FEDERAL COURT OF AUSTRALIA
Karis v Digital CC Management Pty Ltd (No 2) [2022] FCA 859
File number: WAD 60 of 2022 Judgment of: BANKS-SMITH J Date of judgment: 22 July 2022 Catchwords: PRACTICE AND PROCEDURE - application by first respondent for orders facilitating transfer of bitcoin to Australian trustee - where applicant gave undertaking to the Court in support of ex parte anti-suit injunction - where applicant not resident in Australia and no assets in Australia - where ownership of bitcoin disputed - where applicant did not object in principle to bitcoin or proceeds being held on trust pending resolution of proceeding - where parties unable to agree terms as to manner in which rights to bitcoin should be preserved or timing of implementation - orders made Legislation: Corporations Act 2001 (Cth) Part 7.6
Federal Court of Australia Act1976 (Cth) s 23
Cases cited: Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 51 Date of hearing: 18 and 21 July 2022 Counsel for the Applicant: Mr MNC Harvey QC and Ms S Kearney Solicitor for the Applicant: Monaco Lawyers Counsel for the First and Second Respondents: Mr PJ Ward Solicitor for the First and Second Respondents: Williams & Hughes Counsel for the Third Respondent: The Third Respondent did not appear ORDERS
WAD 60 of 2022 BETWEEN: ALEXANDER KARIS
Applicant
AND: DIGITAL CC MANAGEMENT PTY LTD (ACN 168 145 300)
First Respondent
DIGITAL CC HOLDINGS PTY LTD (ACN 167 754 725)
Second Respondent
EUGENI YURIEVICH TSVETNENKO
Third Respondent
ORDER MADE BY:
BANKS-SMITH J
DATE OF ORDER:
22 JULY 2022
THE COURT ORDERS THAT:
1.By 5.00 pm (AWST) on 29 July 2022 the applicant is to notify the rehabilitation trustee of Mt Gox Co Ltd of the transfer of his claims in the rehabilitation to Boutique Capital Pty Ltd (AFSL 508011), to be held by Boutique Capital on trust pending the resolution of these proceedings and in accordance with order 3.
2.Such notification is to be made by the applicant in accordance with the online or offline manner of notification identified by the rehabilitation trustee in two memoranda, copies of which were provided to the applicant's solicitors by the first respondent's solicitors on 6 July 2022.
3.Boutique Capital must hold any bitcoin or funds relating to the bitcoin received from the rehabilitation trustee on trust to be distributed only in accordance with an order of this Court or the joint instruction of the solicitors on the record in this proceeding who represent the applicant and the first respondent respectively.
4.The applicant must provide a copy of these orders and reasons for decision to Boutique Capital forthwith.
5.The matter is listed for a further case management hearing on a date to be fixed but not before 1 August 2022.
6.The parties, and Boutique Capital Pty Ltd as…
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- Case
- [2022] FCA 859
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the court was whether to uphold the anti-suit injunction that had been granted ex parte. The court had to consider the arguments presented by both parties, the potential impact on the distribution of the bitcoins, and the likelihood of Mr Karis fulfilling his undertaking to place the bitcoins or their proceeds into trust. The court had to balance the interests of both parties and determine whether the injunction should be maintained, modified, or discharged.
The court found that both parties had respectable arguments regarding their claims to the bitcoins. However, given the central role of the bitcoins in the dispute and their potential value, the court determined that it was appropriate to grant relief that would preserve the bitcoins or their proceeds until the matter was resolved. The court decided to largely follow Digital CC's proposal, which involved placing the bitcoins or their proceeds into trust. The court noted that there was no evidence to suggest that Mr Karis intended to breach his undertaking to the court, but that it was necessary to act in a fair and sensible manner. The court concluded that it had the power to grant the relief sought under section 23 of the Federal Court of Australia Act 1976 (Cth).
The court ordered that the anti-suit injunction be maintained, with certain conditions. The injunction would remain in place until the case was resolved by judgment or further order, unless by consent. The court also ordered that Mr Karis place the bitcoins or their proceeds into trust, as proposed by Digital CC. This decision aimed to ensure that the disputed bitcoins were preserved and would not be distributed until the court could make a final determination on their ownership.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
At the second hearing Digital CC continued to press for the relief set out in its interlocutory application. Mr Karis through senior counsel made relevant submissions with respect to the application, but also requested an adjournment until 3 August 2022 so that Mr Karis could 'come back to the Court with something concrete', and submitted that there was no fear of a distribution by the rehabilitation trustee in that period. Senior counsel also emphasised that Mr Del Monaco was willing to be a trustee and that inquiries had indicated that such a course was possible.Consideration It must be borne in mind that the anti-suit injunction proceeded on an ex parte basis. On this application both Mr Karis and Digital CC have been represented. At this stage of the proceeding, where the case has been presented on affidavit and the pleadings have not progressed beyond a statement of claim, it is not possible to predict with certainty what will be the outcome of the case. However, I am satisfied on what I have seen to date that the parties both have respectable arguments underlying their claims to the bitcoin in question. Neither claim at present can be described as vexatious or frivolous. Whilst I was prepared to grant the ex parte anti-suit injunction on the basis of the undertaking provided by Mr Karis through senior counsel at that time (and noting that the court may receive the undertaking of an overseas applicant - Caravelle Investments Ltd v Martaban Ltd (1999) 95 FCR 85 at [24]‑[25]), Digital CC has now had the opportunity to be heard relevantly as to whether the undertaking can be supported and the risks with respect to access to the bitcoin. Digital CC points to the difficulty that none of Mr Karis, the bitcoin or the rehabilitation trustee are within the jurisdiction of the Court and that at present, it has nothing but Mr Karis's word that the bitcoin or proceeds that he receives will be placed by him into his solicitors' trust account or otherwise placed in the hands of a trustee. This is in a scenario where Mr Karis has indicated some good intent with respect to directing the bitcoin or its proceeds into trust: so much is apparent from his execution of the letter of 24 June 2022, and also from the statement in his solicitors' email of 24 June 2022 to the effect that he is not unwilling to secure the bitcoin. I add that senior counsel for Mr Karis rightly acknowledged before me in effect that the undertaking that he gave to the Court on behalf of his client on 13 June 2022 was given with the understanding that it was necessary and had a purpose. For the reasons that follow I will make orders largely in accordance with Digital CC's proposal, but in doing so I note that the evidence does not establish that Mr Karis in fact intends to breach his undertaking to the Court. However, as a matter of fairness and common sense, having regard to all of the matters before me, I consider it appropriate that there be relief that preserves the bitcoin or its distribution proceeds until this proceeding is resolved by judgment or further order, unless by consent. The bitcoin is one of the subjects of and is central to the dispute, the rights to it are contested and it is apparently of potentially significant value. In those circumstances I consider that I have power under s 23 of the Federal Court of Australia Act1976 (Cth) to grant the relief sought, and that it is appropriate to do so.