Catalyst drops sting application

Lin Toronto awyers for Catalyst Capital Group won’t be bringing a so-called “fresh evidence” application that revolved around a sting on a former judge.

Lawyers for Toronto private equity firms Catalyst and West Face Capital were due at the Ontario Court of Appeal Friday, both to deal with the fresh evidence and with West Face’s furious response as to how it had been obtained.

Catalyst is appealing a 2016 decision by Ontario Superior Court Judge Newbould, who dismissed its lawsuit against West Face and a former junior analyst named Brandon Moyse.

That appeal, originally scheduled for Sept. 26, was adjourned at the last minute when lawyer Brian Greenspan told Justice Paul Rouleau he had just been provided “with information that requires immediate investigation and may well lead to the tendering of a fresh evidence application” and also that an “irreconcilable difference” related to the new information, had arisen between Catalyst and its lawyers from the Lax O’Sullivan Lisus Gottleib firm.

The Lax O’Sullivan lawyers later withdrew from the case, leaving Greenspan and veteran litigator David Moore on the file.

But as the National Post revealed last weekend, that fresh information was obtained by a covert sting run on the 74-year-old Newbould by the private investigations firm Black Cube, based in Israel and staffed by former members of that country’s elite security service.

As the Post reported, Catalyst says Black Cube was working as a sub-contractor to another firm the company had retained because of various security concerns, and that neither Catalyst nor its lawyers knew about or approved secretly recording the former judge.

In a letter to West Face lawyers that was filed in court Thursday, Greenspan said “We agree that the unauthorized means by which the tape recordings were obtained was unacceptable.”

But he said that as Catalyst’s lawyer, he nonetheless had a duty “to objectively and dispassionately assess the impact of the contents of the tape recordings.”

In fact, Greenspan said in the letter, he remains of the view that portions of the tapes themselves “are equally, if not more unacceptable and troubling, than the manner in which the recordings were obtained.”

He said the Post story had mischaracterized what Newbould said on the tapes. The Post, which was given unsolicited a USB flash drive with the contents of the sting on it, stands by its characterization.

Newbould retired from the bench last June, and is now working as an arbitrator in downtown Toronto. It was in this new capacity that in mid-September he was first approached by a man purporting to represent a potential client.

On Sept. 18, he met the man at his office and had dinner with him that night at Scaramouche, an expensive mid-town restaurant.

Both conversations with the agent, as the man was described later in transcripts given to the Post, were surreptitiously recorded, and Newbould was also photographed.

The former judge learned of the sting only because the Post gave him and his lawyer, Brian Gover, the USB drive to copy.

In both conversations, the agent appeared to be trying to induce Newbould to make anti-Semitic remarks.

Newbould failed to rise to the bait, but at one point made what could be described as an intemperate remark about Chinese witnesses.

When West Face learned of the sting from the Post story, one of its lawyers, Matthew Milne-Smith, wrote a furious letter to Greenspan.

Milne-Smith Thursday told Judge Rouleau in a letter that West Face doesn’t contend that Greenspan, Moore or the lawyers from Lax O’Sullivan “acted in bad faith or improperly.”

It was Greenspan’s response to that letter which was filed at the court Thursday.

In another court battle between the two firms, this one in the Ontario Superior Court, West Face recently alleged Black Cube had also tried to set up at least five of its employees or former employees, deploying operatives who pretended to be either executive recruiters or potential investors in West Face, and even flying some employees to England.

In response to that motion, Superior Court Judge Glenn Hainey on Nov. 16 ordered that Catalyst and all its lawyers and Black Cube “take immediate steps to preserve all evidence” relating to “investigative activities undertaken against” West Face employees or former employees.

Catalyst and West Face were competitors in the fight for WIND Mobile, with Catalyst claiming when Moyse changed jobs and briefly went to work for West Face, he took Catalyst secrets with him.

Newbould dismissed the Catalyst lawsuit entirely.

The appeal of Newbould’s decision is now scheduled for two days in February.