Baker & Anor v Financial Conduct Authority (Re Ipagoo LLP) [2022] EWCA Civ 302 (09 March 2022)

Baker & Anor v Financial Conduct Authority (Re Ipagoo LLP) [2022] EWCA Civ 302 (09 March 2022)

The EMRs, interpreted in light of the EMD and PSD2, do not require or create a statutory trust over relevant funds received by an EMI. The safeguarding regime is satisfied by statutory priority in insolvency, not by imposing a trust. The asset pool for distribution to electronic money holders does not extend to sums not properly safeguarded; holders of unsafeguarded funds rank as unsecured creditors.

Citation
[2022] EWCA Civ 302
Parties
Applicants/respondents: Jason Daniel Baker and Geoffrey Paul Rowley; Intervener/appellant: The Financial Conduct Authority
Jurisdiction
England and Wales
Judgment Date
09 March 2022
Procedural Posture
Appeal / Court of Appeal Judgment on Appeal From High Court
Outcome
Appeal dismissed; cross-appeal allowed in part
Legal Topics
Electronic Money Regulations, Statutory Trusts, Safeguarding of Client Funds, Priority of Claims in Insolvency, Interpretation of EU Directives
Insolvency Law Financial Regulation Trusts Law European Union Law Electronic Money Regulations Statutory Trusts Safeguarding of Client Funds Priority of Claims in Insolvency +1 more

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Parties

Jason Daniel Baker and Geoffrey Paul Rowley

Applicants/respondents

The Financial Conduct Authority

Intervener/appellant

Procedural Posture

Appeal / Court of Appeal Judgment on Appeal From High Court

Legal Issues

  1. 1 Whether funds received by an electronic money institution (EMI) from electronic money holders are subject to a statutory trust under the Electronic Money Regulations 2011 (EMRs)
  2. 2 Whether the safeguarding requirements of the EMRs and underlying EU Directives require the imposition of a statutory trust
  3. 3 Whether the asset pool for distribution in insolvency should be extended to include sums not properly safeguarded

Ratio Decidendi

The EMRs, interpreted in light of the EMD and PSD2, do not require or create a statutory trust over relevant funds received by an EMI. The safeguarding regime is satisfied by statutory priority in insolvency, not by imposing a trust. The asset pool for distribution to electronic money holders does not extend to sums not properly safeguarded; holders of unsafeguarded funds rank as unsecured creditors.

Court Disposition

Appeal dismissed; cross-appeal allowed in part

Orders

  • Declaration that the EMRs do not create a statutory trust over relevant funds received by an EMI
  • Electronic money holders have statutory priority only over the asset pool as defined; unsafeguarded funds do not benefit from priority and rank as unsecured claims