Axion Ventures Inc. v. Bonner, 2023 BCSC 337

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Axion Ventures Inc. v. Bonner, 2023 BCSC 337 Date: 20230307 Docket: Vancouver Registry: S210438 Between: Axion Ventures Inc. and Axion Interactive Inc. Plaintiffs And John Todd Bonner, Nithinan Boonyawattanapisut, Monaker Group, Inc., William Kerby, Cern One Limited, Red Anchor Trading Corp., CC Asia Pacific Ventures Ltd., Jonathan Chen, HotPlay Enterprise Limited, HotPlay (Thailand) Ltd., Christopher Bagguley, Mark Henry Saft, Longroot, Inc., Jane Doe and ABC Corp. Defendants Before: The Honourable Justice A.

Ross Reasons for Judgment Counsel for the Plaintiffs: P.J. Sullivan S. Shuchat L. Gnanasihamany Counsel for the Defendants: L. Ridgedale M. Turcott Place and Date of Trial/Hearing: Vancouver, B.C. January 30–31, 2023 February 1–3, 2023 Place and Date of Judgment: Vancouver, B.C. March 7, 2023 Table of Contents

Summary of Orders and Declarations Sought .. 5 Issues .. 7 Jurisdiction .. 8 How Did We Get Here? .. 9

Summary and Order .. 17 [ 1 ] This unusual application comes before me following two sets of reasons for judgment that I delivered in May and October 2021 in an oppression proceeding. [ 2 ] This multi-faceted litigation began as a proxy fight for control of a publicly- traded electronic gaming and technology company. That proxy fight is largely resolved. However, as I understand the current situation, there is continuing litigation over the ownership of certain valuable technology assets.

That litigation has blossomed into at least ten separate proceedings in British Columbia in addition to other actions in other jurisdictions. All of the B.C. proceedings are being case-managed by Justice Walker.

[ 3 ] I heard and decided the first piece of this litigation, which was an oppression petition brought by two of the defendants in this action, Mr. John Todd Bonner (“Mr. Bonner”) and Ms. Nithinan Boonyawattanapisut (known in those proceedings as “Jess”). Mr. Bonner and Jess are married. Mr. Bonner is the former chief executive officer and a former director of Axion Ventures Inc. Jess was a significant beneficial shareholder. In my prior reasons, I ruled against Mr. Bonner and Jess. [ 4 ] In this action, Axion Ventures Inc. and a subsidiary, Axion Interactive Inc. (the “Axion-related Parties”) claim against Mr.

Bonner and Jess, along with the other defendants aligned with them (the “ Bonner-aligned Defendants ”). The Axion-related Parties allege that the Bonner-aligned Parties participated in a number of conspiracies and breaches of duty to wrongfully take over ownership and control of the shares and technology of certain valuable corporate assets that are owned by the Axion-related Parties. [ 5 ] This application arrives back in front of me because of positions that were taken by the Bonner-aligned Defendants in an application before Justice Walker. In brief:

a) The Axion-related Parties brought an application for a

summary trial and injunctive relief relating to the ownership of one of the corporate assets. In that application, the Axion-related Parties sought to rely on the findings of fact that I made in my reasons for judgment in the oppression proceeding.

b) In the middle of that

summary trial application, the Bonner-aligned Defendants made a submission alleging that the Axion-related Parties had achieved success in the oppression litigation (before me in 2021) by committing fraud upon the court. Hence, the Bonner- aligned Defendants should not be bound by those findings in this litigation.

c) That was obviously a significant allegation. Justice Walker adjourned the application until the Bonner-aligned Defendants’ allegations could be resolved. [ 6 ] This situation has led to a roadblock in the ongoing litigation before Justice Walker. In short, the Axion-related Parties take the position that my findings in May and October 2021 are binding on the parties in the other litigation.

Although the Bonner-aligned Defendants raised the “fraud on the court” issue in this proceeding (and other litigation), those same defendants did not commence an action to establish that there had been any such (alleged) fraud upon the court. [ 7 ] As a result, the Axion-related Parties have taken the unusual step of bringing this application before me seeking a number of forms of relief. The core of the application seeks a declaration that my prior reasons were not obtained by fraud.

