Neutral Citation Number: [2006] EWHC 1851 (Ch)
Case No: HC05C01270
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 20/07/2006

Before :

MR JUSTICE PETER SMITH
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Between :

	McCarthy	Claimant	
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	McCarthy & Stone PLC 	Defendant	

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Derek Sweeting QC & Jeffrey Jupp (instructed by Clarke Wilmott) for the Claimant
James Goudie QC  & Martin Griffiths (instructed by Travers Smith) for the Defendant

Hearing dates: 11th July 2006
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Judgment
Peter Smith J : 
INTRODUCTION
1.	This judgment arises out of a hearing on two matters:-
	1)	A preliminary issue by order of Master Bragge dated 15th February 2006 “to 	determine whether on its true construction of Rule 4.4 of Part B of 	the 	McCarthy & Stone PLC Company Share Option Plan (Unapproved) 2000 	(“the 	Share Option Plan”) has the meaning and effect set out in paragraph 12 of 	the Particulars of Claim and if so 	whether the Claimant is entitled to the 	declaration of support” 
	2)	An application for summary judgment brought by the Defendant on the 	grounds that it believes that the Claimant’s Defence to its Counterclaim has no 	real prospect of success and there is no other reason why it should await trial.
BACKGROUND
2.	The Claimant was a director and latterly an employee of the Defendant until December 2003.
3.	The Defendant operated two Share Option Schemes.  The first was the Executive Share Option Scheme (the 1996 scheme) which was adopted on 16th January 1996.  The second was the 2000 Scheme which was adopted on 10th November 2000.
4.	After his retirement the Claimant sought to exercise his share options.  He gave notice on 22nd November 2004 that he wished to exercise his option over 138,786 shares which had been granted on 21st November 2000.  There was an initial denial of entitlement but ultimately the Defendant’s Remuneration Committee in January 2005 allowed the Claimant to exercise his option over 75% of the shares granted to him.
5.	The relevant rule (4.4) is as follows:-
“Where an Option Holder ceases to hold any office or employment the Remuneration Committee shall in its absolute discretion determine whether the Option will be exercisable having considered the extent to which the Performance Condition has been achieved at the date of termination.  If the Remuneration Committee so decides the Option Holder may exercise all or a proportion of his Option(s) during the period which begins on the date of such cessation and ends twelve months later, such proportion being determined by the Remuneration Committee pro rata to the achievement of the Performance Condition”.
6.	It is necessary to elaborate a little on the Scheme Rules.
7.	In the rules “Performance Condition” is defined as “the objective Performance Condition which must be met before Options may be exercised”.  The objective condition is where the increase in earnings per share in the performance period is equal to 10% or greater than 10% per year above the level of the rate of inflation.  The performance period was three consecutive financial years of the company commencing on 1st September 2000 i.e. expiring on 1st September 2003. 
8.	The Performance Condition was satisfied and it was satisfied before the Claimant left his employment with the Company.  It will also be seen that the Performance Condition is linked to the overall increase in the earnings per share of the Company during the Performance Period.  It is not a performance that is personally linked to the Claimant.  This is not surprising given his role in the Defendant.  His role would be the directing force presumably which would lead to the increase in the value of the shares over the relevant period.  That is important because it is necessary in that context to examine the reasons the Remuneration Committee gave for not entitling the Claimant to a 100% exercise over his Share Options.  
9.	Under rule 2.3 the Options are only exercisable following the attainment of the Performance Condition.  There is an overriding power (rule 2.4) when events happen which cause the Directors to consider that the Performance Conditions become unfair or impractical.  In that eventuality they can amend, relax, waive or substitute such Performance Conditions and issue a replacement Option Certificate or other notice.  It is not permissible under that rule to impose more onerous conditions.  
RIGHTS OF EXERCISE
10.	The Option may not be exercised before whichever is the later of the 3rd anniversary of the Date of Grant or any date which has been specified in the Option Certificate or it can be ascertained that the Performance Condition has been achieved.
