IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Copytrack Pte Ltd. v. Wall, 2018 BCSC 1709

Date: 20180912

Docket: S183051

Registry: Vancouver

Between:

Copytrack Pte Ltd.

Plaintiff

And

Brian Wall

Defendant

Before: The Honourable Mr. Justice Skolrood

Oral Reasons for Judgment

In Chambers

Counsel for the Plaintiff: B.J. Cabott Counsel for the Defendant: T.W. Clifford Place and Date of Hearing: Vancouver, B.C. May 22, 2018 Written Submissions of the Plaintiff: June 12 and July 4, 2018 Written Submission of the Defendant: July 4, 2018 Place and Date of Ruling: Vancouver, B.C. September 12, 2018





Introduction

[1] THE COURT: The plaintiff, Copytrack PTE Ltd. ("Copytrack") is a Singapore company engaged in the business of digital content management and automated copyright enforcement. As part of its business, it created cryptocurrency known as “CPY Tokens”.

[2] From on or about September 10, 2017 to February 10, 2018, Copytrack offered CPY Tokens for sale to investors as part of an initial coin offering campaign (the “ICO”).

[3] The defendant Brian Wall (“Wall”) participated in the ICO and subscribed for 530 CPY Tokens. On or about February 15, 2018, Copytrack mistakenly transferred to Wall approximately 530 Ether Tokens (the “Ether Tokens”), which are a different form of cryptocurrency. The transfer was made to Wall's cryptocurrency wallet, referred to as the "Wall Wallet".

[4] The value of the CPY Tokens intended to be transferred was about $780 CDN. The value of the Ether Tokens that were transferred was about $495,000 CDN.

[5] Immediately after the erroneous transfer of the Ether Tokens to Wall, Copytrack advised Wall of the mistake and requested that he immediately return the Ether Tokens. To date, he has failed to do so. As I will discuss in further detail below, his position was that he no longer has possession or control of the Ether Tokens.

[6] This application is thus brought by Copytrack seeking a number of orders relating to what it says is Wall's wrongful retention or conversion of the Ether Tokens. Copytrack seeks summary judgment pursuant to Rule 9‑6 of the Supreme Court Civil Rules. While Copytrack’s notice of civil claim alleges a number of different causes of action, its summary judgment application was limited to its claim for conversion and wrongful detention in respect of the Ether Tokens. To complicate matters, on May 25, 2018 I was advised by the parties that Wall had died on May 23, 2018, the day after Copytrack’s application was heard. I therefore asked counsel to provide me with written submissions on the impact, if any, of Wall's death. I also asked for additional submissions on the question of whether cryptocurrency is a “good” for the purposes of the doctrines of conversion and detinue. This latter point was only addressed in passing by the parties at the hearing.

Additional Facts

[7] While I have set out the basic facts underlying the proceeding, it is useful to highlight a few additional facts to complete the narrative.

[8] As noted, the mistaken transfer of the Ether Tokens occurred on February 15, 2018. On the same date, when the error was discovered, Copytrack requested the return of the Ether Tokens from Wall.

[9] Wall did not return the Ether Tokens, but rather transferred them into a cryptocurrency trading account with a cryptocurrency exchange.

[10] After some further email exchanges on February 16, 2018, Wall agreed to return the Ether Tokens. He asked Copytrack to provide him with the address to send the tokens to and Copytrack provided him with its cryptocurrency wallet address. Wall did not immediately return the Ether Tokens, however between February 16-23, 2018, the Ether Tokens were returned to the Wall Wallet.

[11] On February 25, 2018, the Ether Tokens were transferred out of the Wall Wallet into five different wallets. Wall asserts that these transfers were made by an unknown third party who unlawfully accessed his wallet without his knowledge or consent. This gives rise to his principal defence to Copytrack’s claim, namely that he no longer has control of the Ether Tokens and is therefore unable to return them.

Legal Framework

[12] Copytrack’s application is brought pursuant to Rule 9‑6, subrule (5) of which provides:

(5) On hearing an application under subrule (2) or (4), the court,

(a) if satisfied that there is no genuine issue for trial with respect to a claim or defence, must pronounce judgment or dismiss the claim accordingly,

(b) if satisfied that the only genuine issue is the amount to which the claiming party is entitled, may order a trial of that issue or pronounce judgment with a reference on an accounting to determine the amount,

(c) if satisfied that the only genuine issue is a question of law, may determine the question and pronounce judgment accordingly, and

(d) may make any other order it considers will further the object of these Supreme Court Civil Rules.

