Mulcaire v News Group Newspapers Ltd

From 2002 to 25th January 2007 the claimant (“Mr Mulcaire”) was, through his service company, employed by the defendant (“NGN”) as a private investigator. On 26th January 2007 Mr Mulcaire was sentenced to six months imprisonment in respect of convictions on guilty pleas to one count of conspiracy to intercept communications contrary to s.1(1) Criminal Law Act 1977 and five counts of unlawful interception of communications contrary to the Regulation of Investigatory Powers Act 2000. The conduct of Mr Mulcaire, of which those offences were examples, has given rise to 70 separate claims against NGN and Mr Mulcaire. The first was instituted by Gordon Taylor on 30th March 2007, the most recent by Abigail Clancy on 6th December 2011.

In relation to the claim brought by Gordon Taylor Mr Mulcaire agreed with NGN, acting by its then solicitors Farrer & Co, that, on the basis that he did not file a defence, NGN would indemnify Mr Mulcaire against any liability for costs or damages awarded against him. The other terms of that agreement were contained in a letter from Farrer & Co to Mr Mulcaire dated 9th June 2008. In due course that action was settled. The second action was instituted by Max Clifford on 28th July 2009 and served on NGN and Mr Mulcaire on 30th September 2009. On 5th January 2010 Mr Mulcaire instructed Ms Sarah Webb, then a partner in Russell Jones and Walker and since 10th January 2011 a partner in Payne Hicks Beach, to act on his behalf in connection with that claim. By a letter dated 28th January 2010 NGN, by Farrer & Co, agreed to indemnify Mr Mulcaire against the costs of opposing an application for an order requiring Mr Mulcaire to disclose on oath the identity of those who instructed him to target Max Clifford, those to whom he had supplied transcripts or recordings of intercepted calls to or from Max Clifford and those who had enabled him to obtain them. In the event the claim of Max Clifford was settled too without liability falling on Mr Mulcaire.

The third, fourth and fifth actions were commenced by Kelly Hoppen on 17th March, by Skylet Andrew on 23rd April and by Nicola Phillips on 10th May 2010. They were all served on NGN and Mr Mulcaire in May 2010. The five actions to which I have so far referred covered the same events as the five counts of unlawful interception to which Mr Mulcaire had pleaded guilty. The sixth action, and the first not the subject matter of a conviction, was commenced by Andy Gray and served on NGN and Mr Mulcaire on 8th June 2010. On that day Ms Webb wrote to Mr Pike of Farrer & Co. seeking his confirmation that NGN would meet Mr Mulcaire’s costs of the outstanding proceedings. On 11th June 2010 Mr Pike wrote to Ms Webb indicating that NGN would be prepared to meet Mr Mulcaire’s costs “always subject to review” and asking her to arrange a meeting with Mr Mulcaire. On 23rd June Ms Webb replied to the effect that Mr Mulcaire was not prepared to meet NGN until he had an unequivocal indemnity in writing against any liability for costs or damages. That letter crossed with one from Mr Pike enclosing a schedule indicating the information NGN sought from Mr Mulcaire. On 28th June Mr Pike submitted a revised proposal for providing Mr Mulcaire with an indemnity against any liability for costs and damages. Ms Webb made minor amendments to it and on 29th June Mr Pike resubmitted his revised proposals.

The letter (“the Indemnity Letter”), addressed to Ms Webb and incorporating her amendments, so resubmitted was in these terms:

“Glenn Mulcaire

Thank you for your letter of 23 June on which I have taken instructions.

In terms of moving things forward, I am instructed to make a revised proposal in relation to providing Glenn with an indemnity in respect of costs and damages.

As regards costs, NGN will agree to indemnify Glenn in respect of his legal costs and disbursements or dealing with and defending proceedings in which he and NGN are joint Defendants, including any costs order made against him, subject to:

1.

Glenn’s continued and timely co-operation in respect of all proceedings and matters which need to be dealt with in respect of each of them.

2.

Glenn and/or his lawyers informing NGN and/or its lawyers in a timely fashion of steps taken in the proceedings either by or against Glenn and, as much as is reasonably possible, to see correspondence passing between Glenn and/or his lawyers with the other parties and/or their solicitors.

3.

Glenn at all times providing NGN with information which is true to the best of his knowledge and belief (NGN acknowledging that Glenn no longer has access to documents and that there has been a passage of time since the events to which the claims relate).

4.

Any conflict of interest arising between Glenn and NGN.

5.

The amount of Glenn’s lawyers’ costs being reasonable on a solicitor and client basis.

6.

