Tulip Trading Ltd (a Seychelles company) v Bitcoin Association for Bsv (a Swiss verein)
| Jurisdiction | England & Wales |
| Judge | Master Clark |
| Judgment Date | 05 January 2022 |
| Neutral Citation | [2022] EWHC 2 (Ch) |
| Docket Number | Case No: BL-2021-000313 |
| Court | Chancery Division |
[2022] EWHC 2 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Master Clark
Case No: BL-2021-000313
John Wardell QC, Bobby Friedman, Sri Carmichael (instructed by Ontier LLP) for the Claimant
James Ramsden QC (instructed by Bird & Bird LLP) for the 2 nd to 12 th Defendants
Matthew Thorne (instructed by O'Melveny & Myers LLP) for the 15 th & 16 th Defendants
Hearing date: 25 November 2021
Approved Judgment
Applications
This is my judgment on two applications for security for costs made by:
(1) Amaury Séchet and Jason Cox, the 15 th and 16 th defendants (“D15/16”) – dated 7 September 2021;
(2) the 2 nd to 12 th defendants (“D2–12”) – dated 3 November 2021.
These defendants are all domiciled out of the jurisdiction. They have applied to set aside the order dated 8 May 2021 of Deputy Master Nurse granting permission to serve the claim documents on them out of the jurisdiction (“the jurisdiction applications”). Those applications are listed for a 5 day (including 2 days pre-reading) hearing before a High Court Judge from 28 February 2022.
The security applications seek security for the costs of the jurisdiction applications. The first defendant, Bitcoin Association for BSV, has acknowledged service stating that it intends to defend the claim, and does not therefore challenge jurisdiction. For the purposes of this judgment, I refer to the security applicants as the defendants.
Parties and the claim
The claimant is a Seychelles incorporated company, whose ultimate beneficial owners are Dr Craig Wright and his family. Dr Wright claims to have created the Bitcoin system under the pseudonym “Satoshi Nakamoto”.
The defendants are open-source software developers who developed or improved the Bitcoin Core and Bitcoin Cash ABC software on a non-commercial basis.
The claimant claims to be the owner of about US$4.5 billion worth of digital assets (“the Bitcoin”), which were accessed and controlled by Dr Wright from his computer and network in England. In order to do so, Dr Wright used secure “private keys”. These private keys were deleted (presumably after having been copied) by hackers who accessed Dr Wright's computer in February 2020. Dr Wright is now unable to access the Bitcoin.
The claimant's case is that the defendants owe fiduciary and tortious duties to it to re-write or amend the underlying software code to enable it to access the Bitcoin. It has asked them to take those steps. The defendants do not consider themselves to be under the duties alleged by the claimant and have refused to take the steps requested.
The key issues in the Claim are:
(1) whether the claimant owns the Bitcoin;
(2) whether the defendants have the ability to restore the claimant's access to and control of the Bitcoin in circumstances where the claimant has lost access to the private keys;
(3) if the defendants do have such ability, whether they owe the claimant fiduciary and/or tortious duties to:
(i) restore its access to and control of the Bitcoin, or
(ii) at least take all reasonable steps to restore the claimant's access to and control of the Bitcoin, and
(iii) take all reasonable steps to ensure that effect is not given to the fraud that has been perpetrated against the claimant by the hackers;
(4) if such duties exist, whether the defendants have breached them; and
(5) what relief the claimant is entitled to if the defendants are found to be in breach of their duties.
Evidence
The evidence in the security applications comprises:
(1) 3 rd witness statement of David Foster dated 2 September 2021 (“ Foster 3”) – in support of D15/16's application;
(2) 4 th witness statement of Oliver Cain dated 28 October 2021 (“Cain 4”) — in answer to D15/16's application;
(3) 4 th witness statement of David Foster dated 12 November 2021 (“ Foster 4”) – in reply to Cain 4;
(4) 4 th witness statement of Sophie Eyre dated 3 November 2021 (“Eyre 4”) in support of D2–12's application;
(5) 5 th witness statement of Oliver Cain dated 16 November 2021 (“Cain 5”) — in answer to D2–12's application;
although I was also referred to parts of the voluminous evidence in the claimant's application to serve out and the jurisdiction applications.
Legal principles
The applications are made under CPR 25.13(2)(a), which relevantly provides:
“25.13—Conditions to be satisfied
(1) The court may make an order for security for costs under rule 25.12 if–
(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(b)
(i) one or more of the conditions in paragraph (2) applies,
…
(2) The conditions are– (a) the claimant is—
(i) resident out of the jurisdiction; but
(ii) not resident in a State bound by the 2005 Hague Convention, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982 (c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so; …
(f) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he will be unable to pay the defendant's costs if ordered to do so;
(g) the claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him.”
These conditions and the order in which the defendants relied upon them can be conveniently summarised as:
(1) the impecuniosity condition: CPR 25.13(2)(c)
(2) the nominal claimant condition: CPR 25.13(2)(f)
(3) the non-residence condition: CPR 25.13(2)(a)
(4) the enforcement avoidance condition: CPR 25.13(2)(g).
The purpose of ordering security for costs is to protect the defendant (who is an involuntary party to litigation) against the risk that they may be unable to recover the costs of the claim brought against them: Bestfort v Ras Al Khaimah [2016] EWCA Civ 1099, [2016] 2 CLC 714 at [71].
