BL-2023-001505 - [2025] EWHC 2156 (Ch)

The alternative way in which the claimant pursues his case or, as Mr Parfitt said, his fallback, is through the doctrine of proprietary estoppel.

I was referred to the following authoritative formulation of the requirements which a claimant must satisfy, by Lord Scott of Foscote in Thorner v Major [2009] 1 WLR 776 at [15]:

Connected to the requirement for detrimental reliance by the claimant on the representation or assurance of the defendant is the requirement for it to be unconscionable for the defendant to resile from the representation or assurance given. Robert Walker LJ put it thus in Gillett v Holt [2001] Ch 210 at 232:

Proprietary estoppel is generally relied on in relation to the acquisition of interests in or over land. It is clear on authority, however, that it extends beyond such interests. I will deal with Mr Nicholls’ objections below, but he did not contend that it was conceptually incapable of extending to share options, or to shares. The claimant relied on Harris v Kent [2007] EWHC 463 (Ch), where Briggs J held that the claimant in that case was entitled to a remedy in estoppel following his reliance on a representation that he would be entitled to regard himself as the beneficial owner of half of certain shares held by the defendants. His statement, at [121], of how the estoppel arose is strikingly concise. In Yeoman’s Row Management Ltd v Cobbe [2008] 1 WLR 1752, Lord Scott said at [14] that the doctrine applied to claims to a proprietary right – ‘usually a right to or over land but, in principle, equally available in relation to chattels or choses in action’. This clearly includes rights in or over shares.

Consideration therefore turns to the nature of the assurance given by Mr Pyper to Mr Dixon on behalf of the defendant. This was that his share options would vest in line with current conditions, and that he would retain his entitlement to 44,800 options (the latter being the way in which the point was recorded in clause 16 of the Settlement Agreement). As I have indicated above, Mr Nicholls submitted that this offered the claimant nothing more than he was entitled to under the Plan rules read together with the Option Certificate, such that he would be entitled to retain his options until his employment actually came to an end, even though in practice there was no practical possibility of his receiving any benefit in accordance with those rules in that time. Mr Dixon had the benefit of legal advice when negotiating the terms of the Settlement Agreement, and it was his own lookout if the assurance he was given was essentially illusory. For this reason, it was submitted on behalf of the defendant that it has not acted contrary to the representation made by Mr Pyper, and there was no indication that the rule 7.1 power would be exercised in the claimant’s favour or at least that any exercise would be limited in the manner described in this paragraph. Mr Pyper said that the options would be added to the Settlement Agreement and they were so added.

I disagree with this analysis. A person in the position of the claimant, who was being asked to extend the time when he worked for the company for three months beyond the period he was initially required to work and to subject himself to restrictive covenants for a period thereafter, upon an assurance that he would retain his existing stock options on current conditions, would understand that he was being offered something of some real value. I also disagree with Mr Nicholls’ characterisation in oral submissions of the claimant’s position as relying on a ‘misrepresentation’ by Mr Pyper. Paragraph 15 of the amended particulars of claim alleges that Mr Pyper made an assurance to Mr Dixon in relation to the continuing right to exercise his options. I consider that what Mr Pyper said purported to be an assurance and falls to be viewed accordingly.

The relevant question is what Mr Dixon reasonably understood Mr Pyper, on behalf of the defendant, to have meant through his words and acts: see Thorner v Major at [5]–[6], Lord Hoffman. It is also Mr Dixon’s unchallenged evidence that he understood that he would continue to be entitled to exercise his options after cessation of his employment as if he had continued in employment, i.e. as I have described at [69] above (albeit in a different context). I consider it reasonable for him to have understood the defendant’s assurance in that way: cf. Thorner v Major at [27].