The Axion-related Parties also seek other relief arising from their allegation that the Bonner-aligned Defendants’ actions in court constituted an abuse of process. [ 8 ] In response, the Bonner-aligned Defendants filed an application response and written submissions, and made oral argument. In my opinion, it is fair to describe the Bonner-aligned Defendants’ position as having “evolved” over the course of those three steps. I describe that evolution below, but the end-point was a concession by counsel during the hearing that there had been no fraud upon the court.

In short, counsel concedes that, whatever new evidence has been discovered since May 2021, it would not be sufficient to change the result of my decisions in the oppression proceeding. Hence, there was no fraud upon the court. [ 9 ] At the end of the five-day hearing, I granted one of the paragraphs of relief sought by the Axion-related Parties . I declared that there had been no fraud upon the court.

I reserved on all of the other paragraphs of relief sought by the Axion-related Parties. [ 10 ] For the reasons set out below, I find that I must adjourn the application for the other paragraphs of relief sought by the Axion- related Parties. Those matters should properly be before Justice Walker. [ 11 ] However, I note that the Axion-related Parties’ application seeks an award of special costs. That issue was not argued before me.

However, for ease of reference, I describe the steps that were necessary for the Axion-related Parties to take in order to obtain the Bonner-aligned Defendants’ concession on the third day of this five-day hearing.

Summary of Orders and Declarations Sought [ 12 ] As noted, at the close of the five-day hearing, I reserved on all of the relief sought by the Axion-related Parties except one paragraph. That paragraph related to the allegation of fraud on the court. Based upon the evidence tendered at the application, and the concessions made by counsel for the Bonner-aligned Defendants, I made the following declaration sought by the Axion-related Parties (enumerated at para. 11 of the notice of application):

a) There had been no fraud on the court committed by the Axion-related Parties in the oppression proceeding. [ 13 ] The Axion-related Parties’ notice of application seeks a total of 19 items of relief (declarations and orders), in addition to special costs. [ 14 ] During submissions at the close of the hearing, counsel for the Axion-related Parties indicated that some of the paragraphs were duplicative.

Hence, some declarations would not be needed if other declarations were granted. [ 15 ] The Axion-related Parties urged upon me to exercise my discretion to assume jurisdiction over the other relief sought in the application. As discussed below, that relief relates to the “abuse of process” submissions, and the resulting relief. [ 16 ] I have decided to adjourn the other 18 items of relief so that they can be heard by Justice Walker.

In my opinion, the other forms of relief are more appropriately decided by Justice Walker. [ 17 ] To be clear, I am not deciding any of the items of relief other than “no fraud on the court”. I will, however, hear submissions relating to the costs of the preparation for, and conduct of, this application.

[ 18 ] Counsel for the Axion-related Parties described the relief he was seeking as falling into different “buckets”. I infer that he drafted the various paragraphs of relief in an attempt to be very precise in his language so that there would be no debate over the meaning of the orders granted. Since I am adjourning the application relating to these paragraphs, I can describe them in their “buckets”. [ 19 ] The Axion-related Parties seek the following relief (each description followed by the paragraph numbers from the notice of application):

a) A declaration that the Bonner-aligned Defendants are barred from challenging the findings of fact made by this Court in decisions rendered in Bonner v. Axion Ventures Inc. (BCSC Vancouver Registry No. S209078) (the “Oppression Proceeding”) (Paras. 1, 13).

b) A declaration that all of the Bonner-aligned Defendants are barred from raising issues of law that were, or could have been, raised by the Axion-related Parties in the Oppression Proceeding (Paras. 2, 5, 15–19).

c) A declaration that the Bonner-aligned Defendants are not barred from raising or arguing the matters that were not raised by the Axion-related Parties in the Oppression Proceeding (Paras. 3–4, 12).

d) A declaration that the Bonner-aligned Defendants are committing an abuse of process by directly or indirectly challenging the findings of fact made by this Court in the Oppression Proceeding in any B.C. proceeding or in any proceeding in the United States of America (Paras. 6–9, 13).

e) An order that the Bonner-aligned Defendants are barred from commencing a claim for “fraud on the court” in relation to the findings of fact by this Court in the Oppression Proceeding (Para. 10).