The fact of NGN providing Glenn with an agreement to his meet legal costs shall not be disclosed to any third party, including in particular any Claimant (and/or/his solicitors) in any actions brought against NGN and Glenn, save and unless either NGN has agreed to the disclosure or Glenn/his lawyers are ordered to disclose the fact of NGN agreeing to meet Glenn’s legal costs.

Turning to damages, Glenn has indicated that he requires an indemnity in respect of any Order for damages that may be made against him. I confirm NGN will pay any damages which are awarded (or it is agreed should be paid) in respect of which NGN and Glenn are jointly and severally liable.

If Glenn is in agreement with the above wording, we should be grateful if he would sign and date the enclosed copy of this letter as evidence of his consent. Please return the signed letter as soon as Glenn has signed it.”

Mr Mulcaire did not sign and date the copy of that letter whether as evidence of his consent or otherwise.

On 2nd July Ms Webb met Mr Crone, then the legal manager of NGN, at Mr Mulcaire’s request to seek from NGN further compensation for loss of his employment with NGN in return for his full co-operation in the civil litigation beyond what he was otherwise required to give. The sum she sought was £750,000. Mr Crone then went on holiday. On 19th July Ms Webb sent him an e mail asking for his response. None was forthcoming until 1st September when Mr Crone telephoned Ms Webb stating that NGN refused to pay Mr Mulcaire anything. In the meantime, it had emerged from discussions Ms Webb had had with counsel who had acted for Mr Mulcaire in connection with the criminal proceedings that the privilege against self-incrimination might be available to Mr Mulcaire as a defence to the disclosure orders claimants were seeking against him. On 6th July Ms Webb wrote to Mr Pike indicating that Mr Mulcaire was still considering the terms of the indemnity contained in the letter of 28th June. In addition she adumbrated the line of the defence of self-incrimination which might be available to Mr Mulcaire in relation to any claim which had not been subject to a conviction. She pointed out that maintenance of that defence would preclude Mr Mulcaire providing the information to anyone else including NGN.

On 9th July Ms Webb submitted her bills in respect of four claims made or anticipated against NGN and Mr Mulcaire to Mr Pike for payment by NGN. Mr Pike passed them on to Mr Crone and they were duly paid by NGN. On the same day the seventh action was started by George Galloway. On and after 12th August there was disagreement between Ms Webb and Mr Pike as to whether Mr Mulcaire should provide the information sought in the Skylet Andrew claim. NGN considered that it would be easier to settle that claim if the information had not been provided and Mr Mulcaire did not serve a defence. On 9th September Mr Pike indicated in an email to Ms Webb that service of a defence would bring into play conditions 2 and 4 of the Indemnity Letter. Ms Webb replied on the same date to the effect that it was in Mr Mulcaire’s interest that such a defence should be served and he would not provide the additional information sought but rely on his privilege against self-incrimination in relation to individuals not referred to in the original indictment. She concluded:

“We do not see that there need be an irrevocable split between our client and NGN over the matter of the disclosure in the Andrew action. Our client may be willing to continue to co-operate in the co-defending of the claims by notifying NGN of his decisions and giving prior notice of his actions, and receiving comments and suggestions upon such decisions and actions, if NGN were to continue to provide the indemnity currently in place.”

Mr Mulcaire’s defence to the Skylet Andrew claim was served on the same day.

Thereafter NGN and Mr Mulcaire co-operated in respect of the outstanding actions and Ms Webb’s fees for acting on behalf of Mr Mulcaire were paid not only in relation to the first seven actions but also the subsequent 31 commenced before 28th July 2011. On 16th November 2010 Ms Webb sought clarification of whether NGN would pay the costs of Mr Mulcaire in relation to an appeal from a ruling of Mann J. Such confirmation was given by Mr Pike on 19th November. (In the course of the hearing I gave permission to Mr Mulcaire to amend his particulars of claim to rely on this agreement as a separate indemnity. In the event no additional points were raised in relation to it. Accordingly, I have not found it necessary to consider it independently from the general issues.)

On 19th July 2011 Messrs Rupert and James Murdoch gave evidence to the Culture, Media and Sport Committee of the House of Commons. In the light of certain questions asked of them Mr Rupert Murdoch indicated that NGN would stop paying Mr Mulcaire’s legal fees if “it is not in breach of a legal contract”. On 28th July 2011 Farrer & Co wrote on behalf of NGN confirming that NGN would no longer pay the legal costs incurred by Mr Mulcaire. Mr Mulcaire contends that NGN is contractually bound to pay them and is not entitled to terminate the indemnity.

