MB Technology Ltd v Orbis Blockchain Technologies Ltd

[2024] NZHC 3055

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 3055

BETWEEN

MB TECHNOLOGY LTD

Plaintiff

AND

ORBIS BLOCKCHAIN TECHNOLOGIES LTD

First defendant

DAVID SHU-HAN YU
Second defendant

DANIEL JOHN CROTHERS
Third defendant

Continued overleaf

Hearing:	11 October 2024
Appearances:	J S Cooper KC and AJA Cameron for plaintiff R M Keane for first and fourth defendants AJB Holmes for second and third defendants
Date of judgment:	18 October 2024

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 18 October 2024 at 3.30pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

J S Cooper KC, Auckland

AJB Holmes, Barrister, Auckland Buddle Findlay, Wellington

Lee Salmon Long, Auckland Wilson Harle, Auckland

Koo Telle Lawyers, Auckland

MB TECHNOLOGY LTD v ORBIS BLOCKCHAIN TECHNOLOGIES LTD [2024] NZHC 3055 [18 October 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 substantive issue is the plaintiff’s (MB Technology) claim the first and fourth defendants (Orbis and Ecomi) were to pay it cryptocurrency tokens (OMI tokens). (There are other claims and counterclaims.)

[2]    The  proceeding   is   allocated   a   three-week   hearing   commencing   on 25 November 2024. Progress to the hearing largely has been achieved by commendable mutual consent, including as to standard discovery supported by presumptively conclusive affidavits. Two interlocutory applications — Orbis and Ecomi’s application for particular discovery, and MB Technology’s application for remote participation and confidentiality — are for my decision now.2

Approach to particular discovery

[3]Rule 8.19 of the High Court Rules 2016 provides:

Order for particular discovery against party after proceeding commenced

If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered

1 or more documents or a group of documents that should have been discovered, the Judge may order that party—

(a)    to file an affidavit stating—

(i)whether the documents are or have been in the party’s control; and

1      MB Technology Ltd v Orbis Blockchain Technologies Ltd [2022] NZHC 1257 at [1]–[6].

2      I addressed the latter in MB Technology Ltd v Orbis Blockchain Technologies Ltd HC Auckland CIV-2020-404-1541, 11 October 2024 (Minute of Jagose J).

(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and

(b)    to serve the affidavit on the other party or parties; and

(c)    if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.

By “should have been discovered”, beyond documents “within the class of documents to be disclosed”,3 is meant reason to believe the party’s possession of further materially relevant documents for proportionate discovery,4 by reference to the pleadings.5 It then is a question for my discretion if to order such.6

Orbis and Ecomi’s application for particular discovery

[4]Orbis and Ecomi seek particular discovery from MB Technology of:

(a)its  “records  of  its  own  trading  activities  [in]  the  market  for  OMI Token”,7 including as particularised;

(b)communications with Orbis investors relating to their contended entitlement to receive bonus OMI tokens; and

(c)documents relating to QCP Capital Limited and/or Silvergate Bank’s involvement with MB Technology’s investment in Orbis.

—records of OMI token transactions

[5]    Alternatively to obtaining the OMI tokens to which it  says it is entitled,    MB Technology claims damages in the amount of their “money’s worth”. Orbis and Ecomi say records of MB Technology’s OMI token transactions are necessary to establish the realisable value of OMI tokens, given their exchange illiquidity and  MB Technology’s private sales. MB Technology suggests exchange data should

3      Water Users’ Group (NZ) Inc v Minister for Local Government [2023] NZCA 61, (2023) 26 PRNZ 251 at [22].

4      Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].

5      New Zealand Rail Ltd v Port Marlborough New Zealand Ltd [1993] 2 NZLR 641 (CA) at 644.

6      Lyttelton Port Company Ltd v Aon New Zealand [2016] NZHC 2996 at [8].

7      On my query, for Orbis and Ecomi, Rachel Keane accepted the application’s “and the market” (emphasis added) was intended to mean “in the market”.

suffice, rendering its historical record superfluous, but does not dispute either the OMI token’s contended exchange illiquidity or its own private sales.