Impecuniosity condition Principles
The principles applicable to this condition can be summarised as follows:
(1) The applicant must show that, on all the material presently available to the court, there is reason to believe that the claimant will be unable to pay the applicant's costs if ordered to do so: Chemistree Homecare Limited v Teva Pharmaceuticals Ltd [2011] EWHC 2979 (Ch) at [3];
(2) Inability to pay means to pay when the costs fall due for payment: Re Unisoft Group (No 2) 1993 BCLC 532 at 534, approved in Jirehouse Capital v Beller [2008] EWCA Civ 908; [2009] 1 W.L.R. 751 at [23];
(3) This calls for an assessment of what the claimant may be expected to have available for payment at the due date or dates in the form of cash or other readily realisable assets: Longstaff International v Baker and McKenzie [2004] 1 WLR 2917 at [17] and [18]); Autoweld Systems Ltd v Kito [2010] EWCA Civ 1469 at [20] and [29];
(4) The opening words “there is reason to believe” have the effect of watering down the obligation which follows. The defendant does not have to show on a balance of probabilities that the claimant company “will be unable to pay”: 2021 White Book at 25.13.12; Jirehouse Capital;
(5) The approach adopted should be simple and not “over-burdened by technical and semantic arguments relating to the construction of the ‘threshold’ test”: Bestfort at [48];
(6) Where a foreign company is reticent in revealing, or declines to reveal its financial position, it is “sound” practice to grant security against it: Sarpd Oil v Addax [2016] EWCA Civ 120; [2016] 2 Costs LO 227 (CA):
“17. … If a company is given every opportunity to show that it can pay a defendant's costs and deliberately refuses to do so there is, in our view, every reason to believe that, if and when it is required to pay a defendant's costs, it will be unable to do so…
19. … even if deliberate reticence on the part of a respondent is not a breach of CPR 1.3, a court can and should take account of deliberate reticence as part of the overall picture. Any evaluation has to be made on the totality of the evidence before the court; part of that totality is the absence of relevant evidence from the only party who is able to provide it. If, therefore, there were to be a practice of the Commercial Court (as to which we cannot express a view from our own experience) that security for costs will often be granted against a foreign company who is not obliged to publish accounts, has no discernible assets and declines to reveal anything about its financial position, our view is that the practice is a sound one …”
Evidence as to claimant's ability to pay and “reason to believe”
On the claimant's own evidence, contained in Dr Wright's witness statement dated 29 April 2021 (“Wright 1”) in support of the claimant's application to serve out of the jurisdiction:
(1) the claimant is a “holding company” for the Bitcoin;
(2) the Bitcoin is its “main asset”;
(3) it does not trade (this is confirmed at para 3 of the PoC), and so has no customers;
(4) it has no bank account;
(5) it does not file accounts or tax returns.
In addition, the defendants' unchallenged evidence is that the Seychelles is a jurisdiction in which corporations are required to provide little or no information about their business activities, and that no accounts or balance...
To continue reading
Request your trial
-
Tulip Trading Ltd (a Seychelles company) v Wladimir Van Der Laan
...4 here. 153 TTL further relies on a decision in these proceedings by Master Clark that TTL should provide security for costs ( [2022] EWHC 2 (Ch)), which included a finding at [43] that TTL was resident in England. Indeed, Mr Wardell's primary case on residence was a submission that this f......
-
Dr Craig Steven Wright v Coinbase Global, Inc.
...Sarpd Oil v Addax [2016] EWCA Civ 120, recently cited in Tulip Trading Limited (a Seychelles company) v Bitcoin Association for BSV [2022] EWHC 2 (Ch) (Master Clark). 55 I accept all these submissions which are fully supported by the authorities cited. The Ds' contentions on security and ......
-
Blockchain Bites: A fiduciary duty by any other name would smell just as sweet: Tulip Trading v Bitcoin Association
...in the matter. Tulip sought to rely on an earlier case they were involved in, Tulip Trading Ltd v Bitcoin Association for BSV & Ors [2022] EWHC 2 (Ch) (05 January 2022) (the January 2022 matter) which included a finding that Tulip was a resident in England. The Court was not satisfied that ......
-
Cryptocurrency Insufficient To Satisfy Test For Security For Costs
...not result in protection equal to a payment into court or first class guarantee: Tulip Trading Limited v Bitcoin Association for BSV [2022] EWHC 2 (Ch) and [2022] EWHC 141 This judgment marks an important step in a case that could be of vital interest to cryptocurrency holders and developer......
-
Cryptocurrency Insufficient To Satisfy Test For Security For Costs
...not result in protection equal to a payment into court or first class guarantee: Tulip Trading Limited v Bitcoin Association for BSV [2022] EWHC 2 (Ch) and [2022] EWHC 141 This judgment marks an important step in a case that could be of vital interest to cryptocurrency holders and developer......
-
Will Courts Accept Cryptocurrency As A Security For Costs?
...recent English High Court decision, Tulip Trading Limited v Bitcoin Association for BSV [2022] EWHC 2 (Ch) and [2022] EWHC 141 (Ch), the Court refused the claimant's request for security for costs to be paid in Bitcoin. This is the first English case where a party to litigation has sought t......