Tulip Trading Limited (a Seychelles company) v Wladimir Jasper van der Laan & Ors.

On an application challenging service outside the jurisdiction, the court may decide a question of law but need not do so. It should avoid determining controversial questions in a developing area on assumed facts.

It is realistically arguable that cryptocurrency software developers may owe fiduciary duties to owners where they exercise discretionary control over the network software and thereby act in relation to property entrusted to their care. Such duties may include loyalty, abstention from self-interest and, in appropriate circumstances, positive action to protect an owner's assets. Whether those duties exist depends on facts established at trial.

The claimant alleged that hackers had stolen the private keys needed to control bitcoin worth about US$4 billion. It claimed that the defendant developers controlled the software governing four bitcoin networks and were obliged, as fiduciaries and in tort, to introduce code restoring its control of the assets.

Falk J held in [2022] EWHC 667 (Ch) that the pleaded claims disclosed no serious issue to be tried and set aside service on the foreign defendants. Her conclusions that the service gateways were satisfied and that England and Wales was the appropriate forum were not challenged.

The central issue was whether, on the claimant's assumed factual case, it was realistically arguable that the developers owed the alleged duties.

1. Appeal allowed unanimously. The claimant had a real, rather than fanciful, prospect of establishing that the developers owed fiduciary duties. The existence and content of any duty had to be decided after the disputed facts were established at trial.

2. On a challenge to service outside the jurisdiction, the court may decide a legal question arising under either the merits limb or a jurisdictional gateway. It is not bound to do so. The significance of jurisdiction favours deciding a point that is suitable for summary determination, but the court must retain the important caution against deciding controversial law in a developing area on assumed or hypothetical facts.

3. The definitive fiduciary inquiry remained whether a person had objectively undertaken to act for or on behalf of another in circumstances of trust and confidence, attracting single-minded loyalty. Reasonable expectations could have explanatory value but were not the touchstone. An imbalance of power was neither a defining characteristic nor a sufficient condition.

4. On the claimant's assumed case, the developers were arguably a sufficiently defined group exercising authority and discretionary power on behalf of network participants in relation to their property. Their control of access to the source code arguably placed owners' bitcoin in their care. The alleged fluctuation of the developer class and decentralisation of governance were disputed facts which could not properly be assumed against the claimant.

5. The arguable duty could include abstaining from self-interested changes that compromised owners' security and acting in good faith to fix software defects. Lack of unanimity among owners did not preclude a fiduciary duty. Fiduciaries may make decisions affecting beneficiaries differently, and consent to the developers' decision-making authority could arguably be inferred from the circumstances.

6. It was also realistically arguable that, after a competent court had established ownership and the loss of private keys through theft, the developers could be required to introduce code transferring the bitcoin to safety. A code update was of the same general character as their ordinary work. Its positive nature did not make the claim legally unarguable.

7. A risk of inconsistent foreign orders did not eliminate the serious issue to be tried. Nor did the absence of proceedings against unknown hackers defeat the claim. The internet was subject to law, and the efficacy of the proposed remedies was properly a matter for trial.

1. Court of Appeal (Civil Division): In [2023] EWCA Civ 83, the court unanimously allowed the appeal. The fiduciary and related tort claims raised a serious issue to be tried.
2. High Court, Business List (Chancery Division): In [2022] EWHC 667 (Ch), Falk J held that the claims had no realistic prospect of success and set aside service on the participating foreign defendants. She found the service gateways satisfied and England and Wales to be the appropriate forum; those findings were not appealed.
3. Permission to appeal: After Falk J refused permission, Andrews LJ granted it on 10 August 2022.