Executive Summary: Key Legal and Evidentiary Issues

• Isoflex USA, a minority shareholder, petitioned for the dissolution or winding up of TMC2 on grounds of oppression under the Business Corporations Act (BC), alleging that the majority shareholders progressively froze it out of governance and its exclusive sales and marketing role.
• Central to the dispute are sharply conflicting accounts of whether any oral agreement was reached at TMC2's formation regarding board control, division of responsibilities, and Isoflex's exclusive role as TMC2's sales and marketing arm.
• Credibility is a critical issue, as the shareholders' rights and expectations must be determined largely from the parties' conduct, oral and written communications, and competing recollections, in the absence of an executed shareholders' agreement.
• TMC2 separately commenced an action on April 14, 2026 against Isoflex and several of its directors for breach of fiduciary duty, unjust enrichment, and civil conspiracy, raising overlapping factual and legal issues with the petition.
• The court applied the elevated Cepuran framework, under which the mere existence of a triable issue is no longer sufficient to automatically convert a petition to an action; conversion remains a matter of judicial discretion guided by factors of proportionality and access to justice.
• All Terasen factors — credibility, evidentiary gaps, multiplicity of proceedings, and the scale of the dispute — weighed in favour of conversion to the trial list.

Facts of the case

Isoflex USA is a California-based company that brokers the sale of isotopes to international clients. It holds a 42.5 percent minority shareholding in 1218146 BC Ltd. (TMC2), a North Vancouver company that produces specialized stable isotopes. The Webster Respondents — Brian Webster, Roselle Bourgeois, Andrea Libman, and 1488314 BC Ltd. — hold the majority 57.5 percent of TMC2's shares. Prior to TMC2's formation, Isoflex had acted as broker for the sale of isotopes produced by a predecessor company, TMC Manufacturing Company Inc. (TMC), collecting a 35% commission pursuant to a non-binding MOU.

In 2019, the principals of TMC and Isoflex agreed to incorporate TMC2 to capitalize on a specific opportunity: a multi-year contract (the ITM Contract) with a third-party client, ITM, which required a particular isotope and was prepared to make a substantial loan to the new company for its production. Under the ITM Contract, Isoflex was a named party primarily responsible for invoicing, shipping, and collecting payment from ITM, while TMC2 was responsible for producing the required isotopes. Both parties appointed two representatives each to the TMC2 Board. Isoflex agreed to take shares in TMC2 in lieu of a sales commission, with all ITM contract proceeds flowing through Isoflex to TMC2 without commission. All parties agreed that no dividends or officer salaries would be paid for several years while TMC2 ramped up production.

The petition alleges that beginning in December 2023 and escalating through 2024 and 2025, the Webster Respondents undertook eleven acts of oppressive or unfairly prejudicial conduct. These included unilaterally increasing the number of directors from four to five by appointing Ms. Libman without Isoflex's agreement; changing signing authority over TMC2's financial accounts; removing Isoflex-associated staff from access to financial records and production facilities; withholding Isoflex's compensation unless Isoflex agreed to objectionable changes to a Draft Consulting Agreement; engaging a third party (WestCove) at significant expense without board approval; and refusing to accept purchase orders from Isoflex unless it relinquished control of its relationship with ITM. Isoflex's position was supported by three affidavits from its directors — Richard McKannay (founder and managing director), Teck Hing Teo (CFO), and Patrick Hardy (Chief Business Officer and former Executive Vice-President of TMC2) — comprising over 50 pages of sworn evidence and approximately 300 pages of exhibits.

Policy terms and contractual clauses at issue

No fully executed shareholders' agreement was ever reached between the parties, despite extensive and repeated negotiations following TMC2's incorporation. This absence is central to the dispute. Isoflex asserted that an oral agreement governed the founding arrangement, under which it would have equal board representation, exclusive conduct of sales and marketing for TMC2 (including all product beyond the ITM Contract), and shared control over significant governance decisions. The Webster Respondents denied the existence of any such oral agreement and maintained that Isoflex's reasonable expectations as a shareholder were limited to what was agreed at incorporation — including entitlement to dividends — but not control of TMC2 or exclusivity over sales and marketing beyond the ITM Contract. The MOU between Isoflex and TMC, the predecessor company, was characterized by the Webster Respondents as terminable on 30 days' notice by either party, and as incapable of generating reasonable expectations in a distinct newly incorporated entity.

