



COURT OF APPEAL FOR ONTARIO

CITATION: The Catalyst Capital Group Inc. v. Moyse, 2018 ONCA
    283

DATE: 20180322

DOCKET: C62655

Doherty, MacFarland and Paciocco JJ.A.

BETWEEN

The Catalyst Capital Group Inc.

Plaintiff (Appellant)

and

Brandon Moyse and West Face Capital Inc.

Defendants (Respondents)

Brian H. Greenspan, David C. Moore and Michelle
    Biddulph, for the appellant

Robert A. Centa, Kristian Borg-Olivier and Denise
    Cooney, for the respondent, Brandon Moyse

Kent E. Thomson, Matthew Milne-Smith and Andrew Carlson,
    for the respondent, West Face Capital Inc.

Heard:  February 20 and 21, 2018

On appeal from the decision of Justice F. Newbould of the
    Superior Court of Justice, dated August 18, 2016, dismissing Catalysts action,
    reported at 2016 ONSC 5271, and an application for leave and, if leave is
    granted, an appeal from the costs decision of Justice F. Newbould, dated
    October 7, 2016.

REASONS FOR DECISION


I



[1]

The appellant, The Catalyst Capital Group Inc. (Catalyst), and the
    respondent, West Face Capital Inc. (West Face), two investment management
    firms, made separate efforts to acquire WIND Mobile Inc. (WIND) in 2014. In
    early August, it appeared that Catalyst and the principal shareholder of WIND
    had reached an agreement for the sale of WIND to Catalyst. Within days, that
    agreement had fallen apart and West Face, along with other entities (the
    consortium) had come forward with a new, and eventually, successful bid for
    WIND. The consortium and West Face later sold WIND for a very substantial
    profit to Shaw Communications.

[2]

In this lawsuit, Catalyst alleged that West Face effectively stole the
    WIND deal from Catalyst by improperly using confidential information West Face
    obtained about Catalysts strategies in respect of its negotiations for the
    purchase of WIND. According to Catalysts claim, the confidential information
    came from the respondent, Brandon Moyse (Mr. Moyse). He had worked for
    Catalyst as an analyst for about two years until May 2014 when he quit Catalyst
    to go to work for West Face.

[3]

Mr. Moyse had worked on the WIND file while at Catalyst, although the
    extent of his involvement in the file was a matter of dispute in the evidence. He
    also actively pursued employment with West Face while at Catalyst and while
    involved in Catalysts attempts to acquire WIND.

[4]

In the lawsuit, Catalyst alleged that the misuse of confidential
    information by West Face and Mr. Moyse caused damage to Catalyst. Catalyst also
    sought an accounting of the profits made by West Face and the consortium when Shaw
    Communications purchased WIND from the consortium.

[5]

In addition to the claims based on the misuse of confidential
    information, Catalyst sued West Face and Mr. Moyse for spoliation. This claim arose
    out of Mr. Moyses destruction of what Catalyst claimed was relevant evidence
    contained on Mr. Moyses cellphone and his personal computer. Catalyst advanced
    spoliation as a distinct tort claim, alleging damages equal to Catalysts costs
    in pursuing the misuse of confidential information claim. Catalyst also advanced
    spoliation as an evidentiary rule available to assist Catalyst in proving the misuse
    of confidential information by West Face and Mr. Moyse.

[6]

The trial judge dismissed all claims. He awarded costs to West Face on a
    substantial indemnity basis and costs to Mr. Moyse on a partial indemnity
    basis. Catalyst appeals from the dismissal of its claims and seeks leave to
    appeal from the costs order.

[7]

At the end of oral argument, the court dismissed Catalysts appeal from
    the judgment dismissing the action and reserved judgment on the costs-related
    appeals. These reasons address both.


II



[8]

To succeed on the misuse of confidential information claim, Catalyst had
    to prove that:

·

Mr. Moyse gave confidential information concerning Catalysts bid
    to purchase WIND to West Face;

·

West Face used that confidential information when pursuing its bid
    for WIND; and

·

The misuse of that confidential information caused detriment to
    Catalyst.

[9]

Catalyst did not have direct evidence to support its allegations. It
    relied on a body of circumstantial evidence and primarily on the testimony of
    its partners, Newton Glassman, Gabriel De Alba, and James Riley.

