钱志敏案英国高等法院判决书：涉案财产权益主张的法律适用

In this case, the claimant, the Director of Public Prosecutions, has secured the recovery of proceeds of crime to the value of several billion pounds sterling representing the fruits of fraudulent activity perpetrated by and on behalf of the defendants. By far the most valuable of the assets involved are in the form of Bitcoin. These assets are now the subject of claims brought under s.281 of the Proceeds of Crime Act 2002 by those alleging to have been victims of the frauds. Each asserts that he or she has a proprietary interest in the Bitcoin.

The issue to be determined at this stage is limited to the resolution of the question of whether the law of England, China or a combination of the two will later fall to be applied to resolve the substantive legal issues to which the victims’ claims give rise. I have used the term “English law” as a convenient shorthand for the law of England and Wales. No disrespect is thereby intended to the Welsh nation.

No evidence has yet been adduced either as to the content of Chinese law or as to the precise evidential basis upon which each claim may eventually be founded.

To fill the evidential lacuna, a statement of assumed facts has been agreed upon which the court has been invited to base its determination of the applicable law. It is convenient for me now to set out the substance of these agreed facts by way of background.

These are the assumed facts from which only the preamble and footnotes have been removed:

“The First Defendant

1.

The First Defendant (Ms Qian) is a Chinese national born in 1978. She resided in China until around 26 July 2017, when she crossed into Myanmar to evade arrest. She arrived in London in September 2017 and, since then, she has habitually resided in England.

The Company

2.

On or around 31 March 2014, Ms Qian established a Chinese Company named Tianjin Lantian Gerui Electronic Technology Co Limited (the Company). At all times, the Company has been registered in Tianjin City, China.

3.

Ms Qian was at all material times the controlling mind or actual controller of the Company. Ms Qian also operated and/or controlled a number of other purported entities and also acted in a personal capacity for the purposes of the fraudulent schemes. Those purported entities were either fictional or under the control of Ms Qian.

4.

From July 2014 to August 2017, Ms Qian’s associate, Mr Jiangtao Ren (Mr Ren) was the registered “legal representative” of the Company and the sole shareholder and only director of the Company. Mr Ren is a Chinese national and has been resident in China at all material times.

The Investment Schemes

5.

Between 2014 and July 2017, Ms Qian designed and orchestrated around ten purported investment schemes; most of these schemes were implemented in the Company’s name and others in the names of another purported entity, Britain Nice Life Insurance Company (BNLI). These schemes were Ponzi schemes (collectively, the Fraud). They were designed and carried out in China.

6.

The Company was never licensed to provide financial products to investors. In her Basis of Plea dated 29 September 2025, Ms Qian has admitted that such a licence was required by Chinese state law; and any investment activities were therefore unregulated and unlawful.

7.

Ms Qian recruited many individuals, including Mr Ren, to assist her in carrying out the Fraud (the Assistants). These individuals were all Chinese nationals who, at all material times, resided in China.

8.

These Assistants included many individuals who promoted the fraudulent schemes to members of the public across China (the Promoters). The Promoters purported to represent the Company, BNLI and/or Ms Qian personally when promoting the fraudulent schemes. The fraudulent schemes were promoted at promotional meetings, in publicity materials and in media publicity within China.

9.

Promotional material provided to certain s.281 Applicants referred to purported activity in various jurisdictions including China, the United Kingdom, Singapore, Japan, Switzerland, Germany, Sweden, Ukraine, Russia, South Korea, Thailand, Brazil, Norway, Malaysia, Taiwan and Cayman Islands. In 2015 an Assistant led a team of more than 20 salespersons in a 5-day visit to London and Oxford.

The Victims and their Investments

10.

According to an audit carried out by the Zhongyi CPAS Tianjin Office (on the instruction of the Hedong Sub-Bureau), at least 128,409 investment contracts were entered into in connection with the Fraud. [Whether that is the number of Victims or the number of ‘investment contracts’ is not yet known]. The known investors (Victims) were all Chinese nationals, were all resident in China at the time they invested, and the majority of Victims are believed to remain resident in China.

11.

Relying upon fraudulent misrepresentations, some Victims signed written documents at the time they invested in the fraudulent schemes (Contracts); others made payments as part of the fraudulent schemes without signing any written documentation. [The DPP notes that it will be for each s.281 applicant to prove whether they relied upon such representations.] Where Contracts were signed:

a.

The counter-party to the Contracts was generally the Company. Sometimes it was BNLI, which is understood to be a fictitious company. Ms Qian and/or her Assistants and/or Promoters made false claims in promotional materials that BNLI was registered variously in the “City of London, UK” and the Cayman Islands.

b.

Each of the Contracts promised returns to be paid to the Victims in Chinese currency or, in the case of some Contracts, cryptocurrency or digital assets (including purported contracts of insurance of digital assets).

c.

Each of the Contracts was said to relate to a purported investment scheme, being one of the fraudulent schemes designed by Ms Qian. These fraudulent schemes included (i) investment in digital currency schemes and (ii) investment in ‘elderly care’ and related insurance services, and (iii) investment in items such as air purification devices and sterilisers.

d.

Certain of the Contracts contained clauses which provided that, in the case of disputes which cannot be resolved by negotiations, either party may sue in the People’s Court of Hedong District, Tianjin, i.e. in China. Other than these, no known Contracts contained jurisdiction clauses.

e.

Certain of the Contracts stated that they were made “in accordance with the Contract Law of the People’s Republic of China”, pursuant to “the General Principles of the Civil Law, the Contract Law and other relevant rules and regulations” or other such formulations. No known Contract states that it is made in accordance with the laws of any jurisdiction other than China. Certain of the Contracts between BNLI (as the insurer) and Victims (as the insured) contain clauses which state “depending upon applicable law of the insured’s host country, the insurer will issue BTC or fiat currency at its sole discretion” and/or “Definition of business day stated in applicable law of the insured’s host country shall apply”; insofar as such clauses had any meaning, the “host country” of each relevant insured would have been China as their place of residence. In addition, certain BNLI contracts state that “December 24 – 25 will be off work for Christmas Day according to British Law”.

12.

Victims made payments in Chinese currency through one or more methods including:

a.

Point of sale transactions, including debit and credit card payments. These transactions took place within China, using debit or credit cards issued and managed by Chinese institutions.

b.

Cash payments, which took place within China.

c.

Transfers from Victims’ bank accounts, which were registered with Chinese banks (including, for example, Agricultural Bank of China Ltd), at bank branches located within China.

13.

All such payments were credited, in the first instance, to multiple personal bank accounts held in the names of Assistants and/or Promoters. These bank accounts were registered with Chinese banks at bank branches located within China.

14.

A bank account was registered in the Company’s name with a Chinese bank but it was rarely used.

15.

During July 2017, law enforcement in China froze the personal bank accounts used by the Assistants and Promoters to receive investor funds, and seized real property and other assets.

The proceeds

16.

All funds received from Victims, which (according to the judgment of the Tianjin Hedong District People’s Court on 13 September 2021 convicting Mr Ren) totalled approximately RMB 40,228,350,969 (being approximately £4.1 billion) over the period from 2014 to 2017, were controlled by Ms Qian, either directly or through her Assistants and Promoters.

17.

The majority of such funds were ultimately applied:

a.

In making repayments to some of the Victims pursuant to the purported investment schemes. Approximately RMB 34.1 billion (being approximately £3.4 billion) (according to the judgment of the Tianjin Hedong District People’s Court on 13 September 2021 convicting Mr Ren) was repaid in this way between 2014 and 2017. For completeness, not all of the Victims received such repayments. Those payments were in Chinese currency (CNY) and paid out of personal bank accounts of Assistants and Promoters held with at least three Chinese banks (namely Agricultural Bank of China Ltd, China Merchants Bank Co Ltd and Industrial Bank Co Ltd), at branches located within China.

b.

In meeting purported operating costs to perpetrate the Fraud, totalling over RMB 300 million, which included rental costs and costs for the payment of goods and services. Those payments were also made in Chinese currency (CNY).

18.

Some such funds were converted into various assets, including inter alia real estate in China and Bitcoin. The Bitcoin was obtained either:

a.

Through a digital currency trading account opened in June 2014 in the name of Mr Ren with a crypto-exchange called Huobi (the Huobi Account). The Huobi Account was controlled directly or indirectly by Ms Qian. The Huobi crypto-exchange was founded in China. Between 2013 and around October 2017, Huobi’s central place of operations was in China though later it expanded its operations to various different jurisdictions, including the Seychelles, South Korea, Singapore and Japan. More than 100,000 Bitcoin were purchased on the Huobi Account between mid-June 2014 and 7 June 2017.

b.

In “over-the-counter” (OTC) transactions conducted in China between January and June 2017 via a Chinese national called Hua Chen, a former Huobi employee, on Ms Qian’s instructions.

c.

Using cryptocurrency “mining” machines which were located in China.

19.

The funds deriving from Victims which were converted into Bitcoin had been so converted before Ms Qian left China in July 2017 (the Bitcoin).

The First Defendant’s flight from China and move to England

20.

On 12 July 2017 Chinese police officers attended a promotional event in order to arrest Ms Qian but she managed to escape without being apprehended.

21.

On around 26 July 2017, Ms Qian fled over the border into Myanmar.

22.

Ms Qian arrived in London using a St Kitts & Nevis passport in the name of Yadi Zhang on or around 16 September 2017 and has habitually resided in England since then. She met the Second Defendant (Ms Wen) in London in late September 2017. Ms Wen is a Chinese national with British citizenship and at all material times has resided in England.

23.

Ms Qian and Ms Wen began to convert some of the Bitcoin into other assets (including cash, jewellery, investments and other cryptocurrency) for their own personal benefit.

24.

On 31 October and 1 November 2018, the Metropolitan Police searched a property and safe deposit box rented by Ms Qian and Ms Wen in London and seized several devices used to access the Bitcoin (some of which had been brought to England from China), the “keys” to access some of the Bitcoin and other assets. Additional assets were seized when Ms Qian was arrested in April 2024. The assets seized by the Metropolitan Police (together, the Property) were acquired with the proceeds of the Fraud. The Property includes more than 61,000 Bitcoin.

25.

The Property is controlled or otherwise within the jurisdiction of England and Wales and subject to:

a.

the Property Freezing Order made by the High Court on 21 December 2023 (subsequently varied);

b.

a Management Receivership Order made by the High Court on 4 June 2025; and

c.

the Judgment and Declaration made by the High Court on 21 January 2026.

26.

Following the making of the Property Freezing Order, numerous applications pursuant to section 281 of the Proceeds of Crime Act 2002 (PoCA) have been issued in the High Court by Victims in relation to the Property.”

The parties to this litigation are, strictly speaking, the DPP and the defendants. It is, however, clearly convenient for the alleged victims to advance their claims within the framework of the existing litigation. In this judgment they will hereafter be referred to as the Applicants.

One alleged victim, Mr Wang, has taken the initiative of obtaining an order of the court for the appointment of receivers of the Company. Those receivers now also assert claims in respect of assets held by the DPP. Whether the deployment of receivers of a hitherto defunct company which was itself a vehicle through which the Fraud was perpetrated provides a valid basis of claim is a question for another day. For the purposes of this judgment, they are referred to as the “Litigation Receivers”.

Not all of the many thousands of individual Applicants have instructed the same firm of solicitors to represent them. I took the view, however, that it was appropriate, at least for the purposes of resolving the applicable law issue, that one firm should be designated as Lead Firm and that submissions to the court on behalf of all individual s.281 Applicants should be made by one team of counsel instructed by that firm. The Litigation Receivers, whose interests were distinct, were permitted to engage and deploy their own legal team at the hearing. Case management directions were given to this effect.

The DPP contends that, on any analysis, Chinese law applies. The Litigation Receivers support that position.

The Applicants disagree and have identified four legal bases of claim upon which they advance their arguments to the effect that either English law or, alternatively, a hybrid of Chinese and English law applies.

Before moving on to examine in greater detail the respective positions of the DPP, the Applicants and the Litigation Receivers, it may be helpful to consider the nature and broad scope of the statutory scheme laid down in PoCA, as subsequently amended.

Before the coming into force of PoCA, asset recovery laws in the UK were fragmented across numerous statutes including the Drug Trafficking Act 1994 and the Criminal Justice Act 1988. As a result of gaps in the statutory regime, however, criminals could frequently and lawfully retain substantial profits derived from criminal activity even, in some cases, after criminal conviction.

One example of the way in which the courts had interpreted the law before PoCA is to be found in Webb v Chief Constable of Merseyside Police [2000] Q.B. 427 in which the police had lawfully seized money from suspected drug dealers but were found not to be entitled to retain it once their statutory power to do so was exhausted. The Court of Appeal held that even where it had been established, on the balance of probabilities in civil proceedings, that the money constituted the proceeds of drug trafficking, public policy provided no defence to the dealers’ claims since they could nevertheless continue to rely upon their right to possession as against the police at common law.

It was, at least in part, to address the unpalatable outcome of such cases that PoCA introduced a comprehensive framework for tracing, freezing, confiscating and recovering criminal assets which was designed, more broadly, to prevent the enjoyment of the fruits of criminal activity.

One innovation, introduced under Part 5 of PoCA, is the concept of civil recovery proceedings in the High Court with respect to property which is, or represents, property obtained through unlawful conduct. Such property is “recoverable property” under s.240(1). Recovery proceedings may be taken only by an enforcement authority (including, as here, the DPP) against “any person” whom the authority thinks holds such recoverable property (see s.243(1)). The DPP did not, therefore, have to wait for the defendants to be convicted before initiating the recovery proceedings in this case.