[13] In Watson Island Development Corp. v. Prince Rupert (City), 2015 BCSC 1474 [Watson], Mr. Justice Dley provided a helpful summary of the principles governing an application under this Rule. At paras. 21 to 26 he stated:

[21] The City applies under Rule 9‑6 of the Supreme Court Civil Rules, B.C. Reg. 168/2009. Rule 9‑6(5)(a) permits a court to dismiss a claim if it is satisfied that there is no genuine issue for trial. Summary judgment may be granted on all or part of a claim. The onus is on the applicant to prove beyond a reasonable doubt that there is no triable issue: Metro‑Can Construction (HS) Ltd. v. Noel Developments Ltd. (1996), , 1996 CanLII 3329 (BC CA), 26 B.C.L.R. (3d) 26 at para. 4; Wong v. Wilson, 2013 BCSC 1465 at para. 40. Another way of stating the test is whether the plaintiff is "bound to lose": Pitt v. Holt, 2007 BCSC 1555 at para. 10.

[22] The application under Rule 9‑6 is based on the premise that the claim is factually without merit. It raises an issue of fact only or, at best, a question of mixed fact and law, unless the court determines under subrule (5)(c) that "the only genuine issue is an issue of law", in which case the court "may determine the question and pronounce judgment accordingly": International Taoist Church of Canada v. Ching Chung Taoist Association of Hong Kong Limited, 2011 BCCA 149 at para. 9.

[23] On an application under Rule 9‑6 the court is not to weigh the evidence. If the evidence needs to be weighed and assessed, then the test of "plain and obvious" or "beyond a doubt" has not been satisfied and the application is to be dismissed: Skybridge Investments Ltd. v. Metro Motors Ltd, 2006 BCCA 500 at paras. 8‑12; International Taoist Church of Canada at para. 14.

[24] An application to dismiss a claim that is bound to be unsuccessful weeds out unmeritorious claims and saves the heavy price of time and cost borne by the parties and the justice system: 4 Corners Properties Ltd. v. Boffo Developments (Smithe) Ltd., 2013 BCSC 1926 at para. 20.

[25] Caution must be exercised in granting summary judgment on only a portion of a claim so as to guard against litigating in slices: Westsea Construction Ltd v. 0759553 BC Ltd., 2012 BCSC 564 (CanLII) at para. 49. Judgment on only a portion of the claim risks multiple appeals being heard within the same action, findings being made in the absence of a full factual context, and inconsistent findings being made after further evidence has been adduced: Century Services Inc. v. LeRoy, 2014 BCSC 702 at para. 89, var’d on other grounds 2015 BCCA 120.

[26] On the other hand, the resolution of an important part of the claim against a party may significantly impact the balance of the claim and provide for a timelier and cost effective approach: Hryniak v. Mauldin, 2014 SCC 7 at para. 60.

[Emphasis added.]

[14] In order to grant summary judgment, the Court must be satisfied that there is no genuine issue to be tried. The burden of establishing that there is no genuine issue to be tried rests with the party bringing the application.

Impact of Wall’s Death

[15] Both parties submit that Wall's death does not affect Copytrack’s claim. They cite s. 150 of the Wills, Estates and Succession Act, S.B.C. 2009, c. 13, the relevant provisions of which provide:

150 (1) Subject to this section a cause of action or a proceeding is not unknown by reason only of the death of

(a) a person who had the cause of action, or

(b) a person who is or may be named as a party to the proceeding.

…

(5) A person may commence or continue a proceeding against a deceased person that could have been commenced or continued against the deceased person if living, whether or not a personal representative has been appointed for the deceased person.

…

(8) All proceedings under this section bind the estate of the deceased person, despite any previous or subsequent appointment of a personal representative.

[16] In addition Rule 6‑2(1) states:

Party Ceasing to Exist

(1) If a party dies or becomes bankrupt, or a corporate party is wound up or otherwise ceases to exist, but the claim survives, the proceeding may continue in spite of the death or bankruptcy of the corporate party having been wound up or ceasing to exist.

[17] I accept the parties' submissions that given these provisions, Copytrack’s claim may proceed notwithstanding Wall's death.

[18] While Wall's death does not legally impact Copytrack’s claim, it does have certain practical implications that I will return to.

Suitability for Summary Judgment

[19] An application for summary judgment requires that the Court first determine whether the matter is suitable for summary determination pursuant to the principles set out by Justice Dley in Watson.

[20] At the hearing of Copytrack’s application, Wall submitted that the matter was not suitable for summary judgment as there are facts in dispute, specifically the facts relating to his failure or refusal to return the Ether Tokens and his allegation that his wallet was unlawfully accessed and that he therefore no longer had control of the Ether Tokens. He submitted further that the proper characterization of cryptocurrency and whether the doctrines of conversion and detinue are available with respect to cryptocurrency are questions of law that cannot be answered on a summary judgment application.

[21] Copytrack submits that there is no bona fide issue for trial. It submits that it is clear on the uncontradicted evidence that the Ether Tokens were sent to Wall in error and that he has no proprietary interest in them. Copytrack submits further that Wall has simply made a bald and unsubstantiated assertion that the Ether Tokens were stolen by an unknown third party and that, in any event, the loss of control over the tokens is not a defence given that he failed or refused to return the tokens when demand was made and while they were still in his control.

