Were Newsgroup liable for Andy Coulson’s legal fees under the compromise agreement?

Andy Coulson, the former Editor of the News of the World, has lost his High Court legal battle against his former employees to pay his legal expenses in connection with the criminal investigation taken against him by the Police over the ‘phone-hacking’ allegations.

The legal issue before the High Court in Coulson v Newsgroup Newspapers was whether an indemnity in the compromise agreement Mr Coulson signed on leaving the Group in February 2007 obliged them to pay the legal costs associated with the criminal investigation. The High Court held that it did not and Newsgroup was not obliged to pay the costs.

Coulson had been employed as Editor of the News of the World between 2003 and 2007. His compromise agreement provided for re-imbursement of legal expenses “which arise from his having to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings as a result of his having been Editor of the News of the World”. In July 2011, Coulson was arrested and interviewed by the Metropolitan Police in connection with allegations of ‘phone hacking’ and corruption (making unlawful payments to the Police). He denied the allegations, was bailed, but not charged.

Claiming payment of his professional legal costs under the compromise agreement, Newsgroup refused. Coulson brought proceedings for a declaration as to the effect of the agreement under part 8 of the Civil Procedure Rules, which allow Claimants to apply to the Court where a decision is being sought on a question not involving substantial disputes of fact.

It was held that although the indemnity was wide ranging in its wording, seeking to protect Coulson from legal professional expenses arising from the “ordinary occupational hazards” of being an Editor, it did not cover criminal allegations made against Coulson personally. In any case, said trial judge Justice Supperstone, the indemnity was not engaged as, following the wording of the agreement, no “proceedings” had been commenced.
The words used in the indemnity in the agreement are fairly standard so their interpretation will be welcomed by many employers. The High Court’s decision highlights the importance of accurate drafting of contract terms or provisions in compromise agreements under which an employee seeks an employer’s reimbursement for costs and expenses incurred in relation to criminal proceedings or allegations that the employee has otherwise acted unlawfully during and/or as a result of their employment.

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