It is to be noted that a civil recovery order can be made in respect of property “wherever situated” and in respect of a person “wherever domiciled, resident or present”, provided that, where property is outside the UK, there is, or has been, a “connection between the case and the relevant part of the United Kingdom” (see s.282A(1) and (3)).

I will return to the concept of what is “recoverable property” in greater detail when I come, in due course, to consider the Applicants’ third legal basis of claim.

It is s.281 of PoCA which provides the basis upon which all of the Applicants rely in advancing their claims:

“Victims of theft, etc.

(1)

In proceedings for a recovery order, a person who claims that any property alleged to be recoverable property, or any part of the property, belongs to him may apply for a declaration under this section.

(2)

If the applicant appears to the court to meet the following condition, the court may make a declaration to that effect.

(3)

The condition is that—

(a)

the person was deprived of the property he claims, or of property which it represents, by unlawful conduct,

(b)

the property he was deprived of was not recoverable property immediately before he was deprived of it, and

(c)

the property he claims belongs to him.

(4)

Property to which a declaration under this section applies is not recoverable property.”

In short, s.281 provides a safeguard to ensure, in broad terms, that innocent persons are not penalised by the deployment of the statutory recovery procedure. However, in order to satisfy s.281(3)(c), it is necessary for any given Applicant to demonstrate a proprietary interest. Taken as a whole, the section does not create any broader compensation scheme for those who have otherwise lost out through criminal conduct (see NCA v Robb [2015] Ch 520 at [70]). It would not, for example, be sufficient for any given Applicant to establish merely that he is entitled to claim against the perpetrators in personam as a creditor to the value of the money with which he parted.

I note, in passing, that, even where the statutory requirements in s.281 are met, it is arguable that the Court retains a residual discretion as to whether or not to make a declaration in favour of any given applicant (as indicated by the use of the word “may” in s.281(2)). However, there is currently no authority on how any such discretion might fall to be exercised and its existence or scope does not call for any further consideration at this stage of these proceedings. I therefore say no more about it.

There is no dispute before me that, in a case involving foreign elements, the law applicable to the question of whether property “belongs to” a person for the purposes of ss.281(1) and (3)(c) is to be determined by applying the relevant English private international law rules on the conflict of laws. No definition of “belongs to” is to be found in the statute.

I observed during the course of oral argument that section 5 of the Theft Act 1968 provides a definition of “belonging to another” that is broader than the concept of proprietary ownership more generally recognised at common law. The parties, however, were prepared to agree, at least for the purposes of this hearing, that the provisions of section 5 should be left out of account at this stage and I am content to proceed on that basis without further comment.

The other limbs in s.281(3) require the application of statutory concepts defined by PoCA, including “unlawful conduct” (s.281(3)(a)) and “recoverable property” (s.281(3)(b)) and bear the meanings given to them by the statute itself. The focus for the purpose of resolving the applicable law issue must therefore be upon the question arising under s.281(3)(c), namely, whether the property “belongs to” the applicant.

The value of the recovered Bitcoin is so very high compared to the other assets that the parties have understandably focused their attention on the Bitcoin for the purposes of developing their arguments before me. For the same reason, it is also convenient for me to afford the cryptocurrency centre stage in my assessment of the merits of the competing arguments concerning the applicable law.

In any event, there is no dispute that the Bitcoin is property. The cases of AA v Persons Unknown[2020] 4 W.L.R. 35 andD’Aloia v Persons Unknown [2025] 1 W.L.R. 821 have confirmed that this is the position at common law.

Section 1 of the Property (Digital Assets etc) Act 2025, which came into force on 2 December 2025, provides:

“Objects of personal property rights

A thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither—

(a)

a thing in possession, nor

(b)

a thing in action.”

I note in passing, however, that the term “property” covers a wide range of assets and interests some of which are liable to attract different types of categorisation for the purposes of the identification of the applicable law in any given situation than others. Its deployment is not a conceptual trump card giving rise to a determination, or even a presumption, that the applicable law to any given issue must be that of the location of such property at any given time (the lex situs).

The English conflict of laws approach to determining the applicable law requires the court to proceed, issue by issue: first to ‘characterise’ each issue; second to determine which provisions or principles of conflicts of law are relevant to that type of issue; and third to apply those provisions or principles to reach a conclusion as to the applicable law for that issue.

In MacMillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 W.L.R. 387, Staughton LJ described the position thus at pp. 391-2:

“In finding the lex causae there are three stages. First, it is necessary to characterise the issue that is before the court. Is it, for example, about the formal validity of a marriage? Or intestate succession to movable property? Or interpretation of a contract? The second stage is to select the rule of conflict of laws which lays down a connecting factor for the issue in question. Thus, the formal validity of a marriage is to be determined, for the most part, by the law of the place where it is celebrated; intestate succession to movables, by the law of the place where the deceased was domiciled when he died; and the interpretation of a contract, by what is described as its proper law. Thirdly, it is necessary to identify the system of law which is tied by the connecting factor found in stage two to the issue characterised in stage one.”

The characterisation of issues for conflict of laws purposes under the common law therefore involves taking a broad, internationalist approach to classification based upon the fundamental jurisprudential nature of the relevant issue. It follows that the correct conflict of laws characterisation of an issue is not necessarily the same as it may otherwise appear to manifest itself by the application of English domestic law.

As the authors of Dicey, Morris & Collins on the Conflict of Laws (16th edition, Sweet & Maxwell, 2022) (“Dicey”) observe at §2-036 to 2-037, the problem of characterisation is “particularly acute …when an English court is called upon to deal with a claim which, if it were wholly domestic, would be regarded as equitable”.

In this case, however, the process of characterisation must be specifically considered in the context of the potential application of categories originally established by European Regulations and subsequently assimilated into English law. I will deal with the implications of this later in this judgment.

With these features in mind, it is time to consider each of the bases of claim upon which the Applicants advance their arguments on the applicable law issues.

The individual Applicants identify four bases of claim as follows:

“(1)

The s.281 Applicants contend that by application of English law: (a) they have elected (or intend to elect) to rescind in equity any investment contracts into which they entered; (b) upon such rescission they are (or will be) entitled to assert that the recipients of their investment payments or their proceeds held those proceeds on constructive/rescission trust (applying NCA v Robb [2015] 3 WLR 23 and Shalson v Russo [2005] Ch. 281); and (c) they are entitled to trace that proprietary constructive/rescission trust interest in equity through all subsequent dispositions of the proceeds of those payments into the Property which forms the subject of these proceedings.

(2)

In the alternative, the s.281 Applicants contend that by application of English law: (a) their investment payments were received by the recipients of those payments on constructive trust on the basis that the purported investment contracts were instruments of fraud (applying Westdeutsche Landesbank Girozentral v Islington Borough Council [1996] AC 669 at 716C-D, Martin J Halley v Law Society [2003] EWCA Civ 97 at [45]-[48] and D'Aloia v Persons Unknown [2024] EWHC 2342 (Ch) at [340]-[341]); and (b) they are entitled to trace that proprietary constructive trust interest in equity through all subsequent dispositions of the proceeds of those payments into the Property which forms the subject of these proceedings.

(3)

In the further alternative, the s.281 Applicants contend that the principle stated by sections 305 and 306 of POCA, which addresses the tracing of property obtained through unlawful conduct for the purpose of identifying property as recoverable, should be applied, by parity of reasoning to identify, within that recoverable property, property which is to be regarded as belonging to the s.281 Applicants.

(4)

To the extent any obligations on those who perpetrated the unlawful conduct are governed by the law of any other jurisdiction (whether by reason of contract, restitution or otherwise), English law (as the lex situs of the Property) would regard them as giving rise to a proprietary interest in equity such that the s.281 Applicants are entitled to trace that proprietary interest in equity through all subsequent dispositions of the proceeds of those payments into the Property which forms the subject of these proceedings.”

This claim has been described as the rescission constructive trust claim.

I proceed on the basis that, as a matter of English domestic law, the rescission of a contract voidable for fraud is capable of giving rise to a claim based upon a constructive trust. Although the contrary was argued on behalf of the Litigation Receivers, I agree with the Applicants that the point need not and should not be decided at this stage.

The proper approach to the determination of the applicable law must here involve a taxonomical analysis of the relevant legal categories arising from the operation of distinct European Instruments, where relevant, against a background of residual domestic private international law rules.

For the purposes of this case, the potentially relevant European Instruments are:

These Regulations ceased to have direct effect as EU Regulations at the end of the Brexit transition period on 31 December 2020. However, they were thereafter preserved in domestic law as "retained EU law" by section 3 of the European Union (Withdrawal) Act 2018 which incorporated directly applicable EU legislation into domestic law as it stood at the end of the transition period and the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019, which made certain amendments to Rome I and Rome II. Then, under the Retained EU Law (Revocation and Reform) Act 2023, the category of "retained EU law" was abolished from 1 January 2024 and replaced with the concept of "assimilated law".

No argument has been raised before me to the effect that this transition has had any impact upon the applicable law issues which now arise in the circumstances of this case.

Accordingly, the traditional common law approach to the characterisation of issues for the purposes of determining the applicable law must, where the scope of the Rome Regulations is in issue, yield to an autonomous approach to classification. Thus national domestic classifications cannot predetermine the scope of the Regulations. Otherwise the Regulations would fall far short of achieving consistency between the approaches of the individual states which have adopted them. In this respect, I agree with the observation in Dicey at 2-037:

“…where obligations owed by one party to the other are governed, for choice of law purposes, by the statutory choice of law rule in the Rome I or Rome II Regulations, the first question will be whether, on its true construction, the Regulation stipulates the choice of law rule which the court must apply. For if the answer is that it does, there is neither room nor need for a separate exercise in characterisation.”

Where the characterisation process involves deciding whether the claim fits within the categories established by European Regulations, the authors of Dicey conclude at §2-042 that:

“If, for example, an English court has to decide whether the matter before it is one of contractual or non-contractual obligation, in order to determine whether the choice of law rules are those of the Rome I or Rome II Regulation, or neither, the answer is not to be found by asking whether the common law rules of the conflict of laws would regard the issue as contractual, or tortious, or otherwise. The answer is instead to be arrived at by interpreting the language of the Regulations.”

In Nicholls v Mapfre España Cia de Seguros y Reaseguros SA [2025] 1 W.L.R. 660, a case about whether the calculation of interest on awards was a substantive or procedural matter, Dingemans LJ observed:

“The approach to the interpretation of Rome II

26.

There was much common ground between the parties about the proper approach to the interpretation of Rome II. Terms used in European instruments such as Rome II should have a uniform, autonomous meaning and a uniform sphere of application…

27.

It is common ground that the recitals to Rome II are a relevant aid to the proper interpretation of Rome II. As appears above, recital (6) emphasised enhancing the predictability of litigation and recital (11) emphasised the autonomous concept of terms used in Rome II…

33.

In my judgment the court's task is to give Rome II an independent and uniform interpretation, having regard to the wording, the context in which it occurs, and the objectives pursued by the rules of which it is part. The objectives of Rome II were to ensure a uniformity of approach to determining the applicable substantive law.”

These observations are equally applicable to the proper approach to issues relating to the potential application of Rome I.

I note, at this stage, that the continued application of the autonomous approach is not without its academic detractors who argue that the departure of the UK from the EU justifies a realignment to an enlightened lex fori approach to the process of characterisation. This approach has not, however, been argued before me and I therefore proceed on the basis that an autonomous approach remains appropriate. I am, in any event, satisfied that my analysis would have reached the same conclusion regardless of the starting point.

In the circumstances of this case, it is therefore apt to start with a consideration of the scope of Rome I.

Article 1 provides:

“Material scope

1.

This Regulation shall apply, in situations involving a conflict of laws, to contractual obligations in civil and commercial matters.

It shall not apply, in particular, to revenue, customs or administrative matters.”

Article 2 provides:

“Universal application

1.

Any law specified by this Regulation shall be applied whether or not it is the law of the United Kingdom or a part of the United Kingdom.”

Article 12 provides:

“Scope of the law applicable

1.

The law applicable to a contract by virtue of this Regulation shall govern in particular:

a.

interpretation;

b.

performance;

c.

within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages in so far as it is governed by rules of law;

d.

the various ways of extinguishing obligations, and prescription and limitation of actions;

e.

the consequences of nullity of the contract.”

Recital 6 to Rome I states:

“The proper functioning of the internal market creates a need, in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict-of-law rules in the Member States to designate the same national law irrespective of the country of the court in which an action is brought.”

Recital 16 goes on to state:

“To contribute to the general objective of this Regulation, legal certainty in the European judicial area, the conflict-of-law rules should be highly foreseeable. The courts should, however, retain a degree of discretion to determine the law that is most closely connected to the situation.”

The objectives identified in the recitals are not served by an unduly restrictive approach to the determination of the scope of Rome I.

By order of 5 June 2026, it was directed that:

“The Applicable Law Issue shall be determined on the basis of the legal claims set out in schedule 1 (Approved Legal Bases) and the assumed facts set out in Schedule 2 (Approved Assumed Facts).”

It was not directed, and it would have been inappropriate for it to have been so, that the combination of issues which would fall to be determined under each claim as articulated by the Applicants must all attract the same applicable law. It is perfectly possible for some issues arising out of a single dispute to fall within the scope of Rome I and others to fall outside its scope. The process of characterisation whether under Rome I, Rome II or the common law is applied to issues and not to disputes generally. As Staughton LJ observed in MacMillan at p.399C:

“I would regard it as plain that the rules of conflict of laws must be directed at the particular issue of law which is in dispute, rather than at the cause of action which the plaintiff relies on. We should translate lex causae as the law applicable to the issue, rather than the suit.”

In Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC [2001] Q.B. 825 at p.838-40 Mance LJ observed:

“I turn to the opposing analyses of the issue. In RZB's submission, the issue is whether the insurance contract, and/or the right to claim unliquidated damages from insurers for failure to pay under it, was effectively and validly assigned by Five Star to RZB. This, in its submission, is a contractual issue. The judge was therefore right in his general approach. The cargo owners, in contrast, maintain that the relevant issue concerns the validity against "third parties" of an assignment of an intangible right of claim against insurers. In support of their analysis, the cargo owners submit that the dispute is essentially between RZB as purported assignee and the cargo owners, who attached the insurance claim and have no other nexus, let alone contractual, with anyone. So viewed, the dispute in their submission raises an essentially proprietary issue, to be resolved by the lex situs of the attached debt, that is by French law. Under French law, they submit, their attachment prevails over RZB's assignment in the absence of any bailiff's notification or debtor's acceptance by acte authentique.

These opposing analyses both assume that the factual complex raises only one issue and, in their differing identification of that issue, emphasise different aspects of the facts. In my judgment a more nuanced analysis is required…

The parties' respective positions have already been stated. They throw up a choice between the proper law of the insurance and the lex situs of the insurance claim. But a proper legal analysis cannot depend exclusively upon the legal systems for which two parties happen to contend in their own partisan interests. The jurisprudential and academic material which we have been shown indicates the existence of other possible candidates…which may need to be kept in mind.”

In this regard, it is important not to treat the bases of claim selected by and articulated on behalf of the Applicants in English law terms as defining and circumscribing the nature of the categories of issue to which the process of characterisation would fall to be applied.

The Applicants' Claim 1, although ultimately directed to the recovery of what they claim to be their share of the Bitcoin, depends upon a number of distinct and logically anterior legal issues. These include: the nature and effect of the transactions pursuant to which monies were paid into the investment scheme; whether they were void or merely voidable; whether any right of avoidance was effectively exercised; and what consequences, proprietary or otherwise, follow from any such avoidance.

These questions are conceptually distinct from the subsequent issue as to whether any given Applicant can rely upon his or her s.281 application to establish that he or she has a proprietary right by way of rescission constructive trust applicable to part of the Bitcoin located in England.

Furthermore, the Applicants do not seek to contend that their Claim 2 falls to be categorised as one homogeneous issue but accept that “the underlying causes of action…may be governed by Chinese law.”

In the circumstances of this case, and plainly arising from the assumed facts, I am satisfied that there are a number of potential issues which fall squarely within the scope of Rome I. They include, by way of example only:

All of the issues which I have identified arise, in my view, from situations involving a conflict of laws and concern contractual obligations in civil and commercial matters. The fact that I have described some rights as being “property rights” does not imply that they must therefore be treated as arising in the context of a “property dispute” for characterisation purposes. This is a distinction to which I turn later in this judgment.

Of particular relevance is Article 12(1)(e) concerning the consequences of nullity of the contract. I can discern no coherent basis upon which it would normally be appropriate to distinguish, for characterisation purposes, between the legal consequences of a contract void ab initio and one avoided at the election of one of the parties. Indeed, English law has long struggled with the task of drawing the distinction and it would not, in my view, be conducive to the objects of Rome I to introduce such niceties into the process of autonomous characterisation. As Lord Nicholls observed (albeit in the specific context of “mistaken identity” cases) in Shogun Finance Ltd v Hudson [2004] 1 A.C. 919:

“1.

My Lords, this appeal raises a difficult problem about the effect of fraudulent misrepresentation on the formation of a contract. If a crook (C) fraudulently represents to the owner of goods (O) that he is another identifiable person (X) and on that basis O parts with goods to C by way of sale, is there in law a contract between O and C? Does the answer to this question differ according to whether O and C communicated face-to-face, or by correspondence, or over the telephone, or by e-mail? The law on cases involving this type of fraudulent conduct, euphemistically described as cases of "mistaken identity", is notoriously unsatisfactory. The reported decisions are few in number and they are not reconcilable. In the present case Sedley LJ said the law has tied itself into a Gordian knot. Brooke LJ said the law is in a "sorry condition" which only Parliament or your Lordships' House can remedy: see [2002] QB 834 , 847, 855, paras 23, 51.”

Furthermore, reference may be made to the Giuliano-Lagarde Report, the official explanatory report on the Rome Convention, the predecessor of Rome I:

“Subparagraph (e) also makes the consequences of nullity subject to the applicable law. The working party's principal objective in introducing this provision was to make the refunds which the parties have to pay each other subsequent to a finding of nullity of the contract subject to the applicable law.

Some delegations have indicated their opposition to this approach on the grounds that, under their legal systems, the consequences of nullity of the contract are non-contractual in nature. The majority of delegations have nevertheless said they are in favour of including such consequences within the scope of the law of contracts, but in order to take account of the opposition expressed provision had been made for any Contracting State to enter a reservation on this matter (Article 22 (1) (b)).”

To the extent that issues relating to the characterisation of an election to exercise a power of equitable rescission of a contract (or indeed any of the other potential issues I have identified) may be argued not to fall cleanly within the list set out in Article 12, it is to be noted that this list is not expressed to be exclusive. The use of the words “in particular” indicates that the list which follows is not one of closed and strictly circumscribed categories.

In any event, any issue concerning limitation falls squarely within Article 12(1)(d).

Subject to the Applicants’ contentions that Rome I does not apply to the consequences of making their s.281 applications because the issues arising relate to property issues and not contractual obligations and/or the claims involve administrative matters, I thus consider that the Claim 1 falls within the scope of Article 12.

For the sake of completeness, I note that Article 1(2)(i) excludes from the scope of Rome I “obligations arising out of dealings prior to the conclusion of a contract”. Such issues generally fall within the category addressed by Article 12 of Rome II (culpa in contrahendo).

The scope of this exclusion was not the subject matter of argument, written or oral, before me. This may well be because the application of Rome I was not the primary basis upon which either the Applicants or the DPP based their respective arguments. The DPP approached Rome I as very much a fallback position to the application of Rome II, whereas the Applicants rejected wholesale the application of either.

In my view, the fraudulent representations are indeed antecedent to the conclusion of the contracts. However, the issue before the court is not merely whether a tortious obligation arose from those representations. The Applicants rely upon the representations as a ground for avoiding the investment contracts and asserting rights consequent upon such avoidance. The anterior question is therefore what effect the governing law of those contracts gives to a contract induced by fraud. If Chinese law governs the contracts, it is Chinese law which determines whether the contracts are void or voidable and what legal consequences follow from either categorisation.

In any event, even if I were to be wrong in this analysis, I would conclude that the fraudulent misrepresentations would thus be characterised as giving rise to non-contractual obligations, thereby falling, prima facie, within the parameters of Article 4 of Rome II. The consequences of this for the applicable law issue would be, for all relevant purposes, identical.

Of course, in the absence of evidence concerning the substance of Chinese law it would not be appropriate for me to speculate about how those issues may be resolved.

Article 3 provides:

“Freedom of choice

1.

A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract…”

Article 4 provides, insofar as is material:

“Applicable law in the absence of choice

1.

To the extent that the law applicable to the contract has not been chosen in accordance with Article 3 and without prejudice to Articles 5 to 8, the law governing the contract shall be determined as follows: ...

[There follow a number of factors, none of which is material to this case.]

2.

Where the contract is not covered by paragraph 1… the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence.

3.

Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply.

4.

Where the law applicable cannot be determined pursuant to paragraphs 1 or 2, the contract shall be governed by the law of the country with which it is most closely connected.”

On the assumed facts of this case, it is not disputed that, if Rome I were to apply, then the law applicable to the issues which fall within its scope is Chinese.

The individual Applicants, however, contend that Rome I does not apply on grounds to which I now turn. The same arguments apply to Rome II as they do to Rome I. I bear in mind that the application of Rome I or Rome II leaves open for determination the question of the consequent availability of a tracing procedure under the Applicants’ Claim 4.

The Applicants advance two grounds:

The Applicants seek to distinguish between claims founded in contractual obligations (Rome I) and non-contractual obligations (Rome II) on the one hand and proprietary claims on the other. The applications in this case are said to involve proprietary claims which do not fall within the purview of either Rome I or Rome II. The distinction is articulated in Dicey at §34-020 in the following terms:

“Relationship with rules for property matters.

As indicated by its title, the rules contained within the Rome II Regulation determine the law applicable to non-contractual obligations. Their scope does not extend to determining matters of personal status and title to movable and immovable property. Even so, it is far from straightforward to draw the line between matters of ‘‘obligation’’, to which the Rome II Regulation applies, and matters of ‘‘property’’, to which it does not.”

The same difficulty, in my view, is no less likely to arise where the characterisation of issues potentially falling within Rome I is under consideration.

The correct result is not to be achieved simply by attaching the proprietary label to any given issue. The proper approach is more nuanced.

It may be useful at this stage to consider why it is appropriate that issues relating to property should be approached differently.

Property issues are generally determined according to the lex situs.

For these purposes, where disputes arise relating to movable property, the applicable law is ordinarily the law of the place where the property was situated at the time of the transaction the proprietary effect of which is in issue. It is not generally determined by the location of the property when the claim is subsequently brought. In Winkworth v Christie Manson and Woods Ltd. [1980] Ch 496 Slade J held at p.513 G-H:

“(1)

The relevant general principle is, in my judgment, clearly and accurately stated in Cheshire & North's Private International Law , 10th ed. (1979), p. 527:

"Therefore, it is now established that the proprietary effect of a particular assignment of movables is governed exclusively by the law of the country where they are situated at the time of the assignment. An owner will be divested of his title to movables if they are taken to a foreign country and there assigned in circumstances sufficient by the local law to pass a valid title to the assignee. The title recognised by the foreign lex situs overrides earlier and inconsistent titles no matter by what law they may have been created."

This approach rests upon considerations of territorial sovereignty, legal certainty and practical effectiveness. Proprietary rights operate not merely between the parties to a transaction but against third parties and the world at large. The law of the place where the property is situated is ordinarily the legal system best able to define, publicise and enforce such rights and to protect those who subsequently deal with the asset. The rule thus promotes certainty in commercial dealings and ensures that questions of ownership and priority are determined by the law whose institutions exercise control over the property itself.

As the Law Commission Consultation Paper No. 273: Digital Assets and (Electronic) Trade Documents in Private International Law 5 June 2025 expresses it (albeit in the broadest of terms):

“2.80

From this, it is important to appreciate that each of these categories of rules are guided by their own specific internal policies. Contract, for example, is concerned with obligations voluntarily assumed, often in the commercial context. Tort, by contrast, is concerned with allocating loss between a claimant who has suffered loss through no fault of their own, but at the hands (and often, unintentionally) of the defendant. Property, on the other hand, is ultimately concerned with determining which of two (usually innocent) parties’ claims to a property entitlement should take priority.”

Of course, there may be cases in which the applicable law determined by the application of Rome I or Rome II may be the same as by the lex situs. This is a matter to which I will return later in this judgment.

My attention has been drawn to a number of recent first instance decisions which relate to the drawing of the line between obligation and property claims. I propose to consider each in turn.

In Banque Cantonale de Genève v Polevent Ltd [2016] QB 394, the claimant was a bank in Geneva. One of its employees, believing that she was acting on legitimate instructions, transferred monies to an account in London held by the first defendant. In fact, the bank had been the victim of a fraud perpetrated by the first defendant. The third defendant, which also claimed to have been the victim of a fraud, had earlier obtained a freezing order against the first defendant’s London account with the result that the moneys transferred by the claimant remained in the account. The claimant brought against the first defendant, in respect of the transfer: (i) a claim for damages on the basis that the transfer had been procured by deceit and, in the alternative, (ii) a claim for restitution in unjust enrichment based on the mistaken transfer induced by fraud. It was accepted that the deceit claim arose out of a tort and so was by Article 4(1) of Rome II governed by the law of the place in which the damage had occurred, namely Geneva, but the claimant contended that, by Article 10(3) of the Regulation, the restitution claim was governed by English law as the law of the place where the unjust enrichment had taken place. The third defendant maintained that the claimant’s claim for restitution, in common with the claim in deceit, was governed by the law of Geneva either because it arose out of the tort of deceit and therefore Article 4(1) of the Regulation was applicable or because it was a claim for unjust enrichment arising out of a relationship existing between the parties and therefore, by Article 10(1), was governed by the law applicable to the relationship.

On a preliminary issue as to the law applicable to the restitution claim, the court held that while deceit explained why the transfer had been made, it was not a necessary ingredient of a claim for restitution. Therefore, the claim was not a non-contractual obligation arising out of a tort for the purposes of Article 4. A relationship for the purposes of Article 10(1) of the Regulation meant a relationship which had existed before the facts which had given rise to the claim had occurred, not the relationship of wrongdoer and victim created by the commission of a tort and that, accordingly, since there had been no relationship between the claimant and the first defendant before the events which had led to money being mistakenly paid into the latter’s account in England, Article 10(3) applied with the result that the law governing the restitution claim was the law of the country where the unjust enrichment had occurred, namely England.

It is to be noted that in Polevent the monies were not paid pursuant to a contract alleged to be voidable for fraud. The recipient had promised no consideration for the monies. There was no question, therefore, that Rome I could apply.

