Jahangir Piroozzadeh v Persons Unknown Category A & Ors.

Without notice relief requires a full and fair presentation of the facts, likely defences and practical consequences of the order sought. The duty extends to the claimant’s legal representatives and requires them to identify defences reasonably known or anticipated from related litigation. An exchange receiving cryptocurrency into a pooled, unsegregated account may have a bona fide purchaser defence, and that possibility must be disclosed where relevant. Failure to distinguish an exchange from alleged wrongdoers, explain the adequacy of damages, or show how the assets can realistically be preserved may justify discharge of the order. The court retains a discretion to continue or regrant relief, but must consider the importance of the non-disclosure, compliance, culpability and resulting injustice.

The claimant obtained without notice proprietary and injunctive relief against cryptocurrency exchanges after alleging that he had been defrauded of cryptocurrency. The eighth defendant applied to discharge the injunction, alleging that the application had not been fairly presented. It argued that the claimant had failed to disclose the possible bona fide purchaser defence arising from the exchange’s pooling arrangements, the absence of a sufficient risk of breach, the adequacy of damages, and the practical impossibility of preserving or tracing the cryptocurrency. The central issues were whether the without notice order had been fairly obtained and, if not, whether it should nevertheless be continued or regranted.

1. Without notice procedure. Urgency alone will rarely justify proceeding without notice. There must be a well-founded fear that notice would cause injustice, including through action detrimental to the applicant. The court considered that the claimant had not shown a specific risk that notice to the exchange would cause tipping off or other harm.
2. Duty of fair presentation. An applicant must show the utmost good faith, disclose the case fully and fairly, identify crucial points for and against relief, investigate the cause of action and anticipate likely defences. The duty extends to the legal representatives. Reliance on the judge to identify missing matters is insufficient.
3. Material non-disclosure. The claimant failed to explain that cryptocurrency deposited with the exchange was swept into a central, unsegregated pool and that the exchange might therefore contend that it had acquired the assets as a bona fide purchaser for value. The claimant also failed adequately to explain why damages were not sufficient against the exchange, or how the pooled assets could practically be identified and preserved. The presentation wrongly treated the exchange in the same way as the alleged fraudsters.
4. Discretion after non-disclosure. The court retained a discretion to continue or regrant the injunction. Relevant factors included the importance of the non-disclosure, the need to encourage compliance with the duty, the applicant’s culpability and the injustice that discharge might cause. Those factors favoured discharge. The omissions were significant, the legal representatives had deliberately chosen not to disclose a known possible defence, and no significant injustice would result because damages remained available.
5. The court declined to decide finally whether there was a serious issue to be tried on the exchange’s title to the deposited cryptocurrency. It considered that a strike-out or reverse summary judgment application might succeed, but that issue was not necessary to determine the discharge application. The injunction against the eighth defendant was discharged retrospectively from the date it was granted.