PCCW - HKT TELEPHONE LTD AND ANOTHER v. DAVID MATTHEW McDONALD AITKEN AND ANOTHER

HCMP 1294/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1294 OF 2008

(ON APPEAL FROM HCA NO. 1089 OF 2008)

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REASONS FOR JUDGMENT

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Hon Le Pichon JA:

1.  This application by the plaintiffs was, in substance, an application for temporary injunctions pending an appeal to this court from an order of Deputy High Court Judge Au of 10 July 2008 (“the July order”).  The deputy judge set aside the ex parte order of Beeson J dated 13 June 2008 (“the ex parte order”) which had granted the plaintiffs injunctions against the defendants and replaced the same by a more limited form of injunction.  The plaintiffs seek temporary injunctions in the same terms (but with modifications) as the wider injunctions that had been granted by the ex parte order.

2.  While the fact that the application had been framed as an application to extend a further order of the deputy judge made on the same day as the July order (“the stay order”) granting a 7-day stay of execution of the July order rather than an application for temporary injunctions pending appeal has invited criticism from the defendants, this court proceeded to entertain the application on the latter basis, there being no prejudice to the defendants in so doing.  At the conclusion of the hearing the temporary injunctions sought were granted with written reasons to be given later which we now do.  The court also directed that the appeal be expedited and that the first available dates for the hearing of the appeal (with an estimated length of two days) be taken without consulting counsel’s diaries.

Background

3.  Telecommunications is highly regulated in Hong Kong, the industry participants being either Fixed Network Operators (“FNOs”) or Mobile Networks Operators ("MNOs”).  FNOs and MNOs operate under licences issued by the Telecommunications Authority (“TA”) and are subject to guidelines and regulations issued by it.

4.  The plaintiffs (being companies within the same group) are the largest of the FNOs and have a dominant market share of that business.  There is no more than a handful of other FNOs.  For convenience, the plaintiffs will be referred to collectively as “PCCW”.  The second defendant is one of the MNOs.

5.  Under the current regime, there are charges for fixed mobile interconnection, known as Fixed-Mobile Interconnection Charges (“FMIC”).  The present regulatory regime for FMIC is that the Mobile Party Network Pays (“MPNP”) meaning that the paying parties of the interconnecting charges are the mobile operators.  PCCW has the lion’s share of, and thus a substantial stake in, the annual revenues generated for FNOs of about $600 million per annum.  However, as a result of technological advances the distinctions between fixed and mobile networks and services are becoming increasingly blurred.  This phenomenon is known as the Fixed Mobile Convergence (“FMC”).

6.  It is common ground that FMIC/FMC issues which for convenience will hereafter be referred to as “FMIC Issues” are currently “the single most important issue between FNOs and MNOs in Hong Kong in the next 12 months or some time to come thereafter”.  One of the main reasons for this was the TA’s statement issued in April 2007 entitled “Deregulation for Fixed-Mobile Convergence” concerning the TA’s decisions on various regulatory changes concerning FMC.  As recorded by the deputy judge, in § 21 of his decision

“One of these decisions is that by April 2009, the existing FMIC regime (i.e., the MPMP (sic) policy) will expire, and the TA leaves it to the FNOs and MNOs to negotiate amongst themselves for the new terms and conditions concerning interconnection and interconnecting charges.   At the same time, the TA also decides to retain what is known as the Any-to-Any Connectivity (“A2A”) regime.  Under the A2A regime, there is an obligation on the FNOs and MNOs to interconnect with each other.”

7.  It will be seen at once that PCCW (as a FNO) and the second defendant (as a MNO) have diametrically opposed positions and interests in relation to the FMIC Issues and arising out of the 2007 statement.  That is a critical fact in the present application.  It should also be borne in mind that although the other FNOs and PCCW have similar interests vis-à-vis the MNOs and/or the TA, inter se, FNOs are also competitors with each other.

8.  The first defendant is a solicitor admitted to practice in New South Wales but not in Hong Kong.  He joined PCCW as General Manager, Regulatory Compliance, in March 2007 and remained in that position for about a year, until 20 March 2008.  In the course of that year, given his senior management position within PCCW and the timing of the 2007 statement, he had been intimately involved in various confidential and privileged internal and external discussions and conferences on legal, commercial and strategic issues in connection with the 2007 statement and legal proceedings instituted by PCCW as a result as well as the broader FMIC Issues that had arisen prior to the statement.