Separately, on April 14, 2026, TMC2 commenced an action (Action No. S262823) against Isoflex and several of its directors, alleging breach of fiduciary duty (as agents and board members), unjust enrichment, and civil conspiracy, primarily on the basis that Isoflex preferred its own interests over those of TMC2 in dealings with existing and future customers.

Court's reasoning and analysis

Justice Marzari applied the conversion framework established by the five-member BC Court of Appeal panel in Cepuran v. Carlton, 2022 BCCA 76, which substantially raised the threshold from the former "mere triable issue" standard. The court assessed the Terasen factors, as endorsed in Cepuran, to determine whether to proceed by petition, convert to action, or employ hybrid procedures.

On the question of prematurity, the court rejected Isoflex's argument that conversion was premature because the Webster Respondents had not filed their complete evidentiary case. The Webster Respondents had filed over 480 pages of affidavit evidence and documentary exhibits, which the court found more than sufficient to establish the factual conflicts relied upon for conversion, going well beyond vague or flat denials.

On credibility, the court found the issues to be significant and fundamental. In the absence of an executed shareholders' agreement or consulting agreement, the parties' rights and expectations would have to be determined from their conduct, oral and written communications, and competing recollections — matters inherently requiring credibility assessment. The oral agreement alleged by Isoflex regarding exclusive sales and marketing was directly contradicted by Mr. Webster's account of the history. The court noted that centrality of credibility issues where oral agreements are relied upon in oppression cases frequently warrants conversion, citing Phaneuf, Taj Park, and New Great Land.

On the need for a full grasp of the evidence, the court observed that the evidentiary record was incomplete, with significant documents — including the ITM Contract itself — not produced due to confidentiality constraints, and that neither party had provided full disclosure beyond what advanced its own position. The court noted that neither party could fairly resolve key issues, including whether Isoflex was retaining undisclosed margins on proposed sales, without the discovery processes available in trial procedure.

On multiplicity of proceedings, the court was satisfied that the Action filed by TMC2 raised bona fide triable issues that substantially overlapped with those in the petition, and that there was a real risk of inconsistent verdicts if the two proceedings were conducted under different procedural regimes before different presiders. TMC2's agreement to have its Action stand as a counterclaim in the converted proceedings directly addressed this concern.

On costs and delay, Isoflex argued that it had secured four to five days in June for the petition hearing and that conversion would cause harmful delay, pointing to a rejected $24 million contract opportunity it had presented to the TMC2 board in December 2025. The court was not persuaded, finding no evidence of irreparable harm not compensable by damages, and finding that the June dates were wholly insufficient given the volume of materials and the complexity of the issues. The court found that TMC2 continued to operate profitably and could fulfill the ITM Contract for several more years, benefiting both shareholder groups as it had done over the preceding five years during which it had generated tens of millions of dollars. Proceeding by petition, the court concluded, risked inefficiency, duplication, and procedural complexity that would ultimately increase rather than reduce cost and delay.

Ruling and overall outcome

Justice Marzari granted the Webster Respondents' application to convert the petition to an action, and dismissed Isoflex's application to compel. The court ordered that the petition stand as the Notice of Civil Claim unless Isoflex preferred to file a distinct one, with the respondents given corresponding time to file responses to civil claim. TMC2's Action (No. S262823) was to stand as a counterclaim, thereby avoiding a multiplicity of proceedings. The June hearing dates were vacated. The court indicated readiness to set a three-week trial commencing November 22 or 29, 2027, with the parties directed to seek four weeks in November and/or December 2027 through Scheduling. Costs of the conversion application were awarded to the Webster Respondents, payable by Isoflex in the cause. No specific monetary award or damages amount was ordered or determined at this stage, as the decision concerns procedural conversion only.