In Kitover v Bullionvault.com & Or  EWHC 809 (Ch), the High Court was asked to determine a stakeholder application, issued by Galmarley Limited (t/a Bullionvault.com) (Bullionvault), in which there was only one stakeholder. While the court in this case was being asked to determine ownership of gold bullion, the fact pattern is one which may be faced by other agents and trustees involved in investment services.
Bullionvault is a gold investment service. Customers can open an account with Bullionvault, into which they can deposit money. That money can be used to buy bullion. Bullionvault stores than gold with a vault operator, a third party. Under Bullionvault’s terms and conditions, once the money in a customer’s Bullionvault account is used to buy bullion, the Customer becomes a bailor, Bullionvault its agent, and the vault operator is the bailee.
In 2007, a Bullionvault account was opened in the name of Mr Haller. A US passport and a bank statement in his name were provided as proof of identity. Approximately 4kg of gold was purchased through his account.
In May 2018, Bullionvault contacted Mr Haller, seeking updated proof of identity, as the passport that had been originally provided had expired.
Four weeks later, Mr Kitover visited Bullionvault’s offices in London, claiming to be Mr Haller. Mr Kitover’s explanation is that he used a false name and forged documents to open the account with Bullionvault.
Following this meeting, Bullionvault made various attempts to contact or trace Mr Haller, but without success.
The solitary stakeholder application
In July 2020, Bullionvault issued a stakeholder application under CPR Part 86, the requirements of which are:
(a) a person is under a liability in respect of a debt or in respect of any money, goods or chattels; and
(b) competing claims are made or expected to be made against that person in respect of that debt or money or for those goods or chattels by two or more persons.
The judge agreed with parties that the stakeholder application was the most appropriate mechanism for resolving the dispute. Master Teverson found that:
- while the competing claim required under CPR 86.1(b) had not yet been made, if Mr Haller existed, there were “reasonable grounds to consider that a claim on his half should be expected”; and
- if Mr Kitover’s evidence was accepted, it would mean that Mr Haller’s claim could no longer be reasonably expected, but that this did not mean that CPR 86 did not apply.
Concerns about money laundering offences were stated to “be at the heart of Bullionvault’s concerns” about releasing the bullion to Mr Kitover. In considering how the potential illegality of Mr Kitover’s actions affected his claim, the court considered the three factors summarised by Lord Toulson in Patel v Mirza  UKSC 42. Master Teverson found that the “underlying purposes of the laws relating to money laundering and forgery are unlikely to be enhanced by denying Mr Kitover's claim, that there is no other relevant public policy likely to be affected by denying his claim, and that denying his claim (if proven) would not be a proportionate response.”
The court considered the various pieces of evidence that Mr Kitover had provided that he was Mr Haller, including that he had had plastic surgery “which could explain the difference in appearance between [the photograph on the passport used to open the Bullionvault account] and the photograph in his current passport”.
The Court found that Mr Kitover had satisfied the burden of proof, which had fallen on him, and to the necessary standard, that on the balance of probabilities Mr Kitover “did use a false name to open the Bullionvault account and that Mr Haller is the same person as Mr Kitover”.
Investment services, such as trading platforms and exchanges, for a variety of assets may have accounts associated with identity information. Where the validity of that identity information is challenged, the process of a determining the ‘true’ identity of an account holder will require detailed analysis of the supporting evidence.
While this case involved principal-agent and bailor-bailee relationships, the same issues may well arise where the stakeholder’s role is one of purported legal owner, equitable owner, mortgagor or merely contractual counterparty. The High Court’s decision provides a potential mechanism by which investment services, trustees, escrow providers and exchanges can resolve disputes where the identity of a customer is unclear.
Identification issues may arise for cryptocurrency exchanges, where KYC information was provided via automatic verification processes; where legacy accounts have been opened prior to certain KYC requirements; or where the identity information relates to a public key.