed”, which was able to power an electric motor using solar panels and a built-in inverter. Mr. Hurst forwarded a copy of that correspondence to VPI’s Jessie Laba, adding additional commentary: “…today I was at the University with Dr. Kar and engineering staff on my project, we were running an electric motor with our own built-in inverter. Software will do everything we discussed and more…”. Mr. Hurst subsequently sent email correspondence to Mr. Raggio, on February 25, 2013, advising, among other things, that he had met “with Dr. Kar at the University, the software for the switch was completed. After the FedDev close-out he wrote to Mr. Kozar confirming his receipt of the software-based prototype in Matlabs/Simulink.

[315] Despite their content, Mr. Hurst dismisses the emails as evidence of the University’s progress, indicating that he did not really understand everything that was shown to him and the electric motor demonstration in February 2013 was “smoke and mirrors.”

[316] The plaintiff did not adduce any persuasive or cogent evidence that supports Mr. Hurst’s testimonial suggestion, that the University’s asserted lack of progress extended into February 2013, and was masked by an illusory “smoke and mirrors” presentation. Conversely, Dr. Kar, Dr. Iyer, and Dr. Lu all gave evidence that substantial effort and progress was made by the University during the FedDev project/research agreement, and that a functional control algorithm was demonstrated in February 2013. That evidence is consistent with the plaintiff’s own contemporaneous documentation relating to the University’s favourable progress during the research agreement term.

[317] The determination of the University’s research and development progress and its efforts to perform the contract by “carrying out” the solar PV project is substantively related to the issues of whether the University breached the contract, whether the University lied about its contractual performance, and the merits of the plaintiff’s fraud and falsified document allegations.

[318] One of the most troubling aspects of Mr. Hurst’s evidence concerns his testimonial assertion that sometime during summer 2012, the parties entered into an “oral agreement” that amended the research agreement. Specifically, he asserts that the parties agreed to defer Sunsource’s obligation to provide and install solar panels and racking that were identified as part of Sunsource’s in-kind contributions in the terms of the research agreement and required to be supplied during the research agreement period. He asserts the parties agreed that the solar upgrade would be supplied sometime after the end of the research agreement/FedDev project. Mr. Hurst relies on the alleged oral agreement to answer the University’s claim that Sunsource breached the research agreement by failing to provide its in-kind contributions, before the end of the research agreement’s term. After considering this aspect of Mr. Hurst’s evidence in the context of the totality of the evidence, I do not accept that the parties made the alleged oral agreement.

[319] Mr. Hurst’s testimony with respect to the making of the alleged oral agreement is not corroborated or confirmed by any other cogent evidence. Instead, the balance of the evidence overwhelmingly contradicts Mr. Hurst’s evidence on the point. I not only reject this aspect of Mr. Hurst’s evidence as untrue, but based on his persistent and adamant testimonial instance that the oral agreement was made, I conclude that this aspect of Mr. Hurst’s evidence was a deliberate attempt to create an innocuous explanation for Sunsource’s failure to fulfill its contractual obligation to provide its requisite in-kind contributions during the term of the research agreement. I will explain.

[320] Mr. Hurst testifies that as a result of continuous concerns that he expressed about the inflated in-kind contribution values that he was “coached” to put forward in the FedDev grant application, the parties explored the possibility of leveraging his contemplated supply of the solar array during the FedDev project by using it to secure additional funding under a provincial OCE grant. During the second week of July 2012, Mr. Hurst and Ms. Gellman met with Ms. Pratt, Mr. Schmidt, Ms. Kaps, Dr. Kar, and Inga Sliskovic (also from the University’s ORS) to address his concerns. During the meeting, Ms. Pratt raised the possibility of leveraging Sunsource’s FedDev in-kind contributions to obtain additional grant funding through the OCE. She stated that she would arrange for OCE representative Steven Colbert to meet with Mr. Hurst, and Mr. Hurst agreed.

[321] In his testimony, Mr. Hurst did not explain how leveraging the alleged over- inflated value of Sunsource’s in-kind contributions by relying on the same over-inflated values to obtain additional grant funding would have alleviated his original concern that the parties were relying on over-inflated values to obtain grant proceeds. In my view, Mr. Hurst’s willingness to attempt to leverage Sunsource’s proposed FedDev in-kind contributions to obtain additional OCE funding is more consistent with the evidence from Dr. Kar, Ms. Kaps, and Ms. Pratt that Mr. Hurst never expressed any “concerns” over the stated value of Sunsource’s in-kind contributions than it is with Mr. Hurst’s narrative.

