Executive Summary: Key Legal and Evidentiary Issues

• The Court held that amendments to Spocket’s shareholders’ agreements, which enabled the company to compel repurchase of the petitioners’ shares at specified past values, were conducted in a manner that was unfairly prejudicial to the petitioners’ interests as shareholders.

• Under the Amended ROFR, Spocket relied on a Defaulting Shareholder provision and a Competing Shareholder provision to repurchase Ms. Kaplan’s and Ms. Astle’s shares, even though the Original ROFR had contained no unilateral repurchase right.

• Ms. Kaplan’s shares were repurchased using a valuation date (June 4, 2020) when she did not yet own any shares, and Ms. Astle was deemed a competitor without notice, board resolution, or disclosure of the basis for that conclusion, and her shares were repurchased at her original issue price.

• The Court found that the petitioners had reasonable expectations that they would not be forcibly removed as shareholders in this way and that they would be able to hold the shares they had acquired and benefit from any growth in their value, and that these expectations were objectively reasonable in light of Spocket’s past practices and the available evidence.

• The conduct was not found to be “oppressive” in the sense of bad faith or abuse, but it was found to be “unfairly prejudicial,” particularly because of the lack of notice, the retroactive effect of the amendments, the choice of valuation dates, and the process used to deem Ms. Astle a competitor.

• As a remedy, the Court ordered Spocket (but not the individual directors) to compensate Ms. Kaplan in the amount of US$22,325.58 and Ms. Astle in the amount of US$85,787.25, based on a per-share value of US$0.80 as of 2022, and awarded the petitioners their costs.

Facts of the case

Kaplan v. Spocket Inc., 2026 BCSC 69, arises from an application by two former insiders, Kimberly Kaplan and Kaylee Astle, under the oppression remedy in s. 241 of the Canada Business Corporations Act (CBCA). Spocket Inc. is described as a closely held private company incorporated under the CBCA. It provides an online platform for drop-shipping and product supply services. During the relevant period, there were two directors: Saba Mohebpour, who became a director, president and CEO in July 2018, and Christopher Brown, who joined the Board on June 15, 2022. The petitioners became shareholders after exercising stock options granted through Spocket’s stock option plan. They sought relief on the basis that Spocket and the individual respondents engaged in conduct they said was oppressive, unfairly prejudicial, or unfairly disregarded their interests as shareholders, particularly through amendments to shareholder agreements and the subsequent repurchase of their shares.

Ms. Kaplan was a consultant to Spocket, through Kapgrowth Advisory Inc., from January 1, 2019 to June 4, 2020. She was to receive a consultancy fee of C$3,000 per month plus stock options. In August 2019, she agreed to forego the monthly cash fee and have her compensation solely through stock options, because she saw potential value in the options. As of July 23, 2024, when she was cross-examined on her affidavit, she held senior positions at various technology companies, but those later roles are only background. Ms. Astle was employed by Spocket as Head of Operations and Finance from March 18, 2019 to November 5, 2020, with a salary of C$120,000, benefits, vacation and a discretionary bonus. She agreed in her employment contract not to compete with the company during her employment and for 18 months afterward. She later testified that she resigned because of a toxic work culture and alleged mistreatment by Mr. Mohebpour.

Stock option plan and original shareholder arrangements

On September 1, 2017, Spocket adopted a stock option plan (the SOP or Plan) to advance the company’s and its shareholders’ interests by providing a performance incentive to directors, employees and consultants for “continued and improved services.” The Plan expressly gave the Board “full and complete authority” to interpret, administer, amend, alter or vary the Plan, including adopting rules, determining eligibility and fair market value, setting vesting terms, imposing restrictions on shares, and taking other steps it considered necessary or desirable. The Board’s decisions about the Plan, recorded in writing, were binding on the corporation and plan participants.

Under the SOP, when a participant ceased to be a full-time employee or consultant, all unvested options expired as of that date and the participant had 90 days to exercise any vested options. SOP agreements specified the number of options, exercise price and vesting start date, with a 12-month cliff during which nothing vested, followed by 25% vesting at the cliff and the remainder vesting at 2.08333% per month over 48 months. Each SOP agreement stated that the exercise of options and issuance of shares was subject to the Plan, and that the corporation might require the participant to sign “the then current shareholder agreement,” and, as later documents show, shareholder and voting agreements and a power of attorney.

