Dr Craig Steven Wright & Anor v Coinbase Global, Inc & Ors

Taking the applications to amend into account, both sets of Defendants want Paragraph 33 of their Defences to read as follows:

“33.

The First Claimant is and has been involved in various proceedings, in this jurisdiction and overseas, in which his evidence (including documentary evidence adduced by him) has been the subject of serious adverse comment. By way of example:

(a)

Wright v Ryan & Anor [2005] NSWCA 368;

(b)

Investigation by the Australian Tax Office in 2014;

(c)

Ang v Reliantco Investments Ltd [2020] EWHC 3242 (Comm);

(d)

Kleiman v Wright US District Court, South District of Florida, Case No. 18-cv-80176;

(e)

Wright v McCormack [2022] EWHC 2068 (QB); and

(f)

Granath v Wright – Judgment of the Oslo District Court dated 20th October 2022 (Case No. 19-076844TVI-TOSL/04), in which the Oslo District Court found that statements made by Magnus Granath in March 2019 that the First Claimant was not Satoshi Nakamoto were not unlawful. The Oslo District Court held that: “The court believes that Granath had sufficient factual grounds to claim that Wright had lied and cheated in his attempt to prove that he is Satoshi Nakamoto” and further that: “…the court believes that Granath had sufficient factual grounds to claim that Craig Wright is not Satoshi Nakamoto in March 2019”; and

(g)

Wright v McCormack [2022] EWHC 3343 (KB).”

The Cs seek to strike out each Paragraph 33 under CPR 3.4(2)(b) as an abuse of process or otherwise likely to obstruct the just disposal of proceedings, relying on the rule in Hollington v Hewthorn [1943] 1 KB 587 CA in support of their application.

The Ds accept: (1) that the principle enunciated in Hollington v Hewthorn remains good law today and (2) the principle is that a decision of another court or tribunal is inadmissible as evidence of the truth of those findings. They say, however, that the rule does not prohibit the admissibility of such evidence for other purposes.

The Ds point to Paragraph 34 in each Defence which must be read with Paragraph 33:

“34.

Accordingly, where the Claimants are required to prove facts or matters relied upon in their PoC, the Defendants will require strict proof of the same, including by reference to contemporaneous documents and other corroborative evidence.”

Then the Ds submit as follows:

‘As is plain from the face of the pleadings, and as confirmed in correspondence, the Defendants do not rely upon the decisions cited as evidence of the truth of those findings. Instead, those decisions are referred to as reason why the Defendants require the Claimants to substantiate their various assertions with hard evidence: contemporaneous documents and/or credible corroborative testimony. In circumstances where the First Claimant’s evidence on relevant matters has been repeatedly undermined and disbelieved in the past, the Defendants are entitled to explain why they contend that the First Claimant’s assertions should not be taken at face value.

It is therefore perfectly proper to plead, as the Defendants have done, that because of the adverse comment made by other tribunals about the evidence of Dr Wright, strict proof will be required of all facts and matters relied upon by the Claimants in these proceedings (see CryptoOpenPatentAlliance v Craig Steven Wright [2021] EWHC 3440 (Ch) at §§62-67). Such a plea is plainly relevant and material as it supports the plea made in paragraph 34 (which the Claimants do not seek to strike out).’

The Cs characterise paragraph 34 as the hook by which the Ds are seeking to justify the inclusion of paragraph 33.

The Cs relied on the explanation of the rule in Rogers v Hoyle [2014] EWCA Civ 257; [2015] QB 264 (per Christopher Clarke LJ (with whom Arden and Treacy LJJ agreed)):

‘As the judge rightly recognised the foundation on which the rule must now rest is that findings of fact made by another decision maker are not to be admitted in a subsequent trial because the decision at that trial is to be made by the judge appointed to hear it (“the trial judge”), and not another. The trial judge must decide the case for himself on the evidence that he receives, and in the light of the submissions on that evidence made to him. To admit evidence of the findings of fact of another person, however distinguished, and however thorough and competent his examination of the issues may have been, risks the decision being made, at least in part, on evidence other than that which the trial judge has heard and in reliance on the opinion of someone who is neither the relevant decision maker nor an expert in any relevant discipline, of which decision making is not one. The opinion of someone who is not the trial judge is, therefore, as a matter of law, irrelevant and not one to which he ought to have regard.’

