Ruscoe v Cattermole
[2024] NZHC 3883
•18 December 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2024-485-080
[2024] NZHC 3883
BETWEEN DAVID IAN RUSCOE and MALCOLM RUSSELL MOORE
ApplicantsAND
THOMAS VICTOR HENRY RONALD CATTERMOLE
Respondent
Hearing: 26 August 2024 Appearances:
S A Barker and J K McGrath for Applicants R A Hearn for Respondent
Judgment:
18 December 2024
JUDGMENT OF McHERRON J
(Contempt of Court application)
RUSCOE v CATTERMOLE [2024] NZHC 3883 [18 December 2024]
Table of Contents
Further consequences of the hack into Cryptopia [1] The liquidators apply (again) for orders that Mr Cattermole is in contempt [5] Background [9] Who is Mr Cattermole and what is the Principality of Cogito? [10] The Spreadsheets that were mistakenly released to Mr Cattermole [12] Key events between 2020–2023 [13] Interlocutory injunction against Mr Cattermole [36] Law of contempt [43] Burden and standard of proof [50] Mr Cattermole’s alleged failure to comply with the 21 October 2020 Orders [53] First alleged breach of 21 October 2020 Orders: Mr Cattermole’s failure to provide relevant information to the Court and the liquidators [56]
Failure to delete the Spreadsheets [62] Use of information from the Spreadsheets to engage Cryptopia account holders [63] Mr Cattermole’s response [68] My assessment [73] Other methods of enforcing the court order have not been tried unsuccessfully [73](a) The 21 October 2020 Orders were clear and unambiguous and binding on Mr Cattermole [73](b) Mr Cattermole had knowledge of the terms of the 21 October 2020 Orders [73](c) Mr Cattermole knowingly failed, without reasonable excuse, to comply with the terms of the 21 October 2020 Orders [73](d)
Conclusion [74] Mr Cattermole’s alleged failure to comply with the 20 November 2020 Orders [75] Mr Cattermole’s response [79] My assessment [81] Mr Cattermole’s alleged failure to comply with the 5 March 2021 Orders [87] Mr Cattermole’s response [89] My assessment [96] Mr Cattermole’s alleged failure to comply with the 14 July 2021 Consent Orders [110] Mr Cattermole’s response [112] My assessment [113] Summary of findings [117] Result and next steps [120] Costs [121] SCHEDULE ONE — PREVIOUS CRYPTOPIA PROCEEDINGS
SCHEDULE TWO — CHRONOLOGY
Further consequences of the hack into Cryptopia
[1] Cryptopia Ltd (in liquidation) (Cryptopia) ran a cryptocurrency exchange that was hacked in January 2019. Some $30 million worth of cryptocurrency was irretrievably transferred to an undisclosed external exchange. In May 2019, Cryptopia’s shareholders appointed David Ruscoe and Malcolm Moore as liquidators of the company under s 241(2)(a) of the Companies Act 1993. The liquidation
involves complex arrangements regarding about 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 personal property held by Cryptopia as trustee for the benefit of all the account holders of that currency.1 Cryptopia is a beneficiary of some of those trusts for cryptocurrency it held itself.2
[3] In 2019, Mr Ruscoe filed an affidavit in the Christchurch High Court in support of an application for directions. He annexed two spreadsheets as exhibits (Spreadsheets). The Spreadsheets were databases of commercially sensitive and confidential information relating to Cryptopia’s account holders and their cryptocurrency holdings. The Court received this information on a USB drive.3
[4] In April 2020, a Deputy Registrar in the Christchurch Registry mistakenly sent Thomas Cattermole, the respondent in these proceedings, a copy of the Spreadsheets after he requested them. They should not have been provided; Mr Cattermole had no entitlement to receive the Spreadsheets or their contents.
The liquidators apply (again) for orders that Mr Cattermole is in contempt
[5] Cryptopia’s liquidators apply for orders holding Mr Cattermole in contempt of court under s 16 of the Contempt of Court Act 2019 (the Act).4 It is the second contempt application the liquidators have brought against Mr Cattermole in three years. The first application was resolved by consent, as I discuss below.
[6]The liquidators’ contempt application relates to alleged breaches of:5
1 Ruscoe v Cryptopia Ltd (in liq) [2020] NZHC 728, [2020] 2 NZLR 809 at [69], [120], [133], [187],
and [196].
At [146].
3 Ruscoe v Epic Trust Ltd [2024] NZHC 1336 at [5] and [6].
4 The liquidators originally envisaged that the liability and penalty aspects of the present application would be considered together and determined following a two-day hearing. However, both parties asked for liability to be separated from penalty, with a separate hearing on penalty to be convened if liability were established. I have adopted this approach.
5 The contents of each of the orders in respect of which this application relates are summarised in the chronology in Schedule Two below.
(a)the High Court’s orders on 21 October 2020, 20 November 2020, and 5 March 2021 in Ruscoe and Moore v Cryptopia Limited (In Liquidation) CIV-2019-409-544; and
(b)Mr Cattermole’s undertakings recorded in this Court’s consent orders holding him in contempt of Court on 14 July 2021 (also in CIV-2019- 409-544).6
[7] The application concerns confidential information belonging to Cryptopia that Mr Cattermole obtained from the Court file in April 2020 (the information in the Spreadsheets), which this Court has repeatedly ordered him to delete.
[8] More specifically, the liquidators allege Mr Cattermole breached this Court’s orders by keeping the information in his power and control and by using it for his own commercial benefit. In addition, the liquidators say new information, made available to them in December 2023, reveals Mr Cattermole’s earlier breaches of the orders of which the liquidators were previously unaware.
Background
[9] Because the first contempt application did not result in a judgment, but was resolved by consent, I will place the present application in context, by setting out the background in more detail. It is a complicated story covering many separate Court proceedings. I produce a list of related proceedings, and the relevant Court orders that have been made, in Schedules One and Two at the back of the present judgment. I will draw from the information in these schedules in the paragraphs that follow.7
Who is Mr Cattermole and what is the Principality of Cogito?
[10] Mr Cattermole is the director of the Montenegrin company formerly known as Epic Trust Ltd (now Chill Education Ltd). Mr Cattermole is sole director and shareholder of Epic Trust DOO, another Montenegrin-incorporated company, and is the director of Classic Focus Ltd, a Hong Kong incorporated company. Mr Cattermole
6 Ruscoe v Cattermole HC Christchurch CIV 2019-409-544, 14 July 2021 (Orders of the Court by Consent).
7 These schedules are adapted from submissions that were helpfully provided by counsel for the liquidators.
is associated with an unincorporated enterprise known as “Cryptopia Rescue”, which purports to offer to help Cryptopia account holders.
[11] Mr Cattermole is the self-styled “Chairman of the Crown Council” and “Prince of the Principality” of the Cogito Metaverse. He asserts that he has extensive decision- making powers under Cogito’s constitution. However, as this Court held in Epic Trust Ltd v Ruscoe, Cogito is not a foreign jurisdiction and its “law” is not foreign law recognised by this Court.8 The “Cog” is a digital currency created by Cogito. Mr Cattermole’s companies have sent Cryptopia account holders offers to purchase their cryptocurrency claims against Cryptopia in return for Cog.
The Spreadsheets that were mistakenly released to Mr Cattermole
[12] The two Spreadsheets at the heart of the present application were originally attached to Mr Ruscoe’s second affidavit sworn on 8 November 2019 in Ruscoe v Cryptopia Ltd (In Liquidation) CIV-2019-409-544:
(a)One of the Spreadsheets is called “user summary 2019-10-18” and lists usernames and email addresses of Cryptopia’s 960,000 active account holders.
(b)The second of the Spreadsheets is called “coin summary 2019-10-24” and describes the amount of cryptocurrency held by each account holder, a valuation of each cryptocurrency holding in Bitcoin and NZD as at the date of the affidavit, and other confidential account holder information including location information, verification level, registration date, total number of trades, largest holding by value, last trade date and last withdrawal date.
Key events between 2020–2023
[13] Cryptopia’s liquidation attracted significant attention due to the number of cryptocurrencies it held,9 and the number of account holders the hack affected.10
8 Epic Trust Ltd v Ruscoe [2024] NZHC 21 at [19].
9 More than 850 different cryptocurrencies, 400 of which were live at the date of liquidation.
10 Approximately 2.2 million at the date of liquidation in more than 180 countries, 960,000 of which had a positive balance.
