Breach of a settlement agreement: Espire Infolabs v Sharma and getting the money back
Most settlement agreements are never tested. Money is paid, obligations are given, and both sides get on with their lives. Espire Infolabs Limited v Amit Mohan Sharma [2026] EWHC 2061 (Ch) is the case where that did not happen. The employer paid, and within a fortnight, the former employee was again threatening to publish the data he had just promised to delete and demanding a seven-figure sum. On 4 August 2026 His Honour Judge Jarman KC gave summary judgment requiring repayment of the entire £50,000 termination payment, together with a four-year injunction to stop him doing it again. For anyone who is a settlement agreement solicitor, it is a useful illustration of which clauses actually earn their keep.
The background
The claimant provides IT services. One of its customers is a private members club in London. In May 2025 the claimant employed the defendant as a project manager on a six-month probationary period and seconded him to work at the club. That work gave him access to the personal data of members, including addresses and bank and payment card details.
On 30 June 2025, the claimant told the defendant that the secondment would end on 18 July. Shortly after being told, he responded that he had copied the personal data of some 55,000 members of the club and would reveal it unless he was paid £150,000.
The parties negotiated. On 4 July 2025, they signed a settlement agreement under which the claimant agreed to pay £15,000 on signing and £35,000 within seven days (together defined as the termination payment), plus £1,000 towards legal advice.
What the agreement said
Clause 4 dealt with tax. The parties recorded their belief that £30,000 of the termination payment could be paid without deduction as within the threshold in sections 402A(1) and 403 of the Income Tax (Earnings and Pensions) Act 2003 (section 403 ITEPA 2003), with the remainder subject to income tax and national insurance. Clause 4.2 then did the important work: the employer gave no warranty as to the taxable status of the payment, and the employee was wholly responsible for any income tax and employee national insurance arising.
Clause 5.4 was the provision that decided the case. On any breach, including the delivery up obligations at clause 6 and the confidentiality obligations at clause 8, the defendant agreed to indemnify the claimant and its customers for losses (including legal and professional fees), and the termination payment or any part of it, save for statutory entitlement to notice or redundancy pay, became immediately repayable as a debt.
Clause 6.1 required the return and deletion of confidential information, prohibited copies, and required cooperation with the inspection of his devices. Clause 8 contained the familiar suite of restrictions: no derogatory statements (8.3), no media statements about the other party or the termination (8.5), no disclosure or use of the claimant’s confidential information (8.6), and no contact with the claimant’s employees, customers or clients at any time (8.7).
What happened next
The agreement started well. The claimant paid £15,000 on the day of signing. The defendant returned the laptop, confirmed by email that all data belonging to the claimant and its client had been deleted, and allowed an expert instructed by the claimant to examine his personal devices and confirm the deletion.
About a week later, the claimant paid £27,000, completing the termination payment but subject to a deduction of emergency tax. That deduction is where it unravelled. The defendant disputed it. On 21 July he emailed the club, threatening to release its confidential information and emailed some of its members. To appease him, the claimant paid over the deducted tax of £6,916. He replied the following day to say the matter was closed and that no one would hear from him again.
That lasted about a day. From 25 to 31 July he sent numerous emails to the club, its members, the claimant and the press. On 26 July he wrote to the club and the claimant’s solicitor, pointing out that he held records for 55,000 of a client base of more than 208,000, inviting them to value each client at £100, £200 or £500, and saying he was looking for no less than a seven-figure settlement. When the solicitor asked for evidence of what he held, he sent screenshots of payments and a list of member addresses, adding that there was a lot more where those came from.
On 28 July he emailed two members directly, telling them their addresses and sensitive details had been leaked and that their personal safety and that of their families had been compromised. On 31 July he emailed media organisations, opening with “Dear Media people”, listing high-profile members and offering to provide every piece of evidence.
The club reported him to the police on 7 August. He was arrested the following evening, detained overnight, and his devices were seized. On 11 August he emailed to say he had deleted all data.
Matters went quiet, and then did not. The claim form was issued on 9 October 2025. Further emails followed at the end of October, including messages to IT companies from an address the defendant accepted he used, hinting that they would soon see how a leading peer had resolved a serious data breach for a prestigious client. In November he sent texts to the claimant’s solicitor demanding that the police case be dropped and that he be paid £310,000, and pointing out that the claimant’s client list was not public but he had it. Injunctions were granted without notice on 12 November 2025 and continued on notice two weeks later.
Why summary judgment was granted
The test is at CPR 24.3: no real prospect of succeeding on the claim, defence or issue, and no other compelling reason for a trial. The principles are those set out by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), approved by the Court of Appeal in AC Ward & Sons v Catlin (Five) Ltd [2009] EWCA Civ 1098 at [24].
Counsel for the claimant identified four categories of breach: retaining and failing to delete member and client details contrary to clause 6.1; emailing news organisations with derogatory statements in breach of clause 8.5; threatening to use member personal data contrary to clause 8.6; and contacting the claimant’s customers or clients in breach of clause 8.7.
The defendant, who represented himself, did not dispute entering the agreement or sending the material relied on, although he said he disputed some emails from August onwards without being able to identify which. The judge found the content of the emails and texts formed a consistent flow with details that hung together. The defence went to the absence of ongoing risk and to procedural complaints, neither of which addressed whether breaches had occurred.
