BITCOINS IN THE TIP: DEFENDANT COUNCIL GRANTED SUMMARY JUDGMENT: CLAIMANT’S ARGUMENT ON LIMITATION DESCRIBED AS “DESPERATE”

In Howells v Newport City Council [2025] EWHC 22 (Ch) HHJ Keyser KC granted summary judgment to the defendant council in an unusual case. The claimant was seeking to recover a computer hard drive which had been put in the defendant’s landfill site.  The hard drive, it was said, was the key to recovering £600 million in Bitcoin.   The claimant’s arguments against striking out and summary judgment were unsuccessful. There was no cause of action, the case was statute barred and there was no “compelling reason” for the matter to proceed to trial.

“The claimant cannot compel the defendant to accept his offer. If he has no legally sustainable case, disposal at a trial will be fruitless for him and wasteful of the defendant’s resources. And he is not entitled to maintain unmeritorious proceedings in existence for the purpose of imposing pressure on the defendant to accept an offer it has steadfastly rejected”

THE CASE

In August 2013 a hard drive containing the private key to the claimant’s Bitcoin was deposited in error of the Defendant’s landfill site.  The claimant’s case was that the Bitcoin are now worth £600 million, but without the private key he was unable to access them.  He brought proceedings seeking an order that the defendant deliver the hard drive to him, or allow him to excavate the site, alternatively for compensation.

THE DEFENDANT’S APPLICATION

The defendant applied to strike out the claim on the grounds it disclosed no reasonable grounds for bringing the claim or was an abuse of process.  Alternatively it sought summary judgment on the grounds that there was no reasonable prospect of success.

THE DECISION

The judge gave judgment for the defendant on the grounds that there was no realistic prospect of the claim succeeding.

THE JUDGMENT ON LIMITATION

The defendant was successful on a number of grounds.  Here I want to look at limitation.

1. 1. Third, the claimant knew the facts material to his claim by November 2013 but did not commence proceedings until May 2024. In those circumstances, in my judgment, his claim is barred by lapse of time. Section 21 of the Limitation Act 1980 provides in relevant part:

“(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action—

…

(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his own use.

…

(3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the cause of action accrued.”

1. 1. In view of the terms of section 21(1)(b), section 21(3) does not apply to an action to recover trust property from a trustee; no limitation period applies to such a claim. However, not all constructive trusts fall within section 21. Lewin on Trusts (20^th edition), para 50-056, explains the distinction between two kinds of constructive trust (references omitted):

“The first comprises those cases in which a defendant has assumed the duties of a trustee or other fiduciary, doing so by a transaction which was independent of and preceded the breach of trust complained of, e.g. where the defendant acts as a trustee de son tort or agrees to buy land for a claimant but then seeks to keep it for himself; the second comprises those cases in which the so-called trust obligation arises as a direct consequence of an unlawful transaction which the claimant impugns and in which the defendant is no more than a wrongdoer, e.g. where the defendant dishonestly assists the trustee in a breach of trust or obtains property from the claimant by fraudulent misrepresentation. The former, called in this section constructive trusts of the first kind, are true trusts, for the defendant has assumed a fiduciary duty. The latter, called in this section constructive trusts of the second kind, are not true trusts, for the defendant has never assumed any fiduciary duty; they are purely remedial and are described as constructive trusts merely as ‘a formula for equitable relief’.”

