Improper purpose
67 As Owen J explained in Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at [4458]-[4459]:
The limited powers of directors can only be exercised for the purpose for which they are granted. Any exercise of a power for an extraneous purpose is a fraud on the power. … It does not necessarily denote conduct on the part of the appointor amounting to fraud in the common law meaning of the word or any conduct that could properly be termed dishonest or immoral. It simply means that the power has been exercised for a purpose, or with an intention, beyond the scope of, or not justified by, the instrument creating the power.
The first task of the court is to construe the power and to determine the limits within which it may be exercised. This is a question of law. Having done that, the court turns to a question of fact; namely whether, in all of the circumstances, the purported exercise goes beyond the constitutional powers of corporation or is otherwise an abuse of the power so construed. Put simply, the court must identify the nature and scope of the power and the purpose for which it was exercised and then decide whether the purpose was permissible or impermissible.
68 And as Mason, Dawson and Deanne JJ said in Whitehouse v Carlton Hotel Proprietary Limited (1987) 162 CLR 285 at 294:
As a matter of logic and principle, the preferable view would seem to be that regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes … [the relevant decision] will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, "the power would not have been exercised" (citing Dixon J in Mills v Mills (1938) 60 CLR 150 at p.186).
69 While ABB acquired 19.9% of the shares in SLC, it accepted for present purposes that, on 26 February 2024, it acquired commensurate voting power in Superloop Singapore in breach of the Code and the Telecommunications Act.
70 ABB submitted, however, that because it gave an enforceable undertaking on 12 March that it would only exercise voting power up to 12%, the giving of that undertaking prospectively "cured" the breach that had occurred on 26 February. In those circumstances, ABB contended that there was no necessary occasion for the SLC Board to exercise the power under rule 12.A5 of the Constitution to require ABB to divest itself of the excess shares.
71 ABB submitted that it had made good a prima facie case that SLC's professed (legitimate) commercial interests for exercising the power as recorded in the 14 March 2024 Board minutes could therefore not be the actuating purpose for the exercise of the power under rule 12A.5 of the Constitution.
72 It is important to record precisely how that submission was put at the hearing.
73 Senior counsel for ABB, Mr Solomon, submitted that, at trial, ABB would, through cross-examination, test the various attendees at the Board meeting about the "broad ranging discussion" regarding the exercise of the power under rule 12A.5 of SLC's Constitution and why, in circumstances where ABB had itself already remedied its contravention by making the undertaking, it was nevertheless necessary to require ABB to dispose of the excess shares "to cure the breach".
74 I asked Mr Solomon "why do you say that it [the power under SLC's Constitution] was exercised for an improper or oppressive purpose?" He responded as follows:
I'm going to do that right now, so let me take your Honour to the code. The short answer - but it is only a short answer - is that we cured the breach of the code, and that there was, in that circumstance, no necessary occasion for the exercise of the power.
….
… but let me say that again, so I've anchored one prospect for what this fight is about; Aussie Broadband gave an enforceable undertaking on 12 March, which I've shown your Honour, that it would not vote rights attached to 19.9 per cent of its shares, and it would only exercise voting power up to 12 per cent. I now want to show your Honour why we consider that sufficient, prospectively, to remedy our breach.
…
We have for better or worse accepted - we have accepted in our representations to IMDA and we accept before your Honour this morning that even though we acquired only 19.9 per cent of shares in the holding company, we thereby acquired voting power in a commensurate percentage in Superloop Singapore.
…
And we have made representations to IMDA on that basis and we don't adopt a different position in Court before your Honour, although, presumably, there was an argument that we acquired no voting power in the subsidiary when we acquired 19.9 per cent in the holding company. On 12 March, in our enforceable undertaking, we sought with an eye on this circumstance, to ensure that going forwards, we did not have voting power in Superloop Singapore. And at least thus far, it hasn't been put against us that the undertaking was ineffective to achieve that outcome. If that be arguably so, that means, straightforwardly, this: On 26 February, there was a contravention. And on 12 March, prospectively only, it was remedied or cured.