The claims were, in substance, directed towards the recovery of specific funds and therefore had a proprietary aspect but neither of the disputant parties had sought to argue that the claims fell outside the scope of Rome II as a consequence. Accordingly, there was simply no consideration or analysis in the judgment of what the competing arguments may have been had they been articulated.

It is further to be noted that the assets in issue in Polevent comprised monies which had simply been transferred from one bank account to another. The question as to whether or not a claim is to be categorised as essentially proprietary cannot always be resolved without considering the nature of the property involved. A proper analysis involves, as I have already observed, more than merely attaching a property label to any given dispute with the consequence of thereby removing it from the scope of application of Rome I (or, for that matter, Rome II). I have little doubt that, had the transferred monies in Polevent been thereafter invested in real property or shares in a foreign jurisdiction, the issue of whether or not some of the issues arising were proprietary in the strong sense would have arisen. The potential significance of the form of the assets which are the subject matter of any issue concerning the determination of applicable law is a matter to which I will return later in this judgment.

The next case in time is Dhir v Flutter Entertainment Plc[2021] EWHC 1510 (QB) which came before Griffiths J. In that case, one Dubai businessman, the claimant, advanced money to another with the intention that it should be invested in property in Dubai. The latter, however, squandered the money on gambling and it ultimately passed into the hands of the defendant. The claimant sought to recover the money by advancing a claim for a proprietary remedy. One way in which he put his case was on the basis that a Quistclose trust had arisen because the money was intended to be applied for a specific purpose, namely investment in property, which had not been carried out. This argument failed because the court found that the transaction amounted to no more than a loan giving rise to a claim in debt and not a trust. Nevertheless, the judge made it clear that, even if such a claim had been made out, it would have been defeated by the application of Dubai law consequent upon the application of the Rome I regulations.

It is to be noted that in Dhirthe dispute concerning the applicable law involved a choice between Dubai law and the law of the Dubai International Financial Centre. There was never any suggestion that English law would apply to the issues arising under the contract and falling within Article 12.

Having decided that there was no Quistclose trust arising, what the court went on to say about the application of Rome I was obiter and expressed in these terms:

“180.

Another difficulty is that there is no such thing as a Quistclose trust under the applicable law, which was the onshore law of Dubai. Article 12(1) of Rome I provides that the applicable law will govern, not only interpretation and performance, but also "within the limits of the powers conferred on the court by its procedural law, the consequences of breach" (Article 12(1)(c) of Rome I). On the face of it, that means a remedy not available under the applicable law should not be awarded by this court as the lex fori . That is consistent with the view expressed, albeit tentatively, in Dicey, Morris & Collins on the Conflict of Laws (15th edition) at para 32-155 and, if necessary, I would apply it to this case.”

The issue addressed in Dhir was not whether or not Rome I applied (which was not in dispute) but what the consequences of its application would be. As with Polevent, no argument was articulated to the court to suggest that the applicable law was determined by the rules relating to property. This is not, perhaps, surprising since the transaction under which the money paid to the defendant took place in Dubai and so the lex situs for the purposes of a property law analysis would also have been Dubai.

However, this analysis is potentially of more relevance to the Applicants’ Claim 4 and would tend to suggest that, once the applicable law of the contract has been determined by the application of Rome I, English law cannot ordinarily be deployed to provide a trust analysis which supplements the remedies available under that foreign law.

The claim in Kazakhstan Kagazy Plc v Zhunus [2021] EWHC 3462 (Comm) arose out of a long-running fraud perpetrated against the claimants by one Maksat Arip in Kazakhstan. An earlier judgment had established liability. The claimants, however, thereafter sought to enforce the judgment against assets including London properties and approximately £72 million held in a Swiss bank account. The assets were alleged to represent the proceeds of funds misappropriated from the claimants and subsequently channelled through Exillon shares and corporate/trust structures.

Henshaw J upheld the claimants' tracing claim. Despite Kazakh law governing the duties originally breached by Arip, the absence of an equivalent doctrine of equitable tracing under Kazakh law was found not to preclude the claimants from tracing the proceeds through to the assets by the application of English equitable principles. The critical question was whether the relevant Kazakh law duties were sufficiently analogous to fiduciary duties in English law. The court concluded that they were.

The court analysed the competing arguments as to whether English or Kazakh law was to be applied to the claims in the following way:

“TRACING

(1)

Governing law(s)

84.

The Defendants submit that the tracing claim is governed by Kazakh law, and that that law does not recognise the concept of tracing. I deal here with which law(s) apply to the tracing claim.

85.

The general rule as to disputes over real property is stated as follows in Dicey, Morris & Collins, "The Conflict of Laws" (15th ed.):

"Rule 132:

All rights over, or in relation to, an immovable (land) are (subject to the Exception hereinafter mentioned) governed by the law of the country where the immovable is situate (lex situs)"

86.

Dicey § 23-063 states that this general principle is "beyond dispute, and applies to rights of every description. It is based upon obvious considerations of convenience and expediency. Any other rule would be ineffective, because in the last resort land can only be dealt with in a manner which the lex situs allows "...

87.

On that basis, the starting point is that questions of title to the Properties are governed by English law.

88.

The Supreme Court in Akers v Samba [2017] AC 443 stated it to be settled law that " the situs or location of shares and of any equitable interest in them is the jurisdiction where the company is incorporated or the shares are registered " (§ 19 per Lord Mance, § 80(1) per Lord Sumption).

89.

It would follow that, insofar as relevant, questions of title to the Exillon shares, whose proceeds (a) were used to purchase the Properties and (b) remain in the form of the £72 million in the BJB account in Switzerland, would be likely to be governed by Manx law, Exillon having been incorporated in the Isle of Man. A possible alternative would be English law on the basis that the shares were traded on the London Stock Exchange. The parties have in any event agreed that, so far as relevant to these claims, Manx law is the same as English law.

90.

It is debatable which law governs title to the £72 million itself. The most obvious candidates appear to be (a) Swiss law, as the lex situs of the account, or possibly (b) Manx law, as the law governing title to the shares whose proceeds the money represents (see above). However, (a) no party has pleaded that Swiss law applies, nor sought to call expert evidence on Swiss law nor otherwise adduce evidence of Swiss law: and absent such evidence, the court will apply English law; and (b) as already noted, the parties agreed Manx law to be the same as English law for present purposes.

91.

Although English law, or a law presumed to be the same as English law, thus applies to questions of title (as such) to the Properties and the £72 million, the court may still need to have regard to Kazakh law when considering whether the English law preconditions for a tracing claim are met. It is generally a pre-condition of tracing in equity that there be a fiduciary relationship which calls the equitable jurisdiction into being (Agip (Africa) Ltd v Jackson [1991] Ch 547 , 566H (CA) per Fox LJ). (The qualification 'generally' reflects the point I discuss later in relation to tracing following theft absent any pre-existing fiduciary duty.) It is for the English court to decide whether there was a fiduciary relationship: relationships governed by foreign laws with no concept of equity as such can nevertheless be capable of being characterised as fiduciary. However, in deciding whether the relationship is fiduciary, it is necessary to consider the duties to which the defendant was subject, namely the duties arising under the law governing his relationship with his principal or beneficiary. Hence in Kuwait Oil Tanker Company S.A.K. v Al Bader [2000] 2 All ER (Comm), the Court of Appeal considered and approved the judgment of Chadwick J in Arab Monetary Fund v Hashim (15 June 1994 unreported). The primary claims were for conspiracy. However, in the course of considering the claimants' alternative claim for equitable relief based on breach of fiduciary duties Nourse LJ said:

"192.

In our judgment both the decision of Chadwick J in Arab Monetary Fund v. Hashim and the judge's application of it to the present case were correct. In Hashim the claimant sought recovery from the defendants on the grounds that they had acted in breach of fiduciary duties under the law of Abu Dhabi. Chadwick J said:

"In the context of a claim to invoke its equitable jurisdiction it is for the English court to decide whether the necessary fiduciary relationship exists. Where the duties to which a relationship gives rise are determined by foreign law, the question for the foreign law is what is the nature of those duties. It is for the English court to decide whether duties of that nature are to be regarded as fiduciary."

Later, having referred to a passage in the judgment of the Privy Council delivered by Lord Templeman in A.G. for Hong Kong v. Reid [1994] 1 AC 324, 331 , and to what is now rule 200 in Dicey and Morris's Conflict of Laws , Chadwick J continued:

"I find nothing in the rule which is inconsistent with the view that, in cases involving a foreign element in which an English court is asked to treat a defendant as a constructive trustee of assets which he has acquired through misuse of his powers, the relevant questions are: (i) what is the proper law which governs the relationship between the defendant and the person for whose benefit those powers have been conferred, (ii) what, under that law, are the duties to which the defendant is subject in relation to those powers, (iii) is the nature of those duties such that they would be regarded by an English court as fiduciary duties and (iv), if so, is it unconscionable for the defendant to retain those assets."

193 Our only possible criticism of Chadwick J's judgment is that he too referred to the defendants in that case being treated by English law as constructive trustees and not as actual trustees. There may have been special reasons for that. But whether there were or not, the inaccuracy of the description can have had no effect on the principles by which the defendants were held liable. In the present case the answers to Chadwick J's four questions are the following: (i) the proper law which governed the relationship between the defendants and the claimants was the law of Kuwait; (ii) the duties imposed on the defendants by arts 264 and 267 of the 1980 Civil Code were to make restitution in respect of the sums misapplied by them respectively; (iii) the nature of those duties was such that they would be regarded by an English court as fiduciary duties; and (iv) it would be unconscionable for the defendants to retain the funds. We accordingly hold that the claimants' alternative case is made out."

92.

This approach is reflected in Dicey rule 172(2). Rule 172 states:

"(1)

The law applicable to a cause of action or issue determines whether a person is required to hold property on constructive or resulting trust.

(2)

Where the law applicable to a cause of action or issue requires a person to disgorge a benefit but does not know the concept of a constructive or resulting trust, the court may nonetheless regard that person as holding on a constructive or resulting trust, provided that no European or international instrument requires otherwise.

(3)

Where a constructive or resulting trust arises in accordance with sub-paragraphs (1) and (2), the law applicable to that trust is determined in accordance with Rule 168."…

Dicey adds in the commentary at § 29-083:

"Clause (2) of the Rule recognises that English courts have, at common law, considered constructive trusts to arise in circumstances where such trusts are unknown by the law governing the underlying cause of action, provided that the lex causae considers that the defendant owes obligations which would impose on him under that law a liability to disgorge a benefit. If so, an English court may hold him liable as constructive trustee when giving remedial effect to the substantive right arising under the lex causae."

citing inter alia the Arab Monetary Fund and Kuwait Oil Tanker cases.

93.

Thus the court has to decide whether duties imposed by the relevant foreign law are to be regarded as fiduciary. If so, then subject to the broader questions as to applicable law considered earlier, English equitable principles relating to tracing and following can be invoked. I therefore do not accept the Defendants' proposition that if the law governing the relationship between the defendant and the person to whom he owed the duties – here Kazakh law – does not recognise tracing then no tracing claim can lie. In case I am wrong in that view, I consider later whether Kazakh law would in fact allow the Claimants to recover assets such as the Properties representing the proceeds of Mr Arip's fraud.

94.

Dicey also contains a discussion of the law governing unjust enrichment, equitable claims and negotiorum gestio , beginning with the following rule:

"Rule 257

(1)

A non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, which concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict which is closely connected with that unjust enrichment, is governed by the law which governs that relationship.

(2)

Where the law applicable cannot be determined on the basis of clause (1) and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country applies.

(3)

Where the law applicable cannot be determined on the basis of clauses (1) or (2), the law of the country in which the unjust enrichment took place applies.

(4)

Where it is clear from all the circumstances of the case that the noncontractual obligation arising out of unjust enrichment is manifestly more closely connected with a country other than that indicated in clauses (1), (2) and (3), the law of that other country applies.

(5)

Notwithstanding clauses (1)-(4) above, the parties may agree to submit a non-contractual obligation arising out of unjust enrichment to the law of their choice" (citing, as to (5), with Regulation (EC) 864/2007, Art.14 , i.e. the Rome II Regulation on the law applicable to non-contractual obligations)."

95.

If applied to the present case, rule 257(1) would indicate that a claim against Mr Arip or Arka-Stroy based purely on the initial payments from the Claimants to Arka-Stroy would be governed by Kazakh law, which is the conclusion I have already reached and which the Claimants accept. However, insofar as the present case can be regarded as a claim for unjust enrichment, the Defendants have ultimately been unjustly enriched by reason of their legal ownership of the Assets, i.e. the Properties in England and funds in a bank account in Switzerland. Further, any unjust enrichment does not arise out of a relationship existing between the Claimants and the Defendants within rule 257(1). The application of rule 257(3), failing which rule 257(4), would therefore point to English law and (as regards the funds) Swiss law (which in the present case has not been shown to differ from English law).

96.

It is, though, doubtful whether rule 257 would apply to the present case at all. The commentary in Dicey on 'proprietary restitution' notes that:

"Scholars are divided as to the legal foundations of proprietary restitution in English law. Some argue that it is founded upon unjust enrichment. Others contend that such claims are distinct from the law of unjust enrichment and are founded upon the vindication of property rights. If replicated for choice of law purposes, the former view might lead to the application of the choice of law rules for unjust enrichment; the latter view might suggest that they should be classified as proprietary for domestic and choice of law purposes. The latter view would mean that the Rome II Regulation was inapplicable to such claims, since it is concerned with the law of non-contractual obligations and not with the law of property." (36-075, footnotes omitted)

97.

