Who these duties are owed to: Peoples Dept. Store v. Wise says that directors of a corporation only owe fiduciary duties to the corporation CBCA still follows rule from Peoples v. Wise: Duty of care + duty of loyalty owed to corporation, but that the Duty of care also extends to creditors, suppliers, and other constituents (see case brief below for discussion of why this might be a mistake Re City Equitable Fire Insurance Co Ltd (1925) // traditional CL no longer good law “a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.” Directors have no obligation to obtain necessary knowledge about corporate finance – standard is what could reasonably be expected from him “a director is not bound to give continuous attention to the affairs of his company. His duties are of an intermittent nature to be performed at periodical board meetings, and at meeting of any committee of the board” “in respect of all duties that, having regard to the exigencies of business, and the AOI, may properly be left to some other official, a director is, in the absence of grounds fro suspicion, justified in trusting that official to perform such duties honestly” Traditional DoC was v. low Responsibility now are much higher Peoples Dept Store v Wise SCC 2004 Framework for breach of fiduciary duties questions // to whom the duties are owed // requirements under s 122 are evaluated on an obj std with contextual elements Wise Stores – major shareholders and directors were the Wise Brothers (3) In 1992, Wise acquired Peoples (Peoples became a subsidiary) Wise brothers were the directors The brothers realized it was difficult to operate both companies, they sought advise from a VP (David Clement) of Wise Stores (he had a BA in Commerce and 15 years of work experience in finance and admin with Wise, but he was not an accountant) Clement suggested the companies merge their inventory systems As a result, Wise was used to make purchases from foreign overseas suppliers and Peoples bought from local suppliers. This resulted in People’s owing to Wise At the same time, Walmart came to Canada Both companies went bankrupt Trustee in bankruptcy for People’s sued the directors for breaching the DoC (argued the inventory policy caused damage resulting in the bankruptcy) Did the defendant director’s breach their DoC? no
Who these duties are owed to: Peoples Dept. Store v. Wise says that directors of a corporation only owe fiduciary duties to the corporation CBCA still follows rule from Peoples v. Wise: Duty of care + duty of loyalty owed to corporation, but that the Duty of care also extends to creditors, suppliers, and other constituents (see case brief below for discussion of why this might be a mistake Re City Equitable Fire Insurance Co Ltd (1925) // traditional CL no longer good law “a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.” Directors have no obligation to obtain necessary knowledge about corporate finance – standard is what could reasonably be expected from him “a director is not bound to give continuous attention to the affairs of his company. His duties are of an intermittent nature to be performed at periodical board meetings, and at meeting of any committee of the board” “in respect of all duties that, having regard to the exigencies of business, and the AOI, may properly be left to some other official, a director is, in the absence of grounds fro suspicion, justified in trusting that official to perform such duties honestly” Traditional DoC was v. low Responsibility now are much higher Peoples Dept Store v Wise SCC 2004 Framework for breach of fiduciary duties questions // to whom the duties are owed // requirements under s 122 are evaluated on an obj std with contextual elements Wise Stores – major shareholders and directors were the Wise Brothers (3) In 1992, Wise acquired Peoples (Peoples became a subsidiary) Wise brothers were the directors The brothers realized it was difficult to operate both companies, they sought advise from a VP (David Clement) of Wise Stores (he had a BA in Commerce and 15 years of work experience in finance and admin with Wise, but he was not an accountant) Clement suggested the companies merge their inventory systems As a result, Wise was used to make purchases from foreign overseas suppliers and Peoples bought from local suppliers. This resulted in People’s owing to Wise At the same time, Walmart came to Canada Both companies went bankrupt Trustee in bankruptcy for People’s sued the directors for breaching the DoC (argued the inventory policy caused damage resulting in the bankruptcy) Did the defendant director’s breach their DoC? no