Commercial Action1999

CABLE & WIRELESS HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

Related cases with same parties

CACV150/2000PCCW-HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.
CACV243/2000PCCW-HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

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22424-EN-2001-07-09

PCCW-HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

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HCCL000229D/1999

HCCL229/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.229 OF 1999

(formerly High Court Action No.2076 of 1999)

------------------------

BETWEEN
	PCCW-HKT INTERNATIONAL LIMITED	Plaintiff
	(formerly known as Cable & Wireless HKT International Limited and Hong Kong Telecom International Limited)

	AND

	NEW WORLD TELEPHONE LIMITED	Defendant

	AND

	TELEGLOBE TELECOMMUNICATIONS CORPORATION TELEGLOBE CANADA INC.	Applicants

--------------------------

Coram: Hon Stone J in Chambers

Date of Hearing: 9 July 2001

Date of Judgment: 9 July 2001

____________________

J U D G M E N T

____________________

The present application

1. By summons dated 23 April 2001 taken out by the applicants herein, an order is requested that the defendant be excused from giving inspection of documents numbered 269, 290, 291, 293, 297, 301, 302, 306, 307 and 409 in Part 1 of Schedule 1 of their list of documents filed on 21 August 2000, unless within 14 days the plaintiff, by its solicitors, Messrs Herbert Smith, do expressly undertake that the said documents will not be shown nor their contents revealed to anyone other than counsel for the plaintiff, and that the plaintiff will not use the said documents for any purpose collateral to or ulterior to the conduct of this action.

The context of the application

2. This application is made in the context of an action which already has attracted a certain amount of judicial attention, in particular a judgment of this court, dated 5 April 2000, dismissing the defendant's Order 14A application, a decision which was unsuccessfully appealed. As that judgment records, in this case the plaintiff has brought this action against the defendant, New World Telephone Limited ("NWT"), in a bid to recover the sum of HK$280 million it alleges it paid to NWT in delivery fees under a mistake of fact, namely, that the calls in respect of which such fees were paid actually terminated on the defendant's network. These telephone calls have variously been described as 'delivery call diversion' calls or, as the plaintiff also put it in argument, 'hijacked' calls. In addition to the monies allegedly wrongly so paid, the plaintiff further seeks a declaration that it has been entitled, for the like reason, to withhold payment of a further sum of HK$94 million otherwise allegedly due to the defendant.

3. For its part, the defendant, by Amended Defence and Counterclaim, asserts that by virtue of the Interconnection Agreement entered into between itself and the plaintiff as from 1 July 1995, together with the operation of section 36A of the Telecommunications Ordinance, Cap.106, and the 1995 Determination of the Telecommunication Authority, such delivery fees were rightfully paid for the interconnection of its network with that of the plaintiff, and that such fees were a function of interconnection per se as opposed to actual delivery of the call to the called party, that is, termination of the incoming calls. Accordingly, NWT counterclaims for the sum of HK$94 million wrongfully so withheld, and for certain declaratory relief.

4. So much, therefore, for the broad picture. What now has occurred is that in the actual discovery process in this action, 10 particular documents were discovered in Part 1, Schedule 1 of the defendant's list - the very documents in issue in this application - and the applicants herein object to any more than that which might be termed "controlled inspection" of these documents.

5. The matter developed thus. By a letter dated 29 November 2000, solicitors for Teleglobe, Messrs Sinclair Roche & Temperley, wrote to solicitors for New World, Messrs Deacons, saying, inter alia :

"Our client is prepared to consent to an order that disclosure of the relevant documents be given to the Plaintiff. This consent will be given on the condition that Herbert Smith, as the Plaintiff's solicitors, undertake to the Court not to disclose after discovery the contents of the relevant documents to their client."

In response, solicitors for the plaintiff, Messrs Herbert Smith, responded by a letter dated 8 December 2000, stating :

"We have some difficulties with this proposal. Given the technical information that we anticipate the documents will contain, we would almost certainly refer documents to our client for their comment and analysis. We would also anticipate practical difficulties in complying with the requested undertaking if we were unable to disclose any Teleglobe documents, which could be directly relied upon at the trial of this matter, to our client."

In turn, by a letter dated 20 December 2000, Messrs Sinclair Roche & Temperley responded :

"We note the difficulties which Herbert Smith purport to have with our clients proposal for inspection. However, we cannot see how Herbert Smith are in a position to anticipate these difficulties without having themselves first inspected the documents."

6. The matter first came before this court on 24 April this year, when this court agreed to entertain Teleglobe's submissions on the issue of controlled disclosure. I pause to note that for the purpose of this application formal joinder of Teleglobe to this action was not required.

7. By a letter dated 6 June 2001, Messrs Herbert Smith requested inspection of the documents upon their personal undertaking not to disclose their contents to their clients or anyone else, and on the basis that if, upon seeing the documents, they considered that it was not necessary for them to disclose the documents to their clients, they would not proceed with their application for inspection. On the other hand, if upon inspection Messrs Herbert Smith did consider that it was necessary to proceed with the application, accordingly they would resist Teleglobe's application for such controlled disclosure. The documents duly were disclosed to Messrs Herbert Smith and, having so inspected the documents on 22 June 2001, the plaintiff has decided to resist an order for controlled disclosure, Messrs Herbert Smith having taken the view that full disclosure was necessary in all the circumstances.

8. This, then, constitutes the background and broad parameters of the present hearing. It should be added that the defendant, NWT, takes "a neutral position" in relation to this entire issue, although a representative of that party has been present in court today.

The basis of the application

9. Teleglobe opposes the full disclosure of the 10 documents to the plaintiff on the asserted basis that such documents contain "highly sensitive pricing information" and "trade secrets", and therefore that such documents should not be revealed to a competitor such as the plaintiff. These assertions are contained in two affidavits in support of this application, each sworn by Mr Anthony Hill, the applicants' solicitor, upon information and belief, and respectively dated 23 April 2001 and 19 May 2001. There is no affidavit evidence from any officer of the applicants. The relevant battleground, therefore, is confidentiality.

Applicable principles

10. There is, I think, no dispute between counsel as to the relevant principles to be applied by the court in circumstances such as these. Mrs Newell, for the applicants, does not dispute that confidentiality alone does not give rise to a claim for privilege, and in itself constitutes no ground for protection. She accepts that the jurisdiction of the court to order production is discretionary, although the court naturally will weigh in the balance the claim for confidentiality, the circumstances in which such claim is made, and whether the order is necessary either for disposing fairly of the cause or matter or for saving costs. Mrs Newell helpfully referred me to a number of authorities in this area, of which the observations of Lord Wilberforce in the well-known decision of Science Research Council v. Nassé [1979] 3 All ER 673, at 679 are particularly helpful :

"...
(2) There is no principle in English law by which documents are protected from discovery by reason of confidentiality alone. But there is no reason why, in the exercise if its discretion to order discovery, the tribunal should not have regard to the fact that documents are confidential, and that to order disclosure would involve a breach of confidence. In the employment field, the tribunal may have regard to the sensitivity of particular types of confidential information, to the extent to which the interests of third parties (including other employees on which confidential reports have been made, as well as persons reporting) may be affected by disclosure, to the interest which both employees and employers may have in preserving the confidentiality of personal reports, and to any wider interest which may be seen to exist in preserving the confidentiality of systems of personal assessments.
(3) As a corollary to the above, it should be added that relevance alone, though a necessary ingredient, does not provide an automatically sufficient test for ordering discovery. The tribunal always has a discretion. That relevance alone is enough was, in my belief, the position ultimately taken by counsel for Mrs Nassé thus entitling the complainant to discovery subject only to protective measures (sealing up etc). This I am unable to accept.