[10]

On
    the first issue, whether Mr. Moyse had provided confidential information about
    Catalysts strategies in respect of the acquisition of WIND to West Face,
    Catalyst relied heavily on inferences it claimed should be drawn from Mr. Moyses
    conduct while he was pursuing employment with West Face, immediately after he
    left Catalyst to join West Face, and after this litigation was commenced. That evidence
    included the following:

·

Mr. Moyse deliberately provided Catalysts confidential information
    to West Face when he was trying to get a job with West Face. This information did
    not relate to WIND.

·

Mr. Moyse erased emails that showed he provided that confidential
    information to West Face;

·

Mr. Moyse erased all of the contents of the BlackBerry Catalyst
    had provided to him for work purposes before he returned it to Catalyst after
    he quit;

·

Mr. Moyse made inaccurate and potentially misleading statements
    in affidavits filed on preliminary motions in this litigation;

·

Mr. Moyse deleted his internet browsing history from his personal
    computer and installed programs to scrub the computer registry where deletions
    could otherwise be detected, in the face of a court order requiring that he
    turn his computer over to his lawyer so that the computer could be forensically
    examined for the purposes of this litigation.

[11]

Catalyst
    claimed that Mr. Moyses conduct was consistent only with him having provided
    confidential information about Catalysts proposed acquisition of WIND to West
    Face.

[12]

Mr.
    Moyse gave various innocent explanations for his conduct. West Face also led
    evidence that when Mr. Moyse was hired by West Face, extensive measures were
    taken to ensure that Mr. Moyse had no knowledge of, or involvement in, West
    Faces ongoing negotiations for the purchase of WIND shares. The witnesses
    testified that there were no breaches of this confidentiality wall during the
    few weeks that Mr. Moyse was actually present in the West Face offices.

[13]

The
    respondents also introduced a body of evidence, which they claimed demonstrated
    that no confidential information from Catalyst had been used in the ultimately
    successful bid for WIND. The respondents argued that the approach taken by West
    Face and its consortium to the acquisition of WIND, particularly with respect
    to the need to obtain certain concessions from the government, was
    fundamentally different than the approach taken by Catalyst. Consequently, West
    Face had no use for any information pertaining to Catalysts strategies.

[14]

The
    respondents also defended on the basis that the appellant had not proved any
    damages. The respondents claimed that Catalysts bid to acquire WIND in August
    2014 failed, not because of any competing bid made by West Face and the
    consortium, but because Catalyst chose to terminate negotiations with the
    vendor of the WIND shares after the vendor demanded a significant break fee very
    late in its negotiations with Catalyst. The respondents contended at trial that
    the evidence showed that Catalyst chose to end the negotiations rather than
    agree to the break fee demanded by the vendor. On this argument, which did not
    depend on the trial judge accepting the testimony of Mr. Moyse, or the West
    Face witnesses, Catalyst suffered no damages or detriment, even if Mr. Moyse
    had given confidential information to West Face and West Face had attempted to
    use that information in its negotiations with the vendor of the WIND shares.

[15]

The
    trial judge gave lengthy and detailed reasons for judgment. He found against
    Catalyst on almost every contested factual issue. Specifically, he found
    (paras. 126-30) that the appellant chose to terminate its negotiations with the
    vendor of the WIND shares when the vendor demanded a substantial break fee.

[16]

In
    his reasons, the trial judge made strong credibility findings against the
    appellants primary witnesses, particularly Mr. Glassman, and equally strong
    credibility findings in favour of the respondents witnesses, including Mr.
    Moyse. The trial judge accepted the explanations offered by Mr. Moyse for his
    conduct outlined above, at para. 10. The trial judge found, as a fact, that Mr.
    Moyse had not provided any confidential information to West Face in relation to
    the appellants negotiations for the purchase of the WIND shares.


III



[17]

Catalyst
    advanced essentially three arguments on appeal. The first asserts alleged
    errors in the trial judges fact-finding process, the second alleges procedural
    unfairness, and the third relates to the trial judges treatment of the
    spoliation arguments.

A.

the alleged fact-finding errors

[18]

The
    appellant submits that the trial judges factual findings cannot stand, first,
    because they are the product of an unfair and uneven scrutiny by the trial
    judge of the competing versions of the relevant events and, second, because
    they are tainted by several material misapprehensions of the evidence.

