Bezeq Claims
- According to Bezeq, the request for approval is based entirely on the fact that the Ministry of Communications imposed a financial sanction on it. However, the imposition of a financial sanction on Company does not in itself require the conclusion that the company's officers and employees, against whom no financial sanction has been imposed, have been wronged by it. The applicant is trying to reverse the basic concepts of the theory of organs. Governmental sanctions such as the imposition of financial sanctions are commonplace, and it is inconceivable that it would be possible to automatically "shift" the responsibility to the organs acting on behalf of the company.
Bezeq argued that it can be concluded from the financial sanction imposed on it that the Communications Ministry's position was that the company itself did not comply with its instructions, but not that Bezeq acted deliberately to thwart the reform. The existence of the sanction also does not mean that there was a defect in the conduct of any of the company's officers. Bezeq further noted that according to its approach (which was ultimately rejected), there was no reason to impose the sanction on it at all.
- Moreover. The obligation to comply with the provisions of the Communications Law and the service file applies to Bezeq. The provisions of the Communications Law enable the use of governmental enforcement measures in connection with the alleged violations that were the basis of the financial sanction only against Bezeq itself. The Communications Law contains provisions in matters other than the breach of the license, which allow, in appropriate circumstances, to impose personal liability on the corporation's managers. The fact that the legislature allowed the imposition of personal liability on officers only in relation to specific provisions of the law (while in the case of a breach of a license, liability can only be imposed on the company), means that it is not possible to impose liability on officers in relation to the financial sanction.
Bezeq added that the application contains no evidence of concrete flaws in the conduct of the company's officers or employees. The Applicant did not mention the names of the officers that he believes was wronged by the company, did not mention their role in the implementation of the reform, and made do with raising obscure allegations against them. The Applicant even admitted that he did not know whether and how the officers or employees had wronged the company. The Applicant did not point to a concrete cause of action that the company has against them, and made do with a general argument regarding the deliberate thwarting of the reform. Hence, his request is in fact a fishing expedition and cannot be granted.
- Although a financial sanction was imposed on Bezeq, none of Bezeq's officers or employees thwarted or torpedoed the reform. The officers and employees prepared in a professional and reasonable manner for the implementation of the reform, and the company has no cause of action against them. According to Bezeq, the supervision process at the end of which the financial sanction was imposed on it was conducted with an unreasonable standard of "zero faults." This was in the first days of implementing a complex and multi-dimensional reform. The final inspection report attributed negligible violations to the company in relation to the total number of actions required to implement the reform. Bezeq also noted that it has many complaints about the correctness of the procedure in which the changes were made in relation to the reform.
- It was further argued that the Applicant did not meet the burden imposed on him, and did not present a preliminary evidentiary basis with respect to the causes of action that he seeks to attribute to Bezeq against the officers and employees. Among other things, the Applicant raised a hypothesis that Bezeq's officers or employees had a personal interest in deliberately thwarting the Regulator's directives and torpedoing the implementation of the reform in order to receive bonuses. According to Bezeq's approach, this hypothesis is unfounded, and therefore it should not be surprising that it was neglected in the Applicant's summaries. In practice, the officers acted in dealing with the reform in accordance with their discretion, without personal interest and for the benefit of the company.
- According to Bezeq, the purpose of the document disclosure process is not to answer the questions of a shareholder regarding unfounded assumptions or to constitute a committee of inquiry into the conduct of the company's officers. A request for disclosure of documents before filing a derivative claim should be examined from the perspective of the company's best interest. The Applicant adopted the Regulator's point of view, and thus there is a material failure in the application.
- Bezeq clarified that the applicant did not lay a minimal evidentiary basis for establishing the causes of action against the officers. The application does not address the grounds required to prove the cause of action for breach of the duty of care. With regard to the breach of the duty of care, it is possible to deduce from the business judgment rule – and to assume that in the absence of personal interest, the officers are acting in the best interest of the company. The applicant in fact inadvertently assumed that the liability of the company's officers was "infinite". The company's officers did not violate the supervisory responsibility that applies to them, but rather they prepared and acted to promote the reform and its implementation in a professional manner. The Ministry of Communications also recognized that in the first year of the reform's implementation, difficulties would naturally emerge.
It was further argued that the application does not attest to a breach of fiduciary, deviation from authority, or breach of statutory duty of any of the officers. The applicant did not lay an evidentiary basis for these claims.
- The regulator, and subsequently the applicant, focused on four violations out of the countless complex actions that Bezeq was required to implement following the reform. Bezeq's officers acted as expected of cautious and responsible officers. The reform was a dramatic and unprecedented move in scope and complexity, which touched on all parts of Bezeq's activity and required a fundamental change in the way it operates. Bezeq implemented the reform successfully, and the financial sanction was imposed on it for specific matters and out of policy considerations by the Ministry of Communications. According to Bezeq, it is clear that its deliberate thwarting of the regulator's directives would not have allowed for the successful implementation of the reform as a whole.
Bezeq emphasized that its officers acted to minimize the negative consequences of the reform by taking legitimate legal steps. She denied the claim that she had disregarded the authority of the regulator, and claimed that she had cooperated with him. The judgment rejecting the administrative petition also did not establish any factual finding regarding the manner in which Bezeq prepared for the reform. Although the reform had significant implications for the company and it sought to reduce its negative aspects, this does not establish a cause of action against its officers. On the contrary. This shows that these are responsible officers who acted for the benefit of society.
- Bezeq referred to the violations attributed to it in the final inspection report. According to her, the violations are based on actions carried out by her and on which she had a legitimate professional position. Even if this position was ultimately rejected by the Ministry of Communications, it does not establish grounds for conducting legal proceedings against the company's officers. It is inconceivable that the manner in which Bezeq implemented the reform in its early days will serve as the basis for a lawsuit filed by the company against its officers.
Moreover, it was argued that there are often errors in the regulator's guidelines or interpretation. Sometimes the regulator exceeds its authority, and sometimes its conduct is what impedes the entity under its supervision. As a legal policy, officers should be incentivized to protect the company's interest vis-à-vis the provisions of the regulation. In this case, there were professional disagreements between Bezeq and the Ministry of Communications. However, the specific violations that are the subject of the financial sanction were not the result of a deliberate policy.
- Bezeq's approach, which emerges from all of the above, is that the applicant is trying to "fish" the company's documents, in the hope that they will establish a basis for a cause of action for him. It was further argued that the applicant was not in good faith. He purchased a small amount of shares shortly before the application was submitted just for submission, when he was not a shareholder in Bezeq at the time of the events described in the application. The applicant concealed this from the court.
- According to Bezeq, the lawsuit and its management are not in its favor. The prosecution did not have a minimal evidentiary basis; The financial sanction was imposed on the company in respect of specific and sporadic events in respect of which the supervision process was conducted; and conducting a lawsuit against the company's officers and against employees who acted in good faith to implement the reform is not in the company's interest.
Beyond that, the disclosure of the requested documents is not in the company's interest. The Applicant demands the disclosure of documents on an imaginary scale, and this fact also strengthens the conclusion that there is no basis for his claims in the application. Most of the requested documents do not exist and the company will be required to produce them for the purpose of the proceeding; Providing some of the requested documents and details constitutes a violation of the privacy of the company's employees; And many of the documents are internal and confidential company documents that include trade secrets and sensitive business information.