Newcastle Airport hit with £2.5m legal bill for bonus row

Newcastle Airport handed £2.5m legal bill after losing High Court battle over bonus payment agreed seven years ago

Newcastle International Airport
Newcastle International Airport

Newcastle Airport was handed a legal bill of around £2.5m – to recover just £2 worth of damages.

The airport, which has legal insurance to cover its costs, faced the huge bill after taking lawyers at Eversheds to court over a bonus payment agreed seven years ago.

Former chief executive John Parkin was effectively allowed to set his own contract and bonus after the airport’s remuneration committee showed itself incapable of taking charge of payouts.

Bosses at Newcastle Airport, majority-owned by the seven North East councils, took Eversheds to court to say it should have acted in the interest of the board and offered better advice over the controversial £8m bonus package for Mr Parkin and former finance director Lars Friis, who has since died.

The airport lost at the High Court after remuneration chairman Rosemary Radcliffe admitted before a judge that she did not read complicated legal documents, and sometimes did not even go through emails from legal advisers.

A Court of Appeal judgement handed down last week saw judges agree with Newcastle Airport that Eversheds should have sent the board a summary email advising of the deal and its implications.

But, the judges ruled, there was no evidence to suggest Ms Radcliffe would have even opened the email, and handed out damages on that point of just £2.

Eversheds said appeal judges have now analysed arguments and ordered Newcastle Airport to foot its legal bill and Eversheds’ legal bill.

A spokeswoman said: “Eversheds has been awarded costs for both the first trial and the appeal.”

An airport spokeswoman said the decision on costs would not result in a “call” on the public purse because insurance was in place.

She said: “Newcastle International Airport Ltd (NIAL) notes the decision of the Court of Appeal in respect of costs associated with NIAL’s appeal in its proceedings against Eversheds LLP.

“While disappointed at this outcome, NIAL wishes to highlight that in conjunction with its solicitors it put in place at the onset of this litigation a range of measures, including legal expenses insurance, designed to ensure there will be no call upon company finances, or the public purse, as a result of these proceedings.

“NIAL has a new management team in place that is working successfully with both its Local Authority and new AMP Capital shareholders to deliver new air routes, significant capital investment and an award winning regional airport for the North East.

“The Airport is a critical component of the regional economy, providing thousands of jobs and an economic contribution of over £640m. This will almost double by 2030 through the implementation of its Masterplan, published earlier this year.”

Appeal Court judges pointed to evidence given at the initial High Court trial which made clear that “on very many occasions Ms Radcliffe said that she did not bother to open, let alone read, attachments.”

For this reason, the court of appeal said, it was “unlikely that Ms Radcliffe would have read an Eversheds document she had not requested, and that anyway, even if she had, she would have misread the parts dealing with the refinancing bonus.”

The Court of Appeal did not reverse the previous decision that Eversheds was entitled to take instructions from the directors who had authority, and its judgement does not mean that paying the huge bonuses was an Eversheds failing. The blame there still rests with the carelessness of the remuneration committee.

Newcastle Airport ended up at the epicentre of an almighty row after new contracts signed with Mr Parkin and Mr Friis in 2006 entitled them to bonuses totalling £8m on achieving a £337m re-financing deal for the airport.

Airport bosses reacted with shock when they realised the size of the bonuses and took legal action against Mr Parkin and the estate of Mr Friis, who died of cancer later the same year.

That case was settled confidentially in October 2008.

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