The claim form in this action was issued by Mr Mulcaire and served together with the particulars of claim on 17th August 2011. It has progressed with commendable speed with a defence and reply served on 22nd September and 21st October respectively. The issues may be summarised as follows:

I propose to deal first with issues 1 and 3. My conclusions on those issues will indicate whether and to what extent issues 2 and 4 to 6 arise. In the light of my conclusions on those issues I will deal with the seventh issue. The evidence before me was confined to the documents disclosed by the parties, the witness statement of Ms Webb and her cross-examination in respect of it. Mr Mulcaire waived privilege both in respect of communications between him and Ms Webb and in relation to without prejudice discussions between him and Ms Webb on the one hand and NGN through its solicitors and Mr Crone on the other. NGN did not waive its privilege except to the extent that it did not object to evidence, both documentary and oral, being given in relation to without prejudice discussions with Mr Mulcaire and his solicitors. I heard no evidence oral or written from Mr Mulcaire, Mr Pike or Mr Crone. NGN called no evidence. The oral evidence of Ms Webb was not questioned by counsel for NGN. I accept her evidence as that of an honest and careful witness.

The penultimate sentence of the Indemnity Letter invited Mr Mulcaire, if he was in agreement with the wording of the revised version to “sign and date the enclosed copy of this letter as evidence of his consent”. Ms Webb was then invited to return the signed letter as soon as Mr Mulcaire had signed it. Though this requirement was mentioned in the written argument of counsel for NGN, and dealt with by counsel for Mr Mulcaire in his opening submissions, counsel for NGN accepted in his oral argument that notwithstanding that requirement the offer contained in the Indemnity Letter could have been accepted by conduct. In my view that concession was correctly made. It is clear from the term I have quoted that the signature of Mr Mulcaire was only sought as evidence of consent; it was not stipulated as the only method of acceptance. It follows that the second issue summarised in paragraph 9 does not arise.

Counsel for NGN contends that the effect of the conversation of Ms Webb with Mr Crone on 2nd July, and no subsequent communication appears to have taken the matter any further, amounted to a counter-offer which, on well-known principles, constituted a rejection of the offer contained in the Indemnity Letter. He relies on the decision of Lord Langdale MR in Hyde v Wrench (1840) 3 Beav.334 which clearly establishes that proposition and has never been doubted. Counsel for Mr Mulcaire does not dispute the proposition; he denies that it is applicable on the facts. He contends that the discussions between Ms Webb and Mr Crone were collateral negotiations which did not constitute a rejection of the offer contained in the Indemnity Letter. To resolve this issue I must consider the evidence on this part of the case, in particular the oral evidence of Ms Webb, in much more detail than I have done so far.

When Mr Mulcaire left NGN in 2007 he was paid £80,000 in full and final satisfaction of all his claims. He undertook not to disclose the terms of that settlement nor thereafter to make any statement or comment which might injure, damage or impugn the good name, character or reputation of NGN. Mr Mulcaire considered that he had “carried the can” for all those involved in telephone tapping at NGN. By at least 2010 he felt that he had been badly treated by NGN when compared with others also involved in telephone tapping; as subsequently became apparent, some were paid substantially more, others retained their positions in NGN. It was in these circumstances that, as recorded by Ms Webb in paragraph 17 of her witness statement:

“..not least in the light of NGN’s promises to be fair and reasonable with him, Mr Mulcaire asked me to meet with Tom Crone and to request payment of further compensation in return for his full co-operation in the civil litigation, beyond that he was required to give in respect of it.”

Those instructions were given in the context of earlier correspondence between Ms Webb and Mr Pike. On 11th June Mr Pike offered the indemnity to meet Mr Mulcaire’s costs, but “subject to review” to which I referred in paragraph 3 above. One of the terms attached to that offer was:

“While we appreciate that Glen [Mr Mulcaire] has co-operated to date, his continued co-operation is essential. In this respect, we wish to be able to know in advance any steps in the proceedings Glen proposes to take, and, as much as is reasonable, to see correspondence passing between you and the other parties.”

In a telephone conversation on 21st June between Ms Webb and Mr Pike the former sought a list of the questions to which Mr Pike wanted the answers. Mr Pike was anxious that he should meet Mr Mulcaire to demonstrate that they were there to try and help him.

On 23rd June Mr Pike wrote to Ms Webb enclosing a schedule of questions. He indicated that these were the questions posed by Max Clifford and other claimants so that “there are no surprises”. He added:

“It is really important that Glen is able to make the meeting since we need to obtain the maximum benefit from the meeting. I think it would also be helpful for Glen to meet [Mr Crone] and me so he knows we are all on the same side and looking to minimise Glen’s future involvement.”

