UNIGLOBE TELECOM (FAR EAST) LTD. v. TELECOMMUNICATIONS AUTHORITY

HCAL 10/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE

LAW LIST NO. 10 OF 1998

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J U D G M E N T

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1. The Applicant company ('Uniglobe' or 'the Applicant') seeks by way of judicial review to challenge the cancellation of its licence by the Respondent ('the Authority'). The licence in question is one that enabled the Applicant to participate commercially in Hong Kong's international telecommunications industry. The challenge is founded on the basis that the Authority's decision to cancel was 'Wednesbury unreasonable' and/or that the Authority, in reaching its decision, offended the rules of fair procedure.

2. Hong Kong's international telecommunications industry is regulated by statute. At the outset, therefore, it is necessary to consider the legal framework within which Uniglobe originally obtained its licence and within which the Authority has sought to cancel that licence.

A description of the service and the legal framework within which it operated

3. The applicable statute is the Telecommunication Ordinance, Chapter 106 ('the Ordinance'). In terms of sections 8 and 30 of the Ordinance, it is a criminal offence to establish or maintain telecommunication services or to possess or use any radio communications equipment without a licence. Licences must be obtained from the Authority which is itself a creature of the Ordinance. The Authority is empowered by section 7 to grant licences to such persons as it thinks fit. It was in terms of this power that the Authority granted a licence to the Applicant to carry on the business of providing what is commonly called an international calling card service.

4. How did the service work? In a judgment of the Court of Final Appeal given in March 1999 (Uniglobe v. SAR FACC No. 5 of 1998), Litton PJ described the service by saying that it was comprised of 3 elements; namely:

(i) The computerised system operated by the Applicant at its premises which validated subscribers' calls and enabled their outgoing international calls to be routed overseas by interconnections described in paragraphs (ii) and (iii) below.

(ii) Interconnection with the local public switched telephone networks operated by licensed carriers under fixed telecommunication network services licences ('FTNS licences') which were the means by which access to the gateway overseas was attained.

(iii) The gateway itself operated by Hong Kong Telecom International Ltd (HKTI) through which all overseas calls must exit.

5. Litton PJ went on to describe the service by saying:

"In practice, what happened was this: A subscriber wishing to gain access to the appellant's service dialled 30023777 and an automatic computerized answering device located at the appellant's premises in Causeway Bay asked the subscriber for his personal identification number (PIN). Once the PIN number was validated by the computer, the pre-recorded voice asked the subscriber to dial the overseas number which was then recorded in the appellant's computer. The computer automatically routed the call directly to one of [the] FTNS carriers ... with whom the appellant had accounts and the call would then be carried by the FTNS carrier to the gateway operated by HKTI under its exclusive licence. Through the gateway the call would then be transmitted overseas."

6. It must be emphasised that all calls had to be channelled through the international gateway operated by HKTI. Neither the Applicant nor any of its FTNS carriers were entitled to set up a system which by-passed that gateway.

7. The Applicant, it appears, contracted with 5 organizations to carry out the function of FTNS carriers. According to the affirmation of Albert Chan Kam Chung, the Applicant's managing director, those 5 were: Hong Kong Telecom, New T & T, New World Telephone, SPRINT and an organization calling itself Bestlong International Limited ('Bestlong').

8. As the body responsible for ensuring compliance with the Ordinance, the Authority has the power to cancel, withdraw or suspend licences. In this regard, section 34(4) reads:

"Any licence, permit, permission or consent granted under this Ordinance may at any time be cancelled or withdrawn by the authority by whom it was granted, or suspended by such authority for such period, not exceeding 12 months, as the authority specifies, in the event of any contravention by the licensee or the person to whom the permit, permission or consent was granted, as the case may be of this Ordinance or of any condition to which the licence, permit, permission or consent is subject ..."

9. In terms of the Ordinance, therefore, the Authority possesses the power to cancel, withdraw or suspend a licence granted by it if there has been a contravention of the Ordinance or of 'any condition' to which the licence is subject.

10. How was it then that the Authority came to employ its powers in terms of section 34(4) to cancel the Applicant's licence? To better understand this, some historical background must be given.

