MccArthy v Mccarthy & Stone Plc [2007] EWCA Civ 664 (04 July 2007)

MccArthy v Mccarthy & Stone Plc [2007] EWCA Civ 664 (04 July 2007)

Rule 4.4 requires a two-stage process: the Remuneration Committee's absolute discretion applies only to the decision whether the option is exercisable; if so, the proportion must be determined pro rata to achievement of the Performance Condition, which in this case was 100%. The Remuneration Committee's determination of 75% was invalid. The Company is entitled to restitution for tax and National Insurance paid under compulsion of law, discharging the Claimant's liability.

Citation
[2007] EWCA Civ 664
Parties
Appellant: John McCarthy; Respondent: McCarthy & Stone PLC
Jurisdiction
England and Wales
Judgment Date
04 July 2007
Procedural Posture
Appeal From High Court Chancery Division / Court of Appeal Judgment
Outcome
Appeal allowed in part; cross-appeal dismissed
Legal Topics
Share Option Schemes, Discretion of Remuneration Committee, Restitution for Tax and National Insurance, Interpretation of Contractual Clauses
Contract Law Employment Law Restitution Share Option Schemes Discretion of Remuneration Committee Restitution for Tax and National Insurance Interpretation of Contractual Clauses

Case Brief

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Parties

John McCarthy

Appellant

McCarthy & Stone PLC

Respondent

Procedural Posture

Appeal From High Court Chancery Division / Court of Appeal Judgment

Legal Issues

  1. 1 Proper construction of Rule 4.4 of the Company Share Option Plan
  2. 2 Entitlement to exercise share options upon cessation of employment
  3. 3 Restitutionary claim for reimbursement of tax and National Insurance contributions

Ratio Decidendi

Rule 4.4 requires a two-stage process: the Remuneration Committee's absolute discretion applies only to the decision whether the option is exercisable; if so, the proportion must be determined pro rata to achievement of the Performance Condition, which in this case was 100%. The Remuneration Committee's determination of 75% was invalid. The Company is entitled to restitution for tax and National Insurance paid under compulsion of law, discharging the Claimant's liability.

Court Disposition

Appeal allowed in part; cross-appeal dismissed

Orders

  • Declaration that Claimant was entitled to exercise option in full prior to takeover
  • Dismissal of appeal against summary judgment for Company on counterclaim for reimbursement of £197,931.33