Estoppel by Conduct: Privilege Cannot Shield a Litigation Volte-Face Justified Only by “Changed Legal Advice”

Court: England and Wales Court of Appeal (Civil Division)
Neutral citation: [2026] EWCA Civ 1027
Date: 31 July 2026
Appeal from: Business and Property Courts, London Circuit Commercial Court (KBD), [2026] EWHC 876 (Comm) (HH Judge Bird, sitting as a High Court Judge)
Judges: Lady Justice Andrews (lead), Lord Justice Bean (VP), Lady Justice Cockerill

1. Introduction

This appeal concerned a strike-out application directed at a counterclaim in Commercial Court proceedings arising out of a share purchase agreement (“SPA”) for the sale of a company providing direct debit subscription services to veterinary practices (“EDD”). The claimants (the sellers) sued for outstanding sums due under the SPA. The defendant buyer (“IVL”) counterclaimed for breach of warranty, alleging that at completion EDD’s pre-completion business model operated unlawfully under the Payment Services Regulations 2017, because EDD required Financial Conduct Authority (“FCA”) authorisation.

The central issue was procedural and ethical rather than purely contractual: should IVL’s counterclaim be struck out as an abuse of process (estoppel by conduct / “approbation and reprobation”), because in earlier Employment Tribunal (“ET”) proceedings brought by the seller’s managing director (as claimant there), IVL had advanced the opposite stance—namely that EDD’s business was lawful and not required to be FCA regulated—and had obtained a significant litigation advantage from that stance in resisting interim relief?

Key actors and proceedings

• Commercial claim: sellers’ claim for outstanding SPA monies; buyer’s counterclaim for breach of warranty (regulatory illegality at completion).
• ET proceedings: whistleblowing-related dispute following the managing director’s dismissal; application for interim relief (reinstatement) under the Employment Rights Act 1996 (“ERA”).

2. Summary of the Judgment

The Court of Appeal allowed the sellers’ appeal and struck out IVL’s counterclaim as an abuse of process. It dismissed IVL’s cross-appeal.

• Clear inconsistency: IVL had adopted a “true volte-face” on the lawfulness of EDD’s pre-completion (indirect) business model.
• Insufficient justification: IVL could not fairly rely on “changed legal advice” (and an allegedly improved understanding of facts) while maintaining legal professional privilege over the advice and providing only vague, non-specific assertions as to what materially changed.
• Materiality to earlier decision: IVL’s earlier stance was a material factor in the ET’s refusal of interim relief; it contributed significantly to the ET’s conclusion that protected disclosures were not shown to be “likely” at that stage.
• Result: this was “a paradigm case” for estoppel by conduct; the counterclaim was struck out.

3. Analysis

3.1 Precedents Cited (and how they shaped the decision)

LA Micro Group (UK) Ltd v LA Micro Group Inc and others [2021] EWCA Civ 1429; [2022] 1 WLR 336

The Court treated LA Micro as the clearest modern statement of the domestic approach: estoppel by conduct in this context is a broad, merits-based assessment, not confined by the stricter requirements of issue estoppel. A key enquiry is whether the earlier decision was obtained “on the footing of” or “because of” the stance taken; absent that factor, inconsistency may go to credibility but not necessarily to abuse.

Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993

The Court adopted the classic proposition (via LA Micro) that where a litigant makes an election “in the face of the court” and procures an order affecting others, the court may hold the litigant to that conduct and refuse a restart on a contrary basis.

New Hampshire v Maine [2001] 532 US 742

The Court treated New Hampshire as consistent with English law and applied its core factors as persuasive guidance:

• Clear inconsistency between earlier and later positions.
• Judicial acceptance of the earlier position such that acceptance of the later position would create a perception that one court was misled.
• Unfair advantage/detriment if the inconsistent stance is permitted.

Critically, the Court drew on New Hampshire to reject “better informed later” explanations where the party had the opportunity and incentive to ascertain the relevant materials earlier. That comparison underpinned the Court’s scepticism about IVL’s asserted “black box” narrative and its alleged late-emerging understanding of the regulatory position.

Malik v Malik [2024] EWCA Civ 1323; [2025] 4 All ER 409

Malik supplied two important clarifications applied here:

• The “clearly inconsistent” requirement does not demand an objectively unequivocal earlier statement; it is enough that the party set out to persuade the court it held a position, the court was persuaded, and acted on that footing.
• In assessing abuse, it is relevant to ask what was said previously and with what purpose; and to consider whether the earlier stance was “a reason for” the earlier order in evaluative decisions.

The Court used Malik to address the causation/materiality question: IVL could defeat estoppel only by showing the ET decision would inevitably have been the same even without IVL’s earlier stance—a difficult burden in evaluative, multi-factor decisions like interim relief.

Steer v Stormsure Ltd [2021] ICR 1671

Although not central to the estoppel doctrine, Steer was used to explain the high threshold for interim relief under ERA (a “pretty good chance of success”), providing context for why the ET’s view of regulatory compliance could realistically tip the likelihood assessment on protected disclosures and causation.

