Coulson v News Group Newspapers Ltd

This is an appeal from an order of 21 December 2011 of Mr Justice Supperstone, dismissing the claim of the Claimant/Appellant (“Mr Coulson”) and ordering him to pay the costs of the Defendant/Respondent (“NGN”) to be assessed. The appeal is brought by permission granted on 15 May 2012 by Lord Neuberger of Abbotsbury, Master of the Rolls (as he then was) and my Lord, Lord Justice Laws.

In the action Mr Coulson claimed against NGN a declaration that, upon the true construction of clause 4.6 of an Agreement (“the Agreement”) dated 26 February 2007 and entered into between the parties on the termination of Mr Coulson’s employment with NGN, NGN was obliged to pay the professional costs and expenses properly incurred of Mr Coulson in defending allegations of conspiracy unlawfully to intercept communications, contrary to section 79 of the Regulation of Investigatory Powers Act 2000 (“RIPA”), and making unlawful payments to police officers contrary to the Prevention of Corruption Act 1906 in respect of which he had been arrested on 8 July 2011. These allegations are referred to in the Particulars of Claim and by the judge as “the criminal allegations”; I adopt that definition in this judgment.

Clause 4.6 of the Agreement was in these terms:

In addition to the declaration Mr Coulson also claimed against NGN damages for breach of the Agreement caused by his having had to pay professional costs and expenses which should have been borne by NGN.

Mr Justice Supperstone dismissed Mr Coulson’s claims and he now appeals against that decision.

The background facts of the case are as follows.

Mr Coulson was editor of the News of the World (“NoW”) newspaper from 13 January 2003 to 28 February 2007.

In August 2006 a Mr Clive Goodman, a senior NoW employee was charged with conspiracy unlawfully to intercept communications contrary to section 79 of RIPA; a Mr Glenn Mulcaire, a private investigator hired by the NoW was charged with related offences. In November 2006 both Mr Goodman and Mr Mulcaire pleaded guilty to such offences and on 26 January 2007 they were each sentenced to a term of imprisonment. As noted above, the Agreement was made on 26 February 2007, only a month later.

On 18 November 2008 the Culture, Media and Sport Committee of the House of Commons opened an enquiry into matters relating to the “hacking” of telephone conversations which led to a report by them, published on 24 February 2010, entitled “Press Standards, Privacy and Libel”. On 7 September 2010 the Home Affairs Select Committee of the House also opened an enquiry into the issue of unauthorised tapping into or hacking of mobile telephone communications.

On 26 January 2011 the Metropolitan Police announced that it would start an investigation into telephone hacking, which became known as “Operation Weeting”.

On 10 February 2011 Ms Jo Rickards of the solicitors DLA Piper UK Limited (“DLA”) wrote to BCL Burton Copeland, then NGN’s solicitors thanking them for having referred Mr Coulson to her as a client and “to explain how [DLA] calculate … fees as your client, News International (“NI”) is responsible for Mr Coulson’s legal costs”. The letter continued as follows:

In July 2011 the Government announced the institution of a public inquiry (to be chaired by Lord Justice Leveson (“the Leveson Inquiry”) into, among other matters, unlawful conduct within newspaper organisations.

On 6 July 2011 the Metropolitan Police announced that they would also be conducting another investigation into inappropriate payments apparently made to police officers as a result of evidence found during the conduct of Operation Weeting. This further investigation has been called “Operation Elveden”.

On 8 July 2011, as already mentioned, Mr Coulson was arrested in respect of the criminal allegations.

By letter of 23 August 2011 from Mr Tom Mockridge, the Chief Executive of NI Group Limited (which I understand to be the holding company of NGN) to Mr Coulson, Mr Mockridge stated that NGN would pay for Mr Coulson’s reasonable expenses in respect of the Leveson Inquiry and the Select Committee investigations. However, he went on to state that NGN declined to provide any further assistance towards costs and expenses incurred by Mr Coulson “in defence of, or appearance in, any criminal proceedings or other proceedings relating to alleged conduct outside the scope of the terms set out in your contract of employment” i.e. not, therefore, in respect of defending the criminal allegations. The stance taken in that letter was challenged on Mr Coulson’s behalf by DLA by letter dated 30 August 2011. In a reply by letter of 5 September 2011, Allen & Overy, the solicitors now acting on behalf of NGN, confirmed NGN’s position to be that stated in Mr Mockridge’s letter of 23 August 2011.

