Hutchison 3G Australia Pty Ltd v Telstra Corporation Limited
[2009] VSC 203
•27 May 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST A
No. 5231 of 2009
| HUTCHISON 3G AUSTRALIA PTY LTD (ABN 76 096 304 620) AND HUTCHISON WHAMPOA LTD (COMPANY NUMBER 54532) | Plaintiffs |
| V | |
| TELSTRA CORPORATION LIMITED (ABN 33 051 775 556) AND ORS (ACCORDING TO THE SCHEDULE) | Defendants |
---
JUDGE: | DAVIES J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 May 2009 | |
DATE OF JUDGMENT: | 27 May 2009 | |
CASE MAY BE CITED AS: | Hutchison 3G Australia Pty Ltd and Anor v Telstra Corporation Ltd and Ors | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 203 | |
---
CONTRACT – Construction of defined words in a contract – Meaning of “Beneficial Ownership” – Meaning of “Change in Control” – Contractual right where a “Change of Control” – Validity of exercise of contractual right.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mark Moshinsky SC and Wendy Harris | Allens Arthur Robinson |
| For the Defendants | Charles Scerri QC and Sharon Burchell | Arnold Bloch Leibler |
HER HONOUR:
Issue
The issue in this proceeding is whether the second defendant (“TSub”) validly exercised a right reserved to it in clause 41.3 of a contract between the first plaintiff (“H3GA”) and TSub called the 3GIS Partnership and Operating Agreement (“the POA”). The determination of that issue depends on the construction of contractual terms that appear in clause 41.3.
Under clause 41.3, TSub, a wholly owned subsidiary of the first defendant (“Telstra”), may, in the event of a “Change of Control” of H3GA or its Australian parent, Hutchison Telecommunications (Australia) Limited (“HTAL”), appoint its nominees to the position of chairman of the Board and the Technical Committee of the fifth defendant (“3GIS”), a company in which TSub and H3GA each have a 50% interest. TSub has purported to appoint its nominees as chairmen by reason of an asserted “Change of Control” event, being a change in “Beneficial Ownership” of HTAL’s shares. The appointments, if valid, have given those chairmen casting votes.
The “Change of Control” event alleged by the defendants is an agreement, styled the “Implementation Agreement” (“IA”), that the second plaintiff (“HWL”), HTAL and Vodafone Group Plc (“Vodafone”) entered into. The IA contains HWL and HTAL’s agreement to “standstill arrangements” in relation to HTAL’s ordinary shares. HWL, a Hong Kong listed company, holds the majority shareholding in HTAL through Hutchison Communications (Australia) Pty Limited (“HCAPL”), an Australian subsidiary.[1] Clause 2 (“the standstill clause”[2]) binds HWL to ensure that HCAPL does not, for a specified period, dispose of its shares, or interest in its shares, in HTAL.
[1]HCAPL currently owns 52.03% of HTAL’s issued ordinary shares; further, HWL has a “relevant interest” in an additional 11.13% of the ordinary shares in HTAL arising from an equitable mortgage of shares between Leanrose Pty Limited and HCAPL.
[2]Clause 2 of the IA.
There are two questions of construction that arise for consideration:
(a) Does Vodafone, by the standstill clause, have “Beneficial Ownership”, as defined in the POA, of the shares in HTAL?
(b) If so, does that “Beneficial Ownership” constitute a “Change of Control” as defined in, and for the purposes of, the POA?
I have concluded that the standstill clause does not give Vodafone “Beneficial Ownership” of HTAL’s ordinary shares. If I am wrong about this, I have further concluded that the taking of such “Beneficial Ownership”, in any event, would not have caused a “Change of Control”.
