Is it time to review your Deed of Access and Indemnity?

07 August 2008 Topics: Professional liability

On 11 April 2007, the New South Wales Court of Appeal in NRMA v Whitlam held that the deed of indemnity is to be construed narrowly in favour of the indemnifier where the terms of the deed of indemnity are ambiguous.

The facts of this case are as follows:

The plaintiff was formerly the president of the defendant company. In the course of his duties as president, he participated in a recorded television interview after consultation with various senior officers and the media adviser to the defendant company. The interview was edited and he took the view that the program changed the meaning of what he said, and was defamatory of the plaintiff.

The plaintiff sought indemnity from the defendant company for his legal costs in bringing the defamation action as well as a loss of reputation and loss of future earning capacity which arose out of, or in consequence of, the performance of the officer in good faith in their capacity as an officer on the basis of the indemnity deed, or on the basis of general law.

Based on the principle of construction that a commercial document that is elliptical or ambiguous should not be given a construction that is commercially unlikely, the Court held that indemnity neither extended to the claim initiated by the officer against a third party, nor to the type of loss that is involved in suffering damages to reputation, or consequential damage to earning capacity or feeling.

If you are an officer of a company, and have an existing deed of indemnity in place or intend to enter into a deed of indemnity, you need to ensure that it is termed widely enough to cover those costs and/or losses.If you do not have an appropriate deed, you could be at risk of not being entitled to indemnity for costs you incur or not being entitled to access to documents you may require to respond to action or investigation by a government agency in respect of a company which you were once, but are no longer, a director.

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