MB Technology Ltd v Orbis Blockchain Technologies Ltd
[2024] NZHC 3631
•2 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
COMMERCIAL PANEL
CIV-2020-404-1541
[2024] NZHC 3631
BETWEEN MB TECHNOLOGY LTD
Plaintiff
AND
ORBIS BLOCKCHAIN TECHNOLOGIES LTD
First defendant
DAVID SHU-HAN YU
Second defendantDANIEL JOHN CROTHERS
Third defendantContinued overleaf
Hearing: 25 November 2024 Appearances:
J S Cooper KC, JAR Barrow, B E Marriner and AJA Cameron for plaintiff
M Heard, R M Keane and I K Rollinson for first, fifth and sixth defendants
AJB Holmes for second and third defendants
C P Browne, J P Rea and J J Gosha for fourth defendantDate of judgment:
2 December 2024
REASONS FOR JUDGMENT OF JAGOSE J
[Pre-trial applications]
This judgment was delivered by me on 2 December 2024 at 2.30pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………………….. Registrar/Deputy Registrar
MB TECHNOLOGY LTD v ORBIS BLOCKCHAIN TECHNOLOGIES LTD [2024] NZHC 3631 [2 December 2024]
ECOMI TECHNOLOGY PTE LTD
Fourth defendant
DENISE MULLINGS
Fifth defendant
JAHANZAIB KHAN
Sixth defendant
[1] This proceeding’s background is summarised in my 1 June 2022 judgment.1 At material issue for trial now is MB Technology’s retention of title in Orbis shares (or alternative entitlement to damages for their loss).
[2] My 25 November 2024 minute determined various pre-trial applications heard on the first morning of the proceeding’s three-week trial:
(a)MB Technology’s 22 October 2024 application for leave to bring a new cause of action was refused;
(b)MB Technology’s 20 November 2024 amended application to serve:2
(i)supplementary briefs of evidence from Chenzhang Li was granted on conditions; and
(ii)a brief of evidence from Kenneth Tan SC was refused;
(c)Orbis’ 21 November 2024 application to set aside subpoenas was granted, with indemnity costs to Orbis (to include any reasonable expenses incurred by Ernst & Young); and
(d)Orbis’ 17 October 2024 application relating to the admissibility of the December 2020 email was granted, with consequential amendment to Mr Godenzi’s brief—
all with reasons to follow. These are those reasons.
1 MB Technology Ltd v Orbis Blockchain Technologies Ltd [2022] NZHC 1257 at [1]–[6].
2 My minute incorrectly specified “file”, instead of the application’s “serve”.
MB Technology’s 22 October 2024 application (new cause of action)
[3] MB Technology and Orbis each is party to a 13 December 2018 share subscription agreement (with an effective date of 23 October 2018) by which, among other things, Orbis warranted its authorised stock capital consisted of “3,300,000 shares of Ordinary Shares. As of 23 October 2018, there were outstanding 3,300,000 shares of Ordinary Shares”. MB Technology contends some 3.8 million ordinary shares were issued, diluting its shareholding in Orbis, and seeks to amend its claim to include a claim for damages on that breach of warranty.
[4] MB Technology requires leave to amend, because r 7.7(1) of the High Court Rules 2016 prohibits amendment “after the close of pleadings date without the leave of a Judge”. It is common ground leave requires an applicant to cross the “three formidable hurdles” of establishing leave is in the interests of justice, and will not significantly prejudice other parties or cause significant delay.3
[5] Against that is raised the principle “parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceeding”.4 But that principle was articulated in terms of the former r 187 of the Judicature Act 1908, which permitted filing of an amended pleading “at any time before trial” (with leave, if after the setting down date). (The articulation is maintained as ground for the court’s, rather than a party’s, amendment of a pleading.5) Case management now imposes substantial obligations on solicitors adequately to have addressed their clients’ cases.6
[6] The essence of MB Technology’s application is it only recently appreciated contended divergence from the warranty from Orbis’ discovery and responses to interrogatories. But, since 18 June 2021, Orbis’ registration on the Companies Register included reference to its increased number of shares since 20 April 2018. MB Technology has had notice of Orbis’ increased share issue since 18 June 2021.7
3 Elders Pastoral v Marr (1987) 2 PRNZ 383 (CA) at 385.
4 Shanton Apparel Ltd v Thornton Hall Manufacturing Ltd [1989] 3 NZLR 304 (CA) at 309.
5 High Court Rules 2016, r 1.9(2); Beech v Patterson & Patterson Ltd [2019] NZHC 1466 at [11].
6 Platt v Porirua City Council [2012] NZHC 2445 at [21].
7 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285, [2018] 3 NZLR 809 at [66].
