AM Gold Inc. v. Kaizen Discovery Inc.

2022 BCCA 204 AM Gold Inc. v. Kaizen Discovery Inc.

COURT OF APPEAL FOR BRITISH COLUMBIA Citation: AM Gold Inc. v. Kaizen Discovery Inc., 2022 BCCA 204 Date: 20220609 Docket: CA47393 Between: AM Gold Inc. Appellant (Plaintiff) And Kaizen Discovery Inc. Respondent (Defendant) Before: The Honourable Madam Justice Saunders The Honourable Mr. Justice Tysoe The Honourable Madam Justice Fenlon Supplementary Reasons to AM Gold Inc. v. Kaizen Discovery Inc., 2022 BCCA 21, Vancouver Docket CA47393 Counsel for the Appellant: T.A. Takemi M. Turcott Counsel for the Respondent: D.R. Brown J. Buysen Place and Date of Hearing: Vancouver, British Columbia December 7, 2021 Place and Date of Judgment: Vancouver, British Columbia January 21, 2022 Written Submissions Received: May 5, 17 and 24, 2022 Place and Date of Supplementary Judgment: Vancouver, British Columbia June 9, 2022 Supplementary Reasons of the Court Summary: The respondent, who was successful in having the appeal dismissed, requests that the costs of the appeal to which it is entitled be assessed as special costs. Held: The costs are to be assessed on a party and party basis under Appendix B of the Court of Appeal Rules. The appellant was not guilty of reprehensible conduct in the appeal. Supplementary Reasons for Judgment of the Court: [1] In reasons for judgment indexed as 2022 BCCA 21 (the "Appeal Reasons"), this Court dismissed the appeal brought by the appellant ("AM Gold") from an order following trial dismissing AM Gold's action against the respondent ("Kaizen"). The Appeal Reasons were silent as to costs of the appeal, with the result that Kaizen was entitled to the costs pursuant to s. 23 of the Court of Appeal Act, R.S.B.C. 1996, c.

77. Kaizen now requests an order pursuant to Rule 61 of the Court of Appeal Rules, B.C. Reg. 297/2001, that those costs be assessed as special costs against AM Gold. [2] In order to understand the request, it is useful to briefly summarize the portions of AM Gold's claim that were the subject matter of the appeal. [3] The parties were both involved in mining exploration and development. One of Kaizen's projects was an exploration project in Nunavut called the Coppermine project. AM Gold's flagship asset was an indirect interest in a Peruvian gold mining venture called the Pinaya project, which was being explored and developed pursuant to a joint venture agreement with a third party. [4] Kaizen became interested in acquiring the Pinaya project and entered into a confidentiality or non-disclosure agreement with AM Gold concerning the project (the "NDA"). Approximately a year later, AM Gold sold its interest in the Pinaya project to Kaizen in exchange for $500,000 and 15,384,615 common shares in Kaizen. [5] In its action, AM Gold advanced several claims against Kaizen. Two of the sets of claims were pursued on appeal. The first related to alleged non-disclosure and misrepresentations concerning the Coppermine project, and it is not relevant to the request for special costs. [6] The second set of claims related to the Pinaya project. Prior to the closing of the transaction between

the parties, Kaizen's representatives and consultants attended at the Pinaya project on three occasions, and they took soil and water samples on the third visit. AM Gold claimed in its action that the taking of the samples constituted a breach of the NDA and a trespass (the trespass claim was not pursued on appeal). [7] At trial, AM Gold took two positions in connection with its claims of breach of the NDA and trespass, both of which were supported by the testimony of AM Gold's president. The first was that the price for the Pinaya project had been reduced as a result of contamination caused by artisanal miners and that the samples taken by Kaizen's consultants disclosed that the contamination was not significant. The second was that the sale of the Pinaya project was on an "as-is, where-is" basis. After rejecting both of these positions, the trial judge went on to hold that Kaizen did not breach the NDA or commit a trespass. She held that Kaizen did not breach the provision of the NDA prohibiting it from visiting the Pinaya site without the prior consent of AM Gold because the provision did not require the consent to be expressly given and the parties had adopted a pattern of conduct for the giving of implied consent. The judge found that this pattern of conduct had been followed on the last visit when the samples were taken. [8] Following the issuance of the trial judgment,

Kaizen applied for special costs against AM Gold and its president personally. In response to the application, AM Gold's president swore an affidavit endeavouring to explain his testimony at trial. The trial judge granted the application and, in doing so, she held that AM Gold's president knowingly gave false testimony concerning the Pinaya claims with the intention to mislead the court. These awards of special costs are the subject matter of two appeals which were heard on May 31, 2022 by another division of the Court (Nos. CA47774 and CA47791). Judgment in those appeals has been reserved. In view of our decision in these supplementary reasons, it is not necessary to await the outcome of those appeals. [9] AM Gold applied to have the president's affidavit admitted into evidence on the appeal. We dismissed the application in the Appeal Reasons on the basis that the proposed evidence did not meet the test set out in Palmer v. The Queen, [1980] 1 S.C.R.

