Payment of P M Sulcs by Fujitsu
178 It will be remembered that Mr Hooper first approached Fujitsu in May 1988. He secured Mr Docherty's agreement (on whatever terms) that Fujitsu would assist in the conversion of the P M Sulcs software (supra: para 67). The contribution would be at the rate of $250,000 for $1 million hardware sold by Fujitsu to Daihatsu. In March 1989, as Daihatsu was about to commission the Analysis Report, Mr Hooper took up the issue of funding with Mr Docherty once more. He wrote on 3 March 1989, opening with these words: (Exhibit A, doc 378)
"This letter is to ask you for your assistance to resolve the frustration we have been experiencing in addressing the outstanding relationship issues with Fujitsu.
As you are aware, I am empowered by P M Sulcs to formalise our agreement that Fujitsu fund the $350,000 conversion of P M Sulcs's Material and Customer Control System to Fujitsu's UTSM environment on the sale of Fujitsu's system to Daihatsu with P M Sulcs reimbursing Fujitsu $100,000 on completion of the conversion."
179 Mr Hooper complained that "he had yet to formalise the agreement between our two companies". A formal relationship was required.
180 Mr Docherty responded at once. His letter of 6 March 1989 identified two potential business relationships which were open (Exhibit A, doc 379). First, a formal long term marketing arrangement, which would require a sales plan, and the involvement of Fujitsu marketing staff; or secondly, a specific deal by deal arrangement.
181 In respect of the second alternative, Mr Docherty said this: (Exhibit A, doc 379)
"In this method, the specific deal which P M Sulcs and Fujitsu were investigating jointly would be looked at to fund a conversion of the software from the Wang environment to the Fujitsu environment. Fujitsu would contribute to the costs of P M Sulcs converting its software. The Daihatsu situation is a typical example of this type of opportunity."
182 Mr Docherty then provided his understanding of his arrangement with Mr Hooper: (Exhibit A, doc 379)
"There was never any concept that Fujitsu would fund P M Sulcs to convert the software to the Fujitsu environment in the deal-by-deal basis. The understanding I had was that Fujitsu as part of the deal to Daihatsu, for example, would fund a proportion of the conversion."
183 Mr Docherty sought to correct Mr Hooper's impression of their arrangement by adding these words: (Exhibit A, doc 380)
"My understanding of the arrangement was that P M Sulcs would organise and complete the conversion of the Material and Customer Control System to the Fujitsu UTS/M environment for Daihatsu and that Fujitsu would contribute to this conversion, which P M Sulcs would fund, at the rate of $250,000 from a sale of $1 million to Daihatsu. This, of course, is a very different arrangement from the one you seem to have understood."
184 It was suggested that Mr Hooper speak to the Sales Manager, Mr McInerney.
185 Mr Docherty did not deal expressly with the timing of Fujitsu's payment. The letter does not suggest, to my mind, that funding will be withheld until after the conversion has been achieved.
186 Mr Hooper wrote back on 9 March 1989. His letter included the following: (Exhibit A, doc 380.1)
"I agree with your points 1 and 2 that we are jointly exploring two separate avenues for the recovery of costs of the conversion of P M Sulcs's Material and Customer Control System to UTSM.
I re-interate (sic) that at no time has it ever been discussed with Fujitsu or agreed by P M Sulcs that P M Sulcs would pay for the conversion of its software upfront. All discussions that I have had with yourself and other Fujitsu staff members have been on the clear understanding that Fujitsu would finance the conversion.
You will recall from our discussion in December that we agreed that Fujitsu would fund the conversion of our software as part of the Daihatsu sale and that P M Sulcs would then re-imburse Fujitsu with $100,000.00 (or if the sale price of our software to Daihatsu was under $100,000.00, 75% of this sale price would be re-imbursed)."
187 Mr Hooper sought a meeting "to resolve the confusion".
188 Again Mr Docherty responded at once (letter 10 March 1989). He said, somewhat tersely, that he had "no confusion". He was responding to the suggestion that Fujitsu would fund the conversion, and that P M Sulcs would then reimburse Fujitsu. He added: (Exhibit A, doc 380.3)
"At no stage have I agreed, nor would I agree to give you $350,000 in blind faith for you to go away and convert your software. Please understand that is not good business sense. What I have always said, is that Fujitsu would contribute to the conversion. You may have assumed other words, John, but that is what I have said."
189 The correspondence continued. Mr Hooper wrote back on 13 March 1989 as follows: (Exhibit A, doc 383)
"I agree that you have not agreed to give P M Sulcs $350,000 in blind faith for us to go away and convert our software.
