The Court of Appeal has ruled that an employer was obliged to fund the defence of a former employee against criminal proceedings committed during his employment with the company. News Group Newspapers Limited (NGN) had entered into a compromise agreement with their former editor of the News of the World, Mr Andy Coulson. In the Agreement, NGN agreed to pay any reasonable professional costs and expenses incurred by Mr Coulson after the termination date which arose from his having to defend, or appear in any administrative, regulatory, judicial or quasi-judicial proceedings stemming from his time as editor of the News of the World.

When it was alleged in July 2011 that Mr Coulson had conspired to unlawfully intercept communications and make unlawful payments to police officers, NGN argued that the indemnity did not cover conduct outside the scope of the terms set out in Mr Coulson’s contract of employment. However, when Mr Coulson applied to the High Court for a declaration that NGN was obliged to pay the costs he incurred in defending the criminal allegations the High Court rejected his application.

On appeal, the Court of Appeal overturned this decision since:

  • It deprived the indemnity of all practical use to restrict it to lawful responsibilities.
  • Costs required in defence of these particular proceedings were properly incurred.
  • Regardless of whether the charges were brought, precharge costs fell within the indemnity.

Key Point: Employers should take care when drafting indemnities for costs incurred in relation to criminal proceedings and should work with the employee to specify the circumstances where they believe the indemnity may be called into action, so that employers are not left financially exposed.

Coulson v News Group Newspapers Limited [2012]