The Supreme Court of Canada this morning released its reasons for judgment in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69. Oddly, this doesn’t yet appear to have received much coverage in the news sites. Perhaps we’re all eager to get home early and shovel our driveways?
Having not yet finished digesting the decision, I can’t say much. There’s a wealth of interesting and essential material here: a restatement of the directors’ fiduciary duty to the corporation, and the extent to which consideration of other stakeholders’ interests may enter into that duty; the “business judgment” rule; the obligation of a court in approving an arrangement under s. 192 of the Canada Business Corporations Act and the test to be used; and the nature of the s. 241 oppression remedy and the interests protected.
What immediately jumped out at me was the rather pointed criticism aimed at the reasoning of the Quebec Court of Appeal – which, it should be noted, was a unanimous decision rendered by an expanded 5-judge panel. In the concluding paragraph of its reasons, the Supreme Court stated:
The Court of Appeal’s contrary conclusion rested, as suggested above, on an approach that incorporated the s. 241 oppression remedy with its emphasis on reasonable expectations into the s. 192 arrangement approval process. Having found that the debentureholders’ reasonable expectations (that their interests would be considered by the Board) were not met, the court went on to combine that finding with the s. 192 onus on the corporation. The result was to combine the substance of the oppression action with the onus of the s. 192 approval process. From this hybrid flowed the conclusion that the corporation had failed to discharge its burden of showing that it could not have met the alleged reasonable expectations of the debentureholders. This result could not have obtained under s. 241, which places the burden of establishing oppression on the claimant. By combining s. 241’s substance with the reversed onus of s. 192, the Court of Appeal arrived at a conclusion that could not have been sustained under either provision, read on its own terms.
Mind you, that’s not nearly as harsh as one recent comment by a (B.C.) corporate lawyer, who described the Quebec Court of Appeal decision as “poorly reasoned, spectacularly wrong in its conclusions and generally reflect[ing] a lack of understanding of both corporate law principles and commercial realities”, adding that “parties to sophisticated business agreements will be far better served by agreeing to adjudicate their disputes in Ontario, where the courts generally have much greater commercial sophistication.” Ouch.