Thorner v Major was not a case in a commercial setting, or where the relevant assurances had been made in writing. It involved assurances, characterised as ‘oblique and allusive’ but mutually understood, that the claimant would inherit the defendant’s farm if he continued to work for him without remuneration. It cannot, in my view, be harder to establish a relevant assurance because it is made in writing. This is not a case, like Yeoman’s Row, where parties took the risk that their negotiations, continuing subject to contract, might not lead to a binding agreement between them. Nor do I consider that, in an estoppel case, it is necessary to interpret any material document in accordance with the canons of contractual construction. It is in the nature of an alleged proprietary estoppel that there is no contract to be construed. The court considers not only the words used, but all the material acts of the defendant. It is clear from Thorner v Major that the reasonable understanding of the claimant of the meaning of these words and acts is what counts. See especially at [84].

Having said that, it seems to me that Mr Dixon’s understanding of the words used in relation to the share options is also objectively reasonable. This is for three reasons. First, the suggestion that Mr Pyper intended to offer Mr Dixon something which could practically never result in any benefit to him seems objectively improbable in circumstances where Mr Pyper was seeking to persuade Mr Dixon to act in the defendant’s interests. Secondly, and connected with this, Mr Lilley’s palpably honest evidence in cross-examination was that the defendant would not have taken advantage of Mr Dixon, and that it tries to do the right thing by its employees. He accepted that if the remuneration committee had been informed in 2014 of the terms of the Settlement Agreement and that there had been no exercise of the rule 7.1 power, it would not have kept quiet and would have reviewed the position based on what Mr Pyper had said. It was not Mr Lilley’s evidence that the remuneration committee or Mr Danson would necessarily have come to the view then that Mr Dixon’s options would lapse or had lapsed on the termination of his employment. As Mr Parfitt submitted in closing, Mr Lilley accepted that no-one looking at the Settlement Agreement would have thought that Mr Dixon’s options had lapsed. Thirdly, there is no evidence from anyone on behalf of the defendant indicating that their understanding of Mr Pyper’s words and of clause 16 of the Settlement Agreement was as narrow as Mr Nicholls suggests; that is only counsel’s submission. Such evidence might not be admissible for the purposes of contractual construction, but it would be relevant when determining the reasonableness of Mr Dixon’s understanding of what he was told.

I would also comment that Mr Dixon’s understanding is consistent with what was later agreed with Mr Pyper in his own settlement agreement. That agreement was that his options would ‘continue to vest in two tranches (50% T2 and 50% T3) in accordance with [the defendant’s] performance targets (as set by [the defendant’s] remuneration committee from time to time) the Scheme Rules, [and] the Option Certificate’. Whilst Mr Pyper’s agreement post-dates Mr Dixon’s by some years, it shows the way in which the defendant understood how options under the Plan could continue to be exercisable following the termination of an employee’s employment. I do not agree that the defendant complied with the assurance by adding the options to the Settlement Agreement. First, the extension of the options merely until the end of 2014 afforded no actual benefit to Mr Dixon and I find that neither Mr Pyper nor Mr Dixon intended the assurance to be so illusory. Furthermore, the options were in no meaningful sense in fact ‘added’ to the Settlement Agreement. They were certainly mentioned in clause 16 but on the defendant’s case (which I accept) the rule 7.1 power was not exercised. Such an exercise of discretion would have been required even for the limited extension to the date of cessation of employment (see rule 6.3 of the Plan).

Mr Nicholls argued that the representation made by Mr Pyper on behalf of the defendant was not an assurance that Mr Dixon would acquire any proprietary interest. He already held options under the Plan, and it was said that he would retain those options. Mr Nicholls relied on Newport City Council v Charles [2009] 1 WLR 1884, where it was held that a housing authority landlord could not acquire by proprietary estoppel the right to bring a possession claim in circumstances where its tenant concealed facts which would have justified the landlord bringing a claim for possession until after the time when such a claim had become time barred. The Court of Appeal held that the landlord was not claiming any interest in land; its interest as freeholder was not in question and it did not require any estoppel to found it: see at [27]. The tenant’s conduct founded an estoppel by representation which, unlike proprietary estoppel, did not found a cause of action. With evident regret, the Court of Appeal dismissed the claim.

