Claim No: LM-2023-000318 - [2025] EWHC 1098 (Comm)

I turn first to the application to strike out.

An application can be made to strike out all or part of a statement of case on the grounds that it discloses no reasonable grounds for bringing or defending the claim (applying CPR rule 3.4(1) and (2)(a)). The correct approach to an application to strike out, based on this aspect of the CPR, was considered by Warby J in HRH The Duchess of Sussex v Associated Newspapers [2020] EWHC 1058 (Ch) where he stated at [33(2)]:

“An application under CPR 3.4(2)(a) calls for analysis of the statement of case, without reference to evidence. The primary facts alleged are assumed to be true. The Court should not be deterred from deciding a point of law; if it has all the necessary materials it should "grasp the nettle": ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 , But it should not strike out under this sub-rule unless it is "certain" that the statement of case, or the part under attack discloses no reasonable grounds of claim: Richards (t/a Colin Richards & Co) v Hughes [2004] EWCA Civ 266 [2004] PNLR 35 [22]. Even then, the Court has a discretion; it should consider whether the defect might be cured by amendment; if so, it may refrain from striking out and give an opportunity to make such an amendment”.

The passage referred to by Warby J in the Court of Appeal’s judgment in Richards v Hughes is worth setting out in full in the context of the present case. There Peter Gibson LJ (with whom all other members of the court agreed) explained:

“22.. I start by considering what is the correct approach on a summary application of the nature of Mr. Richards's application at this early stage in the action when the pleadings show significant disputes of fact between the parties going to the existence and scope of the alleged duty of care. The correct approach is not in doubt: the court must be certain that the claim is bound to fail. Unless it is certain, the case is inappropriate for striking out (see Barrett v Enfield London Borough Council [2001] 2 AC 550 at p. 557 per Lord Browne-Wilkinson). Lord Browne-Wilkinson went on to add:

“[I]n an area of the law which was uncertain and developing (such as the circumstances in which a person can be held liable in negligence for the exercise of a statutory duty or power) it is not normally appropriate to strike out. In my judgment it is of great importance that such development should be on the basis of actual facts found at trial not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strike out.”

The application in the present case is to strike out paragraphs 16, 21.2, 26.1, 28.1, 29.4, 30.4, 30.6, 45.1.2.2, 45.1.2.3, 45.3, 46, 48.2 and 48.5.3.2 of the Reply and Defence to Counterclaim and answers 1 to 3 to a Request for Further Information that were provided on 9 October 2024. References hereafter are to paragraphs of the Reply and Defence to Counterclaim unless otherwise indicated.

Shorn of unnecessary assertions regarding the clarity of the Defence, paragraphs 16 and 21.2 contend in essence that there was no entitlement on the part of IVL to withhold payment of the sums claimed in Particulars of Claim. In my judgment it would not be appropriate to strike out these passages. They add nothing of substance to what is stated in the Particulars of Claim and no attempt is being made to strike out that statement of case.

Paragraph 26.1 essentially admits that EDD had no authorisation from the FCA. There is simply in addition a reference to this having been disclosed under the SPA. I can see no proper basis on which it would be appropriate to strike out what is in substance an admission.

Paragraph 28.1 is also in substance an admission of the description applied by IVL to how vet practices outside of its group were serviced after completion under the SPA. Again I do not consider there to be any proper basis to strike out what is in substance an admission.

Paragraphs 29.4, 30.4 and 48.2, along with answers 1 to 2 of the Claimants’ response to the Request for Further Information, appear to be linked and address the issue of whether EDD was engaged in the “acquiring of payment transactions”. Specifically, paragraph 30.4 contains a denial that EDD carried on such activity within the meaning of the relevant provisions of the Regulations. This is expanded on in paragraph 30.7 and in the answers to the Request for Further Information by not only denying such activity but by also saying in the alternative, that if, prima facie, there was any such activity EDD was nevertheless exempt from the requirement to obtain authorisation on the basis that its services were limited to those of a technical service provider within the meaning of paragraph 2(j) of Schedule 1, Part 2 of the Regulations.

The denial that EDD has been engaged in “acquiring of payment transactions” and the reliance on the exclusion of services provided by a technical service provider must be considered in light of the Claimants’ pleaded case regarding what EDD actually did. This is expressed in very general terms in the Particulars of Claim, paragraph 3(b) as “the business of helping veterinary practices receive direct debit payments from their pet owners” and is not greatly clarified in the Reply and Defence to Counterclaim, which at paragraph 27, denies that EDD handled any money or had any other involvement in relevant processes other than “passing pet owner’s information over to a payment service provider…which payment service providers would then submit payment requests to BACS…”.