f) An order striking certain paragraphs of the Bonner-aligned Defendants’ response to civil claim (Para. 14). [ 20 ] Also, as noted, I have not heard submissions on the Axion-related Parties’ application for special costs of the proceeding before me (Para. 20 of the notice of application). Issues [ 21 ] Because I have decided to adjourn the majority of the relief sought by the Axion-related Parties in this application, the issues are straightforward:

a) Do I have jurisdiction to hear this application?

b) If so, should I exercise my discretion to hear it?

c) Was there a fraud upon the court? [ 22 ] On the issue of the test to set aside a decision based upon a fraud upon the court, both parties refer to the decision in Long v. Red Branch Investments Limited , 2018 BCCA 115 : [26] On the question of the substantive relief, the appellants say they can establish, on a balance of probability, on the affidavit evidence before us: Messrs.

Long and Darch gave false testimony at trial; their perjured evidence is material; the fraud was not known to the appellants at the time of trial and could not have been known to them; and they are bringing the application in a timely fashion. In short, they say they can meet the test described in Wentworth v.

Rogers (No. 5) (1986), 6 N.S.W.L.R. 534 (C.A.) at 538: …it must be shown, by the party asserting that a judgment was procured by fraud , that there has been a new discovery of something material, in the sense that fresh facts have been found which, by themselves or in combination with previously known facts, would provide a reason for setting aside the judgment. [ 23 ] As I discuss below, the Bonner-aligned Defendants now concede that any new evidence that has been unearthed since the time of my prior decisions would not “provide a reason for setting aside the judgment.” [ 24 ] Hence, there was no fraud upon the court.

I clearly have the jurisdiction to make that finding. [ 25 ] As noted, the Axion-related Parties seek a number of forms of relief. With respect to those paragraphs, I am exercising my discretion not to hear them. As noted, I adjourn those claims for relief to be heard by Justice Walker. Jurisdiction [ 26 ] On this issue of jurisdiction, I clearly have the authority to hear an application alleging that a prior decision that I made was obtained by fraud. [ 27 ] I have heard the application on that point and decided it.

There was no fraud upon the court. [ 28 ] Thus, in the paragraphs above, I have either decided or adjourned the substantive elements of the Axion-related Parties’ application. However, as noted, the Axion-related Parties apply for (but have not yet argued for) special costs. For that reason, I set out below the steps that led the parties to the application before me.

How Did We Get Here? [ 29 ] In order to explain: “How did we get here”, it is necessary for me to set out a chronology of events. I note that in my timeline below, I am addressing steps and positions taken in the litigation. I make no findings in respect of the allegations, evidence, or facts in this action, except those related to the alleged “fraud on the court”. [ 30 ] The parties in this action are generally divided into two camps:

a) The Axion-related Parties.

b) The Bonner-aligned Defendants. [ 31 ] In May and August, 2021, an oppression proceeding came on for hearing before me. In that proceeding, Mr. Bonner and Jess were the petitioners. The respondents were Axion Ventures Inc. and certain of its directors. [ 32 ] Axion Ventures Inc. is a publicly-traded company. Its shares are listed on the TSX Venture Exchange. [ 33 ] Mr. Bonner had been the CEO and a director of Axion Ventures Inc. and many of its subsidiaries. Mr. Bonner’s employment as CEO was terminated by a vote of the Board of Directors on July 14, 2020.

At a later Board meeting, on July 27, 2020, the same directors approved a share issuance that has been described as a “poison pill”. [ 34 ] On September 8, 2020, Mr. Bonner and Jess commenced the “Oppression Proceeding” against Axion Ventures Inc. and three of its directors, Mr. Yamazaki, Mr. Kim, and Mr. Willey. Mr. Bonner and Jess alleged that the actions of the directors were oppressive or unfairly prejudicial. That was the “Oppression Proceeding”. [ 35 ] On January 15, 2021, the Axion-related Parties commenced this action (BCSC Vancouver Registry No. S210438) against the named Bonner-aligned Defendants.

The Axion-related Parties in this action allege that the Bonner-aligned Defendants, through a number of conspiracies and breaches of duty, wrongfully took over ownership and control of the shares and technology of at least two Axion Ventures Inc. subsidiaries, including Hotplay Enterprise Limited (“Hotplay”) and Longroot Inc. The Axion-related Parties allege that the technology developed by Hotplay and Longroot Inc. were the most valuable assets owned by the Axion-related Parties. [ 36 ] On February 1, 2021, Mr.

