Plaintiff/Defendant by First Counterclaim/Defendant by Second Counterclaim v Defendants/Plaintiffs by Counterclaim

For the Plaintiff/Defendant by First Counterclaim/Defendant by Second Counterclaim

1 The plaintiff, Mr Jin Chen, seeks to enforce a settlement deed (Deed) made on 22 June 2018. It was made between Mr Chen; ACX Tech Pty Ltd (ABN 48 600 876 622) (ACX Tech); the first defendant, Blockchain Global Limited (ABN 82 601 628 497) (BGL); Peak Hong Kong Limited (ARBN 615 938 899); the second defendant, Mr Liang Guo (also known as Allan Guo) and the third defendant, Mr Xi Samuel Li (also known as Sam Lee). The purpose of the Deed was to formalise the arrangements related to Mr Chen's exit from ACX Tech and BGL as well as to settle disputes between the parties on a without admissions basis (recital H of the Deed). Clause 3.1 of the Deed is of central importance. It provides:

3. POST SETTLEMENT

3.1 Post-Settlement Payments

(a) BGL will transfer to Jin the Second Instalment 30 days after Settlement.

(b) BGL will transfer to Jin the Final Instalment on or before 30 September 2018.

(c) To secure payment of the Second Instalment and Final Instalment, Sam and Allan will provide 117.33 bitcoins as security, which shall be undertaken by creating a multi-signature wallet, with Jin and Allan as joint signatories to the wallet (such that both signatures are required to transfer any bitcoins from the wallet). The bitcoins shall be released to Sam and Allan immediately upon the Second Instalment and the Final Instalment being satisfied.

2 There is no dispute that BGL did not transfer the Second Instalment or the Final Instalment, being a total of 117.33 Bitcoin, to Mr Chen. Mr Chen now seeks to enforce the security in clause 3.1(c) of the Deed. He seeks to rely upon an implied term concerning release of the security and, alternatively, what he contends to be the proper construction of clause 3.1(c). The 117.33 Bitcoin have a present value in excess of $10 million. The 117.33 Bitcoin referred to in clause 3.1(c) of the Deed are the subject of an interlocutory preservation order made against Mr Guo in this proceeding on 23 December 2021. In addition, the 117.33 Bitcoin are also the subject of a freezing order made against, among others, Mr Chen and Mr Guo in another proceeding in which Mr Guo and Mr Chen are defendants together with others (S ECI 2021 03329) (the Abel proceeding). The plaintiffs in the Abel proceeding are not parties to this proceeding.

3 Mr Chen now only seeks relief against Mr Guo. Mr Guo filed an appearance and retained a solicitor until 21 September 2023. Since that date, Mr Guo, via the email address nominated by his former solicitors upon ceasing to act for him, has been copied in to correspondence from the Court and the parties, including emails attaching orders of the Court. No response has been received from Mr Guo since he ceased to be represented. BGL is in liquidation. Pursuant to s 471B of the Corporations Act 2001 (Cth), during the winding up in insolvency of BGL, the proceeding against it cannot be proceeded with except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. As a result, Mr Chen makes no claim for relief against BGL. Mr Li is a necessary party as he and Mr Guo jointly granted the security interested described in clause 3.1(c). The security is presently held by Mr Chen and Mr Guo. As a result, Mr Chen makes no claim for relief against Mr Li. Mr Li was served and notified of the trial date but has not filed an appearance in this proceeding. He is presently incarcerated in Al Awir Central Prison, located at Al Awir Road, Dubai, United Arab Emirates.

4 In Hacer Group Pty Ltd v Euro Façade Tech Export Sdn Bhd,[1] Stynes J set out the applicable principles where a Court determines to proceed with a trial without the appearance of a defendant:

26 In circumstances where the Court determines to proceed with the trial generally without the appearance of the defendant, the authorities suggest:

(a) the court must investigate the merits of the matter;

(b) Hacer must prove its case on the balance of probabilities in the usual way;

(c) Hacer's relief is restricted to that claimed in its pleadings;

(d) the court may allow evidence to be tendered and affidavits to be read on behalf of the party which is present; and

(e) the court is entitled to assume the correctness of the facts claimed by Hacer in its submissions where Hacer tenders uncontroverted evidence in support of those submissions.[2]

