Summary
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.
Factual background
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.
Held
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
The court’s approach to earlier authorities
Available to signed-in members.
Appellate history
First-instance decision. The judgment itself records no prior appellate decision.
Appeal route
- This judgment [2022] EWHC 667 (Ch) High Court (Business List)
- Appealed to[2023] EWCA Civ 83Outcomeappeal allowed unanimously
Key cases cited
18 authorities cited.
- Lehtimäki and others v Cooper [2020] UKSC 33
- Poole Borough Council v GN (through his litigation friend “The Official Solicitor”) and another [2019] UKSC 25
- Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20
- Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4
- Four Seasons Holdings Incorporated v Brownlie [2017] UKSC 80
- Michael and others v The Chief Constable of South Wales Police and another [2015] UKSC 2
- NML Capital Limited v Republic of Argentina [2011] UKSC 31
- AK Investment CJSC v Kyrgyz Mobil Tel Limited and others (Isle of Man) [2011] UKPC 7
- Henderson v Merrett Syndicates Ltd (Feltrim Underwriting Agencies Ltd v Arbuthnott, Gooda Walker Ltd v Deeny, Hughes v Merrett Syndicates Ltd, Hallam-Eames v Merrett Syndicates Ltd, The Lloyd’s Litigation: the Merrett, Gooda Walker and Feltrim Cases) [1995] 2 AC 145
- Spiliada Maritime Corpn v Cansulex Ltd (The Spiliada) [1987] AC 460
- Eurasia Sports Ltd v Aguad [2018] EWCA Civ 1742
- Lehtimäki v The Children's Investment Fund Foundation (UK) & Ors [2018] EWCA Civ 1605
- VTB Capital Plc v Nutritek International Corp & Ors [2012] EWCA Civ 808
- Bristol and West Building Society v Mothew [1998] Ch 1
- Fetch.Ai v Persons Unknown and Others [2021] EWHC 2254 (Comm)
- In re Banco Nacional de Cuba (Banca Carige SpA Cassa di Risparmio di Genova e Imperia v Banco National de Cuba) [2001] 1 WLR 2039
- Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363
- Ion Science Limited & Anor v Persons Unknown unreported, 21 December 2020
Sign in to see how the court treated each authority. A free account is enough.
Cases citing this case
2 later cases · 2 positive
Most senior citing decisions:
- John Colin Graham v Fidelidade – Companhia De Seguros SA [2024] EWHC 2010 (KB) applied
- LMN v Bitflyer Holdings Inc & Ors [2022] EWHC 2954 (Comm) approved
Sign in for the full treatment table. A free account is enough.