[322] Mr. Hurst and Mr. Colbert met in Dr. Kar’s lab in late July 2012. Mr. Hurst states that Dr. Kar was originally present, but left the lab shortly after Mr. Colbert arrived. Mr. Hurst testifies that he and Mr. Colbert discussed the planned upgrade of the solar array that was part of the FedDev project. In response to Mr. Colbert’s specific inquiry, Mr. Hurst advised him that the entire upgrade would cost approximately $5,000 to complete (including labour). He says that Mr. Colbert advised him that the OCE would “not inflate prices for anyone” and that he intended to contact Ms. Pratt and Dr. Kar over the issue. Mr. Hurst states that Mr. Colbert also raised concerns about the plan to leverage the same Sunsource in-kind contribution (the solar array) for the purpose of obtaining grant funding from both the OCE and the FedDev program during the same time period.

[323] Mr. Hurst deposes that after a series of meetings between himself, Mr. Colbert and University personnel, a potential grant agreement was developed whereby the OCE would provide the University with a $25,000 grant if Sunsource made a $5,000 cash contribution to the University (ostensibly to allow the University to directly purchase a 6-panel solar array), and a further contribution of in-kind services valued at $5,000 to install the array. Mr. Hurst testifies that the University was able to “pad” the value of the solar array in order to potentially receive $25,000 from the OCE.

[324] Mr. Hurst further deposes that sometime later, Mr. Colbert advised him that the OCE’s determination about whether Sunsource’s contemplated “solar panel” contribution could be used to obtain OCE grant funding could only be addressed after the FedDev project was complete (ie. after March 31, 2013). Following Mr. Colbert’s advice, Mr. Hurst met with Ms. Pratt, Dr. Kar and another individual from Ms. Pratt’s office on August 9, 2012.

[325] During the meeting, he and Ms. Pratt orally agreed that the parties would pursue an OCE grant after the scheduled close of the FedDev project (March 31, 2013). Ms. Pratt advised him that the issue of the solar panel upgrade that Sunsource was obligated to provide, pursuant to the research agreement, would not be addressed until some time after the FedDev project period. According to Mr. Hurst, the parties’ oral agreement was prompted by Mr. Colbert “shutting down OCE funding” during the FedDev project period because the solar panels could not be “double leveraged” during that time.

[326] Mr. Hurst deposes that as a result of the parties’ oral agreement, it was “common knowledge” that the solar panels were going to be ordered at the close of the FedDev project (March 31, 2013), and that Sunsource was relieved from performing that aspect of its in-kind contributions obligations during the research agreement term. He reasons that Sunsource did not have to supply the solar panel upgrade “under the FedDev” because the University was going to apply for further funding from the OCE at the close of the FedDev project.

[327] Sunsource submits that the foregoing aspects of Mr. Hurst’s evidence are confirmed by email correspondence that he sent to Ms. Sliskovic on August 14, 2012, in which he writes, “Inga, just a follow-up I know you were going to contact Steve at OCE to inform him that we were going to apply later, have you sent him a notice?”

[328] Sunsource further submits that Mr. Hurst’s evidence finds additional confirmatory support through email correspondence that Ms. Pratt sent to him on August 15, 2012, in which she writes, “Just heard back from Steve at OCE, they will match the $ 5,000 cash from Sunsource if we apply for the [Technical Problem Solving grant] in the fall. I’ll have [Ms. Kaps] draft the contract between the UWindsor and Sunsource and send it out for review.” Mr. Hurst characterizes the content of that correspondence as Ms. Pratt’s “final statement” and “final decision” on both the timing of the parties’ anticipated OCE grant application and the timing of Sunsource’s anticipated performance of its obligation to upgrade the solar array.

[329] Although Ms. Pratt’s reference to “the fall” in her August 15, 2012 email contextually appears to describe the fall 2012, Mr. Hurst deposes otherwise. He explains that despite being written in August 2012, Ms. Pratt’s statement actually references the parties’ intent to apply for an OCE grant application in fall 2013 (at least six months after the scheduled end of the research agreement) rather than fall 2012. That aspect of Mr. Hurst’s evidence is not consistent with his evidence that as a result of the August 9, 2012 meeting, the parties contemplated that the solar panels would be ordered at the close of the FedDev, which was March 31, 2013.

[330] Mr. Hurst also acknowledges in his testimony that despite Mr. Colbert’s expressed position that the OCE would not allow leveraging of the solar array contribution during the term of the FedDev project, Ms. Kaps continued to prepare a draft research agreement between the University and Sunsource related to OCE funding that ostensibly was contemplated to occur during the FedDev project period. Her efforts, in that regard, continued until August 14, 2012, which Mr. Hurst observes is prior to Ms. Pratt’s “final decision” on August 15, 2012.