5 Initially, Mr Chen initially sought relief at the trial in the following terms:

1. The Second Defendant must by 4.00pm [ ] 2025 facilitate the release of the 117.33 Bitcoins (Bitcoins) held in the following bitcoin address 3JcX4jengY4Gw8EfsZtKY5CXc6Nb9j9Z3x (Security Wallet) to be transferred to the Prothonotary of the Supreme Court of Victoria in performance of clause 3.1(c) of the deed of settlement of 22 June 2018 by delivering up his "seed phrase" in respect of the Security Wallet to enable the Prothonotary of the Supreme Court of Victoria to control the Bitcoins from the Security Wallet.
2. The Counterclaim of the Second Defendant be dismissed.
3. The Second Defendant pay the Plaintiff's Costs of the Proceeding on the standard basis to be taxed in default of agreement.

6 This relief was addressed in Mr Chen's written outline of opening submissions and in a proposed minute of order attached to it. At the trial, upon questioning by the Court as to the utility of the relief in paragraph 1 given the existing preservation order, Mr Chen abandoned it. Mr Chen then sought an order in the terms of paragraph B of the prayer for relief of the further amended statement of claim which is expressed as follows:

1. An order for specific performance of the Implied term, or alternatively an order that Alan do all things necessary or desirable in order to release the bitcoins in the Security Wallet to Jin including an order that Allan authorise the release of the bitcoins in the Security Wallet to Jin.

7 Upon questioning by the Court on the present effect of the freezing order upon such relief, Mr Chen then also abandoned that relief in his closing address and, as a result, ultimately sought the following orders at the trial:

(a) Mr Guo's counterclaim be dismissed.

(b) The question of Mr Chen's entitlement to final relief be adjourned until the hearing and determination of the Abel proceeding or to a date to be fixed.

(c) Mr Guo pay Mr Chen's costs of the proceeding on a standard basis, to be taxed in default of agreement.

(a) the Deed;

(b) that 'Settlement' under the Deed took place on 22 June 2018 and 58.67 Bitcoin were transferred by BGL to Mr Chen, being the First Instalment under the Deed;

(c) that BGL did not transfer the Second Instalment or the Final Instalment to Mr Chen; and

(d) that Mr Chen has issued notices under the Deed to Mr Guo seeking that Mr Guo do all things necessary in order to release the 117.33 Bitcoin in the security wallet to Mr Chen.

9 Mr Chen gave evidence. His evidence was primarily directed to matters arising on Mr Guo's counterclaim, including on whether Mr Chen complied with his obligations under the Deed. It important to refer to the following provisions of the Deed:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Deed:

...

Final Instalment means the third and final instalment of the Settlement Amount, being one-third (1/3) of the Settlement Amount;

First Instalment means first instalment of the Settlement Amount, being one-third (1/3) of the Settlement Amount;

...

Second Instalment means the second instalment of the Settlement Amount, being one-third (1/3) of the Settlement Amount.

Settlement means settlement of the dispute between the parties as contemplated by this Deed.

Settlement Amount means 176 Bitcoin (which includes any applicable GST in the event that such GST is payable).

Settlement Date means the date of execution of this Deed.

...

2. SETTLEMENT

2.1 Time and Place

Settlement will take place on the Settlement Date at the offices of BGL and ACX Tech's solicitors, Nicholson Ryan Lawyers, or at another time and place agreed by the parties.

2.2 Obligations on Jin

At Settlement Jin must:

(a) deliver to ACX Tech or its nominee the Cold Wallet and thereby transfer to ACX Tech, Sam and Allan their bitcoins and cryptocurrency holdings held by Jin in the Cold Wallet;

(b) deliver to ACX Tech or its nominee all login credentials and security devices which he uses to operate and maintain the software and systems of ACX Tech;

(c) deliver a complete copy of the ACX.IO cryptocurrency exchange source code (in GIT format) on either a USB stick, CD or portable hard disk (with a MD5 checksum);

(d) deliver a complete copy (as at 10 April 2018) of the code package from the running ACX.IO servers (as it is without credentials) on either a USB stick, CD or portable hard disk with the version number clearly identified (with a MD5 checksum);

