Gary Jones v Persons Unknown

Hearing date: 16 April 2025

Draft judgment circulated to parties: 17 April 2025

APPROVED JUDGMENT

Louise Hutton KC:

By an application issued on 18 February 2025 (“the Security for Costs Application”), Mr Jones, the Claimant in these proceedings, applies for security for costs from Kyrrex Limited, which has made an application dated 15 November 2024 to set aside the order for summary judgment made in these proceedings by Nigel Cooper KC on 5 September 2022 (“the Summary Judgment Order”).

By the Summary Judgment Order, Nigel Cooper KC ordered summary judgment for Mr Jones on his claim against the First and Second Defendants for deceit and unjust enrichment in the sum of 89.61616088 Bitcoin and summary judgment against the Fourth Defendant, Huobi Global Limited (“Huobi”), “for holding the 89.61616088 Bitcoin (“BTC”) as constructive trustee” and also ordered other consequential relief in favour of Mr Jones. The Summary Judgment Order recorded that a specific identified “Exchange Wallet” under the control of Huobi “has been used to store fraudulently obtained Bitcoin including those belonging to [Mr Jones]”.

In his evidence in support of the application to set aside the Summary Judgment Order (“the Set Aside Application”), Mr Plumpton, the CEO of Kyrrex, states that Huobi operates a third-party exchange platform and that the wallet identified in the Summary Judgment Order is “assigned for BTC customer deposits made by Kyrrex” but that it is “owned, controlled and managed by Huobi”. Mr Plumpton says Mr Jones was therefore wrong, in advancing his claim, to say that that wallet was owned by Kyrrex. (Mr Jones says that it was not his case that the wallet was owned by Kyrrex, and that he did not know about Kyrrex until after the Summary Judgment Order and therefore could not have argued that Kyrrex owned the wallet.) In any event, Mr Plumpton says that following the Summary Judgment Application, Huobi removed over 98 BTC from Kyrrex's account “without any involvement or discussion with Kyrrex”. By the Set Aside Application, Kyrrex seeks to have the Summary Judgment Order set aside, saying that Mr Jones' claim can then proceed to a trial which Mr Plumpton says Kyrrex will defend. In the meantime, Mr Plumpton says the 98 BTC should be returned to the relevant wallet at the Huobi exchange.

Mr Maguire (who appeared for Mr Jones) and Mr Lorrell (who appeared for Kyrrex) agree that the new rules at CPR 25.26 to 25.28, substituted with effect from 6 April 2025, apply to this application. Reflecting that new numbering, the grounds of the Security for Costs Application are that:

i) Kyrrex is resident out of the jurisdiction (being incorporated in St Vincent and the Grenadines): CPR 25.27(b)(i);

ii) Kyrrex is a company and there is reason to believe that it will be unable to pay Mr Jones' costs if ordered to do so: CPR 25.27(b)(ii); and/or

iii) Kyrrex failed to give its address on the Set Aside Application notice: CPR 25.27(b)(iv).

The first issue that arises is whether Kyrrex should be regarded as the claimant for the purposes of the Security for Costs Application. CPR 25.26(1) provides (emphasis added) that, “ A defendant to any claim may apply for security for their costs of the proceedings”. The issue is whether the relevant “claim” or “proceeding” is Mr Jones' underlying claim, in which case he is not a defendant and cannot apply for security for costs under CPR 25.26, or whether the relevant “claim” or “proceeding” is Kyrrex's Set Aside Application, in which case security for costs may be ordered if the conditions in CPR 25.27 are satisfied.

The Judicial Committee of the Privy Council (“the JCPC”) considered a similar question arising in an official liquidation in the Cayman Islands in GFN SA v Bancredit Cayman Ltd (in official liquidation) [2010] Bus LR 587. Three creditors each submitted a proof of debt which was rejected by the liquidators. Pursuant to the Insolvency Rules 1986 which then applied in the Cayman Islands, the creditors appealed to the Grand Court against the rejection of their proofs of debt and applied to expunge the liquidators' acceptance of the proofs of debt of two banks. The liquidators applied for security for costs in relation to the applications. The judge held that an appeal against a rejection of proof was not an action or other legal proceedings within the meaning of the Grand Court Rules and the Companies Law so as to allow the court to make an order for security for costs. The Cayman Islands Court of Appeal reversed that appeal, and the JCPC dismissed the appeal from the Court of Appeal.

Lord Neuberger (with whom Lord Rodger, Baroness Hale and Sir Jonathan Parker agreed) said:

30. As Lord Scott so clearly demonstrates, the court has an inherent jurisdiction to order security for costs, and, while that jurisdiction is essentially discretionary, the discretion must be exercised not merely in a generally judicial manner, but in a manner which accords with the settled practice of the court, as circumscribed or extended by primary or secondary legislation.

31. I am prepared to assume for the purpose of this appeal that, in order to justify an order for security for costs, it is necessary for the respondent liquidators to establish that the applications are within the ambit of section 74 or of GCR Ord 23, r 1, although there is considerable force in the contention that those provisions extend, rather than limit, the court's inherent power to order security, as Lord Scott explains in paras 10 to 14. I also accept that it is the settled practice of the court not to order security for costs against a defendant in relation to any steps which are reasonably necessary to enable him to resist a claim brought against him. Additionally, I agree that, at least in general, a discrete order for security will not be made in relation to what is in substance an interlocutory application. It further seems to me that it must be right, at least as a general rule, that, when deciding whether a particular application is an “action, suit, or other … proceeding” or an “action or other proceedings”, the court must look at the substance of the application as opposed to its strict form.

32. In my judgment, viewed in the light of these principles, the applications in the present case were originating applications falling within the expressions I have just quoted. They brought before the court issues which were not previously before the court, and which would not otherwise have been before the court; and, although brought in the context of a winding up ordered by, and under the ultimate supervision of, the court, these applications were essentially free-standing. The applications arose because of Bancredit Cayman Ltd's insolvency and because of a dispute as to whether that company was genuinely indebted to the appellants (as they claimed and the liquidators denied) or to other claimants (as the liquidators claimed and the appellants denied). The winding up proceedings merely provided the forensic framework in which the applications were made, or the procedural launch pad from which the applications were issued. Indeed, in his engaging submissions, Mr Lowe QC...