PCCW-HKT TELEPHONE LTD AND ANOTHER v. THE SECRETARY FOR COMMERCE AND ANOTHER

HCAL 51/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 51 OF 2013

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J U D G M E N T

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INTRODUCTION

1.  The Office of the Communications Authority (“OFCA”) is the executive arm of the Communications Authority (“Authority”), the 2^nd Respondent in these proceedings. OFCA, as well as its predecessor, the Office of the Telecommunications Authority (“OFTA”), is and has at all material times been operating on a trading fund basis as a self‑financing accounting entity under the Trading Funds Ordinance, Cap. 430 (“TFO”). The income of the OFTA/OFCA Trading Fund (“Fund”) was and is derived mainly from fees payable by various licensees as defined under section 2 of the Telecommunications Ordinance, Cap. 106 (“TO”), including inter alia the Applicants.

2.  Section 7(2) and (6) of TO provide:

“(2) The Secretary may by regulations prescribe-

(a) the general conditions, including the period of validity, for a carrier licence other than an exclusive licence; and

(b) the fees payable including for the grant and renewal of a carrier licence other than an exclusive licence and by way of annual fees.

…

(6) For licences other than exclusive licences and carrier licences, the Authority may determine-

(a) the form of licences;

(b) the conditions of licences;

(c) the period for which a licence is valid;

(d) the types of licences, including class licences, to be issued;

(e) the fees payable including for the grant and renewal of licences and by way of annual fees.”

3.  Section 6 of TFO provides for the control and management of a trading fund. In particular, section 6(6) provides:

“The general manager shall manage a trading fund with the objectives of:

(a) providing an efficient and effective operation that meets an appropriate standard of service;

(b) within a reasonable time, meeting expenses incurred in the provision of the government service and financing liabilities of the trading fund out of the income of the trading fund, taking one year with another; and

(c) achieving a reasonable return, as determined by the Financial Secretary, on the fixed assets employed.”

4.  The target rate of return on the fixed assets employed, as determined by the Financial Secretary, was 14.5% in 2005-06, 8.5% in the years which followed and 6.7% from 2012-13 onwards. The actual rate of return on fixed assets employed, however, has been consistently in excess of the target rate of return from 2006 to at least 2012, which resulted in an excess of funds. This excess is in addition to the development reserve maintained by the Fund during the same period. The reserve for the year 2011 – 12, for instance, was over HK$690 million.

5.  On 29 June 2012, the Respondents jointly issued a public consultation paper to invite members of the public to make representations on the proposed “Licence Fee Reduction for Unified Carrier Licences (“UCLs”), Public Radiocommunications Service (“PRS”) Licences and Services-Based Operator (“SBO”) Licences” issued under the TO (“Proposal”) by 30 July 2012. 

6.  In relation to UCLs, the Proposal was to reduce, beginning 1 March 2013, the customer connection fee from HK$800 to HK$700 for each 100-customer connections; in other words, a reduction from HK$8 to HK$7 per customer connection per year. The other items of fees payable by holders of UCLs, including the annual flat rate fee of HK$1 million, were to remain unchanged. 

7.  In relation to PRS and SBO Licences, the Proposal was to reduce the mobile station fee for PRS Licences (Paging) and SBO Licences (Class 3) from HK$800 to HK$700 for each 100 mobile stations or less, in tandem with, and subject to, the implementation of the proposed reduction of customer connection licence fee for UCLs.

8.  Written comments were submitted by the Applicants and others in the industry including some of the Interested Parties. The preponderance of the written comments was to request a further, and immediate or backdated, reduction in licence fees than that set out in the Proposal. There were also requests for a refund of licence fees paid and/or a tax holiday and a review of licence fees on an annual basis.

9.  By letter dated 20 August 2012, the Applicants and several of the Interested Parties jointly wrote to the Secretary for Commerce and Economic Development (“Secretary”), the 1^st Respondent in these proceedings. The letter reiterated the arguments and submissions made in response to the Proposal and put forward an industry request for (i) a partial refund of past licence fees paid; and (ii) an immediate reduction in the current and future licence fees, starting with the current year of the Fund i.e. 2012-13.

10.  In a Joint Statement dated 27 November 2012 entitled “Licence Fees Reduction for Unified Carrier Licences, Public Radiocommunications Service Licences and Services-Based Operator Licences Issued under the Telecommunications Ordinance” (“Joint Statement”), the Respondents made known their decision on licence fees reduction (“Decision”) as follows:

“The Administration’s Decision

Having duly considered the views and comments received in [the] context of the consultation exercise, the Administration has come to the decision that the Proposal should be proceeded with as planned.”

11.  In essence, the Decision was that the Respondents did not accede to the request of the Applicants and others in the industry for greater fee reduction. Nor did the Respondents agree to refund any licence fees paid, grant a total fee/tax holiday or to implement the fees reduction stated in the Proposal earlier than 1 March 2013.

12.  On 27February 2013, the Applicants applied for leave to apply for judicial review against the Decision. After hearing the Applicants ex parte in May 2013, this court granted leave on 12 July 2013.