(e) deliver a complete backup (as at 10 April 2018) of the customer database of the ACX.IO cryptocurrency exchange and all other white label cryptocurrency exchanges maintained by ACX Tech on either a USB stick, CD or portable hard disk (with a MD5 checksum);

(f) deliver a written statement setting out in sufficient detail the SSH access and instructions to the ACX.IO servers and all other white label cryptocurrency exchanges maintained by ACX Tech for Mr Jackie Hai;

(g) deliver access to all data on all servers (as at 10 April 2018) for the ACX.IO cryptocurrency exchange and all other white label cryptocurrency exchanges maintained by ACX Tech on either a USB stick, CD or portable hard disk (with a MD5 checksum) which includes cryptocurrency hot wallet servers of the ACX.IO cryptocurrency exchange and all other white label cryptocurrency exchanges serviced by ACX Tech);

(h) deliver the login credentials for the management account for the hosting service providers to the ACX.IO cryptocurrency exchange and or white label cryptocurrency exchanges serviced by ACX Tech including the AWS and IBM (Softlayer) services;

(i) deliver a soft copy of the last audit report produced by Mr Jin Chen in respect of the ACX.IO cryptocurrency exchange and all other white label cryptocurrency exchanges on either a USB stick, CD or portable hard disk (with a MD5 checksum).

(j) deliver to ACX Tech or its nominee his signed resignation as a director of ACX Tech that is expressed to be effective from the time Settlement is completed;

(k) deliver to BGL duly executed share transfer forms in respect of his entire shareholding in ACX Tech, so as to transfer to BGL Jin's unencumbered right, title and interest in his shares held in ACX Tech;

(l) deliver to ACX Tech, ACX.IO and BGL his signed Deed Poll; and

(m) do all other things necessary or desirable to affect [sic] the transactions contemplated by this Deed as it relates to Jin.

...

2.3 Obligations on BGL

At Settlement BGL must pay Jin the First Instalment.

2.4 Obligation on ACX Tech

At settlement, ACX Tech must

(a) cause its Board of Directors to resolve to accept the resignation of Jin and the transfer of Jin's shares in ACX Tech with effect from the time Settlement is completed; and

(b) do all other things necessary or desirable to affect the transactions contemplated by this Deed as it relates to ACX Tech.

2.5 Simultaneous actions at Settlement

In respect of Settlement:

(a) the obligations of the parties under this Deed are interdependent;

(b) all actions required to be performed will be taken to have occurred simultaneously on the Settlement Date; and

(c) all actions required to be performed will be taken to have occurred simultaneously with the settlement or completion of the transactions contemplated by the BGL Settlement Deed.

3. POST SETTLEMENT

3.1 Post-Settlement Payments

(a) BGL will transfer to Jin the Second Instalment 30 days after Settlement.

(b) BGL will transfer to Jin the Final Instalment on or before 30 September 2018.

(c) To secure payment of the Second Instalment and Final Instalment, Sam and Allan will provide 117.33 bitcoins as security, which shall be undertaken by creating a multi-signature wallet, with Jin and Allan as joint signatories to the wallet (such that both signatures are required to transfer any bitcoins from the wallet). The bitcoins shall be released to Sam and Allan immediately upon the Second Instalment and the Final Instalment being satisfied.

...

15.6 Entire agreement

This Deed contains the entire agreement and understanding between the parties in respect of its subject matter and supersedes any prior agreement or understanding between the parties on anything connected with that subject matter.

10 Clause 3.1(c) does not expressly state what is to occur with respect to the security described in that clause upon any default by BGL in transferring the Second Instalment and the Final Instalment to Mr Chen. I address this further shortly.

11 Mr Chen gave the following evidence concerning the security referred to in clause 3.1(c) of the Deed:

1. At some point during the evening, I had helped Allan to install 'Electrum' on his laptop, which is open source wallet software used to access the First Cold Wallet and to create the Security Wallet. Around 2.10am, we started to set up the Security Wallet. Allan installed the software himself and sent me the public key necessary for me to finish the set up. That email is PD145 (JC2677). The process finished around 2.30am.
2. Allan and I then prepared for the next series of transfers, by signing the relevant transactions but not broadcasting them to the network. In the course of doing this, I showed Allan how to transfer Bitcoins out of the Security Wallet.
3. Sometime between 2.30am and 3.30am, we received a confirmation of the transfer of 185.9568 BTC referred to at paragraph 343 above.