[19]

Counsel
    for the appellant candidly acknowledge that they face an uphill climb in their
    assault on the fact-finding at trial. This was a hard-fought trial. The result
    was almost entirely fact-driven. The trial judges findings of fact turned on
    his assessment of the credibility of the key witnesses, the reliability of
    their evidence, and the inferences to be drawn from certain primary findings of
    fact. All of those tasks engage a myriad of considerations by the trial judge.
    His determinations are owed strong deference on appeal. The appellant must
    overcome that deference in the face of reasons by the trial judge that display a
    strong command of the evidentiary record and a full understanding of the issues
    and positions of the parties.

(i)

The Alleged Uneven Scrutiny of the Evidence

[20]

In
    support of the uneven scrutiny argument, counsel submits that the credibility
    of the Catalyst witnesses was subject to a hypercritical microscopic examination
    by the trial judge. Any misstep or inconsistency in their testimony, no matter
    how apparently minor, became, for the trial judge, a reason to reject the
    evidence of those witnesses. In contrast, argues counsel for the appellant, the
    trial judge forgave or ignored similar, and much more serious, defects in the
    evidence of witnesses for the respondents.

[21]

To
    demonstrate the unevenness of the trial judges consideration of the evidence,
    counsel compared the trial judges treatment of Mr. Moyses testimony with that
    afforded Mr. Glassmans evidence. The appellant argues that the trial judge excused
    the litany of serious misconduct by Mr. Moyse, including a deliberate breach of
    a court order, as mere mistakes or errors explainable by Mr. Moyses youth
    or his fatigue. Counsel contrasts the trial judges benign treatment of Mr.
    Moyses evidence with his aggressive rejection of Mr. Glassmans evidence on what
    counsel argues are much weaker and more subjective grounds.

[22]

The
    appellant submits that the trial judge totally rejected Mr. Glassmans evidence
    because on occasion he slipped into the role of advocate when testifying and overstated
    certain matters. Counsel submits that even if this characterization is
    accurate, Mr. Glassmans transgressions pale beside the egregious misconduct of
    Mr. Moyse. Counsel submits that the trial judges complete acceptance of Mr.
    Moyses evidence and his total rejection of Mr. Glassmans evidence can be
    explained only by the application of very different levels of scrutiny to their
    testimony.

[23]

Counsel
    devoted much of their oral argument to their uneven scrutiny submission. They
    referred to various examples from the trial judges reasons, which they claimed
    demonstrated his uneven scrutiny of the evidence.

[24]

Counsels
    submissions make a case for different credibility and reliability assessments
    than those made by the trial judge. Unfortunately for the appellant, that is
    not enough to warrant appellate intervention. It is not for this court to
    consider what alternative findings may have been reasonably available on the trial
    record.

[25]

The
    trial judge approached the evidence of the respondents witnesses no differently
    than he did the evidence of the appellants witnesses. The trial judges
    reasons must be considered in their entirety. Mr. Moyses evidence that he did
    not provide confidential information concerning the WIND negotiations to West
    Face did not stand alone. The evidence found considerable, largely
    uncontradicted support in the testimony of the West Face witnesses. It also gained
    some inferential support in the trial judges findings as they related to the West
    Face strategy in respect of the WIND negotiations, and the ultimate reason for
    the breakdown of the negotiations between the appellant and the vendor of the
    WIND shares.

[26]

The
    trial judge was alive to the details of the evidence said to demonstrate Mr.
    Moyses dishonesty and the unreliability of his evidence. He appreciated the appellants
    argument and the need to carefully and critically examine Mr. Moyses evidence.
    The trial judge examined the evidence at length, particularly as it related to
    the allegation that Mr. Moyse had deliberately deleted material from his
    personal computer and installed programming to hide that deletion and prevent
    any recovery of the material. In the end, the trial judge accepted Mr. Moyses
    explanations for what he had done, and concluded that it could not be
    established that Mr. Moyse had actually used the programs he had installed on
    the computer to hide the deletions.

[27]

The
    trial judge approached Mr. Moyses evidence by examining the substance of that
    evidence in the context of the entirety of the evidence. He also considered, as
    a trial judge is entitled to do, his impressions of Mr. Moyse as he testified.
    The trial judge took the same approach to Mr. Glassman and other witnesses for
    the appellant. As often occurs, the same approach to the evidence of different
    witnesses yielded very different credibility and reliability assessments. Those
    different assessments are not indicative of any flawed fact-finding process,
    but instead reflect the essential witness-specific nature of credibility and
    reliability determinations.

