Electronic copy available at: http://ssrn.com/abstract=1403490
The Supreme Court of Canada has toyed with the boundaries of
advanced to identify when fact-based accountability will arise (e.g.
vulnerability, power differential, reasonable expectation) are vague
notions that potentially derail the conventional function of the
that fiduciary accountability regulates the merits or fairness of the
now appears to have explicitly adopted that view, albeit without
recourse to any of the criteria it had previously identified.2It also
regulation. The decision represents yet another novel turn, and a
radical one, in the court’s mercurial intercourse with fiduciary
The case involved a proposed restructuring of BCE under the
arrangement provisions of the Canada Business Corporations Act.3
Creditors of a BCE subsidiary challenged the specific plan of
and investment grade status of their debentures. Pursuing an
oppression claim, they argued that they had a reasonable
expectation that the directors would protect, or at least consider,
their economic interest in maintaining the value of the debentures.
They also advanced asecond claim that thearrangementshould not
have received the judicial approval required by s. 192 of the CBCA
because it was not fair and reasonable. I will not address the court’s
University of Saskatchewan.
See R. Flannigan, “The Boundaries of Fiduciary Accountability” (2004), 85
Can. Bar Rev. 83.
2008 SCC 69, 301 D.L.R. (4th) 80, sub nom. BCE Inc. (Arrangement relatif
a) (Re); Addenda Capital Inc. v. BCE Inc.; Addenda Capital Inc. v. Bell
Canada; Aegon Capital Management Inc. v. BCE Inc. The unanimous
decision, without a lead author, has an ex cathedra or implicit legislative
R.S.C. 1985, c. C-44.
While the Supreme Court insisted (supra, footnote 2, at paras. 47 and 119-21)
that the oppression and s. 192 claims were “different types of proceedings,
engaging different inquiries”, there appears to be little substantive difference
between the two (other than a difference in onus) where they are both raised
Electronic copy available at: http://ssrn.com/abstract=1403490
the oppression analysis that incorporates or implicates fiduciary
this duty, which, as will be seen, is fundamental to the reasonable
expectations of stakeholders claiming an oppression remedy”.5The
supposition in that statement is that the fiduciary accountability of
factors into the reasonable expectations of stakeholders so as to
ground an oppression action. The first part of the supposition (“fair
treatment” as fiduciary content) represents a clear departure from
conventional fiduciary accountability. It is the first indication in the
judgment that dramatic change is at hand. The second part (the
linkage to oppression) signifies a reassignment or re-tasking of
fiduciary accountability to serve as one factor in an oppression
The court described the fiduciary accountability of directors as a
duty to act in the best interest of the corporation. That is a common
conceptual mistake.6The duty to act in the best interest of the
corporation is the main duty imposed on directors by the law of
agency.7All agents (and all trustees, guardians, etc) have that same
nominate duty to their principals. Fiduciary accountability is
narrower.8It requires that directors act in the best interest of the
by the same facts given that the test is “unfair disregard” for the former and
“fair and reasonable” for the latter. Note also that the court did not
categorically limit s. 192 claims to legal rights, leaving room for undefined
extraordinary or exceptional circumstances. To the extent a distinction
between legal and economic rights remains, it alters the reach but not the
substantive identity of the “fairness” standard of the respective claims.
Supra, footnote 2, at para. 36.
A mistake the court has made before. See R. Flannigan, “Reshaping the
Duties of Directors” (2005), 84 Can. Bar Rev. 365 at pp. 366-67.
R. Flannigan, “Fiduciary Duties of Shareholders and Directors”,  JBL
277 at pp. 288-89. Director conduct is regulated by the common law of
agency as modified by the applicable statutory corporate law regime. The
statutory regulation typically is supplementary or collateral and does not
fundamentally alter the innate agency character of the director/corporation
The fiduciary accountability associated with the agency of directors is
outlined in s. 122(1)(a) of the CBCA. The provision joins in one statement
the fiduciary duty (to act honestly and in good faith) and the agency duty (to
act with a view to the best interest of the corporation) of directors. The
corporation in one specific respect. Their duty,which is proscriptive
in nature, is to set aside their personal interest. They must not
That initial conceptual stumble by the court was followed by an
unfamiliar summary of the duty. Tendered without reference either
introduced several unconventional propositions:9
The fiduciary duty of the directors to the corporation is a broad,
contextual concept. It is not confined to short-term profit or share value.
Where the corporation is an ongoing concern, it looks to the long-term
interests of the corporation. The content of this duty varies with the
situation at hand. At a minimum, it requires the directors to ensure that
the corporation meets its statutory obligations. But, depending on the
context, there may also be other requirements. In any event, the fiduciary
duty owed by directors is mandatory; directors must look to what is in
the best interests of the corporation.
Each sentence in this extract raises concerns. First, fiduciary
accountability is not a “broad” concept. It was designed to address
While the duty has a broad practical application (because limited
the circumstances (the context) can excuse an unauthorized conflict
or benefit. It is contextual only in the assessment of whether an
arrangement involves a limited access in some respect or dimension,
or whether a conflict or benefit is involved. Once those
determinations are made, the circumstances are irrelevant except to
Fiduciaries are not relieved from fiduciary liability because their
actions might be considered reasonable or justified in the
Secondly, the reference to temporal profit (and share value)
statutory declaration of duty clearly was intended to incorporate the
equitable and common law principles established in the case law. The
Dickerson committee did not intend to create a separate “statutory” duty
that was to be treated as distinct from the agency and fiduciary duties crafted
by the judiciary. See R. Dickerson et al., Proposals for a New Business
Corporations Law for Canada (Ottawa: Information Canada, 1971), vol. 1;
Flannigan, supra, footnote 6, at pp. 367-69.
Supra, footnote 2, at para. 38.
10. See R. Flannigan, “The Strict Character of Fiduciary Liability”, 
NZLR 209 at p. 214.
the decision, subject to the common law version of oppression. It
would include, for example, considering the economic effects of a
restructuring on existing creditors, if only to confirm that their
contractual rights were addressed (including, potentially, their
intentional breach). After modern oppression rights came into
statutory oppression standard (replacing the common law
oppression standard) that directors not exercise their powers in a
requirement essentially became part of the definition of the agency
consequences for directors who undertake a course of action in the
interest of the corporation that nevertheless unfairly disregards the
oppression constraint on their agency duty. One aspect of that
Did the directors appropriately consider the conflicting economic
interests of specific stakeholder classes? Nothing in that analysis, it
principles where there is no evidence suggesting any “fiduciary”
mischief on the part of the directors (no unauthorized conflict or
is an inquiry into the performance of the agency duty of directors.
With that analysis, the conclusion of the court would remain
unchanged, and the distortion of conventional fiduciary regulation
would have been avoided.
review) and a new role (as a reasonable expectation factor in a
also appears to have compromised the strict operation of the
the prudence — of holding fiduciaries to a strict control of their
implications or interpretations of its fiduciary remarks. Or the
it plainly lacks justification in other contexts where there are
established rules that apply idiosyncratic control to the nominate
“fairness” standard cloakedin fiduciaryterminology. Conventional
fiduciary accountability was designed to control opportunism in
of that regulation by turning it to the service of discordant ends.