A brief history

11. On 12 September 1996, Hong Kong Telecom complained to the Authority that a number of operators were infringing HKTI's exclusive right to provide a gateway for calls out of Hong Kong; specifically it was alleged that certain operators had been by-passing the gateway when connecting calls to the Mainland. Accordingly, on 18 of that month the Authority obtained search warrants to make searches at the offices of the Applicant and also of Bestlong.

12. On 20 September 1996 a team of Authority officers (accompanied by a police constable) executed the search warrant at the Applicant's premises in Causeway Bay. The search was, however, part of a co-ordinated operation which included a simultaneous search of the offices of Bestlong in Yuen Long.

13. The primary purpose of the searches were to trace a call that would be made via the Applicant's service to Beijing to see whether that call went lawfully through the gateway operated by HKTI or by-passed it. The call itself lasted more than an hour and a half. It was discovered that the call was received by the Applicant and was routed to the premises of Bestlong. It did not, however, go through the gateway. Instead, at Bestlong's premises, Authority officers discovered a microwave transceiver with its antenna pointed at Shenzhen. That illegal equipment was capable of beaming calls to the Mainland that by-passed the gateway. No licence had been issued to Bestlong's Yuen Long premises nor was the transceiver licensed.

14. The illegal equipment located at Yuen Long was seized and Bestlong's operation in those premises was closed down. However, nothing was seized at the Applicant's premises nor were the Applicant's personnel told what had happened; namely, that illegal equipment had been found at Bestlong's premises and that a 'sample' call routed through the Applicant and Bestlong had been connected to China with the use of that illegal equipment. The search party completed its work at the Applicant's premises and then departed. No warning was given nor any indication that the Authority may contemplate further action.

15. However, in or about mid-March 1997 - approximately 6 months later - the Applicant was served a Magistrate's Court summons charging the Applicant with an offence contrary to section 8(1)(a) of the Ordinance; namely, establishing or maintaining a means of communicating without a licence. The charge stated that the Applicant had contravened the Ordinance by re-routing international telephone calls from its premises to the premises of Bestlong in Yuen Long and from there out of Hong Kong other than in accordance with a licence granted for that purpose. On 18 September 1997, after trial, the Applicant was convicted.

16. Although Bestlong's operation in Yuen Long had been closed down and its equipment seized, it either started business again from new premises or continued in business from alternative premises. These second premises were situated in Sheung Shui. Again, Bestlong used an illegal microwave transceiver to beam radio waves to Shenzhen where they were picked up and routed onwards. The Applicant continued to do business with Bestlong, using it as one of its FTNS carriers.

17. Unknown to the Applicant, on 6 December 1996 the officers of the Authority searched Bestlong's Sheung Shui premises, seized the illegal equipment and closed down that second operation. Prior to that visit, however, it appears that the Authority had been monitoring test calls made to the Mainland using the Appellant's service. A very small percentage of these calls (2.8%) were proved to the satisfaction of the Authority to have by-passed the gateway operated by HKTI and these formed the basis for a further prosecution of the Applicant.

18. On this second occasion the Applicant was charged with 2 offences; namely, maintaining a means of telecommunication without a licence, contrary to section 8(1)(a) of the Ordinance and using radio communication apparatus without a licence, contrary to section 8(1)(b). This second set of proceedings was heard in the District Court.

19. As the District Court trial was a criminal trial, the fact that the Applicant had a few months earlier been convicted of an offence under the Ordinance was not revealed. The Authority, of course, when it came to consider whether the Applicant's licence should be cancelled, was not so constrained.

20. In his Reasons for Verdict dated 21 November 1997, Deputy Judge Davies (as he then was) found that the suggestion that the Applicant and Bestlong had colluded had not been proved. In this regard, he said:

"Having considered all the evidence I am not satisfied that it shows conclusively that the [Applicant] company, as represented by its management staff, was aware that any of [the Applicant's] calls to Bestlong were 'bypassing' HKTI's gateway enroute to China, nor that it must have known of the existence of the microwave radio transceiver at Bestlong's premises in Landmark North, Sheung Shui. There is insufficient evidence to prove beyond reasonable doubt that [the Applicant] had knowledge of what happened to its calls after they reached Bestlong. Nor am I satisfied that the prosecution evidence proved there was 'a turning of a blind eye' to the obvious. I feel the situation was far from obvious on the evidence I have been asked to consider."