[6]    For so long MB Technology seeks damages alternatively to specific performance, the loss of any OMI tokens to which it may be entitled must be valued at some date, perhaps that of the award. While aggregated exchange-based data may be available, the degree to which such is representative of OMI tokens’ traded value on any date is disputed. Accordingly, another or supplementary objective foundation to check or determine value is required. (That does not extend to MB Technology’s subjective valuation, if any, as may be derived or inferred from its internal documentation or correspondence with others, as also is sought by Orbis and Ecomi for particular discovery.)

[7]    MB Technology privately has traded significant quantities of OMI tokens for value; such transactions are a natural check on or substitute for any exchange-based data. Although Mr Godenzi says he does not hold any trading records, that is not in response to any specific requirement for their discovery. The documentation, to the extent within MB Technology’s control,8 is relevant and material and proportionate to MB Technology’s damages claim for such value. Even if not directly of value at the date of any later award, the relationship of private trades to contemporaneous exchange values would likely inform assessment of value to MB Technology at that date. There is no suggestion I nonetheless should withhold its availability to Orbis and Ecomi. I will order its discovery.

—communications with Orbis investors

[8]    MB Technology alleges its 24 September 2018 agreement with Orbis and Ecomi to issue “bonus” OMI tokens to equity investors in Orbis. The allegation is denied, Orbis and Ecomi saying such is contradicted by subsequent documentation between the parties.  Orbis  and  Ecomi  now  seek  to  bolster  their  denial  with  MB Technology’s communications with equity investors in Orbis, implicitly as likely to refer to any such entitlement, anticipating they may undermine (or endorse) — tend

8      High Court Rules 2016, r 8.7. Mr Godenzi indicates records may be held by the facilitating Bitforex exchange, but such is not under his control.

to prove or disprove — the existence of the contended agreement. Explicitly, Orbis and Ecomi seek to infer from the absence of such reference the lack of any such agreement.

[9]    The sought discovery in this respect plainly is a fishing expedition — looking for, rather than at, evidence9 — and founded only on once-removed hearsay evidence MB Technology’s communications with equity investors lacked reference to their entitlement to be issued OMI tokens. That is an insufficient foundation on which to assert relevant documents exist for particular discovery, especially sought only on the basis of an implication as to the presumed content of such correspondence. I will decline its discovery.

— QCP Capital Limited and/or Silvergate Bank’s involvement

[10]   MB Technology alleges, on 22 October 2018, it paid Orbis USD 900,000 to subscribe for 183,673 ordinary shares in Orbis on terms. The allegation is denied, Orbis saying it received such an amount then from “QCP Capital PTE Ltd, a Singaporean entity, and the payment reference was ‘QCP BNY CUST RRN – O/B SILVERGATE B’”. MB Technology advised it liquidated cryptoassets through QCP, which it assumes paid through an intermediary, Silvergate.

[11]   Although argument and evidence was limited on the issue, as MB Technology is claiming the benefit of a payment ostensibly made by another, it should have to discover any foundation for that claim. I will order discovery here too. But such does not extend generally to MB Technology’s relationship with either QCP or Silvergate.

Result

[12]   I order, as soon as possible within 10 working days of the date of this decision, MB Technology file and serve an affidavit in terms of r 8.19(a) as to the documents stipulated at paras (a)(i) and (c) (the latter amended to refer only to QCP or Silvergate’s “involvement with the USD 900,000 payment”) of the Schedule to Orbis and Ecomi’s 24 July 2024 application and, if the documents are in MB Technology’s control, make

9      Re Securitibank (No 31) (1984) 1 PRNZ 514 (HC) at 519–520.

those documents available for inspection, in accordance with r 8.27, to the other parties.

Costs

[13]   In my preliminary view, given Orbis and Ecomi’s only partial success on the application, costs on the application should lie where they fall or fell.

[14]   If the parties disagree, and cannot agree costs between themselves, costs are reserved for determination on short memoranda each of no more than five pages — annexing a single-page table setting out any contended allowable steps, time allocation and daily recovery rate  —  to  be  filed  and  served  by  Orbis  and  Ecomi  within 10 working days of the date of this judgment, with any response or reply to be filed within five working day intervals after service.

—Jagose J