11.	Rule 4.2 provides that save as set out in 4.3, 4.4 and 5.6, an Option may only be exercised by an Option Holder whilst he is a Director or employee of a Group Company.
12.	Rule 4.3 gives an absolute right to a personal representative of a deceased Option Holder to exercise an Option during the period of one year following the date of death.  This is somewhat surprising when one looks at the elaborate provision of 4.4 which applies when the Option Holder has ceased to be in employment or hold any office.  If that cesser occurred by reason of death none of the complications created by this case would arise. 
13.	Rule 5.6 is a variation which applies when there are changes of control, Schemes of Arrangements or compulsory acquisitions or there is a winding up.  Clearly that has no implication to the present dispute.
DECISION OF REMUNERATION COMMITTEE
14.	The Remuneration Committee met on 17th January 2005.  It does not have any lawyers in its composition but that is a bad point because it acted with the benefit of legal advice as the minute shows.  The minute shows that, after reporting the request to exercise and summarising the rule and being mindful of the fact that the Performance Condition had been exceeded, the decision is as follows:-
“The Committee discussed the circumstances surrounding the approach made on behalf of the McCarthy family interests in June 2003.  In making the approach JSM had allied himself with the interests of a competing business.  He had not been in a position to make any material contribution to the performance of the Company or the achievement of the Performance Condition from the date the approach was made.  The results of the approach had been very considerable disruption to the normal operations of the Board, a risk to the morale and retention of staff, and a cost to the Company in terms of legal and professional fees in the order of £300k.  At the time the approach was withdrawn JSM, whilst still a Director of the Company, had been responsible for a press announcement suggesting that the shares in the Company were over-valued.  Further, prior to termination of his employment he had circulated an email message to staff in terms which implied that their interests would be better served by joining the competing business of which he indicated he had agreed to become a Director.
After discussion of the conduct of JSM and the proper weight to be given to the achievement of the Performance Condition, IT WAS RESOLVED by the Committee in exercise of its absolute discretion under Rule 4.4 that the notice of exercise dated 22 December 2004 served on behalf of JSM be accepted as a valid notice of exercise in respect of 75% of the options granted to JSM under the 2000 Unapproved Plan, that is to say that the exercise of options by JSM be regarded as valid over 104,089 shares at an exercise price of 267.5 pence per share”.
15.	It would be seen that the Committee considered that an approach had been made by the McCarthy family interests (the Claimant’s family) to acquire the shares.  They concluded that the Claimant had allied himself with interests of a competing business in June 2003 and had not been in a position to make any material contribution to the performance of the Company or the achievement of the Performance Condition from the date the approach was made.  It is suggested that that caused considerable disruption to the operations of the Board affecting morale and cost the Company £300,000.  
16.	The Claimant disputes these matters.  It is of course to be appreciated that the Performance Condition was achieved despite these matters and that the Performance Condition is not a personal performance indicator addressed to the Claimant.  Finally the Performance Condition is over 3 years and the alleged disruption was for 3 months.  If the reduction was by 25% on an apportionment basis that is far too high.  The minute does not say how the Remuneration Committee arrived at the figure of 75%.
CLAIMANT’S SUBMISSIONS
17.	The Claimant in essence contends that the Remuneration Committee has to perform a twofold exercise.  First (looking at the first sentence of clause 4.4) it has an absolute discretion to determine whether the option will be exercisable “having considered the extent to which the Performance Condition has been achieved at the date of termination”.  
18.	Mr Sweeting QC, who with Mr Jupp appears for the Claimant acknowledges that in that exercise the satisfaction of the Performance Condition is not anything other than an important but not determinative factor that can be taken into account.  He also concedes that they have an absolute discretion which cannot be challenged provided they are bona fide in their decision not to exercise.  It was unclear to me precisely what he said about the other factors.  At some stage during the course of his submissions he appeared to accept that a bona fide belief in the factors referred to in the minute (although disputed) could be considered by the Remuneration Committee at this first stage.  Later in his submissions he retreated from that view.
