Executive Summary: Key Legal and Evidentiary Issues

• Whether the trial judge applied the correct materiality threshold after finding that Mr. Long had perjured himself at the 2015 trial to mislead the court about the neutrality of a key witness.
   
• Once a party is shown to have intentionally deceived the court, the test for the effect of the fraud on the result should not be set too high, and it is enough that the fraud might have misled the court.
   
• Credibility was the central issue at the first trial, and the witness's supposed impartiality was a material factor in how that credibility contest was resolved.
   
• Reweighing the first trial evidence to predict whether the original judge would have decided differently was an error in principle, since that task belongs to a new trial.
   
• Independent evidence supporting the original result carries diminished weight where a party has tendered false evidence designed to mislead the trier of fact.
   
• Mr. Long's argument that the appellants failed to exercise due diligence was rejected because it rested on findings of fact he could not show were in error.
   

Facts of the case

Red Branch Investments Limited and Gerald Wright have been in litigation with David Long for more than 15 years over a royalty interest in Asia Pacific Resources Ltd.'s undeveloped potash mine at Udon Thani, Thailand. Mr. Wright acquired the royalty in the 1990s, when it had only speculative value, and in 1999 transferred his interest to Mr. Long, a lifelong friend, through a backdated agreement. Around the same time, Mr. Long signed an undated agreement to transfer the royalty to an unnamed purchaser, referred to as the "Blank Agreement." In June 2010, at Mr. Wright's request, Mr. Long transferred the royalty to Red Branch, a Hong Kong company, for $1 under the "2010 Agreement." Neither the 1999 agreement nor the 2010 Agreement specified what interest, if any, Mr. Long held. After the parties fell out in 2011, Red Branch refused to confirm that it held half the royalty in trust for Mr. Long, and he sued.

At the three-week first trial, Justice Wong accepted Mr. Long's version that the parties were equal beneficial owners and ruled in his favour on November 27, 2015 (2015 BCSC 2192). John Darch, a long-time business associate of Mr. Wright and fellow royalty holder, testified that Mr. Wright said he was sharing the royalty with Mr. Long and would rather receive half than one quarter. Justice Wong described Mr. Darch as "a neutral witness, having no bias in favour of either of the parties." He did not address the evidence of Mr. Wright's accountant, Paul Royce, or his wife, Gail Wright, both of which supported Mr. Wright's position. Special costs were awarded against the appellants in 2016, and the Court of Appeal dismissed their appeal on July 12, 2017 (2017 BCCA 256).

During proceedings over the special costs, the appellants obtained information from Mr. Long's solicitor's file about Mr. Darch's involvement with Mr. Long and his counsel before trial. In 2012 correspondence, Mr. Long described Mr. Darch as his "business partner, friend and confidant," and Mr. Darch wrote that "[t]he goal is to prove GW is a liar." At trial, however, Mr. Darch had testified that he had "no friendship interest," no financial interest, and no business interest in either party, and Mr. Long had repeatedly denied ever discussing the litigation with him. On March 28, 2018, the Court of Appeal declined to admit this fresh evidence or reopen the appeal but said its ruling did not bar a fresh action in the trial court (2018 BCCA 115). The appellants filed a notice of civil claim on July 13, 2018.

After a 12-day second trial at which only Mr. Wright, Mr. Long and Mr. Darch testified, the judge found that Mr. Long had perjured himself and made "a clear attempt to mislead the court" about Mr. Darch's involvement. He nonetheless held that the fraud was not material to the outcome and dismissed the claim on August 28, 2024 (2024 BCSC 1588). In a later costs ruling on March 18, 2025 (2025 BCSC 468), he set aside the first trial special costs order because of the perjury, but awarded Mr. Long Scale B costs of both trials as the successful party. The appellants appealed on materiality, and Mr. Long cross appealed the loss of special costs.