The Cs also referred to Jinxin Inc v Aser Media Pte Limited [2022] EWHC 2431 (Comm) (“Jinxin”), in which the Deputy Judge (Peter MacDonald Eggers KC) had to consider a Hollington v Hewthorn issue in the context of an action for deceit. The deputy judge in Jinxin considered a similar issue to that which arises before me and concluded that one could not avoid the rule by saying that findings of fact in earlier judgments could be mentioned in the pleading because they provide a basis for adopting a particular approach to pleading the case. He said:

‘[87] … the decision in Medcalf v Mardell [2002] UKHL 27; [2003] 1 AC 120, para. 21-22, 79 was not concerned with what inadmissible evidence is or is not appropriate to plead. Instead, it was concerned with the separate question of what the pleader may legitimately take into account in deciding whether to plead a case of fraud or dishonesty; such a pleader may justify the pleading of a serious allegation of fraud or dishonesty by reference to inadmissible evidence. That does not mean however that such inadmissible evidence can be pleaded for any purpose, including the purpose of demonstrating to the Court or the parties to the action that the case of fraud or dishonesty is properly pleaded.

[88] In this respect, I have had regard to the decision of CryptoOpenPatentAlliance v Wright [2021] EWHC 3440 (Ch) relied on by Mr Beltrami KC, where the Court considered the Chancery Guide equivalent to the Commercial Court Guide at para. C1.3(c), which provides that:

“(i)

Full and specific details should be given of any allegation of fraud, dishonesty, malice or illegality; and

(ii)

where an inference of fraud or dishonesty is alleged, the facts on the basis of which the inference is alleged must be fully set out.”

[89] With respect to the learned judge in Crypto v Wright, I do not read Commercial Court Guide, para. C1.3(c) as permitting a party to plead inadmissible evidence to establish that it has properly pleaded a case of fraud or dishonesty. Instead, I consider that para. C1.3(c)(ii) of the Commercial Court Guide - to which the judge in Crypto v Wright directed himself - is concerned with the pleading of facts and matters on the basis of which the Court is being invited to infer that fraud or dishonesty has taken place. Any such facts and matters must be proved by way of admissible evidence and/or must themselves be admissible evidence; if the relevant evidence is inadmissible, it is difficult to see how the Court could draw the inference in question.’

Whilst there are exceptions to the rule, none of them apply here. The Ds’ reliance on Paragraph 34 is an imaginative attempt to retain these Paragraphs 33, but it is one I am unable to accept. As pleaded, the findings adverse to Dr Wright and his credibility in the decisions referred to are pleaded as findings of fact and as evidence of the truth of those findings. If the only purpose of the references to the decisions in Paragraph 33 was to justify the plea in Paragraph 34, it is my view that this part of the pleading would have been structured very differently. In particular, the purpose of the reliance on the adverse findings would have been made explicit. Although the purported purpose has now been made clear in correspondence, it does not supplant the terms of the pleading. Furthermore, life is far too short to have to refer to correspondence to understand what a pleading meant to say but doesn’t.

My conclusion is that these Paragraphs 33 offend the rule in Hollington v Hewthorn and they will be struck out or permission to amend to include parts refused. In reaching this conclusion, I emphasise I am making no ruling as to what documents or material may or may not be put to Dr Wright in cross-examination (e.g. previous inconsistent statements). Those matters are for the trial judge.

Amongst the alleged defining characteristics of Bitcoin is the allegation that ‘The Bitcoin System implemented all of the concepts described in the White Paper’. This allegation is already disputed in Paragraph 64(a) of the Defences. The amendment sought is to add an example which the Ds wish to allege shows this allegation is not correct. To understand the point, one also needs to understand that the Ds say that one of the key concepts in the White Paper is the ‘non-reversible’ nature of Bitcoin transactions. The proposed amendment is shown underlined below—

The Cs resist the introduction of the underlined text on two related bases. First, that this plea is unclear since it is based on a technical misunderstanding and second, it has no prospect of success. Both arguments are founded on a technical point about the nature of the confiscation transaction protocol. In his second witness statement, Dr Wright explained that Bitcoin (BSV) allows an owner of Bitcoin (BSV) to have a remedy where the owner has lost access to it or where freezing or seizure is required by law enforcement agencies. He explains that the feature does not allow for the “reversal” of Bitcoin (BSV) transactions. Indeed, the Cs say that a key aspect of the Bitcoin System is that blocks once embedded in the blockchain cannot be altered. Rather, the activity will be recorded on the Blockchain as an additional entry. Dr Wright notes that this is in line with the White Paper which refers to the “owner” and “owners” of Bitcoin, not possession.

