Howells v Newport City Council: Challenges and Innovations in Digital Asset Recovery

The case of Howells v Newport City Council [2025] EWHC 22 (Ch) concerns the claim by Mr. Howells (‘the Claimant’) to recover a hard drive containing the private key to bitcoins worth over £GBP 600 million, allegedly deposited in the Docksway Landfill Site owned by Newport City Council. The Claimant’s case was that without the hard drive containing the private key, he remains unable to access his bitcoins. The case raises significant questions concerning ownership rights, the application of traditional legal principles to digital assets, and the balance between individual property interests and public policy concerns. It also addresses the traditional legal distinction between tangible and intangible property and the classification of cryptocurrency, which does not fit neatly into either category.

Background

In August 2013, the Claimant inadvertently disposed of a hard drive containing the private key to 8,000 bitcoins. The hard drive was subsequently deposited at the Docksway Landfill Site owned by Newport City Council. The Claimant argued that he mined these 8,000 bitcoins in early 2009 and has a complete record of the mining history, including all block numbers and transaction identification.

The Claimant first met with Mr. Gwyn Jones, the Operations Manager of Newport City Council, on 25 November 2013 to discuss access to the hard drive. Following this initial meeting, the Claimant made repeated requests to the defendant for access to the site to find and retrieve the hard drive, but these were largely ignored. By 2023, the Claimant had begun to formally advance his case to recover the hard drive, which by then was estimated to contain bitcoin worth over £600 million and that, without the hard drive containing the private key, he would be unable to access them.

The Claimant sought a Court order that the defendant either deliver the hard drive or allow his team of experts to excavate the landfill in order to find it, and (in the alternative) compensation for wrongful retention equivalent to the value of the bitcoin that he can no longer access.

Property Categorisation and Cryptocurrency

Judge Keyser KC held that the case was not about the ownership of bitcoin. In his judgment, the only relevant issues concerned the ownership of, and rights of access to, the hard drive. He deemed it necessary to make this clear at the outset because, during the hearing of the defendant’s application, there was reference to rights regarding bitcoin and intangible property. 

In his dicta, Judge Keyser KC acknowledges that cryptocurrency constitutes a third category of personal property, which is distinct from tangible and intangible property, and therefore, subject to personal property rights. Specifically, he references Tulip Trading [2023] EWHC 2437 (Ch), the Law Commission's Final Report on Digital Assets, and the decision in D'Aloia v Persons Unknown [2022] EWHC 1723 (Ch), thus reinforcing that cryptocurrency is recognised as property within the English legal framework. 

In addressing the Claimant's request to be recognised as the owner of both tangible and intangible property associated with the hard drive, the Court identified the hard drive itself as the tangible element. However, it found the argument that bitcoin could be located "on" the hard drive to be incorrect, as bitcoin is not a tangible entity and cannot reside on a physical object. 

The Court emphasised that the Defendant did not claim ownership of the bitcoin, acknowledging that the Claimant retained ownership, provided he had not transferred it. The Defendant's focus was on its ownership of the hard drive, arguing that the Claimant had no legal right to access it. Consequently, there was no dispute over the ownership of bitcoin between the parties.

The Court explained that the hard drive contained a digital record of the private key, which is information necessary for accessing the cryptocurrency account, rather than property itself. This was akin to having information written on paper; if the claimant had another record of the private key, he could still access the bitcoin. While the confidentiality of the private key meant unauthorised use would be unlawful, the Defendant acknowledged it had no right to use it.

Ultimately, the Court rejected the Claimant's contention that the defendant's refusal to return the hard drive amounted to wrongful interference with property rights, concluding that this claim was unsupported by law. The importance of clearly distinguishing between tangible and intangible assets was emphasised to prevent legal ambiguities.

Statutory Interpretation and Digital Assets

HHJ Keyser KC's interpretation of Section 14(6)(c) of the Control of Pollution Act 1974 demonstrated a strict adherence to statutory language. The Court emphasised that the words “shall belong to the authority” are unqualified and unrestricted, and that the phrase “and may be dealt with accordingly” confers a practical right. This interpretation raises significant questions about the adaptability of existing legislation to technological advancements.

The Court rejected the Claimants’ arguments for a more nuanced interpretation of the legislation, noting that the provision does not distinguish among users of the facilities based on their authority or state of mind. It found no proper basis for implying any limitation into the words of the provision.