On July 18, 2018, Spocket terminated its prior shareholders’ agreement and entered into a Right of First Refusal and Co-Sale Agreement (the Original ROFR Agreement), intended to induce investors to purchase Class A preferred shares. It granted investors a general right of first refusal over share transfers and prohibited transfers to entities the Board determined to directly or indirectly compete with Spocket or place it at a competitive disadvantage. For purposes of any requirement in the company’s articles for shareholder consent to transfers, each common shareholder was deemed to have consented to transfers permitted or required under the Original ROFR. It could be amended and restated with written consent of, among others, common shareholders holding a majority of the common shares. That same day, a voting agreement (the Original Voting Agreement) was executed, later amended on August 28, 2019. The Original Voting Agreement could be amended and restated by written agreement of the company, a majority of common shareholders and a majority of preferred shareholders. Together, the Original ROFR and Original Voting Agreement are referred to as the Original Shareholders Agreements.

The Original ROFR did not contain any provision giving Spocket a unilateral right to compel repurchase of a shareholder’s common shares outside the right of first refusal or co-sale context.

Kaplan’s and Astle’s acquisition of shares

On January 1, 2019, Ms. Kaplan entered a consulting agreement with Spocket. In addition to the C$3,000 monthly fee, she was granted stock options representing 0.25% of the company’s fully-diluted capitalization (101,674 options), vesting over 48 months with a one-year cliff. On October 29, 2019, she signed a SOP agreement fixing the exercise price at US$0.05 per share and confirming that her options were subject to the SOP and that Spocket could require her to execute the then-current shareholders’ and voting agreements and/or a power of attorney, at the Board’s discretion. She acknowledged in her consulting agreement that she had an opportunity to consult independent legal and financial advisors but did not do so and did not recall raising concerns with Mohebpour.

Her consulting work ended on June 4, 2020. That same day she signed an adoption agreement making her a shareholder under the Original ROFR, although she did not yet own shares. On July 24, 2020, she exercised her vested options and purchased 36,009 common shares at US$0.05, for a total of US$1,800.45. Her notice to exercise recited that the purchase was made pursuant to the October 29, 2019 SOP agreement and required her to become a party to any existing investors’ rights agreement, right of first refusal and co-sale agreement, voting agreement, or similar agreements, as the Board might require. In November 2020, she executed a power of attorney, “coupled with an interest,” appointing Mohebpour as her sole and exclusive attorney to sign corporate documents, including shareholder consents and amendments to shareholder agreements, in consideration for Spocket issuing her shares. Although signed in November 2020, the POA is dated June 4, 2020 and begins “The undersigned holder of common shares in the capital of Spocket,” even though she did not become a shareholder until July 24, 2020. Mohebpour deposed that this POA was a standard form used for all option holders, and that similar POAs had been used at least since July 2018, including when he signed the Original ROFR on behalf of other common shareholders.

On March 18, 2019, Ms. Astle began work at Spocket as Head of Operations and Finance under an employment agreement providing for C$120,000 annual salary, benefits, vacation and discretionary bonus, and an agreement not to compete during employment and for 18 months afterward. She acknowledged having the opportunity to consult a lawyer but did not do so and did not raise concerns with Mohebpour or any director at the time of hiring. On October 29, 2019, she signed a SOP agreement granting her options over 305,022 shares at US$0.05, with vesting starting May 1, 2019 and following the same 12-month cliff and 48-month vesting structure. Like Kaplan’s, her SOP agreement confirmed that options were subject to the SOP and that she might be required to sign the then-current shareholders’ and voting agreements and a power of attorney. On October 13, 2020, she gave notice of resignation, effective November 5, 2020, stating she resigned because of toxic work culture and mistreatment. On September 10, 2020 she had incorporated 12329891 Canada Inc. as a shell company, and in 2021 she started Blanka, which she described as a company that helps other companies or brands create makeup and that purchases inventory from third parties and fulfills orders on behalf of its clients.