1. 1. The only kind of constructive trust that could possibly be alleged in the present case is a constructive trust of the second kind. In Williams v Central Bank of Nigeria [2014] UKSC 10, [2014] AC 1189, the Supreme Court confirmed that constructive trusts of the second kind fall under section 21(3), not under section 21(1), and that a claim by a beneficiary under such a trust to recover trust property or in respect of a breach of trust is subject to a six-year limitation period. Accordingly, I reject the claimant’s contention that his claim under a constructive trust would be subject to no limitation period. The claimant’s fall-back position, as I understand it, is that the cause of action accrued only when the defendant asserted ownership of the Hard Drive in its letter dated 25 September 2023: see paragraph 46.2 of his skeleton argument. The problem with that, as it seems to me, is that the constructive trust (if any) would have arisen upon the unconscionable retention of the trust property, and on the claimant’s case the defendant had the requisite knowledge in 2013 but did not give him access to recover his property. As the trust in question arises from unconscionable retention of the property, it is not the terms of correspondence in 2023 that give rise to any cause of action. If the claimant were to attempt to evade this conclusion by saying that no trust arose until, at a much later date, he demonstrated to the defendant the feasibility of a recovery operation, the untenable nature of his contention that any trust at all existed would only be thrown into higher relief.

1. 1. An argument was advanced on behalf of the claimant in reliance on section 32 of the Limitation Act 1980: that it was arguable that the defendant had deliberately concealed a fact relevant to his right of action (namely, the fact of its assertion of ownership of the Hard Drive) and that the period of limitation did not begin to run until he discovered that concealment upon receipt of the defendant’s letter dated 25 September 2023. I regard this as a desperate argument. The claimant knew what had happened to the Hard Drive for a full ten years. The defendant concealed nothing. If it first asserted ownership of the Hard Drive, in reliance on CPA 1974, in September 2023, that was an assertion of law, not of fact. If the assertion itself be regarded as a fact, it had not been concealed because it had not previously been made. Anyway, as the supposed constructive trust rests on unconscionable retention of the property, it is not the assertion that founds the right of action. (If A receives B’s money in circumstances that make his retention of it unconscionable but refuses to return it, nothing is added if at some later date A adds, “It’s mine.”)

1. 1. If, however, the claimant were correct in the contention that no statutory limitation period applies to the claim, I would not accede to the defendant’s invitation to conclude at this stage that the claim would be barred by the equitable doctrine of laches. In P&O Nedlloyd B.V. v Arab Metals Co and others, Moore-Bick J said at [52], “The equitable doctrine of laches … provides the court with ample power to refuse relief when delay on the claimant’s part would make it inequitable to grant it”. At [61] he said: “The question for the court in each case is simply whether, having regard to the delay, its extent, the reasons for it and its consequences, it would be inequitable to grant the claimant the relief he seeks.” I would not be willing to hold on a summary basis that laches would provide an unanswerable defence to the claim. In particular, the consequences of delay are unclear, in circumstances where it is not certain on the evidence before me how much harder any excavation and recovery operation would be by reason of the lapse of time.

NO COMPELLING REASON FOR TRIAL

The claimant argued that there was a compelling reason for a trial. He offered to give 10% of the value of the Bitcoins to the city of Newport. The judge held that this did not amount to a “compelling reason”.

Other compelling reason for trial

1. As I do not consider that the present claim has any realistic prospect of success, it is necessary to consider whether there is any other compelling reason for the claim to be disposed of at trial rather than summarily. In my judgment, there is not. On behalf of the claimant, it has been submitted that there are a great many facts which could only be investigated at trial; however, even if that is so, findings as to any disputed facts are not required for the resolution of the case at this stage. Again, much was made on behalf of the claimant of his offer to give to the city of Newport 10% of the value he realises from his Bitcoin in the event that he recovers the Hard Drive and the private key. It was submitted that “the very fact that the claimant has pledged 10% of the value of the Bitcoin to the community of Newport dictates that the public are also entitled to have these matters fully adjudicated openly” (skeleton argument, paragraph 16). I do not regard this as a compelling reason why the case should be disposed of at trial. The claimant cannot compel the defendant to accept his offer. If he has no legally sustainable case, disposal at a trial will be fruitless for him and wasteful of the defendant’s resources. And he is not entitled to maintain unmeritorious proceedings in existence for the purpose of imposing pressure on the defendant to accept an offer it has steadfastly rejected.