(4) The ultimate test in discrimination (as in other) proceedings is whether discovery is necessary for disposing fairly of the proceedings. If it is, then discovery must be ordered notwithstanding confidentiality. But where the court is impressed with the need to preserve confidentiality in a particular case, it will consider carefully whether the necessary information has been or can be obtained by other means, not involving a breach of confidence.
(5) In order to reach a conclusion whether discovery is necessary notwithstanding confidentiality the tribunal should inspect the documents. It will naturally consider whether justice can be done by special measures such as 'covering up', substituting anonymous references for specific names, or, in rare cases, hearing in camera.

..."

The foregoing observations of Lord Wilberforce were, of course, made in the specific circumstances arising in that case, but in terms of general principle and broad approach his words, it seems to me, are equally applicable to the present debate.

The argument

11. In her persuasive argument Mrs Newell pressed upon the court the concerns of her clients, as set out in the affidavit evidence, to which, she noted, there had been no response. In particular, she relied upon the information contained in paragraph 9 of Mr Hill's 1st Affidavit, where it is said that he has been informed that pricing information in international telecommunications arrangements is typically the main issue, even where this information is apparently stale, as the possession of such information by competitors (of which PCCW-HKT International Limited is considered by Teleglobe to be) allows the competitor to compare historical costing and to ascertain whether Teleglobe had a price advantage. The documents in question further revealed, asserts Mr Hill, that such information as the manner in which Teleglobe negotiate agreements, the form of Teleglobe's agreements, the type of service that could be customized for Hong Kong, the manner in which Teleglobe could configure solutions through engineering/network capabilities, the type of network capacity (i.e. transoceanic cable or satellite) that Teleglobe was using to provide the service, further provide insight into Teleglobe's regulatory due diligence approvals process and insight into where and how it provided this service. All such matters are alleged to constitute "trade secrets" belonging to Teleglobe.

12. In addition, in paragraphs 5 to 7 of his 2nd Affidavit, Mr Hill asserts that he is informed and believes that the schematics and project descriptions of services provided by Teleglobe, as set out in the documents in question, provide details in regard to the configuration and location of Teleglobe's network assets, including the type of equipment Teleglobe utilizes to route international telephone calls. His further information and belief is that these documents also revealed the routing pathway Teleglobe's network uses to transmit international telephone calls and that, in addition, the documents contained Teleglobe's internal processing/order/review forms as developed by Teleglobe. The documents also are said to contain information as to the vendor relationships employed by Teleglobe to provide services. Mr Hill further opines that a competitor of Teleglobe's in receipt of this information could gain an understanding of Teleglobe's network process flow, and that set out in the documents is a detailed description of Teleglobe's network, its functionality, its engineering, the methods by which Teleglobe tests the services provided, and the results of such testing. There is a further amount of detail, but these points, I think, are the gist underlying the application.

13. For his part, Mr Eugene Fung, who appeared on behalf of the plaintiff in opposing this application for "controlled inspection", in summary argued that the twin discovery and inspection requirements of relevance and necessity are amply satisfied in the circumstances of this case, that there was insufficient evidence of "trade secrets", that there was a fundamentally displaced concern over the issue of disclosure to competitors, and that, if, which specifically was denied, these documents contained "trade secrets" properly so-called, it was difficult to see how such information could be regarded as remaining so, given that in its October 1998 Determination the Hong Kong Telecommunications Authority had ruled expressly that delivery fee diversion calls/number translation was not permitted, and that, accordingly, the proprietary aspect of Teleglobe's alleged "trade secrets" could no longer exist, not least because the documents in question related to a practice discontinued over two and a half years ago. In so summarizing the argument I do not wish to minimise its import, but these points at least represented the bare bones.

Decision

14. In my judgment, this application fails, and fails signally. I agree with Mr Fung's arguments. Upon the fundamental issue of relevance and necessity for the fair determination of matters in issue in this case, in my view Mr Fung is absolutely correct when he says that a critical component of delivery fee diversion calls (as defined by the plaintiff in the Amended Statement of Claim) is the involvement of an overseas telecommunications operator who is responsible for 'diverting' calls travelling to Hong Kong to the defendant's network. And that, absent such an overseas operator, delivery fee diversion calls cannot occur. Therefore, he says, any document concerning agreements with, and the involvement of, such overseas operators is plainly relevant and is necessary for the fair determination of the matters in issue in this action. In the event, Mr Fung notes, the issues of relevance and necessity of the 10 documents themselves never have been disputed by the defendant or Teleglobe (and, I would note, somewhat oddly Mrs Newell has told me that she has not even had a sight of the pleadings in this case, which makes it extremely difficult for her to argue this matter in what is, in effect, a factual vacuum).

15. Having dealt with the issue of relevance and necessity, the court is thrown back, therefore, squarely upon the confidentiality issue. I agree with Mr Fung that although the burden may be on him to establish necessity, the burden is certainly on Teleglobe to establish that the 10 documents contained "trade secrets". Although in the affidavits supporting the application Teleglobe asserts that there are "trade secrets" in the 10 documents, it is, I think, fair comment for Mr Fung to respond, as he did, that all that these documents revealed is the nature of the information alleged, and that it is unclear why such information is said to constitute "trade secrets"; there was, for example, no evidence showing that any information from the 10 documents is exclusively owned by Teleglobe, or how and to what extent Teleglobe would be prejudiced (if at all) if such information is disclosed. In this connection I would observe that, having perused these 10 documents myself (they were called for in the manner anticipated by Lord Wilberforce in Nassé, op.cit.), I am wholly unable to discern the "trade secrets" referred to. Moreover, no attempt has been made to do anything but to exclude all 10 documents in their entirety, and no elision or excision of any form has been suggested. In fact, looking at these documents as a whole, I would further comment that, at this stage, their confidential purport and current sensitivity is not immediately apparent.

16. Mr Fung also makes the further point, and it is very much a forensic point, that some of the diagrams and material in the documents now sought to be excluded actually have appeared elsewhere in the unrestricted discovery. For my part, I recall poring over certain of these documents, or very similar documents, in the Order 14A application. So that I am quite unable, on the face of the present evidence, to be satisfied of the existence of "trade secrets" as asserted by the applicants. I think it is probably fairer or more accurate to say that, for whatever reasons, the applicants indeed feel a certain sensitivity towards the material in those documents. But, as I say, I am disinclined to attribute to them the label "trade secrets".

17. Mr Fung also argued that, whilst the reason put forward by Teleglobe for limiting disclosure is the apparent concern that the information contained in the 10 documents would be revealed to competitors of Teleglobe, including the plaintiff, nevertheless such a concern was misplaced for two reasons. First, it was clear, he said, that the plaintiff is not a competitor of Teleglobe in the sense of being engaged in the process of diverting telephone calls with an overseas telecommunications operator. This is perhaps an obvious proposition, and I remind myself that these practices ceased several years ago. Indeed, said Mr Fung, apart from a bare assertion, there was no evidence from Teleglobe that the plaintiff indeed was one of its competitors, although I suppose it can be said in a general sense (and I am certainly prepared so to accept it in this sense) that both are competitors or at least both work in the telecommunications field. But I fail to see why these documents, which outlined and detailed a practice which was discontinued in late 1998, now should obtain the protection of the court in this case; indeed, all 10 documents are dated within the first four or five months of 1997, that is, some four years ago.

18. Even if he were to be wrong about his primary submissions, said Mr Fung, in any event Teleglobe should not be concerned, as it now apparently is, that the information obtained by the plaintiff from these 10 documents would be disseminated to Teleglobe's other competitors. He referred to two matters in this context. First, he cited the well-known implied undertaking by a party who obtains discovery not to use the documents for any collateral or ulterior purpose. This is so well-known that nothing more needs to be said about it. Moreover, said Mr Fung, there was an additional element, because the plaintiff's key staff involved in the present action also had given express personal confidentiality undertakings that they would not "except with the leave of the Court, directly or indirectly make use or permit another to make use of the Defendant's documents or the information contained therein, being documents listed in the Defendant's List of Documents dated 21st August 2000 and produced for inspection, otherwise than for the purposes of this action", and that such undertakings would of course cover the 10 documents in issue.