The schedule set out the information sought by Max Clifford by means of the disclosure order I summarised in paragraph 2 above in respect of seven actual or anticipated claimants, namely Skylet Andrew, Andy Gray, Nicola Phillips, David Davies, George Galloway, Mark Oaten and Sienna Miller. Ms Webb responded to the effect that she had passed both Mr Pike’s email and the schedule to Mr Mulcaire but that he was not available for the meeting the following day. She added:

“We will ask him to look at the schedule and try and provide the information. In the meantime, he has informed us that he will not agree to meet until he has an indemnity in writing to meet his legal costs in respect of all the matters. Whilst your letter of 11 June goes some way to assist it is not the unequivocal undertaking that he requires.”

On Monday 28th June Mr Pike sent Ms Webb “a revised offer in relation to the indemnity both in respect of…legal costs and damages”. He suggested that they should agree its terms before Ms Webb submitted it to her client. The revised offer was headed “Without prejudice for discussion” and contained a space for the signature of Mr Mulcaire. In the morning of 29th June Ms Webb spoke to Mr Pike on the telephone. She indicated that his draft was being returned with very minor amendments which should not cause a problem. Her attendance note of the conversation, which I accept as the best evidence of what was said, continues:

“I then said that at the moment Glenn was refusing to meet with them in any circumstances. I said that basically he feels let down by News Group and that he keeps saying that they have the information. He feels that this could have all been wrapped up at the time of the employment matter. Whilst he acknowledges the indemnity that they have offered, I think he actually feels that News Group should be paying him more in effect for his silence. He says he keeps having journalists banging on the door, including somebody from the New York Times. Julian [Pike] informed me that Glenn signed a confidentiality agreement when the employment matter was resolved. I said that I had not seen that and it would be extremely helpful if he could send me a copy. Julian said that he needs Glenn to comment on that schedule because News Group really don’t have the answers to it. People who did know about the matter have left, and those that remain have denied it. What they want to be able to do is to deal, as a matter of law, with the position that News Group are not responsible for exemplary damages, and then to wrap up all of the claims and try and settle…them on the basis that liability is admitted but quantum denied. He said he really cannot do that without Glenn’s co-operation. I said that I thought that Glenn was considering talking [to] the press, publicity etc, and seeing that as a better option. I said I did not share the view that it was as Glenn would lose his indemnity, he would have to take the risk that any award for damages made against him would be significantly less than any amount he would receive from the newspapers etc. But I said equally Glenn was very upset by this matter and was not feeling well-disposed towards News Group. I said that I was meeting him at 1.30 on Thursday but at the moment he didn’t want to meet them at all. Julian reiterated that he thought it would be helpful, it would show that he was being supportive of him etc.”

The revised indemnity letter was then sent by Ms Webb to Mr Pike with the two minor amendments to which she had referred. As she had anticipated, they were accepted by Mr Pike without demur. He then sent the final version of the Indemnity Letter to Ms Webb stating in a covering letter:

“if Glen does not wish to assist then, as per the indemnity letter, the indemnity is likely to be withdrawn. I hope that this will not be necessary.”

There was then a subsequent conversation between Ms Webb and Mr Pike. Her attendance note records:

“I said we really couldn’t do much without the indemnity so I can show that to Glenn, and also a copy of the confidentiality agreement. Julian said if Glenn was not going to co-operate then they would not give the indemnity. I said that was the wrong way round. They might as well give the indemnity, we can show it to Glenn to show that News Group are being supportive and then, obviously, if he doesn’t co-operate, it can be withdrawn. I said there was no point in not giving it, that was just going to make the position worse. He said he would speak to Tom and get back to me asap.”

The compromise agreements sought by Ms Webb were then e-mailed to her. In his covering email Mr Pike added:

“I do hope that you can persuade Glen to meet with us on Thursday [1st December] as the approach we are looking to adopt will also benefit him.”

The meeting with Mr Mulcaire sought by Mr Pike did not take place on Thursday 1st July or at all. On Friday 2nd July Mr Crone went to Ms Webb’s office. In her witness statement Ms Webb accepted that in the conversation between her and Mr Crone she indicated that “Mr Mulcaire was unwilling to provide the information requested unless he was paid a sum of £750,000”. The information referred to was that sought in the schedule sent by Mr Pike to Ms Webb on 23rd June I have described in paragraph 15 above. Ms Webb specifically verified paragraph 8c of Mr Mulcaire’s reply where it was asserted that:

“[Mr Mulcaire] sought additional compensation from [NGN], having learned, amongst other things, of the significantly more generous compensation paid by [NGN] to other former employees connected to telephone interception such as Mr Clive Goodman and Mr Andy Coulson.”

Ms Webb was not cross-examined about the content of her conversation with Mr Crone. She was asked about the response of Mr Crone. She indicated that his main concern was whether he could pay the sum sought without it becoming common knowledge. He wanted to keep it confidential and would consider my request.

