The High Court, in the case of Robert Ong Thien Cheng v Luno
Pte Ltd & Anor [2020] 3 AMR 143, ruled on appeal that
Bitcoins fall within the ambit of the term "anything"
under section 73 of the Contacts Act 1950 ('CA') and as
such is a thing "capable" of being returned.
Section 73 of the CA states that "a person to whom money
has been paid, or anything delivered, by
mistake or under coercion, must repay or return it". The
appellant in this case contended that Bitcoins are not a
"thing" capable of being returned under section 73 of the
CA.
The brief facts leading up to the appeal before the High Court are
as follows –
- The first respondent carries on the business as an online wallet and an exchange of digital currencies whilst the second respondent is a wholly owned subsidiary of the first respondent and acts as the intermediary regional operating centre of the first respondent which holds the bank account that accepts deposits from the first respondent's customers in Malaysia;
- The appellant was at all material times a registered customer of the first respondent and had been assigned a Luno e-wallet by the first respondent to, inter alia, trade cryptocurrencies;
- On 1 November 2017, the first respondent, at the request of the appellant, transferred 11.3 Bitcoins from the appellant's Luno e-wallet to the appellant's Bitfinex e-wallet;
- However, due to a technical glitch, the first respondent mistakenly transferred an additional 11.3 Bitcoins ('the mistakenly transferred Bitcoins') into the Bitfinex e-wallet after having transferred the initial 11.3 Bitcoins on the same day;
- The appellant, after being notified by the first respondent of the mistakenly transferred Bitcoins, acknowledged and admitted that he is required to return the same;
- The appellant, having utilised the mistakenly transferred Bitcoins, offered to return the same in the form of cash about one month after the mistaken transfer but this was not acceptable to the first respondent as the value of Bitcoin fluctuates day-to-day; instead, the first respondent requested the appellant to return 11.3 Bitcoins;
- Due to the appellant's failure and/or refusal to return the mistakenly transferred Bitcoins, the respondents initiated an action in the Sessions Court to recover the same or its equivalent fiat value at the time of filing of the claim; and
- The Sessions Court ruled in favour of the plaintiffs/ respondents and ordered the return of the mistakenly transferred Bitcoins or its equivalent fiat value at the time of filing.
The crux of this appeal was whether Bitcoins fall within the
ambit of the term "anything" under section 73 of the CA,
thereby entitling the respondents to the return of the mistakenly
transferred Bitcoins. It was argued that "thing" or
"commodity" must refer to something tangible and
encompasses only goods or chattels.
The Sessions Court held that while cryptocurrency is not
"money", cryptocurrency is a form of
"commodity" as real money is used to purchase the
cryptocurrency and as such there is value attached to Bitcoins in
the same way as value is attached to "shares". Thus, the
Sessions Court ruled that Bitcoins fall within the ambit of the
term "anything" under section 73 of the CA. This decision
was subsequently affirmed by the High Court.
The High Court pointed out that while cryptocurrency is not
"money", cryptocurrency is defined as a form of
"security" under order 3 of the Capital Markets and
Services (Prescription of Securities) (Digital Currency and Digital
Token) Order 2019 ('Order').
Order 3 of the Order provides a digital currency is deemed to be a
security for purposes of securities law if –
- It is traded in a place or on a facility where offers to sell, purchase, or exchange of, the digital currency are regularly made or accepted;
- A person expects a return in any form from the trading, conversion or redemption of the digital currency or the appreciation in the value of that currency; and
- It is not issued or guaranteed by any government body or central banks as may be specified by the Securities Commission Malaysia.
The High Court held that the CA, which was drafted in 1950,
should be construed to reflect "changes in modern
technology and commerce" and as such, the term
"anything" under section 73 of the CA is wide enough to
cover Bitcoins and that the mistaken transfer was a result of a
technical glitch and
not due to a mistake of fact or law.
The learned High Court judge further held that up until the point
the Bitcoins are assigned to a specified user, it is just a pool of
Bitcoins that the respondents have full custody and control of and
as such, the respondents have the requisite locus standi to
initiate the action for recovery.
Comments
This case is noteworthy as it is the first reported decision in
Malaysia on cryptocurrency. it is an example of how the courts are
adapting existing traditional laws to technological changes. Whilst
cryptocurrencies are intangible assets with volatile value and are
not recognised as legal tender in Malaysia, the High Court has
recognised cryptocurrencies as a form of commodity as there is
value attached to cryptocurrencies. It is interesting to note that
the High Court appears to have categorised Bitcoins as both a
"security" (such as shares) and a "commodity"
(such as precious metals).
Alert prepared by Tan Wei Liang (Associate) of Skrine.
Originally published 21 May, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