[331] Finally, Mr. Hurst acknowledges that despite his assertion that the parties had agreed to defer Sunsource’s supply of the solar panels and related racking until the close of the FedDev project in March 2013, throughout the summer and fall 2012, he continued to obtain quotes and have technical drawings prepared with respect to the manufacture and installation of solar panel racking at the University’s premises. He also wrote several contemporaneous emails to the University updating his progress in that regard. He explains that notwithstanding the parties’ oral agreement to defer the solar upgrade, he continued to engage in activities so that Sunsource would be ready to install it during the research agreement term, in case Ms. Pratt identified other funding sources to leverage during that time.

[332] Sunsource reasons that because of the parties’ August 9, 2012 oral agreement, its admitted failure to perform its solar array in-kind obligation specified by the research agreement does not constitute a breach of contract. The University denies that the parties agreed to extend the time by which Sunsource’s contractual obligations under the research agreement were to be performed.

[333] Dr. Kar and Ms. Pratt both testify that in July 2012, the parties agreed to pursue additional grant funding through the OCE to be made concurrent with the FedDev grant funding, by leveraging Sunsource’s anticipated solar array in-kind contribution. Ms. Pratt testifies that at that time, both the OCE and the FedDev ARC Program permitted such leveraging, which was generally an accepted granting practice, particularly since the FedDev was a federal funding organization and the OCE was a provincial funding organization.

[334] I accept the foregoing aspects of Ms. Pratt’s evidence, which are not contradicted by any other direct evidence, including evidence from Mr. McClelland, who oversaw the FedDev ARC program at the time. I also reject Mr. Hurst’s evidence that Mr. Colbert advised him to the contrary.

[335] I am satisfied that as a result of the nature of her duties as the University’s Director of Research Development, Ms. Pratt was well positioned to know whether Sunsource’s contributions under the FedDev could be leveraged to secure additional funding through the OCE, and whether such funding could occur during the FedDev funded project period. Ms. Pratt’s evidence that leveraging of that kind was possible in 2012 is supported by the balance of the available evidence.

[336] The parties jointly advised the court that Mr. Colbert has no recollection of any events material to this proceeding, and as a result, neither of them called him as a witness. As a consequence, there is no evidence from Mr. Colbert confirming the content of the conversation Mr. Hurst testifies to. There is also no direct evidence from Mr. Colbert that he held or expressed the specific concerns that Mr. Hurst attributes to him.

[337] In addition, the contemporaneous documentary evidence, largely in the form of email communications (which the parties agree are authentic) militates against Mr. Hurst’s testimonial narrative.

[338] Specifically, on July 23, 2012, Mr. Hurst sent an email to Dr. Kar, titled “OCE Funding”, in which Mr. Hurst discloses that he was scheduled to meet with Mr. Colbert the following day in Dr. Kar’s lab. Mr. Hurst invited Dr. Kar to meet with him prior to the OCE meeting. Dr. Kar indicated that he would be out of town from late afternoon until the following evening. There is no evidence, apart from Mr. Hurst, that Dr. Kar and Mr. Hurst met before Mr. Hurst’s meeting with Mr. Colbert.

[339] Subsequently, Mr. Colbert sent email correspondence to Dr. Kar dated July 25, 2012, in which he indicated that he had a good meeting with Mr. Hurst on July 24, 2012 and understood what Mr. Hurst wanted to do; and he questioned when Dr. Kar might be able to make “good use of the OCE co‑funded project.” In his email to Dr. Kar, Mr. Colbert did not raise any concerns that the value of Sunsource’s in-kind contributions were inflated under the FedDev grant proposal, or at all. Further, there is no evidence that Mr. Colbert ever raised that as an issue with Dr. Kar or Ms. Pratt, at any time. Mr. Colbert proposed a meeting on August 1, 2012, to which Dr. Kar agreed. Contextually, it appears that a meeting between Dr. Kar, Mr. Colbert and Mr. Hurst occurred on that date.

[340] On August 2, 2012, Mr. Hurst sent email correspondence to Dr. Kar in which he states that during their August 1, 2012 meeting, Mr. Colbert indicated that “he did not know where to place the technology in the OCE’s funding pool”. He proposed a further meeting between them, Ms. Pratt and several third parties, including representatives of the provincial government, to “brainstorm” Sunsource’s “funding issues”.

[341] Dr. Kar forwarded Mr. Hurst’s email to Ms. Pratt who replied directly to Mr. Hurst by, among other things, expressing concern that a broader brainstorming session related to funding would “move away from the project that Dr. Kar was working on”. She indicated that Mr. Hurst’s proposed brainstorming session would be better suited to Sunsource’s business development rather than the specific subject matter of the FedDev project. She proposed a meeting on August 9, 2012, limited to herself, Dr. Kar, Ms. Gellman, and Mr. Hurst. Mr. Hurst confirmed that he was satisfied with her approach. Mr. Hurst does not suggest in his communication that either he, or Mr. Colbert, were concerned with inflated in-kind values or the timing of OCE funding.

