Cases & Legislation

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AA v Persons Unknown and others

Cryptocurrencies have recently hit the headlines once again, this time in relation to a cyber attack on prominent Twitter accounts (including Apple, Elon Musk and Barack Obama), appearing to promise to double any money transferred into an anonymous Bitcoin wallet. 

When attacks like this occur and individuals try to recover their funds, what is the status of the cryptocurrencies?  In January 2020, it was held in the case of AA v Persons Unknown and Others that cryptocurrencies are a form of property.  In that case, insurers brought an application in private and in part without notice in relation to nearly $1m that they had paid in Bitcoin as a ransom, their insured’s computer system having been hacked and locked the insured out.

Why is this important?  It matters because proprietary rights are recognised against the whole world, whereas other more personal rights are only recognised against someone who has assumed a relevant legal duty.  The term property is also used widely in statutes and cases and it is important to know if they are applicable to cryptoassets, for example in tracing where there has been fraud.  Here, the decision meant that the ransom sum could be the subject of an injunction.

This position accords with and goes so far as to endorse the legal statement on cryptoassets and smart contracts published by the UK Jurisdictional Task Force in November 2019 which sets out that there is no bar under English law to cryptoassets having the legal status of property.  Rather, crypotassets have all the characteristics of property: they are definable, identifiable by third parties, capable in their nature of assumption by third parties and have some degree of permanence. Their novel features such as their intangibility do not disqualify them, nor does the fact that they are pure information and not classifiable as either a thing in possession or action.  While the legal statement is not binding, it was intended to provide greater market confidence that the courts would take a pragmatic approach.  And so they have.

As technology advances at an almost breakneck speed, especially in light of the challenges of COVID-19, it is good to see the court being flexible in applying caselaw that was nearly 150 years old and therefore understandably narrower in its formulation.  As set out in the legal statement, it is important that the common law can “stretch traditional definitions and concepts to adapt to new business practices”.  This is also an uplifting decision as it shows insurers and insureds working together to use their rights of subrogation and assignment effectively, thereby creating a positive result all round.

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