19.	After the first stage his submission is that the second sentence of rule 4.4 operates so that the Remuneration Committee then determines the proportion of the Option Holder shares “pro rata to the achievement of the Performance Condition”.  
20.	He submits that primarily the purpose of rule 4.4 is to deal with the fact that an Option Holder might cease to be an employee or officer before the Performance Condition has been satisfied.  Thus it would be unfair if the Performance Condition (for example) had been substantially satisfied but he would lose all rights when his employment ceased.  On analysis of course that could happen even if he ceased to be an employee by virtue of being wrongfully dismissed by the Defendant: see for example Thompson v Asda-MFI Group [1988] Ch 241 and Micklefield v SAC Technology Ltd [1990] 1 WLR 1002 and compare Levett v Biotrace [1999] ICR 818.
21.	Thus he submits that if the Remuneration Committee exercise their absolute discretion at stage 1, they then go on to consider the extent to which the option should be allowed.  At that stage the wording of the second sentence means there is in reality no discretion; they are simply required to “determine” the extent of exercise allowed pro rata to the Performance Condition.  In the case of the present situation where the Performance Condition has been completely satisfied the determination can only be to 100%.  There will of course be a far different exercise in the most usual case where the Performance Condition has only been partially satisfied.  In that eventuality the Remuneration Committee will have to assess the extent to which the condition has now been satisfied (it will be observed there are no criteria set out in rule 4.4).  
22.	Either way Mr Sweeting QC submits that it is impermissible in deciding the appropriate percentage to introduce the factors which the Remuneration Committee relied upon.  It is impermissible because they are irrelevant to the question it can ask namely “what is the pro rata figure measured against the Performance Condition being satisfied?”
CONSEQUENCES
23.	The Claimant by his claim seeks a declaration that the Performance Condition in relation to the Share Option Plan has been met and a declaration that he is entitled to exercise his option in full.
24.	This has caused me considerable difficulty.  The Remuneration Committee exercised a discretion.  That discretion is absolute.  It is plain from their decision and the Defendant’s submissions that they believed that there was no 2 stage process.  It is their case that as part of one decision making process they have an absolute discretion as to whether or not to permit the exercise of the option in full or in part and that the decision cannot be challenged as long as they act bona fide.  Accordingly if they have a bona fide belief as set out in the minute they are entitled to decide that it is appropriate to allow only a conditional exercise.  As part of that discretion they are also allowed to determine the percentage upon which the shares are to be exercised.
25.	If the Claimant’s contentions are correct the consequence is that the Remuneration Committee have come about their decision in a way which is wrong in law i.e. they have exercised their discretion under a mistaken belief that the law entitles them to act in the way they did.
26.	It seems to me that the consequence of that contention if successful is that the decision is a nullity.  The normal train of events therefore would be a declaration that the decision of the Remuneration Committee was null and void and to seek an order remitting the matter back to the Remuneration Committee and to require it to exercise it correctly according to the manner in which the law determines it can be exercised.  
27.	Mr Sweeting QC did not find this an attractive proposition.  The reason for that is the (perhaps understandable) suspicion that if the matter is remitted back to the Remuneration Committee and it is given guidance at stage 1 as to the exercise of their discretion they will simply exercise their discretion to award the Claimant nothing.  I am by no means convinced that that would be the case.  The Remuneration Committee is an independent body which is supposed to exercise its discretions according to rule 4.4.  At the stage 1 decision making process it has to have regard to the Performance Condition.   At that stage they will appreciate that the Claimant has satisfied the Performance Condition entirely.  At any time before his departure between September and December 2003 he could have exercised his option as of right and this debate would never have taken place.  The relief sought by the Claimant on the other hand seeks to take the benefit of part of the (faulty) method of decision i.e. the decision to allow the Claimant to exercise but removes from that decision the (inconvenient) part which allows only 75% exercise.  