19. Again, somewhat curiously Mrs Newell appears at be at a disadvantage, noting at the end of her submissions that, as matters had transpired, she has not even had a sight of these express undertakings. Why that is so I know not. Indeed, I also observe in passing that, although the defendant takes a neutral stance and has been present in this application, and has no doubt been copied in on the evidence, there does not appear to have been much contact or liaison between the defendant and the applicants.

20. Having found in favour of Mr Fung's primary submissions, there is no need to dwell on to his fallback position, which is that, in any event, even if Teleglobe could establish that the 10 documents contained "trade secrets", and therefore are as such confidential, the court should nevertheless exercise its discretion to order full disclosure. All I will say upon this aspect is this. Were I to be wrong in accepting Mr Fung's submissions, and should this matter go further, I am in no doubt that even if Mrs Newell had made out her case (which, in my view plainly she has not), I should not have hesitated in the circumstances to find that these documents as discovered, but as at present only partially inspected, are necessary for the fair determination of this matter, and that uncontrolled disclosure and inspection therefore would have been ordered notwithstanding such confidentiality as asserted. In my view the applicants are adequately protected by both the implied undertaking and by the express undertakings as proffered, and, as I have already observed during this hearing, I fail to understand why such documents, which in telecommunications' terms relate to a long abandoned practice and no doubt, also, involve four-year-old technology, should be regarded as anything other than technology fossils of historical interest only, with little relevance to what players in the technology field actually are doing today.

Order

21. In my judgment, the correct order, and the order that I now make, is that the applicants' summons dated 23 April 2001 be dismissed.

[Submissions from counsel]

22. I have now had the opportunity to hear counsel on the costs of this application. Mr Fung asks for his costs, and Mrs Newell, appropriately in my view, does not resist, although she does say that she should not be made to pay the costs of what she refers to as the plaintiff's 'preliminary issue'. This is a matter that I have not adverted to in this judgment, and which arose after the defendant had sent the documents in question to Messrs Herbert Smith without, the argument goes, the implied undertaking attaching thereto. I did not think there is anything in the point, and I did not treat the so-called 'preliminary issue' as having any importance, the court proceeding immediately to the main issue and Mrs Newell's application.

23. In my view the appropriate order is that the plaintiff is to have the costs of and occasioned by this application, to be taxed and paid by the applicants. This does not take care of the costs position entirely because Miss Ng, who appears today for the defendant, but has said nothing of substance, asks me to order her costs be paid by the defendant. I have reflected on her position. She has told me during the course of the hearing that she has a separate contractual arrangement with the applicants whereby her costs are to be met, and I see no reason why I should visit an order of the court upon that contractual arrangement, or indeed why she should have the costs of today as a matter of separate order. I make no order as to costs as far as the defendant is concerned. What Miss Ng does or does not do with the applicants is entirely her affair.

24. One matter remains outstanding. The summons which was the catalyst for this application, that is, the plaintiff's summons dated 2 April 2001 for the discovery that has been the subject of today's hearing. Paragraph 1 thereof asked for inspection of the documents which have occupied the court's attention today, and paragraph 2 asked that the defendant pay the plaintiff's costs in any event. No point will be served in making an order in terms of paragraph 1 because the inspection has, as a matter of practical politics, now taken place, and it can now go forth in an "uncontrolled" manner, if I can use that term, with the applicants being protected by the implied and express undertakings that have been given. As to paragraph 2, Miss Ng says that she should not bear the costs of this summons because she was effectively stuck in the middle. I am in two minds about this, but at the end of the day I make no order as to costs of this summons. In effect, the real battle has been between the applicants and the plaintiff, the plaintiff now having succeeded on its summons dated 2 April 2001.

25. I thank the parties for their assistance.

	(William Stone)
	Judge of the Court of First Instance
	High Court

Representation:

Mr Eugene Fung, instructed by Messrs Herbert Smith, for the Plaintiff

Ms Rosie Ng of Messrs Denton Wilde Spate, for the Defendant

Mrs Glenys Newell, instructed by Messrs Sinclair Roche & Temperley, for the 1st and 2nd Applicants

22512-EN-2000-06-07

CABLE & WIRELESS HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

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HCCL000229C/1999

HCCL 229/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.229 OF 1999

(formerly High Court Action No.2076 of 1999)

---------------

BETWEEN
	CABLE & WIRELESS HKT INTERNATIONAL LIMITED (formerly known as Hong Kong Telecom International Limited)	Plaintiff

	AND

	NEW WORLD TELEPHONE LIMITED	Defendant

---------------

Coram: Hon Stone J in Chambers

Date of Hearing: 7 June 2000

Date of Judgment: 7 June 2000

____________________

J U D G M E N T

____________________

1. There are before the court today two summonses. First, the plaintiff's summons dated 18 April, which on its face deals with two matters :

(a) the issue of payment of costs of the Order 14A argument; and
(b) directions for the further conduct of this action.

The second summons is another summons dated 16 May issued by the plaintiff, wherein the plaintiff seeks leave to amend its Statement of Claim in the terms set forth in the draft annexed to that summons.

2. With regard to the first summons, I dealt with paragraph 1 thereof - the issue of the variation of the costs order nisi as contained in the judgment of this court dated 5 April dismissing the defendant's application under Order 14A, rule 1 - when these summonses were first called on on 19 May 2000. The balance of that summons dealing with directions, together with the amendment summons in its totality, were then stood over until today, primarily in order to give the defendant the opportunity to reflect on the proposed amendments to the Statement of Claim.

THE SUMMONS TO AMEND

3. Mr Shieh, on behalf of the plaintiff, formally moves the amendment in terms. Not all the amendments are opposed. Mr Carolan, who appears today for the defendant as he did at the first hearing of this summons on 19 May, has helpfully indicated that the extent of the defendant's opposition falls into three distinct categories :-

(i) paragraphs 11B and 30C;
(ii) paragraph 17B, and the first sentence of paragraph 22D; and
(iii) paragraphs 29B and 29C.

No other objections are raised.

4. The areas covered by these paragraphs are broadly thus :

5. Paragraph 11B (to which paragraph 30C(1) follows) pleads an implied term within the agreement between the parties that, as a matter of law, in dealing with each other in respect of the implementation of the agreement, the plaintiff and the defendant would act in good faith.

6. Paragraph 17B (to which the alternative plea within the opening sentence of paragraph 22D follows) pleads that if, on a true construction of the 1995 Determination, the local network operator did not have to terminate an incoming external call to earn a delivery fee, it would not on any account be entitled to the fee if it participated in any refiling contrary to the other statements of the Telecommunication Authority.

7. Paragraphs 29B and 29C - those which Mr Carolan characterizes as the 'new mistake' paragraphs - plead payment made by the plaintiff under a mistake of fact, namely, that the defendant had not participated in refiling of such calls, and this plea is relied on even if, which is denied, under the 1995 Determination a local operator does not disentitle itself to delivery fees for incoming international calls where it has participated in refiling, contrary to the policy of the Telecommunication Authority as declared in Statement No.1. The plaintiff here contends that had it known what was going on it would not have paid the delivery fees in the first place, and would have reported the matter to the Telecommunication Authority and obtained a new proscriptive Determination on the point as a matter of urgency.

8. The foregoing summary is intended to be no more than a broad indication of the relevant amendment battleground. The amendments speak for themselves on the face of the proposed amended pleading, and the context of these particular matters can, I hope, be gleaned from the substantive judgment of this court upon the Order 14A application.

