Jane Lambert
Business and Property Courts in Wales (Chancery Division) His Honour Judge Keyser KC Howells v Newport City Council [2025] EWHC 22 (Ch) 9 Jan 2025
On or about 5 Aug 2013 Mr James Howells of Newport inadvertently placed a hard drive holding the private key to his Bitcoin holding in a black plastic binliner and asked his partner to carry it off to the tip when doing the school run. She was reluctant to do so at first but later changed her mind and deposited the bag at the Newport City Council landfill site. Not long after dumping the hard drive the value of Bitcoins surged. Mr Howell estimates that his holding is now worth over £600 million. As he needed the key to realize his fortune he asked the local authority to let him enter the site with a team of retrieval experts to forage for the drive but the City Council said "no".
The Claim
Mr Howells issued proceedings against the Council on 17 May 2024 claiming declarations that he is the legal owner of the hard drive and all tangible and intangible property on it together with either (a) an order for delivery up of the hard drive or (b) damages for its wrongful retention.
The particulars of claim were as follows:
"9. The claimant was able to mine 8000 Bitcoin in early 2009 and has a complete record of the mining history which shows all block numbers and transaction identification. The mined Bitcoin are currently located in their original wallet addresses [these are set out] and this can be evidenced by publicly available and independently verifiable blockchain data.
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10. When running the Bitcoin Client software for the first time the software created a 'wallet.dat' file for the claimant containing a public and private key address which was saved on an internal 2.5 inch laptop hard drive ('the hard drive') at all times owned and in possession of the claimant.
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12. The wallet.dat file is where the public and private key data is stored. The private key (which is located inside the wallet.dat file) is the only information which can enable access to the claimant's legally owned Bitcoin.
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27. The claimant never intended to dispose of the hard drive. The hard drive was taken from his home without his permission or consent on the morning of 5th August 2013.
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29. With the hard drive containing the only wallet.dat key the claimant is unable to access his Bitcoin and is unable to transfer, or undertake any transactions with, his Bitcoin. The claimant has access to the Bitcoin database and ledger where on any given day he can view the value of his digital property (the bitcoins).
30. Without the wallet.dat file contained on the hard drive the claimant is unable to access his Bitcoin. There is no other way for him to access the Bitcoin without the wallet.dat file.
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39. For the first time on 25 September 2023 the defendant asserted in writing to the legal representatives appointed by the claimant that, as the hard drive had been deposited at [the Site], they were the legal owners of the hard drive.
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43. The claimant has been able to identify the precise location where the hard drive is placed within Cell 2 - Area 2 of Docks Way landfill site and has also established a recovery team who have set out in substantial detail in writing to the defendant, how the hard drive may be successfully recovered (at no cost, and at minimal risk to the defendant).
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45. By asserting ownership of the hard drive, the defendant has substantially interfered with the claimant's rights and has denied the claimant access to not only the tangible property of the hard drive, but additionally has deprived the claimant of his intangible property and his access to the same."
Mr Howells claimed to be the legal owner of the drive and demanded its return or damages for wrongful interference. The judge said that head of claim was the heart of his case. Alternatively, he relied on proprietary restitution. Finally, he argued that the drive was held for him on a constructive trust,
The Defence
The Council alleged that it had acquired the hard drive upon delivery of the binliner by virtue of s.14 (6) (c) of the Control of Pollution Act 1974:
"anything delivered to the authority by another person in the course of using the facilities shall belong to the authority and may be dealt with accordingly."
As the hard drive now belonged to it, the Council contended that Mr Howells was no longer entitled to recover the drive.
The Application
By an application notice dated 20 June 2024, the Council applied to strike out the claim contending that it disclosed no reasonable cause of action and/or was an abuse of the process of the court or, alternatively, seeking summary judgment on the ground it had no realistic prospect of success and there was no compelling reason for the claim to go to trial. The application was heard by His Honour Judge Keyser KC sitting in Cardiff as a judge of the High Court on 3 Dec 2024. He handed down judgment on 9 Jan 2025 (see Howells v Newport City Council [2025] EWHC 22 (Ch)).
Strikeouts and Summary Judgment
The judge referred to CPR 3.4 (2) (a) and (b) and paras 1.2, 1.3 and 1.5 of the Part 3A Practice Direction. Before considering CPR Part 24 he observed at para [7] of his judgment:
"Although the defendant has relied in the alternative both on r. 3.4 (2) (a) and on r. 3.4 (2) (b), the application has been advanced simply on the basis that the claim cannot succeed. It is common ground that, when considering an application advanced on that basis, the court ought to assume that the facts relied on by the claimant are true: that is, the defendant's contention is that, even if (which it does not necessarily accept) the facts alleged by the claimant are true, his claim must fail."