Bonner and Jess filed an application in the Oppression Proceeding to have an independent chair appointed for the Annual General Meeting of Axion. That application, along with the hearing of the petition, proceeded before me on April 6–8 and 13, 2021. Due to time constraints, only the “independent chair” issue was completed within those dates. I dismissed the application for an independent chair from the bench on April 13, 2021, with written reasons to follow. My subsequent reasons on the independent chair issue were released on May 20, 2021: Bonner v.

Axion Ventures Inc ., 2021 BCSC 963 . [ 37 ] On February 24, 2021, Axion Ventures Inc. filed a notice of application seeking an injunction relating to the preservation and the ownership of the technology developed or controlled by a company now named Longroot Inc. [ 38 ] The hearing of the Oppression Proceeding petition commenced before me April 6–8 and 13, 2021, and completed August 4–5, 2021. On the basis of the evidence adduced at that hearing, I dismissed the claims of Mr. Bonner and Jess. I issued my reasons dismissing the Oppression Proceeding on October 1, 2021 ( Bonner v.

Axion Ventures Inc., 2021 BCSC 1899 ). Mr. Bonner and Jess did not appeal. [ 39 ] In my reasons for judgment released October 1, 2021, I made a number of findings regarding the July 14, 2020 Board meeting. In particular, I found that, until July 14, 2020, the directors of Axion Ventures Inc. were not aware of the existence of an agreement (“Letter of Intent”) that Mr.

Bonner and Jess had signed with a the (current defendant) Monaker Group, Inc. [ 40 ] I also found: [40] … I further accept that, in relation to the allegation regarding the corporate process for a CEO’s termination, the Majority Directors only had a certain amount of information on July 14. … [46] However, I find that the petitioners’ [i.e. Mr. Bonner and Jess] formulation of their reasonable expectation ignores the most important context. That context is:

a) immediately before the July 14 meeting, Jess and Mr. Bonner executed the Monaker LOI that, if completed, would effectively take over control of Axion;

b) they negotiated and signed that deal in secret; and

c) Mr. Bonner then put into play the (planned) forced conversion of the Bonner Family Loans at $.17 per share. [47] In my opinion, having taken those steps, in secret, it is inconceivable that Jess and Mr. Bonner did not reasonably expect dire consequences if the Majority Directors discovered the existence of the Monaker LOI . Put simply, the fact that the petitioners kept the existence of the Monaker LOI secret from the Majority Directors establishes that they expected negative consequences if it was disclosed.

That inference is inescapable. [ 41 ] As noted, I am informed that there are, in total, ten other proceedings in British Columbia. Those ten proceedings are being case- managed by Justice Walker. I understand that the trial of six of the ten proceedings will be heard at the same time in a trial commencing

in December 2023 for 80 days. I am also aware of a claim brought by certain Bonner-aligned Defendants against Axion-related Parties in Washington State. [ 42 ] In the Washington State proceeding, Monaker Group, Inc. under its new name Nextplay Technologies Inc. (“Nextplay”) sued Axion Ventures Inc. and the directors who had fired him. That Nextplay action in Washington State was commenced on November 1, 2021, one month after the release of my reasons for judgment in the Oppression Proceeding.

In other words, the Washington State action was commenced within the appeal period. [ 43 ] In the “Summons in a Civil Action” (the equivalent of our notice of civil claim), Nextplay makes the following allegation, in relation to the Oppression Proceeding: 156.

In 2020, Bonner commenced litigation in Canada to address his wrongful firing by [Axion Ventures Inc.] [Axion Ventures Inc.] defended against this lawsuit by submitting false and perjurious evidence to the court, … by hiding evidence of the fact that Bonner had informed Board members of the non-binding proposal with Monaker, … [ 44 ] As required by the rules of the United States District Court in Washington State, Mr.