I consider that case to be of no relevance to the present claim. In this case, the subsistence of Mr Dixon’s options is very much in question. It is the defendant’s position that they have lapsed and, as I find, Mr Dixon was given an assurance that they would continue in existence. I do not consider equity to be so inflexible that it can give effect to an assurance that an interest would be conveyed to the claimant, but that it cannot give effect to an assurance that an interest would continue and not cease to exist.

I did not understand Mr Nicholls to be making the objection that the assurance given by Mr Pyper on behalf of the defendant was insufficiently clear and unambiguous to form part of a claim to an interest by virtue of a proprietary estoppel. I consider that the assurance, understood in the way I have described above, was sufficiently clear and lacking in ambiguity. The number of shares over which the options would continue to subsist, and not lapse, was fixed. The way in which the assurance was communicated in the 29 September 2014 letter explained that the conditions for exercise, required to be determined by rule 7.1, would be as Mr Dixon reasonably understood them to be. The conditions for exercise would therefore, as with other former employees whose options did not lapse, be liable to variation in accordance with the rules of Plan in due course.

It is relevant to consider the comments of Lord Neuberger of Abbotsbury in Thorner v Major as to the requirement of certainty in a claim for proprietary estoppel. He explained at [94], with reference to Cobbe’s case, that there had in that earlier case been total uncertainty as to the nature of the benefit or interest that the claimants had expected to receive as a result of the parties’ in-principle agreement. In Thorner v Major, the subject matter of the material assurances was a farm and, even though the physical extent of the farm might change in time, the nature of the interest to be received was clear – the extent of the farm at the death of the representor: see at [95]. I consider what Lord Neuberger said at [85]–[86], after stating at [84] that the effect of words and action must be viewed in their context, to be of application here:

See also what Lord Neuberger said at [98]. In particular, ‘focussing on technicalities can lead to a degree of strictness inconsistent with the fundamental aims of equity.’ Any uncertainty in how the assurance given to the claimant ought reasonably to be understood can be addressed at the stage of remedy, and does not mean that a remedy should be denied altogether. This is material here in the context of the tranche 3 exercise under a new plan, the circumstances of which will not have been foreseeable in 2014.

Nor do I consider it to be an objection to an estoppel arising that the context was commercial rather than domestic or familial. This is not a case (such as Cobbe’s case) where the parties might have been expected to enter into a contract but had consciously chosen not to do so (see Thorner v Major at [96]). The relevant contract was always going to be made between the claimant and Canadean, and indeed was so made.

On a summary judgment application issued by the defendant in 2024, Mr Nicholls argued that the property subject to the claimed proprietary estoppel did not relate to specified property. For a proprietary estoppel to arise, the representation or assurance made must relate to identified property owned by the defendant: see Thorner v Major at [61] (Lord Walker of Gestingthorpe) for this requirement. Again, this point was not pursued at the trial, but for the avoidance of doubt I am satisfied that an option over a company’s shares is property which is identified. An option, or the bundle of rights held under the Plan at such time when the option subsists and has not lapsed, is a chose in action independent of the property right which might be obtained upon the exercise of the option.

In Thorner v Major, Lord Neuberger said at [101]:

That question requires consideration of the detriment which the claimant has incurred in reliance on the assurance given to him. In this case, the question of when the promise falls to be performed is not entirely straightforward. In my view it relates both to the time when the rule 7.1 power should have been exercised (which was upon or shortly after the entering into of the Settlement Agreement) and when the options came to be exercisable thereafter. If the options had continued in existence on the same footing as they would have done had Mr Dixon’s employment continued, they would have been exercisable on tranche 2 within their initial period of validity. He would also have been eligible to be considered for inclusion in the new scheme when the tranche 3 targets were not going to be met in 2020, at which point all subsisting 2011 option holders were included. It was, of course, apparent to the claimant that the defendant contended that his options had lapsed only when he sought to exercise them. It would have been open to the claimant to argue that his rights were being unconscionably denied at any time after the defendant contended that his options would not continue as if he remained in relevant employment, as Mr Pyper’s words and actions were reasonably understood by him.