He then turned to CPR 24.3. After stating that many cases have explained the correct approach to applications for summary judgment he said that Mr Justice Lewison had set out the classic summary of the principles at para [15] of his judgment in EasyAir Ltd v Opal Telecom Ltd, [2009] EWHC 339 (Ch):
"........ The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91 ;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
Judge Keyser noted that the Court of Appeal had approved Mr Justice Lewison's summary in Global Asset Capital Inc v Aabar Block SARL [2017] EWCA Civ 37, [2017] 4 WLR 163. He also said that he had regard to paras [8] to [10] of Lord Justice Potter's judgment in ED&F Man Liquid Products Ltd v Patel, paras [41] and [42] of Lady Justice Asplin's judgment in Elite Property Holdings Ltd v Barclays Bank Plc [2019] EWCA Civ 204, paras [3] and [4] of Mr Justice Andrew Baker's judgment in Skatteforvaltningen v Solo Capital Partners LLP [2020] EWHC 1624 (Comm), paras [11] to [18] of Mrs Justice Cockerill's judgment in Foglia v The Family Officer Ltd [2021] EWHC 650 (Comm) and paras [33] to [39] of Mr Justice Henshaw's judgment in Lex Foundation v Citibank NA [2022] EWHC 1649 (Comm).
The learned judge summarized the position as follows in para [10]:
"......... For present purposes, I can summarise the position as follows. Summary judgment will be given against a claimant on a claim or issue only if the court is satisfied that the claim or issue has no real, as opposed to fanciful, prospect of success; a claim or issue that is merely arguable but carries no degree of conviction will not have a real prospect of success. The court will not conduct a mini-trial and, where necessary, will bear in mind that full disclosure has not yet taken place and that there might be more evidence to come. Accordingly, where there are disputed questions of fact, it will not generally attempt to determine where the probabilities lie. However, the court ought to carry out a critical examination of the available material and is not bound to accept the mere say-so of anybody; where it is clear that a factual case is self-contradictory or inherently incredible or where it is contradicted by the contemporaneous documents, the court, after careful consideration of the evidence that is currently before it and having regard to the nature of such further evidence as might reasonably be expected to be available at trial, is entitled to reject that case even on a summary basis. The court will not be dissuaded from giving judgment by mere Micawberism—the unsubstantiated hope that 'something might turn up'. (I should record that the defendant in the present case does not invite the court, on this application, to question the factual basis of the claimant's claim.) Where the claim turns on a point of law that can properly be determined on the available evidence, the court is entitled to go ahead and determine it. The complexity of litigation is not itself a reason for refusing summary judgment: the circumstances may be such that determination of the case is impossible without a trial; on the other hand, it might be possible to analyse the case sufficiently at an early stage and thereby avoid the unnecessary time and expense of the continuation of litigation until trial. In all cases, r. 24.2 (b) falls to be considered in principle."
Tangible and Intangible Property
The judge distinguished between tangible and intangible property. The hard drive was tangible property and that was all that went into landfill. Answering a submission that the hard drive somehow also contained Mr Howell's title to his Bitcoin His Honour drew the following analogy:
"(If a copy of the novel that won the Booker Prize in 2024 were thrown into the landfill, the author's copyright would not go with it.) "
He added: "In order to avoid going down blind alleys, one needs to focus on what property one is talking about." He continued in the next paragraph:
"Paragraph 58 of the particulars of claim identifies the intangible property on the Hard Drive as the Bitcoin, and in his oral submissions Mr Armstrong KC ended up contending that the Bitcoin were "on" the Hard Drive. That is plainly wrong. Bitcoin are not tangible property and cannot be on the Hard Drive or in the Landfill. Bitcoin are also not intangible property (on this, see the helpful discussion in the Law Commission's Digital Assets: Final report, at paragraphs 3.52 to 3.54), and neither intangible property nor property within the third category has physical location. Mr Armstrong's late contention is, in fact, contrary to the case advanced in the witness statement of the claimant's solicitor, Mr Manley, which says in paragraph 33 that the Bitcoin 'exist independently on the Blockchain, away from the hard drive.'"
The judge noted that the Council made no claim to the Bitcoin stating "What is on the Hard Drive is at most a digital record of the private key, which is a code provided to the claimant to enable him to operate his cryptocurrency account." Essentially it was information and not property.