28.	I do not see how that can be done.  This is not a claim for damages as such; it is a challenge to the exercise of a discretionary decision.  If that decision was done in a way which was not lawful according to clause 4.4 then the consequence is that it is a nullity.  It does not in my view enable the Claimant to cherry pick the parts of the decision which suit him and ignore the parts which do not suit him.
THE DEFENDANT’S CONTENTIONS
29.	The Defendant contends that the Remuneration Committee under rule 4.4 had “an absolute discretion”, and the Performance Condition is not determinative but simply requires consideration.  It submits that on the Claimant’s case the second stage confers no discretion at all: it is “all or nothing”.  That is the consequence of the Claimant’s submission.  The Defendant submits that the two stage process is over elaborate and overly technical and as contended for by the Claimant requires the Remuneration Committee simply to perform an arithmetical exercise if it is decided initially that the Claimant should be entitled to exercise his Share Options.  
30.	There are a number of difficulties about those observations.  First I do not regard the two stage process put forward by the Claimant as being overly technical.  Even if it is, the clause must be construed as it is and if that is technical then so be it.  Second of course as I have already observed whilst there might not be any lawyers on the Remuneration Committee they clearly had legal advice.  Third the Defendant’s arguments in my view do not give sufficient explanation as to what the phrase “such proportion being determined ….. pro rata to the achievement of the Performance Condition” means. 
31.	In my view that part of the second sentence clearly requires a determination that is measured pro rata to the achievement Performance Condition.
32.	In that context I should also say that I do not accept that as part of that determination they can change in effect the Performance Condition.  It is measured solely by reference to the achievement of an increase in value of the earnings per share.  That is not a direct personal assessment of the Claimant’s performance.  If the Claimant has behaved in the way in which the Defendant contends it was of course always open to the Claimant to allege he therefore acted in breach of his fiduciary and contractual duties to the Defendant and commence proceedings against him.  It has never done so.  The matters remain merely disputed allegations.  If of course they had prevented the achievement of thePerformance Condition then that would have been another matter.  The Remuneration Committee would then be in a position to assess the extent to which the Performance Condition had then been satisfied and then allow and exercise “pro rata” to that satisfaction.  I do not see how the Defendants can say these matters are relevant to the satisfaction of the Performance Condition when it was satisfied in any event 3 months later.
33.	Further in exercising their first stage discretion they will of course be aware of the consequences at stage 2.  The reason for that of course is that at first stage they have to have regard to the Performance Condition.  There is no reason why they cannot providing they act bona fide decide that it is not appropriate to allow him to exercise his option because they do not bona fide believe it will be appropriate for him to have (for example) 100% of the shares.  That might occur for a number of reasons.  A leaver might have left early in the process of satisfying the Performance Condition and then sought to exercise the options (there is a long time limit).  The Remuneration Committee might think it inappropriate for him to have an exercise for 100% when he contributed minimally to the achievement of that performance by reason of his early departure.  Equally if they had a bona fide belief that someone’s conduct had for example reduced the percentage of which the Performance Condition had been satisfied they could in my view take that into account.  They take all this into account on the Claimant’s case at stage 1.  
34.	On the Defendant’s case they take them into account globally.  The difference between the two in effect is as to the consequence.  On the Claimant’s case once they had made the decision it is simply arithmetical at stage 2.  On the Defendant’s case greater flexibility is introduced in that they are enabled having regard to the Performance Condition to decide at what level it is appropriate to permit the Claimant to exercise his share option. The final sentence it is submitted is merely the way in which the shares are calculated.  Thus if they decide that it is appropriate in his case to have regard to 75% satisfaction of the Performance Condition then pro rata he is entitled to 75% of his shares. 
