Case of the week: Employment

Coulson v News Group Newspapers Ltd (2011)
EWHC 3482 Queen’s Bench Division, Supperstone J.
21 December 2011


Does an agreement between a newspaper editor and his employer made in contemplation of the termination of the employment render the employer liable for legal fees arising from criminal allegations relating to the hacking of mobile phone voicemails?

Judgment for defendant

Former News of the World editor Andy Coulson sought a declaration as to the proper construction of a clause in an agreement between him and his former employers, News Group Newspapers (NGN).

In January 2011 the newspaper’s former royal correspondent Clive Goodman was sentenced for conspiracy to intercept communications unlawfully in breach of the Regulation of Investigatory Powers Act 2000 s.79, along with private investigator Glenn Mulcaire. The following month NGN referred Coulson to a major law firm for advice regarding “investigations (civil, criminal and parliamentary) into the allegations of phone-hacking at the newspaper” and any other allegations arising from his editorship. The newspaper group paid Coulson’s legal fees from then for the next eight months.

Meanwhile, on 26 February 2011 the parties signed an agreement concerning the end of Coulson’s employment with NGN agreeing to meet Coulson’s reasonable legal costs and expenses properly incurred after termination that arose from his having “…to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings as a result of his having been editor…”. Two days later Coulson’s employment terminated.

By June 2011 the Government had launched the Leveson Inquiry into allegations of phone-hacking. Coulson was arrested and interviewed under caution regarding criminal allegations of phone-hacking and bribing police officers during his time as editor. Coulson denied any wrongdoing and was not charged, but was given bail, which continued to the date of the instant hearing. In August NGN said it would no longer pay Coulson’s legal fees, as criminal proceedings were outside the scope of the agreement between them.

In court Coulson argued that the agreement was deliberately wide because NGN had agreed to any legal costs incurred by him, including criminal legal costs.

Coulson also contended that it was in NGN’s interest to assist him with his current criminal proceedings, as rebutting the allegations would free NGN from the threat of vicarious liability for Coulson’s actions.

NGN submitted that the agreement related only to expenses arising from the ordinary hazards of editorship, but that in any case there were no extant criminal proceedings. NGN also argued that the agreement was silent as to the time of reimbursement, and that none was due unless and until he was found not guilty.

Judgment for defendant

The factual background included Coulson’s contract of employment, which provided for the possibility of summary dismissal without compensation if he was convicted of a criminal offence (barring one not affecting his role as editor).

As editor Coulson was required to act lawfully, so there could have been no intention to indemnify unlawful activity outside the scope of his role, still less any serious criminal activities for which he was alleged personally to be responsible.

The agreement had to be read as a whole, and personal wrongdoing was not within its intention. It envisaged the editor being ’drawn’ into judicial proceedings as a
result of his responsibility for content, or because of supervisory, organisational or vicarious responsibility.

Vicarious liability was not in issue; neither party argued that Coulson’s job entailed the commission of criminal offences.

Coulson was correct that the indemnity under the agreement required NGN to meet his legal costs within a reasonable time of payment falling due. However, it did not cover the criminal allegations made against Coulson personally.

For Andy Coulson

James Laddie, Matrix Chambers
Jo Rickards, DLA Piper

For NGN

Christopher Jeans QC , 11KBW
Nicholas Randall, Devereux
Mark Mansel, Allen & Overy

Commentary
Sarah Webb

21 December 2011 was both a bad news day and a good news day for News Group Newspapers (NGN). The publisher lost Glenn Mulcaire’s claim against it for an indemnity in costs but won the claim against former News of the World editor Andy Coulson for what appeared to be much the same claim. An analysis of the Coulson judgment indicates this is not unsurprising, and there were significant differences between the claims.

When Coulson left NGN he had a widely drawn agreement covering fees in having to defend or appear in any judicial or quasi-judicial proceedings from his editorship. He argued that this was intended to cover criminal proceedings, although denies being guilty of a crime. This was his first problem. He was required to act lawfully
in his job, and an indemnity for personal wrongdoing could not have been in the intention of the clause.

His second difficulty was that even if it was covered prior to any charges against him, the investigation could not amount to judicial proceedings.

The court held that arguments of public policy under ex turpi causa were not directed at agreements concluded after the criminal event in relation to civil proceedings arising out of it.

One ray of hope for Coulson is that if the enquiries are concluded without any finding of guilt against him, the door may be open for him to seek to recover his costs.
Sarah Webb, partner, Payne Hicks Beach, is representing Glenn Mulcaire, the private investigator at the heart of the
NGN phone-hacking claims