The Court reiterated that what was delivered to the landfill was the hard drive not bitcoin. The delivery, although not made by the Claimant himself, was effectively carried out by "another person," specifically the Claimant’s partner at the time, which suffices under the law as it was done "in the course of using the facilities." Under the circumstances, the Court concluded that the hard drive belonged to the Defendant, and that the Claimant was not entitled to it.

This strict reading of the law could potentially limit the flexibility needed to address future cases involving the inadvertent disposal of cold wallets, cryptocurrencies, and other digital assets. It raises important questions about how existing legislation should be interpreted when confronted with technological innovations that were not contemplated at the time of their enactment.

Finally, the judgment's interpretation that the statutory provision does not distinguish among users of the facilities based on their authority or state of mind highlights a potential blind spot in current legislation. While consistent with traditional waste management policy, this strict reading may not adequately address scenarios where high-value digital assets are inadvertently disposed of in public waste facilities.

Proprietary Claims and Digital Assets

The dismissal of the Claimant's proprietary restitutionary claim highlights a significant gap in legal remedies for digital asset recovery where assets are disposed of in similar circumstances. The Court's distinction that proprietary restitutionary claims do not arise for chattels or land is important and warrants further exploration, especially in relation to the hybrid nature of digital asset storage.

The Claimant argued that this case involved a complex, uncertain, and evolving area of law, therefore, making it unsuitable for a summary determination. However, the court noted that even if this area of law is as the claimant describes, it does not justify allowing the case to proceed if there is no reasonable basis for the claim or realistic prospect of success.

The Court dismissed the claim, noting that such remedies are not available for chattels like the hard drive in question. It distinguished this case from Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch), which dealt with intangible assets. In the instant case, the distinction was “based on the notion that the Claimant had, at all times, retained legal title to the relevant asset, which asset had been transferred away from the Claimant and it (or its substitute) had found its way into the hands of the Defendant.”

The Judge emphasised that issues concerning the legal ownership of tangible assets are addressed at common law through the law of torts, particularly trespass and conversion, rather than through proprietary restitutionary claims. The proprietary restitutionary claim in Armstrong was a common law claim based on the retention of legal title, not a claim in equity, and such a remedy is not available where the asset is a chattel, as is the case with the hard drive.

This distinction raises important questions about the nature of cryptocurrency ownership. While the private key is stored on a physical medium, the bitcoin itself exists as data on a decentralised blockchain network. The court's approach in treating the hard drive as the relevant property, rather than the bitcoin it provided access to, may not fully capture the economic reality of cryptocurrency ownership.

The Court's reluctance to extend proprietary restitutionary principles to this case could set a precedent that limits legal recourse for individuals seeking to recover lost or stolen cryptocurrencies under similar circumstances. This approach may need to be reconsidered as digital assets become increasingly prevalent in commerce and personal wealth.

Constructive Trusts and Digital Assets

The Claimant argued that even if legal ownership of the property, specifically the hard drive, had passed to the Defendant, he still held an equitable interest in the property under a constructive trust. However, the Court dismissed the Claimant's argument for a constructive trust, a decision that merits closer examination, particularly given the high value of the lost bitcoin. The Court found no realistic prospect that the Defendant’s retention of the hard drive could be deemed unconscionable, as the Defendant was not keeping it for gain or because it desired it.

The Court identified three reasons for finding no realistic prospect of success for a constructive trust claim. First, Section 14(6)(c) of the CPA 1974 precluded the necessary equitable interest. Second, the court noted there was no realistic prospect of finding the Defendant's retention unreasonable, as the Council had legal and environmental reasons for its decision and was not actively retaining the hard drive but merely refusing excavation. Third, the claim was likely barred by the six-year limitation period applicable to constructive trusts of the "second kind," as per Williams v Central Bank of Nigeria [2014] UKSC 10, [2014] AC 1189.

The Court's reluctance to find a constructive trust in this case could set a precedent that limits the availability of equitable remedies in future cryptocurrency disputes, potentially leaving a significant gap in legal protections for digital asset owners.
In the instant case, the hard drive was located within land that the Defendant possessed and was buried under material that the defendant owned. It did not end up in that position due to any wrongdoing by the Defendant. Therefore, there was no reasonable basis for the Claimant to assert an entitlement either to require the defendant to excavate its own land to recover his hard drive, which was not actually what he was seeking, or to enter the defendant’s land and interfere with the defendant’s property.

