Tulip Trading Ltd (a Seychelles company) v Bitcoin Association for BSV (a Swiss Verein)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Birss,Lord Justice Popplewell,Lord Justice Lewison |
| Judgment Date | 03 February 2023 |
| Neutral Citation | [2023] EWCA Civ 83 |
| Docket Number | Case No: CA-2022-001050 CA-2022-002184 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 83
Lord Justice Lewison
Lord Justice Popplewell
and
Lord Justice Birss
Case No: CA-2022-001050
CA-2022-001062
CA-2022-002184
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Mrs Justice Falk [2022] EWHC 667 (Ch)
BL-2021-000313
Royal Courts of Justice
Strand, London, WC2A 2LL
John Wardell KC, Bobby Friedman, Sri Carmichael (instructed by Ontier LLP) for the Appellant
James Ramsden KC (instructed by Bird & Bird LLP) for Respondents 2 to 12 & 15 to 16
Alex Charlton KC, Daniel Khoo (instructed by Brett Wilson LLP) for Respondent 14
Hearing dates: 7–8 December 2022
Approved Judgment
This judgment was handed down remotely at 10.45am on 3 February 203 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The question in this appeal is whether the developers who look after bitcoin may arguably owe fiduciary duties or duties in tort to an owner of that cryptocurrency.
The problem arises in this way. Tulip Trading Limited, a company associated with Dr Craig Wright, claims to be the owner of some bitcoin with a very high total value (the value in $ expressed in April 2021 was about $4 billion). The bitcoin is held at two addresses on the blockchain called 1Feex and 12ib7. However the private keys have been lost in a hack, likely stolen. Without its private keys Tulip cannot access its assets or move them to safety. However, Tulip contends, the developers named as defendants in this case control and run the four relevant bitcoin networks, and it would be a simple matter for them to secure Tulip's assets, e.g. by moving them to another address which Tulip can control. Tulip contends that the role the developers have undertaken in relation to Tulip's property (the bitcoin) and the power this role gives them, and all the circumstances (discussed below), mean that the developers should be recognised as a new ad hoc class of fiduciary, owing fiduciary duties to the true owners of bitcoin cryptocurrency, including in this case Tulip as true owner of the bitcoin at 1Feex and 12ib7. The fiduciary duties owed should extend to implementing the necessary software patch to solve Tulip's problem and safeguard Tulip's assets from the thieves. Tulip also alleges the existence of certain duties in tort. The developers deny they owe fiduciary or any other duties to Tulip. They contend that they have nothing like the power or control Tulip alleges and that duties of the kind Tulip contend for would be highly onerous and unworkable.
All of the defendants are resident outside the jurisdiction. Tulip obtained leave from the Master to serve the defendants outside the jurisdiction and the matter came before Falk J on an application to set aside service brought by most of the defendants who had by then been served. They were the second to twelfth, fifteenth and sixteenth defendants. The first defendant did not challenge service and the thirteenth defendant has not responded.
There is no dispute here or below about the general approach to jurisdiction disputes of this kind. There are three matters to be addressed: a merits test relating to the claim itself, a test relating to the gateways for service out of the jurisdiction under CPR Practice Direction 6B, and a forum conveniens/discretion question focussed on whether England and Wales is the appropriate forum for the dispute (see e.g. VTB Capital plc v Nutritek International Corp & Ors [2012] EWCA Civ 808 (paragraphs 99–101)). The claimant bears the burden on all three points.
The judge addressed all three matters, ruling against Tulip on the first one (the merits). The conclusion was that Tulip had not established a serious issue to be tried because there was no realistic prospect of establishing that the facts pleaded amount to a breach of fiduciary or tortious duty owed by the defendants to Tulip.
On the second (gateway) and third (forum) matters Falk J reached conclusions in Tulip's favour at paragraphs 138–165 and 166–168 respectively. There was also an allegation by the defendant applicants of lack of full and frank disclosure before the Master but this was rejected (at paragraphs 169–170). None of these other matters have been pursued on appeal.
