UNIGLOBE TELECOM (FAR EAST) LTD. v. HKSAR

FACC No. 5 of 1998

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 5 OF 1998 (CRIMINAL)

(ON APPEAL FROM CACC No. 104 OF 1998)

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J U D G M E N T

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Chief Justice Li:

1. I agree with the judgment of Mr Justice Litton PJ.

Mr Justice Litton PJ:

Introduction

2. On 21 November 1997 the appellant Uniglobe Telecom (Far East) Ltd was convicted in the District Court (Davies DJ) of two offences under s. 8(1) of the Telecommunication Ordinance, Cap. 106. The charges were:

" 1st Charge
Statement of Offence

            Maintaining a means of telecommunication without a licence, contrary to s.8(1)(a) of the Telecommunication Ordinance, Cap. 106.

Particulars of Offence

            Uniglobe Telecom (Far East) Limited, between 26th November and the 6th day of December 1996 inclusive, in Hong Kong, maintained a means of telecommunications, namely an external public telephone service between Hong Kong and China, without a licence.

2nd Charge
Statement of Offence

            Using radio communication apparatus without a licence, contrary to s.8(1)(b) of the Telecommunication Ordinance, Cap. 106.

Particulars of Offence

            Uniglobe Telecom (Far East) Limited, on or about the 6th day of December 1996, used radio communication apparatus installed in Flat 1215, Landmark North, Sheung Shui, to transmit telephone calls originating from Hong Kong to recipients in China without a licence."

3. On 17 July 1998 the Court of Appeal (Power V-P, Mayo and Stuart-Moore JJA) dismissed the appellant's application for leave to appeal against conviction. The Appeal Committee having granted leave on 10 November 1998 the appellant now appeals against conviction to this Court.

Background facts

4. The appellant provided for its subscribers what is called an international calling card service under licence granted by the Telecommunication Authority under the Telecommunication Ordinance, Cap. 106. The service enabled subscribers' telephone calls in Hong Kong to be routed to parties overseas. The licence, called a public non-exclusive telecommunications service licence ("PNET licence") permitted, and in effect limited, the appellant to providing a service as described in the First Schedule to the licence. This service comprised three elements:

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

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

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

5. All overseas calls must exit through that gateway as HKTI had exclusive rights in respect of overseas calls. The service provided by the appellant is also described in the First Schedule to the licence as a telephone call routing service. In practice, what happened was this: A subscriber wishing to gain access to the appellant's service dialled 30023777 and an automatic computerized answering device located at the appellant's premises in Causeway Bay asked the subscriber for his personal identification number (PIN). Once the PIN number was validated by the computer, the pre-recorded voice asked the subscriber to dial the overseas number which was then recorded in the appellant's computer. The computer automatically routed the call directly to one of three FTNS carriers (Hong Kong Telecom Co. Ltd, New World Telephone Ltd and New T&T HK Ltd) with whom the appellant had accounts and the call would then be carried by the FTNS carrier to the gateway operated by HKTI under its exclusive licence. Through the gateway the call would then be transmitted overseas.

6. A piece of detail, referred to at trial but irrelevant for the purposes of the analysis on this appeal, is the "call back service". This enabled an outgoing overseas call to be converted automatically into an incoming call, as if generated by the overseas party. Not all overseas destinations had such a facility. Where such facilities existed and if the overseas rates were cheaper than the local rates, the cheaper rates would be charged to the calling card service provider who would therefore be able to charge its own subscribers a rate lower than that charged, say, by Hong Kong Telecom Co. Ltd on its International Direct Dialling ("IDD") service.

Facts giving rise to the charges

7. In June 1996 the appellant entered into a contract with a company called Bestlong International Ltd ("Bestlong"). The services to be rendered by Bestlong are stated in clause 1.1 of the contract to be:

"A global long distance call service which allows users to place long distance calls on a global basis via Bestlong long distance network and system."