3.2 Legal Reasoning

(A) The inconsistency was real and central, not semantic

The Court upheld the finding that IVL’s ET stance (“EDD’s business was lawful; no FCA authorisation required; the managing director knew that; motivations were financial”) was plainly inconsistent with the later Commercial Court counterclaim (EDD’s pre-completion model was unlawful; warranties were breached). The Court stressed that even though the alleged protected disclosures in the ET focused on a post-completion “direct model,” IVL’s ET case necessarily relied on asserting lawful operation and regulatory sufficiency of the pre-existing “indirect model” to undermine the reasonableness and protected nature of the disclosures.

(B) “Changed legal advice” cannot do the work—especially under privilege

Two linked propositions were articulated with unusual clarity:

• Fairness and evidential logic: if a party seeks to justify a litigation U-turn by reference to changing legal advice over time, it cannot fairly maintain privilege so as to prevent the court and opponent from testing what changed and why. Bare assertion should carry “little or no weight” in the evaluative assessment.
• Public policy: a simple change in legal advice will “rarely, if ever” justify a volte-face of this nature. Otherwise, parties could evade the rule by “finding a new lawyer willing to express a different view,” undermining the integrity of the judicial process.

The Court acknowledged that asserting privilege does not generate an adverse presumption of fact, but held that the burden of providing a proper explanation for the inconsistency rests on the party seeking to resile; if it withholds the key information, it “must live with the consequences.”

(C) A material change of circumstances requires specificity (and reasonable unavailability earlier)

The Court accepted in principle that a volte-face might be justified by material changes such as fraud, mistake, or genuinely new information that could not reasonably have been obtained earlier. But here:

• IVL’s explanation as to what factual material emerged between June 2023 and September/October 2023 was vague and non-specific.
• The record suggested IVL had extensive due diligence opportunities pre-acquisition and regulatory/legal engagement well before the ET interim relief application.
• There was an unresolved tension between (i) IVL’s October 2022 letter asserting pre-completion illegality and (ii) IVL’s June 2023 ET stance asserting lawful operation—supporting a perception of position-taking “according to the exigencies of the moment.”

(D) The earlier ET stance was a material factor in refusing interim relief

The Court agreed that IVL’s ET stance significantly influenced the ET’s “likely” assessment on whether protected disclosures would be established. Because interim relief involves an evaluative, multi-factor judgment, IVL could not show that the ET would inevitably have refused relief even if IVL had accepted (or even left open) pre-completion non-compliance. Following Malik v Malik, the counterfactual was not predictable with sufficient confidence to defeat materiality.

(E) Remedy: strike-out of the counterclaim

Having satisfied (i) clear inconsistency, (ii) judicial acceptance/material reliance, and (iii) unfair advantage/detriment, the Court held this was a “paradigm case” for estoppel by conduct and struck out the counterclaim as an abuse of process.

3.3 Impact

Practical impact on multi-forum litigation (employment + commercial)

• Positions taken in “interim” employment applications can bind later civil claims: especially where a corporate group takes a deliberate stance to defeat interim relief and later seeks an inconsistent financial advantage in commercial litigation.
• Care in witness statements and pleadings: corporate respondents defending whistleblowing claims must anticipate downstream consequences of asserting “everything was lawful” as a litigation tactic.

Privilege and “changed advice” narratives

• No “have it both ways” approach: a party cannot expect the court to accept a privilege-protected “advice changed” explanation as a sufficient answer to approbation/reprobation.
• Incentive to waive (at least partially) or plead differently: parties may need to (i) waive advice in a controlled way, (ii) provide concrete, non-privileged particulars of the newly discovered facts and why they were previously unavailable, or (iii) avoid absolute positions in earlier proceedings.

Doctrinal impact: reinforcing integrity-based estoppel

The judgment strengthens the integrity-of-process rationale: the focus is not merely on private unfairness between parties, but on avoiding the perception that courts/tribunals were used to obtain inconsistent advantages on incompatible theories.

4. Complex Concepts Simplified

• Estoppel by conduct / “approbation and reprobation”: if a party persuades a court/tribunal to proceed on the basis of a particular position, it may be prevented from later taking the opposite position where that would undermine fairness or the integrity of justice.
• Abuse of process (strike-out): the court can stop a claim/counterclaim from continuing where pursuing it would misuse the court’s procedures in a way that is unfair or disreputable.
• Interim relief (ERA whistleblowing dismissals): an exceptional remedy requiring reinstatement before the full hearing; granted only where the claimant is “likely” to succeed on key elements, a high threshold.
• Legal professional privilege: a right to withhold legal advice communications from disclosure. This case emphasises that privilege can be maintained, but doing so may deprive the party of the ability to rely on “changed advice” as a persuasive justification for inconsistent positions.
• “Material factor” vs “but for”: the court need not find the earlier stance was the sole cause of the earlier decision; it is enough that it materially influenced an evaluative judgment and the outcome cannot be shown to be inevitable without it.

5. Conclusion

[2026] EWCA Civ 1027 is a strong reaffirmation that parties cannot run incompatible cases across proceedings to suit changing interests. Where a party seeks to justify a litigation volte-face by invoking “changed legal advice,” it must provide a properly testable explanation; maintaining privilege while offering only vague assertions will not suffice. If the earlier stance materially influenced a prior tribunal’s evaluative decision, the later inconsistent claim is liable to be struck out as an abuse of process to protect both fairness between parties and the integrity of the judicial process.