In the evidence in support of the amendment, one of the Ds’ solicitors says that Dr Wright “does not point to any place within the White Paper that discloses this novel procedure”. The Cs say that is a complaint that there is something which is in the Bitcoin (BSV) system that is not in the White Paper, rather than something in the White Paper that is not in the Bitcoin (BSV) system which is the pleaded allegation. Further, they say it does not explain what this has to do with the Bitcoin Characteristics which is what paragraph 64 is about.

These exchanges show that the Cs understand the plea but, as I have indicated, their real point is that it is based on a technical misunderstanding. As for the second objection (i.e. the amendment has no real prospects of success), the Ds say the objection is bad as a matter or procedure and substance.

The Ds’ procedural point is that whether it is necessary to show that a proposed amendment has a “real prospect of success” depends on whether the amendment is to introduce a new claim or alternatively provide further particulars, based on factual material, in support of an existing pleaded point. They say that whilst the former does need to meet the test, the latter does not as Roth J explained in Phones 4U Limited v EE Limited [2021] EWHC 2816 (Ch) at [11]:

‘…a contested amendment which seeks to introduce a new basis of claim or ground of defence into the proceedings, for example a new allegation that there was an implied term in a contract, will not be allowed if the party seeking to amend has no real prospect of success upon it. It would be pointless to allow the amendment if the other party could then obtain summary judgment against that head of claim or that ground of defence or that issue. All that is very different from an application to amend by giving further particulars based on factual material in support of an existing plea. In my judgment, the court should not, on such an application, conduct an assessment of whether each of the various particulars which it is sought to introduce have a real prospect of supporting that plea. Those are matters for trial.’

The Ds say that this amendment falls within the latter category and so the “real prospects of success” test does not apply.

As a matter of substance, even if the ‘real prospect of success’ test does apply, the Ds say that I cannot determine the technical issue without the benefit of a full understanding of all relevant technical matters derived from independent expert assistance.

It seems to me that the underlying issue depends on the level of generality at which one considers ‘reversibility’. I have a strong suspicion that Dr Wright’s technical explanation will turn out to be correct but I do not consider I should decide this point on this application. I will therefore allow the Ds to make the amendment (for what it is worth) but with one alteration. It is clear that the plea in paragraph 64(a) of the Defence will be the subject of expert evidence. It follows, in my view, that any respects in which it is said the Bitcoin system does not implement the concepts in the White Paper must be specifically pleaded. It is not sufficient to say this is just an example and to leave any other points unsaid. Accordingly, I allow the proposed amendment but with the words ‘Hereunder the Defendants rely on the following. The’ in place of ‘For example, the’. If the Ds have other examples, they will have to propose a further amendment.

Each set of Defendants seeks security for costs in the following amounts (and I should point out that each figure is said to be 70% of the total relevant incurred or estimated costs):

In both actions, security is sought against C2.

The gateway provisions relied upon by both Defendants are CPR 25.13(2)(a) (the non-residence condition), and/or (c) (the impecuniosity condition). In addition, the Kraken Defendants rely on the gateway in (g) (the enforcement avoidance condition) and/or CPR 3.1(5) on the basis the Claimants failed to comply with the relevant pre-action protocol without good reason.

