COURT FILE NO. CV-20-00651052-0000
DATE: 20220222
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GROUPDESK INC.
Plaintiff
– and –
HOPPER INC.
Defendant
Graham Jones, lawyer for the Plaintiff
David Milosevic, lawyer for the Defendant
HEARD: FEBRUARY 4, 2022
REASONS FOR DECISION
G. DOW, J.
[1] The parties sought and agreed to determination of the issues between them by summary judgment. That is, the defendant, Hopper Inc. sought dismissal of the action while the plaintiff, Groupdesk Inc. sought damages in the form of two, $35,000.00 USD payments not made plus additional expenses of $39,506.43 incurred as part of terminating employees it alleged Hopper was committed to hire.
Background
[2] Following negotiations entered into in the last half of 2019 and January 2020, the parties entered into a “Talent Acquisition Agreement” drafted by Brian Carroll, a vice president and general counsel for Hopper. Groupdesk was in the tourism and technology business and discussions ranged from what it would take for Hopper to purchase Groupdesk in its entirety to the more narrow plan to hire a group of 10 individuals working at Groupdesk as a team. This team ranged from the Chief Executive Officer to Senior Engineer/Developers to a support person which I understood to involve secretarial duties. The motivation at Groupdesk to complete a deal was increased in January, 2020 when their head investor pulled out and their top client was lost. Given the claim for termination expenses occurred when Hopper failed to hire some of the targeted 10 individuals and the evidence from Groupdesk that its full staff consisted of 12 employees, the denial by Groupdesk’s president, Alexander Handa that the situation was dire was difficult to understand.
[3] It was deposed by Groupdesk that this process of entering into an agreement to hire employees from another company in return for a cash payment (known as an “acquihire”) was common amongst technology companies and start-ups. Further, a common valuation for an engineer-developer in an “acquihire” was $100,000. The propriety of such agreements was not raised by either party and, given my reasons below, will not be commented on further.
[4] The parties disagree on the proper interpretation of Clause 2 of the Agreement, that the price was, as submitted by Groupdesk, $200,000.00 USD, payable in the amount of $130,000.00 USD up front with the balance payable of $35,000.00 each, on April 15 and June 30, 2020. Hopper maintained the $35,000.00 US payments were subject to its continuing to employ the CTO (Chief Technology Officer) plus 5 of the 7 identified 10 employees as of the dates indicated.
[5] The Talent Acquisition Agreement also provided for these new Hopper employees to continue working with Groupdesk until April 1, 2020 as part of facilitating “a wind-down of Groupdesk’s business”. It also addressed non-solicitation and non-hire issues with the sentence “The restrictive covenants of this Section shall cease to apply with respect to an individual employee in the event that the Buyer [Hopper] unilaterally terminates the employment of such Employee. It contained in Clause 10, entitled Miscellaneous” that “This Agreement constitutes the entire Agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, by or among the said parties in respect of such subject matter. This Agreement cannot be modified, amended or waived, in whole or in part, or in any way except by an instrument in writing signed by the Parties, and it shall be binding upon and inure to the benefit of the representatives, designees, successors and assigns of the Parties”.
[6] During the week of February 3, Hopper made offers of employments to several of the 10 individuals listed in the Talent Acquisition Agreement including the CTO and at least 6 of the engineering employees who agreed to join Hopper. The initial payment of $130,000.00 USD was made February 14, 2020. On April 6, 2020, or 9 days before the second payment was due, Hopper terminated 4 of the developers and a support person. They were terminated without cause. Hopper did not offer employment to two of the 10 individuals listed indicating same on March 25, 2020.
[7] In March, 2020, as a result of the COVID-19 pandemic, there was a significant impact on tourism and travel including Hopper’s business which included terminating approximately 40 percent of its global staff as of April 6, 2020.
