Court of Appeal to consider crypto ‘duty of care’

By Michael Cross >>

(15 August 2022)

The question of whether developers of cryptocurrencies and other blockchain-based assets owe a duty of care to investors in their products is to be examined in the Court of Appeal. Ruling last week in Tulip Trading v Van der Laan and Ors, Lady Justice Andrews granted permission for a Seychelles company owned by Dr Craig Wright, who claims to have invented the bitcoin digital currency to appeal a judgment by Mrs Justice Falk of 25 March denying jurisdiction over a claim for breach of fiduciary and tortious duties.

The company, Tulip Trading Ltd, is seeking to bring proceedings in the High Court that would require 16 bitcoin developers based around the world to write software ‘patches’ to enable the recovery of assets worth more than £1bn stolen in a 2020 hack on Wright’s computers. The March judgment dismissed the claim that the developers owe any continuing fiduciary duty to users of their open-source software. 

However in granting the appeal, Lady Justice Andrews said: ‘The issue as to whether developers owe duties of care and/or fiduciary duties to the owners of digital assets and if so, what is the nature and scope of those duties is one of considerable importance and is rightly characterised as a matter of some complexity and difficulty. Given that in addition to its complexity and difficulty the underlying facts will play a significant role in determining that issue, it is arguable with a real prospect of success that it is not susceptible of summary determination in the context of a challenge to the jurisdiction, and therefore that the judge fell into error in deciding that there was not even a serious issue to be tried and in the approach she adopted.’

Wright’s solicitor, Oliver Cain, partner at specialist London firm Ontier, said: ‘We are grateful that Lady Justice Andrews recognised the wider importance of establishing in law the responsibilities of developers of digital assets to end users. The complex and fact-heavy considerations, that characterise developers’ duties to those who have lost access to their Bitcoin, deserve to be explored and determined at full trial and not to be dismissed through a jurisdiction challenge.’

A Law Commission consultation on the legal status of digital assets opened last month but does not specifically address the duty of care issue.

(Courtesy: The Law Society Gazette)