347. At 3.36am, following that confirmation being received, I transferred:

(a) a total of 318.966 BTC to Allan, comprised of two transfers as follows:

(i) 208.966 BTC from Address 2 to Allan's Third Address; and

(ii) 110 BTC from Address 3 to a third address nominated by Allan, being 33DX3qKwzBKs18YVB3x5Whpzy6tZz8XQhf (Allan's Third Address); and

(b) 176 BTC from Address 2 to the Security Wallet, at address 3Q6vrBWvTsrNAVy1D5fHb7gx5zUseiehJ (the Security Transfer).

1. At this point, I had transferred from Addresses 2 and 3 to Allan the total Reconciliation Sum of 504.9228 BTC. I refer to these transfers collectively as the Reconciliation Transfers.
2. After the transfers of 185.9568 BTC and 110 BTC from Address 3, I was left with the 110 BTC in that address - which Allan agreed I should receive as a repayment of 80 BTC I had loaned Bitcoin Reserve via a direct deposit into its ACX Exchange account, together with 30 BTC being the sum Sam had taken from Bitcoin Reserve referred to at paragraph 299(b) above.
3. After I had made those transfers, I said to Allan words to the effect of 'now I've done everything, it's time for you to make the transfer to me.' Allan replied, 'hao'.
4. I then created a transfer request for the First Instalment of 58.667 BTC to be paid to me in my part of the Security Wallet (signed by me and containing all the transfer information). I gave the transfer request to Allan and told him to import it into his part of the Security Wallet (via the Electrum software) and sign it with his private key. I cannot now find an email containing this transfer request and I do not keep a backup of my sent mail folder. It is also possible I provided it to Allan via USB.
5. Allan signed the transaction with his private key, and I broadcast it to the network. The transfer was approved by the network on 23 June 2018 at 3.38am.
6. After the First Cold Wallet Transfers, Reconciliation Transfers and Security Transfer were each complete, I stuck my hand out offering the Second Cold Wallet to Allan and asked 'do you need this?'. Allan replied with words to the effect of 'No, I have no use for this wallet and I don't know how to use it, you keep it.'

12 As I have already said, it is common ground that BGL did not transfer the Second Instalment or the Final Instalment to Mr Chen. The 117.33 Bitcoin presently remain in the security wallet.

13 On 13 September 2021, the Abel proceeding was commenced against BGL, ACX, Mr Guo, Mr Li and Mr Chen. This proceeding has been the subject of lengthy delays mainly caused by the liquidation of BGL and the plaintiffs not actively prosecuting the proceeding. This proceeding is now listed for a 3-week trial commencing on 20 April 2026. In summary, the plaintiffs, being alleged users of the cryptocurrency exchange platform operated by BGL and ACX (the ACX Platform), allege they were unlawfully denied withdrawal of their cryptocurrency assets from the ACX Platform. On that basis, they seek, inter alia, declarations that certain cryptocurrency assets that were held on the ACX Platform form trust assets belonging in equity to the plaintiffs. The plaintiffs specifically plead the Deed and that the 117.33 Bitcoin held in the security wallet pursuant to clause 3.1(c) of the Deed were sourced from the plaintiffs' assets and seek relief in relation to, inter alia, these Bitcoin. On 13 September 2021, this Court made a freezing order concerning the 117.33 Bitcoin against BGL, ACX, Mr Guo, Mr Li and Mr Chen. The freezing order provides, inter alia:

1. You must not remove from Australia or in any way dispose of, deal with, encumber or diminish the value of the 117.33 'Bitcoins' in the wallet bearing the address 3JcX4jengY4Gw8EfsZtKY5CXc6Nb9j9Z3x ('Assets').