The Claim Form in this action was issued on 22 September 2011.

The rival contentions of the parties can be shortly stated.

Mr Coulson’s submission before the judge and before us was and is that NGN’s obligation, pursuant to clause 4.6 of the Agreement, is to pay his reasonable legal costs properly incurred in all types of proceedings, including criminal proceedings, concerning his conduct as Editor of the NoW.

NGN submits that it is not obliged to pay such costs of and incidental to criminal proceedings because they are not incurred “as a result of his having been Editor of the [NoW]” but because of his own personal misconduct outside the lawful duties of an editor. Over and above its contention that, on its true construction, clause 4.6 does not impose any such obligation, NGN invokes the legal principle known as “ex turpi causa non oritur actio” (no action arises out of a base cause). In addition, before the judge, NGN argued that whatever the extent of the obligation under clause 4.6 it had not at that stage arisen in respect of the criminal allegations because there were no relevant “proceedings” on foot, as Mr Coulson had only been arrested but not charged with any offence.

That position has changed since the date of the learned judge’s judgment because, on 24 July 2012, as a result of Operation Weeting, Mr Coulson was charged with five offences of conspiracy to intercept communications. He has since appeared before the Magistrates Court and the Crown Court to face those charges. A trial date has been fixed for 26 September 2013. The police investigation called Operation Elveden, which also involves Mr Coulson, is continuing. At the time of the hearing on 8 November he remained on bail to the police in respect of that matter and was due to surrender to that bail on 20 November 2012. We have been subsequently informed that the claimant has been charged with further offences.

The argument for Mr Coulson has an attraction of simplicity. Mr Linden QC on his behalf (who appears with Mr Laddie QC) submits that the “proceedings” faced by Mr Coulson are “judicial”. Mr Coulson is to “defend” them and to “appear” in them and they “arise…as a result of his having been Editor of the [NoW]”. Mr Linden contends that the wording of clause 4.6 is wide (indeed, it could not be any broader) and, as long as the proceedings in question are a consequence or outcome of his editorship, which these proceedings are/will be, then the fees incurred in defending them are to be borne by NGN.

It is submitted that the phrase “any administrative, regulatory, judicial or quasi-judicial proceedings” was employed to demonstrate the width of the indemnity envisaged. In so far as obliged to pin his colours to the mast of any of the words used, Mr Linden submits that the proceedings after arrest but before charge were either “administrative” (being acts of the Administration) and/or “judicial” in nature (being a stage of the criminal proceedings which in turn are judicial).

Mr Jeans QC (with whom Mr Randall appears) for NGN says not so; the indemnity does not cover any of these costs. The clause was not designed to give Mr Coulson an indemnity in respect of costs incurred in defending accusations of unlawful acts which were outside the lawful activities of any editor of a newspaper. He submits that the clause’s ambit is to protect the beneficiary from expenses in defending himself against proceedings arising from the “ordinary occupational hazards” of being editor, such as libel actions and press complaint inquiries. Mr Jeans argues that an editor’s duties can only comprise lawful activity. He submits, therefore, that the costs in question are not covered by clause 4.6 on its true construction and/or as a matter of necessary implication in the Agreement and the contract of employment.

Mr Jeans invites us to note that NGN had the right summarily to dismiss Mr Coulson if he was convicted of a criminal offence, subject to very limited exceptions. Further, he adopts a point made by the Single Judge, who initially refused permission to appeal, that the phrase, “as a result of his having been Editor” could only provide the indemnity if it extended beyond conduct which was part of the job to “any conduct for which his Editorship provided the context or which would not have occurred but for his Editorship”. “That…”, said the Single Judge, “…would be an implausibly wide indemnity, not to be assumed in the absence of evidence driving the court in that direction”.

On the literal construction for which Mr Coulson contends, argues Mr Jeans, clause 4.6 would cover defence to criminal charges of which NGN was the alleged victim, e.g. a fraudulent claim to recover fictitious or improper expenses. (That was a point that impressed the judge below.) It is argued by Mr Jeans that the availability of the indemnity is not dependent either on whether Mr Coulson is convicted or acquitted of the charges in issue; it all depends upon what is alleged, not upon the ultimate outcome of the allegation.

The short submission of Mr Jeans in his skeleton argument was,

whom he no longer employs

in respect of alleged criminal activity which formed no part of his job.”