8. Bestlong had no telecommunication licence. Between 26 November and 6 December 1996 test calls were made to Mainland China by Telecommunication Authority officials, using the appellant's service. It was discovered that 2.8% of such calls were made without going through HKTI's gateway, in breach of HKTI's exclusive rights. The calls were transmitted to Mainland China by means of an unauthorized microwave radio transceiver located at Bestlong's premises at Sheung Shui. The radio waves were beamed from those premises to a high-rise building in Shenzhen and then onward transmitted to other parts of Mainland China.

9. This gave rise to the two charges against the appellant, the subject of the present appeal. Bestlong's managing director was also charged with offences under s.8(1)(a) ["maintaining a means of telecommunication" without a licence] and s.8(1)(b) ["possession of radio communication apparatus" without a licence] to which he pleaded guilty.

The trial

10. At trial the prosecution's primary case was that the appellant had colluded with Bestlong to maintain a means of telecommunication without a licence, namely an external public telecommunication service which bypassed HKTI's gateway, and likewise had colluded with Bestlong to use the communication apparatus at Sheung Shui without a licence. This primary case failed. The trial judge, in his Reasons for Verdict, said:

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

11. The judge then turned to the prosecution's alternative case which was that the two offences as charged were ones of strict liability; the appellant was upon the primary facts guilty as charged without proof of guilty knowledge in accordance with the principles set out in Gammon (HK) Ltd v. Attorney-General of Hong Kong [1985] AC 1. The judge found for the prosecution on its alternative case, and also found that the defence had failed to prove on a balance of probabilities that the appellant company, through its directing minds, had a reasonably held belief that Bestlong had a licence to maintain the means of telecommunication and to use the apparatus at Sheung Shui. The appellant accordingly stood convicted. As mentioned earlier, the Court of Appeal dismissed the application for leave to appeal.

The issues

12. There are, in essence, two main issues:

(i) Do the facts as found and as proved against the appellant at trial amount to the offence of maintaining a means of telecommunication without a licence as averred in charge 1, and using a radio communication apparatus without a licence as averred in charge 2?

(ii) If the answer in each case is No, that is the end of the matter. The appeal must be allowed. If, in respect of either charge, the answer is Yes, we must then turn to the issue of strict liability.

"Maintaining a means of telecommunication"

13. The expression "maintaining a means of telecommunication" is not defined in the Ordinance. This is not surprising, having regard to the wide range of activities which comes within that expression, as evidenced by the scheme for the grant of licences set out in the Telecommunication Regulations. As things stand today there are 33 items in Schedule 1 to those Regulations for which licences to establish and maintain means of telecommunication may be granted, of which a PNET licence is one. This list has grown over the years, from the 21 items seen in the original 1963 Regulations.

14. The power of the Telecommunication Authority to grant licences is derived from s.7 of the Ordinance. Subsection (1), as relevant, reads :

" (1) ... the Authority may, in accordance with this Ordinance grant to such persons as they think fit licences to establish and maintain any means of telecommunication and to possess and use apparatus for radiocommunication or any apparatus of any kind that generates and emits radio waves."

15. This provision has been in the Ordinance from the beginning. In 1993, subsection (2) was added. It reads:

" (2) Where a licence has been granted under this section, ... and is for the time being in force, to any person to establish and maintain any means of telecommunication the Authority may in addition during the period of validity of the licence authorize that person to establish and maintain such ancillary or associated telecommunication services as the Authority thinks fit and the licence shall thereupon be deemed to have been also granted in respect of those services." [Emphasis added]

16. We then come to s.8 which, as relevant, reads:

"(1) Save under and in accordance ... with the appropriate licence granted by the Authority, no person shall in Hong Kong ... -

(a) establish or maintain any means of telecommunication; or

(b) possess or use any apparatus for radiocommunication or any apparatus of any kind that generates and emits radio waves notwithstanding that the apparatus is not intended for radiocommunication; or

(c) ...;"