Reasons
(a) Principles of Construction
The parties were not in dispute about the approach to the construction of the expressions in the POA under consideration. The task is to ascertain what the parties intended the expressions to mean. That task is an objective inquiry, in the sense of what a reasonable person would understand the terms to mean.[3]
[3]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 463 [25] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
The objective meaning is to be determined by interpreting the expressions in light of the whole text of the POA and the context in which the parties entered into the POA.[4] As the High Court stated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:[5]
[4]IATA v Ansett Australia Holdings Ltd (2008) 234 CLR 151, 160 (Gleeson CJ).
[5](2004) 219 CLR 165.
The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[6]
Thus, text alone may not determine the meaning to be ascribed to the expressions under consideration.
(b) Application of Principles of Construction
[6]Ibid 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ), cited with approval in IATA v Ansett Australia Holdings Ltd (2008) 234 CLR 151, 174 [53] in the joint judgment of Gummow, Hayne, Crennan and Keifel JJ. See, too, Gleeson CJ at 160 [8]; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 463 [25] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
(i) The POA
H3GA and TSub both carry on businesses of providing third generation (3G) telecommunication services in Australia independently of, and in competition with, each other. Although competitors, they saw mutual advantage in sharing the infrastructure to provide a 3G network. On 6 December 2004, they entered into the POA to establish a partnership to construct and manage facilities to operate a 3G radio access network that they would share (“the 3GIS network”).
H3GA and TSub each use the 3GIS network to provide 3G services to their customers. Clause 3.3(b) of the POA indicates the commercial benefits that each partner intends to derive from this arrangement:
(b)The Partners intend that the Partnership Business will be operated to achieve the following objectives:
(i)the separate operation of differentiated 3G Businesses by each of Telstra and H3GA;
(ii)the lowest possible cost structure consistent with the quality of service required by the Service Levels;
(iii)subject to paragraph (ii), the provision of industry leading and world class services to a NAC Party under the Network Access Contracts;
(iv)significant cost benefits in both capital expenditure and operational expenditure in respect of the Partnership Business for both Partners; and
(v)having regard to the cost benefits referred to in clause 3.3(b)(iv), enhancements to Coverage Area and service that would otherwise be considered marginal on a stand alone basis.
The parties set up 3GIS to manage the partnership business. Under the terms of the POA, the Board of 3GIS is responsible for the overall direction and management of 3GIS and the formulation of the policies to be applied in the partnership business.[7]
[7]Clause 17.1 of the POA.
H3GA and TSub have equal interest in 3GIS as tenants in common in equal shares.[8]
[8]Clause 3.2 of the POA.
Further, each has equal representation and voting power on the Board. They have the right to appoint three directors each to the 3GIS Board and to nominate the chairman in alternate years.[9] The chairman does not have a casting vote.[10]
[9]Clause 17.2 of the POA.
[10]Clause 17.3 of the POA.
The Board, as directed under the POA,[11] has appointed a Technical Committee. This committee has the power to make decisions in respect of technical matters as described in a charter which is in schedule 11 of the POA. H3GA and TSub likewise have equal representation on the committee and each has the right to nominate the chairman in alternate years. The chairman does not have a casting vote.[12]
[11]Clause 26.1 of the POA.
[12]Ibid.
Decisions on the Board and the Technical Committee require unanimous resolution.[13] In the event of a dispute, the POA prescribes dispute resolution procedures which must be followed.[14]
[13]Clause 18.7(a) and schedule 11 clause 1(g) of the POA.
[14]Clauses 43, 26.4 and schedule 9 of the POA.
It is evident from the terms regulating the management of the partnership that the parties intend that they have equal say in the conduct of the business and consensus in decision-making. However, unanimity in decision-making on the Board and the Technical Committee is made subject to clause 41 of the POA. Clause 41.3[15] relevantly provides as follows:
[15]Clause 41.4 of the POA applies to a “Change of Control” of TSub.