I have set out above at [12] Mr Dixon’s unchallenged evidence of the detriment he incurred in reliance on the assurance given to him by Mr Pyper. The defendant does not maintain the argument pursued on the summary judgment application, that insufficient detriment was pleaded. The primary detriment was the entry into the Settlement Agreement, which required the claimant to work until the end of 2014 and then to be bound by restrictive covenants, thus putting him out of the employment market for some months.

The defendant’s objections at trial to the finding of an equitable estoppel focused on the assurance given on behalf of the defendant rather than the elements of detriment and unconscionability. I consider that the defendant has acted unconscionably in not giving effect to the assurance provided by Mr Pyper orally when meeting Mr Dixon and in his 29 September 2014 letter, and which was then reflected in the Settlement Agreement. I set out above what I consider the assurance to have been. The detriment was far from minimal and, again, any question of proportionality should be considered at the stage of remedy.

As I have indicated, Mr Lilley gave candid evidence about the lack of records held by the defendant which would enable discrepancies with his spreadsheet of option holders to be investigated. He also accepted that the defendant, when the issue arose in 2020, had no way of knowing whether other binding agreements had been reached. Mr Lilley was asked a series of questions in cross examination as to how Mr Dixon would have been treated if the fact that the remuneration committee had not approved the extension of his options (i.e. by exercising the rule 7.1 power) had become known around the time when the Settlement Agreement was made.

In cross examination Mr Lilley accepted (by indicating that he assumed) that if the defendant had become aware of the lack of remuneration committee approval, it would have told Mr Dixon of this fact, and indicated that a new arrangement would be required. He accepted that the defendant would not have taken advantage of Mr Dixon, that it does not try to take advantage of its employees, and that by and large it tries to do ‘the right thing’.

I accept that evidence given by Mr Lilley, which sits uneasily with the position adopted by the defendant to the proprietary estoppel claim. I consider that the indications given by Mr Lilley in evidence are of how the defendant ought conscionably to have acted in light of the non-exercise of the rule 7.1 power in Mr Dixon’s favour. Its failure now to give effect to the assurances provided in autumn 2014 is unconscionable and I consider that the claimant is entitled to a remedy. I consider that the failure to give effect to the entitlement to which Mr Dixon would have had is demonstrated by the refusal to give effect to the tranche 2 rights. On the basis that Mr Dixon’s options would have continued throughout the lifetime of the Plan, and treating him in the same way as all other 2011 option holders, he would have been entitled to exercise those options (as he sought to do). As I indicate further below, it is less obvious to me that the assurance given in 2014 leads to it being unconscionable for the defendant to deny the tranche 3 payment, which was made under another scheme, after the lifetime of the Plan. I consider it to be consistent with authority for that question to be considered at the stage of remedy.

For the avoidance of doubt, and for reasons I have already explained, the defendant cannot rely on any poor performance by the claimant to refute the claim of unconscionability. The evidence does not support any such finding, and in any event the assurance was given to the claimant, and his reliance on it was sought, in full awareness of any criticisms that might have been made of his performance during his employment.

A final objection by the defendant to the granting of a remedy is the exclusion clause at rule 14.1.4, which I have set out at [29] above. The question is whether the clause is intended to cover the breach which has occurred. When one considers clause 14.1 as a whole, it predominantly concerns the employment relationship. Rule 14.1.1 to 14.1.3 deal with the employment contract, which may (as in this case) be with another Group Member, rather than with the defendant itself. Rule 14.1.4 concerns any loss flowing from the fact that an option holder ceases to be in Relevant Employment.

