Look Communications alleged that former directors and officers of the corporation had 'improperly conferred upon themselves substantial monetary benefits', so it sued them. The defendants argued that they were entitled to advance funding of their defence costs under the terms of Look's by-laws and various indemnification agreements. The company pointed to s 124(4) of the Canada Business Corporations Act, which precludes indemnification of defence costs where the defendants have not acted in good faith. The judge at first instance found that Look had established a strong case that the individuals in question had acted in bad faith and that the company therefore did not need to fund the costs of defending its suit against them. On appeal, the directors and officers argued that s 124(4) applies to derivative actions only: the marginal note that accompanies the provision does read 'Indemnification in derivative actions' and there is case law on the equivalent Ontario provision (involving some of the parties to the Look litigation, as it happens) that confines its scope in just that way. This wasn't a derivative action, so...
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