Quoine Pte Ltd v B2C2 Ltd (2020)

Case Summary: Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 2

This case summary examines one of the first apex court decisions globally to address the application of traditional contract law doctrines — specifically mistake and unjust enrichment — to automated blockchain-based transactions. The Singapore Court of Appeal’s ruling in Quoine Pte Ltd v B2C2 Ltd has significant implications for cryptocurrency exchanges, algorithmic trading, and the legal status of smart contracts in commercial disputes.

1. Case Identification

Name of the Case: Quoine Pte Ltd v B2C2 Ltd (2020)
Citation: [2020] SGCA(I) 2

2. Court and Bench

Name of the Court: Singapore Court of Appeal — Civil Appeal No. 81 of 2019 (International Commercial Division)

Bench Composition: The case was heard before a distinguished five-member panel comprising Sundaresh Menon (Chief Justice of Singapore), Andrew Phang Boon Leong JA (Judge of Appeal), Judith Prakash JA (Judge of Appeal), Robert Shenton French (International Judge / former Chief Justice of Australia), and Jonathan Mance (International Judge / former Justice of the UK Supreme Court). The composition reflects Singapore’s International Commercial Court (SICC) model, which permits eminent foreign judges to sit alongside Singapore’s Chief Justice and Judges of Appeal in complex cross-border commercial disputes.

Date of Judgment: 24 February 2020

3. Parties Involved

Appellant — Quoine Pte Ltd: A Singapore-based cryptocurrency exchange operator that managed a trading platform where users could exchange digital currencies such as Bitcoin and Ethereum.

Respondent — B2C2 Ltd: A UK-based electronic market maker specializing in algorithmic trading of cryptocurrencies, which executed trades on Quoine’s platform using automated trading software.

4. Facts

B2C2, a UK-based algorithmic trading firm, executed trades on Quoine’s Singapore cryptocurrency exchange platform. In April 2017, due to a system error, Quoine’s platform allowed B2C2 to trade Ethereum for Bitcoin at an extraordinarily favorable rate — approximately ten times higher than the prevailing market value. Quoine subsequently reversed the trades, arguing they were invalid as a result of the malfunction. B2C2 then commenced proceedings, claiming breach of contract and wrongful reversal of completed trades.[1]

The matter originated in the Singapore International Commercial Court (SICC), a division of the High Court. In 2019, the SICC ruled in favor of B2C2 Ltd, holding that Quoine had breached its contractual obligations by reversing the trades. Quoine then appealed that decision to the Singapore Court of Appeal (International Commercial Division).

5. Issues Raised

The following legal questions were before the Court:

Issue 1: Whether the trades executed by B2C2’s algorithm through automated software were valid and binding, despite being made at an abnormally favorable rate caused by a system malfunction.

Issue 2: Whether Quoine was entitled to unilaterally reverse those trades after discovering the error, or whether doing so constituted a breach of its contractual obligations to maintain the integrity of executed transactions.

Issue 3: Whether the doctrine of mistake under traditional contract law applied to blockchain-based transactions and, if so, whether the trades fell within that doctrine.

Issue 4: Whether unjust enrichment principles were engaged, given that B2C2 stood to gain disproportionately from the trades compared to market value.

6. Arguments of the Parties

Appellant (Quoine Pte Ltd) — Key Contentions:

(a) Mistake of Fact: Quoine argued that the trades were executed at an extraordinarily abnormal rate due to a system error on its platform. It contended that the contracts were void or voidable under the doctrine of mistake in contract law, relying on Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502,[2] the leading Singapore Court of Appeal authority recognizing unilateral mistake in contract formation.

(b) Unjust Enrichment: Quoine claimed that permitting B2C2 to retain the windfall would amount to unjust enrichment, contrary to equitable principles. It relied on restitutionary doctrines recognized under Singapore law.

(c) Right to Reverse Trades: Quoine maintained that it possessed an implied contractual right to reverse trades that were clearly erroneous or invalid, and that the platform’s integrity required such corrective action.

Respondent (B2C2 Ltd) — Key Contentions:

(a) Binding Nature of Smart Contracts: B2C2 argued that the trades were executed through deterministic algorithms, which by design are final and binding once executed. It emphasized that Quoine’s unilateral reversal breached its contractual obligations to honor completed trades.

(b) Inapplicability of the Mistake Doctrine: B2C2 contended that the doctrine of mistake should not apply in this context because the trades were executed automatically, without human intention at the moment of contracting. It further argued that the system error was Quoine’s responsibility, not a shared mistake between the parties.

(c) Trust and Breach of Duty: B2C2 claimed that Quoine held the cryptocurrencies in trust for its users and had breached that trust by reversing the trades, invoking trust doctrines recognized in Singapore common law.

