Coulson v Newsgroup Newspapers Ltd

A contractual indemnity for professional costs incurred in proceedings arising from an employee’s office does not ordinarily cover allegations of the employee’s own serious criminal conduct where the office required lawful performance. Contractual meaning is determined from the words read as a whole and against the relevant background. A police investigation, arrest or bail does not necessarily constitute “proceedings” for the purposes of such an indemnity. Where no payment date is specified, the indemnity is ordinarily performable within a reasonable time after payment becomes due. The ex turpi causa principle did not prevent enforcement of the contractual indemnity in circumstances where the claimant had not been convicted and the claim was for legal costs rather than criminal penalties.

The claimant had been employed as editor of the News of the World. On termination, the parties entered into an agreement under which the defendant agreed, so far as lawfully able, to pay reasonable professional costs incurred when the claimant had to defend or appear in administrative, regulatory, judicial or quasi-judicial proceedings resulting from his having been editor.

After the claimant was arrested and interviewed under caution concerning alleged phone hacking and unlawful payments to police officers, the defendant disputed responsibility for his legal costs. The claimant sought a declaration under Part 8 of the Civil Procedure Rules 1998. The issues were whether the clause covered alleged personal criminality, whether proceedings had begun, whether ex turpi causa applied, and when payment was due.

1. Construction of the indemnity. The clause was construed in accordance with the approach summarised in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. The document had to be read as a whole against the relevant background, including the claimant’s employment contract.
2. The claimant’s duties as editor involved only lawful activities. The reference to “Editor” therefore meant an editor performing lawful editorial duties. The indemnity did not extend to serious criminal activity for which he was alleged personally to be responsible. The words “having to defend, or appear in” were apt to cover an editor drawn into proceedings arising from editorial, supervisory, organisational or vicarious responsibility, but not proceedings for his own alleged misconduct.
3. The conclusion resulted from construction, rather than the implication of an exclusionary term. The court therefore did not need to consider the claimant’s arguments concerning implied terms. The principles of vicarious liability and the authorities on close connection were likewise immaterial because neither party contended that the claimant’s job involved committing the alleged offences.
4. Proceedings. The statutory meaning of “criminal proceedings” in the Contempt of Court Act 1981 was confined to that statute. Authorities concerning the commencement of criminal proceedings did not establish that proceedings had begun here. Whether commencement occurred on charge at the police station or when the accused attended court, no proceedings had yet commenced. The reasoning in R (on the application of Hale) v North Sefton Justices [2002] EWHC 257 (Admin) was distinguishable because that case concerned proceedings which ultimately led to a trial.
5. Article 6 and payment. The right to legal assistance from the first police interrogation did not determine the contractual meaning of “proceedings”. Since the clause specified no payment date, the indemnity required payment within a reasonable time after payment became due. The ex turpi causa principle did not apply to the contractual claim for legal costs in these circumstances.
6. The claim therefore failed. The court held, alternatively, that even if the criminal allegations were covered, proceedings had not commenced.