Howells v Newport City Council: beware not to lose the private key to your cryptocurrency wallet
In the case of Howells v Newport City Council [2025] EWHC 22 (Ch), the claimant, Mr. Howells, sought to recover a hard drive containing the private key to his Bitcoin that had been mistakenly disposed of at the defendant council's landfill site. The claimant argued that the private key contained in the hard drive pertained to Bitcoin he had mined that was now valued in excess of £600 million, but without the private key, he was unable to access the funds.
The defendant council applied for the claim to be struck out or, alternatively, for summary judgment on the basis that the claim had no reasonable prospect of success. HHJ Keyser KC granted summary judgment in favour of the defendant council.
The judgment addressed several points, including the ownership of the Bitcoin and the hard drive, the limitation period for bringing the claim and whether there was a compelling reason for trial.
Ownership of the Bitcoin
The judge was keen to point out that the case was not about ownership of the Bitcoin as the Bitcoin was not ‘on’ the hard drive. The judge noted the following, referring to Law Commission’s recent report on digital assets,i and the recent case of D’Aloia v Persons Unknown and othersii:
“It is now generally recognised that cryptocurrency, such as Bitcoin, is also property, although it does not fit within what the law recognises as tangible or intangible property; as such, it is commonly said to constitute, or to be within, a “third category” of personal property.”
Further, as cryptocurrency is not considered to be ‘tangible’ property, the judge held that the Bitcoin could not be said to be ‘on’ the hard drive. What could be said to be on the hard drive, was a record of the private key that gave the claimant access to the Bitcoin.
Ownership of the Hard Drive
The claimant had sought the council’s permission for the excavation of the landfill in the hope of recovering the hard drive in order to access a copy of the private key, but the council repeatedly denied this request.
The High Court determined that the council's refusal was justified. Ownership of the hard drive had legally passed to the council when the hard drive was deposited and as such had the right to regulate access to it (section 14(6)(c) of the Control of Pollution Act 1974). The judge held this provision was a complete answer to the head of claim and as such found that the claimant had no entitlement to the hard drive or any right to access it.
Limitation Act
The claimant brought claims based on restitution, equitable proprietary and the establishment of a constructive trust. These were deemed to be without merit and in any event time-barred.
The claimant argued that no limitation period applied to his claim as there was a constructive trust, but the court rejected this argument. The judge referred to Section 21(1)(b) of the Limitation Act 1980, which sets out that there are no limitation periods for actions to recover trust property from a trustee. The judge distinguished between two types of constructive trusts as explained in Lewin on Trusts: constructive trusts of the first and second kindiii. He concluded that the claimant's case, if it involved a constructive trust at all, would be of the ‘second kind’, which is not a ‘true trust’ and as such is subject to a six-year limitation period.
The claimant also argued that the defendant had concealed a fact relevant to his right of action (its assertion of ownership of the hard drive), which would result in a delay to the start of the limitation period under Section 32 of the Limitation Act 1980. However, the judge deemed this argument ‘desperate’, noting that the claimant had been aware of the hard drive's disposal for ten years and that the defendant had not concealed anything.
Other ‘compelling reason’ for trial
Despite the claimant's offer to donate 10% of the Bitcoin's value to the city of Newport if he succeeded in recovering the Bitcoin, arguing this was a ‘compelling reason’ for the case to proceed to trial, the judge did not accept this reasoning. The offer did not provide a legally sustainable basis for the claim, and maintaining the proceedings would be seen as an attempt to pressure the defendant into accepting an offer they had consistently refused.
In summary, the court found that the claim was statute-barred, had no reasonable grounds, and there was no compelling reason for a trial. The claimant's case was dismissed, and summary judgment was granted in favour of the defendant council.
i Digital Assets: Final report (Law Com No. 412, 2023)
ii [2024] EWHC 2342 (Ch)
iii Constructive Trusts of the First Kind: These arise when a defendant has assumed the duties of a trustee or other fiduciary role through a transaction that is independent of and precedes any breach of trust. These are considered "true trusts" because the defendant has taken on a fiduciary duty.
Constructive Trusts of the Second Kind: These are formed as a direct consequence of an unlawful transaction that the claimant challenges, where the defendant is essentially a wrongdoer. These are not "true trusts" because the defendant has not assumed any fiduciary duty; they are remedial and are termed constructive trusts as a means to provide equitable relief.