Dicey also includes a somewhat inconclusive discussion of tracing claims at §§ 36-096 to 36-100:

"36-096 It may be necessary for a person to demonstrate that the assets received by the defendant are the claimant's property. If the question is whether the claimant was the original owner of that property, or whether his equitable interest is defeated by, for example, a bona fide purchaser for value without notice, the question is one of property law.

36-097 Greater difficulty arises where the question is whether the claimant's property can still be identified in the hands of the defendant. If the claimant is able to rely on the choice of law rules which deal with transfers of property in order to show that the defendant has his property, he will be able to rely on the same choice of law rule to "follow" that property if it has not changed its form from one person to another. Where property has changed its form, the question may arise whether the claimant's original property can be "traced" through mixture or substitution. In English domestic law, it has been said of tracing that: "In truth, tracing is a process of identifying assets; it belongs to the realm of evidence. It tells us nothing about the legal or equitable rights to the assets traced." This is on the basis that a person who can identify asset through mixture or substitution cannot actually claim them unless he can also show a claim to the original assets, and may yet be defeated by the acquisition of title by a third party purchaser. But such a description should not lead to tracing being classified as "procedural" as tracing may be a necessary step to the assertion of substantive rights.

36-098 The better view is that the lex causae should determine whether a party can trace and that tracing should not be subject to an independent choice of law rule. Frequently, this will lead to the application of property choice of law rules, where a legal or beneficial owner of property asserts that his rights have not been defeated by mixture or substitution. But it may not inevitably do so. For instance, a claim for damages for knowing receipt should, for choice of law purposes, be classified as a non-contractual obligation. If, according to the law governing that obligation, it is necessary to show that the recipient did actually receive the traceable proceeds of the claimant's property through mixture or substitution, it is suggested that that law's rules of tracing should apply, so as not to distort the coherent application of that law and not to lead to recovery where it would not be possible by the lex causae because the assets are, by that law, untraceable.

36-099 When tracing in equity, the fact that the money may have passed through other jurisdictions which would not have recognised the concept of beneficial ownership is irrelevant, for these intermediate laws are not the lex causae. Where English law is the lex causae, the rules of tracing in equity do not require there to have been a fiduciary relationship arising under each law through whose jurisdiction the funds were passed, or for the concept of a trust to be known in each legal system.

36-100 Where it is sought to trace assets of a trust falling within the ambit of the Recognition of Trusts Act 1987 , special rules are applicable …" (footnotes omitted)

98.

It is notable that the discussion in the penultimate paragraph suggests that the 'lex causae' should be applied when determining, at the outset, whether a fiduciary relationship exists. Similarly, there is a suggestion in the discussion of fiduciary duties (for which no authority is cited) that the Kuwait Oil Tanker approach might not be appropriate in a case to which the Rome II Regulation applies:

"Where the Rome II Regulation applies, the law applicable to the prior relationship (insofar as it falls within the ambit of the Regulation) or the law putatively applicable to the non-contractual obligation (where there is no prior relationship) determines whether a fiduciary relationship exists and whether the fiduciary is under an obligation to compensate the principal or to make restitution of a benefit received. This means that if, by the lex causae, a fiduciary relationship exists, the English courts will recognise it, even if such a relationship would not have arisen on the facts in English domestic law. Conversely, at common law, English courts were sometimes confronted with the difficulty that many legal systems are unfamiliar with the concept of a fiduciary duty. In Kuwait Oil Tanker SAK v Al Bader, the Court of Appeal held that in such a case, the correct approach was to enquire: (1) what was the proper law of the relationship between the defendant and the person for whose benefit the powers and duties are created; (2) what, under that law, are those duties; (3) whether these duties, thus defined, have the general characteristics of being fiduciary according to English standards; and, if so, (4) whether it is unconscionable for the defendant to retain the assets. Where the Rome II Regulation applies, however, there appears to be no basis for the court routinely to "translate" foreign duties into fiduciary duties and it should apply the lex causae directly." ( Dicey § 36-072)

99.

However, that begs the question of whether the Rome II Regulation applies. Dicey recognises in § 36-096, quoted above, that the question of whether a claimant was the original owner of property, or whether his equitable interest is defeated by, for example, a bona fide purchaser for value without notice, is a matter of property law. The fundamental nature of the Claimants' claim in the present case is a proprietary one: they allege that Mr Arip stole their funds, and that those funds have through a series of steps been converted into the Assets. At least in those circumstances, I consider that the principles set out in §§ 85-93 apply, and that I am bound by the decisions cited there. I accordingly conclude that English law should be applied, subject to consideration at the first stage of whether the duties Mr Arip owed to the Second Claimant under Kazakh law would in English law be regarded as fiduciary in nature.”

I have reproduced this passage in its entirety because, in contrast to Polevent and Dhir, the analysis directly addressed and analysed the competing but distinct spheres of operation of the Rome Regulations and property issues.

The decision is relied upon by the Applicants in support of their contention that neither Rome I nor Rome II apply to their applications. There are, however, obstacles in the way of applying the outcome of the decision in Zhunus to provide a sure guide to the way in which the applicable law issues should be determined in the instant case. There are important differences between issues arising in the present case and in Zhunus. It is to be noted that the claim in Zhunus was advanced against third-party assets through tracing and did not require the court to consider the consequences of nullity or avoidance of contracts governed by Rome I.

I will now proceed to consider a number of issues arising from the decision which are of particular relevance to the task of considering the applicable law issue in the instant case.

By way of preliminary observation, the analysis of Henshaw J is focused on the availability of a tracing procedure rather than upon the law applicable to the initial wrongdoing. As he observed, "the court may still need to have regard to Kazakh law when considering whether the English law preconditions for a tracing claim are met." Its potential significance is therefore more closely directed to the Applicants' Claim 4 than to Claim 1.

I note that, in paragraph 87 of his judgment, Henshaw J identified the English law of property to be the “starting point” in his analysis. For my own part, I consider that, at least in the circumstances of the instant case, it is preferable to begin with a consideration of the scope of Rome I rather than pre-emptively to carve out an exception to its application by first delineating the contours of English domestic property law. It is to be noted that the Applicants in the instant case presented their arguments in much the same order as that followed by Henshaw J. This, in my view, is to put the cart before the horse. Consideration of the scope of Rome I (or Rome II) is here an integral part of the starting point of the characterisation exercise, not its end point. This does not mean that the conclusion which Henshaw J reached was wrong but only that the route he took was not, in my view, the most apt means of identifying the applicable law in the circumstances of the case before me. It may well be that his approach simply reflected the way in which the parties advanced their respective cases before him, since the judgment does not consider any alternative process of analysis and does not engage in any detailed examination of the terms of Rome II before concluding that it does not apply.

In Zhunus the property involved comprised shares in Exillon, an oil company. The proceeds of the shares went partially into the purchase of real estate with another part remaining liquid in a Swiss bank account.

In so far as the court in Zhunus was concerned with real property, the practical challenges of applying foreign law to land in England were identified but that consideration does not apply in the instant case.

The question was most recently addressed by the Supreme Court in Kireeva v Bedzhamov [2025] A.C. 812:

“1.

It is an established principle in many national legal systems, including the common law of England and Wales, that questions as regards rights to and interests in land and other immovable property are governed by the law of the country in which the property is situated (the lex situs) and that jurisdiction to decide those questions belongs to the courts of that country. Where immovable property is situated in country A, neither the law nor the courts of country A will recognise or give effect to any laws or judicial decisions of other countries which purport to govern or decide issues of rights to and interests in that immovable property, save to the extent of any exceptions under the law of country A. In this judgment, we refer to this principle of private international law, as applied to immovable property in England and Wales, as “the immovables rule”.”

The considerations providing justification for the immovables rule were set out, in so far as is material, in the following terms:

“THE IMMOVABLES RULE

25.

It is the special nature of land that has given rise to the immovables rule, as a result of which a foreign court has no jurisdiction to make orders in respect of land in England and Wales and rights relating to such land are governed exclusively by the law of England and Wales.

26.

Dicey, Morris & Collins, The Conflict of Laws , 16th ed (2022), state the jurisdictional rule, as applied to land in England, as follows:

“Rule 139—A court of a foreign country has no jurisdiction to adjudicate upon the title to, or the right to possession of, any immovable situate outside that country.”…

31.

Professor Adrian Briggs notes (Private International Law in English Courts , 2nd ed (2023), p 619) that the connection between the subject of the proceedings and the law which will apply to it is stronger and closer in the case of land and the lex situs than is the case with any other rule of private international law. Cheshire, North & Fawcett: Private International Law , 15th ed (2017), p 1256, affirming comments by Hay, Borchers & Symeonides, Conflict of Laws, 5th ed (2010), p 1231, consider that “There is no doubt … that the law of the situs has a powerful interest in its rules being applied to a wide range of matters—essentially ‘with the manner in which land is used, occupied or developed’.” The editors of Dicey, Morris & Collins consider (para 24-003) that a modern justification for the rather special position of land in most legal systems is that important social questions may be involved, such as housing policy and tenants’ rights, and the relevant legislation may be regarded as embodying public policy.

32.

These rules are a particular manifestation of wider principles of the sovereignty, equality and independence of states in international law…

36.

The immovables rule, as applied in any jurisdiction, also has a sound basis in practical considerations. The editors of Dicey, Morris & Collins refer, with regard to jurisdiction (at para 24-003), to the facts that proceedings concerning land may involve inspections of the property or of local records which can be carried out only by the courts of the situs and that any judgment that may be given will normally be enforceable only with the co-operation of the courts of the situs. As they point out (at para 24-046), in the last resort only the courts of the situs can control the land and the rights *829 of the parties thereto. They further explain with regard to choice of law, at para 24-069:

“As a general rule, all questions that arise concerning rights over immovables (land) are governed by the law of the place where the immovable is situate (lex situs). The general principle is beyond dispute, and applies to rights of every description. It is based upon obvious considerations of convenience and expediency. Any other rule would be ineffective, because in the last resort land can only be dealt with in a manner which the lex situs allows.””

There are no immovables involved in the instant case and so I make no further comment on the issue.

In Zhunus, the court went on to extend the parameters of its property analysis to the shares in Switzerland with reference to Akers. Again, this step was taken both before and independently of any consideration of the application of Rome II.

In any event, consideration of the situs with respect to shares has been the object of specific consideration and analysis by the courts which recognise their particular characteristics all of which are absent from the circumstances of this case.

Most recently, Lord Hodge observed in Al-Thani v Al-Thani [2024] UKPC 35:

“[39] It is unavoidably less straightforward to determine the situs of incorporeal movable property (or intangibles) such as debts, securities or shares, than the situs of corporeal property. In the leading modern English law case in relation to the situs of shares, Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387, the Court of Appeal of England and Wales was concerned with a question as to who had the better right to ownership of shares in a New York corporation, Berlitz International Inc (‘Berlitz’). Berlitz was incorporated in New York and had its share register there. One party to the competition was Macmillan Inc (‘Macmillan’), which was controlled by the late Robert Maxwell, who, contrary to Macmillan’s interests, had arranged that Bishopsgate Investment Trust plc, which he and his family controlled and which held the Berlitz shares on trust for Macmillan, pledged those shares to three banks in security for loans to his private interests. The opposing parties were the three banks which had taken the shares as security for the loans and claimed to be transferees for value without notice of Macmillan’s interest. The judges of the Court of Appeal (Staughton, Auld and Aldous LJJ) each considered that this proprietary issue was to be determined by the lex situs. Staughton LJ stated (p 399F–G): ‘The general rule, which is subject to exceptions, appears to me to be that issues as to rights of property are determined by the law of the place where the property is.’ He concluded (p 405A–B) that in the ordinary way, unless the shares were negotiable instruments by English law, the lex situs of shares is the law of the place where the company is incorporated, but he left open the possibility of cases where the lex situs is the law of the place where the shares are registered. Auld LJ came to a similar conclusion in favour of New York as the situs of the shares, holding (p 411E) that the lex situs of the shares would normally be where the share register is kept, but not always the country of incorporation. Aldous LJ also considered that the appropriate law to determine the issue as to priority to the shares is the lex situs which is the same as the law of incorporation (p 424F–G). The judges’ differing views as to the significance of the place of the register or the place of incorporation were immaterial in that case as both were New York.”

It is to be noted that this is an authority which did not involve consideration of the Rome Regulations and that, even in the case of shares, the adoption of the lex situs of the place of registration or incorporation of the company was not mandated in every case but rather identified to be the general rule subject to exceptions.

Furthermore, in the particular case of shares, there are good practical reasons why the lex situs of the place of register or incorporation of the company should normally be applied in any given case. Unlike a physical object, a share cannot literally be “located” in a particular place. A share represents a bundle of legal rights against the company such as voting rights and rights to dividends. The law therefore needs a workable rule for assigning it to a location.

The company and its share register provide the natural point of reference. The company is the legal person against whom the shareholder's rights are exercised. Matters such as: who is recognised as the shareholder; registration and transfer of shares; voting rights; dividends; and restrictions on transfers are principally determined through the company's constitutional and statutory framework. Locating the shares at the company's incorporation or registration jurisdiction therefore connects the proprietary rights to the legal system that governs the company. It gives third parties a predictable legal system by reference to which to direct their claims.

The incorporation/registration approach provides a relatively stable and objectively ascertainable connecting factor. A shareholder can move from one country to another without affecting the company's legal relationship with that shareholder. If the situs followed the shareholder, the applicable law could change simply because the shareholder moved to a different country.

Furthermore, the incorporation jurisdiction has regulatory control over the company. The jurisdiction of incorporation can determine the legal incidents of the shares and regulate the company's register. There is therefore a practical connection between that jurisdiction and the legal existence and transferability of the shares.

