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RESTITUTION OF MISTAKENLY TRANSFERRED BITCOINS

Lloyd's Maritime and Commercial Law Quarterly

RESTITUTION OF MISTAKENLY TRANSFERRED BITCOINS

Alvin W-L See * and Man Yip
Ong v LUNO and BitX

1. Introduction

The first Malaysian judgment of precedential value relating to the recovery of mistakenly transferred cryptocurrency, Robert Ong Thien Cheng v LUNO Pte Ltd and BitX Malaysia Sdn Bhd,1 is uncharacteristically short but raises important issues in the law of unjust enrichment. Even within the Commonwealth, this is the first reported case involving an unjust enrichment claim to recover mistakenly transferred cryptoassets.2
In short, Ong was a modern replay of Chase Manhattan Bank NA v Israel-British Bank (London) Ltd 3 involving a mistaken transfer of Bitcoins (“BTC”). The claimant cryptocurrency exchange, LUNO, made a second mistaken transfer of 11.3 BTC to an electronic wallet of the defendant, Robert Ong, after having already made a transfer on the same day. LUNO informed Ong of the mistaken transfer the next day. Ong acknowledged his liability to return the additional Bitcoins received and offered, about a month after the transfer, to pay LUNO RM300,000 for the additional Bitcoins. LUNO rejected this offer on the basis that the value of Bitcoins fluctuated from day to day.
LUNO commenced proceedings against Ong to seek proprietary restitution of the Bitcoins, relying on the Malaysian Contracts Act 1950, s.734 which states: “A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it”. 5 The High Court of Malaysia upheld the decision of the Sessions Court in ordering the return of the 11.3 BTC.6 Although the crux of the appeal concerned statutory interpretation, the decision does raise issues of general importance within the law of unjust enrichment. This commentary discusses two main issues: first, whether BTC is a thing, a question that cuts across statutory interpretation as well as the common law concept of “property”; and second, the availability of proprietary restitution.
* Associate Professor of Law, Yong Pung How School of Law, Singapore Management University.
† Associate Professor of Law, Yong Pung How School of Law, Singapore Management University.
1. [2021] 3 All Malaysia Rep 143.
2. The earlier Singapore case of B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 03; [2019] 4 SLR 17; [2020] SGCA(I) 02; [2020] 2 SLR 20, although also addressing the topic of mistake, does so principally in the context of contract law. The unjust enrichment claim was mounted by the defendant as a defence, the argument being that the defendant was entitled to cancel the trades entered into as a result of a system glitch because the claimant would otherwise be unjustly enriched at the expense of the counterparties to the trading contracts and/or the defendant. The claim failed before both the Singapore International Commercial Court and the Court of Appeal.
3. [1981] Ch 105.
4. The law of unjust enrichment in Malaysia is found both in the Contracts Act 1950 (see, in particular, ss 69–73) and in case law (see, notably, Dream Property Sdn Bhd v Atlas Housing Sdn Bhd [2015] 2 MLJ 441). See generally Alvin W-L See, “Introduction to the Law of Unjust Enrichment” (2013) 5 MLJ i.
5. Malaysia’s Contracts Act 1950, s.73 is in pari materia with the Indian Contract Act 1872, s.72. The same piece of legislation has also been adopted in Bangladesh, Brunei, Myanmar, Pakistan, and Tanzania, thus governing almost a quarter of the world’s population.
6. The High Court of Malaysia also upheld the lower court’s decision to reject Ong’s counterclaim for the tort of unlawful interference of trade. This commentary focuses only on the unjust enrichment claim under the Contracts Act 1950, s.73.
Case and comment

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