This was the overarching question at the heart of the decision in Armeniakou vs Thomson, whereby the High Court was asked to apply a worldwide freeing order relating to substantial cryptocurrency assets in aid of proceedings about to be commenced in Greece. The dispute arose from a matrimonial ancillary relief proceeding under Section 25 of the Civil Jurisdiction and Judgments Act 1982.
Background:
The claimant is a Greek national living in Greece and the respondent is a UK national who has resided in Greece for many years. The parties operated a crypto industry business involving game development and marketing alongside cryptocurrency development. By January 2021, the business operated under the title Vulcan Forged and the PYR currency had been launched.
After a bitter divorce, the parties reached a compromise through mediation. According to the mediation agreement, the defendant should have transferred 250,000 units of PYR to the claimant and about 11 million units of EDV which are claimed to have a value of the order of between US$11-13 million.
There was a back-to-back agreement which required the defendant to purchase back the EDVs as soon as he was financially able to do so, at a price of $1.2 per token. The mediation agreement was subsequently amended, as the respondent did not have the EDV but needed to mint the tokens, but this never occurred.
The PYRs were transferred but the claimants alleged that the respondent had blocked the wallet or amount to which they were transferred to preclude her ability to access them. She alleged various breaches of contract and misrepresentation during the mediation proceedings and alteration of the agreement that the issuance of the EDVs was imminent. Based on these claims, the claimant applied for a freezing order.
Decision:
His Honour Judge Pelling KC acknowledged that the potential
criminal proceedings were irrelevant as only English courts have
jurisdiction to make freezing orders in aid of foreign civil
proceedings.
For a freezing order to be valid, courts will ask themselves four
questions before granting an application. The first was whether the
relief sought would be granted in England and Wales; the second,
was whether the claimant has shown a realistically arguable case on
the merit and there is a real risk of dissipation; third, claimants
should be able to demonstrate it is just and reasonable to grant
such order, and, finally, it should be ascertained whether it is
not inexpedient for the Court to grant the order under Section 25
and the threshold is low for a good arguable case. The real risk of
dissipation was explained in detailed by the Court of Appeal (CoA)
in recent years. The availability of offshore structures is
relevant to the assessment and yet insufficient to conclude that
this ground was met.
One of the pieces of evidence relied upon was the fact that during the mediation proceedings, the respondent lied about a NatWest account containing more than £20 million in credit which was used to transfer crypto assets belonging to a company despite being operated in the respondent's name. This provided a basis for inferring a real risk of dissipation. He was also used to operating an offshore network of companies.
The next point was whether it was just and convenient to grant the order sought, given the fact that the respondent lives in Greece and there is no evidence that he would imminently return to the UK. Consequently, the Court's ability to enforce its order against the defendant is limited. The only assets he has in the UK are one or two bank accounts and so this is not a case "where one should refuse to intervene at all". However, the Court was not prepared to grant a worldwide freezing order, only a domestic one.
Finally, the Court allowed for an alternative means of service owing to the exceptional circumstances.
Implications:
Granting the freezing of assets is very much fact-specific. Here it is clear that the courts are prepared to grant such an order in connection with crypto assets if the four questions are answered positively. While the Judge was requested to make a worldwide freezing assets, in the light of the facts, he decided to limit it to the UK, which demonstrates the discretion afforded to the courts.
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