Analysis
[8] Groupdesk relied on its version of statements and intentions surrounding the negotiations and agreement leading up to the January 31, 2020 execution of the Talent Acquisition Agreement in support of its submission the Agreement should be interpreted to enforce Hopper’s obligation to pay the complete balance of $70,000.00 USD and the additional expenses incurred of $39,506.43 resulting from its failure to abide by the terms of the Agreement as understood by Groupdesk. In support of its submissions, Groupdesk relied on the statement from the Supreme Court of Canada in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 (at paragraph 47) that the “decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”. Here the Agreement is clear. It lists the 10 employees of the team which were of interest to Hopper. It identifies an initial payment of $135,000.00 USD for them become employees of Hopper with provisions to ensure an orderly wind-down of Groupdesk’s business over the next two months by also continuing to work with Groupdesk. It was silent with regard to any obligation on Hopper to hire all 10 listed individuals or maintain their employment. Instead, it reduces the number retained to trigger the second payment of $35,000.00 USD and further reduced the number of employees retained to trigger the third payment of $35,000.00 USD.
[9] I reject the submission by Groupdesk that the Agreement stipulated or included, as an implied term, Hopper waived its right to terminate any of the employees without cause. The sentence in the Non-Solicitation-Hire Clause identified above specifically referred to the parties having contemplated and reduced to writing “the event that the Buyer unilaterally terminates the employment of such Employee”. It does so without reference to whether the termination was with or without cause.
[10] Even if I did accept the submissions of Groupdesk and its version of the intentions of and what the parties agreed to, I would still not reach the legal conclusion Groupdesk sought. To do so would be contrary to the statement in Creston Moly Corp. v. Sattva Capital Corp., supra (at paragraph 57), “While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement”.
[11] Groupdesk also relied on the direction from the Court of Appeal in Ventas, Inc. et al v. Sunrise Senior Living Real Estate Investment Trust et al, 2007 ONCA 205 (at paragraph 24) to interpret commercial agreements in a manner that “accords with sound commercial principles and good business sense, and that avoid a commercial absurdity”. The interpretation that the Agreement, reduced to writing, which provided for access to Groupdesk’s team of 10 employees in exchange for an upfront payment of $130,000.00 USD yet recognized that the new employment relationship might not be satisfactory to either the employee or employer was good business. It provided for additional payments if a threshold number of the employees continued at Hopper. That provision was not commercially absurd. The term of the Agreement that allowed the named employees to continue to work at Groupdesk over the next two months as it wound down accorded with sound commercial principles.
[12] Groupdesk also raised Hopper’s actions contravened its general duty of honesty and good faith in not performing its end of the Agreement, relying on that statement of the law in Bhasin v. Hrynew, 2014 SCC 71. The evidence relied on was those terms in the agreement which made the additional payments conditional on retention of the employees. Groupdesk relied on Hopper “knowingly” misleading Groupdesk that the full $200,000.00 USD would be paid. Unfortunately, that was not what a plain and obvious reading of the wording indicated. It could have easily been clearly written in a manner to reflect that position. Further, it seems clear the terminations were caused by the global pandemic resulting in a business slowdown (if not lockdown) with no evidence Hopper had any awareness same was about to occur.
[13] The defendant’s motion is granted and the action is dismissed. The relief sought by the plaintiff is denied.
Costs
[14] Both parties prepared Costs Outline as required by Rule 57.01(6). If successful, the plaintiff sought partial indemnity costs for the motion in the amount of $20,263.17 inclusive of fees, HST and disbursements. In the defendant’s Costs Outline, it sought costs in the amount of $8,656.94 inclusive of fees, HST and disbursements on a partial indemnity basis.
[15] Given the discrepancies in the amounts claimed, counsel for Groupdesk sensibly agreed that the amount claimed by Hopper was reasonable. The defendant shall be awarded its costs in the amount of $8,656.94 payable forthwith.
Mr. Justice G. Dow
Released: February 22, 2022
COURT FILE NO. CV-20-00651052-0000
DATE: 20220222
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GROUPDESK INC.
Plaintiff
– and –
HOPPER INC.
Defendant
REASONS FOR DECISION
Mr. Justice G. Dow
Released: February 22, 2022