High Court Defines NFTs as Property in Landmark Case: Lavinia Deborah Osbourne v Persons Unknown Category A & Ors

Citation: [2023] EWHC 2974 (KB)
Judgment on

Introduction

The High Court of Justice’s decision in Lavinia Deborah Osbourne v Persons Unknown Category A & Ors [2023] EWHC 2974 (KB) presents a legal analysis of an innovative and relatively less traversed territory in the intersection of property law and digital assets. The case encapsulates discussions on the legal status of non-fungible tokens (NFTs) as property, issues related to their misappropriation, and the lex situs of a non-fungible token. Deputy High Court Judge, Mr. Neil Moody KC, navigates through these novel issues by applying established legal principles and providing guidance for future cases dealing with crypto assets.

Key Facts

The Claimant, Lavinia Deborah Osbourne, experienced the alleged unlawful removal of two NFTs, “Boss Beauties #680” and “Boss Beauties #691”, from her cryptocurrency wallet by Persons Unknown Category A. This case brought into question the appropriate legal categorization of NFTs, as well as the application of remedies within the sphere of English law.

Property Nature of NFTs

One of the key legal issues in this case was the determination of whether NFTs could be considered property under English law. The court refers to the judicial trend from previous decisions, including AA v Persons Unknown [2020] 4 WLR 35, Ion Science Ltd v Persons Unknown (unreported, 21 December 2000), and Fetch.ai Ltd v Persons Unknown [2021] EWHC 2254 (Comm), which have suggested that crypto assets, such as Bitcoin, can be viewed as property. This perspective aligns with the approach already taken by HH Judge Pelling KC in his judgments in the present case, underpinning the court’s willingness to grant injunctions to protect such assets.

Injunctions and American Cyanamid Test

The Court applied the principles from American Cyanamid Co v Ethicon Ltd [1975] AC 396 to determine the appropriateness of an interim injunction. The American Cyanamid test requires the Court to consider whether there is a serious issue to be tried, whether damages would be an adequate remedy, whether the Claimant has given an adequate undertaking in damages, and where the balance of convenience lies.

Jurisdiction & Service

The problem of serving parties out of jurisdiction was observed in relation to both proper service and service by alternative means. Here, Practice Direction 6B para. 3.1 and cases such as Cecil v Bayat [2011] EWCA Civ 135 were referenced to justify serving out of jurisdiction, upon establishing that there is a serious issue to be tried on the merits, falling within the jurisdictional gateways, and identifying that England is clearly the appropriate forum.

Use of Expert Evidence

Expert reports were referenced to support the Claimant’s claims in terms of understanding the movements of the NFTs and assessing their value. The Court considered whether permission was required for these expert reports as per CPR Part 35.4.

Outcomes

Based on the application of the mentioned legal principles, the Court made several orders. Judge Moody KC permitted the Claimant to re-amend the Particulars of Claim to capture changes in fact and to include the proper evaluation of the NFTs according to the updated expert valuations. The interim injunction was granted based on the American Cyanamid principles. For service out of jurisdiction, the court assented, subject to Practice Direction 6B para. 3.1. As for service by an alternative means, the innovative method of service via NFT was allowed, favoring password protection over redaction for practicality and privacy.

Conclusion

In Lavinia Deborah Osbourne v Persons Unknown Category A & Ors, the English High Court has pragmatically applied traditional legal doctrines to modern-day digital assets. By treating NFTs as property, reaffirming the American Cyanamid test for interim injunctions, and creatively addressing jurisdiction and service issues, Mr. Neil Moody KC’s judgments provide valuable legal precedents for future cases involving cryptoassets. This case underscores the adaptability of English common law principles to the evolving nature of property in the digital age.