Newcastle International Airport Limited v Eversheds LLP 2012 EWHC648
This was a negligence case concerning solicitors Eversheds who accepted instructions from a director to draft a service contract that awarded him a substantial bonus. The court held that the solicitors were not negligent in accepting his instructions even though they knew that his remuneration had to be determined by the remuneration committee of the company. The director had had apparent authority to instruct Eversheds who were entitled to rely on this holding out. The non-executive director who chaired the remuneration committee had as a matter of choice left all the contact between the airport and Eversheds to the directors.
Although the new service contract drafted by Eversheds gave the airport director a siginificant bonus as part of a refinancing deal, the firm argued successfully that there was no duty to check whether the directors had apparent authority to give them instructions. Eversheds also denied there was a conflict between the non-executive director and the directors. The judge agreed. The judge added that even if there had been breach of duty by Eversheds the whole of the subsequent loss suffered by the airport would have arisen purely from the non-executive director's failings.
Key point: Solicitors are not required to check the word of those instructing them and can rely on the apparently authorised agents of the company - the executive directors - when drafting service agreements.
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