Although not relevant to the appeal, given the international nature of this dispute, it may be worth briefly highlighting aspects of the judge's now unchallenged conclusions that there was a good arguable case that the claim would fall within the court's jurisdiction. There was no dispute that the cryptocurrency in issue was property (paragraph 141) and there was a good arguable case that Tulip was resident in the jurisdiction (despite being a Seychelles registered company) and that the property was located here (see the passage from paragraph 142, concluding at paragraph 158). Therefore the property gateway 11 (CPR PD 6B) was satisfied. For similar reasons gateway 9(a) (damage within the jurisdiction) was satisfied (paragraphs 159–164). In terms of forum, the conclusion (paragraph 168) was that there was no other jurisdiction with which the dispute had a closer link than England, or was even arguably the proper forum.
Many of the factual allegations made by each side were disputed by their opponents, and a significant volume of evidence had been filed. The judge held (paragraph 13) that “ The Defendants' evidence was certainly not sufficiently strong to enable me to conclude that [Tulip's] factual case was no more than fanciful.” There is no challenge to that conclusion, which in my judgment was the right one. The judge later (paragraph 52) expressly held that Tulip's claim to ownership of the bitcoin and that the hack had occurred could not be dismissed summarily.
The judge approached the decision on the merits by identifying that the two claims (of breach of fiduciary duty and in tort) each depended on a point of law which could be decided, even assuming the facts alleged by the claimant in the claimant's favour. The points of law were whether, on those facts, the defendants owed the alleged fiduciary duties or duties in tort.
The judge decided no such duties arose in law and so, since the claimant failed at the first limb, it followed that the judge's order set aside the service on the relevant foreign defendants. The judgment is [2022] EWHC 667 (Ch), 25 March 2022. On appeal, the judge having refused permission, Andrews LJ gave permission on 10 August 2022. The fourteenth defendant was served after other defendants; and by various orders that defendant has joined the proceedings before this court on the same basis as the existing respondents to Tulip's appeal.
Also before the judge was an argument about whether Tulip was seeking to change its case. The judge addressed this at paragraphs 114–125, refusing to take the new submission into account because no draft amended Particulars of Claim had been put forward and no application to amend had been made. On appeal Tulip produced a draft amended Particulars of Claim and, after prompting from the court, undertook to make an application to amend. I will come back to this below.
Approach to the merits test
The merits test can be summarised as being whether there is a serious issue to be tried, which is the same as there being a real as opposed to fanciful prospect of success, and is the same as the test for summary judgment (see e.g. Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804 at paragraphs 71 and 82, Vedanta Resources v Lungowe [2019] UKSC 20, [2020] AC 1045 at paragraph 42).
So far so good, but what is to be done about points of law? It is not easy to reconcile all the statements in the authorities on the approach to points of law on applications of this kind. The question boils down to whether jurisdiction applications are treated differently from other kinds of summary procedure. Is the court bound to decide a question of law, or at least should the court normally decide it, because the application is a jurisdiction application? Does it depend on whether the question goes to jurisdiction itself, i.e. the gateways, or “only” to the merits test? Moreover how does all this fit with another general principle, pulling in the opposite direction, that on a summary procedure it is no part of the court's function “to decide difficult questions of law which call for detailed argument and mature consideration” ( American Cyanamid v Ethicon [1975] AC 396 at 407, cited in this context in Altimo paragraph 84), and the frequent warning in the authorities against deciding controversial points of law in a developing area on assumed or hypothetical facts rather than on the basis of actual factual findings (e.g. Altimo paragraphs 84–86 and Begum v Maran (UK) [2021] EWCA Civ 326 per Coulson LJ paragraphs 23 and 71)?
In my judgment the same principles, about how to approach points of law, should apply to the merits test aspect of a jurisdiction application as to the test under the gateways, and I believe that view is supported by the first sentence of paragraph 86 of Altimo as follows:
“86. There is no reason why the same principle [that it is not normally appropriate in a summary procedure to decide a controversial question in law in a developing area] should not apply...
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