Singapore High Court addresses the correct date for assessing damages in crypto claims
The Singapore High Court’s judgment in Kalen, Alexandru v World Exchange Services Pte Ltd[1] confirms that the valuation date for damages in cryptocurrency disputes should correspond with the date on which the claimant could reasonably have been expected to mitigate its losses.
The claim arose from the defendant’s breach of contract in 2018, in failing to allow the claimant access to their cryptocurrency stored on its trading platform. The claimants argued that their damages should be assessed at trial, some years later, and awarded in US dollars. The nub of their position was that applying breach-date valuation would not result in an adequate remedy, given the rise in cryptocurrency prices. The court rejected the claimants’ argument, finding that they were aware of the breach in 2018 and could have acted then to limit their exposure.
The judgment reinforces well-known contractual principles and demonstrates the importance of claimants taking steps to mitigate their losses as soon as they find out about a breach. This is particularly important in cryptocurrency cases in which damages are sought in fiat currency, given the potential for asset volatility.
We provide further analysis below.
Underlying claim
The claim was brought by 85 individuals who held accounts with wex.nz, a cryptocurrency trading platform run by the defendant. The claimants obtained summary judgment against the defendant for breach of the user agreement and a buyback agreement based on the defendant's failures to permit them to access their stored cryptocurrency and to buy back certain assets. However, the interlocutory judgment left the issue of damages to be assessed.
Assessing damages
At the assessment of damages hearing, there were three issues for the court to decide:
- The “Quantity Issue” – What was the quantity of digital assets held in the claimants’ accounts on 12 July 2018 (the date from which access was blocked)?
- The “Valuation Date Issue” – What was the appropriate date for valuation of the claimants’ losses?
- The “Valuation Issue” – What was the value of the digital assets as at the date of valuation?
The Quantity Issue
The Quantity Issue was determined by reference to screenshots of the claimants’ accounts. The court was not persuaded by the defendant’s expert evidence that the screenshots lacked credibility.
The Valuation Issue
The claimants sought to have their losses valued at the date of trial and awarded in US dollars. They submitted that breach-date valuation would be tantamount to forcing them to liquidate their cryptocurrencies on 12 July 2017 at a loss, as they would not be able to purchase the same quantity of cryptocurrency at the current market prices. They also argued that the defendant had not only breached the contracts on 12 July 2018 but on an ongoing basis until the present day. The defendant’s position was that there was no reason to depart from the normal rule that losses are valued at the date of breach and that the breach date was 12 July 2018.
The court applied the well-known contract law principle that damages should be assessed by reference to when the claimant could have reasonably been expected to mitigate its loss. The valuation date can be the date of the breach itself if the claimant has knowledge of the breach and it is possible and reasonable to mitigate its loss. Alternatively, if the claimant lacked that knowledge or faced practical impediments to mitigation, the valuation date will shift to the point when action became feasible.
The court determined that there was a single breach on 12 July 2018 and that the appropriate valuation date was around October or November 2018, a reasonable time later. By this time, the wex.nz platform had become unreachable through its standard web address, speculation about a permanent shutdown had begun to circulate, and it would have been fair to expect the claimants to pursue remedial measures. Earlier, the platform operators had still described the outage as a “technical glitch” and suggested withdrawal functions would soon be reinstated, so it was reasonable for the claimants to expect normal service to resume and refrain from immediate mitigation action.
The Valuation Issue
The Valuation Issue was determined by reference to average closing prices on CoinMarketCap and CoinGecko.
Further commentary
This judgment affirms that valuation dates will be determined by when claimants can reasonably be expected to mitigate their losses, not by market movements. It shows that incident communications issued by platform operators may help to determine when it was reasonable for claimants to mitigate their losses.
The judgment follows the approach taken by the Singapore High Court in Fantom v Multichain, in which breach-date damages were awarded – although with obiter commentary that breach-date methodology might not always represent the best assessment methodology in cryptocurrency cases. Please refer to our previous LawNow on Fantom and the English High Court decision on Southgate v Graham, also touching on valuation date when assessing damages, here.
This article was co-authored by Shaina Haria, Trainee Solicitor at CMS Cameron McKenna Nabarro Olswang LLP.