Mr Crone then went on holiday. On Tuesday 6th July Ms Webb wrote to Mr Pike indicating that Mr Mulcaire was considering the terms of the further indemnity. She then dealt with the privilege against self-incrimination, the advice she had received from counsel and the consequence that no information could be disclosed to anyone including NGN. She concluded:

“In accordance with the terms of your indemnity of 28 June 2010 we are now preparing a note of our charges.”

On 19th July Ms Webb sent an e-mail to Mr Crone asking for his views on the conversation she had had with him before he left on holiday. On 12th August in a letter from Ms Webb to Mr Pike she referred to “correspondence that I have had previously with Tom Crone about a sum in compensation being provided to my client for him to provide in advance the information to [NGN] as required in that schedule that you previously submitted”. On the same day she e-mailed Mr Crone seeking a “response to our previous discussions”. The response came on 1st September in a telephone call from Mr Crone to Ms Webb in which he made it clear that NGN were not going to pay Mr Mulcaire anything.

In these circumstances counsel for NGN contends that the request of Ms Webb made to Mr Crone on 2nd July constituted a counter-offer and therefore a rejection of the offer contained in the Indemnity Letter. He submits that the extra £750,000 was sought as the price for the provision of the information set out in the schedule sent by Mr Pike to Ms Webb on 23rd June. He contends that such information was also required under paragraphs 1 to 3 of the Indemnity Letter. Accordingly, so he submits, the submission made on behalf of Mr Mulcaire to the effect that the discussion with Mr Crone was entirely collateral to the provision of the indemnity is unmaintainable.

It is clear that Mr Mulcaire sought to extract a sum from NGN in addition to the £80,000 he had been paid in 2007 because he considered that he had been harshly treated by comparison with others equally involved in phone tapping. That was his motive or reason for instructing Ms Webb as she records in paragraph 17 of her witness statement. But the only basis on which she could do so was as the price for information Mr Mulcaire had but NGN had not. It is clear that the information for which it was intended to be the price was, or at least included, that sought in the schedule sent by Mr Pike to Ms Webb on 23rd June. If such information was required by the Indemnity Letter also then the conversation between Mr Crone and Ms Webb on 2nd July must have constituted a counter-offer and therefore a rejection of the offer contained in the Indemnity Letter.

Counsel for Mr Mulcaire submits that paragraphs 1 to 6 of the Indemnity Letter are introduced by the words “subject to”. He submits that they are qualifications to and therefore limited by what precedes them, namely the indemnity in relation to proceedings to which Mr Mulcaire and NGN are joint defendants; accordingly they are only prospective. In addition it appears to me that each of those qualifications must be read as excluding any action or disclosure which might prejudice the defence of Mr Mulcaire to any of the claims to which the Indemnity Letter referred.

In my judgment the Indemnity Letter did not require Mr Mulcaire to provide to NGN the information sought by Mr Pike in the schedule he submitted on 23rd June. Paragraph 1 relates to continued and timely co-operation in respect of the proceedings and matters which need to be dealt with. Such co-operation did not require the provision of the information sought in the schedule particularly in relation to any claim in which the defence of self-incrimination was available. The only actual or anticipated claim to which the schedule referred where such a defence was not available was that of Skylet Andrew. That claim is still proceeding. It has not been suggested that there has been any lack of co-operation from Mr Mulcaire in relation to it.

Paragraph 2 of the Indemnity Letter deals with information as to steps taken in the proceedings. The information sought in the schedule related to events occurring long before the commencement of any of the proceedings to which the schedule referred. Paragraph 3 is not an open-ended obligation to disclose all information; merely to ensure that all information which is provided is true. Plainly paragraphs 4 to 6 are not relevant to this issue.

My conclusion does not rest only on the lack of correspondence between the information sought by the schedule and the terms of the Indemnity Letter. The discussions between Ms Webb and Mr Crone were collateral to the indemnity. Mr Pike dealt with all matters relating to the indemnity. These discussions were with Mr Crone. As legal manager of NGN his concerns no doubt went much wider than those of Mr Pike who was responsible for the conduct of the defences of NGN to claims made or anticipated. Ms Webb looked to Mr Crone for an answer. She had to wait for his return from holiday. His concern that any payment made to Mr Mulcaire should not become public knowledge was not related just to the conduct of NGN’s defence to claims made or anticipated.

For all these reasons I conclude that the discussions between Ms Webb and Mr Crone were collateral to the discussions between Ms Webb and Mr Pike. They did not constitute a counter-offer to Mr Pike’s offer contained in the Indemnity Letter nor a rejection of it. It follows that that offer remained open to acceptance by conduct of Mr Mulcaire. Accordingly, issues 4 and 5 set out in paragraph 9 do not arise.