[14] On 17 January 2020, Trust Your Client Ltd (a New Zealand registered company of which Mr Cattermole is a director) applied to join the liquidation proceeding. Justice Gendall found account-holders, unsecured creditors and the liquidators to be the interested parties. He found that Trust Your Client fell into none of these categories. Accordingly, Gendall J declined Trust Your Client’s application.11
[15] In April 2020, Mr Cattermole emailed a Deputy Registrar requesting a copy of the Spreadsheets.12 Unbeknown to the liquidators, on 29 April 2020 the Deputy Registrar couriered a USB drive containing a copy of the Spreadsheets to Mr Cattermole. The Deputy Registrar incorrectly assumed Mr Cattermole was a party to the proceedings and was therefore entitled to access the Spreadsheets.13
[16] After receiving the Spreadsheets, Mr Cattermole distributed information from the Spreadsheets and sought to use it for his own commercial gain.
[17] The liquidators began to suspect Mr Cattermole had somehow obtained Cryptopia’s confidential information. However, it was some months before they realised Mr Cattermole had the Spreadsheets.
[18] After finding out that Court staff had provided the Spreadsheets to Mr Cattermole in error, the Acting Civil Manager of the Christchurch Registry requested him, first by phone and then by email, to delete the information he had mistakenly received. She asked him not to disclose the contents of the Spreadsheets, and to contact any other person who had received the information to ask them to do the same. The Acting Civil Manager’s email dated 20 October 2020 records that Mr Cattermole agreed to follow these instructions.
[19]On 21 October 2020, the Court ordered Mr Cattermole:14
(a)To disclose on affidavit:
(i) exactly what information he was provided by the High Court in response to his requests in April 2020 that was not already in the public domain;
11 Ruscoe v Cryptopia Ltd (in liq) High Court Christchurch CIV-2019-409-544, 24 January 2020 (Minute of Gendall J).
12 Mr Cattermole’s exact request was for “the attachments to David’s 2nd affidavit”.
13 See Senior Courts (Access to Documents) Rules 2017, r 9.
14 Ruscoe v Cryptopia Ltd (In Liquidation) CIV-2019-409-544, above n 6.
(ii) where he has stored the information;
(iii) to what uses he has put the information;
(iv) whether he has made copies and provided copies to any third parties.
(b)To delete or return to the Court all information obtained that is not in the public domain.
(c)To permit an independent IT forensic professional appointed by the Court to examine any computers and devices on which the information has been stored to ensure that all confidential and private information has been removed or deleted and has not been sent to third parties.
[20] The 21 October 2020 Court Orders were served on Mr Cattermole personally that same day, with a deadline for compliance of 3 pm on 23 October 2020.
[21] Initially, Mr Cattermole asserted that the liquidators had themselves made the information in the Spreadsheets public and so they were no longer confidential. However, he said he had “under duress” abided by the requests in the 21 October 2020 Court Orders. In an affidavit sworn on 23 October 2020, Mr Cattermole deposed that the information from the Spreadsheets:
(a)had been stored on a USB drive and his laptop;
(b)had been used to assess the viability of the coins listed on the Cryptopia exchange, and to assist account holders, after verification, with basic information about what the liquidators claimed their holdings were.
[22] Mr Cattermole deposed that “[a c]opy has been made and sent to Mikhail Vakharin [sic]”. Mr Cattermole said he had deleted the data off his laptop and that he had returned the USB drive, on which the Spreadsheets had originally been provided to him, to the liquidators’ appointed agents.
[23] The Court then ordered Mr Cattermole to attend and be examined on oath concerning the extent of his compliance with the 21 October 2020 Court Orders. The Court ordered Mr Cattermole to bring to that examination:
…such documentation as is relevant to the Court’s determination of his compliance with the Orders, including but not limited to proof of postage of the USB flash drive via international courier to Mr Vakhrin, track and trace records, recipient information including postal address, email or instant
messenger correspondence with Mr Vakhrin relating to the USB flash drive sent to him, or the data it contained…
[24] The Court also ordered Mr Cattermole to bring to the examination further details concerning his deletion of the information from the Spreadsheets.
[25] On 30 November 2020, counsel for the liquidators cross-examined Mr Cattermole before Associate Judge Lester. During that examination, Mr Cattermole referred to “communication with the group” via Signal “which automatically deletes all conversations after one day”. He said there were only three members in the group, himself, Lou Serafimov and Mr Vakhrin, but that there were other people involved with Cryptopia Rescue. Mr Cattermole said he posted a flash drive containing the Spreadsheets to Mr Vakhrin in St Petersburg, but that he did not send the data or any part of it to him through any other medium. In contradiction to his affidavit of 23 October 2020, Mr Cattermole said in the examination he copied the data from the Spreadsheets onto a USB drive to return to the Court, because he had sent the original USB drive, on which the Spreadsheets had been provided to him, to Russia. He also confirmed that he deleted the information and that he had asked Mr Vakhrin to delete the information, but that he was not sure whether he had done so. Mr Cattermole assured the Court he did not have access to the information from the Spreadsheets.
[26] Following the examination, the Court ordered Mr Cattermole to permit a forensic review of his Microsoft, Facebook and WhatsApp accounts and data, as well as certain bank statements. In March 2021, the Court made further related orders.
[27] On 14 July 2021, by consent the High Court ordered that Mr Cattermole was in contempt of Court.15 These orders record that Mr Cattermole “agrees that he has committed a contempt of Court by breaching the relevant Court orders in not providing all financial/bank statements, and in not providing all devices containing the Spreadsheets to Deloitte”.16 The word “devices” refers to the USB drive containing copies of the Spreadsheets that Deloitte’s forensic investigation had discovered were
15 Re Cryptopia Ltd (In Liquidation); Ruscoe v Cattermole HC Christchurch CIV-2019-409-544, above n 6.
16 Deloitte was a Court appointed forensic examiner.
used on 14 and 15 November 2020, less than one month after the Court’s order requiring Mr Cattermole to delete and return the confidential information.
[28] In the 14 July 2021 Consent Orders, Mr Cattermole gave undertakings that he “does not have any copies of the Spreadsheets within his power, possession or control” and, “if the Spreadsheets or information derived from the Spreadsheets do come into his power, possession or control”, he would immediately delete the information, notify the liquidators, and identify to the liquidators how and from whom the Spreadsheets have come into his power, possession or control.17
[29] During 2023, Cryptopia account-holders received offers to buy their holdings in Cryptocurrency in return for:
(a)“Cog” a digital coin that was said to be able to be used in Cogito’s “metaverse”; and
(b)giving up their claims in the Cryptopia liquidation.
[30] Some Cryptopia account holders complained to the liquidators about the correspondence received from Epic Trust Ltd,18 and associated entities, to purchase their cryptocurrency claims against Cryptopia. Those account holders confirmed they had not provided an email address to Epic Trust or any other associated entity. The liquidators discovered that 39 Cryptopia email addresses that were not publicly available had received these offers. The liquidators inferred from the social media posts and emails of Mr Cattermole, Epic Trust and Cogito that these entities were still using the confidential information from the Spreadsheets.
[31] In December 2023, Mikhail Vakhrin sent the liquidators copies of emails between himself and Mr Cattermole from 2020–2021. The liquidators allege that this material shows that:
17 Ruscoe v Cattermole, HC Christchurch CIV 2019-409-544, above n 6, at [3(h)].
18 Epic Trust Ltd is described in the liquidators’ submissions as the Montenegrin-incorporated trust company for Cogito. Mr Cattermole is the owner of Epic Trust and appears to be the person in control of its activities, although he is not registered as its director. The sole director is a Marina Viktorova Shpineva of whom counsel were unable to locate any details. Around 25 December 2023, Epic Trust Ltd changed its name to Chill Education Ltd. Meanwhile, as of 13 August 2024, a New Zealand incorporated company owned by Mr Cattermole, and of which he is the sole director, has been named Epic Trust Ltd (it was previously named Epic Trust Trustee Ltd).
(a)Mr Cattermole had emailed information from the Spreadsheets to Mr Vakhrin (despite Mr Cattermole’s claim that he had only forwarded the information to Mr Vakhrin by ordinary post);
(b)there was a clear connection between the provision of the information from the Spreadsheets to Mr Vakhrin and Mr Cattermole’s plans to monetise it; and
(c)that Mr Cattermole had lied to the liquidators.
[32] On 22 December 2023, Buddle Findlay, on behalf of the liquidators, served a cease and desist letter on Mr Cattermole in respect of the confidential information in the Spreadsheets. The letter referred to an email from crypotopia- [email protected] dated 21 December 2023 which appeared to have been sent to all Cryptopia account holders for which an email address was recorded in the Spreadsheets. The cease and desist letter stated that the 21 December 2023 email made use of the confidential information in the Spreadsheets, in breach of the 14 July 2021 Consent Orders. The letter acknowledged that the email purported to be from Martin Braine LLB and came from a “principality of Cogito” address. However, Buddle Findlay assumed that Martin Braine LLB was Mr Cattermole’s “nom de guerre”.
