In December 2008, the Supreme Court of Canada released written reasons for its ruling in the landmark case of BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 (CanLII).  This important case discusses directors’ duties and the application of the oppression remedy in business corporation law. Because these business law concepts are applicable to condominium law, the Court’s decision in the BCE case contains important lessons for condominium directors.

The first lesson is simple but critically important:   Directors owe a fiduciary duty to the corporation and only the corporation.   The Court found that, in cases where the interests of the corporation and those of stakeholders do not coincide,

[I]t is important to be clear that directors owe their duty to the corporation, not to stakeholders, and that the reasonable expectation of stakeholders is simply that the directors act in the best interests of the corporation.

The second lesson is that directors must make decisions in a manner that considers the interests of all affected stakeholders. Failing to do so may give rise to a claim that the directors are acting in a manner that is “oppressive or unfairly prejudicial or that unfairly disregards the interests” of a stakeholder, contrary to section 135 of the Condominium Act, 1998.  After considering the cases on oppression, the Court found that:

[T]he duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. There are no absolute rules. In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner, commensurate with the corporation’s duties as a responsible corporate citizen.

While lawyers will continue analyzing its impact for a while, the Supreme Court’s decision in the BCE case offers guidance to condominium directors who routinely make tough decisions that may not please all of their unit owners:  The directors’ main duty is to the corporation, and their decision-making must be even-handed and treat parties fairly.   This ruling also helps explain to unit owners and other stakeholders the criteria that must ultimately guide the directors’ decisions and it sets a benchmark to help stakeholders determine if their rights have been infringed.