Control of Pollution Act 1974
Newport City Council's primary contention was that even if all the facts asserted by Mr Howells were true and correct, his claim could not succeed, because the hard drive was now the Council's property. The judge agreed. He considered s.12 and s.14 (1), (3), (4) and (6) of the Control of Pollution Act 1974. In his view, it was a complete answer to the claim.
Construction of s.14 (6) (c)
Mr Howells argued that "belong" in s.14 (6) (c) was not a term of legalese but a factual one. The argument was not clear to the judge and it does not appear to have been developed. It seems to amount to a contention that it did not amount to a transfer of ownership.
The second argument was that s.14 (6) (c) did not extinguish Mr Howells's title to the hard drive. The judge disposed of it peremptorily at [32]:
"First, there is no reservation, or recognition of the existence, of other rights in the things delivered. Second, the words 'shall belong to the authority' are unqualified and unrestricted: it is not said, for example, that the authority shall have a possessory or other proprietary right in the things delivered. Third, and correspondingly, the words 'and may be dealt with accordingly' are important. If other persons are supposed to retain proprietary rights or interest in the things delivered, what (one may ask) could it mean to tell the authority that it may deal with the things 'accordingly'? According to what? According to proprietary rights that are limited or qualified by co-existing or competing or superior rights? The words "and may be dealt with accordingly" confer a practical right: to put it rather colloquially, they tell the authority, in effect, 'They are yours and you may do with them as you wish.' Fourth, this is consistent with the context of the provision, namely the processing and disposal of waste by the disposal authority. It would be impractical for a disposal authority to be concerned with the possible existence of competing proprietary interests in the deposited waste. In theory it would be possible for such interests to exist but for the disposal authority to be empowered to deal with the waste in disregard of those interests. But one has only to identify that possibility to see that, as a construction of section 14 (6) (c), it is not only unnecessary but absurd: any qualification of the words 'shall belong to the authority' would be contrary to the point of the provision; therefore it makes no sense to introduce such a qualification into the interpretation of the words."
The third argument was that the words "in the course of using the facilities" in s.4 (6) (c) did not apply to the claimant's partner as she was alleged to have disposed of the drive without Mr Howells's consent. The judge did not regard the point as arguable. Whether or not she had his authority to take the bags to the dump and dispose of them there, she was using its facilities. The statutory provision did not distinguish between users of the facilities on the basis of their authority. There was no proper basis for implying any limitation into the words of the provision, and there was every reason not to do so. The local authority's freedom to deal with items delivered to it as refuse could not sensibly be contingent on matters of which it had no knowledge or control.
Dealing with the alternative causes of action, the judge said s.14 (6) (c) was a complete answer to the claim to legal ownership, In pre-action correspondence, Mr Howells had relied on Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch), [2012] 3 WLR 835 where a claim for proprietary restitution had succeeded because there had been knowing receipt of unlawfully obtained electronic vouchers. There had been no knowing receipt in this case and no allegation of wrongful enrichment. The equitable proprietary claim failed because no constructive trust came into being. Had such a trust existed the claim would have been statute-barred,
Reasons for Resisting the Application
At para [54] of his judgment Judge Keyser reproduced the Council's reasons for resisting Mr Howells's application:
"The implications were the Council to allow the claimant access to excavate the site cannot be understated:
(i) breach of the terms of its licence with NRW;
(ii) escape of harmful substances into the environment;
(iii) damage caused by ground movement during or after excavation work;
(iv) risk to the health and safety of site staff whilst work is ongoing;
(v) risk to health and safety of residents within the area of Docks Way whilst work is ongoing and subsequently;
(vi) exposure to the Council's residents to potentially serious risks which raises public health issues and environmental concerns;
(vii) the inability of the Council to discharge its statutory waste disposal functions whilst the site is excavated."
Judgment
At para [55] of his judgment His Honour said that he did not consider that the
particulars of claim showed any reasonable grounds for bringing the case. He did not consider that the claim would have any realistic prospect of succeeding if it went to trial and that there was no other compelling reason why it should be disposed of at trial. It followed that it was open to him to strike out the claim under CPR Part 3 or to give summary judgment for the defendant under CPR Part 24. The latter course seemed preferable to the judge. He gave judgment to the defendant Council and dismissed the claim.
Comment
This judgment contains a useful review of the authorities on CPR 3.4 and Part 24. Anyone wishing to discuss this article may call me on 020 7404 5252 during office hours or send me a message through my contact page at other times. For those who are wondering, "sbwriel" means "rubbish" in Cymraeg.
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