CONCLUSION
35.	In my view the Claimant’s contention is correct.  I do not see that it is overly analytical to require the Remuneration Committee to go through a 2 stage process.  First they have to decide whether or not to exercise their absolute discretion.  The key word I accept is “absolute” which gives them an unfettered discretion provided they act bona fide.  There is no reason in that process why they cannot have regard to the stage 2 consequences in deciding whether to allow it to be exercised and take into account bona fide factors which they believe are relevant to the Claimant’s conduct.  In so far as it had an impact on the satisfaction of the Performance Condition.  I do not believe it would be bona fide to take into account factors such as those referred to in the minute of the Remuneration Committee because (1) they did not affect the satisfaction of the Performance Condition (2) the Company clearly had remedies for such conduct but had chosen not to institute any proceedings so far as I am aware.  
36.	Once the discretion is exercised in favour of the Claimant it is plain in my view that stage 2 requires the Remuneration Committee to decide that the Option Holder may exercise all or a proportion of his options such proportion to be determined pro rata to the achievement of the Performance Condition.  It seems to me that part of the clause is mandatory and gives the Remuneration Committee no discretion as to the extent of the exercise.  It says “if” the Remuneration Committee so decides the Option Holder may exercise all or a proportion then such proportion has to be determined pro rata to the achievement of the Performance Condition.  
37.	In this case exceptionally the achievement of the Performance Condition is 100%.  I accept Mr Sweeting QC’s submission that the clause is primarily intended to operate at a time when an Option Holder departed with the Performance Condition partially satisfied.  The discretion element in my view comes in at stage 1 only.  I have set out above what I believe are the factors that the Remuneration Committee can take into account at stage 1.
38.	For those reasons I prefer the Claimant’s construction of rule 4.4.  However I do not accept that the Claimant is thus entitled to the relief sought by the declarations.  
39.	In my view he is entitled to a declaration that the determination of the Remuneration Committee is invalid and an order directing the Remuneration Committee to reconsider its decision under rule 4.4 in the light of this judgment.  I will leave the parties to draw up a suitable minute of order in that regard.
SECOND ISSUE
40.	In the Counterclaim the Defendant seeks reimbursement of tax and National Insurance which has been paid on the Claimant’s behalf under the PAYE legislation.  
41.	The Counterclaim is based on a number of facts none of which is in dispute.  The Claimant after termination of employment exercised a number of share options.  These share options were taxable under the PAYE income tax regime as income of the Claimant as well as attracting employee National Insurance Contributions also payable under the PAYE regime.  Third the PAYE income tax has been paid on behalf of the Claimant together with his employee National Insurance Contributions.  
42.	Despite that the Claimant contends that he is entitled to refuse to reimburse the Company for the amounts paid on his behalf.  The Counterclaim seeks such reimbursement.  The amount sought is £197,931.33.  That figure is not in dispute.  As I have said the Defendant has paid those sums to the Inland Revenue under the PAYE scheme.  Further in response to a question by me Mr Sweeting QC confirmed that for the relevant tax year the Claimant had paid tax only on the excess above the basic rate sum which the Defendant had deducted i.e. the difference between 22% basic rate and 40% higher rate.   The Claimant therefore has received against his own personal tax and National Insurance liabilities the benefit of the sums paid by the Defendant which it now seeks to recover.
TAX REGIME
43.	The actual regime is not in dispute.  I am grateful to Mr Griffiths junior Counsel for the Defendant for his clear and concise analysis of the regime.
44.	Income Tax is payable on emoluments from employment.  Under the basic PAYE scheme Income Tax is deducted from salary by the employer to HMRC.  This is an advance payment because normally the tax regime only obligates a taxpayer to pay the tax at year end.  It is then paid on the employee’s behalf to the Inland Revenue. 