On November 3, 2020, Mohebpour wrote to her acknowledging her resignation and advising that 114,383 of her options had vested and had to be exercised within 90 days of November 5, 2020. She alleged that she encountered difficulties in exercising her options, including attempts to change her allotment, a requirement to attend in person for documents, and delays in responses about returning documents and payment. Mohebpour denied that she faced difficulty obtaining documents. The Court found it unnecessary to resolve these conflicts and considered them of negligible relevance to oppression. It was not disputed that she executed a notice to exercise in the same form as Kaplan’s, electing to purchase 114,383 common shares at US$0.05 (US$5,719.15 total). She also signed adoption agreements making her a party to the Original ROFR and Amended and Restated Voting Agreement and executed the same form of POA as Kaplan. The documents are dated November 5, 2020, although she deposed that she received and signed them in January 2021. Unlike in her earlier agreements, she testified that she did seek legal advice before executing the POA and adoption agreements. She acknowledged that the POA did not state it would be exercised in her best interests as a shareholder, did not prevent decisions that might affect her rights, and that neither director had given assurances that the POA would not be used to affect her rights as a shareholder.

Share valuation and key policy terms in the Amended ROFR

Mohebpour deposed that Spocket engaged Carta Valuations, LLC to perform annual 409A valuations of its common shares based on section 409A of the U.S. Internal Revenue Code. According to Carta’s appraisals, Spocket’s common share prices during the relevant period were: US$0.05 in 2018; US$0.18 (C$0.26) as of April 22, 2020; US$0.80 (C$1.02) as of April 22, 2022; and US$0.81 as of April 22, 2023. On November 20, 2020, Mohebpour sold 402,592 of his common shares to a venture capital firm at US$4.97 per share, and the buyer was immediately permitted to convert them into Series A-2 Preferred Shares with additional rights, including a liquidation preference. He deposed that these enhanced rights justified a higher valuation and that the price reflected a negotiated deal affected by the timing in November 2020, “the peak of the COVID-19 valuation bubble,” and did not represent the fair market value of common shares.

On January 16, 2023, the Board, without prior notice to Kaplan or Astle (who were then shareholders), passed a resolution approving an Amended and Restated ROFR (the Amended ROFR) and amending the Voting Agreement. The Amended ROFR was consented to by common shareholders, including by Mohebpour signing under the POAs on behalf of several SOP participants, among them Kaplan and Astle. A table in the reasons lists the signatories and their common shareholdings, including Techstars Seattle 2015 LLC, several individual common shareholders, and the petitioners, for an aggregate of 10,760,581 common shares (100%). The Court emphasized that the Original ROFR contained no provision allowing Spocket to compel repurchase of a shareholder’s shares. By contrast, the Amended ROFR added two new mechanisms:

• Defaulting Shareholder (s. 2.4): if a shareholder acquired common shares through the SOP and experienced a “Triggering Event” (defined to include termination for cause or breach, termination without cause or for convenience, or resignation), Spocket was entitled to purchase, and the shareholder was required to sell, all or part of the common shares beneficially owned. If the Triggering Event was a termination without cause/for convenience, or a resignation, the price was the fair market value of the shares as of the date of the event giving rise to the purchase right, determined in good faith by the Board.

• Competing Shareholder (s. 2.5): if a shareholder who acquired shares through the SOP was “ever deemed to be a Competitor,” Spocket could purchase, and that shareholder was required to sell, all or part of their common shares at a price equal to the lesser of (i) original issue price and (ii) fair market value as of the date of the event giving rise to the purchase right, determined in good faith by the Board. Such a repurchase required approval by written instrument of common shareholders holding a majority of common shares (excluding common issuable on conversion of preferred) and by a majority of the Board.

The Amended ROFR defined “Competitor” to include a person engaged directly or indirectly in a business that is similar or substantially similar to, or competes with, Spocket’s business. The definition of Competitor did not exist under the previous shareholder agreement. On February 3, 2023, Spocket notified Kaplan and Astle that the ROFR and Voting Agreement had been amended, and provided them with copies. Kaplan contacted another investor, Patrick Lor, by text to ask about the purpose of the amendments but did not seek legal advice; Astle stated that she did consult counsel about them.