9. Mr Carolan's primary submission upon these three categories of proposed amendments is that they are incontestably bad as a matter of law, and thus are demurrable on their face. He runs a secondary argument, which represents a pronounced theme in the defendant's skeleton argument (which he did not draft) wherein it is said (at paragraph 4) that the "startling" new allegations now pleaded have as their true function and common characteristic "a propensity for complicating NWT's appeal against the recent dismissal of its application under RHC, Order 14A". Whilst Mr Carolan did not choose to put it precisely in this way, the burden of his secondary argument, I think it fair to say, is that if the court was in any doubt about the elements of the proposed amendments to which his client has specifically now voiced its objection, the matter of the amendments could be stood over until the hearing of the interlocutory appeal, which he informs me is anticipated to be fixed in or about October of this year. Accordingly, he says, the Court of Appeal can then attach itself to the proposed amendments at the same time as hearing the substantive appeal against the refusal of Order 14A relief; alternatively, if the amendments were to be granted in the face of his current opposition, a further Notice of Appeal against the allowance of such amendments would in due course be filed, so that the Court of Appeal then would have two interlocutory appeals before it and not, as at present, one.

10. I am not attracted to the suggested course of leaving the issue of these amendments to the Court of Appeal, persuasively though it was broached. It seems to me that I should grasp this particular nettle, and that the existence of the forthcoming appeal should not detract from this exercise. In so far as it be relevant, however, I do not accept the proposition that the "true function" of these allegations is to complicate NWT's forthcoming appeal. As Mr Shieh has confirmed to the court today, and indeed as is reflected by my memory and by my notes of the ambit of the Order 14A argument, the substance and nature of the amendments to which objection is now taken was clearly flagged and outlined by leading counsel for the plaintiff, Mr Field, during argument on the Order 14A application, and further represent matters which, as the judgment makes clear (see in particular pages 15O-17Q thereof), specifically were considered and taken into account by the court in deciding whether to accede to the Order 14A application.

11. So I will decide the amendment issue now. The proposed amendments clearly all represent arguments emerging from the same factual matrix with which the court will have to grapple at trial, so that no new and unanticipated factual underpinning emerges. I bear in mind, moreover, that except in the most demonstrably clear instances, it is inappropriate summarily to decide legal points on a strike out application (or, as in this context, in terms of resistance to proposed amendments). As Sir Nicholas Browne-Wilkinson, VC observed in Frogmore Estates plc v. Berger & Others (1989), unreported, Transcript No.Ch.1988 F 9850, at page 24 :

"... it is better in an emerging body of law to allow the decision to be made on actual facts, not hypothetical or vague principles ..."

quoting in this regard Lonrho plc v. Fayed, [1989] 3 WLR 631. Whilst in Lonrho plc v. Tebbit, [1991] 4 All ER 973, at 979, the Vice-Chancellor further observed :-

"STRIKING OUT

A claim should only be struck out in a plain and obvious case. The difficulty arises where, as in the present case, a claim to strike out depends upon the decision of one or more difficult points of law. In such a case, the judge should normally refuse to entertain such a claim to strike out. But, if in a particular case the judge is satisfied that the decision of the point of law at that stage will either avoid the necessity for trial altogether or render the trial substantially easier and cheaper, he can properly determine such difficult point of law on the striking-out application : see Williams & Humbert Ltd v W & H Trademarks (Jersey) Ltd [1986] 1 All ER 129 at 139, 143, [1986] AC 368 at 435-436, 441 per Lord Templeman and Lord Mackay.

In considering whether or not to decide the difficult question of law, the judge can and should take into account whether the point of law is of such a kind that it can properly be determined on the bare facts pleaded or whether it would not be better determined at the trial in the light of the actual facts of the case. The methodology of English law is to decide cases not by a process of a priori reasoning from general principle but by deciding each case on a case-by-case basis from which, in due course, principles may emerge. Therefore, in a new and developing field of law it is often inappropriate to determine points of law on the assumed, and scanty, facts pleaded in the statement of claim. Thus in Union Carbide Corp v Naturin Ltd [1987] FSR 538 at 544 Slade LJ said :

'There is at least one good reason why in particular, in my judgment, the court hearing a striking out application should be slow to commit itself to stating principles of law which are not clearly covered by previous authority.
Ex Hypothesi it has to deal with the application on assumed facts. General statements of legal principle made on assumed facts are, in my experience, a perilous exercise, since they may well require addition or qualification when applied to the facts as actually found on the evidence in a particular case.'" (emphasis added)

I note in passing that this latter quotation could as easily apply, in my view, to the Order 14A application - but that, perhaps, is to trespass upon matters already decided and presently the subject of appeal.

12. In his skeleton argument, Mr Shieh has further referred me to a number of authorities serving to demonstrate that an implied duty of good faith, as a developing concept in the common law world, cannot on its face be castigated as "hopeless or unarguable", which for present purposes is the benchmark the defendant needs to attain. Whilst as to the issue concerning the Telecommunication Authority's statements, it was not, he said, a question of them "overriding" the TA's Determination, and the court was entitled to take into account the TA's express proscriptions in construing the TA's Determination. Moreover, continued Mr Shieh, the question of how and when the plaintiff could have procured a revision of the 1995 Determination is and was clearly a matter of evidence. The defendant knew full well the turn which events had taken after the plaintiff had discovered the existence of the diversion calls. It therefore sounded ill in the mouth of the defendant to complain that they did not know how events might have developed if the matter had been raised earlier. If, said Mr Shieh, it is the defendant's case that things indeed would have happened differently, it is open to them so to plead.

13. Looked at overall, submitted Mr Shieh, the proposed pleading was manifestly not demurrable on its face, nor could it fairly be said to complicate or prejudice the proposed appeal for the reasons, inter alia, further outlined in detail in paragraph 8 of his useful skeleton argument.

14. I agree. After considering these specific amendments, together with the submissions of counsel, and having reminded myself of the content of the substantive judgment of 5 April 2000, I have no hesitation in granting the plaintiff leave to amend in terms. The matters pleaded may or may not succeed at trial, I know not, nor do I wish to speculate. But in my judgment they are not incontestably bad, and in accordance with accepted principle are to be permitted to go forward for full debate at the appropriate time and place. Listening to this application, it was difficult not to be reminded of the words of Saville LJ in British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd (1994), 45 Con LR 1 at 5, cited with approval by Morritt LJ in Morris & Others v. Bank of America National Trusts & Others, [2000] 1 All ER 954 at 970 :-

" Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing. Each case must of course be looked at in the light of its own subject matter and circumstances."

I respectfully agree with and adopt those sentiments. In my judgment, in light of the circumstances and subject matter of this case, a fair hearing ineluctably involves permitting these amendments as drawn.

15. Accordingly, on the plaintiff's summons dated 16 May 2000, I make an order in terms.

THE BALANCE OF THE PLAINTIFF'S SUMMONS DATED 18 APRIL 2000

16. I turn now to the consequent procedural directions canvassed by this summons. As I made clear at the original hearing, I do not think it appropriate presently to make procedural orders subsequent to discovery - which means that I now adjourn sine die with liberty to restore paragraphs 5-9 of this summons.

17. Now that I have ruled upon the plaintiff's application for leave to amend (wherein formal service of the Amended Statement of Claim is dispensed with), it seems to me, subject to any refinements which counsel may shortly suggest, that the following consequential orders also are appropriate :-

(1) the defendant to have leave consequently to amend its Defence and Counterclaim, if so advised, within 14 days from the date hereof;
(2) the plaintiff to have leave consequently to amend its Reply and Defence to Counterclaim, if so advised, within 14 days thereafter;
(3) the plaintiff do within 21 days after close of pleadings, as so amended, file and serve on the defendant its List of Documents;
(4) the defendant do within 14 days thereafter (but in any event, no less than 35 days from close of pleadings, as so amended) file and serve on the plaintiff its List of Documents;

(5) the documents so discovered be available for inspection after the expiry of seven days of service of the respective Lists; and
(6) the costs of this directions application be in the cause.