41.3 Consequence of Change of Control of HTAL or H3GA
In the event that there is at any time a Change of Control of HTAL or H3GA:
(a)the Chairman of the Board shall be and shall remain such Director from time to time as is nominated by TSub and shall have a casting vote;
(b)the chairman of the Technical Committee shall be and shall remain the Key Representative nominated from time to time by TSub and shall have a casting vote;
(c)the casting votes referred to in paragraphs (a) and (b) may not be used to amend any of the Proposed Agreements to which the Agent is a party (other than an amendment in identical terms under clause 5.2 of both Network Access Contracts to improve the Service Levels for the NAC Party) or require the Agent to act in a manner inconsistent with any of the Proposed Agreements;
(d)subject to paragraph (c), the Chairman of the Board and the chairman of the Technical Committee may use the casting votes referred to in paragraphs (a) and (b) either at a Board meeting or a Technical Committee meeting (as applicable) in respect of all matters, including:
(i)the appointment or replacement of the CEO;
(ii)updating the Rollout Plan (except that the casting vote may not be used with respect to the Rollout Plan (or otherwise) to require the Partnership to build any Enhancements proposed by Telstra);
(iii)subject to subparagraph (iv), the entry into, amendment or termination of any agreement between the Agent and a third party as described in clause 19; and
(iv)if the casting vote is used with respect to the entry into an agreement as described in clause 19, TSub:
(A)will be entitled to an additional share of the Partnership’s profits equal to those arising from that agreement; and
(B)must fund any Partnership losses associated with the incremental costs of performing that agreement; and
(C)must indemnify H3GA and keep it indemnified against any loss, liability, cost and expense that H3GA may sustain or incur directly in connection with the incremental costs of performing that agreement.
It was common ground between the parties that the purpose of clause 41.3 is to protect the relationship that the parties have created by the partnership agreement. That relationship is built on a commonality of interest in the creation and maintenance of a 3G network that will deliver, for both, the commercial benefits identified in clause 3.3(b), but which will allow them, at retail level, to operate independently of the other and to compete for 3G customers.[16]
[16]Clause 3.7 of the POA.
The defendants said that they do not cavil[17] with the following paragraphs in the outline of submissions filed on behalf of the plaintiffs:
[17]Amended outline of defendants’ submissions for 1 May 2009, (29 April 2009), [16].
26.The evident commercial purpose of clause 41.3 reflects the nature of the partnership relationship. The POA does not, in terms, prohibit a change in control in either of the partners after 30 June 2007,[18] thereby preserving the ‘liquidity’ of (relevantly) HWL’s shares in HTAL and HTAL’s shares in H3GA. HWL and HTAL remain free, for example, to bring additional investors into HTAL or H3GA, and HTAL remains at liberty to raise money on the capital markets.
[18]Under clauses 41.1 and 41.2, there were prohibitions on a Change of Control in favour of a Mobile Operator (as defined) for a period of time. These prohibitions ceased to have effect on the earlier of certain dates, one of which was 30 June 2007.
27.Nevertheless, each party has, by becoming a party to the partnership, entered into an arrangement whereby it will cooperate with the other to construct and manage facilities necessary to operate a 3G radio access network used by each of H3GA and Telstra to provide network access services to their mobile telephony customers. The provision of these services and, therefore, the joint arrangements the subject of the POA, are, manifestly, critical to each party’s operations. In such a context, it is – unsurprisingly – important to each party to protect itself against the other selling or relinquishing control to a third party who, for example:
(a)does not have the same shared technical and commercial objectives for 3GIS as the original partners;
(b)might seek to obtain some competitive or strategic advantage by using its ownership stake and correlative veto right over the management of 3GIS to slow investment, or hinder the development and operation of the shared network, or otherwise prevent the establishment and maintenance of industry leading facilities;
(c)might not have the financial wherewithal to contribute its 50% share of the substantial capital and operating expenditure requirements of 3GIS.
28.This is the obvious policy underlying clause 41.3, which protects the relationship of the parties to the partnership arrangement, a relationship which is premised upon – and indeed requires – negotiation and compromise in decision-making to permit the partnership to function.
