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Eversheds has been ordered to pay £2 in nominal damages to Newcastle International Airport (NIA) after the Court of Appeal (CoA) brought to an end a six-year court battle.
Ordering the token payment the CoA said while the firm did not cause the airport any substantive loss, it did owe NIA a duty of care.
The airport was facing a £500,000 legal bill after failing to persuade the High Court that Eversheds should take responsibility for allowing £8.5m in bonuses to be paid to two former NIA executives (29 October 2012).
It was alleged that Eversheds had allowed the two NIA directors to pocket bonuses after following instructions given by them to advise on a £377m refinancing deal with RBS.
The airport argued that Eversheds was aware that the two directors held interests distinct from the airport and that those interests conflicted with it because they were aiming to get the best possible terms in new employment contracts.
Eversheds, NIA contended, should have contacted the airport remuneration committee to check that the instruction was correct.
At the High Court Mrs Justice Proudman ruled that “Eversheds acted in good faith on the basis of the instructions which it was entitled to accept” (2 October 2012).
The CoA, however, reversed the decision, ruling that the firm should have consulted the remuneration committee, chaired by Rosemary Radcliffe, on the impact of the bonus deals.
“If such a memorandum had been provided, and had been carefully read, understood and considered by Ms Radcliffe in conjunction with a consideration of the draft contracts themselves, it is likely, if she had responded to it with proper responsibility, that she would then have convened a meeting of the RC to consider the way forward and there would have been re-negotiation of the terms reflected in the drafts,” the CoA said.
“In fact, Eversheds provided no such memorandum. I consider that in failing to do so they breached the duty of care owed to NIAL under their retainer.”
Lord Justice Rimer, however, also commented that as chair of the committee, Radcliffe should also take responsibility for the contracts.
NIA was previously ordered to pay costs pending the outcome of the appeal. It is understood that the question of costs will now be revisited by the court.
“We are pleased to confirm that the Court of Appeal has upheld the earlier decision in Eversheds’ favour that the airport executives at Newcastle International Airport (NIAL) had apparent authority to instruct Eversheds,” the firm said in a statement. ”The court also upheld the judge’s findings on causation.
“The court found that although Eversheds had been entitled to accept instructions from the executives, they should have provided an explanatory memorandum to NIAL’s Remuneration Committee. As a result, the firm has been ordered to pay nominal damages of £2. However, the CoA accepted the earlier finding that the lay chair of the remuneration committee would not have paid attention to a memorandum.”