[28]

We
    do not propose to examine all of the passages from the trial judges reasons
    relied on by the appellant to demonstrate the asserted different levels of
    scrutiny of the evidence. Each argument fails for a variety of reasons.

[29]

For
    example, the appellant argues that the trial judge used Mr. Glassmans
    repetition of parts of his evidence as a reason for finding that Mr. Glassman was
    not credible, but did not give the same effect to the repetition of evidence by
    witnesses for the respondents. This submission is not supported by the reasons.
    The trial judge referred to repetition of parts of the evidence as a by-product
    of the manner in which the trial was conducted. We do not read his reasons as
    using the repetition of evidence as a basis for disbelieving Mr. Glassman or
    otherwise discounting his evidence.

[30]

The
    appellant also argues that the trial judge treated inconsistencies or
    overstatements in the evidence of the appellants witnesses much more harshly
    than he did similar deficiencies in the respondents witnesses. The appellant
    submits that the trial judge did the same thing when he faulted Mr. Glassman
    for not making obvious concessions, but made no comment when the same
    reluctance was evident in the testimony of witnesses for the respondents.

[31]

The
    evaluation of the impact on credibility and reliability of specific
    inconsistencies and similar flaws in a witnesss testimony lies at the very
    core of the trial judges function. His conclusion that a certain inconsistency
    negatively impacted on the credibility of one witness, while a different
    inconsistency did not have the same negative impact on the credibility of a
    different witness testifying about an entirely different topic, does not, on
    its own, establish that the trial judge applied different levels of scrutiny to
    the evidence of those witnesses. Instead, it demonstrates that credibility and
    reliability assessments are fact and witness-specific.

[32]

In
    support of the unequal scrutiny argument, the appellant also submitted that the
    trial judge proceeded from the assumption that the West Face witnesses were
    credible, while the appellant had to demonstrate the credibility of its
    witnesses. In support of this argument, counsel relies on observations made by the
    trial judge in his costs reasons.

[33]

Setting
    aside whether a judges comments in his costs reasons can assist in
    interpreting his reasons for judgment, the trial judges comments do not
    support the appellants submission. In his reasons for costs, the trial judge
    observed that the appellant could not have succeeded at trial without
    establishing that the West Face witnesses were lying when they claimed they had
    not received any confidential information from Mr. Moyse. This observation was
    correct, having regard to the nature of the claim advanced by the appellant,
    the respective positions of the parties, and the burden of proof on the
    appellant.

(ii)

The Alleged Misapprehensions of the Evidence

[34]

The
    appellant alleged three material misapprehensions of evidence in the body of
    its factum and listed several others in an appendix to the factum. We see no
    misapprehension of any material facts by the trial judge, and do not propose to
    review the appellants claims one-by-one.

[35]

Some
    of the appellants allegations of material misapprehensions of the evidence
    fail because the trial judge did not make the factual finding said to constitute
    the material misapprehension. For example, the appellant argues that the trial
    judge wrongly held that Mr. Moyse did not have any confidential information
    about the WIND negotiations when he left the employment of Catalyst. The trial
    judge did not make any such finding. He did find that Mr. Moyse was not aware
    of the negotiating strategy of Catalyst with the government of Canada and the
    vendor of the WIND shares (para. 48). That finding was open on the evidence of
    Mr. Moyse.

[36]

Other
    submissions made by the appellant alleging material misapprehensions of the
    evidence fail because, even if valid, they relate to factual issues that were
    relatively insignificant and not material to the outcome of the trial. For
    example, the appellant argues that the trial judge misapprehended the evidence pertaining
    to West Faces need for an analyst when it hired Mr. Moyse. Even if it could be
    said that the trial judge went beyond the evidence in describing the extent to
    which West Face needed an analyst, that error could not possibly have impacted
    on his overall assessment of the evidence, or the ultimate findings of fact he relied
    on in dismissing the claim.