Bonner signed a declaration as to the truth of the factual statements involving himself and his companies. [ 45 ] It is evident from this Washington State pleading that the Bonner-aligned Defendants allege that my decision dismissing the Oppression Proceeding was tainted by fraud on the court. [ 46 ] As noted above, the Axion-related Parties filed an application to enjoin any dealings with respect to Longroot Inc. They also sought to bring a

summary trial in relation to the ownership of Longroot Inc. and its technology. The Bonner-aligned Defendants indicated, in correspondence, their position that the Axion-related Parties’ action was not suitable for determination at a

summary trial. The correspondence did not raise the issue of “fraud on the court”. [ 47 ] The Bonner-aligned Defendants then applied for an order declaring that the matter was not suitable for a

summary trial. That application proceeded before Justice Sharma, who dismissed the Bonner-aligned Defendants’ application on November 2, 2021. Again, the Bonner-aligned Defendants did not argue before Justice Sharma that there had been a fraud on the court in the Oppression Proceeding. [ 48 ] In February 2022, examinations and some production of documents occurred. [ 49 ] The combined

summary trial and injunction application was scheduled to commence on February 28, 2022. On February 27, 2022, Mr. Bonner swore his affidavit #3 in response to that application. That affidavit was eventually filed March 22, 2022. This affidavit raises, for the first time in this proceeding, the allegation of “fraud upon the court.” [ 50 ] On February 28, 2022, the parties proceeded before Justice Walker on the

summary trial and on the injunction application relating to the subsidiary Longroot Inc. The Bonner-aligned Defendants, again, raised the issue of suitability. Justice Walker ruled that the Axion-related Parties should proceed with their full submissions. Following the Axion-related Parties’ full submission, the Bonner- aligned Defendants would make their submissions on suitability and, if necessary, on the substantive elements of the application. [ 51 ] Counsel for the Axion-related Parties proceeded with the

summary trial and injunction application on February 28, 2022. In support of their application, counsel relied on findings of fact from my decisions in the Oppression Proceeding. Counsel also relied on a transcript of the July 14, 2020 Board meeting wherein the Axion-related Board members decided to terminate Mr. Bonner as CEO. [ 52 ] In response to the Axion-related Parties’ submissions, the Bonner-aligned Defendants did the following:

a) They tendered the affidavit #3 of Mr. Bonner, sworn February 27, 2022.

b) On March 8, 2022, counsel made submissions and then had an exchange with the court which led Justice Walker to state the following: THE COURT: I’d like at least -- I mean, these are some very serious allegations. Basically the allegation is that this was all about control and -- and there was knowledge on the part of the other members of the board, they knew what was going, but they realized it would be a control issue and they blocked -- they blocked Mr. Bonner’s efforts. They wouldn’t return his calls, and concocted basically a sham board meeting to -- create a sham transcript to fire him and retain control.

And the court is being entirely misled. Ross -- Justice Ross was misled, I’ve been misled, there’s been exploitation of documents, and it’s all coming out now and -- and this -- this whole premise of this -- the underpinnings of this is just simply a concoction. Is that a fair

summary? CNSL C. WILSON: Yes, that’s a fair

summary. And I recognize that the allegations are serious. [ 53 ] In effect, Mr. Wilson, acting as counsel for the Bonner-aligned Defendants at that time, alleged that:

a) the transcript of the July 14, 2020 Board meeting was a sham;

b) in the Oppression Proceeding, I was misled by the Axion-related Parties;

c) the Axion-related Parties have manipulated document disclosure; and

d) the underpinning of the dismissal of the Oppression Proceeding, and the current action initiated by the Axion-related Parties is simply a concoction designed to take control of the company. [ 54 ] I understand that Justice Walker, in the face of an allegation of fraud upon the court, ruled that the

summary trial and injunction application should be adjourned pending the resolution of those allegations.

[ 55 ] On April 8, 2022, Mr. Sullivan, counsel for Axion-related Parties, wrote to counsel for the Bonner-aligned Defendants and indicated that he interpreted the March 8, 2022 submission of counsel as a “collateral attack” on my reasons in the Oppression Proceeding. Of note, Mr. Sullivan did not use the term “fraud on the court” in that letter. [ 56 ] As noted, counsel for the Bonner -aligned Defendants also alleged that the transcript of the July 14, 2020 Board meeting had been a “sham”. Counsel for Bonner-aligned Defendants, in a letter dated April 1, 2022, demanded a copy of the recording. In reply, Mr.