For their part, the Cs say that C2, despite being incorporated in the Seychelles, is resident in the UK and able to meet any adverse costs orders, having substantial current assets. In the alternative, Dr Wright is said to have sufficient assets to meet any adverse costs orders. Further, the Cs say that no security should be ordered on discretionary grounds (i.e. even if one or more of the gateway conditions are satisfied) since the Cs’ primary case is that all the relevant goodwill is owned by Dr Wright, and C2 has only been included to support a secondary case: see paragraph 16 of the Particulars of Claim (where C2 is referred to as WII) which says as follows:

‘16. During the period of 2009 – 2016, Dr Wright set up, owned and controlled various trading entities, including WII, to develop his ideas for blockchain technology. WII was involved with the technical development of the Bitcoin System. nCrypt/nChain was assigned the software, code and financial modelling systems for the Bitcoin System by Dr Wright and those discrete aspects have been further developed by nChain. Dr Wright has remained, at all relevant times, the party responsible for the Bitcoin System, which includes the Bitcoin Characteristics as defined below, and the over-arching development and exploitation of the Bitcoin System. He, whether through his pseudonym Satoshi Nakamoto or otherwise, was the party relevant members of the public and trade identified with the Bitcoin System. The Claimants’ case is that goodwill generated in the Bitcoin System with the Bitcoin Characteristics is owned by Dr Wright, but Dr Wright acknowledges that it may be owned, at least in part by WII. WII is included in this claim accordingly as an alternative to Dr Wright’s primary case.’

On this basis, the Cs say that the addition of C2 adds nothing to the costs of the action, therefore there is no reason to order security against it.

Yet further, the Cs say that if the passing off actions are stayed (as the Ds propose) there will be no future costs incurred until after the resolution of the COPA claim, so security should be revisited at that point.

Finally, by way of introduction, the Ds highlight what they say is a striking feature of the Cs’ defence to this application. Security was first raised last year (August 2022 by Coinbase and November by Kraken), yet the first time that the Cs adduced any evidence of financial means was on 1 May 2023 when they served their evidence for this first CMC. The Ds are highly critical of the Cs’ evidence and I have to assess various points below.

These were not in dispute and I need not discuss the well-known principles applicable to the main gateways relied upon. It is useful nonetheless to remind myself of the explanation given by Nugee LJ in Infinity Distribution Ltd v The Khan Partnership LLP [2021] EWCA Civ 564 at [30]-[31]:

‘[30] The preconditions or gateways in r 25.13(2) are not questions for the Court's discretion: they are matters of fact on which the Court needs to be satisfied, such as where the claimant is resident, whether there is reason to believe that the claimant company will be unable to pay the defendant's costs if ordered to do so, whether the claimant has changed his address with a view to evading the consequences of the litigation, and so on. But once the case has passed through one of the gateways, the other matters are all matters for the Court's discretion.

[31] By r 25.13(1)(a) the Court is expressly required to have regard to "all the circumstances of the case" when deciding to make an order for security. There is a question on the wording of the rules whether this requirement expressly applies only to the issue whether it is a suitable case for making an order in principle, or whether it also applies to what I have called the details – the amount of security, and the manner and time in which it is to be provided. I think the answer is probably the latter, although I do not think that anything turns on it. The reason I take this view is because the overall question under r 25.13(1)(a) is whether it is “just to make such an order”; “such an order” is a reference back to the words “an order for security for costs under rule 25.12” in r  25.13(1); and an order for security for costs under r 25.12 will not only provide that security be given but also in what amount, by what means, and by when it is to be provided. It follows in my view that when r 25.13(1)(a) requires the Court to have regard to all the circumstances of the case in deciding whether it is just to make such an order, this encompasses all the aspects of the order that it is suggested it should make, including the manner in which security is to be provided.’

I should also discuss the principles applicable to a situation where there are two claimants but only one of them can be ordered to provide security. The Ds submitted as follows:

‘The starting point is that the First Claimant’s presence as a co-claimant does not as a matter of law deprive the Court of the power to order security against the Second Claimant which it would otherwise order. An example of a case in which the corporate (non-resident) claimant was ordered to provide security notwithstanding the presence of a (wealthy) individual co-claimant is Tchenguiz v SFO [2014] EWHC 1103 (Comm). It does not appear from the security for costs judgment, but the individual claimant RT was resident in England: Rawlinson & Hunter v ITG [2015] EWHC 1664 (Ch) para 14.

Where there are two claimants (C1 and C2), only one of whom (C2) can be ordered to provide security, the legal position properly to be distilled from the authorities is as follows:

(i)

the starting point is to ask whether C2 should, if it were the only claimant, have to pay security. If not, that is the end of the enquiry. If so, the enquiry proceeds.