The appellant's case

17. When s.7 was amended in 1993, adding the provisions of subsection (2) which empower the Authority to authorize licensees to establish and maintain ancillary or associated telecommunication services, the provisions of s.8 were not amended. There is no offence of maintaining a telecommunication service without a licence. This leads counsel for the appellant to argue thus : When one looks at the PNET licence granted to the appellant, one can see that the "means of telecommunication" maintained by the appellant were limited to the segment whereby the appellant, by the use of its computer located at its premises in Causeway Bay, validated the subscribers' incoming calls and then recorded the overseas telephone numbers. Thereafter, in re-routing those calls to the interconnecting carriers, the appellant was providing a service, an access service; the appellant was simply using the facilities of those carriers, by contractual arrangement, to carry their subscribers' calls. The means of telecommunication, as counsel submits, by which the calls were transmitted overseas were maintained by the FTNS carriers, not by the appellant; hence, if those FTNS carriers should act in contravention of the conditions of their licences it would be those carriers, not the appellant, who contravened s.8(1)(a). Likewise, when Bestlong maintained their unauthorized radio transceiver at Sheung Shui to transmit calls overseas, including calls originating from the appellant's system at Causeway Bay, Bestlong was guilty of the offence, not the appellant. Counsel reinforces the argument by reference to s.23 which provides:

"23. Transmitting or receiving messages, etc., by unlicensed means of telecommunication

            Any person who, knowing or having reason to believe that a means of telecommunication is being maintained in contravention of this Ordinance, transmits or receives any message by such means of telecommunication or performs any service incidental to the transmission or reception of any such message or delivers any message for transmission by such means of telecommunication or takes delivery of any message sent thereby shall be guilty of an offence and shall be liable on summary conviction to a fine of $50,000."

18. Thus, the Ordinance does provide criminal sanctions for the circumstance where a person uses the unauthorized means of telecommunication maintained by others to transmit calls. But, on the judge's findings, the appellant would not have been found guilty of contravening s.23, assuming it had been charged under that section, since the appellant did not know of Bestlong's unlawful activities.

The form of licence

19. To test counsel's submission, it is necessary to look more closely at the form of the PNET licence granted to the appellant: bearing in mind that the scope of the offence under s.8(1)(a) is very wide: all means of telecommunication are forbidden to be maintained, save under and in accordance with a licence granted under the Ordinance.

20. As mentioned earlier the service which the appellant was licensed to provide is called an international calling card service. The licence begins by saying that the appellant is licensed to "provide a public service ... more particularly described in the First Schedule ...". The licence also states that the appellant is licensed to possess, establish, use and maintain such radiocommunication apparatus as described in the Second Schedule, but this is left blank. Turning to the First Schedule, this is what it says:

" FIRST SCHEDULE
Description of Service

The service to be provided is an automatic personal identification number (PIN) validation and telephone call routing service which enables its customers to make outgoing international telephone calls by accessing the computerised PIN validation and telephone system ("the System") operated by the licensee. Access to the System and connection to the gateway of the international public switched telephone service are made by way of the local public switched telephone networks operated under a Fixed Telecommunication Network Services Licence granted under the Telecommunication Ordinance (Cap. 106). All connections for traffic to and from the destinations outside Hong Kong are made through the international public switched telephone service provided jointly by Hong Kong Telecom International and overseas carriers."

The respondent's case

21. Counsel for the respondent says this: The service described in the First Schedule is one entire service; it cannot be cut into segments; it constituted a means of telecommunication which the appellant was licensed to maintain to enable its subscribers to make overseas calls; the means of telecommunication included connections made through the gateway: that is, "the international public switched telephone service provided jointly by Hong Kong Telecom International and overseas carriers" as stated in the First Schedule; where connections were made by-passing the gateway, the means of telecommunication were not as described in the license; hence the means of telecommunication maintained by the appellant were not in accordance with the licence.

22. Counsel for the respondent concedes that the terms of the licence could have been better worded: Where, for instance, clause 1 of the General Conditions says "the licensee shall at all times ... operate, maintain and provide the service in a manner satisfactory to the Telecommunication Authority", what it means, in terms of the Ordinance, is that the licensee shall operate maintain and provide the means of telecommunication in a manner satisfactory to the Authority. This, counsel says, is the inevitable result, once the scheme for licensing under the Ordinance is properly understood.