This issue depends on the actions and statements of Ms Webb on behalf of Mr Mulcaire. I will also relate the actions and statements of Mr Pike. Not only are they the context in which to regard the actions and statements of Ms Webb but if an appellate court considered that my conclusion that the offer contained in the Indemnity Letter had not been rejected was wrong then the actions and statements of both parties would be relevant to issues 4 and 5 summarised in paragraph 9. I have sufficiently described the events leading up to and immediately following the Indemnity Letter in paragraphs 5, 6 and 13 to 20 above. Thus, in her letter of 6th July Ms Webb treated “the indemnity of 28 August 2010” as in force and on 9th July submitted her accounts in relation to the claims made or anticipated by Miller, Gray, Andrew and Galloway. In the meantime, she sent to Farrer & Co on 5th August an updated excel schedule setting out the dates in relation to the various claims. On 6th August Farrer & Co sought additional information which Ms Webb supplied on 9th August.

On 8th September Ms Webb refused to confirm to Mr Pike that Mr Mulcaire would not be serving a defence in the Andy Gray claim. The response of Mr Pike and other events I have already recorded in paragraph 6 above. On 1st October Mr Pike sought from Ms Webb estimates of her costs in relation to the Skylet Andrew, Andy Gray and George Galloway claims. On 18th October Ms Webb and Mr Pike reviewed progress on all outstanding claims. On 27th October Ms Webb sought approval from Farrer & Co for the fee of junior counsel instructed by Ms Webb on behalf of Mr Mulcaire. On 16th November Ms Webb discussed with Mr Pike an appeal from a decision of Mann J. In the light of that discussion, on 19th November, NGN agreed to indemnify Mr Mulcaire against the costs of that appeal as I have already described in paragraph 7 above. On 17th December Ms Webb wrote to Mr Pike, at his request, seeking confirmation that her move to Payne Hicks Beach “will not affect the indemnity in place. I will continue to charge at the same hourly rate”.

On 23rd February 2011 Ms Webb wrote to Mr Pike:

“I would be grateful if you would now confirm the indemnity to me in respect of costs at Payne Hicks Beach…You informally agreed to this but have asked me to set out the proposals in writing.”

She then sought Mr Pike’s approval to an increase in her hourly rate and to her use of an assistant. She enclosed copies of her costs schedules in the Coogan and Gray matters and promised to supply equivalent schedules in relation to the appeal and the Skylet Andrew matters. She ended by asking Mr Pike to advise her on what other matters he required detailed costs estimates. On 25th and 28th February Mr Pike and his assistant Ms Cordrey asked Ms Webb for certain documents and other information. It is not suggested that they were not duly supplied. In early March 2011 Ms Webb and Ms Cordrey corresponded about the identity of leading counsel to represent Mr Mulcaire in the forthcoming appeal. On 7th March 2011 Farrer & Co wrote to Ms Webb indicating that they were taking instructions in relation to the indemnity and asking for detailed costs estimates in all cases at the stage of allocation questionnaires. On 9th March Ms Webb wrote to Mr Pike giving him information in relation to a number of outstanding issues, including explanations of certain manuscript notes made by Mr Mulcaire. In addition she sent to Mr Pike detailed costs estimates in respect of the Andy Gray, George Galloway and Skylet Andrew claims.

On 16th March Ms Webb sent to Mr Pike bills for her fees in respect of all matters she had undertaken. On 26th May she asked him to pay various other bills and discussed an application to be made by Bindmans LLP. On 27th May Ms Webb submitted her bills in relation to 11 specified matters. On 1st June Mr Pike sought a breakdown of some of them. This was provided by Ms Webb on 2nd June. On 13th June Ms Webb asked Mr Bacon (of Farrer & Co) to chase up NGN “who are indemnifying us in respect of these costs” in respect of outstanding bills, including disbursements amounting to £166,516.71.

It was alleged by Mr Mulcaire and not denied by NGN that the costs of Mr Mulcaire, including counsel’s fees, paid by NGN amounted £269,305.70. Following the purported termination of the indemnity agreement on 28^th July 2011 as described in paragraph 8 above Ms Webb wrote on 8^th August 2011 protesting that NGN was not entitled to terminate it. Farrer & Co responded on 11^th August to the effect that NGN was entitled to terminate the indemnity agreement prospectively. They added:

“Our client does not dispute its liability to pay your client’s costs, and appropriate and reasonable third party costs, incurred up to the date that our client made its position clear. Our client will not pay your client’s costs, or third party costs, whether by way of wasted costs orders or otherwise, incurred after that date.”