21. The judge found, however, that both offences as charged were ones of strict liability. He further found that the Applicant had failed to show that reasonable steps had been taken to satisfy itself that Bestlong was duly licensed to operate as it purported to do. Accordingly, the defence open to it in respect of offences of strict liability failed. In regard to the reasonableness of any steps taken by the Applicant, the judge said the following:

"[The Applicant's] evidence, as given by its managing director, reveals that only commercial considerations were given to the arrangement between [the Applicant] and Bestlong while no regard whatever, so far as I can see, was paid to whether such an arrangement might prejudice [the Applicant] in respect of the routing of its calls after they had reached Bestlong.

Even a request to have sight of the licence under which Bestlong purported to operate would at least have signified some concern. In the event of no licence being produced one would like to believe that [the Applicant] would have had second thoughts before proceeding further. Also I do not find acceptable, under these circumstances, the defence evidence that no enquiry could be reasonably made with regard to the FTNS licence holders which Bestlong used or proposed to use for such calls, that is on the grounds of trade secret or confidentiality. There was more at stake here than mere commercial advantage. There was the legal requirement that [the Applicant] and Bestlong operate this service within the terms of a licence and within the provisions of the Telecommunications Ordinance. Consequently, I cannot be satisfied even on the balance of probablities that reasonable steps were taken to ensure, insofar as was possible, that this operation carried out in conjunction with Bestlong, was within the terms of a licence." [my emphasis]

22. It is to be emphasised that the judge made these findings in ignorance of the search warrant executed by the officers of the Authority on 20 September 1996 and the lack of any investigative action (or even inquiries) made by the Applicant in the wake of that search, an incident which must have been of considerable significance for the management of the Applicant.

23. The Applicant was duly convicted of both offences in the District Court. It appealed those convictions. It was unsuccessful in the Court of Appeal but took the matter then to the Court of Final Appeal where the Court quashed the conviction of using radio telecommunication without a licence but upheld the conviction of maintaining a means of telecommunication without a licence. In upholding the one conviction, the Court of Final Appeal held that it was an offence of strict liability.

The intention of the legislation contained in the Ordinance

24. Although the judgment of the Court of Final Appeal was given on 22 March 1999, a full year after the Authority had cancelled the Applicant's licence, and although it related to a criminal matter, I am of the opinion that the Court's observations on the intention of the legislation contained in the Ordinance are of particular relevance in the matter now before me. In this regard, Litton PJ said:

"... the trial judge and the Court of Appeal were of one mind that the offence under s.8(1)(a) was one of strict liability. For good reason. The wave band spectrum available for the transmission of radio waves is a limited resource and it is crucial that its use be strictly controlled. It matters not that telecommunication as defined in the Ordinance goes beyond radio waves and includes wire and other electromagnetic systems. As the trial judge said, "the legislation is intended to protect the integrity of the region's telecommunications system in the community's interest." The subject-matter of the legislation is the regulation of an activity involving potential danger to public safety. The appellant had a choice as to whether to participate or not. There is nothing inherently unjust in placing on someone like the appellant who chose to participate in such activity a duty to take measures to prevent the prohibited act. Those measures would not normally be extravagant ones. A careful operator would make inquiries before establishing the means of telecommunication to ensure compliance with the law. These would normally reveal whether the means as contemplated would contravene s.8." [my emphasis]

The Authority's action to cancel the Applicant's licence

25. By letter dated 20 December 1997 the Authority wrote to Uniglobe to advise it that consideration was being given to the cancellation of its licence. The Authority recounted the fact that Uniglobe had been convicted of 2 offences in the District Court the month before and reminded Uniglobe that in terms of section 34(4) of the Ordinance it had the power to cancel a licence in the event of a contravention of the Ordinance. The Authority's letter concluded:

"The [Authority] considers that the offences which [Uniglobe] was convicted of were not trivial offences. This calls into question the fitness of [Uniglobe] to continue to hold a licence for the operation of a public telecommunications service. The [Authority] is therefore considering to exercise his powers under section 34(4) of the Ordinance to cancel the PNETS Licence No. 254 granted to [Uniglobe] with immediate effect from the date of his decision.

