Legal Fee Indemnities in Compromise Agreement

[Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary]

Did an indemnity in a compromise agreement oblige an employer to pay a former employee's legal expenses associated with a criminal investigation into action alleged to have been taken by him when he was an employee?

No, says the QBD in Coulson v Newsgroup Newspapers.

Mr Andy Coulson was employed as Editor of the News of the World between 2003 and 2007. His termination agreement provided for re-imbursement of legal expenses "which arise from his having to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings as a result of his having been Editor of the News of the World".

Coulson was arrested and interviewed by the Metropolitan Police in conection with allegations of intercepting communications and making unlawful payments to police officers. He denied the allegations, was bailed, but not charged.

He claimed payment of his professional costs under the agreement. This was refused. Coulson brought proceedings for a declaration as to the effect of the agreement under part 8 of the CPR.

It was held that although the indemnity was wide ranging, seeking to protect Coulson from legal professional expenses from arising from the "ordinary occupational hazards" of being an Editor, it did not cover criminal allegations made against Coulson personally.

If that were wrong, said the trial judge (Supperstone J), the indemnity was not in any event engaged as, following the wording of the agreement, no "proceedings" had been commenced.