18. I will hear any observations upon these directions that counsel may now wish to make, in particular in terms of the time element.

[Submissions from counsel]

19. Counsel have submitted on two points. Let me deal with them in order.

20. First, as to the procedural directions, Mr Carolan and Mr Shieh are united in their view that the original formulation as suggested by the court in terms of paragraphs 4 and 5 is not appropriate. They suggest, and I agree, that paragraph 4 of the proposed direction should read : "the parties do file and serve Lists of Documents within 35 days of the close of pleadings as so amended", and in terms of paragraph 5 "that there be mutual inspection of documents seven days after service of Lists". Accordingly, I make such directions as so varied.

21. Next comes the question of costs. I am now reminded by counsel that at the hearing of this matter on 19 May, I reserved the costs of that day to the forthcoming hearing which is, of course, that of today. I confess I had overlooked this. I must, therefore, deal with the costs of both summonses.

22. As to the costs of the plaintiff's summons dated 18 April, Mr Carolan suggests, and I think that he is right, that there should be a bifurcated costs order, and that the costs of the argument as the variation of the costs order nisi must be to the plaintiff in any event, to be taxed if not agreed, and that the costs with regard to the balance of that summons should be costs in cause. I so order, and leave the taxing master to entertain submissions from the respective solicitors as to the way such costs can be apportioned.

23. This then leaves the costs of the plaintiff's amendment summons dated 16 May. Earlier in this judgment, subject to the submissions of counsel, I have simply made an Order in terms of that summons as drawn, and as Mr Carolan has pointed out, the plaintiff itself, at paragraph 3 of this summons, accepted that the costs of and occasioned by this application and of the amendments consequential thereon be to the defendant in any event. Mr Carolan says that there is, in the particular circumstances of this case, no reason to change that which the plaintiff has provided on the face of its own summons unless the court can say that the opposition to the amendments (which he notes was selective) should never have been made at all. Mr Shieh, for his part, says that had the matter ended on 19 May, that is, the first hearing of this summons, he could not have resisted the costs order as reflected on the face of the summons, but that nevertheless there has been an argument this morning, he has won, and he should be compensated in costs. That broadly is the shape of the debate.

24. It is now late and I have no wish to prolong this matter further. At the end of the day, bearing in mind all the circumstances of the case, and given that the amendments were proffered rather later than the plaintiff clearly had intended, thus causing the matter to be stood over to a second day, I am not, on reflection, minded to interfere with the Order, which is reflected in paragraph 3 of the plaintiff's summons. This is a close run thing but I will not indulge, as Mr Carolan puts it, in "microsurgery" in terms of costs. Indeed, as he says, both parties would have had to come here today in any event, argument as to the proposed amendments notwithstanding. Possibly this is not the most satisfactory outcome, but looked at overall I think it is not unfair, and I will leave matters as they are.

25. I thank both counsel for their assistance.

	(William Stone)
	Judge of the Court of First Instance

Representation:

Mr Paul Shieh, instructed by Messrs Herbert Smith, for the Plaintiff

Mr Paul Carolan, instructed by Messrs Deacons, Graham & James, for the Defendant

Defendant's two appeals dismissed by Court of Appeal. Please refer to CACV150/2000 and CACV243/2000 dated 6 March 2001

22511-EN-2000-05-19

CABLE & WIRELESS HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

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HCCL000229B/1999

HCCL 229/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.229 OF 1999

(formerly High Court Action No.2076 of 1999)

---------------

BETWEEN
	CABLE & WIRELESS HKT INTERNATIONAL LIMITED (formerly known as Hong Kong Telecom International Limited)	Plaintiff

	AND

	NEW WORLD TELEPHONE LIMITED	Defendant

---------------

Coram: Hon Stone J in Chambers

Date of Hearing: 19 May 2000

Date of Judgment: 19 May 2000

_____________________

J U D G M E N T

_____________________

1. On 5 April 2000, this court handed down judgment upon an application under Order 14A, rule 1, Rules of the High Court, taken out by the defendant. The result of this judgment, which speaks for itself, is that the defendant's application was dismissed for reasons given therein.

2. Consequent upon this judgment two summonses have been issued, on each occasion by the plaintiff. The first was dated 16 May 2000 and asks for leave to amend the Statement of Claim in terms of the draft annexed. That summons has been adjourned to 9:30 a.m. on Wednesday, 7 June in order to give those acting on behalf of the defendant more of an opportunity to study these amendments. Accordingly, I will deal with that matter at that time.

3. The second summons is, I think it fair to say, currently more contentious. It is dated 18 April 2000. In effect it is in two parts : paragraph 1, to which I will revert in a moment, and paragraphs 2 to 10 which deal with procedural directions which the plaintiff wishes to obtain in order to drive this matter to trial.

4. I deal first with the directions element. In this connection I take the view, and Mr Shieh for the plaintiff does not disagree, that the only directions that can realistically be made at this stage are those encompassed in paragraphs 2, 3 and 4, namely, matters relating to discovery and inspection. After some reflection, I have decided to defer consideration of these directions until the adjourned hearing of the amendment summons. It is of course true that a further 14 days regrettably will have been lost, but in the overall scheme of things I do not think this is of great import. I confidently expect, however, subject always to the arguments put up on the part of the defendant, to be in a position on 7 June to deal both with the amendments and to set discovery in motion. But I will leave it until then. Accordingly, paragraphs 2 to 9 of the summons are adjourned to be heard at the same time as the amendment summons on 7 June.

5. This then leaves the issue which has occupied a considerable part of the argument this morning, that is paragraph 1 of the second summons. At page 20 of its judgment of 5 April, this court made an order nisi that the costs of and occasioned by the application be to the plaintiff in any event, to be taxed if not agreed. It may well be that whichever formulation the court had adopted as an order nisi would have spawned an application by the other party. I confess that in making this particular order my pen hovered somewhat over the page. Be that as it may. Since the order nisi is that the costs be to the plaintiff in any event, it falls to Mr Shieh, on behalf of the plaintiff, pursuant to paragraph 1 of the second summons, to move the court that this nisi order be varied "such that the defendant do pay forthwith to the plaintiff the costs of and occasioned by the defendant's application under Order 14A, rule 1".

6. This matter has been hotly debated. Mr Carolan, for his part, in an admirably moderate address asked that the normal rule be followed, and that these costs not be crystallized until the resolution of the event. He is, of course, correct that this is the normal rule. Mr Shieh, to the contrary, has argued that the circumstances of this application lift this case out of the ordinary and justify the order for which he contends. The question was nicely poised, and I afforded myself the luxury of a short time to consider the competing arguments.

7. After reflecting on all the matters placed before me, I have decided to accede to Mr Shieh's application. I have been particularly impressed in this consideration with two matters. The first is the fact, as Mr Shieh submitted, that the inappropriateness of mounting an Order 14A application was specifically flagged in pre-hearing correspondence. The application itself was taken out under a summons for directions dated 24 August 1999, but by letter dated 23 June 1999 from Messrs Herbert Smith to Messrs Deacons Graham & James, those acting on behalf of the plaintiff, in a carefully argued document, queried first the suitability of the questions at that time raised for determination pursuant to the Order 14A procedure, and then went on, in the second section of that letter, under the heading "Determination of Issues", to observe :

"Given the manner in which your Defence and Counterclaim is pleaded, an in vacuo interpretation of the 1995 Determination could not, in any event, be determinative of all issues raised in the action..."