14 On 23 December 2021, the Court made a preservation order with respect to the 117.33 Bitcoin in this proceeding. The order recorded various undertakings and also provided:

1. Subject to further order, pursuant to r 37.01(1) of the Supreme Court (General Civil Procedure) Rules 2015:

a. by 4.00pm on 24 January 2022, the plaintiff must:

1. record his seed phrase in respect of the 117.33 'Bitcoins' in the security wallet bearing the address 3JcX4jengY4Gw8EfsZtKY5CXc6Nb9j9Z3x (the Security Wallet) in an A4 document titled 'Document provided by the plaintiff pursuant to orders made by Justice Attiwill on 23 December 2021 in proceeding No. S ECI 2020 03554' (Chen document) and provide it to Mr Weinberger, principal lawyer in the firm of KCL Law, the plaintiff's solicitors in this proceeding;

2. file and serve an affidavit of Mr Weinberger in which he deposes to: receipt of the Chen document and its placement by Mr Weinberger in an envelope titled 'Document in proceeding S ECI 2020 03554. Envelope not to be opened without an order of the Supreme Court of Victoria';

3. file (not serve) a confidential affidavit of Mr Weinberger in which he deposes to the precise place and details of storage of the Chen document and the envelope.

b. by 4:00pm on 24 January 2022, the second defendant must:

1. record his seed phrase in respect of the 117.33 'Bitcoins' in the Security Wallet in a A4 document titled 'Document provided by the second defendant pursuant to orders made by Justice Attiwill on 23 December 2021 in proceeding No. S ECI 2020 03554' (Guo document) and provide it to Mr Lee, managing partner in the firm of Neo Legal, the second defendant's solicitors in this proceeding; and

2. file and serve an affidavit of Mr Lee in which he deposes to: receipt of the Guo document and its placement by Mr Lee in an envelope titled 'Document in proceeding S ECI 2020 03554. Envelope not to be opened without an order of the Supreme Court of Victoria';

3. file (not serve) a confidential affidavit of Mr Lee in which he deposes to the precise place and details of storage of the Guo document and the envelope.

4. Subject to further order, the affidavits referred to in paragraphs 1(a)(iii) and 1(b)(iii) of this order are to remain confidential.

5. If the plaintiff or the second defendant cannot comply with order 1, then, by no later than 4:00pm on 24 January 2022, the non-compliant party must file and serve an affidavit setting out the reasons they have not complied with the order and the steps taken in order to attempt to comply with the order.

15 Mr Guo made affidavits on 24 January 2022 and 14 February 2022 in which he deposed to his attempts to comply with the preservation order. Mr Guo has not recorded his seed phrase (i.e. password) for the security wallet containing the 117.33 Bitcoin. Mr Chen has not taken any steps to otherwise enforce the preservation order against Mr Guo. Unless Mr Guo's password for the security wallet is obtained the 117.33 Bitcoin in the security wallet cannot be accessed or dealt with.

16 Mr Chen seeks to enforce the security in clause 3.1(c) of the Deed. I have already said that clause 3.1(c) does not expressly state what is to occur with respect to the security in the event that BGL fails to transfer the Second Instalment and/or the Final Instalment to Mr Chen. Mr Chen relies upon an implied term and, alternatively, what he contends to be the proper construction of clause 3.1(c), as follows:

8. There was an implied term of the Deed as follows (Implied Term):

(a) That if BGL failed to transfer to Jin the Second Instalment 30 days after Settlement and/or the Final Instalment on or before 30 September 2018, then Allan would do all things necessary or desirable in order to release the bitcoins in the Security Wallet to Jin.

Particulars

The term was implied to give business efficacy to the dealings between the parties. The transfers can only occur if Allan and Jin both authorise the transfers from the Security Wallet.

8A. If the Implied Term referred to in paragraph 8 above was not a term of the Deed, then alternatively:

(a) on its proper construction, cl 3.1(c) of the Deed:

(i) required Sam and Allan to provide 117.33 bitcoins as security for the Second Instalment and the Final Instalment, to be forfeited to Jin in the event that BGL defaulted on its obligations to transfer either instalment pursuant to cl 3.1(a) or (b) of the Deed; and

(ii) in the event of such default, entitled Jin to call upon Allan to electronically authorise the transfer of the 117.33 bitcoins accessible via the Security Wallet; and

(iii) in the event of such a call, required Allan and Jin to electronically authorise that transfer;

(b) it was an express term of the Deed that each party would promptly and at its own cost do all things necessary or desirable to give full effect to the Deed (cl 15.2);

Particulars

The term was in writing and contained in the Deed.

