The documents also show the ferry operator pursued a settlement agreement after concluding it would be cheaper to pay off the chief executive than fight a potentially damaging employment tribunal case.
The disclosure comes after The Herald revealed that Mr Drummond, who was ‘sacked’ in April 2024, received annual earnings of £175,000 despite being removed from his post just three days into the 2024/25 financial year.
His final pay packet included a huge “golden goodbye” settlement and six months’ paid notice, which itself breached strict public-sector severance rules designed to protect taxpayers.
CalMac has now been ordered to produce a retrospective business case explaining the massive payout which will go to Transport Secretary Fiona Hyslop.
Scottish Liberal Democrat MSP Jamie Greene, who has been tracking the issues around Robbie Drummond’s departure, said ministers should account to parliament over why there was a breach of the rules over payments for legal costs.
The latest documents reveal that behind the scenes, CalMac’s leadership was attempting to strike a deal that would prevent a legal battle over the circumstances of Mr Drummond’s removal.
In internal correspondence, CalMac told government officials it wanted to pursue a settlement agreement in order to avoid the risk and cost of litigation.
“The costs of defending a claim for unfair dismissal, plus the value of any likely award, would significantly outweigh the proposed settlement terms,” the ferry operator argued in its business case which was seen by both the Scottish Government and its Transport Scotland agency.
The board concluded that paying off its former chief executive would represent “value for money” when compared with the potential financial and reputational cost of a tribunal.
Officials in the Scottish Government’s Transport Scotland agency appeared to accept the logic of the argument.
They concluded that the proposed package was “less than the weighted costs of defending the case” and therefore indicated they would not object to the settlement being pursued.
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But the internal papers also show that the deal required bending — and ultimately breaking — elements of the Scottish Government’s own spending rules.
One example involves the payment of legal fees for Mr Drummond.
Under the Scottish Public Finance Manual, public bodies can normally provide up to £600 to help an employee obtain independent legal advice when negotiating a settlement agreement.
Yet the documents show that Mr Drummond’s legal costs were far higher.
In a message discussing the terms of the deal, CalMac’s managing director Duncan Mackison acknowledged that the proposed payment for legal assistance would exceed the cap.
But he said: “We do not consider it in the interest of CalMac or … that his case is litigated in a public forum.”
CalMac chief executive Duncan Mackison supported the payment of Robbie Drummond’s legal fees. (Image: Newsquest)
He said the legal fees had reached £5,570 — more than nine times the permitted limit.
However, he argued that making an exception was necessary to secure the agreement.
“In the exceptional circumstances of this case, we firmly believe it is in the interests of all parties that the deal be structured to accommodate this minor alteration,” he wrote in an email to Transport Scotland detailing the settlement agreement.
Mr Mackison added that the approach was justified if it meant the dispute could be resolved quickly and without the risk of litigation.
The legal costs element was included in a business case forwarded to the Scottish Government and Transport Scotland and was sent to ministers for their views.
And Mr Mackison warned: “If we cannot resolve the case on this basis, then it is likely we will face protracted litigation.
Transport Scotland maritime director Gary Cox responded to the legal costs saying: “We recognise the need for pragmatism to achieve an acceptable outcome…”
In his email to Mr Mackison he said that he would “need to be comfortable in explaining the rationale for that variation if asked at some point in the future…”
Scottish Liberal Democrat MSP Jamie Greene said: “If CalMac and the Scottish Government weren’t confident in their ability to win an unfair dismissal case, then it begs the question of why Mr Drummond was dismissed in the first place.
“The rules are there to make sure taxpayer’s money is used fairly and responsibly, and they shouldn’t be bent or broken by ministers to avoid embarrassing employment tribunals.
“Ministers must explain to Parliament why [it was felt] appropriate to breach the rules on this occasion and lay out exactly what was known and when.”
Ms Hyslop has said that the level of pay off did not go to ministers for approval, breaching the Scottish Government public sector severance rules, which she said was “entirely unsatisfactory”.
Details of the severance formed part of a settlement that was kept confidential for nearly two years by the ferry operator.
It included not just paid gardening leave for six months estimated to be worth over £100,000 but also £48,000 compensation for “loss of office” despite having his contract terminated.
The Scottish Government’s public finance manual over the proper handling and reporting of public funds that sets out severance policy states exit payments in public bodies “must be capped at £95,000” and includes both contractual and non-contractual elements.
Under Scottish Government financial guidance, if there are “compelling” reasons that the cap cannot be applied, a full business case has to be submitted and ministerial views sought.
CalMac had initially insisted that the settlement agreement would be bang on the threshold of £95,000 – but ministers said that this figure did not include over £12,000 accrued holiday pay. That took the pay over the threshold and Ms Hyslop said they should have sought ministerial approval.
But the documents reveal that the legal-fee breach was only one element of a much larger problem.
Video: MSP Jamie Greene speaks out about the latest CalMac controversy.
In correspondence sent to CalMac earlier this year, Transport Scotland confirmed the accrued unused holiday payment should have been counted as part of the settlement agreement.
It said the omission meant the deal had gone beyond the permitted cap without the required ministerial sign-off.
“This is potentially a serious breach of the Scottish Public Finance Manual,” the letter warned.
The intervention came after months of mounting political and media scrutiny over the secretive payout.
The documents also reveal that officials have told the ferry operator they would need a detailed explanation of why the rules were not followed and how the payout had been justified.
The revelation that the legal-fee cap was knowingly exceeded — while other elements of the payout were incorrectly calculated — intensified criticism of the ferry operator and the oversight of Scotland’s ferry network.
The deal was struck against a backdrop of growing anger over the state of ferry services serving island communities.
How the Herald on Sunday broke the story (Image: NQ)
One ferry user group official said the documents reinforced concerns that public bodies were not being held properly accountable.
He said: “It has been a longstanding gripe amongst many of us that we get a ‘nothing to see’ approach about the handling of our ferry services. Allowing the breaches of rules over public finances add weight to concerns that head should roll in this ongoing fiasco.”
CalMac details showed that Mr Drummond was placed on paid six months ‘gardening leave’, for which he was paid, after the board made a “unanimous decision” to terminate his contract. The Herald was told that there was no formal board vote.
In 2023/24, the year before he had his contract terminated, Mr Drummond received total remuneration of £238,000 in 2023/24 including a basic salary of £173,000 and £52,000 in employer’s pension contribution.
CalMac had said he was “entitled to a six month notice period” for which he was paid his monthly salary.
The gardening leave was for the “duration of his contractual notice period” during which he would “remain on the Caledonian MacBrayne payroll”.
The Herald previously revealed how Scotland’s official anti-secrecy regulator ruled that CalMac had broken transparency laws by wrongly hiding the full extent of the severance package, after forcing him out.
A Transport Scotland spokesman said: “The final decision on whether to enter into a settlement agreement lies with the accountable officer of the public body at the time, taking value for money into account.
“The Cabinet Secretary for Transport has been clear on this matter, this decision should have then come to ministers and the process followed was wholly unsatisfactory. CalMac confirmed it did not seek approval for the settlement figure and have acknowledged that due process was not followed in this case.
“Transport Scotland has written to the CalMac chief executive and chairman to reiterate the need to comply with the Scottish Public Finance Manual. Both bodies will work together to ensure procedures and expectations are clearly understood.”
CalMac was approached for comment.