Power to grant licences

23. As mentioned earlier, the power to grant licences is found in s.7. Subsection (1) is all embracing: the Authority is empowered to grant to such persons as they think fit licences to establish and maintain any means of telecommunication. Telecommunication is widely defined in s.2 to mean:

"any transmission, emission or reception of signs, signals, writing, images, sounds or intelligence of any nature by visual means or by wire or radio waves or any other electromagnetic system."

Is the appellant's argument sound?

24. Plainly, as a matter of commonsense, it is only when a person has established and maintained a means of telecommunication that he can offer to subscribers a service such as the international calling card service, enabling calls to be made overseas. The expression "means of telecommunication" is plainly wider than simply the "hardware" used by the service provider to facilitate the transmission of calls, as counsel for the appellant, in the course of argument, was constrained to concede. Further, the means of telecommunication need not necessarily involve the service provider himself possessing and using radiocommunication equipment. He can enter into contractual arrangements with others. So long as, by those arrangements, his subscribers' calls can be properly relayed, the means of telecommunication are complete.

25. It is, in my judgment, artificial to view the service provided by the appellant in segments, categorizing the "first segment" as the means of telecommunication maintained by the appellant, and what followed as simply service or "access service". Plainly, the expression maintaining a means of telecommunication as applied to the facts of this case involves more than the appellant maintaining the computer facilities at Causeway Bay. It had contractual arrangements with three of the FTNS carriers to carry its subscribers' calls forward to the gateway. Through them, under the licence, access to the gateway was gained. These interconnections and the facilities maintained by those carriers were the means by which, in terms of s.2 of the Ordinance (the definition section) the signals were transmitted. They were means of telecommunication and so long as these interconnections were kept up by the appellant, they were "maintained" by it.

26. Further, the argument that the licensed service provided by the appellant could be viewed in segments is unsound for this reason: The Authority could not have granted a licence in segments, authorizing the appellant to maintain an "access service". Section 7(2) refers to ancillary or associated telecommunication services. On the appellant's argument the "access service" was anything but ancillary. Standing by itself the computer equipment maintained by the appellant at its offices in Causeway Bay was useless: It could not, by itself, have constituted means of telecommunication of any kind: Hence the interconnections with the FTNS carriers could not be regarded as ancillary or associated services.

Arrangement with Bestlong

27. The appellant's case at trial was that the contractual arrangement with Bestlong was simply to provide a "back-up" facility. The appellant itself was a small operator and it was commercially advantageous to link up with Bestlong which, the appellant's managing director thought, was the subsidiary of a large and well-known PNET licence holder. Assuming this to be true - the trial judge made no findings adverse to the appellant in this regard - what it means is this: The interconnection with Bestlong was another means whereby the appellant's subscribers' calls were to be transmitted to the gateway. It was plainly a means of telecommunication maintained by the appellant, albeit a "back-up" means. And if those means involved the transmission of calls overseas otherwise than through the gateway, then the appellant was maintaining a means of telecommunication otherwise than in accordance with the licence: Or, in terms of charge 1, without a licence.

28. In the Court of Appeal, Power V-P, with whom Stuart-Moore JA agreed, came to the same conclusion. He said (p.14 of his judgment):

"A service can ... only be provided by utilizing means of transmission, i.e., by engaging and paying for the services of a person or company who has such means.

What we must ask is whether a provider, by such engagement and payment, maintains those means ....

I have no doubt that the applicant was, when it engaged and used Bestlong, maintaining a means of telecommunication."

29. I agree with this conclusion. Subject to the strict liability point, the appellant would be guilty as charged on charge 1.

Using radio communication apparatus without licence

30. In the lower courts it was regarded as axiomatic that if the appellant was guilty on charge 1 it followed the appellant was likewise guilty on charge 2. In the Court of Appeal, Power V-P, with whom Stuart-Moore JA agreed, said (p.15 of his judgment):

"The applicant used Bestlong. Whatever the state of the applicant's knowledge of Bestlong's apparatus, as it was knowingly using Bestlong it was liable if Bestlong used apparatus without licence".

