High Court permits service by NFT

If NFTs were the only realistic method of serving proceedings, the court should permit service by NFT.

The High Court has ruled in the case of Osbourne v Persons Unknown Category A & Ors [2023] EWHC 39 (KB).

The claimant O opened an account with the cryptoasset management platform, MetaMask Wallet. This wallet was linked to O's account with Ozone Networks Inc, an online cryptoasset marketplace trading as Opensea. O was given Two NFTs, said to be worth between £3,000 and £5,000.

They were deposited in the MetaMask Wallet on 25 September 2021, but on 17 January 2022 the Two NFTs were transferred out of the MetaMask Wallet without O's knowledge or consent by an unidentified person or persons, who had deposited approximately £150 worth of the cryptocurrency Ethereum in the MetaMask Wallet.

O retained an investigator to trace the Two NFTs and obtained injunctions against the first and second defendants in March 2022. One of the NFTs then appeared to be controlled by an individual in South Africa and was advertised for auction on the LooksRare cryptoasset marketplace. She therefore applied to extend the March injunction.

The judge considered that it would be appropriate to grant the injunction sought, applying the principles laid down in American Cyanamid Co v Ethicon Ltd [1975] A.C. 396. He saw no reason to depart from the decision regarding the original injunctions, that there is at least a realistically arguable case that NFTs are to be treated as property as a matter of English law.

He was also satisfied that there was a serious issue to be tried whether the third and fourth defendants held one or more of the two NFTs on constructive trust for O. The evidence demonstrated that the NFTs were assets which had a particular, personal and unique value to O which extended beyond their mere "fiat" currency value. Therefore, damages would not be an adequate remedy. The balance of convenience also favoured the grant of the injunction.

To serve out of jurisdiction, the claimant was required to satisfy three criteria. The first was that there was a serious issue to be tried, which had already been established. The second was that England and Wales was clearly the most appropriate forum for the trial of the dispute, which the court also agreed. The third was more complicated and involved showing that there was a good arguable case that the claim falls within one of the "gateways" set out in sub-paragraph 3.1 of Practice Direction 6B. The judge considered the case law and the relevant gateways and decided that this was an appropriate case in which to permit service of the claim form out of the jurisdiction.

The judge also considered the issue of NFTs as service by an alternative means under CPR 6.15(1). The evidence showed that service by NFT sent to the relevant wallets was the only realistic way of effecting service, The court therefore said that that was a good reason for authorising service of these documents by NFT.

One feature of service by NFT in this case, since the NFT was to be on the blockchain, was that the NFTs used to effect service would be open to the public and the hyperlinks contained in them could be used by anyone to view the documents served. The court allowed redaction of the documents but only on condition that the defendants would be offered access to unreacted versions of the documents and the only redactions which would be made were those which were approved by the court.

Published: 2023-01-18T10:37:23

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