A Focus On Director’s Indemnity Rights - The Bennett Decision

The recent decision of the Ontario Court of Appeal in Bennett v. Bennett Environmental Inc. in certain respects will be a comfort to directors of public issuers, and in other respects highlights issues that should cause directors to not take indemnification for granted. In a period of challenging markets and increasing litigiousness the case is a reminder of the significance of indemnity rights.

The Background

Bennett Environmental Inc. ("BEI"), a soil removal company, publicly disclosed in June 2003 that it had been awarded the largest soil remediation contract in its history. In August 2003, BEI was notified that the contract would actually be much smaller than had been originally planned. Nevertheless BEI continued to disclose the original larger contract as part of its inventory of contracts until July 2004, when it issued a press release explaining the change in the size of the contract. In the ten days following disclosure of the reduced size of the