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Leveson inquiry and privacy law: kiss goodbye to kiss-and-tell

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One assumes that, when the Sun or News of the World reporters were gathering material on the peccadillos of X-Factor contestants, football stars and Formula One bosses, Article 8 of the European Convention on Human Rights was somewhat distant from their minds. This, after all, is the one that says: “Everyone has the right to respect for his private and family life, his home and his correspondence.”

So when Lord Justice Leveson during his inquiry into phone-hacking and related matters asked of former News of the World chief reporter Neville Thurlbeck: “Did anybody or did you give any thought to the Article 8 rights of the women?” meaning those in the Max Mosley affair, the answer was a little slow in coming but predictable: “There was no discussion about that.

Why would there be? After all, why let Article 8 of the European Convention on Human Rights get in the way of a good story?

But in fact Mr Thurlbeck showed the concept of privacy law was not wholly alien to him: “I would say the ‘kiss and tell’ story is now largely dead as a genre. In the last three years, we’ve taken great note of privacy matters.” There were now two questions asked of a story:  “That was the second question after ‘is it true’: ‘is it intruding into privacy?’”

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Sell the Sun: Times’s ethical options after phone hacking scandal

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Rupert Murdoch has promised to “make amends” for the damage caused by the News of the World phone hacking scandal – and he also needs to make amends to the Times newspaper, suffering reputational damage by association. The answer? Sell the Sun and create the new ethical Times – spun off from the News International empire and beyond its mephitic influence.

News International lawyers are apparently working hard on spinning off the papers so why not separate the Times and Sunday Times from their grubby stable mates – and incidentally take £45m of losses off the company’s books? Short of selling the Times to an oligarch, what are the ethical options?

Form a Trust

This would be the ultimate irony – or perhaps the ultimate revenge on the Guardian, which has brought Murdoch’s empire low with its revelations. For years the Guardian trumpeted its trust status. The Scott Trust, formed in 1936, meant the paper had no shareholders or control by an overweening Murdoch-style dictator. Instead of sale of the Times, why not put it on the same footing as its antagonist, challenging the Guardian’s role as the only ethical beast in the newspaper jungle? There is already a “Rupert Murdoch chair of language and communication” at Oxford. “Murdoch Trust” has a similarly convincing ring to it, pleasingly linking those two words in perpetuity, well after the current unpleasantness has passed (one hopes).

The then Manchester Guardian’s aims were enshrined in a trust deed: that the paper be “be carried on as nearly as may be upon the same principles as they have heretofore been conducted”. For the Times, of course, that would not do – in fact the opposite might be more appropriate: that it “be carried on upon quite different principles from those heretofore obtaining during the 30 years of News International control”.

There is a problem with a trust: the rule against perpetual trusts (or rule against inalienability). A trust transfers the beneficial interest of an asset from its owner. But the asset must vest at some point in the future – it must be realized and the trust wound up after a period of “a life in being plus 21 years” in the arcane Common Law formulation that still applies to “purpose trusts”. New rules in the Perpetuities and Accumulations Act 2009 set the term at 115 years for property trusts and those accumulating assets – which the Times is most unlikely to do.

However, there is nothing about a trust that makes it ethically or politically independent. It is simply a tax-saving device to separate (temporarily) ownership from the financial benefits of ownership.

A charity?

The exception to the rule against perpetual trusts is charities. Unfortunately producing newspapers is not a charitable activity according to the law on trusts (though some might feel that giving employment to members of the beleaguered journalistic profession is very much a charitable thing to do these days). Seeking to get round this by giving papers some moral purpose won’t work. This was established in Re Astor’s Settlement Trusts, a 1952 case in which the owners of the Observer sought to create a purpose trust with noble aims: “(i) the maintenance of good understanding between nations; (ii) the maintenance of the independence and integrity of newspapers; and (iii) the protection of newspapers from being absorbed and controlled by combines”. Would that they had succeeded – British journalism might not be in the pickle it is now. But the Astor aims did not benefit individuals, so were not charitable; and nor were they suitable to build a purpose trust around being “void for uncertainty” – not having clear objectives.

If Murdoch sought to set up a non-charitable purpose trust in which “the only beneficiaries are purposes”, who could initiate proceedings to enforce the purpose? Roxburgh J in Re Astor cited Sir William Grant in Morice v Bishop of Durham, 1804: “There must be somebody, in whose favour the court can decree performance” – someone who could make a legal claim against trustees for the benefits of the trust. It is unlikely that the Times readers would count as beneficiaries however beneficial the effect of the excellent articles in that newspaper.