On its face, rule 14.1.4 prevents an employee whose employment has come to an end from seeking any remedy in respect of any loss of right or prospective right or benefit under the Plan, including that of his or her options lapsing. For the exemption clause to bite, the loss must flow from the Eligible Employee ceasing to be in Relevant Employment. Where the loss does flow from such cessation of employment, the exclusion is wide. So, if an employee is unfairly dismissed from employment, even after giving notice of intention to exercise an option, the clause will prevent a claim for damages for loss of the option: Micklefield v SAC Technology Ltd [1990] WLR 1002 (John Mowbray QC). The exemption clause in that case was to similar effect to the clause in the present claim.

But, this is not a case of a claimant pursuing a claim that he lost his options or other rights under the Plan because of the loss of his employment. The claimant does not claim damages or compensation for loss resulting from a loss of his rights upon the cessation of his employment. He claims relief in equity for the denial of rights which he was promised, and on the basis of which promise or assurance he acted to his detriment. He accepts that, were it not for that assurance, his rights under the Plan would have come to an end. Put another way, I do not consider that rule 14.1.4 was intended to protect the defendant from a claim based on an assurance that an employee’s rights would continue, or from claims that rights had been acquired through estoppel. It was objectively intended to protect the defendant from a claim that an employee had suffered loss flowing from the cessation of their employment. That is not the loss which the claimant is claiming here. Were it necessary, I would hold that the assurance provided to the claimant included by necessary implication an assurance that the defendant would not seek to deny the rights promised by reliance on rule 14.1.4. (While it does not arise, I would also have held that the exemption clause would not prevent a claim that the rule 7.1 power had been exercised. The suggestion that a company can exercise a power in favour of an option holder and then deny him the right to enforce the rights given through that exercise by reliance on an exemption clause is self-evidently wrong.)

That leaves the question of remedy. The submissions I received were all premised on the claimant succeeding on his primary case, that the rule 7.1 power had been exercised in his favour. I have not heard submissions on the appropriate remedy in proprietary estoppel or on the authorities relevant to that issue. In principle, the burden is on the defendant to plead and prove that specific enforcement of the full assurance, or its monetary equivalent, is disproportionate: Guest v Guest [2024] AC 833 at [76], Lord Briggs JSC. It is, however, not clear to me what full enforcement would entail in this case and, again, I have heard no submissions on the point.

There are (at least) two discrete issues. First, there is an issue as to the value of the claimant’s options as at the date of his putative exercise of the tranche 2 rights: the market price of the company’s shares increased significantly between the date on which the tranche 2 rights generally became exercisable and the date when Mr Dixon purported to exercise them. I heard submissions on that issue on the footing that the options had continued in existence, but those submissions do not necessarily address the estoppel claim. Secondly, whether full enforcement entails the value of the tranche 3 rights being included, when the defendant would always have had the right to exclude the claimant from the new scheme, is not obvious to me. Again, the arguments may mirror those made on the footing that the options had been extended in accordance with rule 7.1, but they may or may not meet the claim in estoppel.

I have given careful consideration to whether it might be satisfactory to ask the parties simply to provide supplementary written submissions on the question of remedy on the estoppel claim. Having done so I have come to the view that the remedy should be determined as a consequential matter following the handing down of judgment.

At the summary judgment application hearing in 2024, Mr Parfitt indicated that he would rely also on promissory estoppel, and he incorporated into his trial skeleton argument the paragraphs from the application skeleton on estoppel. The effect of a promissory estoppel is that a party is precluded by a promise or assurance given through words or conduct from asserting either a right or a defence as the case may be. The claimant’s skeleton argument suggested that the relevant estoppel would be one preventing the defendant from denying that the rule 7.1 power had been exercised. This would effectively grant to the claimant a proprietary right. It is far from obvious to me that this can be achieved through promissory estoppel and, as the point was not explained at trial, I will not consider it further in this judgment.