Background
Quidpay Finance Limited held funds in accounts with Settlego Solutions Limited, a payment services provider trading as OpenPayd. The commercial relationship broke down and Quidpay applied on 29 April 2026 for a mandatory interim injunction requiring Settlego to release all funds. Those funds comprised a “Balance” of £6,779,721.72 (the excess beyond any permitted reserve) and a “Reserve” of €2,453,717.89 and £7,000,000 that Settlego claimed the right to retain under clauses 15.1 and/or 15.3 of the parties’ General Terms of Use. At an expedited hearing on 20 May 2026 before the same judge, Settlego’s solicitors disclosed that unspecified “regulatory and legal obligations” — apparently connected to a Suspicious Activity Report (SAR) filed under the Proceeds of Crime Act 2002, which constrained what the Defendant could reveal for fear of committing “tipping off” or “prejudicing an investigation” offences — prevented it from making any payment at all, whether of the Balance or the Reserve.
Rather than deliver provisional merits rulings on the mandatory injunction that might have to be revisited, both parties agreed that a trial of Preliminary Issues was the better course. Two issues were ordered: (1) whether Settlego’s contractual right to hold the Reserve survived termination of the parties’ agreements; and (2) what relief, if any, Quidpay would be entitled to if Settlego was found to have no continuing contractual entitlement to retain the Reserve — with the phrase “or cannot” placed in square brackets to reflect unresolved disagreement about whether a legal impediment should be part of that question. A trial was fixed for 25–26 June 2026. On 4 June 2026, Settlego transferred the Balance of £6,779,721.72 to Quidpay — suggesting it had by then obtained a Defence Against Money Laundering (DAML) consent from the National Crime Agency (NCA) — leaving only the Reserve outstanding.
Both parties filed competing applications on 10 June 2026, to be determined on the papers in light of the imminent trial. Quidpay sought two forms of relief: removal of the bracketed words “or cannot” from Issue 2 on the grounds that Settlego had provided no adequate explanation of any continuing legal impediment; and specific disclosure under CPR 31.12 of the SAR (or equivalent report) filed around 18 May 2026, all accompanying documentation, and all pre- and post-submission correspondence with the NCA, including any DAML consent. Settlego’s cross-application sought to remove only the square brackets, retaining the words themselves, and resisted disclosure as premature, procedurally irregular, and liable to derail orderly preparation for the imminent hearing.
The Court’s Holding
The court, sitting as Deputy Judge Richard Spearman KC, received detailed written submissions from both parties and extensive inter-solicitor correspondence before ruling on the paper applications on 18 June 2026. At the centre of the dispute was a procedural paradox: Settlego claimed that the same POCA 2002 obligations that had originally prevented payment of the Balance now prevented any payment of the Reserve — or even of a compensatory damages or debt award arising from a breach of contract finding — yet those same obligations prevented it from particularising the nature or basis of the impediment. Quidpay argued that if Settlego intended to advance an impediment-based substantive defence (as its Points of Dispute now suggested, going further than merely pleading practical delay), fundamental principles of natural justice required it to identify and prove that impediment, which in turn required disclosure of the SAR material. Settlego countered that ordering disclosure would radically and improperly expand the scope of the narrow contractual preliminary issues that had been agreed, and that the situation remained fluid, as shown by the release of the Balance after the DAML was obtained.
The court addressed whether Issue 2 should include the contingency of a legal impediment preventing payment and whether the Claimant’s entitlement to disclosure of the SAR material could be determined in advance of the preliminary issues hearing without derailing that process. The central legal tension identified in the judgment is the interaction between a defendant’s POCA 2002 obligations — which may constitute a complete defence to a payment obligation for so long as an effective impediment subsists — and the claimant’s right to know the case it must meet and to challenge whether any such impediment in fact exists or extends to a damages award as well as the underlying fund. Quidpay’s position was that an impediment-based defence, if asserted, must be proved and must be susceptible to challenge; Settlego’s position was that the court could coherently determine the preliminary issues on the hypothesis that such an impediment exists, without requiring its disclosure.
Key Takeaways
- A payment services provider’s reliance on POCA 2002 obligations (SAR/DAML regime) as a justification for withholding client funds raises distinct procedural and evidential problems when those same obligations prevent the provider from disclosing the basis of its position to the counterparty or the court.
- Where a defendant pleads a POCA 2002-based legal impediment not merely as a practical explanation for delay but as a substantive defence eliminating any payment obligation, the principles of natural justice will require that impediment to be identified, evidenced, and open to challenge — a consideration that may clash directly with obligations under Part 7 of the Proceeds of Crime Act 2002.
- The framing of preliminary issues must be handled with precision where a known external constraint (such as a regulatory impediment) has been a material factor in the parties’ agreement to the preliminary issues process; ambiguities, left in square brackets at the time of the order, require prompt judicial resolution before the substantive hearing.
- Specific disclosure applications involving SAR material engage the NCA’s interests; the claimant here put the NCA on notice of the application, illustrating that third-party agency involvement may be a necessary step in resolving POCA-adjacent disclosure disputes in civil proceedings.
Why It Matters
This case illustrates a growing tension in commercial litigation involving payment institutions subject to the UK’s anti-money laundering framework. When a regulated firm files a SAR and awaits DAML consent, it is statutorily constrained from disclosing that fact or its details to the counterparty, yet commercial litigation requires disclosure and the adversarial testing of any factual defence. The court’s engagement with this dilemma — in an expedited, high-value dispute involving over £9 million in withheld funds — provides a significant illustration of how courts must manage the procedural architecture of a case when a defendant claims both a contractual right to retain funds and a regulatory impediment that bars any payment at all, including of a damages award, without being able to say why.
For payment service providers, e-money institutions, and their counterparties, the judgment highlights the risks of using the POCA 2002 consent regime in a way that appears selective (withholding Reserve funds after releasing Balance funds) and the need for early, candid engagement with both the court and opposing parties about the nature and scope of any regulatory constraint. The case will be of particular interest to practitioners advising on the intersection of financial crime compliance and commercial contract enforcement in the UK.