McCarthy v McCarthy & Stone Plc

McCarthy v McCarthy & Stone Plc

The Remuneration Committee's discretion under Rule 4.4 is two-stage: first, bona fide discretion whether to permit exercise, considering the Performance Condition; second, if permitted, the proportion exercisable must be determined pro rata to the achievement of the Performance Condition, which was 100% in this case. The Committee's reliance on irrelevant factors rendered its decision invalid. On the tax counterclaim, the Claimant is liable in restitution to reimburse the Defendant for PAYE and National Insurance paid on his behalf, as these payments discharged his primary liability.

Parties
Claimant: McCarthy; Defendant: McCarthy & Stone PLC
Jurisdiction
England and Wales
Judgment Date
20 July 2006
Procedural Posture
Civil / Judgment After Hearing of Preliminary Issue and Summary Judgment Application
Outcome
Declaration that the Remuneration Committee's decision is invalid; order for reconsideration; summary judgment for Defendant on the tax counterclaim.
Legal Topics
Share Option Schemes, Discretionary Powers, PAYE Taxation, National Insurance Contributions, Restitution, Implied Terms, Summary Judgment
Employment Law Contract Law Tax Law Share Option Schemes Discretionary Powers PAYE Taxation National Insurance Contributions Restitution +2 more

Case Brief

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Parties

McCarthy

Claimant

McCarthy & Stone PLC

Defendant

Procedural Posture

Civil / Judgment After Hearing of Preliminary Issue and Summary Judgment Application

Legal Issues

  1. 1 Proper construction of Rule 4.4 of the Share Option Plan regarding exercise of options after cessation of employment
  2. 2 Whether the Remuneration Committee's discretion was exercised lawfully
  3. 3 Whether the Claimant is liable to reimburse the Defendant for PAYE tax and National Insurance paid on his behalf

Ratio Decidendi

The Remuneration Committee's discretion under Rule 4.4 is two-stage: first, bona fide discretion whether to permit exercise, considering the Performance Condition; second, if permitted, the proportion exercisable must be determined pro rata to the achievement of the Performance Condition, which was 100% in this case. The Committee's reliance on irrelevant factors rendered its decision invalid. On the tax counterclaim, the Claimant is liable in restitution to reimburse the Defendant for PAYE and National Insurance paid on his behalf, as these payments discharged his primary liability.

Court Disposition

Declaration that the Remuneration Committee's decision is invalid; order for reconsideration; summary judgment for Defendant on the tax counterclaim.

Orders

  • Declaration that the Remuneration Committee's determination is invalid
  • Order directing the Remuneration Committee to reconsider its decision under Rule 4.4 in light of the judgment