If [Uniglobe] considers that there are reasons as to why the [Authority] should not cancel the PNETS Licence No. 254 under section 34(4) of the Ordinance, [Uniglobe] may put forward the reasons in writing by the close of business, 2 January 1998."

26. Uniglobe's solicitors replied by letter dated 31 December 1997 saying:

"Judgment in the District Court was delivered on 21st November 1997 and although His Honour Judge Davies found our client guilty of both offences, this was only due to the fact that the Judge regarded these two particular offences to be offences of strict liability. This means that our client need not have had the knowledge that they were committing the offences, the fact that the offences were committed was sufficient to render our client liable. The Judge also mentioned that the only defence available to these charges was if our client had enquired as to whether or not Bestlong International Limited ("Bestlong") was holding a valid licence to do what they did. In this regard, the Judge found our client had not made sufficient enquiries. This was a mere oversight by our client as they did not realise that such a burden lay on them to ensure all their agents were holding valid licences.

Therefore, in light of the judgment, it remains clear that our client had no intention to commit the two offences in question. This fact was also not proven by the prosecution. The evidence showed that our client had entered into the commercial dealing with Bestlong at "arms length". There was also no evidence adduced by the prosecution to show that there was a conspiracy between our client and Bestlong to bypass Hong Kong Telecom's International Switchboard. Our client was acting in purely commercial interests when entering into the dealings with Bestlong and their failure to make enquiries as to the activities of Bestlong have, we submit, been adequately dealt with by the Judge, by imposing fines with respect to the two charges."

27. No mention was made in that letter about the earlier conviction in the Magistrates' Court. No mention was made of the search warrant executed at Uniglobe's premises on 20 September of the year before and what action, if any, Uniglobe took after that incident to check to ensure it was fully complying with its obligations under its licence. While the Court of Final Appeal found that there was a duty on licencees in the position of Uniglobe to 'take measures' to prevent prohibited acts, the letter spoke of Uniglobe being culpable only of a 'mere oversight'.

28. The Authority, however, did not consider the contravention to be simply an oversight. In a letter dated 13 January 1998 it replied in the following terms:

"Your client has claimed that the offences were committed as a result of failure by your client to make enquiries as to the activities of its contractor, Bestlong International Limited. The [Authority] considers that the failure to ensure that the operation of the service (including the employment of contractors to perform any part of the service) fully complies with the licence conditions at all times is a serious breach and does not agree to treat the breach lightly as your client has apparently suggested through your letter.

The [Authority] notes that the conviction on 21 November 1997 was not the first time when your client was convicted of similar offences under the Telecommunication Ordinance. According to the [Authority's] record, on 18 September 1997, the Magistrate Amanda J Woodcock of the Fanling Magistracy convicted Uniglobe of establishing a means of telecommunication by re-routing international telephone calls from Room 1001, Causeway Bay Commercial Building, 1-11 Sugar Street, Causeway Bay, Hong Kong to Fu Loy Garden, 7 Ma Wang Road, Yuen Long otherwise than under or in accordance with a licence granted by the Governor in council or the Telecommunications Authority."

29. The letter concluded with a further invitation to submit reasons why Uniglobe's licence should not be cancelled:

"If [Uniglobe] considers that there are further reasons as to why the Telecommunications Authority should not cancel the PNETS licence No. 254 under section 34(4) of Cap. 106, [it] may put forward the reasons in writing not later than 27 January 1998."

30. By letter dated 27 January 1998, the solicitors acting for Uniglobe submitted further reasons why the licence should not be cancelled:

"We would respectfully ask the telecommunication Authority, when considering the past two convictions in Fanling Magistracy and the District Court, to view them not as two distinct offences but as one offence committed over a certain period of time. This is because our client only knew it had breached the conditions of its PNET licence when it received the first magistrate summons in March 1997. By this time, the offence which led to the charge against our client in the District Court had already taken place back in December 1996. At this stage of events, our client maintained its belief in its innocence and was therefore continuing to engage in the services of Bestlong ...

