Broadfield recently welcomed a judgment from the Court of Appeal in favour of its clients, Mr and Mrs Lay, in their long-running dispute with Independent Vetcare Limited (“IVL”). In a decision handed down Friday afternoon by Lord Justice Bean, Lady Justice Andrews, and Lady Justice Cockerill, the Court of Appeal allowed the appellants’ appeal and dismissed IVL’s cross-appeal, striking out IVL’s counterclaim against them in its entirety. The ruling represents a significant vindication for the appellants.
Broadfield Partner Sinéad Lester, Senior Associate Cheryl Fletcher and Associate Matt Le Brocq, acted for the appellants in relation to a dispute which arose from the sale of the appellants’ company, Easy Direct Debits Ltd (“EDD”), to IVL. A debt claim was issued by the appellants following IVL’s failure to pay monies due under the share purchase agreement in response to which IVL made a counterclaim for breaches of warranty concerning EDD’s regulatory compliance under the Payment Services Regulations 2017 (“the PSRs”). In short, IVL alleged that as at the date of purchase of the appellants’ shares, EDD was operating unlawfully in breach of the PSRs. The appellants argued that IVL should not be permitted to pursue that counterclaim because it was directly contrary to the position IVL had successfully taken on the very same issue in earlier, separate Employment Tribunal proceedings brought by Mr Lay, following his summary dismissal from EDD.
The appeal arose after the appellants applied to strike out IVL’s counterclaim as an abuse of process. At first instance, HHJ Bird found that the two positions were clearly inconsistent, but declined to strike out the counterclaim, accepting IVL’s explanation that a change in legal advice justified the inconsistency.
The Court of Appeal allowed the appellants’ appeal. Giving the lead judgment, Lady Justice Andrews held that IVL’s change of position amounted to a “true volte-face” and was “a paradigm case for the principle of estoppel by conduct to apply.” The Court found that a party cannot rely on an undisclosed change in legal advice to justify adopting a directly contradictory stance in later proceedings, particularly where, as here, that party maintains privilege over the advice in question and gives the court no means of testing the explanation for its change of position. In a passage Sinéad Lester singled out as especially pertinent, the Court observed that IVL’s conduct “does create a perception that IVL has no compunction in adopting whatever legal position it considers to best suit its interests in the exigencies of the moment.”
The judgment applied the established doctrine variously known as “estoppel by conduct”, “judicial estoppel”, and “the rule against approbation and reprobation”, drawing on English authority such as LA Micro Group (UK) Ltd v LA Micro Group Inc and the US Supreme Court’s decision in New Hampshire v Maine, as well as the recent Court of Appeal decision in Malik v Malik. The Court confirmed that a litigant cannot simply invoke a change in legal advice to escape the consequences of taking inconsistent positions in different proceedings, particularly where it has not been transparent about the basis for that change.
“This is an outstanding result for our clients, and we are immensely proud to have secured it for them. They have shown extraordinary determination in pursuing this appeal, and Mr Lay’s persistence has been thoroughly vindicated by the Court of Appeal. This judgment sends an unambiguous message that parties cannot blow hot and cold across different proceedings to suit their commercial interests.”
Sinéad Lester
Partner
While Broadfield and its clients are delighted with the outcome, the dispute between the parties has not been resolved in full as the underlying High Court debt claim, in which IVL’s counterclaim has now been struck out following the Court of Appeal’s judgment, remains live, as do the separate Employment Tribunal proceedings brought by Mr Lay, which remain pending the outcome of the High Court claim.