(c) by reason of the matters alleged at paragraphs 7(c) and 10 to 14 herein, and in breach of the aforementioned term, Allan has failed to do all things necessary and desirable to give full effect to cl. 3.1(c) of the Deed.

Particulars

Allan has refused or otherwise failed to electronically authorise the transfer of the 117.33 bitcoins in the Security Wallet to Jin.

17 At trial, Mr Chen further refined the implied term as follows:

If BGL fails to transfer Bitcoin to [Mr Chen] the subject of the Second Instalment 30 days after Settlement and/or the Final Instalment on or before 30 September 2018, then [Mr Guo] must do all things necessary or desirable in order to release the equivalent number of Bitcoins in the multi-signature wallet (created pursuant to clause 3.1(c)) to [Mr Chen].

18 The bolded text shows the differences between the alleged term in paragraph 8(a) of the further amended statement of claim and the alleged term as further refined at the trial. In my view, this is not a material change to the case against Mr Guo.

19 Mr Guo denies the implied term and alleged proper construction relied upon by Mr Chen. As a result, he alleges that he was not obliged pursuant to the Deed to do anything to release the Bitcoin in the security wallet to Mr Chen (paragraph 15 of his defence). This is his primary defence. Mr Guo also relies upon paragraphs 16 to 35 of his defence (see paragraphs 10 and 11 of his defence). Not all of these are, however, defences. As to paragraphs 16 to 35 of Mr Guo's defence:

(a) Paragraphs 16 to 18 contain a plea of loss and damage based upon breaches by Mr Chen of the Deed. They do not constitute a defence to Mr Chen's claim. They have not been prosecuted by Mr Guo.

(b) Paragraphs 19 to 22 contain a plea of loss and damage based upon breaches by Mr Chen of alleged implied terms of the Deed. They do not constitute a defence to Mr Chen's claim. They have not been prosecuted by Mr Guo.

(c) Paragraphs 23 to 25 contain a plea in support of the release of the Bitcoin in the security wallet referred to in clause 3.1(c) of the Deed based upon alleged implied terms set out in paragraph 19 of the defence. This is relevant to the Mr Chen's claim. It constitutes a defence to Mr Chen's claim.

(d) Paragraphs 26 to 33 contain a plea of loss and damage. They do not constitute a defence to Mr Chen's claim. They have not been prosecuted by Mr Guo.

20 Paragraph 19 is of central importance to Mr Guo's defence in paragraphs 23 to 25. Paragraph 19 provides:

Breaches by Jin of implied terms of the Settlement Deed

1. If, contrary to the term alleged at paragraph 8(a), the agreement or understanding in respect of the subject matter of the Settlement Deed contained terms other than as set out in the Settlement Deed, then there were implied terms of the Settlement Deed as follows:

(a) BGL would not be required to transfer the Second Instalment if, at the time it was due, Jin was in breach of a fundamental obligation imposed on him by the Settlement Deed.

(b) BGL would not be required to transfer the Final Instalment if, at the time it was due, Jin was in breach of a fundamental obligation imposed on him by the Settlement Deed.

(c) Jin was capable of performing at settlement, and would perform at settlement, the settlement obligations imposed on him by clause 2.2 of the Settlement Deed.

The terms were implied to give business efficacy to the dealings between the parties.

AND ALLAN [MR GUO] CLAIMS:

1. An order that Jin do all things necessary to release to Allan and Sam the 117.33 bitcoins held in a multi-signature wallet pursuant to clause 3.1 of the Settlement Deed.

2. Damages for breach of the Settlement Deed.

   1. Damages pursuant to section 236 of the Australian Consumer Law.

   2. An order pursuant to sections 237 and 243 of the Australian Consumer Law relieving Allan of any obligation to do all things necessary or desirable to release bitcoins in the Security Wallet to Jin.

   3. Interest.

22 The applicable law on implied terms is central to the claims of Mr Chen and the defence of Mr Guo. It is well established. In BP Refinery (Westernport) Pty Ltd v Shire of Hastings,[3] the Privy Council said:

Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.[4]

23 In Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd,[5] the Court of Appeal said:

[140] The conditions in the BP Test are cumulative and import different considerations.

[141] In relation to the condition that an implied term "must be reasonable and equitable", we note that the High Court has refused to imply a term that would operate in a partisan fashion. The application of the condition will often require consideration of the matrix of facts in which a contract was agreed.

