MccArthy v Mccarthy & Stone Plc

MccArthy v Mccarthy & Stone Plc

Rule 4.4 of the Company Share Option Plan requires a two-stage process: the Remuneration Committee has absolute discretion to determine whether the option is exercisable, but if so, the proportion exercisable must be determined solely by reference to the extent to which the Performance Condition has been achieved. Where the Performance Condition is fully achieved, the only permissible outcome is that the option is exercisable in full. The Committee's determination to allow only 75% was invalid. The company is entitled to reimbursement for income tax and National Insurance paid on the claimant's behalf, as these were the claimant's liabilities discharged by the company under compulsion of...

Parties
Appellant/claimant: John McCarthy; Respondent/defendant: McCarthy & Stone PLC
Jurisdiction
England and Wales
Judgment Date
04 July 2007
Procedural Posture
Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal
Outcome
appeal allowed in part, cross-appeal dismissed
Legal Topics
Share Options, Remuneration Committee Discretion, Restitution for Money Paid, Tax and National Insurance Liability
Contract Law Employment Law Company Law Share Options Remuneration Committee Discretion Restitution for Money Paid Tax and National Insurance Liability

Case Brief

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Parties

John McCarthy

Appellant/claimant

McCarthy & Stone PLC

Respondent/defendant

Procedural Posture

Civil Appeal / Appeal From High Court (chancery Division) to Court of Appeal

Legal Issues

  1. 1 Proper construction of Rule 4.4 of the Company Share Option Plan
  2. 2 Whether the Remuneration Committee's determination was valid
  3. 3 Entitlement to exercise share options in full

Ratio Decidendi

Rule 4.4 of the Company Share Option Plan requires a two-stage process: the Remuneration Committee has absolute discretion to determine whether the option is exercisable, but if so, the proportion exercisable must be determined solely by reference to the extent to which the Performance Condition has been achieved. Where the Performance Condition is fully achieved, the only permissible outcome is that the option is exercisable in full. The Committee's determination to allow only 75% was invalid. The company is entitled to reimbursement for income tax and National Insurance paid on the claimant's behalf, as these were the claimant's liabilities discharged by the company under compulsion of...

Court Disposition

appeal allowed in part, cross-appeal dismissed

Orders

  • Paragraphs 1 and 2 of the High Court order set aside; declaration granted that claimant was entitled to exercise the option in full prior to the takeover
  • Appeal against summary judgment on the counterclaim dismissed; company entitled to reimbursement of £197,931.33