[33]The letter demanded Mr Cattermole:
(a)cease and desist from further breaching the 14 July 2021 Consent Orders; and
(b)provide evidence of his compliance by 5 January 2024.
[34] Failing his compliance, the liquidators would further apply to hold Mr Cattermole in contempt of Court. The letter indicated the liquidators would also seek urgent injunctive relief, indemnity costs and sanctions for ongoing contempt of Court, including imprisonment and sequestration of Mr Cattermole’s assets.
[35] As Buddle Findlay foreshadowed in its 22 December 2023 cease and desist letter, on 8 February 2024 the liquidators applied for orders declaring Mr Cattermole in further contempt of court orders, and various associated orders and directions.
Interlocutory injunction against Mr Cattermole
[36] The liquidators have filed proceedings seeking relief from Epic Trust, Mr Cattermole, Mr Martin Braine, and the unknown others for breach of confidence, breach of the Trade Marks Act 2002, and misleading and deceptive conduct under the Fair Trading Act 1989. The liquidators applied to restrain Mr Cattermole from using the confidential information from the Spreadsheets and from using language emulating Cryptopia.
[37] On 13 February 2024, Palmer J granted a without notice interim injunction until the application for interlocutory injunctions was determined.19 The injunction restrained the first to fourth defendants, namely Epic Trust, Mr Cattermole, Mr Braine and persons unknown who have control over or responsibility for the actions of Cogito, from using Cryptopia-related information. Palmer J also ordered Epic Trust Ltd and Mr Cattermole to disclose, by way of affidavit, the identity and contact details of Mr Martin Braine and of any legal persons who are in control of decision-making in the Principality of Cogito or the Cogito Metaverse.
[38] Epic Trust sought rescission of Palmer J’s orders. In May 2024, Isac J granted an interim injunction until trial against the same defendants, and on the same terms as in Palmer J’s earlier decision.20 Isac J summarised the liquidators’ argument in the injunction, as follows:21
…[t]hey say that Mr Cattermole continues to use the information either personally or through human and corporate ciphers, to dupe Cryptopia’s account holders into accepting an offer which would see them lose their valuable cryptocurrency in Cryptopia in exchange for a digital coin Mr Cattermole has created, is not traded on recognised exchanges and that lacks any real value.
19 Ruscoe (as liquidators of Cryptopia Ltd (In Liq)) v Epic Trust Ltd [2024] NZHC 165.
20 Epic Trust, above n 3.
21 Epic Trust, above n 3, at [11].
[39] Isac J recorded there were two significant harms/risks if the interim injunction was not granted:22
(a)First, the continued unconstrained use of the confidential information will cause greater costs in the liquidation, which will ultimately become a cost to the account holders.
(b)Second, there is evidence the defendants—or parties likely connected to them—are offering to supply confidential account holder information, used by the liquidators to verify the identity of account holders, to anyone who can meet Cogito’s verification processes. There is no guarantee that such processes will lead to the identification of legitimate account holders. There is therefore a real risk of release of account holder information to third-parties seeking to pass themselves off to the liquidators as the true owners of coin held on trust. Should the defendants release account holder confidential information to the wrong parties, the liquidation itself may be put at risk. There is clearly a significant risk of irreparable harm to account holders as a consequence.
[40] Isac J considered it “seems seriously arguable” that Mr Cattermole obtained the confidential information, distributed it to others, and that other persons or interests said to be associated with Mr Cattermole, including Epic Trust, continue to misuse or benefit from the misuse of it.23
[41] On 13 June 2024, Isac J granted amended and ancillary orders.24 Because these amended orders are the current applicable orders and supersede and replace those Isac J made on 24 May 2024, I reproduce them in full:
(a)That from the date of this judgment until such time as the proceeding is finally determined the first to fourth defendants are prohibited from:
22 At [31] and [32].
23 Epic Trust, above n 3, at fn 12.
24 Ruscoe v Epic Trust [2024] NZHC 1546.
(i)using, relying on, referring to, disseminating, or disclosing the information about Cryptopia's database and cryptocurrency holdings contained in the spreadsheets exhibited to the affidavit of David Ian Ruscoe dated 8 November 2019 in CIV-2019-409-544 (or copies thereof, whether in electronic or hard copy); and
(ii)using the terms “Cryptopia” and “CRYPTOPIA”:
(1)in the headings or sub-headings of any documents or communications created for the purposes of advertising to or communicating with Cryptopia’s account holders, or persons who may be Cryptopia’s account holders; and
(2)in any domain names, usernames, account names, email addresses, subject lines or display names used for the purposes of advertising to or communicating with Cryptopia’s account holders, or persons who may be Cryptopia’s account holders.
(b)Within two working days of service of this order, the first and second defendants must disclose, by way of affidavit:
(i)the identity, whereabouts and contact details of Martin Braine, the in- house lawyer for the Principality of Cogito; and
(ii)the identity and contact details of any legal persons (being natural persons or other legal entities) who are in control of decision-making for the Principality of Cogito or the Cogito Metaverse.
(c)Within 10 working days of this order the first to fourth defendants are required to disclose on affidavit their knowledge of:
(i)what information has been posted to the Cogito Metaverse or Principality of Cogito websites that contains all or any part of the Confidential Information or is based on or derived from the Confidential Information.
(ii)what information has been disclosed to Cryptopia account holders or persons seeking to accept Cogito's settlement offer since 21 October
2020 that contains all or any part of the Confidential Information or is based on or derived from the Confidential Information, and the identities of the persons or entities the information was disclosed to.
(d)The second defendant is to procure the compliance of all entities, persons and interests under his control to comply with the orders set out at [9(a)].
(e)Leave is reserved for the third and fourth defendants to apply to set aside these orders on three working days’ notice.
[42] This injunction applies until the proceedings are finally determined. In Mr Ruscoe’s updating affidavit sworn on 14 August 2024, he states that the defendants have not complied with the orders made by Isac J.
Law of contempt
[43] The parties were largely agreed on the applicable law. The law of contempt is provided in the Act. This Court also retains inherent jurisdiction to resolve contempt that is not covered by the Act.25
[44]The principal purposes of the Act are to:26
(a)promote and facilitate the administration of justice and uphold the rule of law; and
(b)maintain and enhance public confidence in the judicial system; and
(c)reform the law of contempt of court.
[45] As the Supreme Court held in Siemer v Solicitor-General, effective administration of justice under our constitution requires that the orders of the courts are obeyed unless properly challenged or set aside. Public confidence in the administration of law, necessary for its effective administration, recognises that there
25 Contempt of Court Act 2019, s 3(3) and 26.
26 Section 3(1).
is a strong expectation that those who ignore court orders are quickly brought to account.27
[46] Persons who knowingly fail to comply with a binding and unambiguous court order or undertaking without lawful excuse can be imprisoned, fined, made to perform community work, or be subject to a sequestration order.28
[47] An application to enforce a court order under s 16 of the Act must be made by originating application.29 A court may only enforce a court order under s 16 if other methods of enforcing the court order have been considered and are inappropriate or have been tried unsuccessfully.30 If so, the Court must make a finding as to whether it is proved beyond reasonable doubt that:
(a)the court order being enforced has been made in clear and unambiguous terms and is clearly binding on the person; and
(b)the person had knowledge or proper notice of the terms of the court order or undertaking being enforced; and
(c)the person has, without reasonable excuse, knowingly failed to comply with the court order being enforced.
[48] Whether the liquidators have established the above elements of s 16 in respect of each alleged instance of non-compliance is the main thing I need to determine in this judgment.
[49] Enforcement action under s 16, whether successful or unsuccessful, does not extinguish or affect the liability of the person to comply with a court order.31
27 Siemer v Solicitor-General [2010] NZSC 54, [2010] 3 NZLR 767 at [26].
28 Contempt of Court Act, s 16.
29 High Court Rules 2016, r 19.2(ca). The liquidators applied for leave to bring an originating application, but leave is not required.
30 Contempt of Court Act, s 16(3).
31 Section 16(6).
Burden and standard of proof
[50] The liquidators have the burden of proof. Reflecting the seriousness of a sanction for contempt of court, including the restrictive punishments available, the liquidators must prove their allegations to the criminal standard of beyond reasonable doubt.32
[51] This standard of proof reflects the standard of proof for contempt established at common law in Re Bramblevale Ltd in which Lord Denning MR stated:33
A contempt of Court is an offence of a criminal character. A man may be sent to prison for it. It must be satisfactorily proved. To use the time-honoured phrase, it must be proved beyond reasonable doubt.
