In the UK, the recent case of Toma v Murray  EWHC 2295 (Ch), adds to the evolving case law in respect of cryptocurrencies. At the end of last year, the Commercial Court in AA v Persons Unknown  EWHC 3556 (Comm) granted an interim proprietary injunction over Bitcoin, thereby confirming Bitcoin’s status as property (see our post here). However, in this recent case, Judge Robin Vos refused the claimant’s application to continue an injunction over the defendant’s Bitcoin held in a coin depot account, and opted for granting relief in the form of damages instead. Amongst other reasons, the Judge took the characteristics of cryptocurrencies, specifically Bitcoin and its volatile nature, into account – expressing concerns that, by the time consent was obtained from the claimants to sell the Bitcoin, the defendant could have suffered significant losses. This case demonstrates that, whilst cryptocurrencies are considered property, their unique characteristics will be taken into account when determining whether an injunction is an appropriate remedy.
The claimants did not receive the purchase money for the sale of Bitcoin as the payment was reversed. The claimants issued a claim seeking to recover the value of Bitcoin held by the defendant who controlled the accounts used to make and withdraw payments. The defendant argued that his account had been hacked. The court previously granted the claimants an interim injunction to prevent the defendant from selling the amount of Bitcoin claimed by the claimants. The claimants sought to extend the injunction pending the final determination of their claim.
The balance of convenience
Judge Robin Vos stated that the purpose of an interim injunction was to mitigate the risk of injustice to the claimants between the making of their claim and trial, but that had to be weighed against the risk of injustice to the defendant (the balance of convenience). To decide whether to grant the interim injunction, he applied the test by Mr Justice Bryan in AA v Persons Unknown:
“First, there must be a serious issue to be tried, secondly, if there is a serious issue to be tried, the court must consider whether the balance of convenience lies in granting the relief sought. The balance of convenience involves consideration of the efficacy of damages as an adequate remedy, the adequacy of the cross-undertakings to damages, and the overall balance of convenience including the merits of the proposed claim.”
Applying the test, the court found:
(1) There was a serious issue to be tried.
(2) However, just because there was an arguable case for a proprietary remedy did not mean that the court would inevitably grant a proprietary injunction.
(3) Ultimately, the claimants were seeking to recover the value of the Bitcoin in the defendant’s account, and that claim was capable of being satisfied in monetary terms given that the defendant owned an unencumbered asset.
(4) The claimants admitted it would have difficulty in fulfilling any cross-undertaking in damages i.e. compensating the defendant for any loss or damage that the defendant might suffer if the interim injunction is granted at the initial hearing, but is later found to be improper at the final hearing.
Given the volatile nature of Bitcoin, its value can change drastically. Therefore, to include a provision to allow the defendant to sell the Bitcoin only with the claimant’s consent is not a suitable long term solution. The consent may require time to obtain and result in the defendant experiencing significant losses, which could result in further litigation.
On these grounds, the court refused the claimant’s application for an interim injunction and discharged the existing injunctions.
This case represents another significant step in understanding how the UK courts will approach Bitcoin and other cryptocurrencies. Parties will need to take into account the characteristics of cryptocurrencies when considering any long term injunction strategy.