29.The apparent intent of clause 41.3 is to be borne in mind when considering whether it has been triggered by the standstill clause in the Implementation Agreement.
However, the defendants submitted[19] that the protections as described in subparagraphs 27(a) and (b) of the plaintiffs’ outline “at the least are squarely relevant to the present circumstances” in respect of Vodafone by reason of the standstill clause. They submitted that the standstill clause gives Vodafone significant leverage and power over HCAPL and, through it, H3GA and its conduct of the 3GIS partnership.[20]
[19]Amended outline of defendants’ submissions for 1 May 2009, (28 April 2009), [16].
[20]Ibid [17].
By a letter dated 20 March 2009, TSub asserted that “[t]he standstill arrangements granted in favour of [Vodafone] resulted in a Change of Control of HTAL on 8 February 2009 for the purposes of the P[O]A”. The letter went onto state that:
Accordingly, pursuant to cl 41.3 of the P[O]A, TSub hereby nominates Stuart Lee [the third defendant] as chairman of the Board (replacing the H3GA nominee, Michael Young) with immediate effect. TSub notes that its nominee Michael Swadling [the fourth defendant] is the present chairman of the Technical Committee.
Mr Lee and Mr Swadling (and their successors as nominated by TSub) will hold a casting vote at all meetings of the Board and the Technical Committee respectively.
(ii) The IA
HWL and HTAL entered into the IA with Vodafone on 8 February 2009 (as amended and restated on 25 February 2009) arising out of a proposed joint venture between HTAL and Vodafone in respect of their existing Australian mobile telecommunications businesses.[21] Vodafone has notified the ASX that it would have a “relevant interest” in HTAL’s shares as prescribed by s 608(1) of the Corporations Act 2001 (Cth) (“the Act”), but for the IA being a conditional agreement for the purposes of s.609(7) of the Act.
[21]Paragraphs A, B and C of the Background section in the IA.
The standstill clause that the defendants claim triggered the “Change of Control” of HTAL for the purposes of the POA and the entitlement of TSub to exercise its rights under clause 41.3 provides as follows:
2 Standstill
(a)Subject to clause 2(b), during the Standstill Period, HWL must ensure that HCAPL does not:
(i)Dispose or offer to dispose of any HTAL Ordinary Shares.
(ii)Dispose or offer to dispose of any right or option over, or interest (including Relevant Interest) in any HTAL Ordinary Shares.
(iii)Dispose or offer to dispose of:
(A)the number of HTAL CB Shares that when aggregated with;
(B)the HTAL Ordinary Shares referred to in clause 2(a)(i),
result in VGPlc having control over disposal of 49.9% (by value) of the shares in HTAL (Restricted Preference Shares).
In this clause 2(a)(iii), the terms “shares” and “value” have the meaning given to them in the CPS Terms.
(iv)Dispose or offer to dispose of any right or option over, or interest (including Relevant Interest) in the Restricted Preference Shares.
(v)Enter into any arrangements involving the conferring of rights the economic effect of which is equivalent, or substantially equivalent, to disposing of HTAL Ordinary Shares or Restricted Preference Shares.
(b)Clause 2(a) does not apply to a disposal to a wholly owned Subsidiary of HWL, provided the disposal does not give rise to any person having a conversion right under the CPS Terms.
(c)Despite clause 2(d) below, the parties agree that all the obligations in this document become binding on the Date of this Document.
(d) This document is conditional on the approval of HTAL Shareholders under item 7 of section 611 of the Corporations Act (Acquisition Resolution) on or before the Relevant Date.
(iii) The expressions “Change of Control” and “Beneficial Ownership”
Against that background, I now set out the two expressions under construction.