(ii)

the fact that security cannot be ordered against C1 is relevant to the exercise of the discretion whether to order security against C2, but does not in itself dispose of the need for security; see Pearsonv Naydler [1977] 1 WLR 899 at 904H-905E; Kimpton v Ferox [2013] IEHC 577 at para 22(a); Holyoake v Candy [2016] EWHC 3065 (Ch) at §57.

(iii)

usually, it will only be a good reason to refuse an order for security if C1 is a “good mark” for the costs order: see Holyoake v Candy [2016] 6 Costs LR 1157 at §§57 and 67; Primafacio Limited v Tres Canopia Limited [2023] EWHC 430 (Comm) at §31. On that inquiry, C2 bears the burden of proof. See Holyoake v Candy [2016] EWHC 3065 (Ch) at §57 where this was accepted by the parties.

(iv)

C1 will be a “good mark” for costs against C2 where C1 would be jointly liable with C2 to pay the costs of C2 and where C2 has shown that C1 would be able to do so: Holyoake v Candy [2016] EWHC 3065 (Ch) at §57.

(v)

if C2 cannot show that C1 is a good mark for all of the costs that may be ordered against it (C2), then the defendant will be entitled to the usual remedies (security, failing which a stay) against C2; and

(vi)

ultimately, the question is one of discretion, seeking to do justice in all the circumstances, and balancing the interests of the parties.

The authorities which have addressed this point do not alter the separate legal principle that in considering whether a party will be able to meet any costs order which may be made in due course, the question is whether it will have sufficient liquid assets to meet the costs order within the usual time period (say 14 days).

On the facts here, the Ds contended that certain other more detailed principles were relevant:

I accept all these submissions which are fully supported by the authorities cited.

It is convenient to start with some evidence which the Kraken Ds adduced in support of the enforcement avoidance condition, relying on some statements allegedly made by Dr Wright on social media:

Furthermore, the Ds point to inconsistent testimony which Dr Wright has given about the Tulip Trust:

The Ds do not accept that the Trust exists or exists in the form alleged by Dr Wright. In any event, they say Dr Wright’s own statements make it clear that the Cs have deliberately used a trust and other vehicles to move assets around to avoid enforcement and will continue to do so.

All of this evidence (which was not really disputed) casts a shadow over a number of the issues I have to consider.

A considerable quantity of evidence was filed to address all the issues indicated in this introductory summary set out above. However, as I indicate below, it is not necessary to discuss all the evidence in detail because, with the applicable principles in mind, I came to a clear conclusion that orders for the provision of some security were warranted. This conclusion is based on the following points.

The first point is that I was not satisfied by the evidence from the Cs filed in support of the contention that C2 was resident in the UK. The Ds submitted that the Cs had failed to provide the necessary information to enable the Court properly to scrutinise the Second Claimant’s course of business and trading. In these circumstances, all that the Court can go on is the Second Claimant’s place of incorporation and location of its registered office and registered agent, all of which are in the Seychelles. Accordingly, in the Defendants’ submission the only conclusion that the Court can draw is that the Second Claimant is ordinarily resident in the Seychelles.

The Cs relied on three matters in support of the claim that C2 was resident in the UK. First, matters concerning Dr Wright’s home office in the UK. Second, C2’s registration under the International Business Companies Act 2016 (‘the IBC Act”). Third, a comparison with the position of Tulip Trading Limited.

Dr Wright’s evidence was to the effect that he works from a home office in the UK which “contains computers which are dedicated to WII” and that he carries out work “in relation to WII’s corporate activities from this office, including hosting board meetings” and that “WII’s accounting and corporate books and records are kept at this office”. Other activities mentioned by Dr Wright are administrative functions and activities (hosting board meetings and storing of records) which do not necessarily involve management or control of the Second Claimant’s business and trading.

As for the second point, a registration under the IBC Act tells one nothing about where the company is resident.

The third point carries no weight at all. C2 was compared to Tulip Trading Ltd, which was found to be resident in the UK in Tulip Trading Ltd v Bitcoin Association for BSV [2022] EWHC 2 (Ch). However, as the Ds submitted, in that action, Dr Wright gave evidence that he was the CEO and beneficial owner of Tulip Trading Ltd and controlled its assets (Bitcoin) using keys from his home office. The contrast with the evidence as regards C2 is striking.

