High Court holds that it has jurisdiction to grant summary judgment against "persons unknown"

In the context of a cryptoasset fraud claim, the High Court has granted summary judgment against the alleged fraudsters despite them remaining unidentified and named only as "persons unknown". The court held that it had jurisdiction to grant final relief against such defendants based on the service of the claims by alternative methods, pursuant to an earlier court order: Mooij v Persons Unknown [2024] EWHC 814 (Comm).

Notably, the court rejected the approach adopted recently in similar circumstances in Boonyaem v Persons Unknown [2023] EWHC 3180, which held that it is not open to the courts to grant final relief against persons unknown who remained unidentifiable.  On that basis, the court in Boonyaem refused to grant summary judgment against the "persons unknown" defendants in that case, apart from those who controlled the digital wallets into which the stolen bitcoin was transferred, and against whom proprietary claims were available. (The court reasoned that, unlike on a monetary judgment, a defendant to a proprietary claim would have to identify themself if they sought to resist enforcement by asserting a competing claim to the assets.) 

In the present case, the court concluded that the approach in Boonyaem was not required or justified by the authorities. It considered that, where the court's jurisdiction over persons unknown had been established by deemed service, there was no additional requirement that the defendants be identifiable before the court could exercise its jurisdiction by granting final relief.

While a judgment obtained against an unidentified defendant may obviously be difficult to enforce directly, it can be of value to a claimant by supporting other aspects of the tracing and recovery strategy, including freezing and disclosure orders. In the present case, it meant that existing interim freezing orders were continued (on a post-judgment enforcement basis) against all the alleged wrongdoers – in contrast to Boonyaem where the court refused to continue interim freezing orders against any unidentified defendants beyond those currently holding the stolen assets, despite that potentially leaving some of the fraudsters free to dissipate their personal assets.

Background

The claimant alleged that, in connection with a purported investment in bitcoin, he had been defrauded of (i) an existing bitcoin holding which was transferred to a bogus trading platform and (ii) cash funds totalling €330,000 paid to the fraudsters by bank transfer.

He brought proceedings against various categories of defendant, including:

• The persons unknown involved in the wrongdoing, divided into:
  • the persons who had obtained access to the claimant's funds and bitcoin and carried out transactions that resulted in them being transferred (referred to by the court as "the fraudsters"); and
  • the entities who owned or controlled the accounts/ digital wallets into which the assets had been transferred ("the beneficiaries")
            
• The crypto exchange hosting the wallets ("the target wallets") where the stolen bitcoin was currently held according to a forensic tracing expert relied on by the claimant ("the Huobi defendants").  No wrongdoing was alleged against the exchange and this claim was limited to proprietary relief including delivery up.

The claims against the wrongdoers included both proprietary claims for delivery up of the stolen assets (by the beneficiaries) and non-proprietary claims in deceit – seeking a money judgment for the value of the bitcoin (converted to Sterling) and the €330,000. 

The claimant obtained from HHJ Pelling in the London Circuit Commercial Court:

• interim freezing orders (on both proprietary and non-proprietary bases); and
• permission to serve the claims against the persons unknown out of the jurisdiction and by alternative methods, including by airdrop of a non-fungible token (NFT) into the target wallets and filing the relevant documents at court.

None of the above "live" defendants engaged with the proceedings.

The claimant applied for summary judgment against each of them under CPR 24.4, as well as for continuation of the freezing orders.

Decision

HHJ Russen KC in the Bristol Circuit of the Commercial Court granted summary judgment against all the above defendants (on both the proprietary and non-proprietary claims), and extended the freezing orders against them (as post-judgment orders in support of execution).

Summary judgment

Despite the absence of acknowledgments of service, the court considered that this was an appropriate case to permit the claimant to seek summary judgment (as distinct from default judgment).

The unchallenged evidence of the claimant, supported by the forensic cryptoasset expert, clearly made out a case that he had been defrauded as claimed. The court was entitled to presume that the alternative service previously directed by the court had been an effective means of bringing the defendants' attention to the proceedings, and that their non-engagement meant that they had decided not to defend the case. Those circumstances gave a sufficient basis to conclude that the defendants had no real prospect of successfully defending the claim and that there were indisputable grounds to grant summary judgment in some form.

However, he went on to consider the extent to which the different categories of defendants were amenable to judgment, in light of the recent decision of Mr Richard Salter KC (sitting as a Deputy Judge of the High Court) in Boonyaem. 