“Change of Control” is defined in the POA as follows:
Change of Control means at a relevant time in respect of either HTAL or H3GA (the First Person), the Beneficial Ownership by another person (the Second Person) of 25% or more of the Voting Securities in the First Person, provided that the Beneficial Ownership of Voting Securities of the First Person held by the Second Person is greater than the Beneficial Ownership of the aggregate number of Voting Securities of the relevant First Person held by all members of the HWL Group at the relevant time, but excludes any Change of Control resulting from:
(a)the acquisition by any person of any interest in any securities of HWL; or
(b)the acquisition by any person of Beneficial Ownership of Voting Securities in HTAL or H3GA if the acquisition and any others within the previous six months do not cause the Beneficial Ownership in the Voting Securities of HTAL or H3GA held by the Second Person to increase by more than 3% over the level as at the commencement of the six month period.[22] (emphasis added)
[22]Clause 1.1 of the POA.
“Beneficial Ownership”[23] is defined in the POA as having a corresponding meaning to “Beneficially Own”. “Beneficially Owns” means in the POA:
Beneficially Own means, with respect to Voting Securities, directly or indirectly, through any contract, arrangement or understanding, relationship or otherwise having (whether subject to a condition or not):
(a)voting power, which includes the power to vote, or to direct the voting of such securities; and/or
(b)investment power, which includes the power to dispose of, or to direct the disposition of or in any way encumber such securities.[24] (emphasis added)
[23]Ibid.
[24]Ibid.
The defendants argued that Vodafone has the “power … to direct the disposition of” HTAL’s shares, within the meaning of that expression in limb (b) of the definition of “Beneficial Ownership”, by reason of the restrictions on share disposal effected in Vodafone’s favour under clause 41.3. They argued that the ordinary meaning of this phrase extends to a power to direct that a disposition not occur, either in particular circumstances or not at all, and that it was relevant that the standstill arrangements were sufficient to have given Vodafone a “Relevant Interest” in HTAL as prescribed by the Act.
For Corporations Law purposes, a person has a “Relevant Interest” if they:
(a) are the holder of the securities; or
(b)have the power to exercise, or control the exercise of, a right to vote attached to the securities; or
(c)have the power to dispose of, or control the exercise of a power to dispose of, the securities.[25]
“Control” in the phrase “the power to … control the exercise of a power to dispose of securities” has been held, for Corporations Law purposes, to include the power which another person has to restrict or prevent the doing of something, as well as the power to require the doing of something. In North Sydney Brick and Tile Co Ltd v Darvall[26] Mahoney JA at 689-690, with whom Kirby P and Glass JA agreed, stated as follows:
The company’s submission is that the right which these articles give to Mr Darvall constitute the “power … to exercise control over the disposal of” any share in the company other than his own, within s 9(1)(b).
Whether the articles have this operation depends, in the first instance, upon the meaning to be given to “control” in s 9(1)(b). “Control” is a word which has a number of possible meanings: it has been described as a word of wide and ambiguous import: Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 at 385 per Dixon J. However, in many contexts it is difficult to find a convenient substitute for it. In its essential meaning in this context, it looks to the doing of something, viz, the disposition of a share; to the ways or circumstances in which, unhindered, that could be done or could occur; and to the power which another person has to restrict or prevent the doing of it in some or all of those ways or circumstances. In this sense it looks to two things: the things which may be done by way of restriction or prevention; and the part which the person in question plays in the doing of them. …
[25]Corporations Act 2001 (Cth) s 608(1).
[26](1986) 5 NSWLR 681.
The plaintiffs contended, on the other hand, that the drafters of the definition of “Beneficially Own” in the POA deliberately eschewed a definition of that term corresponding with the concept of “Relevant Interest” as prescribed by the Act and that the standstill clause, which ensures that the status quo of the HTAL shares is preserved, is the antithesis of the “Change of Control” that TSub protects itself against by clause 41.3.
Some support for the view that the drafters eschewed a definition of “Beneficial Ownership” corresponding with the concept of “Relevant Interest” for Corporations Law purposes, may be found in clause 41 itself in that sub clauses 6(d) and (e) use the language of “Relevant Interest”, not “Beneficial Ownership”, as the trigger for certain obligations on the part of Telstra.[27] It indicates that the drafters did not use the expressions synonymously.
