In May 2025, the High Court issued its judgment in MB Technology Ltd v Orbis Blockchain Technologies Ltd. The case involved a dispute between a cryptocurrency consulting company (MB Technology) and a digital collectible company (Orbis). In its judgment, the High Court found that the parties had entered into an illegal contract for MB Technology's purchase of shares in Orbis, but nevertheless granted relief by way of rectifying Orbis' share register to reflect MB Technology's shareholding. In doing so, the Court disallowed privilege claimed by Orbis over email correspondence to MB Technology attaching corporate documents.
Background
MB Technology is a cryptocurrency consulting company incorporated in the British Virgin Islands. MB Technology acted as a cryptocurrency advisor to Ecomi Pte Ltd (Ecomi), a Singapore-incorporated company that issued a digital currency token called OMI. Orbis, a New Zealand-incorporated company, owns and operates VeVe, a platform for the purchase and sale of digital collectibles, supported by the OMI token issued by Ecomi.
In December 2018, MB Technology (already engaged as an advisor to Ecomi) entered into a contract with Orbis for the purchase of 183,673 new shares (the share subscription agreement, or SSA) for USD900,000. In February 2019, MB Technology purchased two further parcels of shares (totalling 82,500 shares for a total of USD175,000) from two of Orbis' seed investors (the Transfer Agreements, or TAs). The process was coordinated by Orbis.
In mid-2020, MB Technology issued proceedings against Ecomi in Singapore for payment under the advisor agreement. It also obtained freezing orders in Singapore and New Zealand.
By August and September 2020, it appeared to MB Technology that the shares had never been issued or transferred to it. MB Technology wrote to Orbis and to the seed investors cancelling the SSA and TAs respectively and issued proceedings in the High Court for return of the purchase price pursuant to the purportedly cancelled SSA and TAs.
MB Technology and Ecomi settled the Singapore proceeding, and Orbis' director, Mr Yu, provided Orbis' corporate documents (shareholders' and director's resolutions approving the issue of shares to MB Technology) to MB Technology in a December 2020 email. MB Technology subsequently withdrew its letters of cancellation and amended its claim in the High Court to seek title to the shares it had purchased under the SSA and TAs.
Disallowing privilege
Orbis claimed settlement (or without prejudice) privilege over corporate documents, including shareholders' and director's resolutions approving the issue of shares to MB Technology, that Orbis' director had sent to MB Technology in December 2020 (ie, that the documents were intended to be confidential and was made in connection with an attempt to settle the dispute for the purposes of s 57 of the Evidence Act 2006).
On 2 December 2024, the High Court upheld Orbis' claim to privilege. On 9 December 2024, following a challenge to the privilege claim on a fresh ground the Court disallowed that privilege under s 67(1) of the Evidence Act 2006.
Section 67(1) provides:
A Judge must disallow a claim of privilege conferred by any of sections 54 to 59 and 64 in respect of a communication or information if satisfied there is a prima facie case that the communication was made or received, or the information was compiled or prepared, for a dishonest purpose or to enable or aid anyone to commit or plan to commit what the person claiming the privilege knew, or reasonably should have known, to be an offence.
The threshold test for disallowing privilege under s 67(1) is unclear - the authorities differ as to whether a high level of dishonesty, such as fraud or intentional deception, is required, or whether it is sufficient to establish that the party claiming the privilege acted other than as an honest person would, for example by taking advantage of a misapprehension.1 The authorities are clear, however, that the document over which privilege is claimed must have a connection to the dishonest/improper purpose.
Evidence at trial suggested that the shareholders' resolution attached to the December 2020 correspondence had been created on dates after MB Technology had purported to cancel its agreement to purchase shares in Orbis, but were dated prior to MB Technology's purported cancellation and were relied on by Orbis in that communication to contend that MB Technology's cancellation came too late (ie, that it had already acquired the shares).
The Court held that on any categorisation of dishonesty, the document appeared to have a dishonest purpose, being to illustrate MB Technology's shareholding in Orbis (which the evidence suggested was inaccurate). As such, it was clear that the privileged communication was "part of the instrumentation" of the dishonest purpose.
The Court disallowed privilege in the communication. One of the factors that the Court took into account was an unsolicited concession by counsel for the director, Mr Yu, that the backdating of the documents had been undertaken because Orbis was not in a financial position to repay the funds sought by MB Technology. This reinforced the dishonesty of the director's actions.