Boonyaem

That decision concerned an application for summary judgment on a similar type of claim, including against categories of persons unknown broadly corresponding to the "fraudsters" and "beneficiaries" categories here.  HHJ Russen noted the following relevant findings in that case:

• Mr Salter KC cited various observations by Lord Sumption in the Supreme Court's judgment in Cameron v Liverpool Victoria Insurance Co Ltd [2019] UKSC 6 as the basis for drawing a distinction between the following types of "persons unknown":
  
  (a)   individuals or entities who are not only anonymous but are not capable of being identified (such as hit and run drivers) – whom Mr Salter KC considered it is not possible to pursue as unidentified parties because it is not possible in principle to know without further inquiry whether they are the same as the persons described in the claim form; and
  
  (b) individuals or entities who are capable of being identified but whose names are currently not known (such as squatters in a property) – who can properly be pursued as persons unknown, provided that they can be served effectively through some alternative method.
   
• Mr Salter KC regarded the "fraudsters" category of defendants as falling into type (a) above. In his view, their description, solely by reference to an involvement in the fraud, was not sufficient to describe any identifiable person against whom judgment could properly be given.  The persons in that category could not properly be sued to judgment unless and until they could be identified. Efforts to do so, including through earlier disclosure orders accompanying interim freezing injunctions, had apparently proved fruitless and he was therefore not prepared to grant summary judgment against them.
   
• However, he considered that the "beneficiaries" controlling the relevant wallets were in a different position, because proprietary relief was available against them.  The relevant persons or entities would have to come forward and identify themselves if they wished to resist enforcement of such a judgment, by asserting a competing claim to the content of the wallets. In his view, that made them capable of being identified and all that was unknown about them was their names.  On that basis, he regarded the beneficiaries as falling into category (b) above and granted summary judgment against them. (He was initially minded to require the claimant to first try to identify those persons by name via the Bankers Trust jurisdiction, but concluded that the delay and costs involved would be at odds with the overriding objective).
   
• Mr Salter KC was also not prepared to continue an interim freezing injunction against the "fraudsters" defendants on any basis, because they "cannot be identified with sufficient certainty to make such an order enforceable".  That was in contrast to the "beneficiaries", against whom existing freezing orders (on both proprietary and non-proprietary bases) were continued, as post-judgment enforcement orders.

HHJ Russen considered Boonyaem to be authority for the proposition that the court should not give judgment for any non-proprietary relief (not even for damages to be assessed) against persons unknown whose identity remains unknown at the time when the court is asked to do so. 

However, he declined to follow that approach.  The context in which the Supreme Court in Cameron was considering persons unknown was not an application for summary judgment but a proposed amendment of a claim, to substitute a defendant. In that context, the central question was whether it would be possible for the court to assume jurisdiction over the proposed new defendant, which turned on whether they could be served effectively. On HHJ Russen's reading, Lord Sumption's comments regarding unidentifiable persons unknown addressed the impossibility of serving proceedings on them, even by alternative methods, for the purpose of establishing jurisdiction over them.  He considered that reading to be supported by the Supreme Court's discussion of Cameron in its recent judgment in Wolverhampton City Council v London Gypsies and Travellers [2023] UKSC 47.

Lord Sumption's observations therefore concerned a very different situation to that in both Boonyaem and the present case, where the court had already granted permission for substituted service and was now considering whether and how to exercise a jurisdiction assumed to have been established. 

HHJ Russen observed that the ultimate purpose behind the court assuming jurisdiction over parties is so that it may grant judgment on a claim. The court in the present case (as it had in Boonyaem) had already exercised its jurisdiction over the relevant defendants by making interim orders against them. That included freezing injunctions, which were granted on the basis that there was a good prospect that the claimant would obtain judgment against the defendants, and were for the purpose of facilitating enforcement of such a judgment.  There was no basis to think that, in the case of an unidentified defendant, the merits test and enforcement function were qualified by an additional requirement or even an assumption that the defendant's true identity must be established by the time the court grants judgment.

Given that jurisdiction was deemed to have been established, HHJ Russen saw no obvious reason why that jurisdiction should not culminate in the ultimate purpose for which the claimant invoked it, which is to obtain judgment. Nor did he consider that that jurisdiction differs according to whether or not a persons unknown defendant chooses to identify themself - whether at the stage of acknowledging service, or by raising their head to resist enforcement of the judgment, or at some stage in between. 

The fact that, even by the later stage of giving final judgment in the proceedings, the defendants still cannot be named may well present an insurmountable problem in enforcing any money judgment against them. However, that was not a reason against the court exercising its jurisdiction to grant relief, including by the grant of a final money judgment.