Second, the evidence established that there are significant obstacles to enforcement of any order for costs against C2 in the Seychelles. Mr Cordell for the Coinbase Defendants explained that the likely legal costs of an English costs order in the Seychelles range between US$25-30K if the enforcement does not require a significant court case, taking between 12-24 months. Ms Mountain for the Kraken Ds points out that there may well be difficulties with the fact that C2’s assets are holdings in BTC, BCH and BSV. She said the judiciary in the Seychelles has no practical experience in cases involving cryptocurrencies and digital assets are not yet recognised as property under Seychelles law.

Third, there is the issue of C2’s impecuniosity. On this issue, the Ds relied on the principles set out in paragraph 54 above.

The Cs relied on the evidence set out in the first witness statement of Mr Chesher (Chesher 1). He says C2 has assets worth US$16.5 billion comprising intellectual property and BTC, BCH and BSV. The Ds say there are a number of serious problems with this evidence.

First, the Ds say Mr Chesher’s evidence is inadmissible. In summary, they contend as follows (and it should be noted these sub-paragraphs contain the Ds’ contentions):

Second, the Ds say that even if Mr Chesher’s evidence is not inadmissible, it should be given no weight since it contains numerous flaws and is demonstratively unreliable, for the following reasons (again, the Ds’ contentions):

Other difficulties with the Cs evidence asserted by the Ds are that:

In these circumstances, the Ds submitted that one would expect to see clear, unambiguous and transparent evidence from an identified and reliable source that it could meet any costs award ordered (relying on Primafacio Limited v Tres Canopia Limited, Euroenergy Investments Corporation [2023] EWHC 430 (Comm) per Sir Nigel Teare at §39 in the context of discussing the evidence that would be required to show that a BVI company was a “good mark” for costs ordered against another Defendant), and particularly so in circumstances where the First Claimant’s credibility and veracity are in question in these proceedings and where Courts here and in other jurisdictions have made findings that the evidence the First Claimant has given in those proceedings is “implausible” and “false”. Instead, the evidence that has been provided is far from independent, is wholly unreliable and not at all clear.

Accordingly, the Ds submitted there is reason to believe that C2 will be unable to meet any adverse costs order following a trial. Alternatively, the lack of specificity in the evidence indicates that C2 is reticent in revealing its financial position so it is “sound” practice to grant security against it.

Fifth, the Ds contend that Dr Wright is not a ‘good mark’ for all the costs which may be ordered against C2. On this point, the Ds accept that here there is a community of interests between the Claimants but they say that should a costs order be made the Defendants have very good reason to believe that the First Claimant would be unable to pay it.

The Ds rely on the following main points (and I emphasise all these sub-paragraphs constitute the Ds’ submissions):

Accordingly, the Ds say that the Cs have failed to demonstrate that the First Claimant is a good mark for any costs order and that it is just in all the circumstances to order security.

I can state my interim conclusion succinctly. Although the Ds’ contentions about the status of Mr Chesher’s evidence have considerable force (i.e. he is not a suitably qualified expert, no permission for expert evidence obtained), it is unnecessary to rule formally on them. Taking the most favourable view of that evidence for the Cs, in all the circumstances it does not persuade me that either C2 or C1 has substantial liquid assets which would be readily available to meet the substantial costs liabilities which might arise in these two actions, whether those costs liabilities are the costs so far incurred by each set of defendants, or the potential costs liability at the conclusion of each action. So these are cases in which the Ds have established a prima facie need for security to be given.

To explain in a little more detail:

I now have to consider what sums to order by way of security taking into account ‘all the circumstances of the case’. I have found this topic somewhat difficult, largely due to the substantial security already ordered in Dr Wright’s favour in the COPA claim.

It seems to me that the present situation has some parallels with a ‘Crabtree’ type case. The notes in the White Book identify the principle (at 25.13.2) as:

‘The court may, in its discretion, refuse to order security for costs in respect of a claim where the same issues arise on a counterclaim in the same proceedings (BJ Crabtree (Insulation) Ltd v GPT Communications Systems (1990) 59 B.L.R. 43, CA).’

