Epic Trust Limited v Ruscoe - [2024] NZHC 21

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2023-485-411

[2024] NZHC 21

IN THE MATTER OF CRYPTOPIA LIMITED (IN LIQUIDATION)

BETWEEN

EPIC TRUST LIMITED

Applicant for joinder

AND

DAVID IAN RUSCOE AND MALCOLM RUSSELL MOORE

Respondents

AND

RYAN HOUCHENS, GIA THANH PHAN, TRISTEN ROBINSON, JOSHUA DAVID STEVENSON, ANDREW ST JOHN ROSS

First to Fifth Interested Parties

AND

GYN.IO LIMITED

Sixth Interested Party

Hearing: 11 December 2023

Appearances:

B P Henry and O K Thomas for Applicant

S A Barker and B E Marriner for Respondents No appearance for First to Fifth Interested Parties L C Bercovitch for the Sixth Interested Party

P G Watts KC, counsel assisting the Court in relation to the distribution application

Appearance excused of J S Cooper KC, counsel assisting the Court as representative counsel for unsecured creditors

Judgment:

24 January 2024

JUDGMENT OF PALMER J

(Joinder)

Solicitors
DLA Piper, Wellington Buddle Findlay, Christchurch
Buddle Findlay, Wellington Cavell Leith, Christchurch

EPIC TRUST LIMITED v RUSCOE & MOORE [2024] NZHC 21 [24 January 2024]

The proceedings

[1] My judgment of 6 September 2023 outlines a summary of the context of these proceedings:1

[1] Cryptopia Ltd (Cryptopia) is a company that ran a cryptocurrency exchange. In January 2019, there was a serious hack of Cryptopia’s cryptocurrency and the loss of some $30 million of its cryptocurrency holdings. In May 2019, the shareholders of Cryptopia appointed Mr David Ruscoe and Mr Malcolm Moore as liquidators of the company under s 241(2)(a) of the Companies Act 1993. Mr Ruscoe and Mr Moore are chartered accountants, partners in the firm Grant Thornton New Zealand Ltd, and licenced insolvency practitioners. The liquidation involves complex arrangements regarding around 370 functioning cryptocurrencies owned by some 960,000 holders of accounts with positive balances in around 180 countries.

[2] On 8 April 2020, the High Court determined that each type of cryptocurrency is intangible property held by Cryptopia as trustee for the benefit of all the account holders of that currency. Cryptopia itself is a beneficiary of some of those trusts. The High Court’s judgment sets out a more detailed account of the factual background of the liquidation.

[2] The liquidators of Cryptopia have applied for directions about distribution of the cryptocurrency assets. On 13 November 2023, Epic Trust Ltd (Epic Trust) sought to make submissions on the application. Epic Trust is owned by Mr Victor Cattermole. As explained in my judgment of 15 November 2023, Epic Trust had not filed and served a notice of appearance, an application to be joined, or a notice of opposition to the application for directions.2 I declined to hear Epic Trust at that hearing. I noted the evidence provided to date raised doubts about whether Epic Trust really had an interest in the proceedings.3

[3] On 14 November 2023, Epic Trust filed and served an application to be joined as a respondent and a notice of opposition to the application for directions with supporting affidavits.4 I heard the application…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Epic Trust Limited v Ruscoe

Details

AGLC: Epic Trust Limited v Ruscoe [2024] NZHC 21
Case: [2024] NZHC 21
Decision Date: 24 January 2024

CaseChat Overview and Summary

In the High Court of New Zealand, Epic Trust Limited sought to be joined as a respondent in the proceedings against the liquidators of Cryptopia Limited, David Ian Ruscoe and Malcolm Russell Moore. The primary dispute involved the distribution of cryptocurrency assets held by Cryptopia, which had been hacked in January 2019, resulting in a loss of approximately $30 million. The liquidators were appointed in May 2019 and had applied for directions regarding the distribution of the assets. Epic Trust claimed to be a beneficial owner of some of these assets, having purchased interests from account holders, and argued that it had a legitimate interest in the proceedings. The court was required to determine whether Epic Trust had a sufficient interest in the proceedings to warrant its joinder as a party.

The legal issues centered on whether Epic Trust had a direct interest in the subject matter of the proceedings and whether its presence was necessary for the just determination of the issues. The court considered the principles of joinder under the High Court Rules 2016 and prior case law, which emphasize that parties should be limited to those whose presence is necessary to determine the issues or who should be bound by the judgment. The court also examined the terms of any purported sale and purchase agreements between Epic Trust and account holders, the validity of any assignments, and the implications of such assignments under the Trusts Act 2019 and the Contract and Commercial Law Act 2017.

The court found that Epic Trust had failed to demonstrate a sufficient interest in the proceedings. There was no evidence that any account holder had assigned their claim to Epic Trust, and the purported sale and purchase agreement lacked a signature from the purported assignor. Moreover, the court concluded that Epic Trust's presence was not necessary for the determination of the liquidators' application, as the interests of the beneficiaries were sufficiently represented by other parties and counsel assisting the court. The court declined Epic Trust's application for joinder.

The final orders of the court were that Epic Trust's application for joinder was dismissed, and it was not joined as a party in the proceedings. The liquidators' application for directions regarding the distribution of the cryptocurrency assets would proceed without Epic Trust's participation.

Orders