[27]Clauses 1.2(i), 41.6(d) and (e) of the POA.
However, the issue in this case is not about the statutory meaning of “Relevant Interest” as it applies to Vodafone by reason of the IA. The issue here is what meaning the parties intended by the language they used to define “Beneficial Ownership” for the purposes of the POA. That language plainly does not adopt “Relevant Interest” as the test. The text of “Beneficial Ownership” does not provide that an entity has “Beneficial Ownership” in HTAL’s shares if that entity has a “Relevant Interest” in those shares. The question here is whether the obligation that HWL contracted in favour of Vodafone to ensure that HCAPL did not dispose of its shares in HTAL gave Vodafone the “power … to direct the disposal” of shares in HTAL. That question must be determined by what a reasonable person would understand by that phrase in the context of the POA.
In my view, a reasonable person would understand the phrase to have the meaning that the words convey by the language itself – that is, in the “doing” or active sense. If an entity has a dispositive power in relation to the shares in HTAL, that power may relevantly be exercised by restraining disposal. However, it does not follow that a restraining power relevantly confers dispositive power on the entity in relation to those shares. Whilst a power to restrain disposal derives from a dispositive power, a power which only entitles the holder to restrain disposal is not a power to direct that there be a disposal. In my view, the text does not support the defendants’ construction and it is the power to direct that a disposal occur which is the criterion that triggers “Beneficial Ownership”.
That meaning, namely in the sense of “to direct that a disposition occur”, is confirmed by the context in which the phrase has its primary signification, which is in the definition of “Change of Control”. “Change of Control”, also a defined expression, is to be understood in the context of clause 41.[28] The definition of “Beneficial Ownership” should be construed in a way that is consistent with the object of clause 41, namely to protect the relationship of the parties without producing some irrational result.[29] It would, in my view, be an a irrational result if the phrase under consideration were construed as comprehending a “Change of Control” merely because a restriction has been placed on the disposition of shares held in HTAL. The restriction operates as a suspension of the power to dispose of the shares in HTAL. It is not a conferral of any power in Vodafone to cause the disposal of the shares. The effect of the restriction ensures the continuation of the status quo which clause 41 is directed to preserving. I accept the plaintiffs’ contention that the effect of the standstill clause is the very antithesis of a Change of Control against which the provision seeks to protect the parties to the 3GIS partnership.[30]
[28]The function of the definitions is to give meaning to the words in the clauses in which they are used: Cf Gibb v FCT (1966) 118 CLR 628, 635.
[29]See Westpac Banking Corp v Tanzone Pty Ltd [2000] NSWCA 25 (Unreported, Priestly, Fitzgerald JJA and Foster AJA, 29 February 2000) [19], [37] (Priestly, Fitzgerald JJA and Foster AJA); Boweler v Hilda Pty Ltd (in liq) [2001] FCA 342 (Unreported, Drummond, Dowsett and Gyless JJ, 2 April 2001) [8], [14], [20], [22] (Drummond J); Fitzgerald & Anor v Masters (1956) 95 CLR 420, 426-427 (Dixon CJ and Fullagar J), 437 (McTiernan, Webb and Taylor JJ).
[30]Cf FCT v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at 613 [55].
I am fortified in my view by a consideration of the contract as whole. The nature of the relationship is one based on equal say in the conduct of the business and consensus in decision-making. Clause 41 is to be understood as the clear exception to that equality as it operates to redefine the nature of that relationship by enabling control of the management of the partnership business to be placed in one partner. A construction of the phrase under consideration that results in a “Change of Control” because there is a restriction placed on disposal of the shares held in HTAL contradicts the evident commercial purpose of clause 41, as reflected in the nature of the relationship between the partners. Accordingly, in my view, the standstill clause did not give Vodafone a “Beneficial Ownership” in HTAL.
