Coulson v News Group Newspapers Ltd

A contractual indemnity for reasonable professional costs of defending or appearing in judicial proceedings may extend to criminal proceedings where the allegations arise from the employee’s performance of the job. The criminal character of the proceedings is not, by itself, decisive.

The boundary is causal: an act wholly unrelated to performing the job, such as a fraudulent expenses claim, falls outside the indemnity. Costs are properly incurred if they are of a nature properly required for the defence of the proceedings; coverage does not depend on the merits of the defence or trial outcome. Advice and representation before charge are part of the criminal process and may be covered, even if no charge follows. Ex turpi causa does not bar an agreed indemnity for defence costs. The appeal was allowed.

Following the termination of his employment as editor of the News of the World, Mr Coulson relied on clause 4.6 of a termination agreement requiring News Group Newspapers to pay reasonable professional costs properly incurred in specified proceedings arising from his editorship. He sought a declaration and damages for costs incurred in responding to criminal allegations concerning telephone interception and alleged payments to police officers.

Supperstone J dismissed the claim, holding that the indemnity did not extend to personal criminal misconduct and that proceedings had not begun before charge. He rejected the ex turpi causa objection. The Court of Appeal considered the proper construction of the indemnity, the inclusion of pre-charge costs, and the public-policy objection.

Appeal allowed. The single judgment of Lord Justice McCombe was agreed by Lord Justice Sullivan and Lord Justice Laws.

1. Fresh evidence. The court admitted evidence under the criteria in Ladd v Marshall [1954] 1 WLR 1489. It was materially relevant to NGN’s submission that an indemnity for criminal defence costs made no commercial sense.
2. Construction of the indemnity. The reference to judicial proceedings was sufficiently wide to include criminal proceedings. The relevant boundary was whether the allegations arose from how the employee performed or attempted to perform the job, rather than from an act wholly unrelated to it. Criminality alone did not exclude the indemnity. A fraudulent claim for expenses would fall outside clause 4.6 because it would not arise from performance of the job.
3. Properly incurred costs. Applying the contractual-construction principles referred to in Investors Compensation Scheme Ltd. v West Bromwich BS [1998] 1 WLR 896, the phrase meant costs of a nature properly to be regarded as required for defending the particular proceedings. It did not require scrutiny of the merits or nature of the defence, or await the outcome of the criminal trial.
4. Pre-charge costs. The statutory contexts in R v Brentwood JJ, ex p. Jones [1979] RTR 155 and R v Elliott (1985) 81 Cr App R 115 were different. The court applied the sensible and realistic approach in R (Hale) v North Sefton JJ [2002] EWHC 257 (Admin). Advice and representation at a police station, including attendance during interview and arrangements for police bail, formed part and parcel of the criminal process for the purposes of clause 4.6. Such costs were covered even if no charge was ultimately preferred.
5. Ex turpi causa. R. Leslie Ltd. v Reliable Advertising [1915] 1 KB 652 and Askey v Golden Wine Co. Ltd. [1948] 2 All ER 35 concerned attempts to recover fines or costs imposed for breach of the law, not contractual funding of a defence. There was no public-policy objection to a private agreement providing funds for a person to defend a criminal charge.

• Court of Appeal (Civil Division): allowed the appeal from the order below.
• Queen’s Bench Division: Supperstone J dismissed the claim and ordered Mr Coulson to pay NGN’s costs in [2011] EWHC 3482(QB).