45.	Further where any assessable income of an employee is provided in the form of a readily convertible asset (such as shares acquired pursuant to share options) the employer is treated for the purpose of PAYE regulations as making a payment of a specified amount of that income.  Thus the employer makes a PAYE payment directly to the Inland Revenue on the employee’s behalf in respect of that deemed income.  Share options have been brought within this regime (see section 471 – 478 Income Tax (Earnings & Pensions) Act 2003) (“ITEA”).  The chargeable event occurs in this case when the securities are acquired pursuant to the option (section 477 ITEA).  The amount of the charge is the difference between the gain realised on the occurrence of the chargeable event and any deductable amounts (section 478).
46.	There is no problem if that occurs whilst the Option Holder is an employee or officer of the Company.  It has recourse to the Schedule E income being earned for the purpose of deduction.  The Claimant instead of having money deducted on previous exercises of share options reimbursed the Company in full when he exercised those options whilst he was an employee.  He thereby acknowledged a liability at that time to account to the Company for the tax which was payable on the exercise of the option.  Had he not done so then they would have deducted it from his earnings.
47.	I should say that at the time when the Option Holder scheme was introduced in 1996 the PAYE legislation summarised above did not apply.  It did however apply when the options came to be granted namely on 26th November 1998 and 13th December 1998 (the legislation having changed with effect from 27th November 1996).
48.	The PAYE regime is applied to the gains from the securities option (section 700 ITEA and by section 712 it is extended to former employees).  The difficulty of course the Company faces by that application to the former employees is highlighted by the present case.
49.	It is significant to see how the payment by the employer is treated.  Under section 710 (1) ITEA the employer makes a notional payment of PAYE and then deducts the Income Tax at the relevant time from any payment or payments the employer actually makes of or on account of the PAYE Income of the employee.  That notional payment has to be paid by the employer even if he is unable to deduct from the employee (see section 710 (3) and (4)).
50.	Finally in this context section 710 (6) provides:-
“(6) any amount – 
a) which an employer deducts as mentioned in sub section (1), or 
b) for which an employer accounts as mentioned in sub section (4), is to be treated as [an amount of tax which], at the time when the notional payment is made, [is deducted] in respect of the employee’s liability to Income Tax”
51.	Thus the employer when deducting and accounting to the Revenue is deducting and accounting on the employee’s behalf for the Income Tax for which of course he is primarily liable by virtue of his emoluments.  Further there is protection for the employee in this sense.   If the employer deducts and fails to account to the Revenue (for example it deducts but goes into liquidation before accounting to the Revenue - a not uncommon occurance) the employee nevertheless receives credit for that deduction as against his own Income Tax liability on his own assessment not withstanding that the Inland Revenue did not receive it.
52.	Regulation 78 of the Income Tax (PAYE) Regulations 2003/2682 provides for the amount of tax which the employer was liable to deduct from the relevant payments made by the employer in that tax period.
53.	Section 222 (1) ITEA provides that if an employee does not pay to the employer the sum due from the employer to the Inland Revenue pursuant to section 710 (4) within 90 days the sum paid by the employer is to be treated as earnings from employment of the employee within the relevant year.  In my view I accept Mr Griffith’s submissions that this is a rough and ready clause designed to penalise the employee who does not account to his employer for the Revenue by raising an assessment on him to cover that 90 day period.  It is an extra payment and in my view has nothing to do with the actual Income Tax deduction operated by virtue of section 710 ITEA.  The liability arises out of consequence to pay the amount within the 90 days.  If the Claimant is liable to pay the subject matter of the Counterclaim that does not involve a double deduction in my view; it merely involves the consequence of his delaying the payment because he is having the benefit of the use of money which he ought to have paid to the Company.  It is designed to stop the Company making the payment and not obtaining reimbursement.
NATIONAL INSURANCE
54.	A similar regime applies for the imposition and recovery of National Insurance Contributions from an employee under the Social Security Contribution and Benefits Act 1992 (“SSCB Act”).  The only difference that I can perceive is that the regulations provide that the deduction of NI is in addition to any other remedy otherwise available for the recovery of the NI contributions (regulation 68 (2)).