75 Mr Solomon submitted that if an interlocutory injunction to restrain the enforcement of the notice were granted, then:
… at trial with the benefit of … all of the documents we got yesterday and other documents, we will be able to test with the chair or the CEO or whoever the witnesses are from the board meeting what the broad ranging discussion was and why the board thought it necessary to require us to dispose of shares when we've already undertaken to ensure that we control voting rights of less than 12 per cent, and where neither of those steps can reach back to 26 February.
76 The reference to "all of the documents we got yesterday" included text messages and emails which SLC had produced by way of informal discovery. Some of these documents were tendered as confidential exhibits, and were said to show that SLC was in fact motivated by commercial considerations other than those set out in the minutes of the Board meeting held on 14 March.
77 If it matters, and speaking on a necessarily preliminary basis, I doubt whether any of that (very limited) material suggests anything of the sort.
78 SLC submitted that the undertaking made by ABB misses the point, and pays no regard to the fact that Superloop Singapore was at risk, and is still at risk, of sanction by the IMDA by reason of ABB's failure to notify it of the acquisition. It relied, in particular, on section 12.6.4 of the Code which provides that "[i]n the event that IMDA concludes that the telecommunication licensee [here Superloop Singapore] ... has contravened or is likely to (or again likely to) contravene any provision of the Code, IMDA may take such enforcement measures as it considers appropriate, including but not limited to" financial penalties and cancellation or suspension of the licence. See [35] and [36] above.
79 As Mr Borsky put it:
… if Superloop didn't take prompt action to correct the contravention, and instead allowed it to continue for an extended period, its risks of sanction were heightened. So that was - those considerations, and that purpose, were entirely proper, and not oppressive. It was entirely responsible and proper of the board to take that proportionate measure available [under] the constitution. And why we say, "proportionate", was because of the 19.9 per cent issue; the power would have authorised a direction to divest 19.9, but the board didn't go that way. The board decided to require divestment of 7.9 per cent only.
80 Mr Borsky also pointed to section 12.6.4.4(c) of the Code which provides that in imposing financial penalties, IMDA will also consider any mitigating factors, including "(iii) whether the Telecommunication Licensee … took prompt action to correct the contravention."
81 For those reasons, SLC submitted that ABB is not able to make out even a prima facie case as to improper purpose, or alternatively, at best, it is only able to make out a very weak prima facie case.
82 In my view, ABB's prima case is at best a very weak one. One fundamental problem with ABB's prima facie case submission is that the claim of improper purpose, it seems to me, is speculative at best, because it was expressed to depend on what may, or may not, fall out through cross-examination of the attendees of the 14 March Board meeting at trial. So much is clear from the submission put by ABB at [74] above. There, counsel submitted that "at trial … we will be able to test with the chair or the CEO or whoever the witnesses are from the board meeting what the broad ranging discussion was and why the board thought it necessary to require us to dispose of shares when we've already undertaken to ensure that we control voting rights of less than 12 per cent, and where neither of those steps can reach back to 26 February."
83 In my view, the proposition that the stated reasons for the exercise of the power to require ABB to dispose of the excess shares were not the true reasons that actuated the board, and that the true causative purpose was "to make it more difficult for ABB to acquire a 100% interest in SLC", is a very weak one, not only because it is speculative, but because there is no evidence of the existence of any extant actual, or even proposed, bid. It also does not address the fact that SLC's own commercial interests and reputation were and are at stake (including risks of fines) if Superloop Singapore does not act promptly to remedy its own breach of the Code, which ABB's actions caused.
84 As Mr Borsky put it:
Your Honour knows, and I have sought to make it good that the risk of sanction to Superloop continued. And so there certainly was occasion and good reason for the exercise of the power available to the Superloop directors under Superloop's constitution that was to mitigate the risk of sanction. And our learned friend's improper purpose theory does not engage with that fact.