When faced with a complex legal document (the new procedural rules, being one example), it is often tempting to skim read and shrug off any incomprehensible sections, in the hope that they are not important. Newcastle International Airport Limited v Eversheds LLP ( EWCA Civ 1514) demonstrates why it pays to press ahead – in a darkened room, with a wet towel over your head if needs be.
In this case, Eversheds was instructed to draft new service contracts for executive directors by the executives themselves. It was only when one of the executives died that the Airport realised the new contract entitled his estate to bonuses totalling £8m. Described in the Newcastle press as a ‘bonanza’, the Court of Appeal stated that when this issue came to light, it understandably caused “considerable consternation”.
In order to recoup part of the payment, the Airport pursued a professional negligence claim against Eversheds. The Airport’s claim was dismissed at first instance. On appeal, the Court of Appeal found that the new contracts should have been accompanied by a written explanation to the Airport, in user-friendly language, of their terms and effect. Thereby ensuring that Eversheds’ client – the Airport – was provided with advice directly, and not merely through the intermediary of its executives, whose interests conflicted with that of the Airport.
However, the Court held that it was unlikely that the chair of the company's remuneration committee would have read the memorandum, even if it had been provided. Consequently, the claim failed on causation grounds.
Newcastle International Airport Limited v Eversheds LLP provides a number of salutary lessons. First, to non-lawyers it shows the importance of reading key legal documents and of seeking assistance in understanding their contents. To lawyers, it reminds us to draft documents in plain English, where possible. It also demonstrates how crucial it is to assess causation in light of what the witnesses’ actual conduct indicates about their likely hypothetical behaviour. In this claim, the courts’ view on causation relied heavily on a litany of documents, which the remuneration committee’s chair had not read or not read adequately.