55.	Finally I should refer to section 59A TMA 1970 which requires a taxpayer to pay the assessed tax in any year if it exceeds the amount of any Income Tax which has been deducted at source.  Thus if there is no deduction (as opposed to a failure to account) the Claimant will be liable.  This is logical because it is tax on his income.
LEGAL BASIS FOR LIABILITY
56.	It is true that none of the Acts or regulations that I have referred to above expressly provide that the employee must reimburse the employer.  
57.	The employer can of course deduct from the salary provided the salary will sustain the deductions.  As these deductions occur on a weekly or a monthly basis that is overwhelmingly what usually happens.  In the case of these share options of course the Defendant has no income due to the Claimant from which it can make a deduction.  
58.	The Defendant puts the liability to repay on three bases, namely, express term, implied term and in quasi contract.  
EXPRESS TERM
59.	There is nothing in the scheme rules which expressly requires the Claimant to reimburse any tax deducted.  As I have said above this particular tax regime did not apply when the schemes were created but the rules could have been generally drafted at the time of their inception or subsequent to this regime.  
60.	Nor is there anything in the Claimant’s contract of employment.  
61.	The Defendant claims that there is an express term by virtue of letters sent to the Claimant when the Option Certificate was sent to him pursuant to the resolution of the Company to grant him an option.  Thus for example there is a letter dated 28th November 2000 addressed to him informing him that he has been granted the option on 21st November 2000, enclosing an Option Certificate and a booklet explaining how the plan worked.  The letter says the booklet is only a guide and that in the event of any conflict between the booklet and the rules the latter will prevail.  The booklet explains that when the option is exercised the grantee of the option will be liable to Income Tax at the highest rate and is payable under the PAYE regime and will be deducted from his monthly salary at the first opportunity after exercise.  It does not of course expressly say he is liable to make the repayment over and above the power to deduct from the salary.  In respect of earlier notification the Defendant contends that in the covering letter (see for example the letter dated 8th January 1999) addressed to Mr McCarthy the question of liability for Income Tax was also raised: “as a condition of exercise you will be required to reimburse the Company for these charges”.  That letter provided for a signed acknowledgment to do that.
62.	The Claimant denies that he received any of the letters on notification or any other Certificates.  His case is that he received none of the documentation and indeed had to chase up the Option Certificates at a much later stage.
63.	Even if I find that he received them Mr Sweeting QC submits that they are post contractual and cannot vary the contract unless they expressly or by implication are agreed by the Claimant to have that effect.  Significantly there is no evidence showing that he ever sent the Counterpart signed back.  The long list of other employees who apparently received such letter at the same time exhibited by the Defendant to its evidence also do not show any signed copies. 
64.	Similarly whilst the Claimant admits to having made payments whilst he was an employee that is entirely consistent it is submitted with his stance because he accepts that he would be liable to make a reimbursement to the Defendant whilst he was still an employee because otherwise they would be entitled to deduct it from his earnings.
65.	I am doubtful as to whether or not the Claimant received these letters.  Nevertheless I do not think I can decide that issue on a Part 24 application.  The Claimant is entitled to present his case.  In addition I accept Mr Sweeting QC’s submission that variations are post contractual and cannot be imposed unless the Claimant has expressly or by implication agreed to them.  There is in my view a possible defence on this aspect which has a real prospect of success.  
66.	I therefore reject at this stage the Defendant’s claim based on an express term of the contract.
IMPLIED TERM
67.	I agree that there is a case for suggesting such an implied term.  I do not accept however at present that the Defendant has satisfied me that the Claimant had no point which has no prospect of success.  In this context I refer to the Revenue and general literature advanced by the Claimant.  There is plainly a gap in the operation of schemes like this which could be said to be needed to be addressed.  That gap has clearly been identified for a number of years.  As Mr Sweeting QC submitted in his written and oral submissions it would have been very easy for the Defendant to ensure an express term occurred.  The rules could have been changed, the terms of employment could have been changed and the properly designated regime on the granting of the option could also have been put in place.  None of those happened.  Given that, Mr Sweeting QC submits that might well be a deliberate exercise designed not to ensure liability to pay.  I am sceptical of that but I am not persuaded that I can decide that at this summary judgment stage.