[52] In that case, the contemnor failed to produce books of account when required to do so and was committed to prison after a hearing in which he told of the destruction of the books. The trial Judge regarded that as a lie. The Court of Appeal allowed the appeal. It held the mere fact that the contemnor might be thought to have told lies was not, without further evidence, sufficient to discharge the burden. Cross LJ noted that the trial Judge himself had referred to the possibility that the books of account were no longer in existence, which meant that the inference that the contemnor was still in possession of them could not be justified even on the balance of probabilities let alone beyond reasonable doubt.34
Mr Cattermole’s alleged failure to comply with the 21 October 2020 Orders
[53] To summarise, the Court’s 21 October 2020 Orders (set out in full above at [19]), required Mr Cattermole to delete or return the information from the Spreadsheets, and to disclose on affidavit to what uses he had put the information and whether he had made or provided to third parties any copies.
[54] In response to the 21 October 2020 Orders, Mr Cattermole filed an affidavit dated 23 October 2020 stating he:
32 Section 16(3)(b) and (4). See also Smith v Smith [2020] NZCA 556 at [30]; Siemer v Solicitor- General [2009] NZCA 62, [2009] 2 NZLR 556 at [62]; and Solicitor-General v Krieger [2014] NZHC 172 at [24]–[26].
33 Re Bramblevale Ltd [1970] Ch 128.
34 Patricia Londono, David Eady and ATH Smith (eds) Arlidge, Eady & Smith on Contempt (5th ed, Sweet & Maxwell, London, 2017) at [3–269].
(a)used information in the Spreadsheets to assess the viability of the coins listed on the Cryptopia exchange and to provide basic information to Cryptopia account holders to assist them in their claims process;
(b)sent a copy of the Spreadsheets to Mr Vakhrin;
(c)had returned the USB drive to the liquidators;
(d)had deleted the data off his laptop.35
[55] In his evidence given before Associate Judge Lester on 30 November 2020, Mr Cattermole confirmed he:
(a)did not use email, and specifically did not use his MyDC network email address, to communicate in relation to the Spreadsheets;
(b)had not sent the Spreadsheets (or any part of the data on them) to Mr Vakhrin otherwise than by post;
(c)asked Mr Vakhrin (after 21 October 2020), to delete the spreadsheets but did not know if Mr Vakhrin had done so;
(d)only provided the information from the Spreadsheets to Mr Vakhrin and some account holders who had requested information pertaining to their Cryptopia accounts via Facebook messenger.
First alleged breach of 21 October 2020 Orders: Mr Cattermole’s failure to provide relevant information to the Court and the liquidators
[56] The liquidators submit, based on the material that Mr Vakhrin provided to them in December 2023, that Mr Cattermole failed to provide relevant information to the Court and to the liquidators, in breach of the 21 October 2020 Orders. Some of Mr Cattermole’s alleged breaches date back to 2020, but these breaches were not known at the time of the 2021 orders and some have only come to light based on Mr Cattermole’s actions in December 2023.
35 In an affidavit sworn on 31 March 2021, Mr Cattermole deposed that he later deleted a backup copy of the Spreadsheets that had been stored on Microsoft OneDrive.
[57]In particular, the liquidators say that, prior to the 21 October 2020 Orders:
(a)Mr Cattermole used his MyDC network address ([email protected]) to send parts of the information from the Spreadsheets to Mr Vakhrin, as well as to Danish Chaudhry and Lou Serafimov. Yet Mr Cattermole had specifically deposed in his 8 March 2021 affidavit that “the information was provided to Mr Vakhrin. I did not provide the information to Mr Chaudhry.”
(b)On 15 July 2020, Mr Cattermole sent an email from the email address [email protected] to Mr Serafimov and Mr Vakhrin attaching “the Cryptopia coin list”, an exact copy of the first three columns of the coin summary spreadsheet. The email chain had the subject line “The pricing sheet for Cryptopia 2”. Mr Cattermole said he would be interested in a joint venture with Mr Vakhrin and Mr Serafimov and would be interested in it being “Cogito branded”. Mr Cattermole referred also to “Cog” from Cogito “as payment”. Mr Cattermole said “for us to be effective the lawyer is saying we will need to provide for all 860 coins on the exchange”. He asked “[c]an we make that happen?”
(c)On 26 September 2020, Mr Cattermole sent an email from the address [email protected] with the subject line “Database by country” to Mr Chaudhry, Mr Vakhrin and Mr Serafimov. The content of the email contained a table of countries, “percentage of holders”, percentage of value, number of holders and estimated “BTC value” of cryptocurrency in that country. That table is an exact copy of the “Country summary” sheet contained in the spreadsheet entitled “User Summary 2019-10-18”. Using WhatsApp, Mr Serafimov messaged Mr Cattermole on 30 September 2020:
Mr Serafimov: do u have the database which we can analyze a bit
Mr Cattermole: From Cryptopia?
Mr Serafimov: Yea
Mr Serafimov: I saw you sent a spreadsheet where most value is with US customers
[58] Mr Cattermole deposed in his examination on oath on 30 November 2020 that he did not use email to communicate with Mr Vakhrin, that there were no emails on his “myDC network” email account to do with the spreadsheets, and that he did not send the data or any part of the data to Mr Vakhrin through any medium other than sending the physical USB drive via post.
[59] However, the liquidators submit that, from the above information, it is obvious that Mr Cattermole failed to disclose the fact that he had email exchanges with Mr Vakhrin about the Spreadsheets. He also failed to disclose that he had provided parts of the Spreadsheets to Mr Chaudhry and to Mr Serafimov.
[60] The liquidators submit that Mr Cattermole’s failure to disclose this material was a knowing rather than inadvertent breach of this Court’s orders. Mr Cattermole's emails to Mr Serafimov and Mr Chaudhry were sent in July and September 2020, only a few months prior to the 21 October 2020 Orders. The Court, in October 2020 ordered Mr Cattermole to disclose on affidavit whether he had made or provided any copies to third parties. In response, Mr Cattermole only deposed that he had provided the information to Mr Vakhrin.
[61] In that context, the liquidators submit that Mr Cattermole ought to have searched any correspondence in relation to the Spreadsheets, including all correspondence to or from Mikhail Vakhrin, and to have provided such material.
Failure to delete the Spreadsheets
[62] The liquidators also submit that Mr Cattermole breached the 21 October 2020 Orders by not deleting all parts of the Spreadsheets in his possession.
Use of information from the Spreadsheets to engage Cryptopia account holders
[63] The liquidators submit that Mr Cattermole continues to use the information from the Spreadsheets to commercialise Cogito. The liquidators have received 40 help desk complaints from account holders referring to an unsolicited communication from Cogito asking whether they were required to register with Cogito to complete the
claims process in the liquidation. Those account holders confirmed they had never signed up to Cryptopia Rescue or Cogito, raising the liquidators’ suspicions that Mr Cattermole and Epic Trust used the confidential information to contact account holders.
[64] In his affidavit of 14 November 2023, Mr Cattermole referred to a social media campaign to contact beneficiaries of the trusts. However, he provided no further evidence of any social media campaign.
[65] Email communications have been sent from [email protected] and [email protected] in late October 2023 explaining steps taken by Cryptopia Rescue and making an offer for Cogito, through Epic Trust, to purchase account holders’ Cryptopia coin holdings and any rights attached to them, in return for “Cog”, payable by Epic Trust. That email is signed off by “T Cattermole”. The liquidator submits that Mr Cattermole used information from the Spreadsheets to obtain the contact details for Cryptopia account holders for this purpose.
[66] By November 2023, at least 64 account holders had emailed the liquidators regarding this offer. The liquidators point out that 39 inactive internal Cryptopia email addresses and 15 active internal Cryptopia email addresses also received the offer. The liquidators say none of those email addresses could have been obtained other than from the Spreadsheets, as they are not publicly available. The liquidators infer that Mr Cattermole used confidential information from the Spreadsheets to create a mailing list of Cryptopia account holders.
[67] The liquidators also refer to what they describe as Mr Cattermole’s express admission at [29] of his statement of defence in the injunction application that “Cogito has provided and will continue to provide account holders with their own personal details from the confidential information”.
Mr Cattermole’s response
[68] Mr Cattermole denies sending the email or similar emails to Cryptopia account holders. However, he has not identified the name of the person responsible for sending those emails and signing them off in his name.
[69] In relation to the Orders made on 21 October 2020, counsel for Mr Cattermole, Mr Hearn, submits that Mr Cattermole’s affidavit of 23 October 2020 provided in response to the Orders has discharged his obligations under them. Mr Hearn disputes that Mr Cattermole failed to fully disclose to what uses he put the information from the Spreadsheets. Mr Hearn submits the affidavit correctly advised that:
(a)the material received from the Court consisted of two Spreadsheets;
(b)Mr Cattermole stored the Spreadsheets on a USB drive and his laptop;
(c)the Spreadsheets were used to assess the viability of the coins listed on the Cryptopia exchange and to assist account holders, after verification, with basic information about what the liquidators claim their holdings are; and
(d)Mr Cattermole made a copy of the Spreadsheets and sent it to Mr Vakhrin.
