Lavinia Deborah Osbourne v Persons Unknown & Anor

Cryptoassets, including non-fungible tokens, may be treated as property where there is a realistically arguable case that English law recognises them as such. For jurisdictional purposes, cryptoassets are treated as located where their owner is domiciled. A proprietary claim arising from fraud may therefore satisfy the constructive-trust gateway for service out of the jurisdiction.

An injunction may be granted where there is a serious issue to be tried, damages are inadequate and the balance of convenience favours preservation of the assets. A Bankers Trust disclosure order requires good grounds for believing that the claimant’s assets have been removed, a real prospect that the information will assist tracing or preservation, an order no wider than necessary, and safeguards for privacy, confidentiality and the respondent’s expenses.

The claimant applied without notice for relief concerning non-fungible tokens allegedly removed without consent from her cryptoasset account. She sought an injunction against persons unknown, permission to serve proceedings out of the jurisdiction, alternative service, and a Bankers Trust disclosure order against Ozone Networks Incorporated, a United States corporation operating the relevant marketplace.

The issues were whether the claimant had a good arguable proprietary claim, whether the assets could be treated as located in England, whether service out and alternative service were appropriate, and whether Ozone should disclose information identifying or locating the persons controlling the recipient wallets.

1. Injunction against persons unknown. The claimant demonstrated a good arguable case that she had been defrauded of the NFTs and a serious issue to be tried. Although the legal status of NFTs as property remained arguable, there was at least a realistically arguable case that they constituted property under English law.
2. Location of cryptoassets. Following Ion Science Ltd v Persons Unknown and others [2020] (Comm), cryptoassets were treated as located where their owner was domiciled. The same approach was appropriate for NFTs. The claimant was therefore treated as having possessed the assets in England.
3. Constructive trust and service out. Applying Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, property obtained by fraud was impressed with a constructive trust when received by those responsible for its removal. The claim therefore realistically engaged gateway 15 in Practice Direction 6B. England was, at that stage, the appropriate forum because the claimant was domiciled there, the assets were treated as removed there, and the location of the defendants was unknown.
4. Alternative service. Applying the principles identified in AA v Persons Unknown [2019] EWHC 3556 (Comm), alternative service was justified despite the possible application of the Hague Service Convention. Speed was important because breach of an injunction could expose a respondent to contempt proceedings.
5. Bankers Trust disclosure. Applying the principles summarised in Kyriakou v Christie, Manson, and Woods Ltd [2017] EWHC 487 (QB), the claimant showed that assets had been removed, that the information sought had a real prospect of identifying the persons controlling the relevant wallets and assisting recovery, and that Ozone was likely to hold relevant customer information. Disclosure was limited to names, addresses, email addresses and other contact details, or ultimate beneficial ownership information where available.
6. The order was subject to privacy and confidentiality safeguards, a right for Ozone to apply to vary or discharge it, undertakings to meet Ozone’s expenses and compensate it for resulting liability, and an undertaking to use the information only to trace the assets.
7. Ozone was a necessary or proper party under gateway 3. Although enforcement difficulties and expense created hesitation, the order was granted on the assumption that Ozone would cooperate with the English court. Costs were reserved.