Background
Clifford and Jacqueline Lay sold their shares in Easy Direct Debits Ltd (EDD), a provider of direct-debit services to veterinary practices, to Independent Vetcare Limited (IVL). In later proceedings concerning money allegedly due under the share purchase agreement, IVL counterclaimed that EDD’s pre-completion business had operated unlawfully without required Financial Conduct Authority authorisation, breaching warranties that the business complied with applicable law.
IVL had previously taken the opposite position when resisting Mr Lay’s Employment Tribunal application for interim reinstatement following his dismissal. In those whistleblowing proceedings, IVL maintained that EDD’s business had operated lawfully and did not require FCA authorisation. The High Court found the positions clearly inconsistent and accepted that IVL’s earlier stance materially affected the refusal of interim relief, but declined to strike out the counterclaim because it accepted that changed legal advice and a changed understanding of the facts justified IVL’s new position.
The Court’s Holding
The Court of Appeal unanimously allowed the Lays’ appeal, dismissed IVL’s cross-appeal, and held that the counterclaim should be struck out as an abuse of process under the principle of estoppel by conduct. IVL’s assertion in the Employment Tribunal that EDD had always operated lawfully was clearly inconsistent with its counterclaim alleging that the pre-completion indirect payment model was unlawful.
IVL could not justify that reversal through bare assertions of changed legal advice and newly understood facts while withholding the advice as privileged and failing to identify the material new information. A change of legal advice alone would rarely, if ever, justify such a reversal absent a material change of circumstances that could not reasonably have been discovered earlier.
IVL’s earlier position was a material factor in the Employment Tribunal’s evaluative decision: it significantly affected whether Mr Lay was likely to prove protected disclosures and was bound up with whether whistleblowing was the principal reason for his dismissal. The Court of Appeal was not persuaded that interim relief inevitably would have been refused had IVL taken a different position.
Key Takeaways
- A party that successfully advances a position material to an earlier judicial decision may be prevented from adopting a clearly inconsistent position in later proceedings.
- A party relying on changed legal advice to explain a reversal cannot expect the court to accept that explanation while withholding the advice and failing to identify the facts that supposedly caused the change.
- Estoppel by conduct does not require proof that the earlier position was the sole or “but for” cause of the decision; it is enough that the tribunal acted on that footing or that the position materially influenced its evaluative assessment.
Why It Matters
The decision reinforces that estoppel by conduct protects the integrity of the judicial process, not merely the private interests of litigants. Parties cannot adopt incompatible positions in separate proceedings according to which position offers the immediate advantage.
It also highlights a practical consequence of maintaining legal-advice privilege: privilege remains available, but a party withholding the evidence needed to substantiate its explanation must accept that the court may give its unsupported assertions little or no weight.