The English High Court has recently allowed for service of Court proceedings by NFT alone. The judgments recently handed down are in relation to a claim brought by Lavinia Deborah Osbourne (“LO”) against persons unknown (referred to as the “Alleged Hackers”), who unlawfully removed two NFTs (the “Boss Beauties NFTs”) from LO’s wallet without her knowledge or consent. The original judgment by HHJ Pelling in March 2022, relating to LO’s initial application for an interim injunction, was the subject of a previous Law-Now article at that time (accessible here).
Background
Following LO’s successful interim injunction application in March 2022, it was found that, in direct breach of the interim injunction order, one of the Boss Beauties NFTs had been transferred through multiple wallets to one that was associated with a specific social media handle and email address linked to an identifiable person (the “Third Defendant”). There was also evidence of this NFT being advertised on the LooksRare cryptoasset marketplace. The other of the Boss Beauties NFTs remained in a wallet that could not be linked to an identifiable person.
LO therefore made a further without notice application to the High Court in September 2022 for, amongst other things, a further interim injunction against the Alleged Hackers in order to stop any further movement of the Boss Beauties NFTs (the “Without Notice Application”). The Without Notice Application was heard by Lavender J.
A return date hearing subsequently took place on 10 October 2022 and was presided over by Mr Healy-Pratt, sitting as a Deputy High Court Judge (the “Return Date Hearing”). The written judgments for both the Without Notice Application[1] and the Return Date Hearing[2] have now recently been published and are the subject of this Law-Now.
What was held?
Injunction granted & service outside of the jurisdiction permitted:
Both Lavender J and Mr Healy-Pratt granted the injunction sought and permitted service outside of the jurisdiction. In relation to the latter, both judges considered that (i) there was a serious issue to be tried, (ii) England and Wales was the most appropriate forum to hear the claims, and (iii) if only on the basis of the old constructive trust gateway, this was an appropriate case to permit service of the claim form outside of the jurisdiction.
It is important to note here that, having taken effect from 1 October 2022, CPR PD6B has now been updated by the creation of new ‘gateways’ for service outside of the jurisdiction as well as amendments made to the wording of existing gateways. In particular, we consider that the creation of the new Gateway 25 will ease the way for applications to be made by victims of crypto (and other) fraud. For more information on the creation of this gateway and its likely impact, please see our Law-Now (here).
Service by alternative means – NFTs as the sole method of service of documents:
Lavender J permitted service by NFT as the sole method of service of documents (in relation to the Alleged Hackers and the Second Defendant) and via email and NFT in relation to the Third Defendant. This was because the Court was satisfied that LO had presented evidence showing no other available method of service on those Defendants. At the Return Date Hearing, Mr Healy-Pratt also allowed for service via NFT alone.
Whilst there had been other instances of the Courts of England and Wales permitting service by NFT and email (see our Law-Now’s on these cases here and here), in this case service by way of NFT airdrop alone was allowed.
Comment:
The volume and complexity of these disputes will likely only continue to grow and so it is critical that the Court continues to arm itself with the tools needed to achieve justice for potential claimants.
Finally, the Court’s approach in this claim speaks to the potential utility of NFTs, which can be used in a plethora of ways to add value and transparency to a number of real-world processes, including the service of legal proceedings.
To learn more about how CMS can advise in the crypto world and our experience advising on NFTs in particular, please visit our website here.
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