I do not resile from my statement that you agreed to finance the conversion project to $350,000 and that P M Sulcs would contribute $100,000 on commissioning of its software at Daihatsu."
190 Mr Hooper added that it was important to the success of the conversion that it be a joint effort between Fujitsu and P M Sulcs. Mr Hooper reminded Mr Docherty that it was P M Sulcs who had introduced Fujitsu to the deal. He said this: (Exhibit A, doc 384)
"I can only re-state the agreement that if we assisted you in selling your hardware to Daihatsu you would finance and jointly fund the conversion of our latest software to Fujitsu's UTSM operating system. This is the reason for our collaboration on your sale to Daihatsu.
We have fulfilled our part of the agreement and in doing so rejected ICL's offer that they match your financing and funding offer which has enabled you to gain the sale at Daihatsu. We now simply ask that you fulfil you part of our agreement to finance and fund the conversion."
191 Mr Docherty wrote back the next day, 14 March 1989, putting an end to the correspondence. He repeated his suggestion that Mr Hooper speak to Mr McInerney (Exhibit A, doc 386). Upon receipt of that letter, Mr Hooper says that he telephoned Mr Docherty. His conversation included the following exchange: (Hooper: Aff. 2.1.98, para 30)
"Hooper: 'What's this all about. I'm getting really annoyed at receiving these facsimile letters from you after we have been working in good faith on our verbal agreement for nearly a year and DAP is about to sign our contracts.'
Docherty: I'm sorry, but I have been completely tied up in meetings, don't worry, you and I are in agreement. FAL will pay you the $250,000.00 commission I promised you. The porting has been costed at $350,000.00 to which Fujitsu will contribute $250,000.00 as your CSV commission and PMS is to contribute $100,000.00. What I objected to in your letter of 3 March 1989 was your use of the wording 'fund', it read to me that you expect FAL to be responsible for all of the porting work and any over-run in the cost.'"
192 Mr Docherty denied that conversation. It is hard to imagine that the conversation was in quite the terms suggested. Mr Docherty was a person of some seniority within Fujitsu. The peremptory terms of his final letter displayed his impatience.
193 Daihatsu, in its submissions, branded Mr Hooper's evidence as yet another instance of his "verballing" a witness. The submissions said this: (Submissions, para 4.8)
"Moreover, as Mr Hooper time and again did whenever the documents showed him up, he resorted to 'verballing' the person who disagreed with him by giving evidence 9-12 years later of conversations breath takingly at odds with contemporaneous extant documentary material."
194 The suggestion, according to the Daihatsu submissions, that Mr Hooper and Mr Docherty "worked it out" in their telephone conversation, was preposterous (Daihatsu submissions, para 4.9). However, the events which followed (which I will shortly describe), suggested that Mr Docherty, in this conversation, reaffirmed to Mr Hooper's satisfaction Fujitsu's commitment to assist P M Sulcs in the conversion. There is no question that Fujitsu had given that commitment. The only uncertainty was when it would be provided, and upon what terms.
195 As suggested by Mr Docherty, Mr Hooper met Mr McInerney. The meeting took place on 15 March 1989. Mr Franks, also from Fujitsu, was present According to Mr Hooper, Fujitsu agreed to pay, but by instalments. The conversation included the following: (Hooper: Aff. 2.1.98, para 31)
"McInerney: 'That's understood, as far as the $250,000.00 CSV commission is concerned, FAL will pay it to PMS on a monthly basis.'
Hooper: 'That seems to be in line with our policy of time and materials billing, I will recommend it to PMS Canada.'"
196 Mr McInerney acknowledged there was such a meeting. He scribbled a note which recorded certain figures mentioned at the meeting (Exhibit A, doc 402A.1). He could not recall the conversation.
197 However, documents generated by Fujitsu in the weeks and months that followed, appear to bear out Mr Hooper's account. Once Daihatsu had executed the Prime Contract Agreement on 30 March 1989 (supra: para 172), Mr Docherty directed that Mr McLean draw up an agreement between Fujitsu and P M Sulcs (McLean: Aff. 2.4.98, para 9(b)). Mr McLean said this: (McLean: Aff. 2.4.98, para 9)
"… I attempted to formulate a schedule with John Hooper setting out when Fujitsu would make payments to Sulcs and the amount of those payments that was acceptable to Sulcs and Fujitsu."
