High Court confirms share option assurances can give rise to enforceable rights under proprietary estoppel

Background

In the case of Dixon v GlobalData plc, the claimant was granted share options under an employee share plan during his employment. Before his departure, he was given assurances that his options would continue as if he had remained employed.

He relied on those assurances by agreeing to extend his employment and accept post-termination restrictive covenants. However, following termination, the employer did not treat him as retaining those rights and refused to allow him to exercise certain tranches of options.

The High Court had previously found that the employer’s assurances gave rise to a claim in proprietary estoppel. The issue in this judgment was the appropriate remedy.

High Court decision

The Court confirmed that the claimant was entitled to equitable compensation reflecting the value of the lost share option rights.

Applying the principles set out by the Supreme Court in Guest v Guest, the Court emphasised that the purpose of the remedy in proprietary estoppel is to address the unconscionability arising from the employer reneging on its promise. The starting point is usually to give effect to that promise, unless doing so would be unjust.

In relation to the disputed share option tranches, the Court held:

• For tranche 2, compensation should be based on the “strike price” that would have applied had the claimant been treated in line with other participants. The Court rejected an argument that a higher market valuation at a particular point in time should be used.
• For tranche 3, the employer argued that no entitlement arose because the relevant benefits were delivered through a new plan created after the original scheme expired. The Court rejected this, finding that the claimant had been assured he would be treated in the same way as other participants and that excluding him was unconscionable.
• The Court was willing to look beyond the formal structure of the arrangements and focus on substance. The creation of a new plan did not justify denying the claimant equivalent benefits.
  The Court awarded substantial compensation for both tranches, together with interest.

Learning points for employers

This case underlines the legal risk of giving informal or imprecise assurances about incentive arrangements. Where employees rely on those assurances, particularly in connection with termination arrangements, employers may face claims based on proprietary estoppel rather than straightforward breach of contract. These claims can be difficult to defend and expose employers to discretionary remedies designed to achieve fairness rather than strict contractual outcomes. Employers should ensure that any statements about share schemes or post-termination rights are carefully controlled, clearly documented, and aligned with the formal plan rules.

For more information or advice, please get in touch with Khadija Khatun in our Employment team.