By William Mackenzie – arch.portfolio member.
I previously covered the security for costs application in the litigation brought by Craig Wright’s company, Tulip Trading (the Claimant) against the developers of BSV. Master Clark had ordered that the claimant provide security for costs in principle with the parties sent away to try and agree the sum payable.
Unsurprisingly, it appears that the parties were unable to agree the amount of security that was to be provided. Master Clark has delivered a further judgement in this matter detailing the amount of costs to be provided by the claimant.
Sums claimed
The various defendants claim for their costs, a total sum of £354,791.00. There was some discount offered by the defendants on these sums but it was marginal. The claimant offered to pay £175,000 as security.
Various arguments were made by the claimant that the sums claimed were excessive and would be reduced on assessment, particularly around hourly rates. However, the judge dismissed these arguments noting that when one took an average of the rates claimed for the Grade A fee earners, they were below the guideline rates.
Turning to the amount that the claimant should be ordered to pay the Judge had regard to two cases, (Danilina v Chernukhin & Ors [2018] EWHC 2503 (Comm) (02 October 2018) & Ingenious Litigation, Re [2020] EWHC 235 (Ch) (10 February 2020) ) which suggested that an award of 60 to 70% would be usual.
Sum ordered as security
The Master decided to that 70% would be reasonable. Accordingly, Master Clark made an order that the claimant should pay a total of £248,354.53.
Use of Bitcoin as a security
Thereafter there were proposals made by the claimant that they would provide security by way of digital assets, particularly Bitcoin Satoshi Vision or Bitcoin Core. The claimant proposed that he would transfer this Bitcoin to their solicitors who would then provide a written confirmation that they hold the Bitcoin and provide an undertaking that it could be used to satisfy any adverse costs orders. They would also provide the public address of the Bitcoin.
The defendants had declined the above proposals and sort security by way of payment into court or by bank guarantee given by a reputable first- class bank in London.
The principles applicable to the court’s discretion as the manner of security are set out by Popplewell J (as he was) in Monde Petroleum SA v Westernzagros Ltd [2015] EWHC 67 (Comm); [2015] 1 Lloyd’s Rep. 330 at [61]:
“It is conventional to order security to be given either by payment into Court or by the provision of a guarantee from a first class London bank. That practice recognises that the security should be in a form which enables the defendant to recover a costs award made in its favour at the trial from funds which are readily available, such that there is little risk of delay or default in enforcement. Although security may be ordered in an alternative form, that form should be such as to fulfil the same function, so as to allow simple and swift enforcement of a costs order from a creditworthy source. In practice any such alternative form of security must be such as can properly be regarded in these respects as at least equal to, if not better than, security by payment into Court or provision of a first class London bank guarantee. See Belco Trading Co. v Condo [2008] EWCA Civ 205 at paragraphs [6] to [9] and Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2013] EWHC 658 (Comm) at paragraph [10].”
It is interesting to note that the claimant had filed a further witness statement of Craig Wright that intended to set out factual matters and arguments in support of the payment using BSV or BTC. However, the evidence was out of time and the claimant required the court’s permission to rely upon the same and the Claimant had not made an application. Thus, it was not permitted.
However, the Judge noted in his judgment that the claimant still failed to give as to its overall financial position and how it is funding its own legal costs. There was also no evidence to suggest that the claim would be troubled if the usual security was ordered.
Interestingly, the Judge states that due to the high level volatility in Bitcoin, it does not, as a security meet the criteria in Monde Petroleum. The Judge said that the security offered by the claimant Would not give sufficient protection to the defendants if there was a fall in the value of Bitcoin. The claimant had suggested that they could top up any security but the Judge had concerns that if the claimant did not comply with any top up order there would be a risk that the Claimant would not give sufficient security before the trial which is due to take place. Accordingly, the Judge declined to grant the claimant’s request for security in the form of BSV or BTC.
Finally, the issue of the costs of the application itself were determined with the claimant being ordered to pay £73,496.47.
Comment
It is interesting to see the court grappling the arguments around using Bitcoin to satisfy a security for costs application. With more and more people investing in Bitcoin and cryptocurrencies (and its status as legal currency in El Salvador) this issue is likely to crop up again.
Clearly, there is a potential for Bitcoin to be used as a medium for security, and as the Court of Appeal said in Infinity Distribution Ltd (in administration) v Khan Partnership LLP [2021] EWCA Civ 565, where a different form of security would provide equal protection to the defendant, the court should, all else being equal, order the form which is least onerous on the claimant.
This piece of litigation is already starting to become expensive. Currently the claimant is having to pay £321,851 for the lost application costs and the security for costs itself. There is potential, if the defendants win on the jurisdictional arguments and succeed in achieving indemnity costs, the claimant could be looking at a further £100,000.