In my judgment I have agreed with that view. Indeed (at page 18 thereof) I note specifically :

"To jump the gun at this early stage, on the basis of assumed facts and absent discovery is, in my view, a signally unwise course to adopt."

8. The other matter that has particularly attracted my attention in the context of the present argument is Mr Shieh's proposition that the defendant's "shifting of the ground", to use his phrase, is revelatory of the true nature of the Order 14A application. I will not here go into detail. In the judgment I set out in full, at page 2 thereof, the form of the original questions. I remain unsure how such questions could realistically ever have succeeded in a highly complex case such as this via the medium of Order 14A. That observation, however, is by the by because, as the judgment again makes clear, leading counsel for the defendant chose to take two paragraphs of the then existing Statement of Claim, namely paragraphs 17 and 26, as his frame of reference within the application as mounted. In fact, I concluded that out of those two paragraphs, only paragraph 17 could have been a potential runner in terms of an Order 14A application, albeit in the event I declined to allow the application on this basis.

9. In reaching my conclusion that it is appropriate that costs be the subject of taxation forthwith, I have not overlooked what I would call 'the amendments argument' which was put forward by Mr Carolan. Indeed, I understand that such amendments loom large in the appeal which I have been told is forthcoming against the judgment of 5 April. However, after having had the opportunity to review the history of these proceedings, I am presently unpersuaded by the argument that had such amendments earlier been in place, no Order 14A application in fact would have been mounted or persisted in. But I am disinclined to attempt to speculate. The plain fact, as Mr Shieh pointed out, is that the way the application developed had an effect on the amendments which have now been formulated, and I think he is right when he says first, that such amendments essentially arose out of the reformulated questions which were put to the court for determination (in lieu of the original questions); and second, that the amendments, such as they be, are in part also a product of the revelations in the affidavits which had been filed on behalf of the defendant in support its application.

10. This has not been a straightforward decision, and it has attracted a certain amount of reflection. At the end of the day, however, in my judgment this is the proper order to make, and accordingly, this amended order as to costs in terms of the summons is to replace the order nisi that was included in the original judgment. If and in so far as leave be necessary to appeal against this costs order, such leave is of course granted, albeit I think it is not necessary because the defendant's appeal will simply be mounted against the revised order in its totality.

11. This is all that I think can usefully be achieved today. Some matters will, of course, reappear for the court's further consideration at the adjourned hearing on 7 June.

[Submissions from counsel]

12. Counsel have now had the opportunity to address the court consequent upon this brief judgment. The only issue which causes further concern is how the costs of today's hearing should be carved up. On reflection, both counsel having had their say, I will reserve that matter to the hearing on 7 June. As to that hearing, I should indicate, for the convenience of the parties, that I intend to start at 9:30, and I have postponed the commencement of a trial in another case to 11 a.m. I do not wish the parties to think that there will be a need for undue haste in the half hour that is otherwise available prior to the usual 10 o'clock start.

	(William Stone)
	Judge of the Court of First Instance

Representation:

Mr Paul Shieh, instructed by Messrs Herbert Smith, for the Plaintiff

Mr Paul Carolan, instructed by Messrs Deacons, Graham & James, for the Defendant

20335-EN-2000-04-05

CABLE & WIRELESS HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

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HCCL000229A/1999

HCCL 229/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.229 OF 1999

(formerly High Court Action No.2076 of 1999)

---------------

BETWEEN
	CABLE & WIRELESS HKT INTERNATIONAL LIMITED (formerly known as Hong Kong Telecom International Limited)	Plaintiff

	AND

	NEW WORLD TELEPHONE LIMITED	Defendant

---------------

Coram: Hon Stone J in Court

Dates of Hearing: 2, 3 and 6 March 2000

Date of Judgment: 5 April 2000

__________________

J U D G M E N T

__________________

THE APPLICATION

1. This is an application under Order 14A, rule 1, RHC. By a Notice under Summons for Directions, dated 24 August 1999, the defendant herein ("NWT") sought an Order that the court determine "the following questions of law and/or construction" :

"On a proper construction of the Determination dated 29th September 1995 ('the 1995 Determination') and the Determination dated 7th October 1998 ('the 1998 Determination') made by the Telecommunications Authority under Section 36A of the Telecommunications Ordinance (Cap.106):-

(1) For incoming external telephone calls made between 29th September 1995 and 6th October 1998 inclusive, were delivery fees payable by the Plaintiff to the local operator to whose network calls were delivered directly from the Plaintiff's international gateway, rather than to the local operator (if different) on whose network such calls terminated?
(2) In the light of the answer to the question at paragraph 1(1) above:

(a) Is the term alleged by the Plaintiff in item 1(a)(vii) of its Answer to the Request for Further and Better Particulars of the Statement of Claim dated 28 April 1999 inconsistent with the terms and conditions imposed by the 1995 Determination?
(b) For incoming external telephone calls made between 29th September 1995 and 6th October 1998 inclusive and routed as described in paragraph 19(a) of the Defendant's Defence and Counterclaim, were delivery fees properly payable by the Plaintiff to the Defendant?
(c) For incoming external telephone calls made between 29th September 1995 and 6th October 1998 inclusive and routed as described in paragraph 19(b) of the Defendant's Defence and Counterclaim, were delivery fees properly payable by the Plaintiff to the Defendant?
(d) Does the 1998 Determination affect the answer to question (2)(c) above in respect of calls made on or after 7th October 1998 and if so, in what respect?"

2. In the event, and as later appears, these specific questions ultimately were not proceeded with, albeit the argument remained concerned with the meaning to be attached to aspects of the 1995 and 1998 Determinations of the Telecommunications Authority.

THE SUBJECT-MATTER OF THIS LITIGATION

3. The plaintiff ("CWHKTI") has brought this action against NWT in a bid to recover the sum of HK$280 million it alleges it paid to NWT in delivery fees under a mistake of fact, namely, that the calls in respect of which such fees were paid actually terminated on the defendant's network. These telephone calls have variously been described as 'delivery call diversion' calls or, as the plaintiff also put it in argument, 'hijacked' calls.

4. In addition to the monies allegedly wrongly so paid, CWHKTI further seeks a declaration that it has been entitled, for the like reason, to withhold payment of a further sum of HK$94 million otherwise allegedly due to NWT.

5. For its part, NWT, by Amended Defence and Counterclaim, asserts that by virtue of the Interconnection Agreement entered into between itself and CWHKTI as from 1 July 1995, together with the operation of section 36A of the Telecommunications Ordinance, Cap.106, and the 1995 Determination of the Telecommunications Authority, such delivery fees were rightfully paid for the interconnection of its network with that of CWHKTI, and that such fees were a function of interconnection per se as opposed to actual delivery of the call to the called party, that is, termination of the incoming calls. Accordingly, NWT counterclaims for the sum of $94 million wrongfully so withheld, and for certain declaratory relief.

6. The foregoing, in very broad terms, represents an overview of what is at stake in this litigation, the generality of the description belying the considerable amount of paper and detail thrown up by a case which has its genesis in the liberalisation by the Government of an hitherto tightly controlled telecommunications market. Indeed, the present application cannot be understood without brief reference to the relevant background.

THE REGULATORY FRAMEWORK

7. Until 31 July 1993, CWHKTI, the plaintiff herein, and its local affiliate, Cable & Wireless Hong Kong Telephone Company ("CWHKTC") operated an international telephone revenue sharing agreement under which CWHKTI paid a percentage of its international call revenue to CWHKTC, which was directly connected to CWHKTI's international gateway, and without whose network international calls could not have originated from, or been received in, Hong Kong. It is probably accurate to say that CWHKTC's revenue share was, at bottom, compensation for the contribution it made to CWHKTI's business by carrying the calls on its local network from the international gateway to the point of termination.