[7] In those circumstances, such interlocutory steps as may allow for better reconciliation are not compelling. MB Technology’s delay in claiming for any resultant breach of warranty is not explicable by reference to Orbis’ subsequent disclosure. Affording MB Technology opportunity now to advance a new head of claim against Orbis is not in the interests of justice.
[8] For those reasons, I refused MB Technology leave to bring a new cause of action.
MB Technology’s 20 November 2024 application (supplementary briefs)
[9] Against an agreed timetable for exchange of briefs, now concluded, MB Technology seeks leave to serve supplementary briefs of evidence from Chenzhang Li, addressing Orbis’ current share value from recent discovery and quantifying the value of a recent dividend. His served brief values Orbis’ shares at 20 April 2018, observing he lacked the information he required to provide a current valuation, and calculates the value of another dividend.
[10] For Orbis, Shaun Hayward has responded to the served brief but indicates substantial time will be required to address the sought supplementary brief’s assessment of current share value. I understand the more recent dividend’s value calculation is simply an application of the methodology Mr Li applied to the former dividend, which Mr Hayward is intended to say “is mathematically correct”.
[11] Rule 9.8 of the High Court Rules requires any supplementary brief to be served “as soon as possible”, its acceptance and use in court being at the discretion of the trial Judge, in the interests of justice,8 almost inevitably after application of a balancing test.9
[12] Although Orbis urges I refuse leave as the first proposed brief is not truly supplementary at all, but MB Technology’s belated reversion to a different basis for calculation of damages, my ultimate consideration is what I may do if finding Orbis liable to MB Technology in damages for calculation other than at the date of any
8 Body Corporate 406198 & HHTS Ltd v Argon Construction Ltd [2023] NZHC 1072 at [15].
9 At [13].
breach. On the other hand, Orbis plainly would be prejudiced if it lacked time to respond. And trial unjustifiably would be delayed if such response was afforded now.
[13] I therefore granted MB Technology leave to serve Mr Li’s supplementary briefs on conditions:
(a)the supplementary Li brief addressing current share value only may be used at trial if first I decide I require to know current share value for the purpose of determining any relief in this proceeding, and then only after affording the defendants opportunity to respond; and
(b)the supplementary Li brief addressing the quantification of dividends may be used at trial.
If I require to know current share value for the purpose of determining any relief in this proceeding, I will establish a timetable for the further evidence.
[14] MB Technology also seeks leave to serve a brief for Kenneth Tan SC. Mr Tan is Singaporean senior counsel who — together with his peer, Abraham Vergis SC — previously gave expert affidavit evidence in this proceeding as to agreed legal principles of contractual interpretation under Singapore law in relation to a settlement agreement required to be construed in accordance with Singaporean law.
[15] I accepted that evidence,10 as did the Court of Appeal.11 In doing so, I observed:12
The expert witnesses disagreed how a Singaporean court may apply those principles to the present facts. Given application of those principles is for this Court, for reasons better explained in Newton v Family Court at Auckland [2022] NZCA 207 at [186] and [189]–[191], I disregard the expert witnesses’ subsequent analysis.
[16] For trial, it is intended Mr Vergis again give evidence, after reciting the agreed principles, as to application of those principles to the matters I now am substantively to decide, including commentary on my and the Court of Appeal’s judgments.
10 MB Technology Ltd v Orbis Blockchain Technologies Ltd, above n 1, at [15].
11 Ecomi Technology Pte Ltd v MB Technology Ltd [2024] NZCA 47 at [51].
12 MB Technology Ltd v Orbis Blockchain Technologies Ltd, above n 1, at [13], n 9.
Mr Tan’s intended supplementary brief, in addition to compiling his prior affidavit evidence, would respond to that. It was not earlier served, because MB Technology anticipated the applicable principles had already been established by the experts’ interlocutory affidavits accepted by me.
[17] Given that acceptance, also by the Court of Appeal, I continue to hold to the view application of the agreed principles to the facts is for me, in which endeavour the experts’ additional proposed evidence is not substantially helpful.13
[18] I therefore refused MB Technology leave to serve Mr Tan’s brief. In doing so, I indicated to counsel I also was unlikely to be assisted by Mr Vergis’ further evidence.
