Newcastle Airport in Court of Appeal over blame for earlier excessive bonus payments
Newcastle Airport has been at the Court of Appeal battling to convince top judges to overrule a previous decision not to punish a law firm (Eversheds) which the airport said was to blame for under-the-radar awards to its former chief executive and finance director. The airport says contracts which handed airport bosses a controversial multi-million pound pay package were “dramatically inconsistent with the principle of fair and responsible remuneration”, a judge has heard. The airport’s leadership group NIAL suffered a stinging defeat last year when a High Court judge ruled that responsibility for the debacle lay not with Eversheds LLP but with non-executive directors sitting on the company’s remuneration committee. They had inadvertently permitted the executives to “dictate” the terms of their contracts and had not read them properly before signing them.” Newcastle airport is majority-owned by 7 North East councils, who did not know about contract negotiations & bonus deals in 2005 & 2006.
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Newcastle Airport bonus deal ‘unfair’ hears Court of Appeal judge
- by Adrian Pearson, The Journal
- Jun 20 2013
CONTRACTS which handed airport bosses a controversial multi-million pound pay package were “dramatically inconsistent with the principle of fair and responsible remuneration”, a judge has heard.
Newcastle International Airport was yesterday at the Court of Appeal battling to convince top judges to overrule a previous decision not to punish a law firm which the airport said was to blame for under-the-radar awards to its former chief executive and finance director.
The airport’s leadership group NIAL suffered a stinging defeat last year when a High Court judge ruled that responsibility for the debacle lay not with Eversheds LLP but with non-executive directors sitting on the company’s remuneration committee.
The row first developed after new contracts signed with chief executive John Parkin and finance director Lars Friis in 2006 entitled them to bonuses totalling £8m on achieving a £337m re-financing deal for the airport.
NIAL reacted with shock when it 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.
The company went on to accuse Eversheds of acting negligently in taking instructions from Mr Parkin and Mr Friis. However, clearing Eversheds of all blame last year, Mrs Justice Proudman said the firm had acted honestly and in good faith. The judge was particularly scathing of NIAL’s non-executive chair, eminent economist Rosemary Radcliffe, and said: “The real reason that NIAL suffered loss was because its non-executive directors failed to carry out their obligations to NIAL.”
Challenging that ruling yesterday, Nicholas Davidson QC acknowledged that executive remuneration is often “a thorny and controversial issue” but said the company had “followed good practice” in setting up a remuneration committee entirely made up of non-executive directors.
“Unfortunately, Eversheds took their instructions as to what the contracts should say from the executive directors and had no direct communication with any member of the remuneration committee…the separation of interests was negated.”
Insisting that “highly capable and conscientious” Ms Radcliffe had performed her role in “a logical and sensible fashion”, the barrister pointed out that she was only part time, had no office of her own within NIAL, and that she was entitled to rely on the Eversheds’ advice. Ben Patten QC, for Eversheds, said NIAL had been “comprehensively defeated” at the High Court for good reasons and that its appeal should be dismissed.
There was no duty on the law firm to go behind the apparent authority of Mr Parkin and Mr Friis to negotiate their contracts and, even had the Ms Radcliffe been directly consulted, it would have made no difference to the outcome, the barrister said.
Insisting that NIAL was “the author of its own misfortune”, the QC claimed Ms Radcliffe had permitted the executives to “dictate” the terms of their contracts and had not read them properly before signing them.
The Appeal Court hearing is due to last up to three days. Lords Justice Moore-Bick, Rimer and Underhill are expected to reserve their decision on NIAL’s appeal until a later date.
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Newcastle Airport begin last-grasp court fight over bonus blame
- The Journal
- Jun 19 2013
NEWCASTLE Airport has begun a last-gasp effort to claw back money lost when its former boss walked away with a multi-million bonus.
The airport last year lost a case against its former legal advisors Eversheds over the £8.5m paid to former chief executive John Parkin and the now deceased finance director Lars Friis relating to a huge remortgaging deal.
Last October, the law firm was cleared of any blame in the way it advised the airport over Mr Parkin’s contract.
But the airport has appealed that decision, with its case opening yesterday at the Appeal Court in London.
The row dates back to 2006 when Mr Parkin was paid £6m and Mr Friis £2.5m for securing a £377m refinancing package with the Bank of Scotland.
Those pay-outs were later reduced but the airport took court action against Eversheds, saying that the firm should not have taken instructions from Mr Parkin and that it should have known he was not allowed to negotiate his bonus terms directly.
The High Court rejected the claims, however, saying that airport’s non-executive directors failed to check legal documents sent to them and adding the head of a crucial remuneration committee had a “blindspot of massive proportions” over the bonuses.
The airport is majority-owned by the seven North East councils, who were kept in the dark for large parts of the contract negotiations in 2005 and 2006. The airport decided to appeal despite the extra cost of fresh legal action.
Yesterday a spokesman for the airport said: “As previously stated, Newcastle International Airport Limited is appealing against the High Court judgement in respect of its legal proceedings against Eversheds LLP.
“The appeal is being heard in the Court of Appeal this week and, due to the legal nature of the proceedings, Newcastle International Airport is unable to comment further at this time.”
The appeal is likely to be heard this week but a decision is not expected until later in the summer.
Last year’s ruling was heavily critical of the chair of the remuneration committee, Rosemary Radcliffe, an experienced accountant who was paid in excess of £25,000 for her role but failed to read legal advice sent to her and effectively allowed Mr Parkin to rewrite his contract.
The court case also revealed that the airport’s then part-owners, Copenhagen Airports, could have acted to warn the North East councils but failed to do so.
Copenhagen has since sold its share in the airport to Australian investment firm AMP Capital.
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Earlier
Newcastle Airport loses bonus battle with Eversheds
2.10.2012 NEWCASTLE Airport has lost its battle with a city law firm over multi-million-pound bonuses. The airport had claimed Eversheds Solicitors had failed to prevent two executive directors taking higher-than expected bonuses. A spokeswoman for Eversheds said: ““The judgment clearly states that Eversheds acted in good faith on the basis of instructions which it was entitled to accept. Furthermore it adds that the real reason Newcastle Airport suffered loss was because its non-executive directors failed to carry out their obligations to the company.“ Newcastle Airport International Ltd are suing Eversheds over bonuses awarded to former chief executive John Parkin and his then finance chief Lars Friis for securing a £377m mortgage deal linked to a re-financing package with the Bank of Scotland. Initially Mr Parkin was paid £6m and Mr Friis £2.5m, but the pay-outs were reduced later in an out-of-court settlement. At the heart of the dispute are the two contracts that underpinned the deal, which resulted in the duo receiving bonuses totalling 3% of £162m. Article …
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