[70] Mr Hearn submits that the order to disclose whether Mr Cattermole provided “copies to any third parties” must reasonably be read as denoting complete copies, not partial extracts of the information. As the emails to Mr Serafimov and Mr Chaudhry in July and September 2020 only reproduced parts of the information, Mr Hearn submits they were not caught by the disclosure requirement in the 21 October 2020 Orders.
[71] Mr Hearn reiterates Mr Cattermole’s confirmation that he no longer possesses a copy of the Spreadsheets.
[72] Mr Hearn also submits that the phrasing of “to what uses he has put the information” in para [1(a)(iii)] of the 21 October 2020 Orders was ambiguous (i.e., did not meet the test in s 16(3)(b)(i) of the Act) and refers to Mr Cattermole’s personal use, as opposed to use by Cogito.
My assessment
[73]Applying the criteria in s 16(3) of the Act:
Other methods of enforcing the court order have not been tried unsuccessfully
(a)Under the 21 October 2020 Orders, Mr Cattermole was required to disclose whether he had made copies of the information from the Spreadsheets and provided copies to any third parties. In his response to the 21 October 2020 Orders Mr Cattermole failed to disclose that he had provided partial extracts from the Spreadsheets to Mr Serafimov and Mr Chaudhry. But the liquidators have now obtained the information that Mr Cattermole failed to disclose. In this respect, the 21 October 2020 Orders have been enforced through other methods (Mr Vakhrin told them). I am not satisfied that such other methods of enforcement were inappropriate or were tried unsuccessfully. Having reached this conclusion, according to s 16(3)(a), the court “must not proceed further” under s 16. However, in case I am incorrect that, on the facts as established, s 16(3)(a) requires me not to proceed further, I will step through my analysis of the remaining criteria.
The 21 October 2020 Orders were clear and unambiguous and binding on Mr Cattermole
(b)Is it proved beyond reasonable doubt that the 21 October 2020 Orders were made in clear and unambiguous terms and are clearly binding on Mr Cattermole? The 21 October 2020 Orders refer to “the information”, which clearly denotes the “information [Mr Cattermole] was provided by the High Court in response to his request in April 2020 that was not already in the public domain”. Mr Cattermole was required to disclose to what uses he has put the information and whether he has made copies and provided copies to any third parties. I consider this order has been made in clear and unambiguous terms and, by its reference to Mr Cattermole, is clearly binding on him. The only point of contention is whether the 21 October 2020 Orders only bound Mr Cattermole in respect of his disclosure of the full Spreadsheets, rather than partial extracts. The 21 October 2020 Orders clearly refer to “information”, a general term. I therefore reject Mr Cattermole’s submission that the 21 October 2020 Orders only extend to complete copies of the Spreadsheets. The Orders are not limited to prohibiting
disclosure of full copies of the Spreadsheets but prohibited Mr Cattermole from disclosing information extracted from the Spreadsheets.
Mr Cattermole had knowledge of the terms of the 21 October 2020 Orders
(c)There is no question that Mr Cattermole had knowledge or proper notice of the terms of the 21 October 2020 Orders — this is not in dispute.
Mr Cattermole knowingly failed, without reasonable excuse, to comply with the terms of the 21 October 2020 Orders
(d)I consider the liquidators have established beyond reasonable doubt that Mr Cattermole knowingly failed to disclose that he provided partial extracts of the Spreadsheets to Messrs Serafimov and Chaudhry. Accordingly, I find that Mr Cattermole had no reasonable excuse not to comply with and that he knowingly failed to comply with the 21 October 2020 Orders to disclose whether he made copies and provided copies of the information to any third parties.
Conclusion
[74] Mr Cattermole ought to have disclosed that he provided partial extracts of the Spreadsheets to Mr Serafimov and Mr Chaudhry in July and September 2020, to comply with the Orders of 21 October 2020. By not doing so, he is in breach of those orders and (apart from my finding in respect of s 16(3)(a)), would have committed a further contempt of Court.
Mr Cattermole’s alleged failure to comply with the 20 November 2020 Orders
[75] The liquidators submit that the Court’s 20 November 2020 Orders required Mr Cattermole to bring to Court any documentation (specifically any email correspondence) relating to his disclosure of the Spreadsheets to Mikhail Vakhrin. The liquidators say it is inconceivable that Mr Cattermole attended Court for his examination without apparently even searching his emails for any correspondence with Mr Vakhrin.
[76] Under the 20 November 2020 Orders that Mr Cattermole attend the Court for examination, he was required to:
Bring with him such documentation as is relevant to the Court’s determination of his compliance with the [21 October 2020] orders, including … correspondence with Mr Vakhrin relating to the USB flash drive sent to him, or the data it contained …
[77] The liquidators allege Mr Cattermole breached these Orders by failing to produce to the Court three emails to Mr Vakhrin sent on 15 July 2020, 26 September 2020 and 28 November 2020:
(a)The 15 July 2020 email is described above at [57](b). Attached to it is “the Cryptopia coin list” which was an exact copy of the first three columns of the Coin Summary spreadsheet.
(b)The 26 September 2020 email is referred to above at [57](c). That email included a table which is an exact copy of the “Country summary” sheet contained in the “user summary 2019” spreadsheet.
(c)On 28 November 2020, Mr Cattermole emailed Mr Vakhrin, two days before his examination before the Associate Judge, regarding the use of information from the Spreadsheets to commercialise the Principality of Cogito. Mr Cattermole informed Mr Vakhrin of his “need [for] a key player for a couple of markets, 11 have gone so five left”. The email attached:
(i)A “Foundation Investor Proposal” which recorded that the Principality of Cogito had obtained the Cryptopia database and was working with many of the 960,000 account holders to resolve their claims on assets.
(ii)An offer for Foundation Investors to purchase some type of investment into the Principality for €250,000.
(iii)A presentation for / from Cogito's founding members which sets out the plans for the “Principality”. The contact address at the
end of the presentation was Mr Cattermole's MyDC network email.
[78] As counsel for the liquidators, Mr Barker, points out, by this stage Mr Cattermole had been specifically ordered to bring all email communications with Mr Vakhrin relating to the data contained on the flash drive sent to him. Yet all he brought to Court on the day of the examination was a piece of paper with the postal address to which he allegedly posted the USB drive to Mr Vakhrin.
Mr Cattermole’s response
[79] Mr Hearn submits that it is not clear that these emails fall within the scope of the 20 November 2020 Orders. However, he accepts that the first two of the emails arguably could be said to relate to the data contained on the USB drive as they include extracts of that data.
[80] Mr Hearn suggests that the 20 November 2020 Orders could also be read as requiring disclosure only of “discussions with Mr Vakhrin about such data” and that if so, the emails would not be caught as they simply forward extracts of the data without comment.
My assessment
[81] Returning to the s 16 criteria, under s 16(3)(a) the Court “must not proceed further” unless it is satisfied that other methods of enforcing the Court order have been considered and are inappropriate or have been tried unsuccessfully. Again, although Mr Cattermole failed to bring these emails to the High Court examination, the emails have subsequently come to the liquidators’ attention. “Enforcing” should be interpreted broadly and does not only require the respondent to do (or abstain from doing) the very thing specified in the court order.36 Therefore, it is unnecessary to further enforce the 20 November 2020 Orders given that material has now come to light.
[82] However, again, in case I am wrong in relation to s 16(3)(a), I will briefly look at the other criteria in s 16(3)(b).
36 Whimp v Dugdale [2023] NZHC 2018 at [62]–[65].
[83] The emails dated 15 July 2020 and 26 September 2020 clearly relate to the data from the Spreadsheets. The liquidators have established beyond reasonable doubt that:
(a)the 20 November 2020 Orders were made in clear and unambiguous terms and is clearly binding on Mr Cattermole;
(b)Mr Cattermole had knowledge or proper notice of the terms of the 20 November 2020 Orders;
(c)Mr Cattermole without reasonable excuse, knowingly failed to comply 20 November 2020 Orders.
[84] According, I conclude that Mr Cattermole should have brought the emails dated 15 July 2020 and 26 September 2020 to Court to comply with the 20 November 2020 Orders.
[85] However, I accept Mr Hearn’s submission that the third email dated 28 November 2020 does not obviously relate to the data in the Spreadsheets at all. One of the four attachments to the Cryptopia database has an oblique relationship to the data but I accept that is not a direct enough connection for the purposes of s 16(3)(b)(iii).
[86] In any event, as discussed, under s 16(3)(a) of the Act I may not proceed further under s 16. That is because I am not satisfied, based on the information provided, that it is necessary to continue to enforce the 20 November 2020 Orders in respect of the three emails, as the liquidators have obtained them by other methods.