At the time the claim form was issued it is claimed that there remained costs billed but unpaid of a further £95,531.24.

In addition to the conduct of the parties shown by the documents disclosed in the action Ms Webb dealt with the matter in her witness statement. In paragraph 25 she said:

“As required in return for the indemnity, I co-operated with NGN on Mr Mulcaire’s behalf.”

She then described that co-operation in some detail in paragraphs 26 to 37. There was no cross-examination in relation to any of those paragraphs or in relation to the events described in them.

In these circumstances, it seems to me to be clear, and I so hold, that following the Indemnity Letter Mr Mulcaire, through Ms Webb accepted the offer therein contained and performed his obligations thereunder. By the same token, NGN clearly recognised their contractual liability under the Indemnity Letter on a number of occasions. NGN performed its obligation by payment of no less than 72 invoices rendered to them by Ms Webb including a number submitted on 28^th and 29^th July 2011.

If and insofar as it might be necessary I would have concluded that there was a contract of indemnity by NGN and Mr Mulcaire on the terms of the Indemnity Letter arising from their conduct in accordance with the principles recognised by the Supreme Court in RTS Flexible Systems Ltd v Muller [2010] 1 WLR 753. The relevant principles are expressed by Lord Clarke of Stone-cum-Ebony in paragraphs 45 and 50 in these terms:

“The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement.”

In paragraph 50, he added:

“(1)

English law generally adopts an objective theory of contract formation, ignoring the subjective expectations and the unexpressed mental reservations of the parties. Instead the governing criterion is the reasonable expectations of honest sensible businessmen. (2) Contracts may come into existence, not as a result of offer and acceptance, but during and as a result of performance. (3) The fact that the transaction is executed rather than executory can be very relevant. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations and difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential. This may be so in both fully executed and partly executed transactions. (4) If a contract only comes into existence during and as a result of performance it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance.”

The propositions described in (2) and (3) are, in my view, particularly applicable to the facts of this case.

Those facts, as I have related them, show quite clearly that both Ms Webb as solicitor for Mr Mulcaire and Mr Pike as solicitor for NGN considered that there was a contract of indemnity between their respective clients. Both of them performed it. On the occasion when it was necessary for the terms of that contract to be considered both of them identified the Indemnity Letter. Thus, as I have related in paragraphs 6 and 29 above, when Mr Pike disagreed with Ms Webb in relation to service of Mr Mulcaire’s defence he wrote to her in these terms:

“I think that if you are minded to serve a defence today when you do not have to, then I think condition 4 of the indemnity comes into play. I also consider that by not notifying us until yesterday of your intended actions today, that condition 2 is also in play. Less than 24 hours notice does not accord with 2a timely fashion”.

In her reply, Ms Webb said:

“We note your comment about the removal of the indemnity. It cannot be appropriate that the indemnity is only on terms that are advantageous to your Client and disadvantageous to our Client.”

NGN seeks to justify its termination of the indemnity as being in accordance with its terms. It contends that the indemnity was terminable at will or on reasonable notice. The Indemnity Letter contains no term to that effect so NGN contends that such a term is to be implied. It submits by reference to A-G of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 paras 16 to 27 that whether the matter is regarded as one of contractual construction or of implication the essential question is the same, namely what may reasonably be presumed to have been the common intention of the parties as to the duration of the indemnity. Counsel points out that from the standpoint of June 2010 it was entirely uncertain how long the voicemail interception litigation would last, how many claimants there would be or what unforeseen and unforeseeable events might intervene.

In that context I was referred by counsel for Mr Mulcaire to the judgment of Buckley J in Re Spenborough UDC’s Agreement [1968] 1 Ch.139. In that case a contract regulating the flow of industrial effluents into a public sewer contained no power of termination notwithstanding that the agreement it replaced did. At p.147, after considering the relevant authorities, Buckley J said:

“An agreement which is silent about determination will not be determinable unless the facts of the case, such as the subject-matter of the agreement, the nature of the contract or the circumstances in which the agreement was made, support a finding that the parties intended that it should be determinable, but there is, in my judgment, no presumption one way or the other.”

