Newcomer Injunctions – a Tool in the Fight Against Crypto Fraud?

On 29 November 2023, the UK Supreme Court (the “UKSC”) handed down its decision in Wolverhampton City Council and others (Respondents) v London Gypsies and Travellers and others (Appellants).

In that case the UKSC thoroughly considered the legal basis for injunctions against persons unknown. Notably, this included those persons who are not identifiable at the time the injunction order is granted, and who have not at that time infringed or threatened to infringe any right or duty which the claimant seeks to enforce – so-called “Newcomers”. In doing so, the UKSC recognised that the issues raised will have wide significance in other contexts.

The court confirmed that injunctions could be granted against such Newcomers, and that the legal position should evolve if necessary to cater for that.

Judgment

Dismissing the appeal, the UKSC concluded that:

I. The court has power (under s.37 of the Senior Courts Act 1981, which is materially identical to the equivalent BVI statutory provision s. 24(1) of the Supreme Court Act) to grant an injunction against Newcomers. The injunction may be granted on an interim or final basis, necessarily on an application without notice.

II. Such an injunction (a “Newcomer Injunction”) will be effective in binding anyone who has notice of it while it remains in force, even if that person had no intention and made no threat to commit the act prohibited at the time the injunction was granted and was therefore someone against whom, at that time, the applicant had no cause of action. It is inherently an order with effect contra mundum, and is not to be justified on the basis that those who disobey it automatically become defendants.

III. In deciding whether to grant a Newcomer Injunction, and if so upon what terms, the court will be guided by the principles of justice and equity, and in particular:

(a) that equity provides a remedy where the others available under the law are inadequate to vindicate or protect the rights in issue;

(b) that equity looks to the substance rather than to the form;

(c) that equity takes an essentially flexible approach to the formulation of a remedy; and

(d) that equity has not been constrained by hard rules or procedure in fashioning a remedy to suit new circumstances.

IV. In deciding whether to grant a Newcomer Injunction, the application of the principles identified at (III) above will be considered in the context of the facts of the matter before the court.

V. If those considerations are adhered to, there is no reason in principle why Newcomer Injunctions should not be granted.

Comment

Although the case arose in the context of local authorities seeking to prevent Gypsies and Travellers from occupying and trespassing on land, the utility of that decision in cryptocurrency and/or fraud cases is clear. The UKSC recognised that the issues raised are liable to arise whenever there is a potential conflict between the maintenance of private or public rights and the future behaviour of individuals who cannot be identified in advance. In addition, the court found that if injunctions are available only against identifiable individuals, then the anonymity of wrongdoers operating online risks conferring upon them an immunity from the operation of the law. It is a short step to applying this analysis to cases of crypto fraud or any other fraud where the use of technology is deployed. We have already seen that the English and BVI courts are willing to grant injunctions against persons unknown in cases of crypto fraud¹. Now, the UKSC has confirmed that the courts of England and Wales can go further than injunctions against persons unknown and grant injunctions against persons unknown who have not yet breached (or even threatened to breach) the act which is prohibited by the order at the time it is granted.

Victims of cryptocurrency fraud are often unaware of the identity of the wrongdoer. In the right context, the case may well be of relevance as a means of preventing cryptocurrency fraud. The principles set out above will be relevant, but they will likely evolve depending on the nature of the application being sought. The approach taken by the UKSC is likely to be highly persuasive in the BVI Courts and, while it remains to be seen whether it will be followed here, it is the view of this author that there is no reason unique to public policy or the grant of injunctions in the BVI why it ought not to be.

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