That argument has lost some of its simple attraction since we admitted into evidence a recent witness statement of Ms Rickards, who is (as mentioned above) Mr Coulson’s solicitor. She produced copies of reported statements by NGN management which indicate that NGN is providing financial support to another former editor of NoW in respect of charges faced by her in respect of the same alleged conspiracy. Mr Coulson’s solicitors asked in correspondence, in the light of those reports, whether such support was indeed being given. However, NGN refused either to confirm or deny the accuracy of the reported statements.

We heard argument from counsel on the application to admit the new statement and decided that we should do so. We said that reasons for that decision would be given in the judgments on the appeal.

It seemed to us that the evidence from Ms Rickards, which I have summarised, satisfied the criteria for the admission of fresh evidence on appeals, set out in Ladd v Marshall [1954] 1 WLR 1489. The most significant argument raised by Mr Jeans in opposition to the application was that it was irrelevant to the issue of construction raised in the action. He argued that an indemnity offered to a different former employee of NGN, even if it was being provided, could not be material on a question of construction of the Agreement now before us between the parties to this case.

Normally, I would agree with such a submission. However, in the light of the submission, quoted immediately above from NGN’s skeleton argument, which NGN maintained, it seemed to us that the evidence had a bearing on whether or not an indemnity to cover costs of criminal proceedings “made no sense” (as NGN would have it) in the circumstances of Mr Coulson’s case. We considered that the fresh evidence was obviously material to that submission based as it was upon the supposed commercial sense of the Agreement.

We informed counsel that, having admitted the fresh evidence, the court would infer that such support was indeed being given in the case of that other defendant to the same criminal allegations, unless that was denied. No such denial was forthcoming.

It is not necessary to say more at this stage about NGN’s argument that pre-charge costs are not in any event covered by clause 4.6. I shall return to that below.

As for the maxim ex turpi causa it is submitted by NGN that Mr Coulson’s claim offends against the rule that a person who is guilty of a criminal offence,

There are further refinements in the arguments on both sides which will emerge later in this judgment.

The learned judge directed himself by reference to the principles of contractual construction, stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v West Bromwich BS [1998] 1 WLR 896, 912-3 (“ICS”). That well-known passage is set out in the judge’s judgment and needs not be quoted again here. The judge found that the factual background of the Agreement which fell for construction included the contract of employment. He quoted the duties imposed upon Mr Coulson by that contract and the provision for summary dismissal upon criminal conviction. He quoted the statement of the degree of misconduct that, in law, justifies an employer summarily dismissing an employee by Lord Jauncey of Tullichettle in Neary v Dean of Westminster [1999] IRLR 288, paragraph 22.

The crux of Mr Justice Supperstone’s finding on the primary argument of construction can be found in paragraphs 29 and 30 of the judgment in these terms:

The judge also accepted NGN’s submission that, even if the clause was wide enough to cover the defence of the criminal allegations, the “proceedings” had not started at the time the matter came before him. He held that “proceedings” only start when an accused person is formally charged or possibly only when he is brought to court to answer the charge.

The judge’s short conclusion of the ex turpi causa point was this:

NGN does not dispute that the criminal proceedings which Mr Coulson proposes to defend are “judicial proceedings”. However, NGN takes two objections. It submits that they do not arise “as a result of his having been Editor” and that it has not been proved by Mr Coulson, upon whom the burden of proof rests, that the costs and expenses in question have been/will be “properly incurred”.

First, it is submitted that it is no part of the duties of an editor to perform criminal acts. Secondly, it was argued by Mr Jeans QC that it cannot be shown that the expenses have been or will be properly incurred until it is known what the nature of Mr Coulson’s defence is and before it is known whether he is convicted or acquitted of the criminal allegations. (This contrasts somewhat with the argument, already noted, that the effect of clause 4.6 cannot vary according to whether Mr Coulson is guilty or not: “Its application must depend on what is alleged” (see NGN’s skeleton argument, paragraph 46)).

Mr Linden QC for Mr Coulson points to the wide words of the clause. He submits that NGN’s argument to exclude the costs of defence works upon the assumption that Mr Coulson is guilty. It makes no allowance for the possibility, asserted by Mr Coulson, that he is innocent and that he is seeking to present a proper defence to the charges brought. The criminal case, it is said, is simply about how Mr Coulson performed his job as editor of the paper and, therefore, the costs of defending it “arise from his having to defend…judicial…proceedings as a result of his having been Editor”. The submission is that there is nothing inherently objectionable or surprising in an employer agreeing, in a severance agreement, to indemnify an employee against the cost of defending criminal allegations which arise as a result of the employment.