Moreover, although we agree that it is necessary for PNET licence holders to observe and comply with the terms and conditions of the licence, we do not agree that our client being a PNET licence holder has to go to such lengths to ensure all its agents carry out their services appropriately. It would have believed that each of its agents, with whom it dealt, would ensure that they carry out the services in accordance with the conditions of their respective licence. We do not feel it appropriate that our client should be burdened with this obligation, it was merely the Judge's decision that this should be the case. It is our submission therefore, that our client's alleged breach is only a technical one."

31. It is correct, of course, that both the Magistrate's Court and District Court offences had been committed prior to Uniglobe receiving its first summons. It is also true that between the date of the search of Uniglobe's premises by officers of the Authority and the receipt of the first summons there had been no communication between Uniglobe and the Authority. It is clear from the correspondence, however, that the Authority was proceeding on the principle that Uniglobe had a positive obligation to ensure that it was fully complying with its licence conditions, that obligation including the responsibility of ensuring that the system being maintained by it was in all respects lawful. To the contrary, Uniglobe felt it had no such obligation, certainly not in respect of the lawful maintenance of its system where that system was under the control of agents such as Bestlong. In this regard, the letter of 27 January 1998 is explicit:

"We do not feel it is appropriate that our client should be burdened with this obligation, it was merely the judge's decision that this should be the case. It is our submission, therefore, that our client's 'alleged' breach is only a technical one." [my emphasis]

32. This is to be contrasted with the judgment of the Court of Final Appeal which held that the Ordinance placed a clear duty on Uniglobe to take active measures as the legislation was intended to protect the integrity of the region's communications system in the community's interest.

33. By letter dated 19 February 1998, the Authority stated that the decision had been made to cancel Uniglobe's licence. In doing so, it rejected certain of the submissions made earlier by Uniglobe. As to the suggestion that the 2 sets of criminal proceedings should be viewed as one, the Authority wrote:

"The [Authority] does not accept that the two offences which Uniglobe was convicted of on 18 September 1997 and 21 November 1997 should be viewed as one offence committed over a period of time. The first offence was committed on 20 September 1996. The [Authority's] staff entered the premises of Uniglobe on 20 September 1996 under a magistrate's warrant to investigate suspected offence under the Telecommunication Ordinance. Uniglobe therefore cannot claim that it only knew that it had breached the conditions of its PNETS licence when it received the first magistrate summons in March 1997. The [Authority's] action on 20 September 1996 must have alerted Uniglobe that its operation might not be in compliance with the licence conditions. Despite this knowledge, Uniglobe had failed to take the necessary action to ensure that its operation was in compliance with the licence conditions and this led to the committal of the second offence on or before 6 December 1996. Such behaviour of Uniglobe has fallen considerably below the standard expected ... of a person fit for holding a licence for the operation of a public telecommunications service."

34. In respect of Uniglobe's failure to take any positive steps to ensure that Bestlong was a duly licensed, competent organization conducting a lawful enterprise, the Authority wrote:

"A licensee for a public telecommunications service is not a layman in the telecommunications industry. It is expected to possess the necessary knowledge and expertise to ensure that it will conduct its operation in a lawful manner. In conformity with the policy of light-handed regulation, the [Authority] relies on the integrity of the licensee which has the responsibility of ensuring that its activities are in full compliance with the licence conditions at all times even though some parts of the activities are carried out by agents. To discharge this responsibility, the licensee is expected to exercise the necessary control over its agents so that they would not do anything which would lead to a contravention of the licence conditions by the licensee. Failure to exercise such control of its agents is a serious abrogation of the responsibility of the licensee. Such behaviour of Uniglobe has also fallen considerably below the standard expected ... of a person fit for holding a licence for the operation of a public telecommunications service."

35. The letter concluded by stating that its decision was made in order to protect the broader interests of the public:

"The [Authority] considers that, in order to safeguard consumers interest and ensure fair and effective competition in the market, it is necessary for the [Authority] in the proper performance of his functions under the Telecommunication Ordinance, to ensure that a licence for the provision of a public telecommunications service should be held only by a person whom the [Authority] considers fit to hold the licence."