Contract for shares
The Court held that the SSA entered into between the parties was an illegal contract. Under s 40 of the Companies Act 1993, any contract that requires a company to issue shares is an illegal contract under the Contract and Commercial Law Act 2017 unless certain conditions are met, namely:
- The board is entitled to issue the shares; and
- The board has complied with s 47 or 49 (the requirement for the board of a company to decide the consideration for shares; decide the terms on which the shares will be issued; and a resolution that the consideration and terms are fair and reasonable to the company and all existing shareholders); or
- All entitled persons agree or concur with the issue of shares under s 107(2); or
- The contract expressly provides that it is subject to the board complying with ss 47, 49 or 107(2).
Orbis had no constitution at the time of the SSA. But the default position under s 45 of the Companies Act 1993 provides that shareholders have pre-emptive rights over shares issued or proposed to be issued when those shares would rank equally with or prior to shares already issued (which was the case here). The SSA was not subject to ss 47, 49 or 107(2). Nor, given the reasons traversed above, was there evidence that Orbis' shareholders had concurred with the issue of shares at the time of the SSA, or evidence that the board had made any resolutions in terms of ss 47 or 49 (although the Court held that such resolutions might be internalised, Mr Yu's evidence was that the share issue was determined by what he believed the company was worth and the funds needed to meet the next phase of the project – there was no reference to fairness or reasonableness to existing shareholders).
The Court then considered whether it should grant relief under s 76 of the Contract and Commercial Law Act 2017, which permits the Court to grant restitution or compensation, or variation or validation of the agreement, to a party to an illegal contract. Having regard to the mandatory considerations under ss 78 (conduct of the parties, object of the enactment, and any other matters); 79 (Court must not grant relief if not in public interest) and 80 (person acting with knowledge of facts or law giving rise to illegality), the Court concluded that:
- The parties' conduct in relation to the SSA itself was not disentitling to relief. Orbis sought further investment and MB Technology wanted to make it. To that end, MB Technology paid the purchase price required. There was no unlawfulness in the SSA itself. The illegality arose because of Mr Yu's failure as a director to comply with the Companies Act provisions
- Those failures may have been capable of ratification, and the ex-post-facto backdating of company documents in September and October 2020 may have been capable of doing so, irrespective of Orbis' (or its shareholders', although not all were party to the proceeding) intention of avoiding the SSA
- The object of the relevant sections of the Companies Act that were breached (and which may have constituted offences) were regulatory rather than restorative
- As such, even if the agreement were capable of validation, the breach of those regulatory provisions did not justify it. The Court still did not have evidence that the provisions of the Companies Act had been complied with substantively (ie, that the issue of shares was fair and reasonable to the company and shareholders). The agreement was effectively operational, or inutile: MB Technology had already paid the money. Both parties may have failed to comply with their stipulated warranties.
The Court accordingly granted relief by rectifying Orbis' share register to confirm MB Technology's purchase of shares, recognising that from the date MB Technology paid Orbis the purchase price of the shares, it was wrongly omitted from Orbis' share register. The Court also made an order for Orbis to compensate MB Technology for dividends that it ought to have received from 23 October 2018.
Key messages from the judgment
The case is an important reminder that the rules of evidence apply equally to civil and criminal proceedings, and privilege claimed over a document is not absolute. Where privileged material is compiled or communicated for a dishonest or criminal purpose, the privilege may be disallowed and referred to in open court. The case also reflects the breadth of the Court's jurisdiction to grant relief for illegal contracts, including by rectifying a company's share register as a remedy for an illegal contract for the purchase of shares.
Buddle Findlay acted for the plaintiff, MB Technology, in this proceeding.
A copy of the decisions can be found here (Evidence Act 2006, s 67(1)) and here (substantive decision).
There were no appeals from this judgment.
1 Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence: Act and Analysis (Thomson Reuters, Wellington, 2018) at [EV67.02] and [EV67.03], p 515-516; M Downs and others Cross on Evidence New Zealand edition (online looseleaf ed, LexisNexis) at [EVA67.3]. For a useful discussion of the development of relevant principles, see Spackman v Martin [2021] NZHC 157.