Mr Linden resisted being drawn into debate about possible limits to the scope of clause 4.6. His argument was that, whatever hypothetical circumstances might be imagined, the circumstances of the present charges against his client fall squarely within the terms of the clause. He argued that it was not necessary to try to identify cases that might arguably lie near the boundary of the indemnity because the defence of these presently pending proceedings falls squarely within it.

In my judgment, however, the examination of examples is helpful. It is hard to see why certain examples of the defence to criminal charges, put to counsel during argument, should not be covered by an indemnity clause, in the terms provided by clause 4.6. One such example, in the context of this very employment, was the defence to criminal charges arising out of publication of allegedly obscene material or out of publication of an article said to amount to incitement to racial hatred. Another was a defence to a charge of assault in a case where an editor had intervened to break up a fight between journalists in the employer’s newsroom and it was being said by the prosecution that his actions went beyond the bounds of lawful self-defence. Another example, in a different type of employment, was the case of a lorry driver charged with careless or dangerous driving in the course of employment who seeks to invoke an indemnity such as this on being prosecuted for the alleged offence. I can see no reason why the defendant to any of these charges should not properly have his costs borne by the employer.

The defence of each of these matters would seem to me to be the defence of proceedings “arising from … having to defend judicial… proceedings as a result of [the employment]”. There is nothing in the criminal nature of the proceedings to render it objectionable that the indemnity should apply. Once one allows within the indemnity costs of defence of some criminal charges, the scope of the indemnity cannot be defined simply by the criminal nature of the proceedings in question.

If I am right to think that there is nothing inherently objectionable in a clause such as this covering the defence of criminal proceedings as such, it seems to me that the limit has to be bounded by the question whether the criminal allegations arise out of how the employee went about the performance of his job or whether they arise out of some act having nothing whatever to do with performing the job.

The resort to examples requires me to address the example, raised by NGN, which made some impression on the learned judge. It also provides an illustration of the “limit” as I see it to be.

At paragraph 31 of the judgment, the judge was clearly of the view that clause 4.6 could not provide Mr Coulson with an indemnity against the costs of defending a criminal allegation in respect of a fraudulent claim for expenses presented to NGN during his employment. I agree, but not because the clause rules out an indemnity against the costs of criminal proceedings. The claim to such an indemnity would not arise “as a result of his having been editor…” It would have nothing whatever to do with the performance or attempted performance of his job: it would simply be a fraud. The charges which Mr Coulson now faces arise out of the allegedly criminal manner of his performance of his role as editor. If made out, the offences charged would demonstrate a dishonest complicity in telephone hacking in a misguided attempt to fulfil his duty to “obtain accurate and authentic information upon all matters and questions dealt with by [the NoW]” (clause 3.1(c) of the employment contract). Dishonest extortion of money, for expenses not genuinely incurred or incurred for a purpose not related to the employment, is not an attempt to do the job at all.

For my part, I cannot accept the judge’s view that because Mr Coulson’s duties as editor comprised only lawful duties, it cannot have been intended that activities outside his lawful responsibilities would be covered by the indemnity: paragraph 29. That would surely deprive the indemnity of all practical use. It would not even cover the editor for the costs of defending proceedings arising out of the publications of alleged libels or publications said to constitute a contempt of court, the very occupational hazards of editorship referred to by Mr Jeans in argument.

What then of the requirement that the costs and expenses must be “reasonable” and must be “properly incurred…which arise from his having to defend…etc.”? Mr Jeans submits that costs of the defence to a criminal charge cannot be “properly incurred” and a person does not “have to defend” where he is guilty of the offence.

The word “reasonable” presents no problem. That is clearly dealing with the level or quantum of costs sought to be recovered. “Properly incurred”, Mr Linden submits, implies the question whether the cost is properly incurred in defence of a charge which the accused person denies, e.g. whether one needs one counsel or two or whether a particular type of expert witness is required and the like. The limitation goes no further, Mr Linden submits, than the well known criteria on assessment of litigation costs that they should have been reasonably and properly incurred. Of course, in such cases the hypothesis on which such costs are being recovered is that the receiving party has been successful in the litigation. One must bear in mind that, on Mr Linden’s argument, the hypothesis is that the defence might be unsuccessful. In that context, is the relevant expense “properly incurred”?