Repurchase of the petitioners’ shares and treatment of other shareholders

On March 3, 2023, the Board adopted a consent resolution approving the repurchase of the petitioners’ shares pursuant to the Amended ROFR. On that date, Spocket notified Kaplan that her 36,009 shares were subject to the repurchase provision in s. 2.4(a) of the Amended ROFR. The letter stated that the termination of her consulting agreement on June 4, 2020 constituted a Triggering Event, and that Spocket would repurchase her shares at US$0.18 per share, said to be the fair market value as of that date. The Court noted that applying the Defaulting Shareholder provision in this way meant Kaplan was treated as a defaulting shareholder on a date when she was not yet a shareholder: she left on June 4, 2020 but only purchased shares on July 24, 2020.

On the same day, Spocket notified Astle that the Board had approved the repurchase of her 114,383 shares under the Competing Shareholder provision. It advised that she had been deemed a competitor as of May 30, 2022 and that her shares would be repurchased at the original issue price of US$0.05 per share, in accordance with s. 2.5. Astle was given no information about how or why the Board determined she was a competitor. The Court observed that there was no Board resolution deeming her a competitor and “very little evidence” about the services provided by Blanka and Spocket. Mohebpour attested that Spocket provides an online drop-shipping and product supply platform, and that Blanka provides drop-shipping services to its customers. Astle described Blanka as helping other companies or brands create makeup, purchasing inventory from third parties and fulfilling orders, and she stated that “drop-shipping” is a common keyword term in many apps including Shopify. The Court found that the evidence did not permit a conclusion that Blanka, and thus Astle, was engaged in a business similar or substantially similar to, or in competition with, Spocket.

In June 2022, Spocket’s counsel wrote to Kaplan to remind her of her confidentiality obligations and to say that Spocket was investigating her potential involvement with Blanka; nothing came of this investigation on the evidence. On August 12, 2022, Spocket commenced civil litigation against Blanka and Astle on the basis that her business competed with Spocket. On the evidence before the Court in this proceeding, that civil case had stalled.

In the months following the March 2023 repurchase of the petitioners’ shares, the Board also approved repurchases from other SOP participants who had exercised options. On May 17, 2023, it adopted resolutions approving the repurchase of shares from Kimberly Yap and Imelda Dharmawi. Yap’s employment had ended March 11, 2022; her shares were repurchased at US$0.78 per share, recorded as the “fair market value” as of that termination date. Dharmawi’s employment ended May 20, 2022; her shares were repurchased at US$0.80 per share, recorded as the “fair market value” as of that date. On November 27, 2023, the Board approved repurchases from Thomas Hansen and Shreyas Sali. Hansen’s employment ended April 29, 2022 and his shares were valued as of that termination date at US$0.80 per share. Sali’s employment was terminated January 27, 2023 and his shares were repurchased at US$0.80 per share, recorded as the fair market value as of the end of his employment.

Court’s analysis: reasonable expectations and unfair prejudice

The Court set out the legal principles governing the oppression remedy in s. 241 CBCA, relying on BCE Inc. v. 1976 Debentureholders and other authorities. Oppression is an equitable remedy focused on what is “just and equitable,” protecting the reasonable expectations of shareholders and other complainants. The Court followed the two-step test: (1) identify the complainants’ reasonable expectations, and (2) determine whether those expectations were violated by conduct that is oppressive, unfairly prejudicial, or unfairly disregards their interests.

On the first step, the petition and written submissions articulated several expectations, including that Spocket would treat stakeholders fairly, that Mohebpour would not advance his personal interests at the company’s expense, that powers of attorney would not be used to extinguish their rights as shareholders, that they would remain shareholders and benefit from increases in share value after exercising options, and that agreements and the CBCA would be followed. In reply, they distilled their expectations to: (a) not being forcibly removed as shareholders, and (b) the expectation to participate in the profits of the corporation. The Court noted there was limited direct evidence of Kaplan’s and Astle’s subjective expectations in their affidavits and expressed concern about “cookie cutter” similarity between their affidavits, citing Slaughter v. Ximen Mining Corp. Nonetheless, the Court inferred from the evidence that they expected that Spocket would not extinguish their legal rights as shareholders without their knowledge or consent, and accepted that their more specific expectations (not to be forcibly removed and to participate in profits) had been established. The Court added that petitioners, as shareholders, also had a reasonable expectation of being treated fairly.