8. In June 1992, the Government announced that telecommunication services in Hong Kong would be opened to competition. New entrants to the field would be allowed to connect both with CWHKTC's local network and CWHKTI's international gateway. New public fixed link telephone networks were to receive payment for carrying traffic to and from customers and the international facilities which were already in place via CWHKTI. At the same time, it was also decided that cellular mobile telephone networks would also be able to directly connect with CWHKTI's international gateway, instead of, as hitherto had been the case, utilizing CWHKTC's domestic network.

9. This process had a profound effect upon the local telecommunications market. As from 1 July 1995, CWHKTC's hitherto exclusive franchise was replaced with a non-exclusive licence coterminus with the grant of additional non-exclusive licences to other network operations wishing to operate Local Fixed Telecommunication Networks ("FTNS"). In fact, three such licences were granted, to the defendant herein, NWT, to New T&T and to Hutchison Telecom, and from 1 July 1995 onwards the networks built and operated by these licensees became interconnected with the plaintiff's international gateway. It followed that as from that day, also, telephone call "delivery fees" became payable to these other FTNS operators, whereas previously in the monopoly years only the plaintiff and CWHKTC had shared the revenue derived from international telephone traffic.

10. It is the circumstances in which payment of such delivery fees is to be made to these other FTNS operators that lies at the heart of this case.

11. On 29 September 1995 the Office of the Telecommunications Authority ("OFTA") published a Determination under section 36A of the Telecommunications Ordinance, Cap.106, governing the payment of delivery fees by the plaintiff for, inter alia, incoming international telephone calls. The effect of section 36A meant that the terms of the 1995 Determination became an integral element of the agreement between plaintiff and the defendant which had come into existence on 1 July 1995, and under which NWT was entitled to delivery fees for incoming external phone calls at the delivery fee rate specified in the 1995 Determination, namely HK$2.23 per minute.

12. It is at this point in the history of events that this action has its genesis. Because after the 1995 Determination came into effect, CWHKTI discovered that NWT had been engaged in the practice of what has been termed by the plaintiff 'delivery fee diversion calls', and by the defendant as 'refile' and 'call back' calls. For present purposes, there is no necessity to become entangled in technical detail; suffice to say that the essence of this is that, in circumstances involving such call diversion, the defendant had interposed its own network between the plaintiff's international gateway (to which the defendant itself is interconnected) and the network of such number as was actually the subject of the incoming international call. Such interposition, as I understand it, arose by virtue of an agreement between NWT and the operator carrying the outward call from the country of origin, so that the incoming international call was routed from its point of origin to CWHKTI's exclusive international gateway, and at that stage was passed onto NWT's interconnecting network before thereafter again being rerouted from NWT's network to the local non-NWT network actually servicing the number of the originally-called party.

13. In addition to such so-called 'refile calls', there is also a type of 'callback' call (other than the species of 'callback' calls recognized by the plaintiff to be legitimate, and for which no claim is advanced in these proceedings) which passes through the CWHKTI international gateway and is delivered to the NWT network. It is to this particular type of 'callback' call (referred to as Type B 'callback' calls) to which the plaintiff further objects, since again it is said to involve the artificial imposition of the NWT network solely in order to obtain payment of the relevant delivery fee.

14. But to revert to the history of the matter. Discovery of the phenomenon of 'delivery fee diversion calls' led to an investigation by OFTA, and as a result, a 1998 Determination was published on 7 October 1998, which grappled with the specific issue of "which local network operator should be the appropriate recipient of the delivery fee for handling the present traffic in the incoming direction". Pursuant to section 36A, the terms of the 1998 Determination also became of the essence of the interconnection agreement between the plaintiff and the defendant, and in this context the 1998 Determination pronounced thus :

"(a) In handling the relevant traffic in the incoming direction from the external gateway of HKTI, the operator of the terminating network shall be entitled to the payment of the delivery fee from HKTI;
(b) In handling the relevant traffic in the incoming direction from the external gateway of HKTI, a local network operator shall not, whether or not in collaboration with any operator outside the HKSAR, perform any telephone number translation function the effect of which is that the telephone number associated with the incoming call routed through the external gateway of HKTI is different from the telephone number dialed by the call originating party so as to alter the identity of the local network operator to which the delivery fee should be paid under this Determination."

15. The 1998 Determination thus put the delivery fee issue unequivocally to rest, and in effect rendered illegitimate call diversion via "any telephone number translation function".

16. In broad terms, therefore, (and I believe this to be common ground) the monetary sums at stake in the present case focus upon the fees harvested from 'refile calls' "since at least January 1997" [paragraph 20, Statement of Claim] until the date of the 1998 Determination, together with such fees accruing from the allegedly illegitimate 'Type B' callback calls from the date of the 1995 Determination onwards, although the window of inquiry in this case necessarily is limited to the period 29 September 1995 (the date of the 1995 Determination) to 31 December 1998, given that further substantial regulatory changes - in particular a 'Framework Agreement' dated 20 January 1998 whereby the plaintiff agreed with the Government to an early surrender of its exclusive External Licence to provide external public telephone services - provoked further major changes, from 1999 onwards, within the international telephone service environment.

THE ARGUMENT

(i) The revised Order 14A questions

17. It became clear at an early stage in the argument of Mr Henderson QC, on behalf of the defendant/applicant, that he did not consider the questions as initially formulated under the Notice of 24 August 1999 to be an appropriate starting point, and he "readily accepted refinement was necessary". In the circumstances of this application there had, he pointed out, been no 'iterative process', given that those acting on behalf of the plaintiff had opposed the concept of an Order 14A determination from the outset. In the event, and in the face of a submission from Mr Field QC, for the plaintiff to the effect that he wished to know the precise issue he was being asked now to address, Mr Henderson proffered an alternative formulation in "simplified form" which he acknowledged itself might require further refinement. Accordingly, it was this document which became the focus of the debate. It is in the following terms :

"1. Are each of the propositions of law pleaded in paragraphs 17 and 26 of the Plaintiff's Statement of Claim correct? If incorrect, in what respect or respects?
2. Apart from the calls prohibited by paragraph 6(b) of the 1998 Determination does that Determination affect the Answer to Question 1 above, and if so in what respect?"

18. In the event, only Question 1 was seriously pursued, and in itself may only be understood by reference to the pleaded paragraphs in question. These respectively read :

"17. On the true construction of the 1995 Determination, in respect of incoming external calls, the 'local network operator' to whom delivery fees were payable was the local network operator which provided its subscribers access to the Plaintiff's international network and on whose network the incoming call initiated by the person or device outside Hong Kong was to terminate.
26. The delivery fees in respect of the delivery fee diversion calls were, pursuant to the Agreement, the 1995 Determination and the 1998 Determination, not payable to the Defendant, but to the Local Operator on whose network the delivery fee diversion calls terminated including HKTC."

(ii) The issues raised

19. The focus of the application having now become the pleaded paragraphs in question, the argument advanced effectively required resolution by the court of two distinct issues :

first, is this an appropriate case for the grant of Order 14A relief; and
second, (and if so) are the matters pleaded in paragraphs 17 and 26 correct as a matter of law?

20. Mr Henderson QC strongly asserted that the first of these issues was no issue at all : this is and was a "paradigm case" for Order 14A. There was plainly an issue on the pleadings, that issue was central to the case, it plainly had to be decided at some time, and the facts as they emerged were never going to change the formulation and effect of the agreement between the parties; indeed, the Determinations in question were quasi-statutory instruments, and clearly candidates for construction in the summary manner requested.