68.	I therefore reject the Defendant’s claim based on implied term.
MONEY PAID TO THE USE OF THE CLAIMANT
69.	Here the Defendant relies upon the well known dictum of Lynskey J in Bernard and Shaw Ltd v Shaw[1951] 2 All ER 267 at 270 B-C as follows:-
“If the money had in fact been paid by the plaintiffs in discharge of the tax liability, it might well be that there would be a cause of action for money paid by the plaintiffs to the use of the defendant, on the basis that they were compelled by process of law to pay money which was due in respect of his remuneration as to which he would ultimately be liable for taxation.  In those circumstances, the money might be recovered ……”
70.	This is supported by Goff & Jones “The Law of Restitution” (6th Edition) 	paragraph 	15-01 as follows:-
“In general anybody who has under compulsion of law made a payment whereby he has discharged the primary liability of another is entitled to be reimbursed by that other.  In the great majority of the cases discussed in this Chapter, that other was liable to pay a debt or other liquidated sum.  Consequently in our view, the Civil Liability (Contribution) Act 1978 will have no application and the common law will still govern.
The classic statement of the common law principle is to be found in a passage from the first edition of Leake on Contracts, which was quoted by Cockburn CJ in Moule v Garrett in 1872
“Where the plaintiff has been compelled by law to pay, or being compellable by law, has paid money which the defendant  was ultimately liable to pay, so that the latter obtains the benefit of the payment by the discharge of his liability; under such circumstances the defendant is held indebted to the plaintiff in the amount.”
The basis of this right is similar to that which underlies the right to contribution.  The plaintiff is allowed to recover because he has been compelled by law to make a payment which has discharged the defendant’s liability to another.  Whereas in contribution, the plaintiff seeks to recover only a proportionate share of his payment, in the cases discussed in this Chapter he claims to be recouped the whole of the payment since the defendant is primarily liable to pay it.  He may also seek relief by subrogation.
To succeed in his claim for recoupment the plaintiff must satisfy certain conditions.  He must show:
(1) that he was compelled, or was compellable, by law to make the payment
(2) that he did not officiously expose himself to the liability to make the payment; and
(3) that his payment discharged a liability of the defendant.
The plaintiff enforces his right to reimbursement by recovering his money as paid to the defendant’s use.  But in certain cases the plaintiff is given a right to deduct a sum equal to his payment from money which he owes the defendant.  He may also become entitled, on making the payment, to the benefit of securities deposited with the creditor by the defendant to secure the debt paid by the plaintiff”.
71.	The Shaw case is not referred to in that extract.  Nevertheless in my view the dictum in it is plainly correct.  The Claimant submits that requirement (3) is not satisfied because it is not discharging a liability of his.
72.	I do not accept that.  As set out above section 59A TMA 1970 reinforces the position that the Claimant is liable to pay tax on his own earnings if it is not deducted.  The Defendant has paid the tax on his behalf which he would otherwise be liable to pay.  He has received that benefit also because he has when his assessment return is sent in and the tax calculated, been given the benefit of that deduction and payment made by the Defendant.  It is only his liability in question.  Merely because the revenue law is designed to ensure that the Revenue obtain early monies from somebody other than the ultimate tax payer as a matter of operation of the recovery of its tax is neither here nor there.  This in my view is also reinforced by the fact that when he was an employee he freely acknowledged his liability and made payments.  I see no difference to the position if he ceased to be an employee.  The Company is deducting monies which represent his Income Tax liability.  As I have said the late payment is a non point for the reason that I have set out.  
73.	I therefore conclude that on this quasi contractual claim the Claimant has no defence which has any prospect of success and that therefore the Defendant is entitled to judgment on the Counterclaim on this basis.