On the second part of step one, the Court considered whether those expectations were objectively reasonable, using factors from BCE and subsequent cases: general commercial practice; manner of the transactions; nature of the corporation; relationship between the parties; past practices; steps they could have taken to protect themselves; representations and agreements; and fair resolution of conflicting shareholder interests. On general commercial practice, the respondents said that permitting repurchase of shares when employees left was consistent with industry standards for North American venture-backed technology companies, but Mohebpour and Brown acknowledged their belief on this point was based entirely on advice of counsel. The Court found that the evidence did not clearly establish what “normal” business practice was for a company like Spocket and described the evidence in support of the respondents’ assertions as slim.

On the manner of the transactions, the Court noted that the SOP’s purpose was to incentivize continued and improved services. Both petitioners, however, exercised their options only after they had ceased employment or consulting. The Court observed that, as they were no longer working at Spocket, their acquisition of shares was no longer consistent with the SOP’s stated incentive purpose, a factor that could tend to undermine an expectation that they would share in profits indefinitely. On the nature of the corporation, the Court emphasized that Spocket was a small, closely held private company with only eight common shareholders and that the petitioners collectively held about 1.4% of the common shares, while Mohebpour held approximately 80%. The company took steps to protect competitively sensitive information, including prohibiting transfers that would place it at a competitive disadvantage and requiring SOP participants to grant powers of attorney and limiting shares under the Plan. On relationships, there were no special family or friendship ties that would alter expectations; indeed, by the time Astle became a shareholder, she had already left, citing a toxic culture and mistreatment.

On past practices, the Court noted that Spocket’s practice under the SOP and Original ROFR had been to allow ex-employees and ex-consultants to exercise options within 90 days and then hold their shares; there had been no practice of compulsory repurchase under the Original ROFR. The Amended ROFR represented a significant change, applied without notice to the petitioners, and in a way that could deny them any increase in share value between the Triggering Event or competitor date and the actual repurchase. The Court accepted that corporate practices can change but held that the respondents had not provided adequate evidence of valid commercial reasons for changing past practice in this way or of how the changes were in the best interests of the corporation.

On steps the petitioners could have taken to protect themselves, the Court accepted that had they taken legal advice earlier, they would have been more aware of the Board’s broad discretion under the SOP and the nature of the POAs. However, the Court doubted they could have reasonably anticipated the specific changes later made to the ROFR—such as retroactive defaulting/competing classifications and valuation at earlier dates—and noted there was no evidence they could have prevented those changes, particularly since they received no notice of the proposed amendments. On the shareholder agreements themselves, the Court acknowledged that the Board was authorized to amend the Original ROFR and that agreements can be used as guides to reasonable expectations. Nonetheless, it rejected the argument that the petitioners’ expectations were thereby rendered unreasonable, emphasizing that having authority to act does not mean the exercise of that authority cannot be unfair.

The Court also examined whether the Board’s actions fairly resolved conflicting shareholder interests, given the directors’ duty to act in the best interests of the corporation. The respondents asserted that they needed a mechanism to repurchase shares, but the Court found “very little evidence” of how these specific changes—particularly the retroactive valuation terms—served the company’s best interests. There were no Board minutes, and neither director had notes explaining their reasoning. By contrast, the changes had clear and significant effects on the petitioners, including denying them any increase in value between the valuation date and the repurchase date. In Ms. Astle’s case, the Court stressed that she was deemed a competitor without notice and without an opportunity to respond, and that notice and an opportunity to be heard are essential elements of a fair process. Weighing all factors, the Court concluded that the petitioners’ expectations not to be forcibly removed as shareholders and to participate in profits were objectively reasonable, and that they also reasonably expected fair treatment.

On step two, the Court considered whether the respondents’ conduct was oppressive, unfairly prejudicial, or unfairly disregarded the petitioners’ interests. It found that the evidence did not establish “oppression” in the sense of conduct that was burdensome, harsh and wrongful or an abuse of power, as described in BCE and other authorities. The allegations that petitioners were targeted because they were women, or that Mohebpour attempted to thwart Astle’s option exercise, were not proved on the conflicting record. The Court acknowledged arguments about whether the POAs created a fiduciary duty to act in their best interests or were “powers of attorney with an interest” allowing the donee to act in their own interests, but held it unnecessary to resolve that issue, given its findings on unfair prejudice.