It follows that there were particularly sound reasons in Zhunus to conclude that the particular issues under consideration fell outside the parameters of Rome II so as to attract a property law analysis.

In the instant case, if the first defendant had purchased real property or shares in England using the Bitcoin with which she had arrived, then it would be perfectly consistent with the approach taken by the court in Zhunusto apply Chinese law to the identification of such rights as the Applicants had in the Bitcoin initially but English law to the availability of the process of tracing and consequent rights arising from the transactions entered into in this jurisdiction. What the court in Zhunus was not saying, however, was that the application of English law to the dispute over the property and shares somehow retrospectively altered the nature of the rights which the claimant had hitherto enjoyed by the application of Kazakh law. The court was not dealing with the characterisation of a transaction giving rise to an issue involving a tracing process in Kazakhstan.

For the reasons which I have given, I do not consider that Zhunus provides directly applicable assistance in the exercise of the determination of the applicable law to the relevant issues in the present case.

In Asturion Foundation v Alibrahim [2024] 1 W.L.R. 2947, the claimant was a Liechtenstein foundation which had been established to hold and manage certain residential properties on the founder’s behalf. One of the claimant’s board members, Mr Assaly, who claimed to be acting on instructions that had been given by the late founder, transferred the registered estate of one of the claimant’s properties, Kenstead Hall, for nil consideration to the defendant, the founder’s widow. The claimant brought a claim to recover the property, contending among other things that the transfer was void because the board member had lacked authority to make the transfer in that (i) the transfer was outside the purpose of the claimant and/or (ii) the board member had had no power under the claimant’s constitution to make the transfer while acting alone.

Claim (i) was: “A claim founded on the principle that a gratuitous disposition of property which involves a breach of fiduciary duty is liable to be rescinded without any requirement to show wrongdoing on the part of the done... Here, it is said that Mr Assaly, in effecting the transfer of Kenstead Hall, acted in breach of duties which are properly characterised as fiduciary.”

Johnson J held:

“283…it seems to me that claim (i) is essentially in the nature of an equitable tracing claim. The choice of law rules under Rome II apply in the case of non-contractual obligations, and not to claims based on the assertion of rights in property.

284.

The editors of Dicey provide the following guidance as to what may amount to a property claim, as opposed to a claim in unjust enrichment, at para 36-096, in their discussion on tracing:

“It may be necessary for a person to demonstrate that the assets received by the defendant are the claimant's property. If the question is whether the claimant was originally the owner of that property, or whether his equitable interest is defeated by, for example, a bona fide purchaser for value without notice, the claim is one of property law.” (Footnote omitted.)

285.

Applying this guidance, Henshaw J in Kazakhstan Kagazy plc v Zhunus [2021] EWHC 3462 (Comm) held that an equitable tracing claim was essentially a proprietary one and thus fell outside the scope of the choice of law rules in the Rome II Regulation.

286.

I think the same result should follow here, at least as regards claim (i). The core allegation underpinning claim (i) is that the Foundation's property—ie, Kenstead Hall—was transferred away in breach of duty and for no consideration; and that in consequence, the Foundation has a subsisting equitable interest in Kenstead Hall which justifies the transfer of legal title being reversed. Moreover, one of the key lines of defence advanced by the Princess, as I have mentioned, is that she has acquired an unimpeachable title, and so the transfer cannot or should not be reversed.

287.

I conclude that claim (i) falls outside Rome II. In my opinion it is squarely a claim to assert an ownership interest in real property in England, and thus is to be governed by English law (see Dicey, rule 140, referenced above at para 151).”

I note that this analysis relates to a basis of claim which is not, in contrast to issues arising in the instant case, founded upon the consequences of any contractual relationship between the claimant and the defendant. There was no question that the relevant issue might fall within Rome I. The starting point was a claim relating purely to an interest in property.

Moreover, the Princess in Asturion contended that she had acquired an unimpeachable title and so the transfer of the land to her could not or should not be reversed. Her position was therefore closely akin to that of a third party bona fide purchaser for value who is a recurring character in disputes to be categorised as being of a proprietary nature.

Finally, the asset in dispute was real property in England and would therefore normally be held to be subject to English law relating to immovables to which I have already referred.

It follows that there is nothing in Asturion which is inconsistent with a separate process of characterisation in the instant case to be applied to issues before and after the alleged acts of rescission on the part of the Applicants.

Claim (iv) in Asturion was “A claim in damages for knowing receipt, arising on the basis that the transfer of Kenstead Hall involved a breach of (in effect) fiduciary duty by Mr Assaly (as in (i) above), and the retention of Kenstead Hall by the Princess would be unconscionable now that she knows (even if she did not know it before) that the asset received by her is traceable to a breach of fiduciary duty…”

The judge held:

“288.

Claim (iv) is more difficult to classify. It is essentially a personal claim for damages, although it has what might be termed a proprietary base. This is made clear by the decisions of the Court of Appeal and Supreme Court in the Byers decision, which I have mentioned above. That is because of what the claim for damages is actually for, and how it arises. Where a defendant is made personally liable in equity for knowing receipt, the liability arises from having been in receipt of the claimant's property, knowing that it was transferred in breach of trust. Thus, the liability may be personal in one sense, but it arises from the fact that the defendant is in law to be regarded as the custodian of assets which in truth are not the defendant's assets at all but continue to belong in equity to the claimant (see per Nugee J as he then was in Courtwood Holdings SA v Woodley Properties Ltd [2018] EWHC 2163 (Ch) at [59] , quoted with approval by the Court of Appeal in Byers at para 74).

289.

Nonetheless, it seems to me difficult to characterise a claim for damages for knowing receipt as solely proprietary in nature. At its heart seems to be the idea that, in certain circumstances, and depending on their knowledge of the prior interest of another in it, the recipient of property comes under an obligation to that other to act in a certain way—ie, to return the property to them rather than retain it (see the Byers case in the Court of Appeal, at para 76, per Newey LJ). If that is correct, then such claims for damages seem naturally to fall within the scope of Rome II (as indicated by Dicey , para 36-062), although there is some doubt whether they properly fall within the general choice of law rule in article 4, or the special choice of law rule for unjust enrichment in article 10. I would tentatively think the former, because one is really concerned with a species of wrongdoing—ie a claim for damages for failing to return property belonging to another when under an obligation to do so.

290.

In the present case, however, I do not think it matters, since under either article 4 or article 10 I arrive at the conclusion that English law is the applicable law. I say that because in my opinion, given that one is here concerned with a failure to restore title to real property situated in England, any tort/delict (article 4), and/or any claim in unjust enrichment (article 10), is manifestly more closely connected with England than with any other country. Consequently, the relevant choice of law rules require the application of English law: see article 4(3) and article 10(4).

291.

In summary, it seems to me that English law is the governing law of both claim (i) and claim (iv), although one arrives there via different routes.”

In this passage, the judge recognises that it is insufficient to rule out the application of Rome II simply because there is in English law a proprietary element to the claim. The important question, however, is how the particular issue under consideration is to be characterised. This reasoning applies with equal force to the application of Rome I.

Again, the distinguishing features which I have identified lead me to the conclusion that Asturion falls far short of mandating me to preclude the application of either Rome I or II to the issues arising in the circumstances of the instant case.

It is important to bear in mind, in this context, that the nature of the constructive trust which is said to give rise to proprietary restitutionary rights in English law is, in itself, notoriously elusive. As Marcus Smith J observed in High Commissioner for Pakistan in the United Kingdom v Prince Muffakham Jah [2020] Ch 421:

“248.

The English law regarding constructive trusts and constructive trusteeship is notoriously woolly or—as Lewin describes it—“an elusive creature” ( Lewin on Trusts , 19th ed (2015), para 7-010). In Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 , 300, Edmund-Davies LJ noted:

“English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague so as not to restrict the court in technicalities in deciding what the justice of a particular case might demand.”

249.

As a result, the books agree that “Constructive trusts can arise over a wide variety of situations” ( Hanbury & Martin, Modern Equity , 21st ed (2018), para 12-006; see also Lewin , para 7-015), but there is little consensus over what, exactly, these situations are.”

It must follow that it would be unwise to take a “one size fits all” approach to the classification of cases involving constructive trusts for the purposes of determining the application of Rome I or II. The mere attachment of the label "constructive trust" under English law to the circumstances of any given case must not be allowed to distract from the need to examine the underlying issues more broadly.

In his Private International Law of English Courts (2nd ed., 2023), Professor Briggs concludes at p. 675:

“By contrast, trusts of the kind which arise, are recognised, or are imposed to remedy a failure to fully perform an obligation, or to prevent wrongful gains, are better viewed as being incidental to or the remedial consequences of the obligation to which they relate. Quite apart from the fact that the challenges of accommodating them to the rules of the Hague Convention scheme are just too great, they are, in most cases, responses to breaches of obligation, contractual or non-contractual. Where that is so, they would naturally fall within the domain of the retained Rome I and Rome II Regulations. While it is correct that the Rome I and Rome II Regulations are not to prejudice the application of the Hague Convention, there is nothing in the Regulations to give equivalent priority to the national law rules of private international law applicable to the trusts referred to in Section 1(2) of the 1987 Act. In consequence and in principle, trusts which are said to arise from, or which exist to give better effect to, a contractual obligation made between the parties should be governed by the lex contractus; those which result from, or which exist to give more effective measures to counter, a non-contractual wrong should be governed by the law which, according to the Rome II Regulation, governs the particular non-contractual obligation. That would locate the trust within the law dealing with remedies for breach of obligations in civil and commercial matters, which is where it belongs.”

I note, in passing, that no argument has been raised before me to the effect that the provisions of the Hague Convention scheme taken together with s.1(2) of the Recognition of Trusts Act 1987 have any part to play in the instant case.

The same author concluded in his work The Conflict of Laws (5th ed., 2024), p. 312:

“The better view always was that 'equitable wrong' was a meaningless term in the conflict of laws, and that all such cases had to be accommodated within a traditional, common law, conflicts rule. It is a relief that insofar as the claim is in a civil or commercial matter, and based on an obligation which is not contractual, it will now fall under the Rome II Regulation, with the result that the patchy history which preceded it can be mostly forgotten.”

Similarly, Professor Dickinson observes in his chapter on the Rome II Regulation in the Oxford Private International Law series (2010) at p.224:

“A trust that arises as a direct consequence of the award or availability of a particular judicial remedy for a non-contractual obligation may also, for present purposes, be seen as an integral part of that remedy rather than as a separate aspect of the parties' relationship governed by a different rule of applicable law."

I agree with these analyses. In my view, where a constructive trust is said to arise as a consequence of the breach of an underlying obligation, whether contractual or non-contractual, there is generally no principled basis for treating the trust as generating an independent choice of law rule detached from the law governing that obligation. Nor can I see any basis upon which a different approach should be taken merely because the underlying obligation is contractual rather than tortious.

The Applicants contend that different member states do not necessarily share the same property rules with respect to Bitcoin and that some may not even recognise Bitcoin as property at all. However, there is no dispute in this case that Bitcoin is property in English law and that English law as the lex situs governs that particular issue arising from the s.281 applications and not Chinese law as the lex contractus. The same approach would be expected to be followed in any member state thus accommodating national variations in the rules relating to Bitcoin without otherwise limiting the proper scope of the application of Rome I and its purpose to ensure a uniformity of approach to determining the applicable substantive law.

On the issue of tracing, it is important to bear in mind that the purchase of the Bitcoin took place in China. If, by whatever legal analysis under Chinese law, the Applicants failed to retain any property rights in the Bitcoin following this purchase, the availability of a tracing process in England cannot later re-establish them. As the House of Lords explained in Foskett v McKeown [2001] 1 A.C. 102 tracing in English law is an evidential exercise cleanly separated from the business of asserting rights in or in relation to assets successfully traced. In this case, any such process can only be deployed in English law in circumstances where under Chinese law such property rights had survived the acquisition of the Bitcoin before control of it moved to England.

I am satisfied that any limitations upon the operation of Rome I arising from the characterisation of particular issues as proprietary fall far short of precluding its application to the issues arising from the consequences of contracts and subsequent transactions, including the purchase of the Bitcoin, which were entered into in China.

In my view, the first point at which any proprietary issues truly arise in this case is when the DPP asserted a claim to the recoverable property within this jurisdiction. Indeed, it is not in dispute that the rules imposed by the statutory framework of PoCA must apply to the determination of whether the Applicants qualify for a declaration that the Bitcoin is not recoverable property in so far as their interests are concerned.

This approach does not, however, justify the retrospective application of English law to the distinct issues arising from the antecedent contractual and transactional events which occurred in China.

I turn now to the Applicants’ alternative contention that these claims relate to administrative matters. Article 1 of Rome I, as set out above, expressly states that the Regulation does not apply to administrative matters.

It is argued that civil recovery proceedings under part 5 of PoCA brought by the DPP within the statutory framework as the enforcement authority are properly categorised as administrative matters. The s.281 applications are all made within those proceedings. I am thus invited to conclude that the DPP is not pursuing a private law action or remedy.

I note, in passing, that it was contended on behalf of the Applicants that the practice direction on civil recovery proceedings expressly mandates that part 5 PoCA proceedings be commenced in the Administrative Court. However, I observe that the Practice Direction relating to civil recovery proceedings actually provides:

“Venue

2.1

Except as otherwise provided in paragraph 2.2, an application made to the High Court under Part 5 or Part 8 of the Act or Parts 4A and 5 of the Order in Council must be made in the Administrative Court.

