Clifford Stewart Lay & Anor v Independent Vetcare Limited

Facts

Mr and Mrs Lay sold their shares in Easy Direct Debits Ltd (“EDD”) to Independent Vetcare Limited (“IVL”) under a share purchase agreement (“SPA”) completed on 28 October 2020, which included a warranty that EDD's business had been conducted in accordance with all applicable laws and regulations (“the conduct warranty”). EDD provided subscription services enabling veterinary practices to collect direct debit payments, accessing the Bankers' Automated Clearing Services system either indirectly through FCA-regulated payment services providers or, from 2021, directly. Mr Lay remained EDD's managing director after completion until his summary dismissal on 7 June 2023, following which he sought interim relief in the Employment Tribunal, alleging he had been dismissed for making protected disclosures about EDD's regulatory compliance. Resisting that claim, IVL asserted, through a witness statement from its General Counsel, that EDD's business had always operated lawfully without requiring authorisation under the Payment Services Regulations 2017, and that Mr Lay knew this; the Employment Judge refused interim relief. When Mr and Mrs Lay later claimed sums outstanding under the SPA, IVL defended and counterclaimed for breach of the conduct warranty, asserting EDD had in fact been operating unlawfully at completion. Mr and Mrs Lay applied to strike out the counterclaim as an abuse of process. HHJ Bird, in the Circuit Commercial Court, found the two positions clearly inconsistent but declined to strike out, holding the change was justified by a change in legal advice. Both parties appealed.