Tulip Trading Limited v Bitcoin Association for BSVA & Ors

Permission to serve proceedings out of the jurisdiction requires a serious issue to be tried on the merits, a good arguable case within a jurisdictional gateway, and England to be the proper forum. Novelty or public importance does not lower the merits threshold.

A fiduciary duty requires an undertaking or assumption of responsibility giving rise to loyalty. An imbalance of power and vulnerability are insufficient by themselves. Nor does common law generally impose a duty to confer benefits or prevent purely economic loss caused by third parties, absent a special relationship or assumed responsibility.

A proposed duty requiring software developers to alter a decentralised network to restore access to assets lost through a hack was not a realistically arguable incremental development of the law.

Tulip Trading Limited claimed to own substantial digital assets held on four cryptocurrency networks. It alleged that a hack removed the private keys and that the defendants, said to control the networks, owed fiduciary and tortious duties requiring them to implement software changes restoring access.

The defendants were outside the jurisdiction and challenged permission to serve the claim out. The court considered whether the claims disclosed a serious issue to be tried, whether the claims fell within gateways 9(a), 11 and 4A of Practice Direction 6B, and whether England was the appropriate forum.

1. Disposition. The claim did not raise a serious issue to be tried on the merits. The order permitting service out was set aside and service of the claim form was set aside.
2. Jurisdictional standard. The claimant had to show a real, rather than fanciful, prospect of success; a good arguable case on a gateway; and that England was clearly or distinctly the appropriate forum. A difficult or developing point of law should generally be determined on facts found at trial, but that principle did not permit service out where the claim plainly failed the serious-issue threshold.
3. Fiduciary duty. The alleged control of the networks, imbalance of power and vulnerability of asset owners did not establish the defining obligation of undivided loyalty. Developers were a fluctuating body, with no pleaded continuing undertaking to make future changes. The requested patch would benefit TTL alone and could prejudice rival claimants and other network users. There was no realistic expectation that the defendants had assumed that risk or would act solely in TTL’s interests.
4. Tortious duty. The alleged loss was purely economic and resulted from an omission following a third-party hack. The proposed duty was not an incremental extension of negligence law. It would require an open-ended obligation owed to an unknown and potentially unlimited class, without a special relationship or sufficiently defined assumption of responsibility. The analogy with the Quincecare duty failed because that duty depended on the contractual bank-customer relationship.
5. Other matters. The pleaded case asserted an existing breach, and TTL could not rely on an unpleaded anticipatory case without a proper amendment application. Public policy and the potential importance of digital assets could not create a common-law duty where none was otherwise realistically arguable.
6. Gateways and forum. Had there been a serious issue to be tried, TTL had the better of the arguments that the digital assets were property located in England, that damage would be sustained there, and that England was the appropriate forum. Those conclusions did not overcome the failure on the merits.

First-instance decision. The judgment itself records no prior appellate decision.