High Court Ruling on Cryptocurrency Loan: Specific Performance Denied, Damages Awarded
In a significant ruling regarding cryptocurrency loans, the High Court has upheld a decision to deny specific performance in a case involving an oral agreement between Southgate and Graham. In 2018, Southgate agreed to loan 144 Ethereum (ETH) to Graham, with the stipulation that the principal plus 10% interest would be repayable within a reasonable time upon demand. However, after Southgate's demand in July 2019, Graham failed to return 115.69 ETH, leading to a breach of contract.
The County Court determined that 'within a reasonable time' meant by midday on October 1, 2019, and since that date, Graham was found to be in continuous breach of the agreement. The court assessed damages at the date of judgment, amounting to approximately £350,000. Given Graham's financial situation, the court declined to order specific performance, citing potential hardship. Instead, it awarded damages based on the value of the 115.69 ETH tokens as of the specified date.
The High Court affirmed the trial judge's decision, emphasizing that damages were an adequate remedy in this case. It noted that when disputes revolve around monetary loss, the implications of failing to comply with a specific performance order could lead to contempt proceedings, unlike the non-compliance with a damages award. The court referenced recent cases from England and Singapore that also refused to enforce specific performance for cryptocurrency returns, suggesting that damages could sufficiently compensate for such losses.
However, the court found fault with the trial judge's determination of the valuation date for damages. It noted that the parties were unprepared to address certain aspects of the damage assessment at that time, and the judge had not considered the parties' submissions regarding the valuation date's appropriateness.
The court indicated that Southgate's argument regarding the valuation date had merit, as valuing the ETH at the breach date would not allow Southgate to recover enough to purchase the outstanding tokens at market price. It also suggested that Southgate should not be required to mitigate his loss by purchasing the ETH immediately after the breach. The court pointed out that damages for specific performance are typically assessed based on the judgment date, as outlined in the Senior Courts Act 1981.
Given the complexity of these issues, the court ordered a comprehensive remedies hearing to determine the correct valuation date and the measure of loss.