[342] Ms. Pratt testifies that during the August 9, 2012 meeting, the participants, including Mr. Hurst, discussed OCE grant funding and the potential of leveraging some of the proposed in-kind contributions used for the FedDev grant to also secure OCE funding. She denies that the parties agreed that Sunsource would perform its obligation to deliver the solar array and racking required by the research agreement, only after the close of the FedDev project, or that the timing of its performance that obligation had to change, in order to leverage an OCE grant.

[343] To the contrary, she explains that leveraging the solar array contributions could only have taken place during the FedDev project period because Sunsource’s ability to provide contributions to that project ceased when the project period expired (March 31, 2013), and the FedDev grant account would be closed at that time. Accordingly, it would not have been practical to defer Sunsource’s contribution of the solar array equipment until after the FedDev project period because to do so would have foreclosed the ability to leverage Sunsource’s contributions with the FedDev.

[344] Ms. Pratt also testifies that she would never have agreed to defer the in-kind contributions until after the project’s term because she did not know what Dr. Kar required in order to conduct his research during the FedDev project period.

[345] Similarly, Dr. Kar testifies that he did not agree to defer the supply of the solar panels until after the FedDev project period. To the contrary, Dr. Kar states the solar panel upgrade (from a 1.5 kW supply to a 3 kW supply) was required during the FedDev period to allow the University to develop a reliable hardware-based 3 kW prototype. Dr. Kar expressly rejects Mr. Hurst’s suggestion that the additional solar panels were not necessary to develop the prototype because the semikron inverter was available. He explains that the semikron was not an adequate substitute for the array upgrade, for the purpose of developing the prototype, because it was anticipated that the prototype would have its own “onboard inverter” and the additional panels were required to test the prototype using a 3 kW solar supply.

[346] Ms. Pratt testifies that the parties’ efforts to secure leveraged OCE funding that would be provided during the FedDev project period continued after the August 9, 2012 meeting. Dr. Kar deposes that in order for the parties to obtain grant funds from OCE in 2012, the OCE required Sunsource to provide a $5,000 cash contribution to the University to allow the University to directly purchase the equipment related to the solar upgrade. Sunsource would also provide an additional in-kind contribution of labour to install the solar array upgrade, valued at $5,000.

[347] Those aspects of their respective evidence are supported by email correspondence from Mr. Hurst to Dr. Kar, dated August 14, 2012, in which Mr. Hurst inquires about the progress of an agreement whereby Sunsource donates $5,000 to the University for the solar upgrade, with funds being used to secure an OCE grant; whether Ms. Kaps had all the information required to draft a legal agreement with respect to same; and whether someone from the University should email an update to Mr. Colbert. In a reply sent August 15, 2012 (the same date Mr. Hurst alleges that the Ms. Pratt made her final decision to defer Sunsource’s obligation to provide the solar upgrade until after the research agreement), Dr. Kar advised Mr. Hurst that he (Mr. Hurst) should have the requisite research agreement related to OCE funding “within a couple of days”. Ms. Pratt also replied to Mr. Hurst and advised that she was waiting for confirmation from Mr. Colbert and once received, Ms. Kaps would be able to draft the agreement very quickly. There is no indication in the evidence that Mr. Hurst took issue with these responses.

[348] Ms. Pratt subsequently sent email correspondence to Mr. Hurst on August 15, 2012, in which she confirmed that she had spoken with Mr. Colbert and that the OCE would match the cash contribution from Sunsource if the University applied for a technical problem solving grant “in the fall”. She further advised that she would have Ms. Kaps draft the contract between Sunsource and the University and send it out for review.

[349] Contextually, I find that Ms. Pratt was referring to the fall 2012, not the fall 2013, as Mr. Hurst asserts. Not only does that accord with her subjective evidence, but objectively, all of the email communications between the parties up to that point had contemplated an agreement premised on OCE funding during the FedDev project period. Mr. Hurst concedes that the nature of the agreement that Ms. Kaps was preparing up to that point was consistent with OCE funding taking place during the FedDev.

[350] The events that occurred after Ms. Pratt’s August 15, 2012 email are also consistent with the parties’ intent to apply for and receive OCE funding in 2012 and not 2013. Specifically, on August 16, 2012 (the day after the alleged final decision to defer the OCE application), Ms. Kaps sent email correspondence to Mr. Hurst enclosing “a draft research agreement” between the University and Sunsource, which contains a recital that the OCE had agreed to review a proposal to provide up to $25,000 for the