[37]

Most
    of the appellants arguments, however, fail because they do not reveal any
    misapprehension of the evidence, but instead reveal that the trial judge
    preferred the evidence of the respondents witnesses and the inferences that
    flowed from that evidence over the competing evidence and inferences relied on
    by the appellant. For example, the trial judge found that West Face and others
    in the consortium did not have actual knowledge of the Catalyst bid for the
    shares of WIND in August 2014. That finding is supported by the respondents witnesses
    who testified that they deduced that Catalyst was a bidder in light of market
    chatter, comments in the media, and a statement made by counsel for the
    appellant to counsel for West Face when Mr. Moyse joined West Face.  This
    evidence provided ample grounds for the trial judges factual finding that West
    Face and the consortium had no actual knowledge of the bid.

[38]

The
    appellants submissions go no further than to suggest that the evidence could
    also have justified the further inference that West Face was aware of the
    actual bid. The trial judge did not make that inference, no doubt because he
    accepted the evidence of the West Face witnesses that West Face did not have
    knowledge of the actual bid. The trial judges preference for the direct
    evidence of the West Face witnesses over the inference urged by the appellant
    is a function of the trial judges fact-finding responsibilities and does not
    reflect any misapprehension of the evidentiary record.

B.

the procedural unfairness argument

[39]

The
    appellant argues that the trial judge made a series of factual findings against
    the appellant in respect of the dealings between the vendor of the WIND shares
    and West Face and the consortium in August 2014. The appellant argues that
    these findings were made despite the trial judge having refused to allow the
    appellant to amend its claim to allege that West Face had induced the vendor of
    the WIND shares to breach its agreement with the appellant in the course of those
    August dealings. The appellant contends that the trial judges findings were beyond
    the scope of the claim as framed in the pleadings before him and were based on
    an inadequate evidentiary record.

[40]

We
    do not accept this submission. The appellant did not move in this proceeding to
    amend its claim to include an allegation that West Face induced the vendor of
    the WIND shares to breach its contract with the appellant. The appellant did
    unsuccessfully seek to make that amendment in a related proceeding. That
    refusal had no impact on the conduct of this trial.

[41]

More
    to the point, evidence of the dealings between West Face and the consortium on
    one side and the vendor of the WIND shares on the other side in August 2014 was
    germane to the appellants claim and West Faces defence that it pursued its
    own strategies in seeking to purchase the WIND shares, which were very
    different from those employed by the appellant. That strategy was reflected, in
    part, in the unsolicited proposal to purchase the WIND shares made by West Face
    and the consortium in early August 2014.

[42]

The
    trial judge heard a great deal of evidence about the dealings between the
    vendor of the WIND shares and West Face and the consortium, particularly in
    August 2014. The appellant did not object to any of this evidence and, indeed,
    elicited most of it. In their closing arguments at trial, counsel for the
    appellant and the respondents urged the trial judge to make certain findings in
    respect of the dealings between West Face, the consortium and the vendor of the
    WIND shares. The trial judges findings reflect those arguments and a
    preference for the position put forward by the respondents. We see no
    unfairness to the appellant in the manner in which these issues were litigated
    at the trial. The trial judges findings of fact in respect of these issues are
    supported by the evidence.

C.

the spoliation argument

[43]

The
    spoliation submission began as an argument that the trial judge had failed to
    properly identify the elements of the tort of spoliation. In oral argument,
    counsel abandoned any reliance on the tort of spoliation.
[1]

[44]

Counsel
    argued that the trial judge erred in holding that an adverse evidentiary
    inference could be drawn against the respondents as a result of Mr. Moyses
    destruction of relevant evidence only if the appellant established that Mr.
    Moyse and/or West Face destroyed that evidence for the specific purpose of
    affecting the outcome of the litigation. Counsel submitted that the adverse
    inference was appropriately drawn if relevant evidence was destroyed in the
    face of pending or reasonably foreseeable litigation.

[45]

The
    appellants argument faces an insurmountable factual hurdle. Any inference that
    may be drawn against the respondents can arise only after a finding that Mr.
    Moyse destroyed relevant evidence. The trial judge found as a fact that Mr.
    Moyse did not destroy relevant evidence (paras. 147, 165). The appellant has
    not established any basis upon which this court can interfere with that factual
    finding. That finding puts an end to any argument that Mr. Moyses deletion of
    data from his computer and cellphone supports an adverse inference against Mr.
    Moyse or West Face.

