Canada - Liability of Company Officials
R v. BATA INDUSTRIES LIMITED and others
The Environment Inspector on a routine inspection noticed a large number of barrels containing chemical wastes on the premises of the accused company in varying stages of decay. They were rusty, uncovered and leaking. Some of the chemicals were highly carcinogenic. It became evident that this process has been going on for several years. One of the directors who was charged, was an "on site" director of the accused company. Although the former had procrastinated in finding suitable waste haulers to dispose with the drums, it was found he had failed to establish that he had exercised all reasonable care to prevent unlawful discharge as required by law. He had seen the storage area accumulating in increasingly deteriorating barrels until it seeped into the ground and failed to take positive steps to remedy the problem. It was further evident that the director had been reminded of his responsibilities by the Technical Advisory Bulletins from the Bata Shoe Organisation.
The other director charged was acquitted as the evidence indicated that as a walk-around director on the site, he dealt with problems when brought to his attention by the on-site director promptly and appropriately and he had periodically reviewed the operations and performancte goals of the facility.
It was also found that the Company president had failed to exercise due diligence. It was not sufficient that only instructions were given to the officers to remedy the problem. Once it was brought to his attention, the president had a responsibility to ensure that the instructions had been carried out.
The company was fined a total of Can$ 120,000 inclusive of a contribution to an environmental project. The two directors found in breach of their respective duties were each fined and the Company was ordered not to indemnify them in respect of the ordered fines. A probation order was also imposed against the Bata Shoe Organisation (world wide) requiring amongst other things to fund a local toxic waste disposal program to pick up various household waste in a number of regions in the countries where the accused company operated.
On Appeal to the High Court, the fines against both the company and the directors were reduced. The probation order was affirmed, applying only to its organisation in Canada and not world wide. The trial Judges order that the directors should not be indemnified was upheld on the grounds of policy.
However, the Court of Appeal struck out the condition relating to indemnification on the basis that it was inefficacious as the company simply had to wait out the period of probation and then indemnify the directors and further such a condition was found to be in conflict with a statutory provision in the Ontario Business Corporation Act.
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