Executive Summary
- The case concerns a dispute between the Claimants (Lay & Anor) and Independent Vetcare Limited (IVL) over earn-out payments following IVL’s acquisition of Easy Direct Debits Limited (EDD).
- Claimants seek £1.5 million in earn-out payments; IVL denies liability and counterclaims breach of warranty related to EDD’s regulatory compliance under the Payment Services Regulations 2017.
- Central legal issue: whether EDD engaged in regulated activity of "acquiring payment transactions" requiring FCA authorization.
- Court refused IVL’s partial summary judgment applications on isolated issues, emphasizing proper procedure for preliminary issues.
- The strike-out application was considered separately, focusing on whether parts of the Defence to Counterclaim disclosed reasonable grounds.
Sanctions Highlights
- No direct sanctions imposed or discussed in the judgment.
- However, regulatory compliance under Payment Services Regulations 2017 is pivotal, implicating FCA oversight and potential sanctions for unauthorized payment services.
- IVL’s counterclaim hinges on alleged non-compliance, which could expose EDD to regulatory sanctions if proven.
Emerging Risks
- Risk of regulatory enforcement against entities operating payment services without FCA authorization.
- Potential for increased litigation over earn-out disputes tied to regulatory compliance post-acquisition.
- Legal uncertainty around classification of payment activities (e.g., "acquiring payment transactions") may affect future M&A due diligence.
- Tactical misuse of summary judgment applications to isolate issues may increase procedural complexity and costs.
Geopolitical Impact
- Case arises under English law, impacting UK regulatory and commercial frameworks.
- FCA regulation reflects UK’s post-Brexit financial regulatory autonomy, distinct from EU Payment Services Directive regimes.
- The case underscores ongoing UK-EU divergence in financial services regulation, with implications for cross-border payment service providers.
- UK courts’ approach to procedural rules (CPR) influences litigation strategy in commercial disputes involving regulated financial activities.
Economic Intelligence
- EDD’s business model supports veterinary practices’ payment processing, a niche but growing fintech segment.
- Dispute highlights economic risks in earn-out arrangements linked to regulatory compliance.
- FCA’s regulatory regime imposes operational costs and compliance burdens on fintech and payment service providers.
- IVL’s acquisition strategy may be impacted by potential liabilities arising from regulatory breaches, affecting valuation and deal structuring.
Strategic Recommendations
- Parties in payment services acquisitions should conduct rigorous FCA compliance due diligence to mitigate post-acquisition disputes.
- Legal teams should carefully assess the viability and procedural appropriateness of summary judgment applications in complex regulatory disputes.
- Businesses should monitor evolving FCA interpretations of payment service activities to anticipate regulatory risks.
- Consider early resolution mechanisms or preliminary issue trials to streamline disputes involving mixed legal and factual questions.
- Maintain awareness of UK regulatory divergence from EU frameworks to manage cross-jurisdictional compliance and litigation risks.
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**Source Notes:**
Sanctions Intelligence Digest, England and Wales High Court (Commercial Court) Decisions, [2025] EWHC 1098 (Comm)
https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1098.html