[46]

As
    this argument runs aground on the trial judges factual finding, we need not
    consider the merits of the substance of the argument. We should not be taken as
    agreeing that the appropriate evidentiary approach to evidence that a party to
    a proceeding destroyed relevant evidence should be functionally different from
    the approach to be taken to other kinds of circumstantial evidence.

D.

the costs appeal

[47]

The
    appellant seeks leave to appeal the costs order. The appellant recognizes that
    this court grants leave to appeal from costs orders only sparingly. It submits,
    however, that the orders made in this case reveal errors in principle that
    warrant leave and intervention by this court.

[48]

The
    trial judge awarded costs to West Face on a substantial indemnity basis because
    the appellant had made serious and unfounded allegations impugning the honesty
    and integrity of West Face and its senior executives. He concluded that the
    lawsuit was precipitated primarily by Mr. Glassmans frustration over losing
    out on the acquisition of the WIND shares. The trial judge said, at para. 10:

He [Mr. Glassman] set out to prove his belief that the West
    Face witnesses were lying and that West Face had obtained confidential Catalyst
    information from Mr. Moyse that they used to defeat Catalysts bid to acquire
    WIND. He was certainly playing hardball, attacking the reputation and honesty
    of West Face. However, in spite of the best efforts of Catalysts very able and
    skilled lawyers, he utterly failed.

[49]

The
    appellant submits that the trial judge in effect awarded costs on a substantial
    indemnity basis because the appellant failed to prove its case at trial. The
    appellant argues that substantial indemnity costs are the exception and not the
    rule. To base an award of substantial indemnity costs on a failure to prove
    ones case is to ignore the exceptional nature of an award of costs on a
    substantial indemnity basis.

[50]

We
    are satisfied that the trial judge awarded costs on a substantial indemnity
    basis, not because the appellant failed to prove its case, but rather because
    the appellant chose to make very serious allegations against West Face,
    maintain those allegations in the face of substantial evidence refuting the
    allegations, and in the end utterly failed to substantiate any of the claims.

[51]

Unfounded
    allegations like those made by the appellant in this case can warrant the
    exercise of discretion in favour of costs on a substantial indemnity basis. We
    see no error in principle in the trial judges decision to award costs on a
    substantial indemnity basis to West Face. We would not grant leave to appeal
    the order as it relates to West Face.

[52]

The
    trial judge found that the appellant had made an unwarranted attack on the
    reputation and integrity of Mr. Moyse. He went on, however, to indicate, at
    para. 18:

However, the steps that Mr. Moyse took that he has readily
    acknowledged were mistakes, albeit with no intention to destroy any relevant
    evidence, must be considered in deciding what level of costs to be awarded to
    Mr. Moyse. In my view, it is a reason not to award costs on a substantial
    indemnity basis, and I award costs only on a partial indemnity basis.

[53]

The
    characterization of some of Mr. Moyses conduct as mistakes is charitable.
    This is particularly true in respect of his conduct when ordered by the court
    to turn his personal computer over to his lawyer so that it could be
    forensically examined. His decision to delete material from the computer
    without speaking to his lawyer and before turning the computer over to his
    lawyer was a serious breach of the court order, even given that he did not
    delete information relevant to the allegations.

[54]

The
    fact remains, however, that the trial judge recognized that Mr. Moyses conduct
    should be taken into account in assessing the appropriate costs order. He
    determined in the exercise of his discretion that it should reduce the order
    from one of costs of substantial indemnity to one of costs on a partial
    indemnity basis. Even if other judges might have gone further, the trial judge
    made no error in the exercise of his discretion in considering the impact of
    Mr. Moyses conduct on the costs award.

[55]

We
    would not grant leave to appeal from the order awarding costs to Mr. Moyse on a
    partial indemnity basis.

E.

conclusion

[56]

The
    appeal is dismissed. The application for leave to appeal the costs order is dismissed.

[57]

Counsel
    should exchange and file submissions on the costs of the appeal within 30 days
    of the release of these reasons. The submissions should not exceed 7 pages.

Doherty J.A.

J. MacFarland J.A.

D.M. Paciocco J.A.





[1]

The existence of an independent tort of spoliation is an open
    question in this court:
Robb Estate v. Canadian Red Cross Society
(2001), 152 O.A.C. 60, at 203-208.


