Five members of Serle Court appeared in the recent case of Guy’s & St Thomas’ NHS Foundation Trust and Anor v ESMS Global Limited and Ors [2022] EWHC 2491 (Comm), on both sides of an application to strike out the Claim and for reverse summary judgment.

The Claim arose from the sale of a business operated by Guy’s & St Thomas’s to ESMS Global Limited (‘ESMS’). The Second to Fifth Defendants were directors and shareholders, and the Sixth and Seventh Defendants shareholders only, of ESMS. The Business Purchase Agreement (‘BPA’) imposed an obligation on ESMS to establish an employee benefits trust (‘EBT’) to which 20% of its share capital was to be transferred. The EBT was duly settled and some 800,000 shares were transferred to it. It was common ground that the requirement for 20% of ESMS’s share capital to be held by the EBT had not been fulfilled.

The first limb of the Claim was an attempt (by way of amendment) to enforce the obligation to transfer the 20% of ESMS’s share capital directly against the Second and Third Defendant on the basis of proprietary estoppel. Miss Julia Dias KC (sitting as a Deputy High Court Judge) concluded that that aspect of the Claim failed at the first hurdle. First, the Second and Third Defendants had made no representations to the employees in their personal capacities; rather, all their statements had been made on behalf of their existing investment vehicle which had approached Guy’s about the purchase or, latterly, on behalf of ESMS.  Secondly, there was no evidence to show that the Second or Third Defendants had made any specific assurances to employees orally about the establishment of an EBT or its mechanics nor that they had relied upon any such representations. The evidence of the only witness who was an employee at the relevant time was that she and the other employees had relied upon the advice of their own solicitors to ensure the necessary contractual arrangements for the EBT were put in place. The Judge further held that even if there were a representation, it was exhausted when the BPA, with its obligation to establish the EBT, was executed.

The second and third limbs rested on assertions that the Second and Third Defendants owed the employees a fiduciary duty in respect of the transfer of 20% of the shares in ESMS, which the Judge likewise held had no real prospect of success. She found there would be an inherent tension between the fiduciary duties the Second and Third Defendants undoubtedly owed ESMS as directors and any duty to the employees as counterparties to ESMS when the employees’ and ESMS’s interests might not coincide. Moreover, the Judge did not accept that the employees were in a position of particular vulnerability vis-à-vis the Second and Third Defendants who had, in any event, assumed no personal responsibility to them. Indeed, the employees at all times had a contractual entitlement to enforce ESMS’s obligations under the BPA.

Lance Ashworth KC and Gregor Hogan, instructed by Ben Gold at RPC, acted for the successful applicants, the Second to Seventh Defendants.

Patrick Talbot KC, Zahler Bryan and Max Marenbon, instructed by David Grinstead at Bingham Mansfield, acted for the Claimants.

View the judgment here.