Construction - Contractual term - Indemnity clause - Claimant found guilty of criminal acts in phone-hacking scandal

Mulcaire v News Group Newspapers Ltd: ChD (Sir Andrew Morritt): 21 December 2011

From 2002 to January 2007, the claimant had been employed through another company by the defendant media company (NGN) as a private investigator.

Subsequent claims were made by ­various individuals against the claimant and NGN, totalling 70 in number, all arising out of the claimant’s activities. Discussions regarding the payment of the claimant’s costs took place between the parties. Subsequent to those discussions, NGN sent a letter to the claimant in June 2011, which broadly agreed that the defendant would indemnify the claimant in respect of costs and damages pertaining to defending proceedings in which he and NGN were joint defendants.

The claimant did not sign or date that letter. The parties cooperated in respect of a number of actions, and the claimant’s solicitor’s fees were paid in relation to 38 actions. In July 2011, the owner of NGN gave evidence to the Culture, Media and Sport Committee of the House of Commons, indicating that NGN would stop paying the claimant’s legal fees if doing so would not constitute a breach of contract. The claimant was subsequently informed that his legal costs would no longer be paid. He commenced proceedings against NGN, alleging that NGN was contractually bound to pay those legal costs and was not entitled to terminate the indemnity.

The issues were, inter alia: (i) whether the offer contained in the letter had been open to acceptance only by its signature and dating by the claimant; (ii) whether the offer contained in the letter or that which was subsequently revived had been accepted by the subsequent conduct of the claimant and/or whether there had been a contract of indemnity on those terms formed by the conduct of both parties; if so, whether the resulting contract was (iii) terminable on notice or by reason of a conflict of interest having arisen or; (iv) contrary to public policy and void. The claim would be allowed.

(i) On the evidence, it was clear that the offer contained in the letter could have been accepted by conduct. The signature of the claimant had been sought as evidence of consent and had not been stipulated as the only method of acceptance (see [11] of the judgment).

(ii) On the evidence, it was clear that following receipt of the letter the claimant had accepted the offer contained therein and had performed his obligations thereunder. The solicitors of the claimant and NGN had clearly considered that there was a contract of indemnity between their clients. Both of them had performed it, and when it had become necessary for the terms of that contract to be considered, both of them had identified the letter as ‘the indemnity’ (see [36] of the judgment). There had been a contract of indemnity on the terms of the indemnity letter (see [36] of the judgment).

(iii) In determining whether the indemnity was terminable on notice, it was necessary to consider the context and creation of the letter. On the true construction of the letter, it would be inconsistent with the history and negotiations surrounding the letter to imply any indeterminate power of determination. Nor was there a commercial necessity to do so, since the indemnity had its own in-built limitation to the proceedings to which the parties were joint defendants, that being the voicemail interception litigation as a whole. If an indemnity was not terminable in relation to any particular claim to which both NGN and the claimant were parties, it would have made little commercial sense to limit it to that action and exclude the other or others raising comparable voicemail interception issues.

Were the contract to be construed so that the phrase ‘conflict of interest’ extended to any situation in which the wishes of the parties diverged, a power would be conferred on NGN to determine the indemnity at will. The phrase ‘conflict of interest’ had a well-recognised meaning within proceedings, and related to situations where one party sought one answer and the other party another, often opposite answer. It had not been suggested that there was any issue in any of the claims to which the claimant and NGN were joint defendants where their interests in relation to an issue or issues diverged so as to conflict (see [39]-[42] of the judgment).

The indemnity was not terminable on notice. No conflict of interest had arisen (see [46] of the judgment).

(iv) It was established law that an indemnity against civil or criminal liability resulting from the deliberate commission of a crime by the person to be indemnified was not enforceable by the criminal or his representatives. However, the mischief to which the rule regarding indemnification against a liability resulting from the deliberate commission of a crime was directed would 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 was unsuccessful (see [43]-[45], [46] of the judgment).

In the instant case, the contract of indemnity had not been and was not void on grounds of public policy or otherwise (see [46] of the judgment).

Benjamin Williams (instructed by Payne Hicks Beach) for the claimant; Alain Choo Choy QC (instructed by Allen & Overy) for NGN.