Court dismisses Catalyst challenge without hearing from West Face defence

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In an unusual move, the Ontario Court of Appeal dismissed a challenge brought by Catalyst Capital Group Inc. against rival fund manager West Face Capital Inc. – without even hearing from the defendants in the courtroom.

Catalyst, a Toronto-based firm that manages distressed-debt funds, had been requesting a new trial of its lawsuit against its former employee Brandon Moyse and West Face, which hired Mr. Moyse in 2014.

At the heart of the matter was an allegation by Catalyst that Mr. Moyse, a junior analyst, provided confidential information to West Face when he left to go work for the competitor. Specifically, Catalyst asserted that Mr. Moyse gave West Face top-secret information pertaining to Catalyst's strategy for its planned acquisition of Wind Mobile Corp., then scrubbed his BlackBerry and computer to destroy the evidence.

Catalyst attempted to acquire Wind, but lost out to a consortium of investors led by West Face. The consortium acquired Wind Mobile for about $300-million, including assumed debt, in September 2014. The group then sold it to Shaw Communications Inc. in late 2015 for $1.6-billion, prompting Catalyst to claim that it had lost out on $750-million of profits.

In August, 2016, now-retired Justice Frank Newbould of the Ontario Superior Court threw out Catalyst's lawsuit "in its entirety," saying that he found no evidence of wrongdoing on the part of West Face or Mr. Moyse. Justice Newbould also raised issues with the reliability of Catalyst founder and managing partner Newton Glassman as a witness, writing that Mr. Glassman was aggressive and argumentative and contradicted his own statements.

Catalyst appealed the ruling, and the company's lawyers argued in court on Tuesday that Justice Newbould failed to properly consider "highly relevant" information relating to Mr. Moyse deleting e-mails and the browsing history on his computer. They also argued that Justice Newbould honed in on inconsistencies in the testimonies of Catalyst witnesses, while overlooking similar discrepancies in the testimonies of West Face witnesses.

Justice David Doherty dismissed the appeal on the second day of hearings Wednesday, saying that it would not be necessary to hear arguments from lawyers for West Face or Mr. Moyse. The three-member panel reserved its decision on costs.

"We accept the conclusion of the court that the high standard to challenge the fact finding by the trial judge was not met," Catalyst said in a statement.

"We await the decision of the Court regarding the costs of the trial proceedings. Based upon the arguments made, we anticipate this decision will likely take into account the Court's observations regarding Catalyst's legitimate concern with the misuse of confidential information and the conduct of Mr. Moyse in the deletion of potentially relevant evidence."

West Face said that it is "very pleased" with the judgment, as it has spent four years defending itself in a case in which the trial judge found the allegations to be entirely without merit.

"The Court of Appeal has affirmed today Justice Newbould's decision which dismissed Catalyst's claims. West Face looks forward to reaching the same result in the defence of Catalyst's other claims," the company statement said.

Among the other outstanding lawsuits is one brought by Catalyst against West Face and the consortium of investors who purchased Wind. The lawsuit, which has not been heard in court, alleges that leaks of confidential data and the breach of an exclusivity agreement cost Catalyst a lucrative opportunity to acquire the mobile-phone company.

West Face CEO Greg Boland has said that the case is without merit and that West Face will defend itself vigorously in court.