Could the words of Murdoch’s advertisement apologizing for the misdemeanors of the News of the World form a starting point? He wrote: “Our business was founded on the idea that a free and open press should be a positive force in society. We need to live up to this.” He might wish to enshrine such fine sentiments in a trust deed, but it would undoubtedly be considered “void for uncertainty”.

Private company

Even if a trust could be set up it would last only for the “perpetuity period”. The Guardian had a good run as a trust (in reality not a purpose trust despite its high-flown aims) but in 2008 it opted to turn itself into a private company with its board initially made up of members of the old trust and bound by a company constitution with the previous aims. The advantage of going private for the Times would be that it could thereafter pursue its aims in perpetuity – or until the no doubt highly generous Murdoch monetary settlement upon it runs out.

Rather than selling the Times, Murdoch could hand it over to a trusted team of the great and the good. He doesn’t have a great track record on this, however. He promised in 1981 that the Times would have an independent board of such people, made similar promises in 2007 when he was negotiating to buy the Wall Street Journal and also in March 2011 when he offered to spin off Sky News into a separate entity. In the first two cases “his commitment to editorial integrity was swiftly questioned” according to the Financial Times.

This time it has to be serious, with a board comprising weighty and respected figures able to stand up to Murdoch – people with bottom such as John Prescott, a man unlikely to take any nonsense from an over-mighty magnate; or Jemima Khan, recently taken on at the Independent as an associate editor, so certainly having the experience to move up to a more challenging journalistic role – and similarly likely to be more than happy to face down a Murdoch throwing his weight around.

The MP George Galloway would be another popular choice as member of the board, and the selection of a prince of the realm such as Wills or Harry would add a certain éclat.

Mutualisation

If selling the Times and trust or charitable status are not options, perhaps the paper could go down the John Lewis route with the workers as partners sharing in the success of the enterprise. If this sounds a bit wishy-washy and liberal for the blue-in-tooth-and-claw Murdoch, then maybe the paper could start to show real support for Conservative values and the David Cameron “Big Society” agenda. All it needs to do is sack its journalists, just like at the News of the World – and then ask them to pop in to run the paper on a voluntary basis now and then.

Note:

A piece on the Leveson inquiry and privacy law is here

Two new European Court press freedom cases are discussed here

Since publication of this post in August, columnist and Murdoch biographer Michael Wolff has proposed selling the Sun to endow a Times trust here

Also since this post the Telegraph has suggested all the newspapers are to be put into a trust

Key quotes from Astor’s Settlement Trusts [1952] Ch. 534:

Roxburgh J: “The second ground upon which the relevant trusts are challenged is uncertainty. If (contrary to my view) an enumeration of purposes outside the realm of charities can take the place of an enumeration of beneficiaries, the purposes must, in my judgment, be stated in phrases which embody definite concepts and the means by which the trustees are to try to attain them must also be prescribed with a sufficient degree of certainty.” (At 547)

“The purposes must be so defined that if the trustees surrendered their discretion, the court could carry out the purposes declared, not a selection of them arrived at by eliminating those which are too uncertain to be carried out.” (At 548)

“If it were to assume this (as I think) novel jurisdiction over public but not charitable trusts it would, I believe, necessarily require the assistance of a custodian of the public interest analogous to the Attorney-General in charity cases, who would not only help to formulate schemes but could be charged with the duty of enforcing them and preventing maladministration. There is no such person. Accordingly, in my judgment, the trusts for the application of income during “the specified period” are also void for uncertainty. (At 548)

But while I have reached my decision on two separate grounds, both, I think, have their origin in a single principle, namely, that a court of equity does not recognize as valid a trust which it cannot both enforce and control. This seems to me to be good equity and good sense.” (At 549)


Hacking hack sackings: can News of the World journalists sue for reputational damages?

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So, after the News of the World sackings, how are the poor old NoW journalists, who have lost their jobs because of the phone hacking scandal, to scrape a living now?

Offer themselves to other papers? But would you employ a second-hand hack from Britain’s biggest selling toxic brand (apart from Rentokil Mouse Killer perhaps)? Maybe hawk around some of the juicier secret documents snatched from the NoW conflagration? But two wrongs don’t make a right, and the laws on handling stolen goods can be pretty strict.