Mr Cattermole’s alleged failure to comply with the 5 March 2021 Orders
[87] The liquidators also submit Mr Cattermole has failed to disclose any financial benefit that had been or would be derived from commercialising the information from the Spreadsheets, or any uses to which Cogito had put the information, in breach of the Court’s 5 March 2021 Orders.
[88] The liquidators submit that Mr Cattermole’s breach of the 5 March 2021 Orders for his own financial gain, whether that was through the vehicle of Cogito or directly benefitting him, was knowing and intentional.
Mr Cattermole’s response
[89] The aspects of the 5 March 2021 Orders which are the subject of the liquidators’ application are that Mr Cattermole was ordered to disclose on affidavit:
(a)Which individuals or entities of which he is aware possess or have possessed a copy of the confidential information [from the Spreadsheets] or information derived from the confidential information.
(b)To what use the data contained in the Spreadsheets was put by Cogito / The Principality of Cogito.
(c)Whether any monetary benefit has already been derived or is intended to be derived in the future from the information contained in the Spreadsheets by Cogito or any other entity with which Mr Cattermole is associated.
[90]In respect of para (a), on 8 March 2021 Mr Cattermole deposed:
Re 1(a) I have previously disclosed the individuals I had sent copy [sic] to, with respects to others this request for information is go [sic: so] general I fear being in breach. As has been noted possibly 100s of people have received parts of the information relevant to them from the spreadsheets, prior to this matter going to Court. I did not keep a list of those I discussed this with.
[91] Mr Hearn submits that Mr Cattermole cannot be held in contempt for this answer. He submits that if the liquidators took issue with the form of Mr Cattermole’s answer, they could have sought further particulars of it. Indeed, Mr Hearn submits that the liquidators did so in respect of the first contempt application, in which they sought to have Mr Cattermole examined again.
[92] In relation to para (b), Mr Cattermole deposed that the data in the Spreadsheets had not been provided to anyone else in Cogito, to his knowledge. The liquidators
submit that Mr Cattermole is in contempt in respect of this answer because he failed to disclose Cogito’s use of the Cryptopia database to attract investors.
[93] Mr Hearn submits that Cogito was using the Cryptopia database, rather than the Spreadsheets, and that the liquidators are wrongly conflating the Cryptopia database with the Spreadsheets and Cogito with Mr Cattermole.
[94] Mr Hearn submits there is no evidence that Mr Cattermole used the information himself to attract Cogito investors, or that he distributed it to Cogito for that purpose. Mr Hearn implies that any of the other individuals who received the Spreadsheets, or extracts from them, could have sent them to Cogito. He submits that the mere fact that Cogito had access to the Cryptopia database does not mean that Mr Cattermole, or even the Spreadsheets, was the source of that database.
[95] On behalf of Mr Cattermole, Mr Hearn submits that the liquidators did not characterise the Spreadsheets as confidential or sensitive. For that reason, Mr Cattermole sought and obtained them from the Court before any orders were made to protect them. The documents provided by the Deputy Registrar were not protected by a password or any other means and there was nothing to indicate that the data in them was confidential or commercially sensitive. Mr Cattermole says that he therefore acted on the basis that he was not under any restrictions as to what he was allowed to do with the information.
My assessment
[96] I accept Mr Hearn’s submission that the liquidators have not established that Mr Cattermole’s answer to para (a) of the 5 March 2021 Orders (above at [89]) is a further contempt of Court. Again, for the purposes of s 16(3)(a), I am not satisfied that the liquidators considered or tried unsuccessfully other methods of enforcing para
(a) of the 5 March 2021 Orders, such as seeking further particulars of Mr Cattermole’s answer.
[97] As Campbell J noted in Whimp v Dugdale s 16 places, at the forefront of the court’s enquiry, the question of whether other methods of enforcing the order have
been tried (and, if so, whether they have been successful).37 The underlying principle is that action by the court under s 16 is a last resort.38
[98] Until the liquidators have explored other methods unsuccessfully, it is inappropriate for:
(a)them to invoke s 16 of the Act by way of enforcement; or
(b)the Court to proceed further under that section until such other methods of enforcement have been considered and are inappropriate or have been tried unsuccessfully.
[99] I do not accept Mr Hearn’s submission that the conflation of the Cryptopia database and the Spreadsheet data is wrong. I find it essentially is the same data and so no conflation exists.
[100] However, I reject the liquidators’ submission that it has been established beyond reasonable doubt that Mr Cattermole was personally involved in the use of information from the Cryptopia database to attract investors.
[101] The “constitution” of Cogito dated April 2023,39 provides ultimate decision- making power to Mr Cattermole. Mr Cattermole holds himself out to be the Prince of the Principality of Cogito, strongly suggesting anything done by Cogito is entirely within his power and control.
[102] Mr Cattermole has not sufficiently explained how other individuals may be overriding his authority or otherwise acting autonomously within Cogito. Is it credible that someone is using his name and company branding without his involvement? Has he taken any steps within or outside of this proceeding to stop Cogito impersonating him, or to exercise control over the other individuals as the self-styled Crown Prince? These are valid questions. However, Mr Cattermole asserts that others are involved. He asserts that he is “one of a large group of people from around the world involved in Principality of Cogito”.
37 Whimp v Dugdale, above n 36, at [65].
38 Johnson v Johnson [2021] NZHC 840 at [64]; and Han v Zhu [2021] NZHC 3007 at [30].
39 Referred to in Epic Trust Ltd v Ruscoe [2024] NZHC 21 at [19].
[103] Given the standard of proof of beyond reasonable doubt, I must be sure before attributing all actions done in the name of Cogito on a blanket basis to Mr Cattermole. Mr Cattermole insists that he is not Cogito. Rather, that he is involved in Cogito, along with others around the world. He deposes that there are several people involved in Cogito, and that he did not have anything to do with the correspondence sent by Cogito in late December 2023 to account holders referring explicitly to the information from the Spreadsheets with an offer to provide it to account holders. He also points out that some Cryptopia account holder data is known to third parties through earlier (pre- liquidation) dealings with Cryptopia. Moreover, Mr Hearn submits that if Cryptopia account holders ask Cogito for their own personal data, Cogito then obtains that data from a third party supplier. Mr Cattermole denies that the third party supplier is him or anyone related to him and insists that he does not know who the third party provider is. He deposes that Cogito does not provide users with access to any other data than their own, something he claims Cogito is obliged to do under applicable privacy laws.
[104] I have significant doubts that any of this, or much of this, is true. But I am not sure. Having considered the material provided by the liquidators, I do not consider it is enough to reach the very high standard of proof of beyond reasonable doubt that is applicable in contempt proceedings. Mr Cattermole has presented evidence that others have been involved in the egregious misuse of confidential information to which he has been a party. To borrow a metaphor Isac J used, I cannot exclude as a reasonable possibility that the pigeons have already flown the coop and that some of the activities attributed to Cogito have been carried out by individuals other than Mr Cattermole.
[105] Mr Cattermole deposed (in an affidavit sworn on 27 March 2024) that before the 21 October 2020 Orders were made, he made a copy of the Spreadsheets, sent the USB drive to Mr Vakhrin in Russia, and discussed and sent extracts of the Spreadsheets to “lots” (potentially “hundreds”) of other people. He says he does not have a list. As this was before the first Court order requiring him to return or delete the information, he “therefore acted on the basis [he] was not under any restrictions as to what [he] was allowed to do with the information”.
[106] In a sense, this Court has already been willing to countenance that these assertions may have substance. I note for example that the interim injunction and ancillary orders extend to bind not only Epic Trust Ltd and Mr Cattermole, but the
mysterious Martin Braine LLB, and even “persons unknown who have control over or responsibility for the actions of Cogito”.
[107] Were this contempt proceeding to be adjudged according to the civil standard of proof (as applies to the injunction), I would be content to conclude on the balance of probabilities that Mr Cattermole is responsible for Cogito’s use of the Cryptopia database to attract investors. As Isac J concluded,40 there is ample evidence linking Mr Cattermole to the confidential information, Cogito, Epic Trust, and, by obvious inference, to the recent emails apparently sent for or on behalf of Cogito to account holders.
[108] However, as noted, under s 16 of the Act the criminal standard of proof applies. Having regard to the evidence put forward by the liquidators, I must be sure that Mr Cattermole was personally involved in all the use of information from the Cryptopia database to attract investors. Based on the evidence adduced by the liquidators, I am not sure he was.
[109] Cogito is not a legal entity. Although Mr Cattermole is undoubtedly associated and intertwined with Cogito, I cannot discount as a reasonable possibility his assertion that other individuals could be involved with that enterprise. Similarly, I cannot discount as a reasonable possibility that those other individuals may have been responsible for the use of the Cryptopia database under the auspices of Cogito to attract investors.