The Court found that the conduct was “unfairly prejudicial” to the petitioners’ interests. It emphasized that unfair prejudice focuses on the effects of the conduct on the shareholder and that bad faith is not required. Applying the Amended ROFR to repurchase the petitioners’ shares without prior notice of the change, using earlier valuation dates (June 4, 2020 for Kaplan, when she held no shares, and May 30, 2022 for Astle’s competitor designation), and deeming Astle a competitor without a clear evidentiary process or opportunity to respond, were all aspects of conduct that the Court found unfairly prejudicial to their reasonable expectations.

Ruling, remedy, and overall outcome

Having found that the petitioners’ reasonable expectations had been breached by conduct that was unfairly prejudicial, the Court turned to remedy under s. 241(3) CBCA. The petitioners sought, among other things, declarations that the affairs of Spocket were conducted oppressively or unfairly prejudicially, that the repurchase of their shares was void, reissuance of shares, payment of fair value or damages, and costs. In shaping a remedy, the Court referred to four guiding principles from case law: the remedy must be a fair way of dealing with the situation; it should go no further than necessary to rectify the oppression or unfair prejudice; it should vindicate reasonable expectations in the corporate context rather than personal relationships; and it must take into account the broader corporate law framework. The remedy should be “surgically crafted” to correct the impugned conduct.

The Court decided that the most appropriate remedy was to compensate the petitioners by paying them the value of their shares as of the date the repurchases occurred, March 3, 2023, less amounts already paid, rather than voiding the repurchases or ordering reissuance of shares. The petitioners requested an independent valuation and argued against reliance on the 409A figures, but the Court was satisfied that it was appropriate to use the 409A valuations from Carta Valuations, LLC. It noted that common shares were valued at US$0.80 on April 22, 2022 and US$0.81 on April 22, 2023, and determined that valuing the petitioners’ shares at US$0.80 per share was fair and equitable.

Based on that per-share value, the Court ordered compensation under s. 241(3)(j) CBCA as follows. For Ms. Kaplan: 36,009 shares × US$0.80 = US$28,807.20, less US$6,481.62 already paid, for net compensation of US$22,325.58. For Ms. Astle: 114,383 shares × US$0.80 = US$91,506.40, less US$5,719.15 already paid, for net compensation of US$85,787.25. The respondents argued that a discount should be applied because the petitioners were no longer working at Spocket and thus no longer contributing to the company’s value, but the Court rejected that, noting that contributions to a business do not necessarily end the day employment or engagement ends and that both petitioners’ roles likely contributed to Spocket’s success beyond their departure dates.

The Court then considered whether to impose personal liability on the individual directors. Applying the Supreme Court of Canada’s framework in Wilson v. Alharayeri, it noted that personal liability generally requires that the director’s conduct be properly attributable to them and that imposing liability be a “fit” remedy, with fairness, necessity, corporate-stakeholder focus and the broader corporate law context all considered. While the directors were involved in the conduct that the Court found unfairly prejudicial, there was no evidence that they acted in bad faith or obtained personal financial benefits from it. The Court concluded that corporate-level compensation by Spocket was sufficient to rectify the harm and that personal liability was not appropriate.

Finally, the Court addressed punitive damages. Although the petitioners sought punitive damages in their written submissions, they had not specifically claimed such relief in the petition. Referring to Whiten v. Pilot Insurance Co., the Court held that punitive damages must be expressly pleaded, and that failure to do so was fatal to the claim. It added that, even if properly pleaded, the evidence did not show the kind of high-handed, malicious, arbitrary or highly reprehensible misconduct required for punitive damages.

In conclusion, the Court declared that Spocket’s affairs had been conducted in a manner that was unfairly prejudicial to the petitioners’ interests, ordered Spocket to pay Ms. Kaplan US$22,325.58 and Ms. Astle US$85,787.25, and awarded the petitioners their costs.