So why not try suing the company for wrongful dismissal? It’s not easy, but it could be lucrative and legal. The average News of the World journalist is now a pariah – shunned and avoided in the street but more importantly, through no fault of his or her own, likely to face difficulty getting a job on a more reputable organ. So sue the Rupert Murdoch empire!

What you are looking for is “stigma damages” – the trashing of your professional reputation through association with a company that has become notorious for – let’s call it dubious practices.

The precedent is the 1997 House of Lords case Malik v Bank of Credit and Commerce International (coupled with Mahmud v BCCI).

Before we proceed we should note that there is not as yet proof that News International, owners of News of the World, or senior mangers acted illegally or can be blamed for the hacking scandal. We do know, however, that the reputation of the News of the World has collapsed sufficient for it to be closed and extensively fumigated while its employees stumble out into the harsh light of publicity and public disapprobation.

In the case of BCCI, which was closed by regulators in 1991, we know that it “had reached the point where the bank itself could be identified with dishonesty. This was a dishonest business, a corrupt business” – the words of Lord Nicholls, hearing the case.

Malik and Mahmud were senior employees made redundant by the bank’s collapse who found that “their association with BCCI placed them at a serious disadvantage in finding new jobs”, such was the scandal attached to their old employer. In the words of Lord Steyn “they were tarnished and therefore undesirable employees to recruit” despite themselves having no role in the dishonesty and corruption. But does the employer (in this case in liquidation) continue to have a legal responsibility for this loss of reputation after the employees have been dismissed? The answer is yes.

‘In agreeing to work for an employer the employee, whatever his status, cannot be taken to have agreed to work in furtherance of a dishonest business. This is as much true of a doorkeeper or cleaner as a senior executive or branch manager’ – Lord Nicholls

Let us assume there is an implied contractual duty for the employer in any firm to maintain trust and confidence among employees (there is). It follows that there is a duty to each employee that the business will be run along moral and legal lines. It would be difficult, after all, to argue the opposite – that employees should be obliged to carry on working for a company acting immorally or illegally. “In agreeing to work for an employer, the employee, whatever his status, cannot be taken to have agreed to work in furtherance of a dishonest business,” as Nicholls points out.

If the employer’s breach of that duty creates a stigma leading to lower employability for the employees, (a “handicap on the labour market because they were stigmatised by reason of their previous employment” as Nicholls put it) then on the face of it damages are recoverable for the financial loss.

Thus: “If the employer commits a breach of the term [duty to maintain trust and confidence], and in consequence the contract comes to an end prematurely, the employee loses the benefits he should have received had the contract run its course until it expired or was duly terminated.”

So it might well be that if News of the World journalists, hitherto regarded as top grade operatives despite the grubby use to which their excellent skills were put producing the paper, now find themselves shunned by other potential employers as a result of the closure brought about by management failings – kerching! They can claim wrongful dismissal and damages for lost earnings – potentially to the end of their working lives.

So it could be the employer’s conduct “prejudicially affects an employee’s future employment prospects. The conduct may diminish the employee’s attractiveness to future employers.” There are other claims such as lost career opportunities and injured feelings (yes, even News of the World hacks have feelings).

If News International comes out of this smelling of roses on the basis that it knew nothing of what was going on under its collective corporate nose, it could nevertheless be argued that its duty extended to actively creating trust and confidence by ensuring such things were not going on.

The potential flood of BCCI cases was, it must be noted, stymied by Bank of Credit and Commerce International v Munawar Ali in 1999. Here it was deemed necessary for former employees to prove actual loss, in other words show that they really could not get work or had to take lesser jobs because of the reputational damage caused by BCCI.

The reputational issue might only apply to senior staff, wholly innocent people over whom the suspicion of complicity in the hacking might nevertheless lie. But senior staff would, of course, be the ones with the biggest claims.

There is already talk of staff suing for unfair dismissal, a relatively straightforward legal remedy that could cost the company £14m, according to one estimate. In fact the legal ramifications are far from straightforward – and potentially could cost far more.

News extra: Law firm Silverman Sherliker prepares for stigma damages class action against News of the World

Related post: Times’s ethical options after NotW phone hacking scandal

Note: Nothing in Alrich’s Weblog or any posting therein, however well argued, should be taken as professional legal advice or relied on in any way

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