A disagreement between two parties.

Wolverton Pacific Partnerships v Triple F Investments Ltd


Written by Connor Jonsson

A “shotgun” clause is a mechanism found within a shareholder agreement that provides shareholders a means to address deadlocks or disagreements and typically involve one shareholder offering to buy out the other shareholder(s) at a specified price.  The other shareholder(s) must either accept the offer and sell their shares or buy out the shareholder who made initial offer at the same price.  It is often a mechanism of last resort where shareholders cannot settle a dispute by discussion or negotiation.[1]  This legal mechanism was at the centre of a recent dispute from British Columbia, Wolverton Pacific Partnership v Triple F Investments Ltd, 2022 BCSC 1074,  where the province’s Supreme Court had to decide whether the buy-out provision in a shareholders’ agreement made between two family shareholders was applicable to, and could be invoked by, the parties.


The petition was brought by Wolverton Pacific Partnership (“WPP”), a partnership of Brent Wolverton and Mark Wolverton, for a declaration that a shotgun provision could not be invoked in the circumstances discussed below. The issue arose in the context of a commercial dispute between themselves and Triple F Investments Ltd (“Triple F”).  Triple F was controlled by Mark James and members of his family. The two parties (WPP and Triple F) were shareholders of a company called 471469 BC Ltd (the “Company”), which functioned as the landlord for properties which housed brewpub restaurant businesses.[2] 

Triple F owned 50% of the Company’s shares, WPP owned 25%, and various Wolverton family members owned the remaining 25%.  The 25% owned by various Wolverton family members had been sold by another corporation in 2004, Knockmaroon Holdings Ltd. (“Knockmaroon”), to these so called “New Shareholders,” and led to the present arrangement where de facto ownership and control of the Company was held 50% by James family members, and 50% by Wolverton family members.  In 1996, the original three shareholders (Triple F, WPP, and Knockmaroon) had entered into a shareholders’ agreement which contained, among other things, a “compulsory buy out” provision (aka a shotgun clause). [3]

The relationship between the James and Wolverton families regarding the corporation was positive and cooperative for many years, but financial strain in the wake of the COVID-19 pandemic led to disagreement about how to remedy the Company’s problems.  Triple F proposed to WPP that the James family shareholders and the Wolverton family shareholders each provide a loan to the company to pay for much needed structural repairs to one of their buildings.  The Wolverton brothers viewed this proposal as an ineffective “Band-Aid” solution and refused.  In response, Triple F sent a letter stating that a disagreement had arisen between the Company’s shareholders and that it was initiating a compulsory buy-out procedure under the 1996 Agreement.[4]  WPP initiated court proceedings to prevent Triple F from proceeding under this provision. 


At trial, the court focused on three fundamental questions to decide whether Triple F was within their rights to invoke the shotgun clause:[5]

1)     Is the 1996 Agreement still valid and binding on Triple F and WPP?

2)     If the answer to Question #1 is yes, have the conditions precedent for Triple F to invoke the compulsory buy-out provision in the 1996 Agreement against WPP been met?

3)     If the answer to Question #2 is yes, is there any other legal basis for preventing Triple F from invoking the provision against WPP?

In its petition, WPP argued that since the New Shareholders were not a signatory to the 1996 Agreement, the Agreement had lost its validity.[6]  This novel proposition, presented without corroborating case law, was dismissed by the court, along the petitioner’s argument that the Agreement had been effectively discharged through the parties conduct.[7]  WPP claimed there had been a kind of abandonment of the contract because the Company had been conducting business since 2004 even though the identity and number of directors was not what was specified in the Agreement.  The court stated, “abandonment discharges a contract only if it amounts to new contract in which the parties agree to abandon the old one,”[8] and concluded that the 1996 Agreement was still valid and binding. 

Moving to issues two and three, the court found that the conditions for invoking the buy-out provision were clearly present and Triple F should not be prevented from invoking it.[9] In coming to this conclusion, the court looked at the content of the compulsory buy-out provision, which outlined the circumstances under which either party could commence the buy-out procedure.  If disagreement arose with respect to any of any of five defined matters, one of which was “any borrowing by the Company or granting of an encumbrance or security instrument in connection with such borrowing,”[10] either party was within their rights to invoke the shotgun clause.  The court found this circumstance was clearly present in the case at bar and opined that overly technical approaches to interpreting shareholder agreements (such as the approach WPP took in arguing that the buy-out provision could only be invoked at a directors meeting with a quorum of four directors present[11]) are bound to fail and are contrary to the common sense approach required of contractual interpretation.[12]  The court also dismissed WPP’s claim that Triple F should be prevented from invoking the shotgun clause by operation of the doctrine of estoppel.  The conditions for estoppel were not present, and the fact that one of the Wolverton brothers “had forgotten” about the 1996 Agreement was not enough to make it void[13] and neither was a lack of strict compliance with certain terms.[14]  Ultimately, the court ruled in Triple F’s favour and dismissed WPP’s petition.


The shotgun clause is a powerful mechanism which can be critical to resolving deadlock when a business relationship has irreversibly soured.  It can avoid the time and cost of a formal valuation of a business and it can compel all sides to be reasonable, as an unreasonable offer can easily turn against the offeror.  However, there are drawbacks to the shotgun clause, including the fact that it can be overly complicated when more than two shareholders are involved, minority shareholders may be given disproportionate power to force out a founder, and a shareholder with deeper pockets can offer to buy at a price they know the other shareholder can’t afford as a means of gaining control of the company.[15]  While none of these scenarios were present in this case, Wolverton emphasizes the fact that disputes over shotgun clauses are fundamentally questions of contract and as such, principles of contract interpretation will be of paramount importance, including the “common sense approach” affirmed by the Supreme Court of Canada.[16]  Parties must be wary of taking an overly technical approach when looking at the provisions of a shareholder agreement and must be prepared to accept that which they previously agreed to if the conditions for contractual validity are present.  Given the power that could be provided to shareholders under a shotgun provision, care should be taken when drafting terms. The shotgun clause can force parties to act reasonably, but, much like its namesake, it can also be harmful in the wrong hands. 

[1] Garnet Brooks, “What is a ‘Shotgun’ clause and how does it work?” (2012), online: Entrepreneur Law <http://entrepreneurlaw.ca/starting-a-business/how-to-use-a-shotgun-to-settle-a-dispute/>.

[2]Wolverton Pacific Partnership v Triple F Investments Ltd, 2022 BCSC 1074, atpara 6 [Wolverton].

[3] Wolverton, ibid at para 11.

[4] Wolverton, ibid at para 20.

[5]  Wolverton, ibid at para 47.

[6]  Wolverton, ibid at para 50.

[7]  Wolverton, ibid at para 51.

[8]  Wolverton, ibid at para 52.

[9]  Wolverton, ibid at para 65 and 70.

[10] Wolverton, ibid at para 59.

[11] Wolverton, ibid at para 62.

[12] Wolverton, ibid at para 61.

[13] Wolverton, ibid at para 68.  

[14] Wolverton, ibid at para 69.

[15] Hudson Law, “Should you include a shotgun provision in your unanimous shareholder agreement?” (2020), online: Hudson Law < https://hudson-law.ca/should-you-include-a-shotgun-provision-in-your-unanimous-shareholder-agreement/>.

[16] See, for example, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633, at para 47

The views and opinions expressed in the blogs and case reporter are the views of their authors, and do not represent the views of the Desautels Centre for Private Enterprise and the Law, the Faculty of Law, or the University of Manitoba. Academic Members of the University of Manitoba are entitled to academic freedom in the context of a respectful working and learning environment.