His central argument was that the circumstances in which the agreement was made were in dispute. He said he had suffered bullying and harassment throughout his employment, and that the size of the payment supported that. The judge’s answer is the heart of the case. The whole point of a settlement agreement, as its name suggests, is to resolve what came before. The medical records showed anxiety and depression in August and December, but there was no suggestion that he had been unfit to enter the agreement or unduly pressurised into doing so, and he did not go so far as to say the agreement did not bind him.
On tax, the drafting held. Because clause 4 expressly disclaimed any warranty and placed responsibility on the employee, the judge found that the agreement plainly supported the claimant’s stance, and that the later payment of the deducted tax had been made without obligation in an attempt to end the matter.
The counterclaim
The counterclaim was pleaded in negligence, abuse of process under CPR 3.4(2)(b), harassment causing psychiatric injury, and breach of implied contractual duties. It alleged that the claimant had pursued urgent civil relief knowing that the devices were in police custody, that the defendant had sworn non-possession, and that he was medically vulnerable.
The judge held that insofar as the counterclaim relied on causes of action arising before the agreement was signed, it was doomed to fail. Insofar as it alleged ongoing abuse of process or harassment, there was no evidential basis for it. It was clearly reasonable, given the emails and texts and the escalating demands for money, for the claimant to contact him and to try to bring the breaches to an end, and reasonable to commence proceedings when his assurances kept proving worthless.
A four year injunction rather than a permanent one
The claimant asked for permanent injunctive relief on the basis that the obligations in the agreement are themselves permanent. The judge declined. A permanent injunction requires clear justification, and here a cooling-off period was more proportionate: four years, with liberty for the defendant to apply to discharge.
That is worth noting when drafting an order. Perpetual contractual obligations do not automatically produce perpetual injunctive relief. The court also took a practical approach to the wording. An exception was added to the non-contact provisions so that the defendant is not prevented from seeking other employment, and the requirement for a further affidavit was narrowed to the specific question of how he retained the club’s customer data and the claimant’s client and competitor data. The claimant reserved the right to seek an inquiry into damages, to be applied for within a modest timeframe.
What I take from it
The clawback did the work. Without clause 5.4, the claimant would have been left claiming damages: proving loss, quantifying reputational harm, and almost certainly going to trial. Instead it had a debt claim for a fixed sum on facts the defendant could not really deny, which is close to ideal territory for summary judgment. If you act for an employer paying real money for silence and delivery up, a repayment on breach clause is not boilerplate. It is the point.
Two drafting issues that this case highlights but does not decide are worth thinking about.
The first is gross or net. The termination payment was £50,000. What the defendant actually received was £15,000, then £27,000 after emergency tax, then a further £6,916 representing the deducted tax. A clause providing that “the Termination Payment or any part of it shall become immediately repayable” leaves room for argument about whether the employee repays what reached his bank account or the gross figure, and about how the employer recovers PAYE it has already accounted for to HMRC. Say which you mean, and deal expressly with any tax the employer can and cannot recover from HMRC.
The second is the penalty rule. A clause requiring repayment of the whole consideration on any breach, however minor, is a secondary obligation triggered by breach and is in principle open to challenge under the rule as restated in Cavendish Square Holding BV v El Makdessi [2015] UKSC 67. It was not argued in this case, and on these facts a legitimate interest in protecting confidential information would have been straightforward to demonstrate. On a trivial breach of a non-derogatory clause the analysis is less comfortable. Tying full repayment to material breach, or tiering the consequences, reduces the exposure without weakening the deterrent.
Keep the statutory carve out. Clause 5.4 excluded statutory notice and redundancy entitlement from the repayment obligation, which is sensible given section 203 of the Employment Rights Act 1996 and the general difficulty of contracting out of statutory rights.
Say what you mean on tax. Clause 4 is a model of allocation: state the belief, state that no warranty is given, put responsibility on the employee, and back it with a tax indemnity. When the deduction was challenged, the clause answered the point. Vague language about the parties “understanding” the treatment would not have.
Do not expect further payments to buy peace. The claimant paid over the deducted tax to bring the matter to an end. It bought roughly twenty four hours. Where a counterparty’s demands escalate with every concession, paying more is not a strategy. Injunctive relief, and in the right case a report to the police, is what changes the position.
Finally, look at access before the secondment starts, not after. A project manager on probation, seconded for a matter of weeks, had access to addresses and payment card details for tens of thousands of individuals. That is a question for the contractual chain between customer, IT supplier and individual: access limited to what the role needs, audit and inspection rights, confidentiality obligations that survive termination, and personal undertakings from the individuals actually given access. It is worth reading your supplier contracts against what your people can genuinely see.
The takeaway
This is a summary judgment decision on stark facts rather than a development in the law. What it shows is a settlement agreement working under pressure, because someone took the trouble to draft the remedies as carefully as the obligations. The judgment carries neutral citation [2026] EWHC 2061 (Ch) and is published on Find Case Law, the free judgments service run by the National Archives.
If you are drafting a settlement agreement where confidentiality genuinely matters, or you have been handed one and want to know what you are giving up, I am happy to look at it. I act for employers and employees in settlement agreement negotiations.
