In Andrew Coulson v News Group Newspapers Limited [2012] EWCA 1547, the Court of Appeal overturned a decision of the High Court and held that News Group Newspapers Limited (NGN) was liable to pay Mr Coulson's legal fees for criminal proceedings against him relating to phone hacking while he was Editor of the News of the World.

On termination of his employment with NGN, Mr Coulson entered into a compromise agreement which included an indemnity to the effect that NGN would pay any reasonable professional legal costs incurred by Mr Coulson from his "having to defend, or appear in, any….proceedings as a result of his having been Editor of the News of the World".  The High Court held that the indemnity only covered Mr Coulson's lawful conduct as Editor and did not extend to payments in connection with criminal proceedings (please see our January update).  Mr Coulson appealed, and the Court of Appeal overturned the decision.  It held that the indemnity did apply where the criminal allegations arose out of how Mr Coulson had performed his job, which was the case here.  The indemnity would not apply if the allegations arose out of an act which had nothing whatsoever to do with the performance of the job.

Although this case was based on an unusual set of circumstances, it does serve as a note of caution to employers.  Careful consideration must be given to the drafting of indemnities and the circumstances in which they might later be relied on by employees.