13.  In the Form 86, the Applicants contend that the Decision is unlawful and/or irrational and that the Respondents have wrongfully and unlawfully failed to take into consideration the very large profits the Fund had made over at least the previous six years. The Applicants further contend that the law required the Fund to be managed with the objective of achieving the prescribed return on fixed asset employed and, under the relevant legislation, the Respondents have no power to budget for a substantial profit every year in excess of the prescribed return on fixed asset employed.

14.  The reliefs sought by the Applicants are as follows:

(1) An order of certiorari to remove into the Court of First Instance and to quash the Decision; and / or

(2) A declaration that the Decision is unlawful and/or ultra vires; and / or

(3) A declaration that it was, and remains, manifestly unreasonable for the Respondents to have reached / given the Decision; and / or

(4) An order of Mandamus to oblige the Respondents to reconsider the Decision after consultation with the Applicants in accordance with the law and/or their legitimate expectations.

15.  On 16 July 2013, the Applicants filed the Originating Summons (“OS”) herein.

16.  There were four applications before this court.

17.  First, the Applicants' application by paragraph 1 of the summons dated 8 October 2013 (“8 October summons”) for leave to amend the OS and the Form 86 (“Amendment Application”).

18.  Second, the Applicants' application by paragraph 2 of the 8 October summons for leave to adduce the expert evidence of Mr Eugene Sullivan on the topic of public finance and trading funds (“Expert Evidence Application”). Mr Sullivan’s evidence is contained in an affirmation dated 23 September 2013.

19.  Third, theRespondents’ application by summons dated 28 October 2013(“28 October summons”) to set aside the Amendment Application and the Expert Evidence Application. This application will not be considered on its own, but alongside the Amendment Application and Expert Evidence Application.

20.  Fourth, the Applicants' application by summons dated 29 October 2013 (“29 October summons”) for specific discovery and production of documents against the Respondents (“Specific Discovery Application”).

Amendment Application

Amendment to the Originating Summons

21.  Under RHC O 53 r 5(1), the originating summons is required to be in Form No 86A in Appendix A to the RHC. Form No 86A requires the applicant to inter alia give notice of the affidavits that it will use at the hearing of the application for judicial review.

22.  In the present case, the proposed amendment to the OS merely seeks to set out all the affidavits which the Applicants intend to rely upon at the hearing of the application for judicial review including inter aliathe Affirmation of Eugene Sullivan. The proposed amendment is purely formal and cannot prejudice the Respondents in any way – the admissibility of the Affirmation of Eugene Sullivan is the subject of a separate application and will be considered on its merits.

23.  No submissions have been made in opposition to the proposed amendment and no good reason has been shown as to why the proposed amendment to the OS should be refused. In the exercise of my discretion, I will grant leave to amend the OS as sought.

Amendment to Form 86/ Setting Aside Application

24.  The two applications can be dealt with together as in substance the Respondents’ stance is the same – the proposed amendment to Form 86 ought not to be allowed.

25.  The proposed amendment seeks to add four paragraphs to the Form 86 viz. paras 60A-60B, 106A, 107(c)(iv)-(v) and (d).

26.  The proposed amendment at paragraphs 60A and 60B sets out what happened to the surpluses of the Fund for the six years ended 31 March 2007 to 2012 ie a substantial portion of them were paid to the general revenue as “payments in lieu of profits tax” totalling ~HK$82 million and “dividends” totaling ~HK$429 million (“Payments”). In the course of his oral submissions, Mr Yu SC, for the Applicants, indicated to this court that his clients would like to further amend the two paragraphs by including the figures for the year ended 31 March 2013. According to the proposed amendment at paragraph 106A, these Payments were unauthorized by any of the relevant legislation and for that reason unlawful.

27.  The proposed amendment at paragraphs 107(c)(iv)-(v) and (d) expands on the Applicants’ grounds of review of the Decision as follows:

“(c) Ground 3: The Respondents have acted unlawfully and/or unreasonably by:

…

(iv) forming the view that the OFCA Trading Fund or the OFTA Trading Fund operate in a commercial or quasi-commercial manner; and

(v) failing to take into consideration the fact that the trading fund’s income had, over at least the past 6 years, far exceeded expenses and the prescribed rate of return on fixed asset.

(d) Ground 4: The Respondents have acted unlawfully by exacting from telecommunications licensees (including the Applicants and the Interested Parties) money to be paid in lieu of profits tax and/or as dividends. The Respondents ought to have excluded payments in lieu of profits tax and/or in respect of dividends from their financial forecasts for OFCA, included a credit in respect of such tax and dividends exacted ultra vires in the past, and set the level of licence fees accordingly. Further or alternatively, the Respondents, in reaching their decision, relied in part on the payments in lieu of profits tax and/or dividends that had been paid in previous years as evidence of future liability which was required to be taken into account in setting licence fee levels, and failed to take into account of the fact that such payments were unlawful and liable to be repaid to the licensees from which such money had been exacted.”

28.  Mr Yu SC submitted to this court that, in the present case, the decision under challenge was the Respondents’ refusal to further reduce the telecommunications licence fees, as embodied in the Decision. The essence of the complaint was that whilst licence fees were authorized for the purposes of the TO, including inter alia the recovery of the costs of the services provided by OFTA/OFCA, they were not authorized as a means of making profits over and above a reasonable rate of return authorized by the TFO. He submitted that the Respondents’ purpose in refusing further reduction was to recover as licence fees more than costs plus a reasonable return and such a purpose was unlawful and irrational. The proposed amendments merely raised issues of law and expanded on the grounds for challenging the Decision, but the target of attack remained the same ie the Decision. The reliefs sought in the Form 86 (or the OS) remained the same. There was thus no question of the Applicants challenging earlier decisions of the Respondents without leave or failing to make an application for judicial review against those earlier decisions promptly.

29.  On the other hand, Ms Cheng SC, for the Respondents, submitted that:

(1) Procedurally, the Amendment Application should be set aside on the ground that it was not supported by an affirmation explaining the belated challenge of the Payments in the six financial years ended 31 March 2007 to 31 March 2012 and/or the licence fees charged by OFTA/OFCA annually in those years.

(2) Further or alternatively, the Amendment Application should be dismissed on ground that:

(i) No leave for judicial review has been applied for or obtained to challenge the validity of the Payments and/or the past licence fees, in contravention of RHC O 53 r 3(1).

(ii) The purported challenge fell outside the time limit under RHC O 53 r 4(1) but there was no application to extend time.

(iii) No good reason has been offered by the Applicants to explain the delay.

30.  The Payments were made known to the general public through the publication of the Fund’s financial reports in the years in question. Further, licence fees under the TO were and are charged and paid annually.  At the time when the licence fees for the years 2007 to 2012 were charged and paid, the lawfulness of the Payments were neither questioned nor challenged. Ms Cheng SC therefore submitted that there was clearly delay on the part of the Applicants in making the proposed amendment and the time limit applicable to judicial review proceedings generally ie 3 months from the date when the grounds for the application for judicial review first arose has long expired.

31.  It is elementary that a court will normally permit such amendments as may be required to ensure that the real dispute between the parties can be determined: Chu Woan Chyi v Director of Immigration [2006] 4 HKLRD 280 at para. 34; De Smith's Judicial Review7^th Ed. para. 16-041; Auburn et al, Judicial Review, Principles and Procedure para. 25.141. In addition to its general powers of amendment, the court hearing an application for judicial review is given wide powers to allow an applicant to amend his statement, whether by specifying different or additional grounds or relief or otherwise as it thinks fit: RHC O 53 r 6(2).

32.  In the present case, the real dispute between the parties has been and remains the lawfulness or otherwise of the Decision itself. As I said earlier, the Applicants do not seek to amend the reliefs prayed for in the Form 86 (or the OS).

33.  Ideally the lawfulness of the Decision should not be judged in a vacuum. Part of the context under which the Decision will be examined is the existence and amount of the surplus generated by the Fund in the past. That has already been set out in the original Form 86 and no question of amendment arises in relation to it. Another part of the context under which the Applicants, by their proposed amendment, invite this court to examine the Decision is what OFTA/OFCA has done with the surplus in each of the past six or seven years in question. While the making of the Payments to the general revenue, whether as payment in lieu of profits tax or dividends, in the past was the subject of a number of earlier and separate decisions capable of being challenged by applications for judicial review, the fact is that, in these proceedings, the Applicants only seek to challenge the Decision. That decision was made in November 2012, the Applicants were within the time limit prescribed by the Rules of High Court, and they have obtained leave from this court to challenge it.

34.  If, as alleged by the Applicants, the Payments were unauthorized and therefore unlawful, the Decision may be liable to be quashed – that is something which will be decided in the substantive hearing of the judicial review. The Respondents may also have to take this unlawfulness into account in revising their financial projections for the future. But as far as the present proceedings are concerned, Mr Yu SC, for the Applicants, has indicated in no uncertain terms that his clients are not seeking restitution of past licence fees paid.

35.  In my view, the fact that in challenging the Decision, the  Applicants also allege that certain past acts/ decisions of the Respondents were unlawful does not without more turn the challenge into one which is out of time. The position is similar to the authorities collected in Fordham Judicial Review Handbook 6^th Ed. at para. 26.2.8 entitled “Delay and Multiple targets”.

36.  Take for instance R v Richmond Upon Thames London Borough Council ex parte McCarthy & Stone (Developments) Ltd[1992] AC 48. In that case, the applicant developers challenged the legality of a decision by the respondent local council to levy a charge on developers for inquiries relating to speculative development or redevelopment proposals.  The council passed a resolution levying the charge on 2 July 1985. The council charged the applicant developers the fee in August 1986 which the applicant had paid. The applicant developer paid another fee under protest in January 1987. It was only sometime in early 1988 that the applicant challenged the council's decision in October 1987 not to revoke the policy of charging the levy. The House of Lords upheld the challenge and declared that the council had no power to charge the fee in question.

37.  In one sense, the applicant in R v Richmond Upon Thames London Borough Council ex parte McCarthy & Stone (Developments) Ltdcould be said to be challenging not only the council's decision in October 1987, but also its resolution in July 1985 and its decision to levy the charge on the applicant in August 1986 and January 1987, but that was not regarded as a hurdle of substance to the judicial review application. In the end, the House of Lords only quashed the October 1987 decision and made a declaration that the council had no power to charge the fee in question.

38.  In R (Burkett) v Hammersmith and Fulham London Borough Council and another [2002] 1 WLR 1593 the local council resolved in September 1999 that outline permission for a development should be granted subject to certain conditions. In May 2000, the conditions were fulfilled and the council granted outline planning permission to the development. The House of Lords gave the applicant leave to amend in order to challenge the actual grant of planning permission in May 2000 notwithstanding that the applicant was out of time in challenging the earlier decision in September 1999.

39.  As Ouseley J put it in Younger Homes (Northern) Ltd. v First the Secretary of State [2003] EWHC 3058 (admin) at [85], “Burkett makes it clear that the challenge can be made to the substantive decision at the end of the process on the grounds of an earlier reviewable error which itself had some legal consequences for the continuation of the process.”

40.  In R v Birmingham City Council ex parte Equal Opportunities Commission[1989] 1 AC 1155, the Equal Opportunities Commission challenged the Council for provision of selective education in single‑sex secondary schools as being discriminatory against girls. The arrangement had been in place for a number of years and was considered by the Commission to be illegal more than a year before it finally instituted judicial review proceedings. In the proceedings, the relief sought by the Commission was for inter alia “a declaration that the arrangements currently made by the council for the provision of selective secondary education were unlawful”. The declaration was granted at First Instance and the council’s appeals to the Court of Appeal and the House of Lords were dismissed.

41.  As I see it, if, in substance, the Applicants are seeking only to challenge the Decision made in November 2012, which I find they are, then they should not be precluded from contending that the Decision is a continuation of past practices / decisions which were unlawful. R v Birmingham City Council ex parte Equal Opportunities Commission is a clear example of a challenge being allowed to be made to a current decision, policy or arrangement which is itself a continuation of past unlawful decisions, policies or arrangements. So is R v Richmond Upon Thames London Borough Council ex parte McCarthy & Stone (Developments) Ltd. As two wrongs do not make one right, the fact that, for reasons good, bad or indifferent, past unlawful decisions have been left unchallenged should not be a bar to a challenge, within time, of a current decision if it can be shown to be equally unlawful. Nor should the Applicants be barred from putting the current unlawful decision in context by contending that it is a continuation of the unlawful past.

42.  For completeness, this court should mention that it does not find Desmond Keane v. The Director of Legal Aid, unrep., CACV 49 of 2000, 15 June 2000, heavily relied upon by Ms Cheng SC, really assists the Respondents. In that case, Mr Keane had applied for leave to amend by deleting the decision which had originally been challenged and substituting it with a new target for judicial review. The problem for Mr Keane was that no leave had been obtained from the court to review the new target. That is not the case here.

43.  For these reasons, this court does not accept the grounds of objection raised by the Respondents. In the exercise its discretion, this court will allow the amendment to the Form 86 in terms of the draft annexed to the 8 October summons.

Expert Evidence Application/Setting Aside Application

44.  The formal and substantive requirements for the admissibility of expert evidence were recently considered by the Court of Final Appeal in Fu Kor Kuen Patrick v HKSAR [2012] 5 HKC 189 at paras. 48 and 51. Essentially, they are:

(1) The evidence must state the factual assumptions upon which any opinion is based.

(2) The opinion expressed must be upon a matter which is legitimately the subject of opinion.

(3) The opinion is relevant.

(4) The opinion is within the expertise of the witness.

45.  Mr Yu SC submitted to this court that, in the present case, all of these conditions were satisfied.

46.  First, there is no dispute that Mr Sullivan, a chartered public finance accountant since 1983 with related working experience, is qualified to testify on matters pertaining to public finance.

47.  Second, his testimony is based on his professional qualifications and experience - it has two elements.

48.  The first part of Mr Sullivan’s evidence is factual and assists in the understanding of the history, rationale and operation of trading funds in the United Kingdom and therefore provides indirectly background information to the TFO. For instance, at paragraph 3.2.2 and then at paragraph 4.12 onwards, Mr Sullivan explains the plausible meanings of the expression "taking one year with another", which expression is also found in the TFO. At paragraph 3.2.3 and then at paragraph 4.17 onwards, he explains the various policies and options for determining fees within a trading fund. At paragraph 3.2.4, he explains the two main types of trading funds. The second part of Mr Sullivan’s evidence is opinion which explains the relevant factors in the determination of licence fees for a regulatory service based on the cost recovery principle and whether the Decision was consistent with that principle.

49.  Third, the evidence is relevant in that it assists the court in understanding inter aliathe workings of trading funds and serves as useful background information. In this regard, it is clear that courts in judicial review applications regularly admit relevant background information which explains the context in which an issue of law is said to arise: FordhamJudicial Review Handbook 6^th Ed. para. 17.2.4 and the authorities listed under that paragraph.

50.  On the other hand, Ms Cheng SC, for the Respondents, submitted that the application should be set aside on the ground of delay; alternatively, it should be dismissed on grounds that:

(1) Mr Sullivan’s opinion does not fall within any of the exceptions set out in R v Secretary of State for the Environment ex parte Powis [1981] 1 WLR 584;

(2) Mr Sullivan’s opinion is irrelevant to the resolution of issues arising from the original or amended Form 86;

(3) Mr Sullivan has usurped the function of the court; and

(4) Mr Sullivan’s evidence contains opinion on matters which do not fall for determination by the court in the present case.

51.  On the question of delay, Mr Sullivan’s Affirmation was filed on 26 September 2013 and the Expert Evidence Application was made on 8 October 2013, approximately three months after leave to apply for judicial review was granted.

52.  It is well-established that, at the hearing of the application for judicial review, the court has power to allow the use of further affidavits by an applicant, provided inter alia that he shall give notice of his intention to do so to every other party: RHC O 53 rr 5A, 6(2) and 6(3); Practice Direction SL3 para. 15. In my view, the most important consideration, in the exercise of the court’s discretion, is whether admitting the further affidavits will facilitate the just resolution of the disputes between the parties in accordance with their rights. If Mr Sullivan’s evidence is legally admissible and relevant to the issues at hand, I will be very slow to refuse the Expert Evidence Application simply on the ground of delay. For this reason, it is necessary for this court to immediately examine the “substantive” grounds of objections raised by the Respondents.

53.  In R v. Secretary of State for the Environment & Anor, Ex parte Powis [1981] 1 WLR 584 at 595, Dunn LJ (giving the judgment of the Court of Appeal), set out the three exceptions to the general rule that no fresh evidence should be admitted on an application for judicial review:

“Finally there was an application on behalf of the tenant to admit fresh evidence which the Divisional Court had refused to admit. Like the Divisional Court we considered the evidence de bene esse. What are the principles on which fresh evidence should be admitted on judicial review? They are: (1) that the court can receive evidence to show what material was before the minister or inferior tribunal…; (2) where the jurisdiction of the minister or inferior tribunal depends on a question of fact or where the question is whether essential procedural requirements were observed, the court may receive and consider additional evidence to determine the jurisdictional fact or procedural error…; (3) where the proceedings are tainted by misconduct on the part of the minister or member of the inferior tribunal or the parties before it. Examples of such misconduct are bias by the decision making body, or fraud or perjury by a party. In each case fresh evidence is admissible to prove the particular misconduct alleged...”

54.  In R (on the application of Lynch) v. General Dental Council [2004] 1 All ER 1159, the applicant applied for judicial review against a decision of the appeal panel which refused him entry on the specialist list for orthodontists maintained by the respondent.  He applied to adduce fresh expert evidence to show that he had had such expertise.  Collins J. (as he then was) made certain important observations on the limits of the court in receiving fresh expert evidence in judicial review proceedings as follows:

“[19]….In judicial review proceedings, the circumstances in which fresh evidence can be received are very limited. In refusing leave to appeal from Mr Pleming’s decision, Hale LJ said:

‘This looks like a classic case for not receiving fresh evidence in judicial review proceedings for the reasons given by the judge. It falls within none of the Powis categories …In so far as it indicates that the panel may not have taken account of relevant evidence it adds nothing to what counsel may submit. In so far as it seeks to advance an opinion that the panel was irrational, it is usurping the function of the court. However attenuated, there are still distinctions between judicial review and appeal on a point of fact which must be taken into account in the operation of any legislative scheme.’

…

[22] I have no doubt that fresh evidence involving expert evidence should in general not be admitted unless it falls within the Ex p Powis guidelines. However, it is and has always been recognized that irrationality is an error of law which can lead to a decision being quashed. If the decision in question is made by an expert tribunal or indeed by anyone dealing in a field involving consideration of matters which would not obviously be fully understood by a layman without some assistance from an expert in that field, it may be necessary at the very least to have some explanation of any technical terms. Mr Garnham accepted that expert evidence could be adduced to provide such explanations. Without it, the court might well be unable to consider properly any irrationality argument. When I used the word ‘irrationality’ I am intending to include not only perversity but also a failure to have regard to a material matter or a taking into account of an immaterial matter.

[23] Mr Havers submitted that, particularly in a case such as this, it was necessary that the court should understand not only the meaning of the technical terms but also their significance. The nature of the treatments which the claimant had carried out could no doubt be explained, but the court would be unable to judge whether the decision was irrational without appreciating their significance. Unless the claimant was able, for example, to show that they were the sorts of treatments which only a specialist would be expected to carry out, he could not establish his claim and this was manifestly unfair.

[24] It is clear that the court’s function must not be usurped. But it seems to me that the court must be enabled to carry out its function. To do this it must understand the material which is put before it. There is in my view a real distinction between a report from an expert which seeks to explain what is involved in a particular process (in this case, treatment) and how complicated that process is and one which goes on to opine that it was irrational for the body to have reached the conclusion it did…

[25] This is, I appreciate, some extension beyond that recognized by Ex p Powis of the possibility of admitting fresh evidence. But its purpose is in reality to explain to the court matters which it needs to understand in order to reach a just conclusion.  It is difficult to see why, where such need is established, that should not in principle be permitted…”

55.  In the present case, it is not seriously in dispute that the expert evidence of Mr Sullivan is “fresh” and the Applicants have not attempted to argue that it falls within any of the three exceptions in Ex p Powis. However, the Applicants do rely on R (on the application of Lynch) v. General Dental Council in submitting to this court that Mr Sullivan’s evidence is relevant and legally admissible in (1) providing relevant background information on e.g. the operation and rationale of different types of trading funds, the different policies and options for fee setting, against which to better understand the Fund; (2) explaining technical expressions used in the TFO and the public finance accounting processes of trading funds and their significance.

56.  In the present case, the grounds of review put forward by the Applicants consist of both unlawfulness and unreasonableness of the Decision: see in particular Ground 3 in the Form 86. In my view, it is not only desirable but strictly necessary for the court to be fully assisted in understanding (i) the nature and workings of trading funds; (ii) the financial objectives, fee setting policies and options available and (iii) the various policies in the management of trading funds, in order to determine whether the Decision made in November 2012 was lawful and reasonably consistent with the statutory objectives and policy of the TFO.

57.  Further, in my view, while construing the TFO and ascertaining its financial objectives and policy is a function exclusively for the court, understanding the nature and workings of trading funds etc. in order to discharge that function is another matter, and, in doing so, there is no reason why the court cannot be assisted by evidence, expert or otherwise.

58.  In this connection, it is important to note that Mr Ivanhoe Chang, Principal Assistant of the Secretary for Commerce and Economic Development (Communications and Technology), also purports to provide, on behalf of the Respondents, background information on the TFO and the Fund in his affidavit dated 24 October 2013 (“Chang”) including inter alia:

(1) The background of TFO and the concept of trading funds.

(2) The establishment of the Fund and the setting up of the Development Reserve.

(3) The control and management of the Fund including the adoption of a time horizon of 5 years in financial projection for the Fund.

(4) The rationale in the collection of telecommunication licence fees.

(5) The review of licence fees by OFCA in the past.

(6) The licence fees reduction proposal by OFCA in December 2011, the consultation, the revision of financial projections and ultimately the Decision in 2012.

59.  Mr Yu SC submitted, with considerable force, that it cannot be right to suggest the Respondents are permitted, but the Applicants are not, to adduce evidence on what they consider to be relevant background information and which they say will assist the court’s understanding of the case in general.

60.  On the question whether Mr Sullivan usurps the function of the court, it is of course trite law that construing a piece of legislation e.g. the TFO or the TO is the exclusive function of the court, not the parties’ experts. But as far as this court can ascertain, Mr Sullivan is not seeking to do that in his affirmation. The Respondents further submitted that it is not for this court to determine in these proceedings whether there was room, or how much room, if any, there was for further reduction of licence fees since that was a decision for the Respondents. That may be correct as far as it goes. However, in determining the (un)lawfulness and (un)reasonableness of the Decision, it is inevitable that the court will have to look into those questions because the crux of the Applicants’ complaint is that the Respondents have wrongfully and unlawfully failed to take into consideration the very large profits the Fund has made over at least the past six or seven years.

61.  For these reasons, this court does not accept the grounds of objection raised by the Respondents to the Expert Evidence Application. In the exercise its discretion, this court will give leave to the Applicants to adduce the expert evidence of Eugene Sullivan in the form of his affirmation dated 23 September 2013.

Specific Discovery Application

62.  It is well-established in judicial review proceedings, there is a duty of candour on the decision maker ie the respondent. This is a duty to be full and frank, to both the court and the applicant, in disclosing all relevant facts and documents. These facts and documents may relate to the actual reasons for a decision or to any other aspect that is relevant in the judicial review proceedings: Chu Woan Chyi v Director of Immigration [2009] 6 HKC 77.

63.  The respondent in judicial review proceedings is expected to discharge its duty of candour, particularly in relation to its decision making process. It must also adopt a generous view of its role in such proceedings and not be too ready to indulge in tactical games, or to take unduly technical or legalistic points: R v Secretary of State for the Home Department ex parte Fayed [1998] 1 WLR 763; Chu Woan Chyi v Director of Immigration supra.

64.  Where the source of knowledge in an affidavit is a document, that document ought itself to be exhibited unless sufficient reason exists to indicate the contrary. This is good practice not only because a document will contain the best evidence but any summary, however conscientiously and skillfully made, may distort: Tweedv Parades Commission for Northern Ireland [2007] 1 AC 650.

65.  There is no automatic discovery or production of documents in judicial review proceedings. If discovery and production is required, a separate application must be made: RHC O 53 r 8. When such an application is made, the test will always be whether disclosure appears to be necessary in order to resolve the matter fairly and justly: Tweedv Parades Commission for Northern Ireland supra.

66.  The court will be astute in judicial review proceedings not to permit “fishing” expeditions by applicants in the hope of unearthing material to enable a challenge to be mounted: Tweedv Parades Commission for Northern Ireland supra; Chu Woan Chyi v Director of Immigration supra.

67.  Production of documents is specifically governed by RHC O 24 rr 10, 11 and 13. In particular, r 13(1) prescribes that an order for production of documents should only be made if the order is necessary either for disposing fairly of the cause or matter or for saving costs. This principle is equally applicable in judicial review proceedings: Au Shui-yuen, Alick v Sir David Ford & ors [1991] 1 HKLR 525.

68.  Where a document has been referred to in an affidavit, under RHC O 24 r 11, the applicant has a prima facie entitlement to see the document, unless the other party can show good cause for refusing the order for production of that document. There is however no rigid, inflexible rule that production of a document referred to in an affidavit will always be ordered. In most cases, the fact that a document has been referred to in an affidavit is a strong indicator of the relevance of the document and the necessity of its production: Moulin Global Eyecare Holdings Ltd. v. Olivia Lee Sin Mei [2013] 3 HKLRD 72.

69.  With these principles in mind, I now turn to the application itself.

70.  The documents sought in the 29 October summons are identified in two schedules ie Schedule 1 and Schedule 2. The difference between the two is that the documents sought under Schedule 2, with one or two exceptions, can be directly traced back and referred to Chang, whereas those sought under Schedule 1 are not.

71.  I shall deal with the two schedules in reverse order.

Schedule 2

72.  As stated above, most of the documents in this Schedule are referred to in Chang and that is a strong indicator of their relevance and the necessity of their production.

Item 1 (Framework Agreements applicable to the OFTA Trading Fund i.e. those pre-dated the OFCATF Framework Agreement dated 1 April 2012)

73.  The Framework Agreement dated 1 April 2012 is referred to at paragraphs 32 and 33 of Chang and has been disclosed. This was the agreement “current” at the time of the consultation and the Decision.

74.  While it is clear from paragraph 31 of Chang that there were such framework agreement(s) since the inception of the Fund in June 1995, it is most unlikely that such historical documents would have been taken into account by the Respondents in arriving at the Decision. The Applicants have failed to demonstrate why these historical documents are relevant to their challenge to the Decision (“relevance”) or why their production is necessary (“necessity”).

75.  For this reason, Item 1 is refused.

Item 2 (The Framework Agreement, Business Plan, Corporate Plan and the Speech stated to be attachments to a letter dated 26 April 1995 from the then Secretary for Economic Services to the Legislative Council House Committee Subcommittee)

76.  The letter is referred to at paragraph 23 of Chang as part of the narration of the history on the establishment of the Fund and the Development Reserve.

77.  It is most unlikely that such historical documents would have been taken into account by the Respondents in arriving at the Decision.  The Applicants have failed to demonstrate relevance or necessity.

78.  For this reason, Item 2 is refused.

Item 3 (The draft Annual Business Plan and draft Corporate Plan, including the referenced 5 year financial projections of OFCA, for every year)

79.  As stated in paragraph 33 of Chang, the draft Annual Business Plan and draftCorporate Plan are prepared by OFCA every year for “the purpose of financial management and planning”. If so, it is difficult to see how the Respondents can argue that the plans prepared for the year 2012‑13 and the years 2012-17 are irrelevant to the Decision or their production is unnecessary. Equally, it is difficult to see why the plans prepared in the earlier years are relevant. Ex hypothesis, those plans would become outdated and would be superseded by the plans for the year 2012 and beyond.

80.  For this reason, I would allow Item 3, but limit it to the draft Annual Business Plan prepared for the year 2012-13 and draftCorporate Plan for the years 2012-17.

Item 4 (minutes of biannual financial monitoring meetings attended by representatives of CTB, FSTB and OFCA)

81.  These are referred to in paragraph 33 of Chang. These meetings are held every year to enable the Communications and Technology Branch of the Commerce and Economic Development Bureau and the Financial Services and Treasury Bureau “to review the financial performance of the [Fund]”. If so, it is difficult to see why the minutes of the meetings held in the year 2012 are irrelevant to the Decision or their production is unnecessary.

82.  For this reason, I would allow Item 4, but limit it to the minutes of the meetings held in 2012.

Items 5 and 9 (Fee revision proposals)

83.  These documents are referred to in paragraphs 39 and 82 of Chang.

84.  The December 2011 licence fee reduction proposal is the very document which initiated the process that led to the Decision. It is clearly relevant and its production is clearly necessary. By the same token, the fee revision proposals for earlier years are just historical documents. The Applicants have failed to demonstrate relevance or necessity.

85.  For this reason, Item 5 is refused and Item 9 is allowed.

Item 6 (The OFCATF report for the year ended 31 March 2013)

86.  This document has been disclosed.

Items 7, 8 & 10 (The Annual Business Plans and Medium Range Corporate Plans)

87.  For the same reason given in paragraph 79 above, I would allow Items 8 & 10.

88.  Item 7, in so far as it concerns plans prior to 2012, is just a collection of historical documents. The Applicants have failed to demonstrate relevance or necessity. For this reason, Item 7 is refused.

Item 11 (Financial projections of OFCA in October 2012)

89.  This document has been disclosed.

Item 12 (Corporate Plan for 2013 - 18)

90.  This document was referred to in paragraph 90 of Chang where he claims the financial projections made in October 2012 were in line with the forecast made by the Fund in compiling the 2013‑18 Corporate Plan. If so, it is only fair that the Applicants should be given the document to verify such a claim.

91.  For this reason, Item 12 is allowed.

Item 13 (OFCA’s proposal to the Communications Authority and the Secretary that there was no room for further reduction in licence fees)

92.  This is the proposal which led to the Decision. It is difficult to see how it can be said to be irrelevant to the Decision or its production is unnecessary.

93.  For this reason, Item 13 is allowed.

Item 14 (The most updated available financial projection said to have been considered by OFCA)

94.  This document has been disclosed.

Schedule 1

Item 1 (financial forecast/projected financial figures of the Fund for the coming 5 years)

95.  The Respondents have indicated in the Joint Statement at paragraph 7 that “The Administration worked out the Proposal with due consideration of … the financial forecast of the current [OFCA] Trading Fund …for the coming five years.”

96.  The financial forecast for the coming 5 years, as referred to in the Joint Statement, is clearly material considered by the Respondents before coming to the Decision. For that reason alone, it should be disclosed.

97.  The Respondents maintain that the forecast has already been disclosed in items 45‑46 of their List of Documents (“LOD”). I see no reason to doubt them. There is no need to make an order in respect of this item.

Item 2 (estimates or forecasts of income and expenses in

respect of “various new initiatives”)

98.  The overall financial impact of the expanded scope of services undertaken by OFCA has been set out in the 5-year financial forecast and has been disclosed. I agree with the Respondents’ submission that the court is not to micro-manage the financial budget of each and every piece of work undertaken by OFCA.

99.  Disclosure of Item 2 is unnecessary and, for this reason, is refused.

Item 3 (The latest profit and loss situation of the OFCATF)

100.  The Respondents maintain that the latest profit and loss situation of the Fund that was considered in arriving at the Decision has already been disclosed: items 43 and 46 of their LOD. I see no reason to doubt them. There is no need to make an order in respect of this item.

Item 4 (annual review of licence fees)

101.  For the reason set out in paragraph 84 above, it is my view that only the December 2011 licence fee reduction proposal is relevant and its production is necessary. The earlier reviews of licence fees are just historical documents. The Applicants have failed to demonstrate relevance or necessity.

102.  For this reason, Item 4 is refused.

Item 5 (analysis of trend of administration cost)

103.  I agree with the Respondents’ submission that the court is not to micro-manage the financial budgeting work of OFCA.

104.  Disclosure of Item 5 is unnecessary and, for this reason, is refused.

Item 6 (Annual business plans for OFCA/OFTA for the past 6 years, i.e. from 2006-07 to 2011-12)

105.  I have already allowed Items 8 & 10 of Schedule 2. Earlier business plans are just historical documents. The Applicants have failed to demonstrate relevance or necessity.

106.  For this reason, Item 6 is refused.

Item 7 (Internal documents evidencing the reasoning behind and the decision as to how the licence fees were and are structured and the level at which it was decided)

107.  The reasoning of the Respondents in arriving at the Decision is set out in the Joint Statement. It is entirely speculation on the part of the Applicants to suggest the existence of “reasoning behind the decision which is not apparent from the Joint Statement”.

108.  I agree with the Respondents’ submission that this is a fishing request and, for that reason, Item 7 is refused.

Item 8 (sensitivity analysis and scenario modelling)

109.  The burden is on the Applicants to establish a prima facie case of existence and relevance of the documents requested. Neither has been established.

110.  For this reason, Item 8 is refused.

Item 9 (budget-to-actual analysis used as part of the annual licence fee review)

111.  I have already allowed Items 8, 9 & 10 of Schedule 2. Earlier licence fees reviews are just historical documents. The Applicants have failed to demonstrate relevance or necessity.

112.  For this reason, Item 9 is refused.

Item 10 (Assessment of the size and purpose of current and future financial reserves)

113.  The setting up and keeping of the Development Reserve is not the subject matter to be challenged in the present judicial review proceedings. Disclosure of such assessment, even if exists, is unnecessary and, for this reason, is refused.

Item 11 (Framework Agreements prior to 2012)

114.  This has been dealt with in paragraph 74 above. For the reason stated in that paragraph, Item 11 is refused.

Item 12 (Approval under section 5(3) TFO)

115.  The setting up and keeping of the Development Reserve is not the subject matter to be challenged in the present judicial review proceedings and there is no suggestion by the Applicants that the Reserve was unauthorized by the Financial Secretary.

116.  Disclosure of Item 12 is unnecessary and, for this reason, is refused.

Item 13 (Direction under section 6(5) TFO)

117.  The Respondents maintain that no such directions have been given. I see no reason to doubt them. There is no purpose in making an order in respect of this item.

Item 14 (All relevant evidence)

118.  This has been superseded by the Order for discovery made on 1 November 2013.

Disposition and costs order nisi

119.  For the above reasons, there shall be an order:

(1) in terms of paragraphs 1 and 2 of the 8 October summons;

(2) dismissing the 28 October summons.

120.  I shall also allow the Specific Discovery Application to the extent indicated above, with liberty to apply.

121.  There shall be an order nisi that (1) costs of the 8 October and 28 October summonses be to the Applicants, with certificate for two counsel; (2) costs of the 29 October summons be to the Respondents, with certificate for two counsel.

122.  Lastly, I would like to thank counsel for both parties for their helpful submissions.