[22] I do not accept Wall's submission that there are factual disputes that make summary judgment unavailable. The essential facts underlying Copytrack’s claim are undisputed. Specifically, I do not accept Wall's submission that the application involves “oath against oath”, particularly given that Wall's evidence about what happened to the Ether Tokens amounts to little more than a bald assertion. Moreover, Wall does not in his amended response to civil claim assert that he has any proprietary interest in the Ether Tokens that, if established, would defeat Copytrack’s claim.

[23] Further, given Wall's death, it is not clear what sending this matter to trial would accomplish since it would not result in further or better evidence on behalf of the defendant.

[24] The real issue on this application is whether the doctrines of conversion and wrongful detention apply and whether that issue can be determined on a summary judgment application.

[25] At the initial hearing, Copytrack’s submission was based on the premise that Ether Tokens are “goods”. For example, at para. 89 of its written submission, it set out the elements of an action in detinue for the recover of “goods” wrongfully converted or detained. It then structured its submissions to address the elements of the test, and submitted that it “has a better right to the goods than the defendant", that it "has requested return of the goods" and that the defendant has refused that request. Nowhere in its submission did Copytrack address the question of whether cryptocurrency, including the Ether Tokens, are in fact goods or the question of if or how cryptocurrency could be subject to claims for conversion and wrongful detention. The submission simply assumed that to be the case.

[26] That issue was however raised by counsel for Wall in his oral submission, virtually in passing, who noted that there are no decided cases dealing with this point.

[27] Given the manner in which this issue was addressed at the hearing, I requested additional submissions from the parties. I pause here to note that it was open to the Court to simply dismiss Copytrack’s summary judgment application on the basis of its failure to address what I consider to be a critical issue. However, given that the application had been fully argued in other respects, and the fact of Wall's death which made a trial untenable, the preferred approach was to permit additional submissions on this point.

[28] In its further submission, Copytrack, having initially staked its position essentially on the assumption that Ether Tokens are goods, now takes the position that a broad range of things can be subject to claims in conversion and detinue and that a determination that cryptocurrency is a good is in fact unnecessary. Copytrack cites various cases in which such claims have been advanced in relation to funds, shares, customer lists, accounts receivable, crops and mineral interests.

[29] Copytrack points in particular to the decision of Mr. Justice Walker in Li v. Li, 2017 BCSC 1312 [Li], where he found that funds may be subject to a claim of conversion, which he described at para. 213 as a “positive wrongful act of dealing with goods, including funds, in a manner and with an intention inconsistent with the owner’s rights”.

[30] Copytrack submits that the evidence establishes that the Ether Tokens have the following characteristics:

a) They are capable of being possessed, stored, transferred, lost and stolen;

b) They were, at the time the conversion and wrongful detention began, held in the Wall Wallet;

c) They are specifically identifiable and have been traced to five wallets in which they are currently being held; and

d) They can be used as a medium of exchange, a store of value, and a unit of account, like funds or currency.

[31] Copytrack submits that given these characteristics, the Ether Tokens can in fact be subject to a claim in detinue based on wrongful conversion or detention.

[32] In the additional submission filed on behalf of Wall, it is submitted that the characterization of cryptocurrency, and whether cryptocurrency is subject to claims of conversion and/or detinue, is a pure question of law that cannot be decided on a summary judgment application.

[33] Various dictionary definitions are cited that suggest that cryptocurrency is not, in fact, a “good” but rather a digital form of currency. However, the defendant submits that cryptocurrency is distinguishable from the type of specific funds dealt with in cases like Li.

[34] In my view, the proper characterization of cryptocurrency, including the Ether Tokens, is a central issue in this case, and one that informs the analysis of whether Copytrack’s claims in conversion and detinue can succeed. However, the evidentiary record is inadequate to permit a determination of that issue on this application, and, in any event, it is a complex and as of yet undecided question that is not suitable for determination by way of a summary judgment application.

[35] However, as I have indicated, there would be no practical utility in sending this matter to trial given Wall's death. Further, regardless of the characterization of the Ether Tokens, it is undisputed that they were the property of Copytrack, they were sent to Wall in error, they were not returned when demand was made and Wall has no proprietary claim to them. While the evidence of what has happened to the Ether Tokens since is somewhat murky, this does not detract from the point that they should rightfully be returned to Copytrack.

[36] In the circumstances, it would be both unreasonable and unjust to deny Copytrack a remedy.

[37] In my view, the appropriate remedy is therefore that set out in para. 1(c) of Cophytrack’s notice of application as follows:

An order that Copytrack be entitled to trace and recover the 529.8273791 Ether Tokens received by Wall from Copytrack on 15 February 2018 in whatsoever hands those Ether Tokens may currently be held.

[38] That is the order that I am prepared to make. The balance of the relief sought in the notice of application, for example, disgorgement and/or damages, is not appropriate for summary judgment and those aspects of the application are dismissed. Those are my reasons.

(Submissions on Costs)

[39] THE COURT: I am going to order costs payable, which may ultimately be from the estate, for this application only, to the plaintiff.

“Skolrood J.”