Judge tosses case against West Face without hearing defence

LEGAL

With 14 terse words, Ontario Court of Appeal Judge David Doherty Wednesday dismissed Catalyst Capital Group’s high-profile claim of wrongdoing by its rival West Face Capital.

“It will not be necessary to hear from the respondents on the main appeal,” Doherty said on behalf of the threemember panel.

It was a rarity, what’s known as dismissing a case “from the bench” — meaning immediately — and without having heard a word from lawyers representing the other side.

The decision came after Catalyst lawyers David Moore and Brian Greenspan had spent more than a day on their feet, arguing that when Ontario Superior Court Judge Frank Newbould threw the Catalyst case out in 2016, he’d done so improperly.

The court took an extended break then and, when the judges returned, it was for Doherty to say they didn’t need to hear from lawyers for West Face or Brandon Moyse, the junior analyst whose actions were at the heart of the case.

Moyse worked for Catalyst for about 18 months until May 2014, when he quit to move to West Face. Within a month, Catalyst was suing West Face and Moyse both, alleging that Moyse had taken with him confidential information and that West Face had misused it.

It was that suit, much amended, that went before Newbould almost two years ago, and which he dismissed in June 2016 after a six- day trial.

The judge found that while Moyse had submitted confidential samples of his writing as part of his efforts to land a job at West Face, they were mistakes made by a young analyst and that the samples contained no information at all about the Wind Mobile transaction so central to Catalyst’s claims; that while Moyse had deleted the browsing history on his computer, he had done so because he was embarrassed by the fact he’d accessed porn sites and that West Face had set up a confidentiality wall to keep Moyse well away from the Wind deal.

The two Toronto private equity firms were both fighting to acquire Wind.

But Newbould found that because Catalyst had voluntarily walked away from the deal when VimpleCom Ltd., a minority owner of Wind but in control of the sale, made a late request for a “break fee,” it had only its own strategy to blame for its failure to get the wireless carrier.

A consortium led by West Face acquired control of Wind in a deal valued at about $ 300 million in 2014. The next year, the group sold the wireless carrier to Shaw Communications for $1.5 billion. Thus, Catalyst said, it was deprived of about $ 750 million in potential profit.

The appeal dismissed this week was of Newbould’s decision that Catalyst was in effect the classic “bitter bidder.”

It doesn’t automatically mean, however, that West Face can now distribute the profits from the Wind sale to its investors.

Catalyst lawyers could seek leave to appeal Wednesday’s decision to the Supreme Court of Canada, a process that could take as long as six months, though it would be a long shot, given how swiftly the appeal court dismissed the appeal.

West Face, sources told the Financial Post, is likely to at least wait until another Catalyst lawsuit is settled.

That one is against VimpleCom Ltd. and other companies for $ 750 million, alleging breach of contract, misuse of confidential information and a conspiracy to defeat Catalyst’s bid for Wind — very similar allegations to those that were dismissed Wednesday.

West Face lawyers have moved to strike, or toss, that suit for abuse of process; that decision could come reasonably soon.

As well, while the appeal court dismissed the main appeal Wednesday, it reserved decision on the question of costs.

Newbould awarded costs to West Face on what’s called “a substantive indemnity basis,” or above the norm, because, he said, Catalyst’s allegations had “attacked the integrity of West Face and its executives,” this in a business where reputation is paramount. The judge fixed those costs at $1,239,965.

He awarded Moyse, against whom he said Catalyst had launched “a full-scale attack,” partial indemnity costs of $339,500. Moyse was actually employed at West Face for less than a month because of the lawsuit, and struggled thereafter to find another job.

Doherty appeared to sharply disagree with the characterization of Moyse’s conduct as benign “mistakes,” but the issue wasn’t settled.

West Face in a statement issued Wednesday pronounced itself“very pleased” by the court’s decision.

Afterwards, Greenspan said he wasn’t surprised at the decision, because it’s so rare for appeal courts to interfere with the decisions of trial judges.