[142] The condition that an implied term "must be necessary to give business efficacy to the contract" requires consideration of whether the term is necessary for the purposes of "giving to the transaction such efficacy as both parties must have intended that at all events it should have", making the agreement work or avoiding an unworkable situation. Where the express terms of an agreement are sufficient to give it the business efficacy the parties intended it to have, it will not become necessary to imply additional terms. However, a term may be commercially necessary, in order for the contract to be workable in a business sense, notwithstanding that it can operate without the term. In Commonwealth Bank of Australia v Barker, French CJ, Bell and Keane JJ stated that the requirement that a term implied in fact be necessary "to give business efficacy" to a contract can be regarded as a "specific application" of the criterion of necessity which also supports the implication of a term in law. They also said that "[i]mplications which might be thought reasonable are not, on that account only, necessary".

[143] The condition that an implied term "must be so obvious that 'it goes without saying'" requires consideration of whether, at the time that the parties were making their bargain, the suggestion of insertion of the implied term into the agreement by an "officious bystander" would have been met "with a common, 'Oh, of course'" from the parties.

[144] In relation to the condition that an implied term "must be capable of clear expression", it is worth noting the observation of Gibbs J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth that the "width and lack of precision" of a term supplied an argument against implying it. Mason J in Codelfa refused to imply a term into a contract on the basis that, had the parties explored the term at the time that they entered into the contract, negotiation about the term "might have yielded any one of a number of alternative provisions, each being regarded as a reasonable solution". It has been observed by this Court that it is elementary that a contractual party who is to be subjected to an additional obligation by reason of the implication of a term into a contract should be "left in no doubt of the extent of the obligation" and, accordingly, a term that would leave a party in a "state of speculation" as to the extent of its obligations would not be implied.[6]

Does the deed contain an implied term as alleged by Mr Chen?

24 I have already set out the implied term as alleged by Mr Chen. Mr Guo denies that any terms may be implied, by reason of clause 15.6 of the Deed. Clause 15.6 provides:

15.6 Entire agreement

This Deed contains the entire agreement and understanding between the parties in respect of its subject matter and supersedes any prior agreement or understanding between the parties on anything connected with that subject matter.

25 Clause 15.6 does not foreclose the possibility of terms being implied into the Deed. In Hart v MacDonald,[7] Isaacs J (as his Honour then was) observed that an 'entire agreement clause' - that is, one which purports to exclude all agreements or understandings not embodied in the written contractual instrument - does not exclude implications arising on a fair construction of the agreement itself, and that 'in the absence of definite exclusion, an implication is as much a part of a contract as any term couched in express words'.[8]

26 In addition, in my view, the implied term, as alleged by Mr Chen, is implied. It is reasonable and equitable. This is because Mr Guo and Mr Li provided the Bitcoin as security for BGL's performance of its obligations to transfer the Second and Final Instalments. It is necessary to give business efficacy to the Deed. This is because without the implied term the security would be of no worth as security. It is so obvious that it goes without saying. It is capable of clear expression and does not contradict any express term of the Deed.

Does the Deed contain implied terms as alleged by Mr Guo?

27 I have already set out the implied terms as alleged by Mr Guo. Mr Chen denies that such terms are implied. Mr Guo relies upon this as an alternative plea. This is because, as I have already said, he denies that any terms may be implied by reason of clause 15.6 of the Deed.

28 If there are such implied terms as alleged by Mr Guo in paragraph 19 of his defence, then it is necessary to determine whether Mr Chen breached any fundamental obligation under the Deed. If not, then it is not necessary to determine those matters.

29 In my view, the implied terms, as alleged by Mr Guo, are not implied. They are unreasonable and inequitable. This is because, apart from the obligations upon 'Settlement' which are expressed to be 'interdependent', no other obligations are expressed to be interdependent. In addition, many of the obligations are expressed to be immediate and are not contingent upon other obligations. The implied terms are not necessary to give business efficacy to the Deed. This is because without the implied terms action may be taken by other parties to the Deed to enforce Mr Chen's obligations under the Deed. They are not necessary. They are also not so obvious that it goes without saying. They also contradict express terms of the Deed. Sub-clauses 3.1(a) and (b) are not expressed to be dependent upon Mr Chen complying with any obligations under the Deed whereas as other obligations are expressly stated to be 'interdependent'.