Orbis’ 21 November 2024 application (subpoenas)
[19] Ernst & Young had conducted a valuation of Orbis as at 4 April 2024. The valuation is in the common bundle for trial (with the usual consequences),14 in which it bears Orbis’ objection on grounds of hearsay.15
[20] Less than four weeks before trial, without required notice to the defendants,16 MB Technology served subpoenas on a number of Ernst & Young personnel for their attendance at trial as witnesses and to produce a wide scope of documents.
[21] On Ernst & Young’s complaint, I directed no person was required to comply with the subpoenas.17 Ultimately, MB Technology sought to maintain a subpoena against only Ernst & Young’s partner responsible for the valuation, and then seemingly only to have him as a witness to avoid Orbis’ objection.
[22] But the truth of the contents of the valuation inevitably also is opinion evidence,18 even if relevant at 4 April 2024, for which the partner may not be qualified to give or in any event to afford substantial help and I already have addressed how
13 Evidence Act 2006, s 25(1).
14 High Court Rules 2016, r 9.5.
15 Evidence Act, s 17.
16 High Court Rules, r 9.7(6).
17 MB Technology Ltd v Orbis Blockchain Technologies Ltd HC Auckland CIV-2020-404-1541, 19 November 2024 (Minute of Jagose J) at [2].
18 Evidence Act, s 23.
I will deal Orbis’ current share value for the purpose of determining any relief in this proceeding.19 No admissible evidence can properly be given by the partner.
[23] I may set aside a subpoena if no admissible evidence can eventuate, or it is oppressive or an abuse of process.20 In my assessment, for the reasons I have outlined, the subpoenas served on Ernst & Young personnel qualify to be set aside on each ground. For those reasons also, MB Technology’s improper service of the subpoenas exceptionally put Ernst & Young and Orbis to such unnecessary expenditure of time and expense (for Orbis, in a critical period of trial preparation) as justifies their indemnification.21
[24] I thus set aside the subpoenas, with indemnity costs to Orbis (to include any reasonable expenses incurred by Ernst & Young).
Orbis’ 17 October 2024 application (privilege)
[25] Last, Orbis seeks exclusion of specified portions of Benn Godenzi’s proposed brief as impermissibly referring to without prejudice communications. While MB Technology has withdrawn a number of the objected references, it maintains the balance is information to which it was entitled as shareholder.
[26] The relevant communication is an email exchange between the parties in December 2020 which sought and provided particular documents, when the parties had agreed to a finite standstill of this proceeding in good faith to attempt its settlement.22 The communication was initiated “[t]o allow [MB Technology] to assess the current state of the business, and a path forward”, being “mindful of the timeline”. The response recognised the information was sought to resolve the parties’ relationship and hoped for “a positive outcome”, the information expressly being provided “under the shareholder privilege”.
19 At [13] above.
20 Slater v Patel [2006] NZAR 690 (CA) at [9], referring to Re Golightly [1974] 2 NZLR 297 at 302 and Rota v Tukiri [2001] 1 NZLR 715 at [19].
High Court Rules, r 14.6(4)(a); Cummins v Body Corporate 172108 [2023] NZCA 226 at [10]–
[11] and Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27]–[28].
22 MB Technology Ltd v Orbis Blockchain Technologies Ltd, above n 1, at [12].
[27] In that context, the communication plainly was intended to be confidential, made in connection with an attempt to settle the parties’ dispute and accordingly is privileged.23 There is no foundation on which to contend it has been waived or must be disallowed.24
[28] Orbis accordingly has a right to refuse to disclose the communication and any information contained in it,25 and may require (as it has) it not be disclosed in this proceeding.26 If the provided information alternatively was available to MB Technology, the fact of its request and provision in privileged communication means such alternative source is immaterial to disclosure of the privileged communication (including the information contained in it).
[29] I therefore granted Orbis’ application the communication not be disclosed in the proceeding. To be clear, while the information contained in the communication also thus is privileged, its independent existence (if any) is not.
Costs
[30] Costs on all but Orbis’ 21 November 2024 application are reserved for determination on conclusion of trial.
—Jagose J
Counsel/Solicitors:
J S Cooper KC, Auckland
AJB Holmes, Barrister, Auckland JAR Barrow, Barrister, Auckland Buddle Findlay, Wellington
Lee Salmon Long, Auckland Wilson Harle, Auckland
Koo Telle Lawyers, Auckland
23 Evidence Act, s 57(1).
24 Sections 65 and 67.
25 Section 53(1).
26 Section 53(3).
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