ST. JOHN'S, N.L. — A Chinese company that makes equipment for bitcoin mining had a victory recently in its court case against a Newfoundland and Labrador company.
Bitmain Technologies Limited has been involved with a civil suit against Great North Data (GND) and its owner, James Goodwin, since 2017. The trial of Bitmain’s claims against GND and Goodwin was originally scheduled for 25 days, to start on March 23, 2020.
Goodwin and GND, who operated data centres in Happy Valley-Goose Bay and Labrador west, declared bankruptcy in November 2019, meaning the claims by Bitmain were automatically stayed under the bankruptcy act.
Bitmain applied to the courts to have that removed, saying their claims were too complex to be dealt with by the bankruptcy act and even if GND is discharged in bankruptcy, the company will not be released from the claim that Bitmain has against it, among other reasons.
The courts agreed, allowing Bitmain to proceed in its claims of fraud and wrongful conduct against GND and Goodwin.
Justice Garrett A. Handrigan, the judge who heard the motion, said based on the statements of claim Bitmain has filed against GND and Goodwin and the affidavits it filed to support its application to lift the stay of proceedings, he is satisfied that Bitmain has an arguable case on those issues.
According to the notice of motion filed by Bitmain, they entered a collocation contract with GND in 2016, whereby GND would host Bitmain equipment in their facility in Labrador City. The company said they also paid $332,640 USD to GND as a prepayment, which was to be held in trust.
Within a few months, Bitmain alleges, GND told them they would end the agreement.
“The relationship between Bitmain and GND deteriorated quickly,” Handrigan said in his written judgement. “Bitmain alleged that GND sold off to third parties most of the hardware that Bitmain supplied; that GND used funds that Bitmain provided to GND in trust inappropriately; and that GND generally acted in bad faith towards Bitmain.”
He notes that the onus to prove these claims lies with Bitmain but agreed that if they succeed with any of the claims neither GND nor Goodwin will be discharged in bankruptcy from any debt or liability arising from them.
Bitmain also noted that the case had been ongoing for three years, with 1,000’s of documents filed and many court applications.
“Given the effort and expense required to get to this advanced stage of the proceedings, Bitmain submits that it would be materially prejudiced if the stay of proceedings is allowed to remain in place and prevent a full adjudication of its claim,” Bitmain said in its motion.
Handrigan said he is satisfied Bitmain that showed it would be inequitable and unfair to continue the stay of proceedings and they would be materially prejudiced, which is when a creditor is being treated differently or unfairly in a bankruptcy.
GND is scheduled to return to the Supreme Court in St. John’s on Sept. 3.
