B2C2 Ltd v Quoine Pte Ltd

• Jurisdiction: Singapore
• Judge: Simon Thorley IJ
• Judgment Date: 27 December 2017
• Neutral Citation: [2017] SGHC(I) 11
• Court: International Commercial Court (Singapore)
• Docket Number: Suit No 7 of 2017 (Summons No 31 of 2017)
• Year: 2017
• Published date: 29 December 2017
• Hearing Date: 05 December 2017
• Plaintiff Counsel: Danny Ong, Sheila Ng and Daniel Gaw (Rajah & Tann Singapore LLP)
• Defendant Counsel: Paul Ong and Marrissa Karuna (Allen & Gledhill)
• Citation: [2017] SGHC(I) 11

Simon Thorley IJ: Introduction

This is an application for summary judgment pursuant to Order 14 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“Rules of Court”) in an action for breach of contract and breach of trust. Following the hearing on 5 December 2017, I indicated that I would not be granting summary judgment and that I would give my reasons for refusing relief in writing. These are my reasons.

The Defendant is a Singapore registered company which operates a currency exchange platform (the “Platform”) enabling third parties to trade virtual currencies for other virtual currencies or for fiat currencies such as the Singapore or US dollars. The two virtual currencies involved in this action are Bitcoin (“BTC”) and Ethereum (“ETH”).

The Plaintiff is company registered in England and Wales trading inter alia as an electronic market maker. As an electronic market maker, the Plaintiff provides liquidity on exchange platforms by actively buying or selling at the prices it quotes for virtual currency pairs, thereby generating trading revenue.

In recent years, there has been a significant growth in virtual currencies of which Bitcoin is perhaps the best known. They are not linked to any particular country, nor regulated by any central monetary authority. They are traded for other virtual currencies or traditional currencies on computer networks such as the Platform.

Principles governing Order 14 applications

There was no dispute as to the principles underlying the grant of summary judgment. The Plaintiff must establish a prima facie case for judgment. If so, it is then for the Defendant to establish “that there is a fair or reasonable probability that he has a real or bona fide defence” (Associated Development Pte Ltd v Loong Sie Kiong Gerald (administrator of the estate of Chow Cho Poon, deceased) and other suits [2009] 4 SLR(R) 389 at [22]). In so doing, the Defendant’s position must be articulated with “sufficient particularity and supported by cogent evidence” (Lau Hwee Beng and Another v Ong Teck Ghee [2007] SGHC 90 at [33]). In the event that there are conflicts of cogent evidence, the evidence on behalf of the Defendant is to be assumed to be capable of being proved at trial.

The Plaintiff’s counsel also reminded me that there was no reason to refuse summary judgment in an appropriate case simply because the papers might be voluminous and the facts many. This was, I anticipate, to seek to deflect any possible criticism from the Court as to the receipt of written submissions running to over 80 pages from the Plaintiff and over 60 from the Defendant together with, in the final event, six bundles of authorities. I make no criticism of this. It enabled the hearing to be conducted expeditiously.

The Agreement

Traders who wish to use the Platform must open an account. This can be done online, as was done by the Plaintiff on 28 June 2015. At the same time, the Plaintiff agreed to a set of Terms and Conditions (“the Agreement”) available on the Defendant’s website. On that date, the terms of the Agreement were stated to have been “Last updated April 2014”.¹

For present purposes, the relevant passages in the Agreement are as follows:

TERMS AND CONDITIONS

This Agreement (the "Agreement"), effective upon the date of electronic acceptance (the "Effective Date"), pertains to the use of Quoine (the "Platform"), an Internet application fully owned by Quoine Pte. Ltd. (The "Company"), a Singapore based corporation with registration number 201414068E. This agreement is entered into by and between Quoine Pte.Ltd., and the user of Quoine ("User" or "Member") (each herein referred to individually as a "Party", or collectively as the "Parties"). In consideration of the covenants and conditions contained herein, the Parties hereby agree to the following terms and conditions:

General Terms

Quoine is a platform that provides services that allow the exchange of virtual currencies such as Bitcoin for fiat currencies. If you wish register [sic], engage in transactions on Quoine (The Platform), please fully read and understand the terms and conditions that follow.

This is a legal agreement (“Agreement”) between you and Quoine Pte. Ltd., which will apply to you regarding any and all services offered by or acquired (the “Services”) through the Platform.

