On 13 January 2023, the High Court handed down a landmark decision in the case of Osbourne v Persons Unknown and others [2023] EWHC 39 (KB). In what is understood to be a first in the Courts of England and Wales, the High Court has approved service of proceedings exclusively by way of non-fungible token (“NFT”) on defendants accused of stealing NFTs from a cryptoasset account.
Summary
The case concerned the hacking of a digital wallet held by the claimant. The wallet contained two NFTs representing unique digital works of art, with a value in the region of £3,000 – £5,000.
In January 2022, the NFTs were removed from the claimant’s digital wallet by an unidentified hacker, without her consent. With the help of a digital assets tracing company, the claimant traced her NFTs to two different wallets. In March 2022, she successfully obtained an injunction against “persons unknown” (being those who had transferred the NFTs out of her wallet) to prevent the NFTs being traded. The asset tracing company later discovered that one of the NFTs had been transferred to a separate wallet apparently held by a South African individual on a cryptoasset marketplace, and applied to amend its claim to add that individual as a defendant.
Among other things, Mr Justice Lavender was asked to authorise service of the amended claim form, amended particulars of claim, his order and supporting documents on some of the defendants exclusively via NFT. Given that the claimant had no other available method of service on three of the defendants, Mr Justice Lavender permitted service by NFT, with the NFTs containing embedded hyperlinks to the relevant documents. He sanctioned the redaction of the documents, on the basis that the NFTs were to be situated on the blockchain and therefore accessible to the public. The claimant was instructed to offer the defendants access to the unredacted versions of the documents.
Analysis
Osbourne follows a decision in July last year, where the High Court authorised service by email and NFT on an anonymous defendant in an action to recover stolen cryptocurrency. As identified by Mr Justice Lavender at paragraph 48 of his judgment, however, the ruling in Osbourne is unique. It is considered to be the first occasion on which service by NFT has been approved by a Court in England and Wales as the exclusive method of service of documents.
The decision in Osbourne further demonstrates the Courts’ willingness to embrace NFTs and strengthens the ability of crypto-fraud victims to pursue anonymous hackers for the theft of their property. This latest ruling also shows that Courts are prepared to accept less traditional methods of service, when traditional forms of service are not available – an encouraging development for Court users in England and Wales.
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About the author(s)
Sean Adams is a commercial disputes partner, primarily based in Birmingham. He has a broad commercial practice, with significant experience in a variety of sectors (including within the automotive, aerospace, financial services and renewable energy sectors).
Chris supports our dispute resolution lawyers in providing excellent client service by keeping them abreast of current awareness and legal developments in their practice areas. He also writes client insights and articles on topics of importance in the areas of litigation and arbitration.
Alistair is an associate in the commercial litigation team at Gowling WLG. Before qualifying into the team, Alistair trained at the firm, also spending time in the corporate and real estate departments.
Henry Stride is a trainee in Gowling WLG's London office.