Some Observations On The Business Judgment Rule

The Supreme Court of Canada in Peoples Department Store Inc. (Trustee of) v. Wise revisited the question of the business judgment rule in Canada. (This is the rule whereby courts will defer to the directors’ business judgment so long as they brought an appropriate degree of prudence and diligence in reaching a reasonable business decision at the particular time it was made.)

Major and Deschamps JJ. speaking for the court stated:

"Canadian Courts, like their counterparts in the United States, the United Kingdom, Australia and New Zealand, have tended to take an approach with respect to the enforcement of the duty of care that respects the fact that directors and officers often have business expertise that courts do not. Many decisions made in the course of business, although ultimately unsuccessful, are reasonable and defensible at the time they are made. Business decisions must sometimes be made, with high stakes and under considerable time pressure, in circumstances in which