Background

In the case of Dixon v GlobalData plc, the claimant had been granted share options under his employer’s plan. When his role was made redundant in 2014, he negotiated a settlement agreement. During those discussions, the group’s then chief executive gave him an assurance that he could keep his remaining share options. This was confirmed in a follow-up letter, which stated that the options would “vest in line with current conditions,” and was later reflected in a clause of the settlement agreement.

The agreement also required the claimant to stay on until the end of the year, rather than leaving in September as first proposed, and to accept restrictive covenants preventing him from working for competitors for four months after leaving. The claimant gave evidence that he relied on the assurances about the options in agreeing to those terms and in not seeking other employment immediately.

Several years later, once the company had met the financial performance targets, the claimant tried to exercise his options. The company refused, arguing that they had lapsed automatically when his employment ended, as there had been no formal board or remuneration committee decision under the plan rules to extend them.

What the court decided

The court accepted that no formal decision had been made under the plan rules to keep the options alive, so technically they would have lapsed. On that basis, a contractual claim under the plan itself failed.

However, the court went on to find that the employee was entitled to a remedy under the equitable doctrine of proprietary estoppel.. This arises where one party makes a clear assurance about a property right, the other relies on it to their detriment, and it would be unconscionable to go back on the assurance. The court held that:

the company had given an assurance that the employee would keep his options beyond termination
the employee reasonably relied on that assurance by extending his employment and agreeing to restrictive covenants
he suffered detriment by giving up alternative job opportunities and freedom to work for competitors
it would be unconscionable for the company to now deny him the benefit of what he had been promised.

The company’s argument that an exclusion clause in the plan prevented any claim was rejected, because the loss flowed not simply from his employment ending but from the broken assurance itself. Therefore, the court decided the employee was entitled to relief under proprietary estoppel, with the exact form of remedy (such as the value of the options he sought to exercise) to be determined at a later hearing.

What is a proprietary estoppel remedy?

A proprietary estoppel remedy is designed to prevent unfairness where someone has been led to believe they will have a right to property (such as land, shares, or options), has acted to their detriment in reliance on that belief, and it would be inequitable for the other party to withdraw the promise. The remedy is flexible: the court can enforce the promise in full, or grant a lesser remedy that reflects what is fair in the circumstances. In this case, it means the court can require the company to honour the assurance about the share options, or compensate the employee for their loss.

Learning points for employers

Employers should ensure that decisions about share plan leavers are properly recorded and communicated, with board or committee approval where required. Informal assurances, even if well-intentioned, can create binding obligations if employees rely on them to their detriment. The safest approach is to keep share option promises formal, clear, and consistent with the plan rules. 

For more information or advice, please contact Georgia Blesson in our Employment team.