Executive Summary: Key Legal and Evidentiary Issues

• Three minority shareholders and former officers of PuraVida Foods, Inc. and Haliburton International Foods Canada Inc. commenced an oppression application under s. 241 of the Canada Business Corporations Act (CBCA).
• Alleged misconduct includes an improper "Transfer Pricing" scheme that stripped over USD $6.9 million in revenues from the two companies.
• Central to the motion is whether the proceeding should be converted from an application to an action and consolidated with three separate wrongful dismissal actions commenced by each Applicant.
• Credibility was disputed: the Respondents argued that complex factual issues and credibility conflicts require a trial, while the Applicants maintained these can be resolved on affidavit evidence and cross-examinations.
• Evidentiary weight of the Respondents' sole affiant, Michael Cihra, was challenged on the basis that much of his evidence concerned events predating his appointment and constituted hearsay.
• Premature conversion was the dispositive issue, as the Respondents had not yet delivered responding application evidence when the motion was brought.

Facts of the case

The Applicants — Alexander Schenkel, Victoria Schenkel, and Lauren Watkins-Acebes — are minority shareholders and former officers and employees of PuraVida Foods, Inc. ("PuraVida") and Haliburton International Foods Canada Inc. ("HIF Canada"). Each holds 16% of the common shares of both companies. PuraVida is in the business of distributing PuraVida branded food products, while HIF Canada was formerly in the business of brokering sales for Haliburton International Foods, Inc. ("HIF USA"), an American company that manufactures high-end fire roasted, cryogenically frozen, and kettle-cooked products for industrial food service and retail customers under the "PuraVida" brand.

The Respondents include PuraVida, HIF Canada, Ian Charles Schenkel ("Ian Sr."), Ian William Schenkel ("Ian Jr."), Michael Cihra, and Cynthia Morris. The Applicants plead that Ian Sr. holds a 49% equity interest in and is a director of both companies, and that Ms. Morris holds 3% of the common shares over which Ian Sr. exercises de facto control. Ian Jr., Ian Sr.'s son, and Mr. Cihra each became directors of PuraVida and HIF Canada on or about March 12, 2025, with Mr. Cihra also assuming the role of Chief Executive Officer of both companies at that time.

The Applicants allege a series of wrongful acts tied to Ian Sr.'s direction. Alexander Schenkel, who was a director and President of HIF Canada and Vice President of Operations for PuraVida, was replaced as a director of HIF Canada on or about March 12, 2025, and was wrongfully terminated as an employee of both companies on or about March 28, 2025. Victoria Schenkel was wrongfully terminated from HIF Canada and PuraVida at Ian Sr.'s direction on or about March 17, 2025. Lauren Watkins-Acebes resigned as a director of PuraVida on or about February 24, 2025, and was wrongfully terminated as President of PuraVida on or about April 8, 2025, at the direction of Ian Sr. and Mr. Cihra. The Applicants commenced the within application by a Notice of Application issued on August 29, 2025, and each Applicant separately commenced an action against PuraVida and HIF Canada for remedies arising from the termination of their employment.

Statutory provisions and claims at issue

The Applicants seek declaratory relief under s. 241 of the CBCA, alleging that the business of PuraVida and HIF Canada has been conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, the Applicants as minority shareholders. They also seek a declaration that Ms. Morris, Mr. Cihra, Ian Sr., and Ian Jr. are in breach of their statutory and fiduciary duties under s. 122 of the CBCA. The Applicants allege that the Respondents improperly stripped over USD $6.9 million of revenues from HIF Canada and PuraVida through what they characterize as an improper "Transfer Pricing" scheme involving allegedly improper adjustments and transactions. Among the remedies sought are an order directing the Respondents to purchase the Applicants' shares at fair value, compensation as aggrieved persons, variation or setting aside of the allegedly improper transactions and accounting adjustments, restraint of the complained-of conduct, and, if necessary, the appointment of a receiver or receiver-manager.

Court's reasoning and analysis

The court applied the principles established in Collins v. Canada (Attorney General), 2005 CanLII 19819, as affirmed by the Court of Appeal in V2 Investment Holdings Inc. v. Mizrahi, 2026 ONCA 275, that an application will not be converted to an action unless there is good reason to do so — specifically, when the hearing judge cannot properly determine the issues on the application record, such as where issues of credibility or the need for viva voce evidence arise. The court also noted that disputed facts alone are insufficient to justify conversion; the disputed facts must be material, and even material factual disputes may be resolved on the application record without a trial. The court further relied on Obolus Ltd. v. International Seniors Community Care Inc., 2023 ONCA 708, for the proposition that the motion judge must review whether the proceeding was properly commenced as an application and whether it can be properly resolved as one.

The court found that while Mr. Cihra's affidavit made numerous conclusory assertions about complexity and credibility, it did not clearly identify which specific credibility issues would require a trial. The court rejected the Respondents' submission that applications are reserved for relatively uncontested matters, noting that oppression claims and share valuation disputes are routinely adjudicated on a paper record. The court also found that the existence of the three separate employment actions did not compel conversion and consolidation, since the central issue in the oppression application — whether revenues were stripped in breach of the Applicants' reasonable expectations as shareholders and former directors — is distinct from the claims arising from the termination of each Applicant's employment. Drawing on Rare Charitable Research Reserve v. Chaplin, 2006 CanLII 50901 (ON SC), the court noted that a conversion motion brought before responding evidence has been delivered is premature, and that the application judge hearing the matter on its merits is better placed to determine whether conversion is warranted once the full evidentiary record is developed.

Ruling and overall outcome

Justice Cavanagh dismissed the Respondents' motion in its entirety on June 4, 2026. The Applicants were the successful party on this motion. No monetary award was granted at this stage; the decision was procedural in nature. The court ordered that the matter proceed as an application, without prejudice to the Respondents' right to renew the conversion motion before the application judge after the full evidentiary record — including the Respondents' responding evidence and cross-examinations — has been developed. On costs, the court directed that if the parties are unable to resolve the matter between themselves, written submissions may be made in accordance with a timetable to be agreed upon by counsel and approved by the court; no costs amount was specified in the decision.