759. None of the evidence contained in the affidavit was before us on the appeal. [10] In making its request for special costs of the appeal, Kaizen recognizes that conduct at trial (or an award of special costs at trial) cannot on its own support an order for special costs on appeal. However, relying on Njoroge v. Canadian Union of Public Employees, Local 15, 2021 BCCA 435 at para. 32 (which, in turn, relied on Tom Harris Cellular Ltd. v. Chang, 2017 BCCA 209 at para. 10), Kaizen says misconduct at trial can be considered on appeal if it is continued in this Court. Of course, such misconduct must have risen to the level of being reprehensible conduct deserving of rebuke: Garcia v. Crestbrook Forest Industries Ltd. (1994), 9 B.C.L.R. (3d) 242 at para. 17 (C.A.). [11] Kaizen submits that AM Gold attempted to defraud this Court by pursuing the fabricated evidence of AM Gold's president on the appeal in two respects. The first was his evidence that he did not know that Kaizen intended to conduct environmental testing at the Pinaya site. The second is that the sale of the Pinaya project was conducted on an "as-is, where-is" basis. [12] Kaizen has not cited any authority in support of the proposition that an appellant who unsuccessfully pursues evidence found by the trial judge to have been fabricated is guilty of reprehensible conduct deserving of rebuke in the form of an award of

special costs. As it is our view that AM Gold did not attempt to have us accept or act upon evidence found to have been fabricated in resolving the issues on the appeal, it is not necessary for us to determine whether, and in what circumstances, special costs should be awarded when an unsuccessful appellant attempts to rely on fabricated evidence that is central to an issue on the appeal. [13] AM Gold raised two grounds of appeal with respect to the trial judge's finding that the NDA had not been breached. The first was that the judge applied the wrong test in interpreting the NDA. In its costs submissions, Kaizen says AM Gold's misconduct at trial continued on appeal because AM Gold's factum stated that Kaizen did not have the required consent to access the Pinaya site and to take the soil and water samples. Kaizen submits that, in doing so, AM Gold was asking this Court to accept its president's testimony at trial that he did not know the purpose of the third site visit, in preference to the trial judge's rejection of this testimony. [14] With respect, we did not interpret AM Gold's factum in this manner. Rather, AM Gold was asserting that the judge erred in her interpretation of the NDA and that, on a proper interpretation, no prior consent had been given. This ground of appeal involved an extricable question of law and, in the circumstances of the appeal, it was resolved by

a proper characterization of the judge's reasons. The trial testimony of AM Gold's president was not determinative of this ground of appeal. [15] The second ground of appeal on the NDA did relate to findings of fact because AM Gold asserted that the trial judge made palpable and overriding errors. However, AM Gold did not urge us to accept the testimony of its president which had been rejected by the trial judge. Rather, AM Gold argued that the judge made palpable and overriding errors in relying on the evidence of an officer of Kaizen who had significant memory issues and to have stated that there was no evidence that the Pinaya project was sold on an "as-is, where-is" basis. The first aspect had nothing to do with the testimony of AM Gold's president. [16] On the second aspect, AM Gold's factum asserted that it was palpably wrong for the judge to have stated that there was no evidence that the sale was on an "as-is, where-is" basis because an officer of Kaizen had described the sale in those terms in an email. Although the officer did use the expression in the email, the trial judge accepted his testimony that he used it to mean that AM Gold was only prepared to give limited representations and warranties, and did not use it in the sense alleged by AM Gold. [17] In its costs submissions, Kaizen says AM Gold engaged in misconduct on the appeal by returning to its position at

trial that the sale of the Pinaya project was done on an "as-is, where-is" basis such that both sides were to remain ignorant about the environment status of the project. However, AM Gold's factum did not request this Court to accept the evidence of its president on this topic. Rather, the ground of appeal was that the trial judge made a palpable error in stating that there was no evidence that it was an "as-is, where-is" sale when one of Kaizen's officers had used that expression in an email. While AM Gold's factum made a passing reference to the use of the expression by its president, it did not form the basis of a ground of appeal. Even if we had acceded to this ground of appeal, it does not mean that we would have accepted the testimony of AM Gold's president which had been rejected by the trial judge. Conclusion [18] We are not persuaded that AM Gold was guilty of reprehensible conduct in the appeal and, accordingly, it is not an appropriate case for an award of special costs on the appeal. We direct that the costs of the appeal to which Kaizen is entitled be assessed as party and party costs under Appendix B to the Court of Appeal Rules. "The Honourable Madam Justice Saunders" "The Honourable Mr. Justice Tysoe" "The Honourable Madam Justice Fenlon"