2.2

A claim for a recovery order must be started in the Central Office of the King’s Bench Division. Where a claim for a recovery order has been issued, any interim proceedings preserving the property which is the subject of the claim will be transferred by the Administrative Court to the Central Office of the King’s Bench Division.

2.3

The preceding paragraph does not limit the power of the High Court to transfer claims or applications to or from the Central Office of the King’s Bench Division, Administrative Court, Chancery Division or specialist list of the High Court.”

In any event, I am unpersuaded that the procedural allocation of civil recovery proceedings within this jurisdiction is of any real assistance to me in interpreting the scope of Rome I.

However, the more general flaw in the Applicants’ argument, in my view, arises from the proposition that if the DPP’s application for recovery is properly categorised as an administrative act (which may well be the case) then so must the s.281 claims. This simply does not follow.

The Applicants claim that the property belongs to them by the application of the law relating to general private law rights. Theirs are not claims which either depend upon or are limited by the exercise of any powers by, or available only to, a public authority.

Furthermore, the Applicants’ approach would also lead to potentially incoherent legal consequences.

Had any given applicant made a claim against Ms Qian while she was in control of the Bitcoin in England but before the DPP had started recovery proceedings then the administrative exception could not apply and, all other things being equal, Rome I would, on my analysis, mandate that Chinese law would apply. However, applying the Applicants’ argument, upon the commencement of recovery proceedings, any claim, albeit in identical terms, under s.281 would fall outwith the scope of both Rome I and Rome II and English law would apply.

As the Supreme Court held in Aquila Advisory Ltd v Faichney [2021] 1 WLR 5666:

“33 The overarching principle of POCA is that neither a confiscation order under Part 2, nor a civil recovery order under Part 5, nor the money laundering provisions in Part 7 interfere with existing third-party property rights.”

If the commencement of civil recovery proceedings were capable of changing the applicable law, there would be a real risk that the existence and scope of pre-existing proprietary rights would depend upon whether and when an enforcement authority chose to commence proceedings thus frustrating the overarching principle identified above. I see no justification for contaminating the statutory scheme with such incoherence.

I therefore reject the argument that this is an administrative matter.

In case I am wrong to conclude that Claim 1 falls within the scope of Rome I, I shall briefly consider the position on the alternative assumption that Rome II applies.

For present purposes, I assume, contrary to the conclusion reached above, that the element of fraudulent inducements rather than the resulting contractual relationship provides the proper characterisation of the claim. As noted above, this is the DPP's primary case. Indeed, it is arguable that issues relating to the validity of the contract fall within the scope of Rome I whereas those arising thereafter fall within the scope of Rome II being more readily characterised as being tortious or delictual. The operation of the Regulations is mutually exclusive even though the consequences of the choice of either may be identical in any given case.

I repeat the observation that the mere fact that a remedy is expressed in English law through the language of constructive trust, and arises in a factual context involving a contractual relationship, does not necessarily exclude the application of Rome II. Whether a claim falls within Rome I or Rome II is not determined by domestic classifications but by the autonomous concepts employed by the Regulations themselves.

As Recital 11 to Rome II explains:

“The concept of a non-contractual obligation varies from one Member State to another. Therefore for the purposes of this Regulation non-contractual obligation should be understood as an autonomous concept...”

The objective of the Regulation is further reflected in the Explanatory Memorandum issued in connection with its implementation. Although not forming part of the Regulation itself, it describes Rome II as establishing uniform choice-of-law rules in relation to non-contractual obligations, including claims in tort and unjust enrichment, with the aim of ensuring that courts throughout the Member States ordinarily identify the same applicable law when addressing the same dispute.

Similar guidance is to be found in Recital 6, which states:

“The proper functioning of the internal market creates a need, in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict-of-law rules in the Member States to designate the same national law irrespective of the country of the court in which an action is brought.”

Article 1(1) of Rome II provides:

“This Regulation shall apply, in situations involving a conflict of laws, to non-contractual obligations in civil and commercial matters. It shall not apply, in particular, to revenue, customs or administrative matters or to the liability of the State for acts and omissions in the exercise of State authority (acta iure imperii).”

For the reasons I have already given when addressing the equivalent argument under Rome I, I do not consider that the claims advanced by the Applicants under s.281 constitute administrative matters. The rights asserted are private law proprietary rights which exist independently of the recovery proceedings and which could equally have been asserted against a private individual. Accordingly, if Rome II were otherwise applicable, I would not regard the administrative matters exclusion as removing the claims from its scope.

Article 1(2) contains a number of specific exclusions. These include:

“non-contractual obligations arising out of the relations between the settlors, trustees and beneficiaries of a trust created voluntarily”.

That exclusion is confined to voluntarily created trusts. There is no equivalent exclusion for constructive trusts or trusts arising by operation of law. Accordingly, the fact that a proprietary claim may, as a matter of English law, be analysed through the medium of a constructive trust does not itself prevent the application of Rome II.

If, contrary to my earlier conclusion, the relevant aspect of Claim 1 is properly characterised as a non-contractual obligation falling within Rome II, the applicable law falls to be determined in accordance with Article 4.

Article 4(1) provides that:

“Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.”

In the present case, the relevant damage occurred in China. The Applicants parted with their money in China. The alleged fraudulent representations were made in China. The contractual relationships thereby induced were entered into in China. The immediate economic consequences of the alleged wrongdoing were likewise suffered in China.

Nor does Article 4(2) point away from that conclusion. The victims and the perpetrators were habitually resident in China at the relevant time.

Equally, there is no basis for applying the escape clause contained in Article 4(3). It cannot plausibly be said that the alleged wrongdoing was manifestly more closely connected with England than with China. Every materially significant element of the alleged fraud, the resulting transactions and the loss sustained by the Applicants were centred in China.

Accordingly, if any aspect of Claim 1 falls within Rome II, I would conclude that Article 4 requires the application of Chinese law. Subject to any distinct issues arising in relation to tracing procedures, enforcement mechanisms, or the separate analysis of Claims 3 and 4, the result would therefore be materially the same as that reached under Rome I. The applicable law would be Chinese law rather than English law.

Also of potential relevance is Article 10 which provides:

“Unjust enrichment

1.

If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship.

2.

Where the law applicable cannot be determined on the basis of paragraph 1 and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country shall apply.

3.

Where the law applicable cannot be determined on the basis of paragraphs 1 or 2, it shall be the law of the country in which the unjust enrichment took place.

4.

Where it is clear from all the circumstances of the case that the non-contractual obligation arising out of unjust enrichment is manifestly more closely connected with a country other than that indicated in paragraphs 1, 2 and 3, the law of that other country shall apply.”

If, contrary to my primary conclusion, any aspect of Claim 1 were to be characterised as giving rise to a non-contractual obligation arising out of unjust enrichment, Article 10 would likewise point overwhelmingly towards the application of Chinese law.

In the first instance, Article 10(1) directs attention to any pre-existing relationship between the parties which is closely connected with the alleged unjust enrichment. On the Applicants’ own case, the transfers of value which they seek to recover were made pursuant to arrangements entered into in China following representations allegedly made in China by Chinese residents to Chinese residents. Any relationship from which the alleged unjust enrichment arose was therefore centred in China and governed by Chinese law.

Even if Article 10(1) did not apply, Article 10(2) would lead to the same conclusion. The victims and perpetrators were habitually resident in China when the relevant events occurred.

Nor would Article 10(3) assist the Applicants. The alleged enrichment occurred when funds were obtained from the Applicants in China and became available to the operators of the scheme there. The substance of the enrichment was therefore located in China rather than England.

Finally, there could be no realistic basis for invoking Article 10(4). Looking at the circumstances as a whole, this case is manifestly and overwhelmingly more closely connected with China than with England. The representations, the parties, the transactions and the immediate consequences of the alleged wrongdoing were all centred in China.

Accordingly, if any element of Claim 1 falls within Article 10 of Rome II, I would conclude that Chinese law is the applicable law.

It follows that the Applicants can derive no assistance from Rome II. Whether the claim is analysed under Article 4 as a tortious or delictual obligation, or under Article 10 as an obligation arising from unjust enrichment, the applicable law would be Chinese law.

If I am wrong in concluding that the relevant issues fall within either Rome I or Rome II and they are properly to be characterised as disputes concerning competing interests in property, the applicable law falls to be determined by the common law rules of private international law.

On that footing, the central task is to identify the lex situs in respect of the particular proprietary issues which arise. As with the analysis under the Rome Regulations, characterisation must be undertaken on an issue-by-issue basis. The question is therefore not where the disputed assets happened to be located when the proceedings were commenced but which system of law governs the proprietary questions said to arise from the transactions upon which the Applicants rely.

In Akers, Lord Sumption observed at paragraph 80 “The transmission of property is governed by the lex situs…” [Emphasis added].

That principle directs attention to the law governing the acquisition, transfer and transmission of the proprietary rights in issue. The location of the property at the time when such rights are said to arise and the location of the property at some later stage in its history are not necessarily the same.

The process relied upon by the Applicants under Claim 1 is the alleged acquisition of proprietary rights arising from payments made pursuant to fraudulent inducements and the subsequent rescission of the relevant transactions. The proprietary interests said to arise are therefore traced back to the original dealings between the Applicants and the operators of the scheme.

Those dealings were overwhelmingly centred in China. The Applicants were resident in China. The alleged fraudulent representations were made in China. The payments were made in China. The monies thereby obtained were received in China and, so far as presently material, were converted into Bitcoin in China.

The Applicants do not identify any subsequent dealings on the part of Ms Qian with the Bitcoin in England which themselves generated distinct proprietary issues requiring separate analysis. Nor is this a case in which competing proprietary claims arise out of a later transaction occurring within this jurisdiction. The proprietary rights asserted under Claim 1 are said to derive directly from the original transactions and their alleged legal consequences.

In those circumstances, I consider that the proprietary questions raised by Claim 1 are most closely connected with China. To treat the later presence of the Bitcoin in England as determinative would risk conflating the location of an asset at the time of recovery proceedings with the law governing the original transmission of the proprietary rights which the Applicants seek to assert.

Accordingly, if the relevant issues are characterised at common law as proprietary rather than contractual, tortious or restitutionary, I would nevertheless conclude that the applicable law is Chinese law as the relevant lex situs.

For all of the above reasons, and applying the three-stage approach identified in Macmillan, I conclude that Claim 1 does not lead to the application of English substantive law.

Whether analysed through the prism of Rome I, Rome II, or the common law rules applicable to proprietary questions, the governing law of the issues upon which the Applicants rely is Chinese law. English law is engaged only to the limited extent, which is common ground between the parties, that the statutory procedural machinery provided by Part 5 of PoCA governs the manner in which those rights arising under Chinese law fall to be asserted and determined before this Court. Of particular significance in this regard will be the question of whether the rights acquired by any given Applicant by the application of Chinese law to all antecedent issues are such as to entitle that Applicant to establish that the property belongs to them for the purposes of s.281.

The Applicants rely on what is described as an Instrument of Fraud Constructive Trust as follows:

“In the alternative, the s.281 Applicants contend that by application of English law: (a) their investment payments were received by the recipients of those payments on constructive trust on the basis that the purported investment contracts were instruments of fraud (applying Westdeutsche Landesbank Girozentral v Islington Borough Council [1996] AC 669 at 716C-D, Martin J Halley v Law Society [2003] EWCA Civ 97 at [45]-[48] and D'Aloia v Persons Unknown [2024] EWHC 2342 (Ch) at [340]-[341]); and (b) they are entitled to trace that proprietary constructive trust interest in equity through all subsequent dispositions of the proceeds of those payments into the Property which forms the subject of these proceedings.”

At the hearing, however, the Applicants did not seek to advance Claim 2 as an independent basis of recovery and instead sought to subsume it within Claim 4. In my view, that approach reflects a significant difficulty inherent in the structure of the claim.

The premise of Claim 2 is fundamentally different from that underlying Claim 1. Claim 2 proceeds on the basis that, from the moment the payments were received, the recipients held them upon constructive trust for the Applicants. If that analysis is correct, the Applicants never ceased to enjoy the beneficial interest in the property represented by those payments and any substitute assets into which they were converted.

On that footing, the Applicants' rights would arise immediately upon receipt of the monies under the fraudulent scheme. They would not depend upon any subsequent rescission of the transactions or upon the later recognition of an equitable proprietary interest by an English court.

It follows that the events giving rise to the alleged proprietary interests relied upon in Claim 2 occurred entirely in China. The alleged fraudulent representations were made in China, the payments were made in China, the monies were received in China and, so far as presently material, the conversion of those monies into Bitcoin likewise occurred in China.

Accordingly, if the Applicants' analysis under Claim 2 is correct, the claim is even more closely connected with China than Claim 1. The alleged trust would have arisen, if at all, at the moment of receipt of the monies in China.

For that reason, if, as I have concluded, Chinese law governs the matters relied upon under Claim 1, it follows a fortiori that Chinese law must also govern the rights asserted under Claim 2.

Moreover, Claims 1 and 2 rest upon materially different analyses of the legal consequences of the original transactions.

Claim 1 proceeds upon the basis that the Applicants initially transferred beneficial ownership under transactions which were merely voidable and which subsequently became susceptible to rescission, thereby generating the proprietary consequences upon which the claim is founded. Claim 2, by contrast, proceeds upon the basis that the beneficial interest never left the Applicants at all because the recipients held the monies upon constructive trust from the outset.