198 Mr McLean drafted a series of Work Orders, which were then discussed with Mr Hooper. The first was sent by fax on 30 March 1989 (Exhibit A, doc 409.1). It included the following payment schedule (Exhibit A, doc 409.7)
" ITEM 6
Payment Schedule
Payment of monies to the Sub-Contractor under the terms and conditions of this work order will be structured as follows:
1. Upon receipt by FAL of $75,000 from the Customer subject to the Customer signing the Sub Contractors standard terms of trade agreement FAL will pay $50,000 to the Sub-Contractor.
2. FAL will pay to the Sub Contractor the sum of $10,000 per week payable monthly at mid month to a maximum of sixteen (16) weeks from the date of commencement of the conversion project.
3. FAL will pay to the Sub Contractor the sum of $17,000 upon the Sub Contractor signing a standard licence agreement with Sticky Software for the use of the 'Cascaid" Cobol Conversion software tool.
4. FAL will pay to the Sub Contractor the sum of $35,000 upon the Sub Contractor signing a standard licence agreement with Rapitech Systems Inc. for the use of the ' COBLIX-C' Cobol to 'C' Conversion software tool.
5. DELIVERABLES:
5.1 FAL will pay to the Sub Contractor the sum of $8,000 upon completion of deliverable item no. 1 as per Item 1 of this Work Order.
5.2 FAL will pay to the Sub Contractor the sum of $10,000 upon completion of deliverable item no. 2 as per Item 1 of this Work Order.
5.3 FAL will pay to the Sub Contractor the sum of $10,000 upon completion of deliverable item no. 3 as per Item 1 of this Work Order."
199 There were two further clauses (clauses 6 and 7), dealing with payment, which it is unnecessary to reproduce. Successive versions of the Work Order included the paragraphs set out above, with annotations by Mr Hooper. The undated draft (Exhibit A, doc 409.15), for instance, included the following addition to clause 2: (Exhibit A, doc 409.20)
"2. …. The date of commencement is defined as the date of the customer signing the Sub Contractor's standard terms of trade agreement as per 1 above."
200 Fujitsu and P M Sulcs were never able to settle upon a final agreement before a meeting between Mr Hooper and Mr Docherty on 23 May 1989. Mr Hooper asserted that Mr Docherty, in that meeting, changed the entire basis of Fujitsu's association with P M Sulcs. I will deal with that meeting, and Mr Hooper's assertion, when I deal with the events of late May 1989.
201 Mr McLean identified the reason for the failure to reach agreement. It was Mr Hooper's insistence throughout that P M Sulcs be paid the $250,000 "up front". Mr McLean attributed the following words to Mr Hooper, which he said were repeated on many occasions: (McLean: Aff. 2.4.98, para 11)
"Hooper: 'I want to be paid up front. I won't agree to anything that does not involve Sulcs being paid up front.'"
202 However, I believe that Mr McLean is mistaken in that recollection. Whilst Mr Hooper may have been hopeful in early March 1989 that P M Sulcs would be paid up front, by the time he spoke to Mr McInerney on 15 March, he understood and accepted that his company would be paid progressively. Indeed, he annotated the first Payment Schedule (set out above) in the Work Order sent by Mr McLean on 30 March 1989, with these words: (Exhibit A, doc 409.7)
"Payments must be strictly as per PMS contracts with Daihatsu. The $250k commission from FAL paid at $10k 1 week for 25 weeks."
203 Later versions of the Work Order did not reflect Mr Hooper's suggestion. Rather they reproduced the Payment Schedule set out above, without apparent resistance from Mr Hooper (see Exhibit A, docs 409.15, 410, 446.2).
204 Two other documents created by Fujitsu during this period are also relevant. Fujitsu used a form for each contract known as a PCS. It was an important accounting document. Various managers were obliged to sign at the foot of the page. It recorded the sale price, discounts and other detail. Against the item "Conversion", it recorded $250,000 (Exhibit A, doc 1007). A cash flow was also prepared in May 1989. It showed $50,000 being paid to P M Sulcs at the outset (reflecting the payment in the Schedule above, para 1), and $40,000 every four weeks thereafter (reflecting the Schedule, para 2). Instead of the payment for the conversion tools referred to in paras 3 and 4, it included three payments (totalling $114,000) to Paradyne. That company was put forward by P M Sulcs in May as being the company which would undertake the conversion.
205 These documents reflect, therefore, that Fujitsu would advance monies to P M Sulcs during the course of the conversion. That is where matters stood before Mr Hooper's meeting with Mr Docherty on 23 May 1989.