Policy and legislative provisions at issue

No statute or contractual clause was directly in issue on appeal. As noted above, neither the 1999 agreement nor the 2010 Agreement specified Mr. Long's interest, and Justice Wong described the dispute as one of "conflicting credibility between the parties as to their agreed arrangement." The governing framework was the four-part test from Canada v. Granitile Inc. (2008), 302 D.L.R. (4th) 40 (O.N.S.C.), which the parties generally agreed applied. To set aside a judgment for fraud on the court, an applicant must prove (1) the fraud on a balance of probabilities with clear and cogent evidence; (2) lack of knowledge of the fraud and the evidence to prove it at the time of the original trial; (3) that the fraud was material to the result, though it need not have been a determining factor; and (4) that it acted without undue delay. Materiality was the sole issue raised by the appellants, while Mr. Long also asked the Court to examine due diligence afresh.

Reasoning and analysis

Justice Butler, writing for a unanimous panel with Justices MacNaughton and Brundrett, accepted Mr. Long's position that materiality is a question of mixed fact and law that generally attracts deference. Relying on Housen v. Nikolaisen, 2002 SCC 33, he noted that errors in principle can still be extricated from such questions. He compared materiality to the standard of care in negligence but distinguished the two: a negligence trial judge hears all the evidence, whereas the second trial judge heard only part of it, and was acting in a gate-keeping role where the integrity of the trial process takes on added importance.

The Court found that the judge's statement of the materiality threshold was "not incorrect" but incomplete because it failed to recognize the lower threshold that applies once fraud on the court is established. Reviewing 100 Main Street East Ltd. v. Sakas [cited as "Saka" in the Granitile passage quoted at para. 70], Meek v. Fleming, [1961] 2 Q.B. 366 (C.A.), and Fullerton v. Matsqui (District) (1991), 62 B.C.L.R. (2d) 273 (C.A.), Justice Butler drew two principles. Where a party presents false or incomplete evidence about a matter of central importance, including credibility, designed to mislead the trier of fact, a new trial is required to preserve the integrity of the process. In those circumstances, other independent evidence supporting the result becomes less significant, because it should be weighed at a new trial free of the perjured evidence.

Applying those principles, the Court held that the judge asked the wrong question. Rather than asking whether the fraud might have altered the result, he asked whether Justice Wong would have decided differently had he known of it, and then reweighed the first trial evidence to answer that question. Citing Vale v. Sun Life Assurance Co. of Canada (1998), 39 O.R. (3d) 444, the Court said it was not the judge's role to try to penetrate the original trial judge's mind. The judge's findings that Mr. Long committed perjury, did so to mislead the court, and lied about a matter central to credibility should have been sufficient to meet the threshold. His conclusion that Mr. Darch's neutrality was immaterial also ignored the Court of Appeal's earlier finding that Justice Wong's acceptance of Mr. Darch's evidence was "critical to the outcome." It contradicted his own ruling in the April 24, 2024 evidentiary application (2024 BCSC 2165) that the second trial was not meant to relitigate ownership of the royalty. Compounding the problem, he did not hear all of the relevant evidence, including the evidence Justice Wong had failed to consider.

Mr. Long's due diligence argument failed. The judge had found as a fact that Mr. Wright neither knew of the fraud nor had the evidence to prove it until he gained direct access to Mr. Long's solicitor's file, and Mr. Long identified no palpable and overriding error in that finding. The Court added, citing Vagi v. Peters, [1990] 2 W.W.R. 170 (Sask. C.A.), that a party who intentionally deceives the court is poorly placed to protect the resulting judgment by pointing to the other side's lack of diligence. D.K. Investments Ltd. v. S.W.S. Investments Ltd. (1990), 44 B.C.L.R. (2d) 1 (C.A.), was distinguished because it involved no allegation of fraud.

Ruling and overall outcome

The appeal was allowed in favour of Red Branch and Mr. Wright. The order from the second trial was set aside, and the Royalty Action was remitted to the trial court for a new trial. Because the new trial was ordered, the Court set aside the costs orders from both the 2016 Costs Decision and the 2025 Second Costs Decision and did not need to decide Mr. Long's cross appeal. [The reasons at para. 104 set aside both costs decisions, while the formal disposition at para. 106 refers only to the Second Costs Decision.] Costs of the first trial, the 2017 appeal and the 2018 supplemental appeal decision will be determined at the new trial. The appellants were awarded their costs of the second trial and of this appeal. [Para. 105 awards these costs to the appellants, while para. 106 states that costs "will be considered afresh at the new trial."] The decision does not state any dollar amount, so no monetary figure can be determined from the judgment.