Mr Cattermole’s alleged failure to comply with the 14 July 2021 Consent Orders
[110] The liquidators allege Mr Cattermole breached the 14 July 2021 Consent Orders by retaining copies of the Spreadsheets. Generally, the liquidators contend:
(a)It is common ground that Mr Cattermole was served with the Orders and was well aware of them.
(b)The terms of the Orders were clear and unambiguous.
40 Ruscoe v Epic Trust Ltd, above 3, at [23].
(c)Mr Cattermole’s various failures to disclose material was a knowing rather than inadvertent breach of the Court’s Orders.
(d)Mr Cattermole did not delete all parts of the confidential information, and continues to use that information for his own gain (or Cogito’s gain).
(e)Cogito is Mr Cattermole’s creation and is an entity over which he appears to have almost complete control.
[111] The liquidators submit Mr Cattermole’s behaviour in response to this Court’s orders demonstrates a “contumacious disregard and disrespect for this Court’s processes.” Moreover:
(a)the use of the information from the Spreadsheets undermines the administration of justice;
(b)that if the information is disseminated too widely the liquidators may be unable to protect its confidentiality;
(c)the information could be used fraudulently and could compromise the account ownership verification process the liquidators have established in their claims portal, meaning the liquidators may need to take additional steps at further cost to account holders;
(d)use of the information from the Spreadsheets to commercialise the Cogito Metaverse is an unauthorised misuse of account holders’ and Crytopia’s information, which infringes on those parties’ rights and is improper.
Mr Cattermole’s response
[112] Under the 14 July 2021 Consent Orders Mr Cattermole undertook that if the Spreadsheets or information derived from the spreadsheets came into his power, possession or control, he would delete that information and notify the liquidators of the fact, and how and from whom the information came to be in his possession. The
applicants allege this undertaking has been breached through Mr Cattermole retaining copies of the Spreadsheets. Mr Hearn submits he has not, as outlined above, so this ground must fail.
My assessment
[113] I do not consider that the liquidators have established beyond reasonable doubt that Mr Cattermole continues to retain copies of the Spreadsheets. Again, according to the criminal standard of proof, I must be sure.
[114] Mr Cattermole deposed that when he was ordered to delete the Spreadsheets in October 2020, after the Court explained to him that he should not have been provided with them, he did delete them. Mr Cattermole says he has previously deposed that he does not have any copies of the Spreadsheets in his power, possession or control, and “that remains true”. Mr Cattermole deposes that he did not have anything to do with correspondence sent by Cogito in late December 2023 to account holders referring to the confidential information with an offer to provide it to account holders.
[115] Difficult as it may be for them to do so, the liquidators would need to do more than they have done to establish beyond reasonable doubt that, despite his assurances to the contrary, Mr Cattermole retains a copy of information from the Spreadsheets. This ground of the application must fail.
[116] Mr Hearn says the liquidators seek contempt orders based on Mr Cattermole’s failure to adhere to Court orders made between 21 October 2020 and 14 July 2021. Counsel argues that contempt prior to 14 July 2021 is caught up in the original contempt order, and so cannot be reopened. I do not accept this. Further instances of contempt compound the original breach that has been found and the powers under s 16 are exercisable as often as is necessary to control proceedings.41
Summary of findings
[117] The liquidators have established the following incidences of Mr Cattermole’s knowing failure to comply with Court orders:
41 Contempt of Court Act 2019, s 25.
(a)Mr Cattermole failed to disclose that he provided partial extracts of the Spreadsheets to Mr Serafimov and Mr Chaudhry in July and September 2020. In failing to do so, he failed to comply with the Orders of 21 October 2020.
(b)Mr Cattermole failed to bring the emails dated 15 July 2020 and 26 September 2020 to Court. In failing to do so, he failed to comply with the 20 November 2020 Orders.
[118] However, in each case, I do not accept that other methods of enforcement were inappropriate or were tried unsuccessfully by the liquidators. Having reached this conclusion, according to s 16(3)(a) of the Act, the Court “must not proceed further” under s 16.
[119] Relevant to “other methods of enforcement”, at the hearing I expressed the preliminary view that many of the orders at (f)–(h) of the liquidators’ application ought to be able to be made by consent. Mr Hearn appeared to indicate Mr Cattermole might be amenable to consent orders. However, I note that many of those orders are formally opposed, and they mostly duplicate orders already made. I direct the parties to discuss what further orders might be able to be made by consent and to file a joint memorandum if possible (or separate memoranda if not), no later than 31 January 2025.
Result and next steps
[120]I dismiss the liquidators’ application under s 16 of the Act.
Costs
[121] Costs are reserved. The parties are encouraged to resolve any questions of costs between themselves. If unable to do so, they may file and serve memoranda of no more than two pages, according to the following timetable:
(a)liquidators no later than 31 January 2025;
(b)Mr Cattermole no later than 10 February 2025.
[122]I will determine any application for costs on the papers.
McHerron J
Solicitors:
Buddle Findlay, Wellington for Applicants Corcoran French, Christchurch for Respondent
SCHEDULE ONE — PREVIOUS CRYPTOPIA PROCEEDINGS
CIV-2019-409-544
Ruscoe and Moore v Cryptopia Ltd (In
Liquidation)
[Trust application]
Liquidators’ application for directions as to whether the cryptocurrencies held by Cryptopia were held on bare trust for the benefit of account holders. Mr Cattermole, through his company Trust Your Client Ltd, unsuccessfully sought to be joined to the proceeding. This is the proceeding to which the previous contempt orders against Mr Cattermole relate.
CIV-2023-485-375
Ruscoe v Houchens
[Sale Application]
Liquidators’ application for directions permitting them to realise NZD5 million of cryptocurrency to fund ongoing trust administration costs. Several account holders, whose legal fees Mr Cattermole agreed to pay (but did not) opposed the application.42
CIV-2023-485-431
Houchens v Ruscoe
The same funded account holders’ application for appointment of an independent representative (Kim Francis) to supervise the liquidators’ administration of the trusts. The representative would have the power to require the liquidators to “promptly provide the independent representative with information that [it] reasonably considers to be reasonably necessary to fulfil their role as representative”.43
CIV-2023-485-411
Cryptopia Ltd (In
Liquidation) v Ruscoe
[Distribution Application]
Liquidators’ application for directions as to distribution of the cryptocurrency held on trust. Mr Cattermole, through Epic Trust Ltd, sought to be joined to and oppose this application.44 It was through this application that Mr Cattermole’s alleged contempt of court came to be known to the liquidators.
CIV-2023-485-759
Ruscoe v Cattermole
[Section 266 Examination]
Liquidators’ application for public examination of Mr Cattermole pursuant to s 266 of the Companies Act 1993.
CIV-2024-485-58
Ruscoe v Epic Trust Ltd
[Injunctions Application]
Liquidators’ application against Mr Cattermole, Epic Trust Ltd (now Chill Education Ltd) and persons unknown seeking injunctions preventing them from using the name “Cryptopia” to mislead account holders and preventing them from using or disclosing the Confidential Information from the Spreadhseets.45
42 Ruscoe v Houchens [2023] NZHC 2490. See also affidavit of Emma Moran filed in that proceeding to come off the record due to non-payment of fees.
43 Houchens v Ruscoe [2023] NZHC 2969.
44 Ruscoe v Epic Trust Ltd [2023] NZHC 3224; Epic Trust Ltd v Ruscoe, above n 8.
45 Ruscoe v Epic Trust Ltd, above n 19; Ruscoe v Epic Trust Ltd, above n 3.
SCHEDULE TWO — CHRONOLOGY
Date
Summary
21 October 2020
High Court orders that:
Mr Cattermole is to disclose by affidavit:
• what information he was provided by the High Court in response to his requests in April 2020 that was not already in the public domain.
• where he has stored the information.
• to what uses he has put the information.
• whether he has made copies and provided copies to any third parties.
Mr Cattermole is to:
• delete or return to the Court all information obtained that is not in the public domain.
• Allow an independent forensic IT professional to examine any devices which have been used to store confidential information.
23 October 2020
Mr Cattermole deposes that:
• The Court provided him two spreadsheets which was stored on a flash drive and his laptop.
• The spreadsheet information has been used to assess the viability of the coins listed on the Cryptopia exchange, and to assist account holders, after verification, with basic information about what the liquidator claims their holdings are.
• A copy of the Spreadsheets has been made and sent to Mikhail Vakhrin.
• He has deleted the data off his laptop.
5 November 2020
The Court orders that:
Accendos Group Ltd is to file an affidavit regarding:
• the data that Accendos or those associated with Cryptopia Rescue were provided with.
