McCarthy v McCarthy & Stone Plc [2006] EWHC 1851 (Ch) (20 July 2006)

McCarthy v McCarthy & Stone Plc [2006] EWHC 1851 (Ch) (20 July 2006)

Rule 4.4 requires the Remuneration Committee to exercise an absolute discretion at stage one as to whether options are exercisable, considering the Performance Condition and bona fide relevant factors. If discretion is exercised, the proportion of options exercisable must be determined strictly pro rata to the achievement of the Performance Condition, which was 100% in this case. The Committee's decision to limit exercise to 75% based on extraneous factors was unlawful. However, the appropriate remedy is to declare the Committee's decision invalid and remit the matter for reconsideration, not to grant the Claimant the full relief sought. On the tax counterclaim, the Claimant is liable in...

Citation
[2006] EWHC 1851 (Ch)
Parties
Claimant: McCarthy; Defendant: McCarthy & Stone PLC
Jurisdiction
England and Wales
Judgment Date
20 July 2006
Procedural Posture
Chancery Division Company/employment/contract / Judgment on Preliminary Issue and Summary Judgment Application
Outcome
Claimant succeeds on construction of Rule 4.4; Defendant succeeds on counterclaim for reimbursement of tax and NI.
Legal Topics
Share Option Schemes, Exercise of Discretion, PAYE Taxation, National Insurance Contributions, Restitution/quasi Contract
Employment Law Contract Law Tax Law Equity and Trusts Share Option Schemes Exercise of Discretion PAYE Taxation National Insurance Contributions +1 more

Case Brief

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Parties

McCarthy

Claimant

McCarthy & Stone PLC

Defendant

Procedural Posture

Chancery Division Company/employment/contract / Judgment on Preliminary Issue and Summary Judgment Application

Legal Issues

  1. 1 Proper construction of Rule 4.4 of the McCarthy & Stone PLC Company Share Option Plan (Unapproved) 2000
  2. 2 Whether the Remuneration Committee's discretion was exercised lawfully
  3. 3 Whether the Claimant is entitled to exercise 100% of his share options

Ratio Decidendi

Rule 4.4 requires the Remuneration Committee to exercise an absolute discretion at stage one as to whether options are exercisable, considering the Performance Condition and bona fide relevant factors. If discretion is exercised, the proportion of options exercisable must be determined strictly pro rata to the achievement of the Performance Condition, which was 100% in this case. The Committee's decision to limit exercise to 75% based on extraneous factors was unlawful. However, the appropriate remedy is to declare the Committee's decision invalid and remit the matter for reconsideration, not to grant the Claimant the full relief sought. On the tax counterclaim, the Claimant is liable in...

Court Disposition

Claimant succeeds on construction of Rule 4.4; Defendant succeeds on counterclaim for reimbursement of tax and NI.

Orders

  • Declaration that the Remuneration Committee's determination is invalid; order for reconsideration under Rule 4.4 in light of the judgment.
  • Judgment for the Defendant on the counterclaim for £197,931.33 for PAYE tax and National Insurance.