Further matters considered by the Authority

36. While the reasons detailed above were the only stated reasons given by the Authority to the Applicant both prior to and at the time of cancellation, it transpired that a number of unstated matters also affected the Authority's decision to cancel Uniglobe's licence.

37. Fairly late in the proceedings, the Authority saw fit to file an affirmation made by its Senior Controller of Telecommunications, Mr Lam Lung. That affirmation, dated 6 November 1999, spoke of a number of particular matters which were considered by the Authority at the time it made its decision. Mr Lam, in his affirmation, introduced these matters by stating:

"The state of the facts before the [Authority] at the time of its decision on 19th February 1998 is mostly before the Court in the case materials relating to the two incidents ... Some of the details of fact that I list below are clear from all these produced papers as a matter of necessary inference. A few are matters which might be reasonable inferred from the facts but should be expressly stated. In one or two instances, the relevant facts, known and considered by [the Authority] at the time of its decision are not to be gleaned from the papers now before the Court." [my emphasis]

38. In the body of his affirmation, Mr Lam detailed the following particular matters:

(f) Whatever the state of its knowledge about Bestlong and Mr Man Wan [Bestlong's Managing Director] prior to 20th September 1996, Uniglobe, after an agreement with Bestlong, at a time prior to 20th September 1996, must have programmed its IVRS machines to divert customers China-bound calls to local telephone number 2470 1441. If they had enquired they would have discovered that this terminated at 7th Floor residential premises in Yuen Long.

(g) After the removal of equipment at the Yuen Long residential address on 20th September 1996, the 2470 1441 line would have become useless and ineffective for China bound calls and Uniglobe must then have acted to divert calls directly or indirectly to FTNS operators and the HKTI gateway by re programming IVRS machine number 3.

(h) Unless Mr Man Wan had established the Landmark North operation as a parallel facility to the Fu Loy Garden, Yuen Long facility, there would be an interval of time when Uniglobe could only operate through FTNS licence holders and HKTI's international gateway. The [Authority] did not find it likely that Landmark North operated at the same time as the Yuen Long address. But switching to a Landmark North number from the Yuen Long residential number would have required Uniglobe to re-programme one of the IVRS machines.

(i) After Bestlong and Mr Man Wan had set up Landmark North, Uniglobe must have consciously and intentionally through its authorised managers decided to re-enlist. They would have had to programme an IVRS machine and make the necessary connections to divert China bound calls to the Landmark North telephone number.

(j) On the seizure of equipment on December 6th 1996, a further re-programming would be necessary to stop the calls from Uniglobe customers to China being diverted down an ineffective line.

39. Mr Lam spoke too of other particular matters which had been considered by the Authority but in respect of which no invitation had been made to Uniglobe to comment or make submissions:

(l) Given the difference in cost between Hong Kong and China international calls and Shenzhen local calls to a destination in China, the [Authority] did not believe or accept that the cost of Bestlong was only 5-10% cheaper as stated to Judge Davies.

(m) Because the costs at all material times of egressing China lawfully to other international destinations was very high, the [Authority] did not find it likely that international calls other than China calls received by Uniglobe were diverted to Bestlong and Shenzhen.

(n) In the period in question in 1996 there was no shortage of capacity in respect of international calls out of Hong Kong. When therefore it was explained in the District Court that Bestlong were engaged "only as a "back up" supplier in the event of the trunk lines of Uniglobe's normal FTNS operators becoming overloaded" the TA had reservations about this. There was no reason for Uniglobe not to engage another FTNS operator directly. Going through another PNET operator who then engaged a FTNS operator simply adds a step.

40. A great many, if not all, of the matters referred to by Mr Lam were challenged by the Applicant as being either incorrect or a distortion of the true picture.

41. In light of the fact that the Authority had considered a number of matters in reaching its decision to cancel without giving Uniglobe the opportunity to make submissions in respect of those matters, Uniglobe was granted leave to amend the grounds upon which relief was sought so that it could argue that the Authority had not honoured the dictates of procedural fairness; in short, that in denying Uniglobe the opportunity to make representations in respect of the particular matters referred to above, it had denied it natural justice.

