The Catalyst Capital Group Inc. v. Vimpelcom Ltd. et. al.

In The Catalyst Capital Group Inc. v VimpelCom Ltd. et. al. (2019 ONCA 354), the Court of Appeal for Ontario dismissed the appeal of the plaintiff, The Catalyst Capital Group Inc., from the judgment of Justice Glenn Hainey of the Ontario Superior Court of Justice (Commercial List) (2018 ONSC 2471). Catalyst argued on appeal that Justice Hainey had erred in dismissing Catalyst’s action as an abuse of process. The Court of Appeal held that Justice Hainey had “rightly concluded” that Catalyst’s action was an abuse of process because it was an attempt to re-litigate findings that had been made in previous proceedings arising from Catalyst’s failed efforts to purchase WIND Mobile, a Canadian telecommunications company, in September 2014.

BACKGROUND OF THE CASE

In September 2014, a consortium of investors, led by West Face Capital Inc., purchased WIND from its then-owner, VimpelCom Ltd. The transaction was based on an enterprise value for WIND of $300 million. Shortly thereafter, Catalyst amended its statement of claim in a pre-existing lawsuit against West Face to allege that West Face had misappropriated and misused confidential information belonging to Catalyst in order to acquire WIND. Specifically, Catalyst alleged that West Face had solicited and obtained Catalyst’s confidential information about its regulatory strategies for WIND from a former employee of Catalyst who had been hired by West Face, and that but for West Face’s alleged misuse of this information, Catalyst would have acquired WIND.

In March 2016, West Face and its co-investors sold WIND to Shaw Communications for $1.6 billion by Plan of Arrangement. Catalyst initially sought to block the sale of WIND to Shaw on the basis that Catalyst had claimed a constructive trust over West Face’s interest in WIND; however, Catalyst ultimately abandoned this position after a hearing in the plan of arrangement proceeding before Justice Frank Newbould, in which Justice Newbould expressed skepticism about Catalyst’s position. Catalyst instead claimed entitlement to all West Face’s net profits from the transactions.

Catalyst’s first action proceeded to trial in June 2016. Six days before the trial commenced, Catalyst launched a second action concerning its failure to acquire WIND. In this second action, Catalyst alleged that its efforts to purchase WIND had been thwarted – not because of any leaked confidential information from its former employee, but because the consortium of investors led by West Face had conspired together with VimpelCom’s financial adviser, UBS Securities Canada Inc., to induce VimpelCom to breach its exclusivity and confidentiality obligations to Catalyst. Catalyst later amended this second claim to assert damages of $1.3 billion, which Catalyst asserted was the total net profits to all of the consortium members.

Every claim asserted by Catalyst against West Face in the first action was dismissed by Justice Newbould in August 2016 following the conclusion of trial (see The Catalyst Capital Group Inc. v Moyse et. al., 2016 ONSC 5271). Justice Newbould also subsequently awarded West Face its costs on a substantial indemnity basis, totalling $1,239,965 (see The Catalyst Capital Group Inc. v Moyse et. al., 2016 ONSC 6285). In February 2018, the Ontario Court of Appeal dismissed Catalyst’s appeal of Justice Newbould’s decision on the merits, from the bench and without the need for oral submissions from counsel to West Face. The Court of Appeal also subsequently dismissed Catalyst’s motion for leave to appeal Justice Newbould’s costs award, and it awarded West Face a further $200,000 for its costs of the appeal (see The Catalyst Capital Group Inc. v Moyse et. al., 2018 ONCA 283 and The Catalyst Capital Group Inc. v Moyse et. al., 2018 ONCA 447). Catalyst’s subsequent application to the Supreme Court of Canada for leave to appeal from the Ontario Court of Appeal’s decision was dismissed with costs on March 28, 2019.

At the same time that Catalyst was pursuing the appeal of its first action concerning WIND, it continued to maintain its right to pursue the second action.

MATTER SIGNIFICANCE AND GUIDANCE

On April 18, 2018, Justice Hainey determined that this second lawsuit was essentially an attempt to re-litigate the same facts and issues that had previously been decided by Justice Newbould in the first such claim between Catalyst and West Face. On this basis, Justice Hainey dismissed the claim against West Face and all of the other defendants, relying on the doctrines of issue estoppel, cause of action estoppel and abuse of process. In reaching these conclusions, Justice Hainey noted that Catalyst’s second lawsuit was “an attempt to impose a new legal theory of wrongdoing on the same facts,” and that Justice Newbould’s findings in the first action, including that Catalyst would never have acquired WIND regardless of what West Face did, were determinative of the second action regardless of the alleged wrongdoing (see The Catalyst Capital Group Inc. v VimpelCom Ltd. et. al., 2018 ONSC 2471).

Catalyst then appealed Justice Hainey’s judgment to the Ontario Court of Appeal. On May 2, 2019, the Court of Appeal dismissed Catalyst’s appeal in every respect and affirmed Justice Hainey’s analysis and application of the doctrines of issue estoppel, cause of action estoppel, and abuse of process. In particular, the Court of Appeal concurred that Catalyst’s behaviour exhibited “classic signs of re-litigation,” in that Catalyst’s second action concerning WIND was an abusive attempt to re-litigate findings made by Justice Newbould in the first action that were central to the reasons why Catalyst had failed to acquire WIND.

While Justice Hainey’s and the Ontario Court of Appeal’s decisions did nothing but apply well-established legal principles and jurisprudence to Catalyst’s second action, the case has been closely watched by the Canadian financial and legal communities, given the amounts at stake and the highly public manner in which Catalyst has pursued its various complaints against numerous high-profile defendants.

Catalyst has made an application to the Supreme Court of Canada for leave to appeal from the Ontario Court of Appeal’s decision upholding Justice Hainey’s judgment. To date, Catalyst has been ordered to pay over $3.9 million in legal fees to the various defendants of its successive unsuccessful lawsuits concerning WIND.

Catalyst was initially represented by Lax O’Sullivan Lisus Gottlieb LLP, with a team composed of Rocco DiPucchio, Andrew Winton, and Brad Vermeersch. Since the fall of 2017, Catalyst has been represented by David Moore and Ken Jones of Moore Barristers LLP and Brian Greenspan of Greenspan Humphrey Weinstein. Since the spring of 2018, Catalyst has also been represented by John Callaghan, Benjamin Na and Matthew Karabus of Gowling WLG.

West Face Capital Inc. has been represented by Davies Ward Phillips & Vineberg LLP, with a team composed of Kent Thomson, Matthew Milne-Smith and Andrew Carlson.

Globalive Capital Inc. has been represented by Borden Ladner Gervais LLP, with a team composed of James Douglas, Caitlin Sainsbury and Graham Splawski.

VimpelCom Ltd. has been represented by Norton Rose Fulbright Canada LLP, with a team composed of Orestes Pasparakis, Rahool Agarwal, Michael Bookman and Danny Urquhart.

Tennenbaum Capital Partners LLC, 64NM Holdings GP LLC, 64NM Holdings LP, and LG Capital Investors LLC has been represented by Blake, Cassels & Graydon LLP, with a team composed of Michael Barrack, Kiran Patel and Daniel Szirmak.

Novus Wireless Communications Inc. has been represented by McCarthy Tétrault LLP, with a team composed of Junior Sirivar, Jacqueline Cole and Geoff Hall.

UBS Securities Canada Inc. was represented by Stikeman Elliott LLP, with a team composed of Daniel Murdoch and David Byers.

Serruya Private Equity Inc. was represented by Lerners LLP, with a team composed of Lucas Lung and Jameel Madhany.