31. Apart from this, there was no analysis in the lower courts of the ingredient of use by the appellant of the apparatus without a licence, as averred in charge 2.

32. It is to be observed that whilst charge 1 alleged a span of time during which the appellant maintained the means of telecommunication without a licence, the averment of use in charge 2 is of a specific date: 6 December 1996. What it boils down to is this: Does the fact that the appellant had a contractual arrangement with Bestlong for Bestlong to transmit the appellant's subscribers' calls from time to time necessarily mean that every time a connection was made and a call was transmitted by the use of Bestlong's equipment, the appellant itself was using such equipment? As a matter of the ordinary use of language, the proposition seems startling.

33. The appellant maintained means of telecommunication by having contractual arrangements with the FTNS carriers and interconnections with their network. In loose terms it can be said that the appellant was using those carriers for telecommunication. It would, in my judgment, be straining the meaning of words to breaking point by going one step further and to say that when calls were transmitted by those carriers, the appellant was using their equipment. The appellant was no more using their equipment than the appellant's own subscribers, in putting their calls through to the appellant, were using the appellant's equipment.

34. In my judgment, the conviction on charge 2 failed at the threshold. On the judge's findings of fact the appellant did not use the apparatus located in Bestlong's premises as averred in charge 2. The conviction on charge 2 must be quashed.

Strict liability

35. It remains for me to re-visit charge 1, on the issue of strict liability. There, the trial judge and the Court of Appeal were of one mind that the offence under s.8(1)(a) was one of strict liability. For good reason. The wave band spectrum available for the transmission of radio waves is a limited resource and it is crucial that its use be strictly controlled. It matters not that telecommunication as defined in the Ordinance goes beyond radio waves and includes wire and other electromagnetic systems. As the trial judge said, "the legislation is intended to protect the integrity of the region's telecommunications system in the community's interest". The subject-matter of the legislation is the regulation of an activity involving potential danger to public safety. The appellant had a choice as to whether to participate or not. There is nothing inherently unjust in placing on someone like the appellant who chose to participate in such activity a duty to take measures to prevent the prohibited act. Those measures would not normally be extravagant ones. A careful operator would make inquiries before establishing the means of telecommunication to ensure compliance with the law. These would normally reveal whether the means as contemplated would contravene s.8. I share the view taken by the judges in the lower courts that the offence created by s.8(1)(a) is one of strict liability in that: (i) the prosecution does not have to prove guilty knowledge; but that (ii) it is a defence for the accused to prove, on a balance of probabilities, that he honestly held, upon reasonable grounds, a belief in the existence of facts which, if true, would make his conduct innocent.

36. The trial judge went on to consider whether, on the evidence, the appellant's defence was established. In this regard, he said:

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

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

37. No challenge has been made to these findings. Accordingly, the appeal against conviction on charge 1 must fail.

Conclusion

38. For the reasons stated above, I would quash the conviction on charge 2 and dismiss the appeal on charge 1. As to costs, I would make an order nisi that each party should pay its own costs of the appeal, the order to become absolute after 14 days from the date of this judgment being handed down, unless either party gives notice within that time that it seeks some other order. In this event the party giving notice must, within 14 days of such notice, lodge written submissions on the issue of costs. The other party may, within 14 days of receiving such submissions, lodge its reply.

Mr Justice Ching PJ:

39. I agree with the judgment of Mr Justice Litton PJ.

Mr Justice Bokhary PJ:

40. I concur in Mr Justice Litton PJ's judgment.

Lord Nicholls of Birkenhead NPJ:

41. I agree with the judgment of Mr Justice Litton PJ.

Chief Justice Li:

42. The Court, being unanimous, quashes the conviction on charge 2 and dismisses the appeal on charge 1 and makes the order nisi on costs set out in the conclusion to the judgment of Mr Justice Litton PJ.

Representation: