PCCW-HKT TELEPHONE LTD v. TELECOMMUNICATIONS AUTHORITY

HCAL 49/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO.49 OF 2003

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J U D G M E N T

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Introduction

1. On 12 June 2003, a consent summons was filed by the applicant and the respondent in these judicial review proceedings. The summons in substance sought an indefinite adjournment of the proceedings. The summons was accompanied by a statement signed by the legal representatives of both parties explaining the basis upon which the court was asked to make an order in terms of the summons. That statement articulated an expectation that during the period of adjournment the cause for the judicial review proceedings would be resolved. That same day, having considered the matter, I made an order in terms of that summons ('the consent order').

2. Thereafter, on 20 June 2003, a summons was filed by Wharf T & T ('Wharf') seeking to discharge, vary or set aside the consent order. This judgment determines the issues raised in Wharf's summons.

3. Pursuant to O.53, r.5(3) of the High Court Rules, Wharf is a directly affected party. As such, in terms of s.2 of the High Court Ordinance, Cap.4, it is a party to the action. As such, no objection has been taken to its locus standi in respect of its application.

4. To understand the nature of Wharf's application, it is necessary (in broad brush terms at least) to set out the relevant history.

The background

5. The applicant ('PCCW') is the holder of a fixed telecommunications networks services licence issued under the Telecommunications Ordinance, Cap.106 ('the Ordinance'). The respondent, the Telecommunications Authority ('the TA'), is the public authority appointed to discharge functions under the Ordinance.

6. Under its licence, PCCW has a general obligation to interconnect its network with other telecommunication services licensed under the Ordinance. Without expounding on engineering technicalities, it is sufficient, I believe, for the purposes of this judgment to record that PCCW's fixed network is capable of providing 'narrowband services' (essentially conventional voice telephone services) and 'broadband services' (required for internet access and multimedia applications). It is of no surprise that demand for broadband services has grown substantially in recent times.

7. Wharf procured narrowband services from PCCW in or about 1996 and in or about late 2000 sought also to procure broadband services. However, negotiations to secure PCCW's broadband services were not successful. In the result, in July 2001, together with New World Telecommunications Ltd ('New World'), Wharf applied to the TA under s.36A of the Ordinance to make a determination on the terms and conditions for such interconnection. S.36A gives broad powers to the TA. In part, the section reads :

" (1) The Authority may determine the terms and conditions of interconnection ...

(2) The Authority may make a determination on the request of a party to the interconnection or, in the absence of a request, if he considers it is in the interest of the public to do so.

(3) The terms and conditions in a determination may include any technical, commercial and financial terms and conditions that the Authority considers fair and reasonable."

8. By letter dated 24 December 2001, the TA advised the parties that proceedings were to be commenced for a determination pursuant to s.36A and invited representations. According to the letter, the matters to be determined would include :

"	(i)	Relevant charges;
	(ii)	Technical specifications and provisioning procedures considered to be unable to be settled in the Industry Forum on Code of Practice for Interconnection of Broadband and Narrowband Local Access Links;
	(iii)	Agreed use of the local loops;
	(iv)	Co-location of equipment; and
	(v)	Any other terms, conditions or matters that are relevant to the interconnection."

9. Some five months later, on 15 May 2002, the TA made a direction in terms of s.36B of the Ordinance requiring PCCW to provide Wharf and New World with broadband services on an interim basis pending the determination to be made under s.36A. No terms to govern the interim arrangement were stipulated.

10. In due course, PCCW, New World and Wharf came to interim agreements on applicable tariffs and other relevant terms. Those interim agreements still subsist. I have not been informed as to the content of New World's agreement but Wharf's agreement is subject to retrospective adjustment after a determination had been made pursuant to s.36A.

11. I am told that Wharf has never been happy with the interim agreement and entered into it on the basis only that the determination proceedings would be finalised in a matter of five or six months. In an affirmation dated 10 July 2003, Agnes Kok Peng Tan, a representative of Wharf, has said that the disadvantages for Wharf under the interim agreement are such that it "simply does not present a viable business case for [it] in the broadband business". That being the case, Wharf has sought an early and successful conclusion of the determination proceedings which it originally sought and obtained under s.36A of the Ordinance.

12. In November 2002, PCCW wrote to the TA seeking fresh consultation on the TA's existing policy of broadband interconnection. It did so on the basis that since the policy had been first decided there had been dramatic changes in the nature of the market and greatly increased competition. The TA agreed to this request, confirming that there would be a public consultation leading to a policy review.

13. In light of this undertaking by the TA to conduct what amounted to a full policy review in respect of broadband interconnection, PCCW made representations to the TA to suspend the determination proceedings under s.36A until the policy review had been completed. It was asserted by PCCW that it would be "illogical and unreasonable" for the TA to make a final determination under s.36A when the basis for that determination may well be rendered obsolete by the results of the policy review.

14. The TA rejected the request to put the determination into abeyance. It did so on the basis that the policy review would relate to future policy while the determination would be made on the basis of existing policy. The TA's decision to proceed with the determination was conveyed to PCCW in a letter dated 17 March 2003. It is that decision which PCCW has sought to have judicially reviewed.

15. PCCW filed its application for leave to apply for judicial review on 15 May 2003, seeking by various means to set aside the TA's decision to proceed with the determination without first considering its position in light of the new policy review. In addition, PCCW sought a stay or an injunction restraining the TA from making a determination pursuant to s.36A of the Ordinance before the judicial review proceedings had been determined.

16. I granted leave on 19 May 2003 but directed that there be an ex parte oral hearing in respect of the request for a stay. That oral hearing took place on 23 May 2003. At the conclusion of that hearing, I ordered that there be an interim stay subject to the following conditions :

(a) that PCCW provide an undertaking in damages;

(b) that TA have liberty to apply;

(c) that the judicial review proceed on an expedited basis; and

(d) that there be a directions hearing on 13 June 2003.

17. It appears that PCCW's originating motion was (in terms of O.53, r.5) filed on 30 May 2003, being served on Wharf's legal representatives on 2 June 2003. This of course was well after the matter of interim stay had been argued and the stay granted. But that being said, it is not disputed that, being an interested party directly affected by the granting of the interim stay, Wharf at all times had sufficient locus standi to formally intervene and/or to seek to set aside the stay.

18. As it was, on 5 June 2003, the TA, by way of summons, applied to set aside the stay. The matter was set down for hearing on 14 June 2003. The issuing of the summons by the TA meant that Wharf was not obliged (at that time) to take action itself to intervene.

19. However, on 12 June 2003, a day before the directions hearing ordered by myself (see para.15 (d) supra), the consent summons to which I have earlier made reference was filed by PCCW and the TA. As I have said, it is the consent order made in terms of the summons that Wharf seeks to have discharged, varied or set aside.

20. Wharf views the TA's agreement contained in the consent order as a "complete reversal" of its position. In her affirmation of 10 July 2003, Agnes Kok Peng Tan has commented :

"... the TA's agreement to the terms of the consent summons constitutes a complete reversal of the TA's position in respect of the abeyance issue and to the relief sought by PCCW in this action. This reversal of position took place some time between 5 and 12 June 2003 and without any prior consultation with [Wharf] whatsoever, as either to its position generally or as to its views on the evidence filed by PCCW in support of the Notice of Application. [Wharf] strongly objects to it as any action by the TA concerning the determination proceedings or the abeyance issue seriously affects [Wharf's] interests."

The consent order

21. The terms of the consent order were to the following effect; namely; that -

"1 the Order ... that there be an interim stay under Order 53, rule 3(10) shall continue in effect until after the completion of the Policy Review and the publication of the Government's decision on the Policy Review ... whereupon the Order will cease to have effect;

2 the Respondent's [the TA's] Summons dated 5 June 2003 be adjourned sine die and the hearing fixed for Monday, 14th July 2003 be vacated.

3 the Judicial Review of the Respondent's decision of 17 March 2003 ... be adjourned sine die;

4 ...

5 liberty to the parties to apply."

22. As I have earlier said, the consent summons was accompanied by a statement purportedly made under practice direction SL3, para.1.11 ('practice direction 1.11'). The statement commenced by saying that PCCW and the TA were agreed as to the terms on which PCCW's application for judicial review 'can be disposed of'. However, no dismissal or granting of PCCW's application was sought. Instead, having set out what had been agreed, more particularly that the interim stay should remain in force until the TA's policy review had been completed, the statement said that it was "proposed that the judicial review be adjourned generally (with no need for the Respondent or interested parties to serve evidence under O.53 r.6(4)) with liberty to restore." The statement continued :

"The intention is that the application will remain adjourned until after the completion of the Police Review and the publication of the Government's decision of the above-mentioned policy review, after which the Applicant shall promptly withdraw the application with no order as to costs."

23. As to the matter of public interest, the statement asserted that -

"... the wider public interest is served by the saving in public resources that would otherwise have to be expended in conducting litigation which may not be resolved finally before the completion of the now pending policy review."

24. In respect of interested parties (such as Wharf), the statement was to the following effect :

"Notice of the consent order sought has been given to the interested parties served with the application for judicial review although they have not yet appeared or filed notice of intention to act."

25. While notice was given to Wharf, Mr Coleman, who appeared for Wharf, said that it was manifestly inadequate. It appears that a copy of the consent summons and statement was only faxed to Wharf at about 11:30 a.m. on 12 June 2003, copies being delivered by hand half an hour later. Instructions were then given by Wharf to its solicitors to protect its interests. In this regard, it was originally intended that an appearance would be made at the directions hearing set for the following morning, 13 June 2003. However, as I considered that the terms of the consent summons removed the need for a directions hearing, that hearing was vacated. Wharf was thereby deprived of the opportunity to appear on 13 June 2003 to state its objections to the granting of the consent order.

The issue of prejudice to Wharf

26. As I understand it, the real prejudice complained of by Wharf is that, in terms of the consent order, the TA has agreed to suspend the determination proceedings instituted by it pursuant to s.36A of the Ordinance until it has completed its general policy review into broadband interconnection. In the result, submitted Mr Coleman, Wharf has remained burdened for an extended time with the inequitable interim arrangements that it has reached with PCCW. In short, as I understand the thrust of it, the TA's volte face has prejudiced Wharf's commercial interests and indirectly that of the public.

27. I accept, of course, that in matters of judicial review the court is not only an arbitrator of legal issues between the parties but the guardian of the public interest. In Estate of Kingsley v. Secretary of State for Transport CO/2746/1993, Laws LJ observed that :

" In public law cases, certainly in judicial review, the role of the court is quite different from its role in private law claims. In judicial review, the court guards the public interest as it may be affected by the decision under challenge, and it is a commonplace that such decisions often have critical implications for third parties not before the court; so, manifestly, do challenges to road orders, planning appeal decisions, and so forth. Where, in such a case, the respondent concedes that relief should be granted, there is no question but that the court has to approve any order carrying that into effect."

28. In exercising its discretion whether or not to grant approval, the court, in my view, must weigh all relevant factors, one of those factors being whether approval of an order will materially prejudice a third party, leaving that third party with no remedy.

29. By agreeing to the suspension of the determination proceedings, said Mr Coleman, the TA had "surrendered" to the demands of PCCW. If the TA was of the view that its original decision to proceed with the determination proceedings remained sound then it was for the TA to stand by its decision, said Mr Coleman. As a public authority, that was the TA's duty. I do not agree. In respect of the judicial review proceedings, the TA stood in the position of a litigant and, like all litigants, able to act on professional advice. That advice encompasses not only the legal merits but also the myriad tactical matters that determine the dynamics of litigation. A public authority has no obligation in law to charge into the fray simply because it is advised it has legal right on its side. If the battle is not worth the cost, if it achieves nothing, the irrationality lies in fighting it, not avoiding it.

30. In an affirmation dated 9 July 2003 Mr Au Man Ho, Deputy Director-General of the Office of Telecommunications, has explained that for a number of reasons, especially having regard to the context of various time frames, it was simply not considered worthwhile to contest the proceedings. As to the terms contained in the consent summons, Mr Au said that, in his opinion, they constituted the most sensible and practical way of disposing of the judicial review proceedings without any admission on the part of the TA that his earlier decisions in respect of the determination proceedings were flawed. As he said :

"Considerable delay has already occurred in the determination process as a result of the present proceedings. And the TA expects that there is a high prospect of yet further delay which will necessarily be involved in the interlocutory stage of the present proceedings as a result of:

(1) the TA's application for setting aside the interim stay;

(2) any appeal by either party on the outcome of the setting aside application; and

(3) any other interlocutory applications that may be made by the parties.

In view of the delay, the TA considers that the value of contesting the current proceedings will rapidly diminish, given that the outcome of the policy review is due to be published in late 2003/early 2004.

As a public body, the TA must have regard to the considerable public resources that will inevitably be expended in defending the present proceedings, and balance this factor against the likely limited benefit to be gained. Given the particular circumstances of this case, there is not likely to be much merit in allocating substantial public resources to contest the present proceedings, the end result of which may not be significantly different from (or, may in essence be the same as) suspending the determination process until the completion of the policy review."

[my emphasis]

31. In respect of third parties, Mr Au said that the TA had not ignored their interests :

"The TA is at all times aware that [Wharf and New World], being parties to the determinations, are 'interested parties' in the present proceedings. The TA has taken into account their interests in formulating the best strategy in the present proceedings. The TA is satisfied that [Wharf and New World's] interests are adequately protected by the interim arrangements."

32. Mr Dykes SC, counsel for PCCW, said that the TA is charged with regulating the telecommunications industry in the public interest. The compromise was entered into because it was seen as being consistent with the effective performance of that duty.

33. Certainly, nothing was placed before me during the course of the hearing to suggest that the TA agreed to the compromise on an erroneous legal or factual assumption or that the agreement was so unreasonable as to be beyond the discretion of a reasonable decision-maker.

34. Mr Coleman complained that, prior to agreeing the compromise, the TA was under an obligation in law to consult with Wharf and other interested parties. Again, I cannot agree. In the present case I am unable to identify any duty resting on one party to the litigation to consult with other parties to that litigation on the merits of a compromise. The court must, of course, approve the compromise and in that regard the TA is answerable to the court but that is another matter. I am satisfied that as parties to the litigation, PCCW and the TA were entitled to reach a compromise without the TA having first to consult with interested third parties.

35. During the course of the hearing, Mr Reyes SC, counsel for the TA, said that even if the consent summons was set aside, the TA had no intention of deviating from what it had determined was the best way of resolving the judicial review proceedings. Wharf has no power, said Mr Reyes, to compel the TA to take active steps to attempt to set aside the interim stay or to proceed to trial on the substantive issue. In short, Wharf cannot dictate how the TA should conduct its litigation. I agree.

36. By its own terms, the consent order keeps the judicial review proceedings alive with a liberty to apply. The terms of the consent order bind only the parties to it; namely, PCCW and the TA, they do not bind Wharf. At all times, therefore, as an interested party, Wharf has had the locus standi, if it wished, to formally intervene in the proceedings in order to seek the discharge of the interim stay and/or to argue the substantive merits. Through its counsel, the TA has said that it would have no objection to any such intervention.

37. Despite these options remaining open to it, options that go directly to the substantive prejudice allegedly being suffered by Wharf, what is sought by Wharf is instead a setting aside of the consent order. That, in my view, invites the question : 'if Wharf cannot dictate to the TA how it should conduct its litigation, what benefit is to be obtained by Wharf in setting aside the consent order?' In advocating Wharf's case, Mr Coleman adopted what I call a 'progressive' approach. If the consent order is discharged then Wharf will wait to see what transpires. If the TA takes no steps to attempt to set aside the interim stay or to bring the substantive issues to trial then consideration will be given to a formal intervention. But it has been made clear that the TA has no intention, even if the consent order is set aside, of moving to set aside the interim stay or of taking the judicial review to trial to determine the substantive issues. How then does the setting aside of the consent order assist Wharf? In my view, Mr Dykes stated that matter accurately when he observed that there can be no substance in Wharf's application if Wharf does not intend an application of substance itself.

38. Essentially, as I understand Wharf's complaint, it is that the consent order should never have been made and must therefore be set aside. First, this Court was misled as to adequate notice being given to Wharf, that being equivalent to a failure to make full and frank disclosure in ex parte injunction proceedings; second, PCCW has been guilty of an abuse of process in resting on the benefits of its interim relief without proceeding to trial and, third, there were material procedural errors which worked to Wharf's prejudice.

Failure to give adequate notice

39. In his affidavit of 12 July 203, the solicitor for PCCW, Mr Simon Powell, said that it was only in the late morning of 12 June 2003 that a compromise was reached between PCCW and the TA. But immediately after the consent summons and accompanying statement had been signed, he said, copies were faxed to Wharf and further copies despatched by messenger half an hour later. In the result, Wharf received notice before (or at least no later than) the documents were filed with the court. It was intended, said Mr Powell, that the parties would appear the following morning at the directions hearing when Wharf would have been able to attend too. No dispute of substance could have been resolved at that hearing as it was set for just 15 minutes. But, if it wished, Wharf could have sought a date in order to make substantive representations. As it was, however, the court, in considering the consent summons the same day it was received and making the consent order, unilaterally vacated the directions hearing set for the following morning.

40. In all the circumstances, said Mr Dykes, there was no merit in the argument that the court had been misled in being informed that notice had been given to the interested parties. Notice had been given. It is just that circumstances had combined to prevent Wharf from making its representations before the consent order was made. At best, what could be said was that there had been inadequate notice. But again any inadequacy was occasioned by circumstances. There could be no suggestion of mala fides or ulterior motive on the part of PCCW or the TA and therefore no abuse of process. If, through a mishap, Wharf was prevented from making representations, said Mr Dykes, that mishap had now been corrected by giving to Wharf the opportunity to make representations.

41. I am satisfied, having considered the evidence, that there was no intention on the part of PCCW and/or the TA to mislead the court. If Wharf had not been prevented from attending court on the morning of 13 June 2003 there would be no issue (of any real merit) as to inadequate notice. I am further satisfied that, in so far as Wharf may have been denied the opportunity to make representations on 13 June 2003, that omission has now been rectified.

42. I am unable to agree with Mr Coleman that failure to fully explain the matter of service in the statement accompanying the consent summons should be seen in the same light as a failure to make full and frank disclosure in ex parte injunction proceedings and that such failure, even caused by inadvertence, should result in the consent order being set aside. As I have said, PCCW and the TA, as litigants, were entitled to reach a compromise without consulting third parties. All that was required was the consent of the court. The compromise bound PCCW and the TA only, it did not bind Wharf. An interlocutory injunction on the other hand very much binds a defendant's liberty at a time when there has been no finding of wrong doing by the court. The one proceeding cannot be equated with the other.

Wrongful use of interim relief

43. It is not disputed that an applicant or plaintiff who has secured a form of interim relief that restricts a respondent or defendant is required ordinarily to proceed to a resolution of the substantive issues at trial with due diligence. See, for example, Lloyds Bowmaker Ltd v. Britannia Arrow Holdings plc [1988] 1 WLR 1337 where Dillon LJ said in respect of a Mareva injunction (at 1349) :

" where a party has obtained a Mareva injunction, that party is bound to get on with the trial of the action not to rest content with the injunction. The injunction is merely ancillary to the trial of the action to hold the position until the action comes on for trial."