(d) Precedent and Policy: B2C2 warned that permitting reversals would undermine confidence in blockchain trading systems, where certainty and finality of transactions are essential to the integrity of the market.

7. Final Decision

The Singapore Court of Appeal overturned the SICC’s earlier ruling and held that Quoine was entitled to reverse the disputed cryptocurrency trades. The Court found that the trades were affected by a fundamental mistake of fact, since no reasonable trader would have intended to transact at such an abnormal rate. It rejected B2C2’s argument that automated contracts are immune from traditional legal doctrines, and equally dismissed the trust claim, holding that Quoine operated as a platform provider rather than a trustee of digital assets. The Court ordered the trades to be treated as voidable, upheld Quoine’s reversal, and awarded costs to Quoine — affirming that national courts retain supervisory oversight and the power to apply principles of fairness in digital and smart contract environments.

8. Legal Reasoning

The Singapore Court of Appeal reasoned that although the trades were executed automatically through algorithmic software, the law must still assess them against established doctrines of contract law — particularly the doctrine of mistake. The Court found that the abnormal exchange rate resulted from a system malfunction, and that no reasonable trader, nor the algorithms acting on their behalf, would have intended to contract on such terms.

The Court emphasized that smart contracts are not immune from doctrines such as mistake or unjust enrichment, and that the certainty of blockchain transactions cannot override fundamental principles of fairness. Rejecting B2C2’s trust argument, the Court held that Quoine did not hold cryptocurrencies in trust for its users but rather operated as a platform provider. By affirming Quoine’s reversal of the trades, the Court underscored that digital innovation must operate within the boundaries of traditional legal principles, ensuring that automated systems do not produce outcomes that are unconscionable or contrary to established contract law.

Legal Principles and Doctrines Applied:

(i) Doctrine of Mistake (Contract Law): The Court held that trades executed at an abnormally favorable rate due to a system malfunction could be voidable for mistake, reaffirming that traditional doctrines apply even in automated, algorithmic transactions.

(ii) Unjust Enrichment: The Court emphasized that permitting one party to retain a windfall from a system error would amount to unjust enrichment, and that equity requires correction of such outcomes.

(iii) Smart Contracts and Legal Oversight: The Court clarified that smart contracts, while self-executing, are not immune from established legal doctrines and must be interpreted within the framework of contract law.

(iv) Trust Law: The Court rejected the argument that Quoine held cryptocurrencies in trust for its users, confirming that cryptocurrency exchange platform operators are not automatically trustees of digital assets.

(v) Judicial Oversight in Digital Transactions: By overturning the SICC ruling, the Court reinforced the principle that national courts retain supervisory authority over blockchain-based transactions to ensure fairness and legality.

Significant Precedents Cited:

The Singapore Court of Appeal relied on the following precedents to ground its reasoning in established contract law principles:

(i) Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502[2] — A leading Singapore case on unilateral mistake in contract formation, cited to establish that contracts may be voidable when one party knows the other is entering the agreement under a fundamental mistake.

(ii) Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 (UK Court of Appeal)[3] — Referenced for the modern test of common mistake, clarifying when contracts can be set aside if both parties are mistaken about a fundamental fact.

(iii) Bell v Lever Brothers Ltd [1932] AC 161 (House of Lords)[4] — A classic authority on common mistake, used to illustrate the limits of when a mistake can render a contract void.

(iv) Associated Japanese Bank (International) Ltd v Crédit du Nord SA [1989] 1 WLR 255 (UK High Court)[5] — Cited to reinforce the principle that contracts founded on a fundamental false assumption may be void or voidable.

9. Conclusion

The ruling in Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 2 is a landmark decision — one of the first apex court judgments globally to address how traditional contract doctrines apply to blockchain transactions and algorithmic trading. By affirming that principles such as mistake and unjust enrichment remain operative even in digital environments, the Court reinforced judicial oversight in fintech disputes. The decision clarified that cryptocurrency exchange operators are not automatically trustees of digital assets, and established a significant precedent ensuring that technological innovation operates within established legal frameworks. It continues to shape the evolving landscape of cryptocurrency regulation and digital commercial law.

References

[1] Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 2 (Singapore Court of Appeal, International Commercial Division, 24 February 2020).
[2] Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502 (Singapore Court of Appeal).
[3] Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 (England and Wales Court of Appeal).
[4] Bell v Lever Brothers Ltd [1932] AC 161 (House of Lords).
[5] Associated Japanese Bank (International) Ltd v Crédit du Nord SA [1989] 1 WLR 255 (England and Wales High Court).