International firm Eversheds has been made to pay a nominal £2 in damages after a seven-year battle with Newcastle Airport over bonus contracts.
The Court of Appeal foundhttp://www.bailii.org/ew/cases/EWCA/Civ/2013/1514.html the firm in Newcastle International Airport Ltd vs Eversheds had breached its retainer in failing to properly advise a non-executive director, Rosemary Radcliffe, who was responsible for the contracts.
Former chief executive John Parkin and a colleague Lars Friis received a bonus package of £8m in 2006.
The airport had appealed an earlier high court ruling in favour of Eversheds, claiming for damages for alleged negligence, but its case failed in the appeal court on causation grounds.
Lord Justice Rimer, sitting with Lords Justice Moore-Bick and Underhill, said the firm was correct to say the executives had authority to negotiate their own bonuses.
He noted Eversheds should have sent a summary note advising the airport board in ‘user-friendly language’, but that the breach was not causative of ‘substantial loss’ and the blame ultimately lay with the ‘inadequate approach’ of the director to considering and understanding legal documents.
The judge said that even if Eversheds had provided a summary note, 'there is no basis upon which this court can or should conclude that the judge was wrong in holding that, even if it had led to Ms Radcliffe [achieving a change in restrictive covenants]... contracts would still have been signed containing the same refinancing bonus entitlements.’
He added that the correct formal course was to allow the airport’s appeal and substitute one paragraph of the judge’s order to make Eversheds pay nominal damages of £2.
The airport, which is 51% owned by several north east councils, could face a legal bill of several million pounds.
A separate hearing will be held regarding costs.