Newcastle Airport legal battle is heard in High Court

A LEGAL battle between Newcastle International Airport and its lawyers over multi-million pound bonuses paid to former directors is continuing in the High Court.

John Parkin, former chief executive of Newcastle Airport

A LEGAL battle between Newcastle International Airport and its lawyers over multi-million pound bonuses paid to former directors is continuing in the High Court.

The airport is claiming that Eversheds was negligent over a deal that saw former chief executive John Parkin and former finance director Lars Friis handed the bonuses for securing a £377m mortgage as part of a refinancing deal with the Royal Bank of Scotland in 2006.

Eversheds is vigorously denying it was in breach of its duty when it accepted the mandate from the directors.

The remuneration committee of the airport – part-owned by seven local authorities – approved the deal under which Mr Parkin would get 2% of the mortgage and Mr Friis receive 1%. Up to £83m was shared between all seven local authorities under the refinancing deal. Former airport chairman Rosemary Radcliffe, who also chaired the remuneration committee, was yesterday quizzed over email exchanges between her, the airport’s legal advisers and other senior officials about the deal.

Yesterday’s hearing focused on whether the bonuses – agreed in January 2006 – to be awarded to the former directors were discretionary or not, and whether they were based on the return to the shareholders following the refinancing deal or the debt itself.

Under cross-examination by Eversheds barrister Ben Patten, Miss Radcliffe told the court that she never had “any doubt in her mind” that the bonuses were discretionary and would be based on the money distributed to shareholders.

She also told the court that in December 2006 she made enquiries about the entitlement of Mr Friis’ estate.

The court then heard exchanges of emails began, with attached documents, and telephone conversations between her and the airport’s advisers, that ultimately confirmed the obligatory nature of the bonuses and upon what they were based.

Subsequent meetings chaired by Miss Radcliffe were held at the airport, including one in December where she told colleagues that “something had gone wrong” and she was “very much concerned” by the size of the bonus.

“But I also said that it seemed to me that the advice we were getting was that we were stuck with it,” she said.

Miss Radcliffe added all those present where “shocked” by the size of the numbers being discussed.

Other colleagues were extremely concerned about the situation in that and following meetings, the court heard.

She also confirmed a telephone conversation with Mr Parkin in January 2007, urging him to reconsider his position with regard to the bonuses – with the airport keen not to get into a “fight” with someone they saw as important to its future.

But the court heard that a subsequent letter from Mr Parkin’s solicitors made it clear his view was that he was entitled to everything in his contract and a warning about how the situation could be seen that he was being constructively dismissed.

A conversation was then held with the airport’s lawyers, where Miss Radcliffe claimed Mr Parkin has been “duplicitous” in turning the situation over the refinancing deal to his advantage as it was finalised over 2006.

Questioned by the airport’s barrister, Nicholas Davidson, Miss Radcliffe also said she expected Eversheds to highlight any discussions they had had with Mr Parkin with her.

The case continues, with Mr Parkin expected to take the stand today.

 

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