The Kingdom Bank Corporation v Moorwand Ltd
[2023] EWHC 3069 (Comm)
Simon Ashley Rowe (as Liquidator of ONESTOPMONEYMANAGER Ltd) v Redbones Limited & Ors
28 February 2024
[2024] EWHC 369 (Ch)
High Court
A company went bankrupt. The person in charge of sorting things out wasn't sure about the rules on money held for customers and whether that money was legally protected. The court decided the rules didn't automatically protect the money, and gave the customers a short time to claim it; if they don't, the money goes to the government.
Key Facts
- •OnestopMoneyManager Ltd (the Company) was an electronic money institution authorised by the Financial Conduct Authority (FCA).
- •In 2019, Visa withdrew the Company's licence, and the FCA imposed restrictions on its activities.
- •The Company entered members' voluntary liquidation in October 2020.
- •The liquidator, Simon Rowe, sought to return funds to merchants but faced challenges in engaging some.
- •Four merchants (Respondents) failed to comply with due diligence requirements.
- •The liquidator applied to court for directions under section 112 of the Insolvency Act 1986.
Legal Principles
Interpretation of the Electronic Money Regulations 2011 (EMR) and Payment Services Regulations 2017 (PSR) regarding the creation of a statutory trust.
Re ipagoo LLP [2021] Bus. L.R. 1469, Re ipagoo LLP [2022] Bus. L.R. 311, Re Supercapital Ltd [2021] 1 B.C.L.C. 355, Re Allied Wallet Ltd [2022] EWHC 1877
Application of section 112 of the Insolvency Act 1986 to determine questions arising in a winding up.
Insolvency Act 1986, section 112
Outcomes
The Company was regulated under the EMR 2011, with the PSR 2017 safeguarding provisions applying to payment services under Regulation 20(6) of the 2011 Regulations.
The Company was authorised under the 2011 Regulations; no application was made for authorisation under the 2017 Regulations.
The safeguarding provisions in the EMR 2011 and PSR 2017 do not create a statutory trust.
Following the reasoning in Re ipagoo LLP, the Court found the regulations' language did not support a statutory trust. The similarities between the safeguarding provisions in both regulations were key to this decision.
A 42-day period was allowed for the Respondents to provide the outstanding information.
A balanced approach was needed, providing a fair opportunity for claims while allowing the liquidation to proceed.
If Respondents do not respond within 42 days, the funds should be paid into the Insolvency Service Account.
This balances the need for fair opportunity for claims with the need for the liquidation to conclude. Paying the funds to the Insolvency Service Account prevents a windfall to members.
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