42. In this regard, the amended grounds referred to the following matters which the Authority had considered while denying Uniglobe the opportunity to make submissions concerning their accuracy, strength or relevance:

(1) The Applicant must have:-

(a) Programmed its IVRS machines to divert customers China bound calls to local telephone number 2470 1441 of Bestlong's Yuen Long premises; and

(b) Re-programmed its IVRS machines to Bestlong's Landmark North telephone number after Bestlong's equipment was removed from the Yuen Long premises by the [Authority] on 20 September 1996 and that such re-programming was a conscious and intentional act on the part of the Applicant.

(2) The [Authority] did not believe or accept District Judge Davies' finding in DCC 865 of 1997 that the costs of Bestlong was only 5-10% cheaper than that of other service providers to the Applicant.

(3) The [Authority] had reservations about the Applicant's explanation (which was accepted by Judge Davies) that Bestlong was engaged "only as a 'back up' supplier in the event of the trunk lines of Uniglobe's normal FTNS operators becoming overloaded".

43. As already mentioned, Uniglobe took objection to each of these matters as either being wrong in fact or considerations which should not have been taken into account. In this regard, Uniglobe's amended grounds read:

(1) The Applicant's access number of Bestlong's Yuen Long premises was not 2470 1441;

(2) There was no allegation, nor any evidence, that the Applicant knew at the material times where a particular Bestlong access number terminated;

(3) The Applicant did not re-programme its IVRS machine as suggested in the Lam Affirmation;

(4) There was no allegation, nor any evidence, that the Applicant knew that any of Bestlong's access numbers terminated at the Landmark North premises;

(5) There was no allegation, nor any evidence, that the Applicant knew that at the material times there was a raid on Bestlong's premises on 20 September 1996 or that its equipment had been removed by the [Authority].

(6) The [Authority] expressly relied upon the decision of Judge Davies in its correspondence with the Applicant's solicitors and did not cross-appeal any of the findings of fact by Judge Davies. In any event, the TA never mentioned in the correspondence that he harboured any doubts or reservations as to the findings of fact by Judge Davies; and

(7) There was no evidence that the cost of Bestlong was other than as found by Judge Davies or that Bestlong was not used as a "back up" by the Applicant contrary to the finding of Judge Davies.

Did the Authority act in a way that was procedurally fair?

44. Uniglobe's application was made originally on the basis that the Authority's decision to cancel its licence was a draconian step that bore no relationship to its culpability. In that sense the cancellation was 'Wednesbury unreasonable'.

45. The principle stated in Associated Provisional Picture Houses v. Wednesbury Corporation [1948] 1 KB 223 is contained succinctly in the dicta of Lord Greene MR:

"The court is entitled to investigate the action of the local authority with a view to seeing whether they have taken into account matters which they ought not to take into account, or, conversely, have refused to take into account or neglected to take into account matters which they ought to take into account. Once that question is answered in favour of the local authority, it may be still possible to say that, although the local authority have kept within the four corners of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the court can interfere. The power of the court to interfere in each case is not as an appellate authority to override a decision of the local authority, but as a judicial authority which is concerned, and concerned only, to see whether the local authority have contravened the law by acting in excess of the powers which Parliament has confined in them."

46. Clearly, a decision which suffers from a total lack of proportionality will qualify as a decision subject to control by judicial review as being 'Wednesbury unreasonable'. It would in that sense, be a decision which no reasonable decision maker could have reached. But, as was said in Council for Civil Service Unions (CCSU) v. Minister for the Civil Service [1985] AC 696 at 262, it is a 'severe' test and is different, from the test of 'proportionality' which is contained in some Continental jurisdictions but not at this time, as I read it, in the law of England or Hong Kong.

47. However, before considering whether the decision itself is susceptible to review, it is necessary to deal with the challenge arising out of Mr Lam's affirmation; namely, that the Authority did not act in a manner that was procedurally fair.

