A trial in London is the right place to decide a cryptocurrency dispute which could lead to a 'significant development' in the law of fiduciary duty, three Court of Appeal judges have ruled. They were overturning a decision by Mrs Justice Falk last year dismissing a claim by a Seychelles company against bitcoin developers based outside the UK.  

The case, Tulip v Van der Laan and Others, was brought following a 2020 hacking attack on Dr Craig Wright (pictured below), the Australian computer scientist resident in the UK who claims to be bitcoin's inventor, 'Satoshi Nakamoto'. (In the lead judgment, Lord Justice Birss noted that the claim is 'hotly disputed' but is not relevant to the case.)

Wright contends that, because of the attack, he has lost the private keys to 111,000 bitcoin - currently worth £2.1bn - owned by his company Tulip Trading and held on networks controlled by developers of open source software. He claims the developers owe a fiduciary duty to implement a software 'patch' to safeguard the assets. It has never been suggested that they had anything to do with the hack. 

Craig Wright

The developers, Birss said, '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'.

Tulip appealed the High Court's dismissal of the case on six grounds, including that the judge was wrong to hold that it had no real prospect of establishing the claimed fiduciary duties. The appellants also argued that 'this is a developing, complex and uncertain area of law' and therefore the point should go to trial. A hearing is expected early next year. 

Granting the appeal, in a decision supported by Lord Justice Lewison and Lord Justice Popplewell, Birss said: 'The conclusion is not that there is a fiduciary duty in law in the circumstances alleged by Tulip, only that the case advanced raises a serious issue to be tried.'

The substantive case would tackle issues including the governance of 'De-Fi' assets, he said. 'If the decentralised governance of bitcoin really is a myth, then in my judgment there is much to be said for the submission that bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property.'

He acknowledged that for Tulip's case to succeed 'would involve a significant development of the common law on fiduciary duties'.

Felicity Potter, partner at Wright's solicitors, specialist London firm Ontier LLP, said: 'This is a much-welcomed judgment. We asserted that it is inappropriate to summarily dismiss Tulip’s claims at an early jurisdiction hearing where the disputed underlying facts have not been assessed by the court, and the Court of Appeal agreed. The scope of developers’ duties must now be explored in detail at trial.'

She added that: 'The responsibilities owed by developers of digital assets to end users is of significant importance to all coin holders as the concept of digital assets becomes more mainstream.'

James Ramsden KC, who appeared for 14 of the developers, agreed on the potential importance of the case. 'The courts in this jurisdiction continue to lead the common law world in developing a legal structure for the De-Fi sector. This case will be the most important so far in maintaining that lead and continuing to establish this jurisdiction as the leader for De-Fi litigation. The outcome of this claim at trial will therefore have a profound impact and not just in the UK.'

The Tulip litigation is only one of a battery of cases brought by Wright over the past two years to secure cryptopassets and defend his reputation. In September the Court of Appeal in Oslo is due to hear his appeal against a Norwegian court's dismissal of a libel claim. The High Court in London is also due next year to hear a copyright dispute over Wright's claim to authorship of the seminal 'Satoshi' white paper. Meanwhile, Wright is due to appear before a divisional court in April to contest allegations that he broke an embargo on a London libel judgment. 

John Wardell KC, Bobby Friedman and Sri Carmichael, instructed by Ontier LLP, appeared for Tulip Trading. James Ramsden KC, instructed by Bird & Bird, for 14 developers; Alex Charlton KC and Daniel Khoo, instructed by Brett Wilson LLP, for two developers.

 

This article is now closed for comment.