It does not follow, in any event, that such “Beneficial Ownership” would result in a “Change of Control”. It would still be necessary for the defendants to show that Vodafone’s “Beneficial Ownership” in respect of HTAL’s shares is “greater than the Beneficial Ownership of the aggregate number of Voting securities of [HTAL] held by all members of the HWL Group at the relevant time”. The defendants contended that Vodafone’s “investment power” is relevantly “greater than” HCAPL’s investment power (and hence its Beneficial Ownership) in HTAL’s ordinary shares because Vodafone has the power to direct the disposition, whereas HCAPL does not.
In my opinion there is a confusion of concepts in that argument. If Vodafone has investment power because of the share disposal restraint agreed to by HWL, it is a power that is additional to, and not in substitution of, the power that HWL holds as the majority shareholder of HTAL through its ownership of HCAPL. Indeed, it is because HWL has that power that Vodafone can procure the agreement of HWL to the share disposal restraint.
I accept the plaintiffs’ contention that HTAL’s ordinary shares may be “Beneficially Owned” for the purposes of the POA by more than one person. In other words, that party A may have “Beneficial Ownership” by reason that it owns the shares, the rights of ownership carrying with it the power to direct disposal and, party B may have Beneficial Ownership in the same shares by virtue of some “contract, arrangement or understanding, relationship or otherwise” conferring on that person the relevant dispositive power.
In light of my conclusions, it is not necessary for me to consider the further argument advanced by the defendants that once there is a “Change of Control” the consequences under clause 41.3 will continue notwithstanding that the “Change of Control” is reversed at some future time.
Accordingly I propose to grant the relief sought by the plaintiffs and to dismiss the defendants’ counterclaim. I make the following orders:
1. Declarations that:
a. The nomination by the second defendant, by letter dated 20 March 2009, of the third defendant as Chairman of the Board of directors of the fifth defendant is invalid; and
b. Neither the third defendant, nor the fourth defendant, nor any other representative of the first or second defendants is entitled to exercise a casting vote at meetings, or in respect of resolutions, of:
i. The Board of directors of the fifth defendant; or
ii. The Technical Committee of the fifth defendant –
by reason of the Implementation Agreement dated 8 February 2009 as amended and restated on 25 February 2009 between the plaintiffs and Vodafone Group Plc.
2. Order that the second defendant revoke its nomination of the third defendant as Chairman of the Board of directors of the fifth defendant.
3. Order that each of the first and second defendants revoke any instructions given to:
a. The third defendant to exercise a casting vote at meetings or in respect of resolutions of the Board of directors of the fifth defendant;
b. The fourth defendant to exercise a casting vote at meetings or in respect of resolutions of the Technical Committee of the fifth defendant.
4. Order that each of the first and second defendants instruct each of the third and fourth defendants not to exercise any casting vote at meetings or in respect of resolutions of the Board or Technical Committee of the fifth defendant.
5. Order that the defendants’ cross-claim is dismissed.
6. Order that the defendants are to pay the plaintiffs’ costs of the proceeding, including reserved costs.
---
SCHEDULE OF PARTIES
BETWEEN
| HUTCHISON 3G AUSTRALIA PTY LIMITED (ABN 76 096 304 620) | First Plaintiff |
| HUTCHISON WHAMPOA LIMITED (COMPANY NUMBER 54532) | Second Plaintiff |
| And | |
| TELSTRA CORPORATION LIMITED (ABN 33 051 775 556) | First Defendant |
| TELSTRA ONAIR HOLDINGS PTY LIMITED (ABN 87 094 166 328) | Second Defendant |
| STUART LEE | Third Defendant |
| MICHAEL SWADLING | Fourth Defendant |
| 3GIS PTY LIMITED (ACN 111 440 307) | Fifth Defendant |
----
0
8
0