48. An administrative body such as the Authority, in exercising its powers under the Ordinance in respect of the suspension or cancellation of a licence, must of course act with procedural fairness. A failure to do so is a denial of natural justice.

49. In Judicial Review of Administrative Action by de Smith, Woolf and Jowell, 5th edition, when dealing with the subject of procedural fairness, the authors say at page 441:

"If prejudicial allegations are to be made against a person, he must normally ... be given particulars of them before the hearing so that he can prepare his answers. In order to protect his interests he must also be enabled to controvert, correct or comment on other evidence or information that may be relevant to the decision; ..."

50. In my judgment, it must be accepted that, in reaching its decision to cancel, the Authority relied on a number of specific matters without first giving Uniglobe an opportunity specifically to comment on them. Further, I believe it must be accepted that several of these matters did not arise purely as a matter of inference from the facts commonly known.

51. But were those matters purely tangental or subordinate to the principal reasoning of the Authority? Or to express it more directly, is it clear that the Authority would have reached the decision to cancel even without consideration of the matters stated in Mr Lam's affirmation? The Authority has said only that these matters were 'known and considered'. In my view, that must mean that they formed an integral part of the reasoning process; they were not mere after-thoughts or footnotes.

52. Was there, however, any duty on the Authority, in the particular circumstances of this case, to give Uniglobe the opportunity to 'controvert, correct or comment' in respect of these matters?

53. On more than one occasion the Authority invited Uniglobe to make submissions as to why its licence should not be cancelled. The Authority was of the view that Uniglobe was not a layman in the telecommunications industry and should therefore have known of the sort of matters that needed to be addressed, especially in respect of its relationship with Bestlong.

54. I can see merit in the Authority's contention that by the time Uniglobe submitted its representations concerning cancellation, it would (or should) have known that, in respect of all criminal proceedings against it, Bestlong had been the source of its troubles. By that time it would (or should) have known that Bestlong's premises and equipment had never been licensed. Despite this, Uniglobe chose to make no representations concerning the manner in which it came to deal with Bestlong and what steps, if any, it had taken to ensure itself that Bestlong was a reputable organisation being financially sound and technically competent. On all such issues, although they went to the heart of its culpability, it chose to remain silent. Similarly, by the time it made its representations, Uniglobe would (or should) have known that on 20 September 1996 Bestlong's premises in Yuen Long had been searched and its equipment seized; in short, its operation had been abruptly shut down. Despite this, Uniglobe chose to make no representations as to the effect that such precipitous closure had or had not had on the maintenance of its operation.

55. That being said however, in my judgment the Authority cannot escape from the fact that it considered a number of matters in respect of cancellation which Uniglobe could not necessarily have been expected to anticipate. The scepticism of the Authority (and it is no more than scepticism) in respect of the true discount offered by Bestlong is an example. The importance of that particular matter needs no elaboration. If the discount offered seemed too good to be true then it probably was and Uniglobe would have appreciated that fact. Its continued dealing with Bestlong in such circumstances would have been evidence of its lack of good faith or fitness to hold a licence.

56. In addition, while the Authority gave Uniglobe an opportunity in the broadest of terms to make representations, it invited no representations in respect of particular matters, technical or otherwise, that clearly caused it particular concern. The Authority, however, then proceeded to take such matters into account. These were matters which, judged objectively, the Authority could not be sure were correct without first giving to Uniglobe the opportunity to accept, reject or qualify their accuracy. As such, in my view, there were two inter-related consequences; first, the Authority did not follow the standard tenents of fair procedure by allowing Uniglobe to be heard in respect of particular issues which Uniglobe could not be expected to anticipate and, second, flowing from that, there was a real possibility that it may, therefore, have founded its decision on facts which did not exist or, if they did, were at best misconceived. In those circumstances, I cannot see how the decision of the Authority can stand.

57. In the circumstances, there will be an order of certiorari quashing the decision of the Authority and an order of mandamus remitting the matter back to the Authority for reconsideration. As for costs, at this juncture, provisionally, I see no reason why the Applicant should not be entitled to its costs and there will, therefore, be an order nisi awarding costs to the Applicant, to be taxed if not agreed.