9.  Prior to joining PCCW, the first defendant had worked for the second defendant for about 18 months as Legal Advisor, Legal and Regulatory Affairs.  Several days after he left PCCW, the first defendant rejoined the second defendant as its Head of Regulatory and Corporate Affairs and in that role, he had to deal with matters concerning FMIC Issues.

10.  PCCW seeks to restrain the first defendant from being involved in or discussing the FMIC Issues and the second defendant from involving the first defendant in any of the FMIC Issues.  In simple terms, PCCW’s position is that given the diametrically opposed interests of PCCW and the second defendant on FMIC Issues, having formerly worked on those issues in a senior role at PCCW and therefore privy to PCCW’s confidential and privileged information which is highly relevant to his present role as Head of Regulatory and Corporate Affairs of the second defendant, it would be quite wrong for the first defendant to be involved in the same matter of behalf of the second defendant.

11.  The injunctions sought against the first defendant are in the following terms:

“1.    The First Defendant until the determination of the appeal from [the July order] or further order of the court

a. shall be restrained until the trial of the action herein or until further order from having any involvement, whether direct or indirect, in fixed-mobile interconnection issues related to or arising out of the Statement of the Telecommunication Authority dated 27 April 2007 entitled “Deregulation for Fixed-Mobile Convergence”, including but not limited to (a) negotiation of fixed-mobile interconnection terms and conditions, (b) actual or contemplated proceedings (including court proceedings and appeals to the Telecommunications (Competition Provisions) Appeal Board) relating to fixed-mobile interconnection, (c) the seeking of determinations, determination proceedings or directions from the Telecommunications Authority under the Telecommunications Ordinance (Cap 106) relating to fixed-mobile interconnection, (d) issues concerning fixed-mobile interconnection tariffs (including the Unified Interconnection and Local Access Service Tariff that was published by PCCW in the Hong Kong Special Administrative Region Gazette No. 32/2007 on 10 August 2007 and the revised terms of Interconnection of Public Mobile Radiotelephone Service, etc. tariff published in the Hong Kong Special Administrative Region Gazette No. 21/2008 on 23 May 2008)(“FMIC Issues”).

b. shall keep confidential and not disclose to, or use for the benefit of, the Second Defendant or any other person any of the following confidential information of the Plaintiffs:

i.  advice received by the Plaintiffs from Herbert Smith or counsel instructed by Herbert Smith in relation to FMIC Issues, including advice received in relation to High Court proceedings HCAL 6 of 2007 and Telecommunications (Competition Provisions) Appeal Board Appeals 24 and 25;

ii.  correspondence, discussions and other communications relating to the advice referred to in (a) above;

iii.  correspondence, discussions and other communications concerning the strategic issues arising in respect of FMIC Issues;

iv.  correspondence, discussions and other communications concerning potential regulatory action by or against the Telecommunications Authority related to FMIC Issues;

v.  confidential information relating to PCCW’s FMIC strategy which the first Defendant learned from any of Philana Poon, Lo Shuk Man (Winifred Lo), Stuart Chiron, Kevin Chu or Tang Wing Ho WH.

c. shall not discuss or permit to be discussed in his presence anything relating to the FMIC Issues.”

12.  PCCW seeks an injunction for a similar period against the second defendant restraining it

“(a) from involving the First Defendant, whether directly or indirectly, in any way in FMIC Issues and (b) from discussing or permitting discussion of FMIC Issues in the presence of the First Defendant and (c) from requiring, permitting, assisting or procuring the First Defendant to act contrary to paragraph 1 above.”

13.  It is common ground that for this court to grant injunctive relief pending appeal, it has to be satisfied that PCCW has a sufficiently good arguable appeal which has a real prospect of success and that the balance of convenience requires that the temporary relief be granted.

Good arguable case

14.  Mr Whitehead SC who appeared for PCCW submitted that the deputy judge erred in holding (1) that the principles and protections recognized by the House of Lords in Prince Jefri Bolkiah v KPMG [1992] 2 AC 222 as applicable to confidential and privileged information are restricted in their application to a solicitor-client or an analogous professional relationship; (2) that they do not apply to an employer-employee relationship even where confidential information is imparted in the course of that employment; and (3) that Bolkiah is not a case recognizing (and thus creating) a further category of confidential information other than those defined under Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117 which demands a higher and stricter level of protection.

