Julian Svirsky v Arman Oyekenov

• Jurisdiction: British Virgin Islands
• Judge: Levy JA
• Judgment Date: 26 July 2024
• Judgment citation (vLex): [2024] ECSC J0726-6
• Docket Number: BVIHCMAP2023/0013
• Court: Court of Appeal (British Virgin Islands)

Between:

[1] Julian Svirsky

[2] Denis Donin

Appellants

and

Arman Oyekenov

Respondent

Before:

The Hon. Mr. Mario Michel Chief Justice [Ag.]

The Hon. Mr. Robert Levy Justice of Appeal [Ag.]

The Hon. Mr. Dexter Theodore Justice of Appeal [Ag.]

BVIHCMAP2023/0013

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Interlocutory appeal — Freezing order — Insufficiency of the evidence — Cryptocurrency — Striking out — Overriding objective — . Whether the judge erred by rejecting the appellants' explanation in the absence of expert evidence adduced by the respondent as to the appellants' ability to provide the information sought in the context of what is a highly technical area — Whether the judge's order was not an appropriate order given the procedural history and pending appeals — Whether there was a more appropriate relief available to the Court — Whether the sanction of striking out without any form of judicial determination was inconsistent with the overriding objective

On 17 ^th October 2023, the appellants, Messrs. Svirsky and Donin, filed a notice of interlocutory appeal against the Order of the judge in the court below dated 11 ^th July 2023 (the “July 2023 Order”). The appellants were previously granted leave to appeal the July 2023 Order by Ellis JA by an Order dated 26 ^th September 2023.

Paragraph 1 of the July 2023 Order provided that:

“The second and third defendants shall comply with paragraph 21 of the Freezing Injunction, and within 48 hours of service of this order provide and confirm to the Claimant's solicitors

• a. 1.1 the name of the exchange (or exchanges if more than one) at which the Bitcoin is held;

• b. the name of the exchange (or exchanges if more than one) at which the Ethereum is held;

• c. The number and current value of rewards that have accrued to the staked Ethereum;

• d. the name of the exchange (or exchanges if more than one) at which any Ethereum rewards are held;

• e. the blockchain address (or addresses if more than one) of the Etheruem (the 42-character hexadecimal address).”

Paragraph 21 of the Freezing Order made on 23 ^rd April 2021, more than two years earlier (the “2021 Freezing Order”) provided that unless the appellants relied upon the privilege against self-incrimination then they:

“…must within 48 hours of receiving notice of this Order, and to the best of their ability, inform the Applicant's solicitors of the current location of the transferred Bitcoin and Ethereum, whether in their own name or not and whether solely or jointly held, giving the value, location, and names and physical addresses of any natural person or company holding the aforementioned Bitcoin and Ethereum.”

The July 2023 Order provided, in paragraph 2, that unless the appellants comply with paragraph 1, (which compliance had to be within 48 hours of service on them), then their amended defence would be struck out and judgment would be entered for the respondent, Mr. Oyekenov, who would be awarded the relief set out in para 2.1 of the July 2023 Order, which would have amounted to the substantive relief sought in the proceedings.

The appellants submitted three grounds of appeal challenging the learned judge's order. The first ground of appeal was headed ‘Insufficiency of the evidence/Insufficiency of any breach made out on the evidence’. Under this ground, the appellants asserted that in seeking to meet the respondent's application, the appellants had presented the court with evidence as to the limitations on their ability to give information in respect of cryptocurrency that they averred they no longer had control of. They also emphasised that it was clearly wrong for the court to conclude as to the veracity of the explanation provided by the appellants, on the basis of legal practitioners' affidavits and the views of the receiver, but in the absence of expert evidence adduced by the respondent as to the appellants' ability to provide the information sought in the context of what is a highly technical area. The appellants stated that they themselves are well versed in the workings of cryptocurrencies and gave detailed explanations as to the limits of what they could supply, which evidence was not properly rebutted by the respondent's evidence. The appellants further argued that even if the court considered that there had been a breach of the disclosure obligation in the original order, such breach was a single breach as to the level of effort made in supplying information and was insufficiently serious to require the court to make the July 2023 Order, in particular, given the sanction provided in the same, and given that any breach did not have the effect of impeding the merits-based determination of the claim. Therefore, they submitted that the judge erred in making the July 2023 Order, in the exercise of her discretion, even if a breach were made out.

