Mallone v BPB Industries Plc [2002] EWCA Civ 126 (19th February, 2002)

Mallone v BPB Industries Plc [2002] EWCA Civ 126 (19th February, 2002)

The directors' discretion under rule 5(b)(iii) of the share option scheme, though absolute in form, must be exercised rationally. The committee's decision to cancel Mallone's matured options was irrational, as it failed to consider that these options were vested rights earned through past service and not subject to forfeiture absent misconduct. Therefore, the cancellation was unlawful and damages were properly awarded.

Citation
[2002] EWCA Civ 126
Parties
Claimant/respondent: Giovanni Mallone; Defendant/appellant: BPB Industries plc
Jurisdiction
England and Wales
Procedural Posture
Civil Appeal / Appeal From Queen’s Bench Division to Court of Appeal
Outcome
Appeal dismissed
Legal Topics
Share Option Schemes, Exercise of Discretion, Employment Termination, Damages for Breach of Contract
Employment Law Contract Law Company Law Share Option Schemes Exercise of Discretion Employment Termination Damages for Breach of Contract

Case Brief

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Parties

Giovanni Mallone

Claimant/respondent

BPB Industries plc

Defendant/appellant

Procedural Posture

Civil Appeal / Appeal From Queen’s Bench Division to Court of Appeal

Legal Issues

  1. 1 Whether BPB's cancellation of Mallone's matured share options was lawful under the Scheme
  2. 2 Whether the directors' discretion under rule 5(b)(iii) was exercised rationally and in good faith
  3. 3 Whether the cancellation was premature given Mallone's continued directorships

Ratio Decidendi

The directors' discretion under rule 5(b)(iii) of the share option scheme, though absolute in form, must be exercised rationally. The committee's decision to cancel Mallone's matured options was irrational, as it failed to consider that these options were vested rights earned through past service and not subject to forfeiture absent misconduct. Therefore, the cancellation was unlawful and damages were properly awarded.

Court Disposition

Appeal dismissed

Orders

  • Damages of £100,636 plus interest to Mallone upheld
  • BPB to pay costs, subject to detailed assessment if not agreed