15.  It would not be appropriate to rehearse the arguments and counter arguments as to the scope of Bolkiah or to say anything more as to the merits given the impending appeal save to say that in the circumstances of the present case where the first defendant as a senior professional in-house advice had a role in managing his employer’s legal and litigation issues thereby becoming privy, in confidence, to the relevant privileged information, I am satisfied that PCCW has a good arguable case on appeal.

16.  Apart from submitting that Bolkiah only applies to a solicitor-client or analogous relationship, Mr Burns SC who appeared for the first defendant submitted that what PCCW was seeking to do was to extend indirectly the restrictive covenant of three months’ duration that was part of the first defendant’s employment contract and that that was impermissible.  But, if Mr Whitehead were to succeed on the scope of Bolkiah, this point would necessarily fall away.

17.  Mr McLeish who appeared for the second defendant adopted Mr Burns’ submissions and, in addition, submitted that no good arguable case has been shown in relation to the deputy judge’s conclusion that as regards his client’s conduct after the pre-action letter of 5 June 2008 which put the second defendant on notice of the allegation of confidential information relating to FMIC Issues, there was no sufficient evidence to support an arguable case of direct inducement or procurement of breach by the second defendant.  It was said that no adverse inference should or could be drawn from the second defendant’s failure to reply to the pre-action letter between its receipt on 5 June and 13 June when the ex parte order was obtained because the second defendant did not accept that the Bolkiah principles had any application to the first defendant.  That of course remains the second defendant’s stance in this court.

18.  It is accepted that the second defendant had involved the first defendant in FMIC Issues after the pre-action letter.  I agree with Mr Whitehead that if PCCW has an arguable case that it was unlawful for the first defendant to be involved in FMIC Issues, it follows that there is an arguable case that it was unlawful for the second defendant, after being put on notice, to involve the first defendant in the matter.

Balance of convenience

19.  The deputy judge considered the question whether damages would be a sufficient remedy for the first defendant and concluded that he was not satisfied that if the injunction were to be granted against the first defendant, it was likely that he would be sacked or that there were no other substantial duties for him to perform.  Further, there was nothing before the deputy judge to suggest that damages would not be an adequate remedy for the first defendant.

20.  It was not argued in this court that damages would be an adequate remedy for PCCW if injunctive relief pending appeal were refused.  In the circumstances, it is quite clear where the balance of convenience lies.  Nevertheless, in order to minimise any prejudice that may arise, the matter should be resolved as soon as possible and it is for that reason that directions were given for an expedited appeal.

Scope of the injunctions

21.  Both Mr Burns and Mr McLeish criticised the seemingly wide scope of the injunctions sought.  It was said that the definition of FMIC Issues in paragraphs 1 a. and 2 of the draft order was far too wide, not being limited to matters that involved PCCW.  But if PCCW is entitled to protection in respect of confidential and privileged information under Bolkiah principles, that protection is to close all risk of disclosure to anyone.  As noted above, while MNOs have interests that are diametrically opposed to those of PCCW, in some respects, PCCW is also in competition with other FNOs.

22.  Then it was said that the modified paragraph 1 b. included ‘spent’ information, meaning information relating to litigation that had already concluded such as HCAL 6 of 2007 which the deputy judge had specifically excluded from the relief that he granted.  Mr Whitehead referred to the third affidavit of Mr Crosswell, PCCW’s handling solicitor which addressed this issue.  I am satisfied that the various proceedings engendered by the 2007 statement contain overlapping fundamental issues.  In those circumstances, any attempt to isolate specific issues is likely to be counter-productive.

23.  Finally, it should be mentioned that objection had been taken to the lack of particularity of what was said to constitute confidential information.  Here I would refer to the observations of Nettle J in Sent v John Fairfax Publication Pty Ltd [2002] VSC 429 (at §§ 69-70):

“ 69. … notably that less precision of description may be required where more would annihilate the confidence sought to be protected; that the nature of legal work itself sometimes is sufficient to establish the nature of the confidential information sought to be protected; and that there is confidentiality in the revelations which a client may subconsciously convey to counsel in conference.

  70. In my view, in the circumstances of this case it is likely that any more precision of description than has been employed in Mr Warren’s affidavit would tend to disclose the information which it is sought to keep confidential… I think there is likely to have been disclosure of “getting to know you factors” which on any analysis are highly confidential.”

Hon Hartmann J:

24.  I agree and have nothing further to add.