44. That being the case, said Mr Coleman, it constituted an abuse of process for PCCW to obtain an indefinite adjournment of the judicial review proceedings while continuing to enjoy the interim relief that it had obtained ex parte.

45. But in the present case, of course, the TA the party made the subject of the interim relief agreed to the adjournment. The present case therefore is not one in which PCCW, having gained an interim advantage, has sought unilaterally to prolong that advantage by resorting to tactical stratagems despite the desire of the restricted party to bring the matter to trial. In the present case both parties, for their own reasons, have found the extension of the status quo to be to their advantage. I must therefore reject the contention that PCCW has been guilty of an abuse of process in obtaining an adjournment sine die subject to the interim relief obtained by it remaining in force.

Procedural error

46. It was Mr Coleman's contention that what was sought in the consent summons was not an adjournment but was in substance a disposal of the matter. That, he said, was effectively accepted by PCCW and the TA in the statement accompanying the consent summons, the following being written :

"The Applicant and the Respondent are agreed as to the terms on which this application for judicial review can be disposal of in the light of the initiation on 23 May 2003 of the policy review by publication by the Government of a Consultation Paper entitled 'Review of the Regulatory Policy for Type II Interconnection', and require a court order to put those terms into effect."

47. In the circumstances, said Mr Coleman, practice direction para.1.11 had to be followed. That practice direction reads :

" Uncontested proceedings Where parties are agreed as to the terms on which applications for judicial review can be disposed of, and require an order of the court to put those terms into effect, they should file a draft consent order, together with a short statement signed by the parties' solicitors setting out the matters relief upon as justifying the making of the order, and citing the relevant authorities and statutory provisions. The order and the statement will then be submitted to a judge. If he is satisfied that such an order can be made, the proceedings will be listed for hearing and the order will be announced in open court without the parties or their representatives having to attend. If the judge is not satisfied that such an order can be made, the proceedings will be listed for hearing in the normal way."

[my emphasis]

48. There had been no announcement of the order in open court, said Mr Coleman, this being yet another procedural failure or breach which dictated that the consent order must be set aside.

49. More than that, said Mr Coleman, if Wharf had been able to make representations, the court would not have been satisfied that the consent order should be made and the judicial review proceedings would then have been listed 'in the normal way'.

50. I do not agree that what was sought in the consent summons amounted to a disposal of the judicial review proceedings. Viewed in the round, I am satisfied that what was sought was no more than an adjournment of the proceedings. It is often the case, of course, that adjournments are sought in the hope or expectation that a settlement will be reached. But neither hope nor expectation, when unrealised, amount to a disposal. As I read the practice direction, a disposal takes place when the parties seek either to have the judicial review granted on terms or dismissed on terms. Accordingly, the disposal of the judicial review proceedings still lies ahead. If matters do not go as planned the disposal may well lie in a trial; if matters do go as planned then a resolution will be expected in the form of a granting or dismissal (on terms) of PCCW's application for judicial review.

51. In the circumstances, I do not believe that in failing to announce the consent order in open court there was a procedural error committed. But even if I am wrong in that regard, I do not see that it has resulted in material prejudice to Wharf. Yes, Wharf may have been able to attend court in order to pre-empt the announcement but, as it transpired, it was able to seek an undertaking from myself that the consent order would not be sealed until it had time to consider its position.

Conclusion

52. It was contended by Mr Coleman that if Wharf had been able to make representations, this Court would never have agreed to an adjournment sine die. But I have now heard representations and, in the exercise of my discretion, I remain satisfied that such an adjournment was and remains appropriate.

53. For the reasons given, I am therefore satisfied that the consent order should not be set aside. No unfairness has been visited on Wharf. To the contrary, it is still able, if it wishes, to formally intervene in the judicial review proceedings in an attempt to secure its interests. Wharf's application to discharge, vary or set aside the consent order is therefore dismissed.

54. I see no reason why costs should not follow the event. There will be an order nisi awarding costs to the respondents, that order to be made final 30 days after the handing down of this judgment unless application is made earlier to argue the matter of costs.