It is at this stage of the argument, in my view, that the principles of construction of contracts, formulated by Lord Hoffmann in ICS, come into play. The factual background was not in dispute. First, the parties in this contract used wide words (which went well beyond the contractual indemnity contained in the contract of employment, which was confined to proceedings arising from matters published in the newspaper and was subject to other limitations). Secondly, as a matter of language it is accepted that the clause covers criminal proceedings. Thirdly, the agreement, terminating Mr Coulson’s employment, was made with him as an editor on whose watch interception of communications offences had been carried out, in and about the conduct of NoW’s business, for which two offenders had only a month earlier been sentenced to imprisonment. Indemnity against costs of a defence to criminal charges cannot have been outside the contemplation of the parties to the present agreement.

In my view, it is artificial in such circumstances to have expected that the indemnity would be subject to a scrutiny of the nature or merits of the intended defence to the charges or subject to the outcome of the trial itself. I consider that the phrase costs “properly incurred” in this contract simply means costs of a nature properly to be regarded as required in the defence of the particular proceedings in question.

For these reasons I am satisfied that clause 4.6 does cover Mr Coulson’s costs and expenses of defending the criminal allegations. However, does it cover the costs incurred pre-charge, e.g. for advice and representation on arrest and in interview with the police, for example? NGN argues that it does not.

We were referred to three cases in which the time of commencement of criminal proceedings was in issue in rather different contexts from the present. The cases were R v Brentwood JJ, ex p. Jones [1979] RTR 155, R v Elliott (1985) 81 Cr App R 115 and R (Hale) v North Sefton JJ [2002] EWHC 257 (Admin).

In the Brentwood case the issue was the date on which certain proceedings had commenced for the purposes of transitional provisions in the Criminal Law Act 1977. The Divisional Court held that where, as in that case, the defendant had been arrested without warrant, the proceedings commenced when he was taken to the police station pursuant to the arrest and was formally charged in the presence of a station officer.

In Elliott, the Criminal Division of this court held that the requirement of section 7 of the Explosive Substances Act 1883 (as amended) that,

In the North Sefton case one of the issues was whether a solicitor’s costs of attendance on his client prior to charge and after acquittal were “properly incurred in the proceedings” for the purposes of section 16 of the Prosecution of Offences Act 1985. The Divisional Court held that the former costs were, but the latter were not, within the provision. Speaking of the pre-charge costs, Auld LJ (with whom Gage J agreed) said,

Mr Justice Supperstone held that “proceedings” started for present purposes when the accused person is formally charged at the police station or when he is brought to the court to answer the charge. He held that there had been no charge and that if no charges were preferred there would never be any “proceedings”. He distinguished the North Sefton case on the basis that, in that case, there had been proceedings in court and the client had been acquitted. The pre-charge costs were therefore part of the costs of the proceedings that were eventually brought.

In respect of the charges which have now been preferred against Mr Coulson the judge’s reason for distinguishing the North Sefton case has passed and proceedings are on foot. Accordingly, if that case is applied here, the pre-charge costs would fall within the indemnity. For my part, I can see no reason why they should not.

The point, however, still has to be considered with regard to Mr Coulson’s costs in the ongoing Operation Elveden in respect of which, at the time of the hearing no charges had been preferred against him, but in respect of which he was to surrender to bail on 20 November. In my judgment, such costs also fall within clause 4.6. Advice and representation in relation to proceedings at a police station where a person is suspected of a criminal offence are for the purpose of this Agreement part and parcel of the criminal process, i.e. part and parcel of defending and appearing in “judicial proceedings”. Conduct at interview with police officers and in seeking police bail, subject to suitable conditions, is an important step in the process and cannot, in my view, be sensibly separated from events after charge. If, as I think, clause 4.6 covers costs and expenses of defending criminal proceedings, it cannot be taken to exclude costs at a pre-charge stage, even if no charges are ultimately preferred.

Nor do I consider that the doctrine of ex turpi causa is an answer to Mr Coulson’s claim. The cases to which we have been referred related to attempts by wrongdoers to recover under an indemnity fines and costs imposed for breach of the law. They did not relate to indemnities for the costs of defending oneself. There is nothing contrary to public policy in one person providing funds to another for that other to defend himself against a criminal charge: the Criminal Defence Service does it all the time. I can see no objection to private persons agreeing to do so for consideration.

For these reasons, I would allow the appeal.

I agree.

I agree.