Contract Interpretation, Oppression Remedies, and Limitation Periods – Oh my!

Despite the circus that appeared before Justice Dietrich, including a witness who lied under oath and questionable credibility of all parties, the Ontario Superior Court of Justice has provided a clear reminder that:

• Incomplete contracts can still be binding if the surrounding facts show intent;
• Oppression remedies under 248 of the Ontario Business Corporations Act (“OBCA”) remain available if a reasonable expectation is violated through oppressive or unfairly prejudicial conduct; and
• Limitation periods begin when a claim is reasonably discoverable, not merely suspected.

In Shifrin v LDF Frozen Foods Inc. et al., Alexander Shifrin claimed he was a 15% shareholder in LDF Frozen Foods Inc. based on a 2014 written agreement signed by him and one of two directors, in exchange for a $100,000 investment.  Although the compensation clause was left blank, the court held the contract enforceable, citing Earthco Soil Mixtures Inc. v Pine Valley Enterprises Inc., and emphasizing that contractual intent must be assessed contextually – including actions taken by the parties, such as LDF’s payments to Shifrin and Shifrin’s continued involvement in the company.

Justice Dietrich found that Shifrin was entitled to shares, making him a proper claimant under the OBCA, and that the two-step test for oppression claims was met, as outlined by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders .

The respondents’ argument that the claim was statute barred was also rejected. The court held that, despite the lack of shareholder funds or certificate issued, Shifrin reasonably believed he was a shareholder until July 2024, when the respondents first denied it -particularly since he was allowed to act as a company representative to third parties without objection and mistakenly believed that the failure of LDF to issue share certificates was simply missing paperwork, not a denial of his existence as a shareholder.

The court ruled in Shifrin’s favour, granted the declarations sought, and directed the parties to a case conference to assess damages. This case highlights that the courts will look beyond the smoke and mirrors when interpreting contracts and limitation periods.