Syed Rahman details a High Court enforcement of a foreign judgement.
The case of Tai Mo Shan Ltd v. Persons Unknown [2024] EWHC 1514 (Comm) can be viewed as a significant development in crypto case law.
This is because it saw the High Court grant an application for service out of the jurisdiction in proceedings that were seeking to enforce a New York state court judgment regarding stolen crypto assets. Such a course of action by the High Court is, I believe, a legal first.
The New York judgement had stated that the claimant, Tai Mo Shan Ltd, had a proprietary interest in the contents of a cryptocurrency wallet controlled by its solicitors. This wallet held the proceeds of an ethical hack ordered in related English proceedings.
Test
The High Court judge applied the standard test for permission to serve out of the jurisdiction: that there needs to be a good arguable case, that the claim falls within one of the classes of cases set out in Practice Direction 6B.3.1, that England is the appropriate forum, and that there is a reasonable prospect of success in relation to one of the jurisdictional gateways.
The judge held that the primary claim for enforcement of the New York judgment met the requirement of there being a good arguable case and was satisfied that it fell within the relevant jurisdictional gateway (Gateway 10 for claims made to enforce any judgment or arbitral award). But the judge rejected two claims by Tai Mo Shan Ltd for freestanding declarations regarding its beneficial ownership of assets in the recovery wallet. These claims were deemed not to fall within the relevant gateway. The court stated that a further application to serve out would be necessary in order to pursue them.
The judge did, however, hold that England was the appropriate forum for the proceedings, with there being a plausible evidential basis for concluding that the misappropriated assets should be treated as located in England. As the solicitors controlling the recovery wallet were based in England, the English court could be considered the most appropriate venue for the proceedings. This was an important point as the solicitors would have to be released from undertakings they had given to the English court to hold and preserve the relevant crypto assets as part of their eventual transfer to Tai Mo Shan Ltd.
In concluding that the claim met the reasonable prospect of success threshold, two matters came under consideration:
- The judge said that for a judgment to be enforceable, it "must be in relation to subject matter which is situate in the relevant foreign state." In this case, it was arguable to the required threshold that New York was the situs of the crypto stolen from the claimant, as while the claimant was a Cayman-registered company, it was managed and controlled in New York.
- The judge also assessed whether the New York judgment was sufficiently final and conclusive to be enforceable in England. Although it was a default judgment – that could possibly be set aside by a subsequent application in the United States - the judge found it could still be considered final as long as it was subject to immediate enforcement (which its wording appeared to indicate it was).
Service by Alternative Means
The claimant had applied for permission to serve the claim documents by alternative means, using an Non-Fungible Token airdrop sent to the wallet addresses associated with the defendants.
Permission was granted, with two notable conditions:
- So as to address any potential issues with CPR Rule 6.40(4) - which provides that nothing in the service provisions requires any person to do anything contrary to the law of the country where the claim form or other document is to be served - the relevant order was qualified such that service would not be effective where service by NFT was contrary to the law of the country where the defendant was located at the time service was effected.
- In order to protect against the risk of non-parties gaining access to underlying documentation, the order permitted password protection of the documents, with instructions included on how to obtain the password. This is a contrast to Osbourne v Persons Unknown [2023] EWHC 340 (KB), where documents with various redactions were served, with unredacted copies available to the defendants on request.
Conclusion
This is a case that illustrates the English jurisdiction's ability to enforce foreign courts’ judgments relating to cryptocurrency. It has to be viewed as another significant addition to the growing body of crypto-related case law.
The court’s decision that the lex situs of the relevant crypto assets was New York - where the claimant's management and control was based - as opposed to its corporate domicile in the Cayman Islands can be seen as important. Lex situs has so far been the subject of a number of inconsistent decisions in crypto-related cases. Arguably, the most persuasive authority is the obiter remarks in Tulip Trading Ltd v Bitcoin Association for BSV & Ors [2022] EWHC 667 – in which the court took the management and control approach that was adopted in this case. The judgment's paragraphs on service may also prove useful additions to case law.