Sullivan noted that the recording had been sent by email on February 4, 2021, and, again, on February 27 2021. [ 57 ] On April 25, 2022, counsel for Axion -related Parties filed a further notice of application seeking leave to introduce further affidavit evidence to rebut the allegations of Bonner-aligned Defendants’ counsel. [ 58 ] In their application response dated July 5, 2022, the Bonner-aligned Defendants pleaded the following: 45. The Oppression Proceeding is tainted by fraud and dishonesty. The Bonner Defendants have identified numerous falsehoods in Mr. Kim and Mr.

Utsahajit’s sworn evidence, including on key issues. [ 59 ] Thus, it was clear on the record that the position being taken by the Bonner-aligned Defendants was that my decision in the Oppression Proceeding was “tainted by fraud”. [ 60 ] Also, in July 2022, counsel for Axion-related Parties indicated his position that, if counsel for Bonner-aligned Defendants was alleging “fraud upon the court”, then it was incumbent upon the Bonner-aligned Defendants to bring a new action and plead such fraud.

Counsel for the Bonner-aligned Defendants declined to do so. [ 61 ] Counsel for Axion -related Parties wrote to the Chief Justice on August 11, 2022, indicating that a dispute had arisen and that certain Bonner-aligned Defendants take the position that “evidence before Mr. Justice Ross was falsified”. He noted that those same parties had not appealed the decision and do not seek to challenge the result of the Oppression Proceeding.

The same letter raises the issue of “abuse of process”. [ 62 ] Based upon counsel’s August 11, 2022 letter, this Court directed that the matter should be set down before me. [ 63 ] As a result of that direction, on August 29, 2022, counsel for the Axion-related Parties filed a 54-page notice of application. That is the application before me in this hearing.

The position of the Axion-related Parties is clearly set out in that notice of application. [ 64 ] As of August 2022, the Bonner-aligned Defendants changed counsel. [ 65 ] Between August 2022 and January 2013, the parties sought dates for a five-day hearing. [ 66 ] On January 20, 2023, the Bonner-aligned Defendants filed their 31-page application response which includes the following (at para. 25): The Oppression Proceeding is tainted by fraud and dishonesty.

The Bonner Defendants have identified numerous falsehoods in Kim and Utsahajit’s sworn evidence as set out above. [ 67 ] When the prior paragraph is compared to the quote at paragraph 58, it is immediately clear that there had been no “evolution” of the position taken by the Bonner-aligned Defendants between July 5, 2022, and January 20, 2023. [ 68 ] As noted, the matter proceeded before me from January 30–February 3, 2023. [ 69 ] In oral submissions, commencing on the third day of the hearing before me, counsel for the Bonner-aligned Defendants indicated:

a) Their position has evolved.

b) They concede that any new evidence that has been accumulated following the delivery of my Oppression Proceeding reasons would not be sufficient to change the result of my decision.

c) Hence, the Bonner-aligned Defendants cannot establish one of the essential elements of a “fraud on the court”. I interpret that submission as meaning that the allegedly perjured evidence was not “material”. It would not change the result of my decisions. [ 70 ] Counsel for Axion-related Parties submits that the March 8, 2022 submission by counsel for Bonner-aligned Defendants was an abuse of process. As noted, I have adjourned that portion of the application to be heard by Justice Walker.

I only note, parenthetically, that counsel made the concession on February 1, 2023, some 16 months after the release of my reasons in the Oppression Proceeding and 11 months after (previous) counsel raised the spectre of a fraud upon the court before Justice Walker. [ 71 ] As noted, I have set out the chronology above for the purpose of outlining the reasons that the parties ended up before the court on a five-day application.

Summary and Order [ 72 ] On the basis of the concession made by counsel, and on the evidence, I granted the one paragraph of relief described above, from the bench. I declared: There had been no fraud on the court committed by the Axion-related Parties in the Oppression Proceeding.

[ 73 ] At the close of the hearing, I reserved on the rest of the items of relief sought by the Axion-related Parties. As set out above, I have adjourned all of those items so that they can be heard by Justice Walker. [ 74 ] I will hear submissions on special costs. “A. Ross J.”