Syed Rahman details a case that considered whether damages should be determined at the date of the breach or the date of the judgement.
The volatility of cryptoassets is something that can have a profound effect on their value at any given time – including when crypto-related legal proceedings are being concluded.
This issue was addressed in Southgate v. Graham [2024] EWHC 1692 (Ch). This was a case in which the High Court considered an appeal from the County Court concerning inter alia the appropriate date for assessing damages in a cryptocurrency loan dispute.
In the case, the County Court had determined that the damages to be paid should be based on the cryptocurrency's fiat value at the breach date – the date the offence was committed. But the volatility of the cryptocurrency involved in the case meant that this decision would have meant a much lower damages award being made than if the valuation had been based on a later date, such as the date of the judgement.
Agreement
The case resulted from a verbal loan agreement made in 2018, with Southgate claiming he lent Graham144 ETH (which was then worth approximately £50,000) to be repaid with a 10% premium. Graham contended that the loan was for £50,000 with ETH merely facilitating the loan. When Graham failed to repay the full amount, Southgate sought specific performance (a decree by the court to compel a party to perform their contractual obligations); demanding that Graham acquire and return that amount of ETH or pay damages equal to its value.
The County Court agreed with Southgate's interpretation of the agreement and said that Graham needed to return the 144 ETH plus 10%; making a total of 158.4 ETH. Graham had already repaid the fiat equivalent of 42.7 ETH, so he still had 115.7 ETH to repay.
But the court refused to grant specific performance, saying this could mean hardship for Graham, as by the date of the judgement the fiat value of 115.7 ETH had risen to approximately £350,000. Instead, the court ordered Graham to pay damages, valuing them as of 1 October 2019, the date Graham was found to have breached the agreement.
Appeal
Southgate appealed, arguing that damages should be based on the ETH value at the judgment date, which was September 28, 2023. In the almost four years since Graham breached the agreement and the judgement being made, the price of ETH price had risen significantly.
The High Court allowed the appeal regarding the valuation date and directed a further hearing to establish the appropriate date. But the court denied the appeal regarding specific performance, stating that an appeal court will not interfere with a trial court’s findings of primary fact or the evaluation of those findings unless it is satisfied that the trial judge was plainly wrong.
The High Court found that the trial judge was entitled to take the view that the nature of the hardship was sufficient to justify a refusal to grant specific performance. The High Court's decision to deny specific performance is consistent with the approach taken in a number of other cases.
Regarding the valuation date, the judge outlined the general contract law principle that damages are assessed at the date of breach. But the judge added that this rule is not absolute and can vary, based on the nature of the contract and the breaching of it.
This is a case that emphasises the importance of the steps taken by the party that has not breached the contract. Any steps that they take – or do not take - to mitigate their loss will come under scrutiny if the matter goes to court. While this is likely to happen in many situations, the aforementioned volatility of cryptoassets makes taking the right course of action as swiftly as possible vitally important in crypto-related cases.