It is clear that the principle does not apply merely because there is a claim and counterclaim – it is necessary to assess whether the counterclaim is merely or largely the defence to the claim or whether it has an independent vitality of its own: see e.g. Dawnus Sierra Leone Ltd v Timis Mining Corp Ltd [2016] EWCA Civ 1066, a case which is accurately summarised in the notes to the White Book as follows:

‘Where a claim and counterclaim both have independent vitality and each side can establish grounds for security against the other, the court will normally make orders for security against both sides or neither side.’ … ‘In Dawnus, the Court of Appeal held that both sides were commercially experienced entities claiming similar sums and both were impecunious and the defendant had already commenced proceedings on its cross-claim overseas; in those circumstances the proper order to make was that neither side should give security.’

Certainly these two passing off cases have a vitality which is independent of the COPA claim, at least in certain respects. Nonetheless, the claims are closely linked by the common identity issue. If Dr Wright wins that issue, then these actions will continue. If he loses that issue, it is highly likely that puts an end to these actions.

However, it seems to me that the fact that substantial security has been ordered in Dr Wright’s favour provides no obstacle to an order for security against him in these two passing off actions. After all, the situation which the court had to consider in the COPA action was whether, in the event that COPA lost, it would be able to pay Dr Wright’s costs. The situation I have to consider is whether, in the event that Dr Wright loses the COPA trial, whether the Cs in these actions would be able to pay the Ds costs. I have already concluded they would not or at least there exists a considerable risk that they would not. Furthermore, in these passing off actions, the Cs are the aggressor and the issue of these two actions was their voluntary act whereas for the Ds, being sued was not.

I proceed on the basis that these actions will be stayed pending the outcome of the COPA claim (for reasons explained in my related judgment from the second CMC), in which circumstance the Coinbase Ds seek £339k and the Kraken Ds £205k by way of security. These costs have already been incurred.

These costs (and the estimated costs which will be incurred by the Ds in these actions as a whole) are very high. Furthermore, I note that the hourly rates charged by the solicitors acting for the Coinbase Ds are very significantly above the guideline rates.

I entirely accept that both actions involve novel and difficult issues, which entirely justify the Ds instructing specialist IP solicitors and counsel. One novel and difficult issue is whether it was Dr Wright who adopted the pseudonym Satoshi Nakamoto and was the person responsible for establishing the Bitcoin System and the alleged Bitcoin Characteristics, but that issue will be decided in the COPA action. Even if Dr Wright succeeds on that ‘identity issue’, there remain difficult issues with the remainder of these passing off actions.

The Ds in these actions have different solicitors to those acting for COPA in the COPA claim, even though those solicitors are also a highly experienced IP firm. I have considered whether there has been an element of duplication between the Ds’ costs of these two passing off cases and the conduct of COPA’s claim. After all, the identity issue is the sole issue in effect in the COPA claim, so much of the case against Dr Wright had been explored in some detail by the time these Ds had to plead their defences to these passing off claims. My provisional conclusion is that there has been some duplication but the extent of its effect on costs cannot be determined.

In all the circumstances, I have reached the conclusion that C2 must provide security by way of payment into court or a guarantee from a first-class UK bank in the following amounts:

In ordering security I am comforted by the related facts that, on the evidence, (a) there is no prospect of these claims being stifled and (b) the Cs ought to have no difficulty in putting up security in these amounts if there is any truth in their evidence. Alternatively, if the Cs are being assisted in funding these actions, those standing behind the Cs must assist in putting security in place.

I recognise that it may take a little time to arrange security, so I propose to order that security must be put in place within 28 days of the hand down of this Judgment. If the Cs encounter particular difficulty, then they may apply to me for extra time but they should not assume it will be ordered. The Cs have been on notice for many months that these Ds were seeking security for costs. If any additional time is to be granted, it will require specific evidence as to the efforts put into arranging security and why it has not been possible within the 28 day period.

If security is not put in place within the time specified, then these two passing off actions will stand struck out 7 days after the expiry of the time specified. I ask the parties to agree an Order giving effect to this Judgment.

The issues left over from this CMC will either have been decided in the Second CMC, or fallen away or will have to be restored for further hearing, if required.