Potential exceptions to the rule in Hollington v Hewthorn

The basic rule in Hollington v Hewthorn is that findings of fact by judges or decision makers in previous proceedings are inadmissible at subsequent trials. In Tulip Trading Ltd v Bitcoin Association for BSV [2023] EWHC 2437 (Ch), Mr Justice Mellor considered whether such material would also be inadmissible in the context of the court deciding whether to order trial of a preliminary issue(s).

The substantive claim was brought by Tulip Trading Ltd which is said to be the legal owner of digital assets (Bitcoin) worth around £4.5b. The ultimate beneficial owners of TTL are said to be Dr Craig Wright and certain members of his family. The Defendants are (or have been) involved in the development of various digital asset networks. Dr Wright alleges that TTL are no longer able to access those digital assets because of a hack of its computer systems. TTL now sues the Defendants in an attempt to force them to write software which will enable TTL to recover its claimed digital assets.

The Defendants applied for a preliminary issue trial on two questions: a) whether TTL was the owner of the bitcoin in dispute and b) whether the claim was fraudulent. In support of their application, the Defendants sought to rely on adverse findings made by judges in previous proceedings in various jurisdictions about Dr Wright’s evidence in these previous proceedings.

At paragraph 40, Mellor J identified exceptions to the rule In Hollington v Hewthorn:

 ‘It seems to me that the common theme which is discernible through Medcalf, Berezovsky and Sabbagh is that there is a limited exception to the rule in Hollington v Hewthorn which is applicable in situations where the case is at a preparatory stage yet the court has to consider what evidence at trial there might be. This exception plainly applies where the court is considering whether there is a serious issue to be tried (Berezovsky and Sabbagh) but also when the court has to consider whether counsel had sufficient material to justify a plea of fraud (Medcalf). The material (inadmissible at trial) can assist in identifying the evidence which can reasonably be expected to be available at trial, to which a court is entitled to have regard at the interlocutory stage.’

 At paragraph 50, Mellor J acknowledged that the present case did not fit within these exceptions because the court knew from the defence what material the Defendants intended to rely on.

However, at paragraph 51, the Mellor J went on to observe that:

 ‘Whilst one must guard against conducting any sort of mini-trial, as I said above, the stronger his case on ownership and fraud is, the greater the reason to order a preliminary issue. Although Mr Isaac accepts that at the trial (whether the full trial or the trial of preliminary issue(s)) he will have to prove the allegations that forged documents were put forward by Dr Wright in the various other proceedings, in order to strengthen his prospects of the court ordering preliminary issue(s), Mr Isaac wishes to rely not just on the allegations pleaded in paragraph 54 of the defence of D2-D12, but on the facts that other judges in other proceedings have found Dr Wright to have put forward forged documents and given unreliable evidence.

 Mellor J concluded that reliance on ‘the facts that other judges in other proceedings have found Dr Wright to have put forward forged documents and given unreliable evidence’ did not offend against the rule in Hollington v Hewthorn and he permitted the material to remain in the witness statement in support of the application for a preliminary issue.

The full judgment can be accessed here.

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