Limitation Periods and Digital Assets

The Court applied the general six-year limitation period from the Limitation Act 1980 for most contract or tort claims. This period applies unless exceptions, like those in section 32 for fraud, concealment, or mistake, are relevant. This standard limitation period typically applies from the date the cause of action arises. In the context of digital assets such as cryptocurrencies, these general limitation periods would likely still apply, given that current legislation, such as the Property (Digital Assets etc) Bill introduced on 11 September 2024, seeks to recognise digital assets as personal property under English and Welsh law but does not specifically address limitation periods for digital asset-related claims.

The Court rejected the Claimant's arguments about time limits for filing the claim, highlighting the application of the general six-year limitation period. It determined that if there was a constructive trust, it would have begun in 2013 when the Defendant allegedly knew about the property but did not allow the claimant to recover it. The Claimant argued that the Defendant's assertion of ownership in September 2023 was a new fact that reset the time limit. However, the Court disagreed, stating that this was a legal claim, not a new fact, and had not been concealed before. This illustrates how traditional limitation rules were applied despite arguments for their extension or modification in the context of digital assets.

The Court also considered the doctrine of laches, which suggests that a claim might be denied if the claimant waited too long to bring it without a good reason. The Court stated: “The question for the court in each case is simply whether, having regard to the delay, its extent, the reasons for it, and its consequences, it would be inequitable to grant the Claimant the relief he seeks.” However, the Court was hesitant to conclude on a summary basis that laches would provide an unanswerable defence, especially given the uncertainty about how much harder any excavation and recovery operation would be due to the lapse of time, potentially increasing costs or facing technological barriers.

In fraud cases, including those involving cryptocurrency fraud, the limitation period is governed by Section 32(1) of the Limitation Act 1980. This section provides that the limitation period for fraud does not begin until the claimant has discovered the fraud or could, with reasonable diligence, have discovered it. This principle applies to cases of deliberate concealment or mistake as well and has been upheld in various cases, such as Seedo v El Gamal [2023] EWCA Civ 330) and Bilta (UK) Ltd (In Liquidation) v SVS Securities Plc [2022] EWHC 723 (Ch). If, the instant matter were a fraud case, this exception might have applied, allowing the limitation period to start from the discovery of the fraud. However, since the current case does not involve fraud, the general six-year limitation period applies.

Given the novelty of digital assets in the legal landscape, future case law or legislative amendments may address specific limitation issues related to digital assets. However, as of the date of writing (February 25, 2025), there is no explicit indication of a different limitation period for digital asset claims compared to other causes of action in the UK.

Implications for Future Digital Asset Disputes

The Howells judgment sets a precedent that may influence future claims for the recovery of lost or inadvertently disposed of digital assets. The Court's prioritisation of public policy concerns over the potential recovery of high-value digital assets reflects a conservative approach to balancing public and private interests. The Court's approach raises questions about how the legal system should weigh individual property rights against broader public interests in the context of digital assets.

The strict interpretation of public policy in this case may have far-reaching consequences for the treatment of digital assets in various contexts. Future claimants seeking to recover lost cryptocurrencies or other digital assets may face significant legal hurdles, particularly if their claims intersect with public infrastructure or environmental concerns.

This aspect of the decision may have significant implications for future cases involving lost or inaccessible cryptocurrencies. It suggests that Courts may prioritise established public interest concerns over the recovery of even extremely valuable digital assets. This approach may need to be re-evaluated as digital assets become increasingly integrated into mainstream financial systems and individual wealth portfolios.

Conclusion

The Howells case exposes significant gaps in the current legal framework in dealing with digital assets. While the court's decision aligns with existing legislation and established legal principles, it underscores the need for legal innovation to address the unique challenges posed by digital assets. This suggests that future cases may need to adopt a more flexible approach, balancing traditional legal doctrines with the realities of emerging technologies.

Authors:

Brian Sanya Mondoh, Barrister and Attorney at Law, Founder at Blockchain Lex Group and
CryptoMondays Caribbean and Africa

Palesa Roza Gwele, LLB, Director of PR and Communications at Blockchain Lex Group
and CryptoMondays Caribbean and Africa, Lesotho

Disclaimer: This publication is for informational purposes only and does not constitute legal or financial advice. The content is not intended to be a substitute for professional advice or
judgment. Please consult with a qualified legal or financial advisor before making any decisions based on the information provided in this publication. The authors and publishers are not responsible for any actions taken as a result of reading this publication.