Lavinia Deborah Osbourne v Persons Unknown Category A & Ors

Cryptoassets and non-fungible tokens are at least arguably property capable of supporting a proprietary injunction. The American Cyanamid principles apply. An injunction may be granted where there is a serious issue to be tried, damages are inadequate, and the balance of convenience favours relief.

Permission to serve out requires a good arguable case within a Practice Direction 6B gateway, England and Wales to be the proper forum, and a serious issue to be tried. The location of digital assets after successive transfers, and the time at which assets must be within the jurisdiction, remain matters requiring fuller argument. Service by transfer of an NFT containing an embedded hyperlink may be authorised where it is the only realistically available method and there is good reason to use it.

The claimant alleged that two non-fungible tokens had been removed without consent from her cryptoasset wallet and transferred through several blockchain wallets. An interim injunction had previously been granted against the alleged hackers.

Following evidence that one token was associated with Thembani Dube and that the tokens were held by persons unknown, the claimant sought to amend the proceedings, add persons in possession or control of the tokens and Mr Dube, obtain an injunction, serve the amended proceedings out of the jurisdiction, and serve by transferring NFTs containing embedded hyperlinks.

The central issues were whether the amendments and injunction should be granted, whether the jurisdictional gateways were satisfied, and whether service by NFT was permissible.

1. Amendment. The court permitted the proposed amendments and addition of persons unknown in possession or control of the tokens. There was an issue involving those persons and the claimant, connected with the matters already in dispute, and it was desirable for the court to resolve it under CPR 19.2(2)(b) (para [13]).
2. Injunction. Applying American Cyanamid Co v Ethicon Ltd, there was a serious issue to be tried concerning whether the tokens were property and whether the recipients held them on constructive trust for the claimant. The court agreed that NFTs were at least realistically arguable as property under English law, consistently with the reasoning referred to in AA v Persons Unknown, Ion Science Ltd v Persons Unknown and Fetch.ai Ltd v Persons Unknown (paras [17]-[19]).
3. Damages were not an adequate remedy because the defendants' ability to satisfy a judgment was unknown and the tokens had personal and unique value beyond their financial value. The balance of convenience also favoured relief. An injunction was therefore granted against the relevant defendants (paras [20]-[23]).
4. Service out. The claimant had to show a serious issue to be tried, a good arguable case within a Practice Direction 6B gateway, and that England and Wales was the proper forum. Gateways (4A)(c), (9), (16) and (21) did not assist the claims against the new defendants. Gateway (15)(c), relating to claims governed by English law, was satisfied on a strongly arguable basis because the alleged constructive trust and subsequent receipt of the trust property were arguably governed by English law (paras [24]-[30], [42]-[44]).
5. The court expressed doubt about whether gateways (11) and (15)(b) require the asset to be within the jurisdiction when permission is sought rather than when the cause of action arose. It also left open the construction of gateway (15)(a), particularly where subsequent transfers occurred in unknown places (paras [31]-[41]).
6. Alternative service. Under CPR 6.15(1) and 6.27, transfer of an NFT containing an embedded hyperlink was authorised because the claimant had no other available method of service on the relevant wallet holders. The documents could be publicly accessible on the blockchain, so redactions were permitted only subject to court approval and access to unredacted documents for the defendants (paras [45]-[50]).