This Agreement sets forth the terms and conditions governing the access and use of the Platform. This Agreement may be changed at any time by the Company. It is the responsibility of the User to keep himself/herself updated with the current version of the Agreement. Users and Members waive any claim regarding this issue. This Agreement may only be amended with the express consent of the Company. Unless otherwise explicitly stated, the Terms will continue to apply even after termination of your membership to the Platform. If any provision of this Agreement is held invalid, the remainder of this Agreement shall continue in full force and effect.

Legal Jurisdiction

You expressly agree that any claim or dispute arising from your use of our website and/or our services will be governed by the laws of Singapore without regard to the conflict of law provisions thereof. You further agree that any such claims or disputes shall be resolved in Singapore courts, and you agree to be subject to the personal jurisdiction in, and the exclusive venue of, such courts and waive any objection to such jurisdiction and venue for the purpose of litigating any such claim or dispute.

…

Trading & Order Execution

Only registered users or Members are allowed to buy, sell and use the services provided by the Platform. The exchange functions of The Platform will fill in orders at the best possible available market price. Note that as markets move continuously, the prices displayed on user interfaces, on our web app or on mobile apps are in no way guaranteed. The Platform, however, has been designed to allow members to fill at best possible prices and in a timely manner. Nevertheless the Company will not be liable under any circumstances for the consequences of any delay in order filling or failure to deliver or perform.

Furthermore, once an order is filled, you are notified via the Platform and such an action is irreversible.

…

Representations and Warranties

As a Member or User, you agree to the following:

… h. You agree that the Company reserves the right to change any of the terms, rights, obligations, privileges or institute new charges for access to or continued use of services at any time, with or without providing notice of such change. You are responsible for reviewing the information and terms of usage as may be posted from time to time. Continued use of the services or non-termination of your membership after changes are posted or emailed constitutes your acceptance or deemed acceptance of the terms as modified.

…

[emphasis added]

The Platform

Users of the Platform trade in a variety of ways. For present purposes, there are two types of orders that may be placed: A Market Order: This is an order which is to be executed immediately at the best available current market place. The buyer or seller (as the case may be) indicates what he wishes to trade and the Platform automatically identifies the best available trade in the opposite direction. At the time of order placement, the trader will not know precisely the exchange rate he will receive. A Limit Order: This gives the trader greater control over the prices of a given trade but does not enable him to know when it will be executed. A limit order sets either the maximum price at which he is willing to buy or the minimum price at which he is willing to sell. If and when that price is reached, his order will be fulfilled.

The Platform uses order books to record orders from buyers and sellers for each pair of currencies being traded on the Platform. These are all displayed electronically on what is known as a “Trading Dashboard” which also contains a price chart indicating a current fair market price. It displays real time pricing data both for completed trades on the Platform and for trades on several other major virtual currency exchanges. This is achieved through a software program used by the Platform (the “Quoter Program”).

The Platform has a “matching engine” which uses the order books to detect whether there is a buy or sell order which corresponds to available opposite orders or matches a limit order and so on.

Members of the Platform can, obviously, trade by using their own assets – for example, owners of US dollars can use them to purchase BTC or use BTC to buy ETH. In addition, a trader may trade using funds borrowed either from the Defendant or from other users of the Platform. In this case, there must be assets in the trader’s account which are used as collateral for the loan. This is known as margin trading.

In the event that the margin trader’s equity (calculated as a certain percentage of the total market value of his collateral) falls below a certain percentage of the value of his loans, the Platform will automatically respond by force closing all or part of the trader’s positions to prevent further loss. This is achieved by making “Stop Loss” orders. The Platform relies on the data provided by the Quoter Program to assess the margin trader’s position at any given time.

As noted previously (see [7] above), the terms of the Agreement are displayed on the Defendant’s website. Additionally, the Defendant asserts (and for present purposes the Plaintiff accepts) that a Risk Disclosure Statement was uploaded onto the website on 22 March 2017.² This document figures in one of the proposed Defences, and I shall revert to it later.

Background facts

On 19 April 2017, the Plaintiff sought to buy and sell ETH for BTC.³ To that end, it placed 12,617 ETH/BTC orders of which only 15 were filled on that date, including seven orders which are the subject of...