The second ground of appeal was that the July 2023 Order was not an appropriate order given the procedural history and pending appeals. The appellants argued that the court could not properly have made the July 2023 Order, based only on what is described as relatively short and conjectural written evidence, in a context in which the appellants' disclosure obligation, together with such findings as had been made in respect of alleged asset dissipation, were open questions and, in particular, where the Receivership Order was at that time subject to an appeal. The appellants stated that the continuation of the 2021 Freezing Order was, at the time the grounds were drafted, subject to several undetermined appeals. Lastly, under ground 2, the appellants stated that the July 2023 Order was inappropriately made in circumstances where the respondent had not moved to progress the case beyond case management over the course of some two years, in particular, given the object that the Civil Procedure Rules 2000 (“CPR”) 26.4 serves.

The third ground of appeal was that more appropriate relief was available to the court and that the sanction of striking out (and the grant of the substantive relief in the claim, without any form of judicial determination, let alone consideration of its underlying merits) were inconsistent with the overriding objective.

Held: allowing the appeal under ground 1, dismissing grounds 2 and 3 of the appeal. and ordering that the respondent should pay the appellants one third of their costs of the appeal, such costs to be assessed by the court below, if not agreed within 21 days, that:

• 1. Where matters of a highly technical nature are set out in evidence, rebutting such evidence requires equally technical evidence. When faced with difficult (or potentially difficult) technical issues, a party should present the court with material from an appropriately experienced/knowledgeable person to explain why the evidence to which it replies is, on balance, incorrect or incredible. What may seem highly unlikely in relation to matters that are commonplace and within a judge's usual experience may easily be dealt with as a matter of judicial common sense; the more extraordinary an explanation for a given state of affairs, the less likely that may be. However, where a court is facing highly technical issues with which it is not familiar. then there is a greater need for compelling evidence from a person appropriately experienced or qualified to explain why a given explanation does not hold water.

• 2. The world of cryptocurrency is somewhat novel; some judges may have a better understanding of it than others; and there cannot be a bright-line rule that in all cases concerning it there needs to be expert evidence. The need for such evidence will be case specific. Such evidence may be admissible on technical issues which are outside the court's knowledge or experience. It is not for this Court to second guess whether or not the learned judge had sufficient knowledge of relevant matters such that it was inappropriate for him to proceed in the absence of expert evidence. However, having read all the materials the Court was invited to read, it cannot be said that there was any compelling evidence from a person who has established sufficient technical experience such that the learned judge could have been satisfied that the explanations proffered by the appellants were, on balance, to be rejected. Consequently, there was not sufficient material before this Court to enable any reasonable tribunal to conclude that the appellants had not complied with their disclosure obligation to the best of their ability.

• 3. Disclosure provisions are crucial aspects of orders which are to be complied with to the letter, and serious consequences can be expected for a failure to comply. However, where a freezing order contains a disclosure provision that relates to a relatively novel type of property or asset, the means of compliance has to be crystal clear and, if a technical argument is asserted by way of explanation as to why compliance is not possible, then such explanation has to be discounted by appropriate evidence. There was nothing in the materials that discounts that evidence.

Appearances:

Mr. Robert Nader and Mr. Ben Giblin for the Appellants

Ms. Lisa Walmisley, Mr. Tim Wright and Ms. Sara Malik for the Respondent

1 Levy JA[AG.]: By their notice of interlocutory appeal filed on 17 ^th October 2023, the appellants, Messrs. Svirsky and Donin (who are two of the three defendants in these proceedings), appealed the Order of the learned judge dated 11 ^th July 2023 (the “July 2023 Order”). Paragraph 1 of that Order provided:

“The second and third defendants shall comply with paragraph 21 of the Freezing Injunction, and within 48 hours of service of this order provide and confirm to the Claimant's solicitors

• (a) 1.1 the name of the exchange (or exchanges if more than one) at which the Bitcoin is held;

• (b) the name of the exchange (or exchanges if more than one) at which the Ethereum is held;

• (c)...