Most lawyers felt unease as they watched Harriet Harman tell Andrew Marr that:
Sir Fred should not be counting on being Â£650,000 a year better off as a result of this because it’s not going to happen. The Prime Minister has said it’s not acceptable and therefore it will not be accepted. It might be enforceable in a court of law, this contract, but it’s not enforceable in the court of public opinion and that’s where the government steps in.
A video of the interview can be found here.
So what if the contract is legally binding? What if the parliament has to specially legislate to recover the money? At present the government cannot simply seize your money (or anything else) just because they want to. Lawful authority is needed. This isn’t merely an effect of new human rights legislation, it’s a fundamental part of English law. In the first-year law student case of Entick v CarringtonÂ (1765) 19 Howell’s State Trials 1030, it was said:
The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good.
This is one of the cornerstones of the British constitution – the executive can only do what the legislature has given it lawful authority to do.Â So Harriet Harman taking away Sir Fred Goodwin’s pension entitlement would be the modern equivalent of Lord Halifax, himself a Secretary of State, signing an unlawful warrant to seize Entick’s seditious newspaper articles.
So will they legislate? If parliament did pass such an Act, English law falls away as parliament is supreme. This is where European human rights would surely come into play. Article 1 to the First Protocol to the European Convention on Human Rights:
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
So any Act will need to be in ‘the public interest.’ Does anyone seriously expect that the European Courts will find that it is in the public interest to retrospectively void a lawful contract to recover an economically insignificant sum of money because it doesn’t seem particularly fair that he should receive it and the public are a bit cross?Â
This was an exceptionally foolish time for the government to suddenly stick its heels in, because unless Sir Fred throws in the towel the government will lose, however much it sticks in the throat. And by the time the government do lose, it’ll have had all the factual (and probably embarassing) evidence heard in court, risked adverse findings of fact over Lord Myners’ role, been to Europe, had years’ worth of newspaper headlines against it, and spent many many times Sir Fred’s pension entitlement into the bargain.
The employment law lesson here is that the government committed a basic mistake – negotiate someone’s severance all at once, because afterwards is too late…
Finally, it’s worth quoting Sir Fred’s letter in full, because no-one else seems to be doing so and it gives him more dignity that you’d imagine, whatever you might think of him.
Dear Lord Myners,
You telephoned me yesterday and asked me to consider voluntarily taking a material reduction in my pension entitlement as a “gesture” to acknowledge the level of Government support being made to Royal Bank of Scotland (RBS).
You highlighted that the absence of such a gesture would give rise to significant adverse media comment.
I outlined to you my view of the matter, but as I had not been expecting your call and as you expressly requested me to do so, I undertook to reflect on the matter again.
You emphasised that I would need to provide you with an answer ahead of the publication of the Group’s annual report and financial statements sometime next week.
It came therefore as something of a surprise to find that both details of forthcoming 2008 financial statement disclosures relating to my pension and the substance of our telephone conversation had been placed in the public domain a few hours after we spoke.
In the circumstances, I feel that an earlier response to your request is necessary, and the purpose of this letter is to provide that.
Whilst my pension is the current focus of attention, there were a number of other aspects of my departure from RBS which need to be considered at the same time, particularly in the context of “gestures” and appropriate behaviour.
My contract of employment provided for a 12 month notice period, which I voluntarily waived in October of last year.
This amounted to a loss of 1 years’ (sic) salary, and I discussed this with you at the time, when you indicated that it was both an appropriate and sufficient recognition of the circumstances.
Subsequent to this, you approached the chairman of the group remuneration committee to suggest that I should waive certain share related awards which would otherwise have vested upon my leaving the group.
Whilst difficult to value with precision, these had a value equivalent to about 3 months’ salary at that time.
During these discussions, I am told that the topic of my pension was specifically raised with you by both the chairman of the group remuneration committee, and the group chairman, and you indicated that you were aware of my entitlement, and that no further “gestures” would be required.
On this basis, I agreed to waive my entitlement to the share related awards and proceeded to subscribe for my full allocation of shares in the ensuing share issue.
Like you, I believed that these gestures were appropriate in the circumstances, and sufficient, and revisiting the position today, I believe that they remain so.
I accept responsibility for that which I was responsible for, and recognise that my actions must be consistent with this.
I believe that they have been, and to voluntarily accept a reduction in a pension entitlement which has been built up over many years and in other employments in addition to RBS, is not warranted.
It is important to recognise that my pension arrangements have not fundamentally altered since I joined the group in 1998.
Whilst the quantum of the “pension pot” figure has increased, this is principally as a result of the assumption used last year about retiring at age 60 no longer being appropriate. The amount which I am due to receive as a pension continues to be calculated in a manner consistent with prior years.
Whilst I suspect that you will not now agree with it, I hope you can understand my rationale for declining your request to voluntarily reduce my pension entitlement.
In conclusion, since our private conversation yesterday is now in the public domain, I have no objection to the complete content of this letter being made public.
Sir Fred Goodwin