30 As a result, it is not necessary to determine whether Mr Chen breached a fundamental obligation under the Deed.

31 Mr Guo has a counterclaim but it has not been prosecuted by him. It has been abandoned. Mr Guo did not appear and did not lead any evidence in support of his counterclaim. It is appropriate to dismiss the counterclaim. Mr Chen is entitled to his costs incurred in relation to the counterclaim.

32 Mr Chen submitted his entitlement to final relief should be adjourned until the hearing and determination of the Abel proceeding or to a date to be fixed. This, he submitted, is because the freezing order in the Abel proceeding prevents Mr Chen from compelling Mr Guo to, in effect, take steps to release the 117.66 Bitcoin to him. The freezing order protects an alleged substantive right of the plaintiffs in the Abel proceeding concerning the 117.66 Bitcoin. Mr Chen did not submit that he intends to take any immediate steps to discharge the freezing order. As I have already said, Mr Chen is a party to the Abel proceeding. In the event that the plaintiffs' claims in the Abel proceeding fail, then the freezing order would be discharged. In those circumstances, Mr Chen would be entitled to final relief against Mr Guo substantially in the form of paragraph B of the prayer for relief. As a result, Mr Chen's entitlement to final relief against Mr Guo should be, subject to further order, adjourned until the hearing and determination of the Abel proceeding. In the event that Mr Chen wishes to seek final relief prior to this time, or an order, for example, that the remaining part of this proceeding now be heard and determined together with the Abel proceeding, then he will be at liberty to apply to do so. That is why the order will specifically provide that it is subject to further order.

(a) Mr Guo's counterclaim has not been prosecuted and has been abandoned. Mr Guo did not appear and did not lead any evidence in support of these claims.

(b) BGL did not transfer the Second Instalment or the Final Instalment to Mr Chen pursuant to the Deed.

(c) The Deed contains an implied term as follows:

If BGL fails to transfer Bitcoin to Jin the subject of the Second Instalment 30 days after Settlement and/or the Final Instalment on or before 30 September 2018, then Allan must do all things necessary to release the equivalent number of Bitcoin in the multi-signature wallet (created pursuant to clause 3.1(c)) to Jin.

(d) It is not an implied term of the Deed that BGL would not be required to transfer the Second Instalment or the Final Instalment to Mr Chen if, at the times they were due, Mr Chen was in breach of a fundamental obligation imposed upon him by the Deed.

(e) Mr Chen has established an entitlement to relief against Mr Guo substantially in the form of paragraph B of the prayer for relief subject to the matters relating to the freezing order in the Abel proceeding.

(f) Mr Chen's entitlement to final relief against Mr Guo should be, subject to further order, adjourned until the hearing and determination of the Abel proceeding.

34 Mr Chen is directed to provide a proposed form of order by 4:00pm on 1 May 2025. The Court will then notify the next steps, including whether the Court proposes to make the orders in chambers or to list the matter for further hearing. Subject to hearing from Mr Chen on the precise form of order, I propose to make the following orders:

(a) Mr Guo's counterclaim is dismissed.

(b) Mr Guo pay Mr Chen's costs of the counterclaim, to be taxed on a standard basis in default of agreement.

(c) Subject to further order, the proceeding, including Mr Chen's entitlement to final relief against Mr Guo, is adjourned until the hearing and determination of proceeding S ECI 2021 03329.

(d) Mr Chen's costs of the proceeding to date are otherwise reserved.

Plaintiff/Defendant by First Counterclaim/Defendant by Second Counterclaim

[1] [2022] VSC 373.

[3] (1977) 180 CLR 266 (BP Refinery).

[4] Ibid 282-3 (Lord Simon LJ for Lord Keith LJ and Viscount Dilhorne).

[5] [2015] VSCA 190.

[6] Ibid [140]-[144] (Santamaria, Kyrou and McLeish JJA) (citations omitted).

[7] [1910] HCA 13; (1910) 10 CLR 417.

[8] Ibid 430, cited with approval in Vakras v Cripps [2015] VSCA 193, [422] (Warren CJ, Ashley JA and Digby AJA).