In my view it is necessary to consider the context and genesis of the Indemnity Letter. It was the third form of indemnity provided to Mr Mulcaire by NGN. The first was in relation to the claim brought by Gordon Taylor in 2007. As I have described in paragraph 2 above, the indemnity was in relation to his claim alone. It was subject to Mr Mulcaire allowing the action to go by default. It extended to both costs and damages. The second was in respect of the claim brought by Max Clifford which I have described in paragraph 2 also. That indemnity related only to the costs of a specific application within the claim. Negotiations for the third commenced in June 2010 in the circumstances I have described in paragraph 3 above. The first proposal was for an indemnity “subject to review”. This was rejected on the grounds and in the circumstances I have related in that paragraph. When the first draft of the Indemnity Letter was sent by Mr Pike to Ms Webb on 28^th June he stated in the accompanying email:

“I think it is obviously important that Glenn understands the difficulty with giving him a blanket indemnity. At this stage, we have very little knowledge about the claims being made against NGN in terms of what evidence might emerge. Quite understandably, NGN therefore should, and indeed must, provide some carve outs in the event that matters transpire that make it difficult/impossible for NGN to continue to indemnify Glenn.”

The carve outs to which Mr Pike referred are paragraphs 1 to 6 of the Indemnity Letter I have quoted in paragraph 4. Thus it would be inconsistent with the previous history and negotiations to imply some indeterminate power of determination. Moreover there is not, in my judgment, any commercial necessity to do so. The indemnity has its own in-built limitation to the defence of proceedings to which NGN and Mr Mulcaire are joint defendants, that is the voicemail interception litigation as a whole. An indemnity terminable at the will of NGN, whether or not on notice, had already been rejected and would be of no protection in relation to an action which had already been started. And if an indemnity was not terminable in relation to any particular claim to which both NGN and Mr Mulcaire were parties it would make little commercial sense to limit it to that action and exclude the other or others raising comparable voicemail interception issues. In my judgment the protection for NGN, if any, must be found in the carve outs not some construction or implication inconsistent both with commercial reality and the course of the previous dealings between Mr Mulcaire and NGN.

The only provision in the Indemnity Letter on which NGN relies is paragraph 4. The conflict of interest on which NGN relies is clearly set out in paragraph 36 of the written argument of its counsel as arising from the parliamentary and

“general pressure and risks of ongoing reputational damage to NGN resulting from press articles recounting and criticising (expressly or by implication) the fact that NGN was indemnifying individuals who had been convicted in respect of the consequences of their crimes.”

It is suggested that the phrase ‘conflict of interest’ should be given a general interpretation so as to extend to any situation in which the wishes of the parties diverged.

I do not accept that submission. Such a construction of paragraph 4 would confer on NGN a power to determine the indemnity at will. For the reasons given in paragraphs 37 to 40 above I have already rejected that implication. The phrase ‘conflict of interest’ in relation to proceedings has a well recognised meaning. It relates to issues in proceedings and connotes the situation where one party seeks one answer and the other another, often but not always opposite, conclusion. It has not been suggested that there is any issue in any of the voicemail interception claims to which NGN and Mr Mulcaire are joint defendants where their interests in relation to an issue or issues now diverge so as to conflict. They are, as they always were, in it together.

Counsel for NGN relies on the well-known proposition of law that an indemnity against civil or criminal liability resulting from the deliberate commission of a crime by the person to be indemnified is not enforceable by the criminal or his representatives. The proposition is well established by the authorities to which I was referred, namely Hardy v Motor Insurers’ Bureau [1964] 2 QB 745 and Churchill Insurance v Charlton [2001] EWCA Civ 112. The rationale of the rule, as stated by Lord Denning MR in Hardy v Motor Insurers’ Bureau at p. 760 is that:

“...no person can claim indemnity or reparation for his own wilful and culpable crime. He is under a disability precluding him from imposing a claim.”

But that principle does not prevent an employer protecting himself by insurance from vicarious liability for the criminal acts of his employee, see Lancashire County Council v Municipal Mutual Insurance Ltd [1997] QB 897.

The researches of counsel failed to reveal any case in which such a principle had been applied to an agreement made after the relevant criminal event. For example, it has not been suggested that a conditional fee agreement in relation to civil proceedings arising out of a prior criminal act is contrary to public policy; quite the opposite for such an agreement rewards the advocate not the criminal even though he may be benefitted. Nor has it been suggested that for one of two joint tortfeasors liable in civil proceedings for the consequences of a prior criminal act to pay or agree to pay more than his proper share of the liability is contrary to public policy; indeed it would harm the innocent claimant if it was.

In my judgment the mischief to which this rule of public policy is directed does not include agreements concluded after the criminal event in relation to civil proceedings arising out of it so as to preclude one of the two joint tortfeasors agreeing to pay the costs of the other in defending the claim or satisfying the judgment if that defence is unsuccessful. I reject the submission that the indemnity given by NGN to Mr Mulcaire on the terms of the Indemnity Letter is void as contrary to public policy or for any other reason.

For all these reasons I conclude that:

For these reasons I will make declarations in terms to be agreed between counsel to the effect that