Those analyses cannot simultaneously describe the true legal position in relation to any particular payment. Either the beneficial interest passed, subject to a right of rescission, or it did never pass because a trust arose immediately upon receipt. Although the Applicants are entitled, as a matter of pleading, to advance alternative cases, the underlying legal rights are not matters of election.

I therefore reject the submission that it is simply a matter for the Applicants to choose between Claims 1 and 2 according to whichever basis appears more advantageous from a conflicts perspective. The applicable law must be determined by reference to the legal nature of the rights which in fact arose, not by reference to the forensic manner in which those rights are ultimately pleaded.

In any event, even if I am wrong in that analysis and the Applicants are entitled to pursue Claim 1 without regard to whether Claim 2 ultimately proves to be correct, that would not affect the conclusion which I have already reached in relation to Claim 1. For the reasons set out above, Claim 1 itself is governed by Chinese law.

Accordingly, Claim 2 provides no independent basis for the application of English law. On the contrary, if the constructive trust analysis advanced under Claim 2 is correct, it serves only to reinforce the conclusion that the issues thereby arising are governed by Chinese law.

The Applicants advance a further alternative argument based upon the statutory tracing provisions contained in Part 5 of PoCA. They contend:

“In the further alternative, the s.281 Applicants contend that the principle stated by sections 305 and 306 of POCA, which addresses the tracing of property obtained through unlawful conduct for the purpose of identifying property as recoverable, should be applied, by parity of reasoning, to identify, within that recoverable property, property which is to be regarded as belonging to the s.281 Applicants.”

The argument therefore seeks to derive from the statutory provisions governing recoverable property an analogous principle applicable to the determination of ownership under s.281.

Sections 304 to 310 appear under the heading "Recoverable Property" and form part of the statutory code by which Parliament has defined the assets liable to civil recovery.

Section 305 provides:

“305 Tracing property, etc

(1)

Where property obtained through unlawful conduct ("the original property") is or has been recoverable, property which represents the original property is also recoverable property.

(2)

If a person enters into a transaction by which:

(a)

he disposes of recoverable property, whether the original property or property which (by virtue of this Chapter) represents the original property, and

(b)

he obtains other property in place of it,

the other property represents the original property.

(3)

If a person disposes of recoverable property which represents the original property, the property may be followed into the hands of the person who obtains it (and it continues to represent the original property)."

Section 306 provides:

“306 Mixing property

(1)

Subsection (2) applies if a person's recoverable property is mixed with other property (whether his property or another's).

(2)

The portion of the mixed property which is attributable to the recoverable property represents the property obtained through unlawful conduct.

(3)

Recoverable property is mixed with other property if (for example) it is used:

(a)

to increase funds held in a bank account,

(b)

in part payment for the acquisition of an asset,

(c)

for the restoration or improvement of land,

(ca)

for the discharge (in whole or in part) of a mortgage, charge or other security,

(d)

by a person holding a leasehold interest in the property to acquire the freehold."

The interpretative provisions in s.316 merely provide that the expression "recoverable property" is to be read in accordance with ss.304 to 310. They contain no indication that those provisions are intended to govern the distinct question arising under s.281 whether property "belongs to" a particular applicant.

Indeed, as I have already observed, PoCA contains no statutory definition of the phrase "belongs to" for the purposes of s.281.

In my judgment, the concept of recoverable property and the concept of property belonging to a s.281 applicant are analytically distinct. The former is a statutory construct directed to identifying the scope of property susceptible to civil recovery by an enforcement authority. The latter is concerned with the existence and extent of private proprietary rights which are asserted to have arisen independently of the statutory scheme.

The statutory tracing provisions serve the former purpose. They enable property derived from unlawful conduct to remain recoverable notwithstanding substitutions, dispositions or mixing. They do not purport to create, define or enlarge the proprietary rights of third parties.

There is nothing in the language of ss.304 to 310 which suggests that Parliament intended the statutory concept of recoverable property to be imported into the determination of ownership under s.281. Had such a result been intended, one would expect clear language to be deployed to that effect. No such language appears.

Nor is there any authority supporting the construction advanced by the Applicants. On the contrary, in Robb, Sir Terence Etherton C. stated at para 56:

"Sections 304 to 307 and 308(1) of PoCA lay down statutory rules for following and tracing recoverable property, which broadly mirror ordinary principles of law and equity. There are no similar statutory provisions applicable to a victim who seeks to show that property belongs to him or her for the purposes of an application for a declaration under section 281."

That observation is difficult to reconcile with the Applicants' submission. It recognises that Parliament enacted specific tracing rules for the purpose of identifying recoverable property, whilst simultaneously declining to enact corresponding provisions governing claims brought under s.281.

In those circumstances, I do not accept that the tracing regime contained in ss.304 to 310 can be applied by analogy in order to determine whether property belongs to an Applicant. The question of ownership falls to be determined by the applicable law governing the proprietary rights asserted by the applicant, not by reference to the statutory machinery enacted for identifying recoverable property.

It follows that ss.304 to 310 have no role to play in the determination of the applicable law, and Claim 3 provides no basis for displacing the conclusion already reached that the relevant issues are governed by Chinese law.

The Applicants advance a further alternative case in the following terms:

“To the extent any obligations on those who perpetrated the unlawful conduct are governed by the law of any other jurisdiction (whether by reason of contract, restitution or otherwise), English law (as the lex situs of the Property) would regard them as giving rise to a proprietary interest in equity such that the s.281 Applicants are entitled to trace that proprietary interest in equity through all subsequent dispositions of the proceeds of those payments into the Property which forms the subject of these proceedings.”

The essence of the argument is that, even if Chinese law governs the underlying obligations arising from contract, the fraud or unjust enrichment, English law as the law of the situs of the Property should nevertheless recognise those obligations as giving rise to a proprietary constructive trust capable of supporting equitable tracing into the Bitcoin now located in this jurisdiction.

The principal authority upon which that submission is founded is Kuwait Oil Tanker Co SAK v Al-Bader (No 3) [2000] 2 All ER (Comm) 271. The relevant passages from the judgment of Nourse LJ were cited by Henshaw J in Zhunus and have already been set out earlier in this judgment.

As Henshaw J observed, the principle emerging from Kuwait Oil is reflected in Rule 172(2) of Dicey, Morris & Collins on the Conflict of Laws:

“(1)

The law applicable to a cause of action or issue determines whether a person is required to hold property on constructive or resulting trust.

(2)

Where the law applicable to a cause of action or issue requires a person to disgorge a benefit but does not know the concept of a constructive or resulting trust, the court may nonetheless regard that person as holding on a constructive or resulting trust, provided that no European or international instrument requires otherwise.

(3)

Where a constructive or resulting trust arises in accordance with sub-paragraphs (1) and (2), the law applicable to that trust is determined in accordance with Rule 168.”

The commentary explains the rationale underlying the rule:

“Clause (2) of the Rule recognises that English courts have, at common law, considered constructive trusts to arise in circumstances where such trusts are unknown by the law governing the underlying cause of action, provided that the lex causae considers that the defendant owes obligations which would impose on him under that law a liability to disgorge a benefit. If so, an English court may hold him liable as constructive trustee when giving remedial effect to the substantive right arising under the lex causae.”

The Applicants submit that this approach permits the Court to recognise an English proprietary constructive trust even if Chinese law supplies the substantive rights and obligations arising from the underlying transactions and does not explicitly recognise the concept of a constructive trust.

There is, however, an immediate difficulty. The principle reflected in Kuwait Oil is predicated upon the assumption that the applicable foreign law imposes obligations requiring a defendant to disgorge a benefit whilst not itself recognising the institution of a constructive trust. There is presently no evidence before the court establishing either proposition in relation to Chinese law. In particular, there is no evidence that Chinese law either lacks an equivalent concept or that it imposes obligations of the kind required by the authorities.

More fundamentally, however, Kuwait Oil was decided before the coming into force of Rome I and Rome II. The authorities and commentary to which I have referred make clear that the scope for the application of the Kuwait Oil approach is substantially curtailed where an applicable European choice of law instrument requires the court to apply the foreign substantive law directly.

That limitation is expressly recognised by Dicey’s Rule 172(2) itself, which permits the approach only “provided that no European or international instrument requires otherwise”.

If, as I have concluded, the issues arising under Claim 1 fall within Rome I, Article 12 requires the applicable law to govern the consequences of the parties' obligations and of their non-performance. Equally, if Rome II applies, Article 15 provides that the applicable law is to determine, amongst other matters, the basis and extent of liability and the remedies available in respect of the relevant obligation.

In Dhir the court expressly rejected the suggestion that an English-law remedy based upon a Quistclose trust could be superimposed upon a claim governed by a foreign law selected by Rome I. The reasoning proceeded on the basis that the Regulation required the court to apply the substantive law designated by the Regulation, including its treatment of the relevant rights and remedies.

Academic commentary points in the same direction.

Underhill and Hayton: Law of Trusts and Trustees (20th ed, 2022) states at §104.230:

“At common law, the courts have held that constructive trusts may arise in circumstances where such trusts are unknown by the law governing the underlying cause of action, provided that the lex causae considers that the defendant owes obligations which would impose on him under that law a liability to disgorge a benefit. If so, an English court may hold him liable as constructive trustee when giving remedial effect to the substantive right arising under the lex causae. Nevertheless, the Rome II Regulation requires an English court to apply the lex causae to ‘the remedy claimed’. There is no power under either Regulation to supplement a remedy of the lex causae which the English courts would be procedurally competent to grant with the imposition of a constructive or resulting trust.”

Similarly, Lewin on Trusts observes at §12-043 that the earlier authorities developed in the context of common law choice of law rules and that:

“It is not easy to see that that approach, relevant under a rule of double actionability, can have survived the Rome II Regulation.”

The authors of Dicey, Morris & Collins reach the same conclusion at §36-072:

“Where the Rome II Regulation applies, however, there appears to be no basis for the court routinely to ‘translate’ foreign duties into fiduciary duties and it should apply the lex causae directly.”

In my judgment, these analyses are compelling. Claim 4 does not identify an independent source of rights. Rather, it seeks to re-characterise rights arising under the applicable foreign law by the application of English equitable concepts. Whatever room may once have existed for such an approach under the common law, the Rome Regulations require the court to apply the substantive law identified by their provisions. They do not permit the court to supplement that law by importing additional proprietary consequences derived from English law.

Indeed, counsel for the Applicants realistically accepted in oral submissions that, if either Rome I or Rome II applies, Claim 4 cannot succeed on the basis advanced.

In those circumstances, Claim 4 cannot provide a basis for displacing the application of Chinese law if, as I have found, the issues arising in Claim 1 fall within the scope of Rome I or Rome II.

The Applicants submit that it is not possible to adjudicate on the nature of the applicable law under Claim 4 before there is evidence of what the relevant Chinese law is. I disagree. If, as I have found, Rome I applies then there is no residual scope for the introduction of any hybrid form of English and Chinese law. Only if I had entertained the possibility that a hybrid approach was permissible would it then have been necessary to await determination of any issues of Chinese law.

In light of that conclusion, I do not consider it either necessary or proportionate for me to determine whether, in a hypothetical case falling wholly outside the scope of both Rome Regulations, the principles discussed in Kuwait Oil would be capable of applying on the facts of the present case. I therefore express no concluded view on that question.

It follows that Claim 4 does not assist the Applicants and provides no basis for the application of English law to the rights asserted under s.281.

Finally, the Applicants advance what was described as a "short point raised for completeness". They submit that, unless and until foreign law is pleaded and proved, the court should apply English law. Since Chinese law has not yet been pleaded or proved in these proceedings, they contend that English law falls to be applied by default.

I do not accept that submission.

The whole purpose of the hearing before me was to determine the proper law applicable to the issues arising. That question is logically anterior to any inquiry into the content of the applicable law. The exercise of identifying the applicable law is a conflicts question. The process of establishing the content of that law is an evidential question. The two should not be conflated.

In the present case, I am satisfied that the applicable law can be identified by the application of the relevant choice of law rules. Whether the issues are analysed under Rome I, Rome II or the common-law rules of private international law, the result is the same. The applicable law is Chinese law.

The fact that the content of Chinese law has not yet been pleaded or proved does not provide a basis for treating English law as the governing law. To hold otherwise would permit the absence of evidence as to foreign law to dictate the outcome of the applicable law inquiry when the very purpose of that inquiry is to identify, independently of evidential considerations, the system of law by which the relevant rights and obligations are governed.

The absence of evidence as to the content of foreign law may, in an appropriate case, affect the manner in which a claim is ultimately determined or the relief which may ultimately be granted. It does not ordinarily justify resolving a preliminary choice of law issue upon the artificial basis that English law governs by default.

Accordingly, I reject the Applicants' submission. The applicable law falls to be identified first. Questions concerning the pleading, proof and effect of that law arise only thereafter. In the present case, the applicable law is Chinese law.

For the reasons set out above, I am satisfied that the claims advanced by the Applicants do not engage English law as the governing law of the rights upon which they rely.

Whether Claims 1 and 2 are analysed under Rome I, Rome II, or by reference to the common law rules of private international law, the applicable law is Chinese law.

Claim 3 is unsustainable as a matter of statutory interpretation.

Claim 4 is incapable of displacing the pure application of Chinese law if either Rome I or Rome II applies and I have not found it necessary to determine its status on any contrary hypothesis.

The consequence is that the existence and content of any proprietary rights said to underlie and support the Applicants’ claims under s.281, subject only to the ultimate operation of the statutory scheme of PoCA itself, must be assessed by reference to Chinese law. Any issues concerning the content, effect or proof of that law are matters for a later stage.

I will hear counsel as to the precise form of order consequential upon this judgment.