Given the generality of these statements of case, in my judgment it is not possible to conclude that the defence advanced must fail as a matter of law. Even assuming that all of IVL’s submissions were correct as to how the Regulations are to be interpreted, I could not conclude that EDD was engaging in the “acquiring of payment transactions” or any other regulated form of business merely on the basis of what the Claimants have pleaded. The assertions of the Claimants (which I must assume to be true for present purposes) are simply too general to arrive at a firm conclusion on that matter and, as I have already set out above, on a strike out application of this type I am confined to a review of the statements of case.

IVL has submitted, principally through the witness statement of Mr Murdoch, its solicitor, that the above aspects of the Claimants’ statement of case amount to no more than a bare denial of IVL’s contention that there has been a breach of the Regulations, and, in reliance on paragraph 4 of CPR Practice Direction 3A, this is said to warrant striking out. On analysis, however, I do not accept that the Claimants have only pleaded a bare denial, although I accept that what they have said is rather general. If IVL found this unacceptable then the correct course was to make an application to require a fuller or more detailed answer to its Requests for Information or even to seek a peremptory order to ensure compliance. But no such application has been made.

Paragraphs 45.1.2.2 and 45.1.2.3 and response 3 to IVL’s Request for Further Information that was supplied on 9 October 2024 are the next targets for the strike out application. They all concern the actual knowledge of Mr Keith Chandler, which is said to have encompassed the matters about which IVL currently complains (so falling under the provisions of clause 17.1 and Schedule 5, paragraph 3 of the SPA which prevent any warranty claim being made).

IVL contended in correspondence and in the witness statement of Mr Murdoch that this pleading was impermissible as being contradictory of the Claimants’ principal case that the business of EDD involved no breach of the Regulations. There is nothing in this complaint. As the opening words of paragraph 45 make clear, the Claimants’ reliance on the knowledge of Mr Chandler is pleaded as an alternative case. There is nothing to prevent that under the CPR.

Mr Hanke, counsel for IVL, then submitted that, on the true construction of the SPA, it would have to be shown that Mr Chandler and his colleagues actually knew that EDD was carrying on business in breach of the Regulations before it could be concluded that a warranty claim was excluded on the above basis. However, I am not convinced that such a conclusion on the true interpretation of the SPA can be reached on the materials presently available. At present I have no witness statement from any of the four individuals whose actual knowledge is relevant and have little in the way of context to explain how their knowledge was picked out as being of key importance. Without such materials I do not regard this as a case in which I have all the necessary contextual items to reach a safe conclusion on the true interpretation of clause 17.1 and Schedule 5, paragraph 3 of the SPA. It would not therefore be appropriate to “grasp the nettle” to adopt the language of ICI Chemicals & Polymers (quoted by Warby J in his decision in HRH The Duchess of Sussex). Further I bear in mind the contents of answer 12(b)(xvii) and (xviii) to IVL’s second Request for Further Information that was provided on 23 August 2024, which appear to envisage Mr Chandler appreciating the facts and obtaining expert legal advice on the matters alleged to give rise to the breach of the Regulations on which IVL now relies. Since I have to assume that the Claimants’ pleading is correct, these passages also make it inappropriate for these parts of the Claimants’ statement of case to be struck out.

The next aspect of the strike out application relates to paragraph 46 in which the Claimants plead, in support of their alternative case, that various events or actions post-completion of the SPA are supportive of their case that the matters of which complaint is now made by IVL were already sufficiently known pre-completion to prevent a warranty claim by virtue of Schedule 5, paragraph 3. IVL contends that logically events post-completion cannot support a case of knowledge pre-completion. I do not agree. It seems to me well arguable that conduct post-completion could be consistent with and support an inference of knowledge pre-completion. These matters would have to be explored at trial to reach any firm conclusion. They cannot be resolved by reference only to the statements of case.

This leaves paragraph 48.5.3.2 as the final target of the strike out application. This concerns a non-admission of a contractual right to withhold transfer of the second payment of consideration under the SPA based on performance (or “the second earn out payment” as it was referred to in submissions). I do not regard this passage as being one that should be struck out either. It responds to paragraph 39(e) of the Defence and Counterclaim which contends that management accounts were artificially inflated due to a wrongful transition by EDD to a hybrid business model post-completion. It will properly be a matter for trial as to whether there has been any artificial inflation and as to how each party’s case is to be reconciled with the procedure in the SPA for determination of the amount properly payable in respect of this element of the consideration.