UK High Court Hands Down Judgments In Two News Of The World Indemnity Cases

On 21 December 2011, the High Court handed down judgments in two separate, high profile and potentially important cases relating to indemnities agreed by News Group Newspapers with individuals formerly associated with its now closed newspaper, the News of the World. It was held that former News of the World editor Andy Coulson was not entitled to payment of his legal costs in relation to criminal enquiries under an agreement he had reached with his former employer. Meanwhile, in a separate judgment handed down on the same day, Glenn Mulcaire, a private investigator formerly engaged by the News of the World, succeeded in his claim to enforce an indemnity he had agreed with the same organisation. This OnPoint reports on these two decisions which are significant for those drafting and negotiating indemnities for employees and directors in a variety of situations.

Andy Coulson's claim

Mr Coulson brought proceedings against his former employer for reimbursement of legal costs incurred in taking advice with regard to potential criminal proceedings against him relating to the ongoing phone hacking controversy. An indemnity for legal costs had been agreed shortly before the termination of his employment which provided that, to the extent lawfully permitted, the employer would cover Mr Coulson in respect of fees arising rom his having to defend or appear in any "administrative, regulatory or quasi-judicial proceedings" as a result of having been Editor of the News of the World.

The dispute which the court adjudicated concerned whether this indemnity extended to legal costs incurred by Mr Coulson in relation to his arrest and interview under caution in connection with allegations of conspiracy unlawfully to intercept communications contrary to section 79 of the Regulation of Investigatory Powers Act 2000 and making unlawful payments to police officers contrary to section 1 of the Prevention of Corruption Act 1906.

The court considered a variety of arguments about the interpretation of the indemnity including the contention that the indemnity could only have been intended to protect Mr Coulson in respect of his lawful activities as Editor. Ultimately the court rejected Mr Coulson's claims on two grounds. First, in terms of its proper scope, the indemnity was found not to apply in relation to criminal proceedings against Mr Coulson personally. Second, at the stage where Mr Coulson had been arrested and bailed but not charged, no "proceedings" had been...