• whether any recipient of the data stored the information on cloud storage, a device, or printed hard copy
• how recipients have used the information.
• whether recipients have made copies and provided copies to any third parties.
Accendos is to:
• delete or return data to the Court.
• explain who Mikhail Vakhrin is, where he is located, what is his involvement in Cryptopia Rescue, and why he was given a copy of the Spreadsheets.
Date
Summary
• Permit an independent forensic IT professional to examine any devices which have been used to store confidential information.
9 November 2020
Accendos Group NZ Ltd deposes that:
• it did not receive any data and is not aware of any of those associated with Cryptopia Rescue being provided with the data, other than Mr Cattermole.
• It did not store the data in any form.
• It has not used the data or provided any copies to third parties
• It does not know who Mikhail Vakhrin is or have any information relating to him.
20 November 2020
The Court orders Mr Cattermole to attend the Court for examination as to his compliance with the 21 October 2020 orders. He must bring with him documentation relevant to the Court's determination of his compliance with the order, including but not limited to:
• proof of postage of the USB flash drive to Mr Vakhrin.
• track and trace records.
• recipient information including postal address, email or instant messenger correspondence with Mr Vakhrin relating to the USB flash drive sent to him, or the data it contained.
• the identity of the “IT guy” who provided Mr Cattermole with IT advice on deletion.
• what advice was given by the "IT guy" and when.
30 November 2020
Mr Cattermole attends Court for examination. Associate Judge Lester orders:
• Mr Cattermole to deliver his cell phone to Deloitte’s Christchurch office by 10am on 1 December 2020.
• Mr Cattermole to provide to Deloitte by 10am on 1 December 2020 copies of his bank statements for April 2020 and May 2020 for Deloitte to examine in relation to NZ Post charges.
• Mr Cattermole not to take any steps to alter or delete any data.
18 December 2020
The Court orders Mr Cattermole to:
• Provide an affidavit regarding the proof of postage of the USB drive to Mr Vakhrin and whether any monetary benefits have been, or will be, paid to Mr Cattermole for the provision of the spreadsheets to Messrs Vakhrin and Serafimov or any parties associated with either.
• Provide Deloitte with transaction history, current balances, purchases, and dispositions regarding personal or company cryptocurrency holdings
Date
Summary
• Produce bank statements from 1 April 2020 to 2 July 2021 for any accounts he has authority over.
• Deliver the cell phone to Deloitte’s Christchurch office on 1 December 2020 at 10:00am
Mr Cattermole must not take any steps to delete, alter or amend in any way any of the above data.
21 December 2020
Mr Cattermole deposes that:
• Mr Barker has misled the Court relating to postage and breached his undertaking to the Court regarding the type of data he would access.
• No consideration has been received by him or is due or expected by him for the data.
4 February 2021
The Court orders that Mr Cattermole is to provide Deloitte access to his Microsoft 365 account to conduct the examination. Deloitte is to review Mr Cattermole’s Facebook account, the documents in its possession, and Mr Cattermole's Microsoft account and report to the Court how Mr Cattermole is using or intends to use the two spreadsheets obtained from the Court file.
5 March 2021
The Court orders that Mr Cattermole is to disclose by affidavit:
• Whether he is aware of individuals or entities that possess a copy of the Confidential Information.
• What interests he holds in “Cogito”, the ultimate owner of Cogito, and the country of domicile of the owner/operator.
• How Cogito used the data in the spreadsheets.
• Whether any monetary benefit has been derived or is intended to be derived from information in the Cogito spreadsheets or any other entity Mr Cattermole is associated with.
• Whether the Confidential Information has been provided to or is accessible by the parties in the “Joint Venture Agreement”, namely TranscendQuantum Ltd (an entity associated with Mr Vakhrin) and
• what use those entities intend to put the information.
8 March 2021
Mr Cattermole deposes that:
• “Possibly 100’s of people have received parts of the information relevant to them from the spreadsheets, prior to this matter going to Court.” He did not keep a list of who he disclosed the copy of the information to.
• He is one of a large group of people involved in the Principality of Cogito.
• Principality of Cogito operates a democratic process and “my understanding is there are many people involved from several countries around the world”
Date
Summary
• “The data in the spreadsheets has not been provided to anyone else in Cogito to my knowledge”
• Monetary benefit was irrelevant as “this information has not been provided to Cogito”.
10 March 2021
The Court orders that:
• Deloitte is authorised to provide Buddle Findlay with WhatsApp and Telegram chat history.
• The liquidators are permitted to delay the orders on Mr Cattermole until the US Bankruptcy Court has considered additional evidence.
15 March 2021
Contempt application is filed by the liquidators.
24 March 2021
Mr Cattermole deposes that:
• “As I had received the files from a government department, and there was no covering letter or other indication that I could not use the information, I assumed that I was entitled to use the information”
• “I was endeavouring to assist crypto currency holders in relation to the liquidation”
• “I agreed to delete the file because I had little use for the information as the data on the USB stick had proved unreliable. I had also sent the data to computer experts in Europe who had a copy.”
• He complied with everything in the 21 October 2020 order except handing over his laptop computer because he misinterpreted the Order.
• “When I was served with the Order, I made a copy onto a flash drive which I gave to the document server, as that's what I understood was required in the Order”
• He assumed that since he complied with everything else that the appointment of the IT specialist to look at his laptop was waived and not be continued with.
• “If there was material on the hard drive, I had no idea it was there. I certainly did not load it there. I assumed that it was some sort of automatic back up.”
• He works with Cryptopia Rescue and is on the board of Accendos.
26 March 2021
Mr Cattermole files an application to rescind the Court's 21 October 2021 order and files an affidavit deposing that:
• He “had not been made aware of any duty that was imposed on him in relation to receipt of the information”
• “When I was advised by the Court that I should not have received the information, I told the Court that I was happy to delete any copies that I had.”
Date
Summary
• “I dealt with the information on the basis that I was using it to assist coin holders in the relevant company”
• “When I received the flash drive, there was no covering letter telling me the uses to which the information could be put or setting out restrictions to the use of information.”
• He thought the flash drive containing the details of company creditors and coin holders would be made public through future liquidation reports.
29 March 2021
By minute, Gendall J directs Mr Cattermole to file an affidavit confirming that he has deleted all copies within his control of the Spreadsheets, and confirming the location and the manner in which the Spreadsheets have been stored in the past and present.
25 May 2021
Deloitte (Paul Alexander Taylor) files an affidavit reporting to the Court on its investigations of Mr Cattermole's devices.
• Deloitte found two Excel spreadsheets on Mr Cattermole's Microsoft account that appeared to contain the Confidential Information, timestamped 14 and 15 November 2020. The USB device and laptop had been provided to Deloitte on 14 November 2020 for a forensic extract, so these further documents must have been copied from an unknown source on those dates.
• In a conversation with Matt Holland on 28 October 2020 (following the 21 October 2020 order), Mr Cattermole discussed methods of wiping his laptop. Mr Holland suggested using a spare laptop of his and told Mr Cattermole to ensure Deloitte did not read their conversation.
• The user profile of the laptop Deloitte later examined was created at 8.23pm on 4 November 2020.
31 March 2021
Mr Cattermole deposes that:
• He deleted all copies of the Spreadsheets that he made or received except the copy he sent to Mr Vakhrin and a copy to Verdi van Beek, on the request of Mr Barker.
• He deleted the copy of the Spreadsheets when the Court notified him of their mistake.
• He had no knowledge of the Microsoft One Drive back up copy but deleted this backup copy when notified by Deloitte.
• He, and Stephen Guckert from Control IT, ensured there was no copy of the Spreadsheets remaining.
• He sent the original flash drive to Mr Vakhrin. He has no confirmation about how the flash drive was used and whether Mr Vakhrin deleted the information.
4 June 2021
Mr Cattermole deposes that:
• He is assisting people who were unhappy with the liquidators and were launching a proceeding against the liquidators
Date
Summary
• The original hard drive was returned to him on 3 November 2020 when he installed a new hard drive.
• He still has the original hard drive and did not give it back to Deloitte in April 2021. He has not used the hard drive since 3 November 2020.
• He did not connect a USB to the laptop on 10 January 2021 that was related to Cryptopia files.
14 July 2021
Order for Mr Cattermole to:
• Pay a penalty of $7,500
• Produce all devices and USB storage devices in his possession which stored information relating to the Spreadsheets for forensic review and/or destruction.
• Produce bank statements from 1 April 2020 to 2 July 2021 for any accounts he has authority over.
Mr Cattermole undertakes that:
• he has no copies of the Spreadsheets within his power, possession, or control.
• if he comes into possession, power, or control of information relating to the Spreadsheets that he will delete the information and notify the liquidators.
4