21. As to the construction issue, the bull point was that whatever NWT may or may not have done in practical terms to divert the calls in question, this could not affect the proper construction of the relevant Determinations, and accordingly it was "inappropriate" for NWT to respond to certain pejorative aspects of the case as they had emerged on affidavit. It followed, continued Mr Henderson, that if a party had made what turned out to be a "harsh agreement", it was not the function of the court to come to its aid, and whilst recovery of delivery fees in the present circumstances "may seem unmeritorious", nevertheless if that was the effect of the plain language of the agreement between the parties, the court can and must not shrink from so holding. In this context, he submitted, the fact of interconnection provided the consideration for the payment of delivery fees : in its 1995 Determination, the Telecommunications Authority had determined :

"...that the following terms and conditions concerning delivery fees shall form part of the terms and conditions of an agreement between HKTI and each local network operator respectively for the interconnection between the network of HKTI and each local network...",

'delivery fee' also being defined in that Determination as meaning :

"the payment to the local network operator for the delivery of the relevant traffic to and from the network of Hong Kong Telecom International Limited (HKTI). The delivery fee is expressed in gross terms before any deduction for Universal Service Contribution; ..."

22. In the present case, therefore, there was no doubt that there had been 'interconnection' in the technical sense, the calls in question had indeed ultimately been 'delivered', and NWT indisputably had played a part, albeit an intermediate part, within that delivery process.

23. For his part, Mr Field QC took strong issue with this latter argument. The significance of the 'refiling' manoeuvre (albeit until discovery it remained unclear precisely how the originally dialed number in fact had been "subverted" to achieve the relevant diversion onto the NWT network, nor for that matter what were the terms of the agreement between NWT and the operator carrying the incoming call from the country of origin) was that such 'refiling' was the only way in which there could be such 'intermediate delivery' of an incoming external call. And that if and in so far as this court was minded to accede to the defendant's request to grapple with this issue in whatever guise the defendant now chose to put it forward, it was as plain as a pikestaff that 'delivery' connoted delivery to the call party from beginning to end, as the true context of the 1995 Determination clearly demonstrated. This was so because first, it must be taken that the Telecommunications Authority was throughout acting consistently with its policy (which in this regard was clear on the relevant documents, including in particular earlier Statements whereby IDD by-pass schemes clearly had been proscribed) and second, that what was apparently being done by NWT in terms of such 'intermediate delivery' conferred no benefit whatever on the party actually paying the delivery fee (namely, CWHKTI), the international gateway being turned to account only upon actual completion of each call to the called party. All possible called party networks had a direct interconnection with CWHKTI's international gateway, said Mr Field, and but for interception by way of refiling (which was not done at the request of the calling or called party) there could be no doubt that the calls in question would have been carried direct to the called party's network. Accordingly, if there was to be an Order 14A construction, such should clearly be resolved in his client's favour.

24. This, however, did not represent Mr Field's primary submission upon this application. His main submission on behalf of the plaintiff was that, in the circumstances of this case, to proceed by way of Order 14A, as the defendant now sought to do, was singularly and manifestly inappropriate : in fact, he chose to characterise as "nonsense" the "three very expensive days" examining this summons. The relief sought was premature, it might well lead to difficulties further down the line, and it would not obviate the necessity for a trial, which would inevitably take place in any event. This had been the position adopted by his client since the defendant had first broached the Order 14A issue in correspondence prior to the filing of this application some six months previously. Accordingly, the plaintiff's unequivocal (and consistent) position was that this application should be dismissed, but that if it was to be entertained in whatever form - and in this regard there had been a demonstrable and fundamental shift in the defendant's approach, as was clearly reflected in the change of stance in terms of the questions posed - then the plaintiff's construction was to be preferred.

25. Descriptive compression does less than justice to submissions of counsel, but that at any rate formed the parameters of the argument.

DECISION

26. The detailed and heavily documented submissions made by the parties on this application have inevitably resulted in the court forming certain provisional views upon the issue of whether what was characterised as 'indirect delivery' of the relevant calls (which by the conclusion of the argument represented NWT's stance) was sufficient to justify payment of a delivery fee, or whether such payment followed on 'direct' delivery absent interposition of an interconnecting network. In this connection I recognize Mr Henderson's efforts to circumvent potential factual disputes, the defendant for the purposes of this application being prepared to "live with" the allegations presently levelled against it within the context of a case in which, as Mr Henderson put it, the plaintiff had nailed its flag to the mast on the pleadings in their current form. And I bear further in mind that Mr Henderson accepted that the court could "even now refine" the question posed, noting that the "termination theme will always remain" whatever else may or may not occur in this case.

27. Put thus, there is a passing temptation to take up Mr Henderson's invitation and to express a concluded view on a point whose true profile only emerged during this application, albeit I am resistant to any suggestion that the court should, in effect, seek further to 'refine' the debate. It seems to me, with respect, that either the defendant gets home on its application as presently posed, or it does not.

28. In my judgment it does not. After reflecting upon the argument, together with the wealth of material placed before the court, I have decided that in the exercise of my discretion I should decline this application, which in any event I consider was mounted too broadly even in such revised form, since in my view any sensible issue would have to be limited to paragraph 17. However, I am firmly disinclined to countenance this application, even in these restricted terms, persuasively though the argument was advanced. I say this for the following principal reasons.

29. First, I place heavily in the balance the overwhelming probability that there will be a trial of this action. I am unpersuaded by the argument that, in effect, there is waiting in the wings a settlement waiting to happen consequent only upon this court expressing its opinion upon the construction issue (which judgment would almost certainly be appealed, thereby causing yet further delay), and that refusal to do so will result in additional unnecessary expenditure in terms of both time and costs. With respect, I consider this unlikely. The calibre of legal advice available to each of the litigants ensures that a robust view of this case can be taken at any time, and I do not accept the implication that, absent compliance with the defendant's current application, early resolution necessarily will be precluded.

30. Nor do I agree with Mr Henderson's recurrent theme that since the delivery/termination issue has to be decided at some stage, in effect 'tis better 'twere done sooner rather than later. The stark fact is that the defendant's present posture invites decision upon an issue on the basis of assumed facts (but carefully and progressively revealed in the affidavit evidence) and prior to discovery; indeed, in the particular circumstances of 'refiling' I do not accept the blanket assertion that it makes absolutely no difference what the defendant may or may not have done, and notwithstanding leading counsel's submissions on the point I remain unconvinced that discovery considerations have played no part in the decision to mount and maintain this application. Nor, for that matter, would I be confident that any construction which might be made in the terms now requested might not effectively constrain (or be said to constrain) the normal process of discovery.

31. At the end of the day, in my view the case is a far cry from that of Korso Finance Establishment Anstalt v. John Wedge (unreported, February 1994, CA Transcript, No.94/387, digested at White Book MN14A/2/5), which decision Mr Henderson strongly prayed in aid, contending that the current Order 14A application indeed was "stronger" than in that case. In Korso, as I understand it, the English Court of Appeal took the opportunity to construe a document the effect of which would almost certainly be dispositive of what was perhaps perceived as an unmeritorious action.

32. Such is clearly not the case here. The submission made by the plaintiff that in any event this case will proceed to trial, and consequently that there will not be any great saving in costs, has considerable substance. As Mr Field pointed out, even if the present issue were to be decided in his client's favour, the defendant denies that there has been any mistake of fact, and alternately alleges a change of position defence, so that the issue of the defendant's belief that it was entitled to the delivery fees as paid would have to be explored, not least because the defendant must have known, some five months prior to the 1995 Determination, that OFTA had declared that refiling of incoming calls would not be condoned; accordingly evidence of what the defendant had been doing, and what it had done to conceal it, remained highly pertinent.

33. Nor, he submitted, would the action be over if the indirect/direct delivery point were now to be concluded in the defendant's favour, since not only would it remain open to the plaintiff to establish that the true facts were different from those which the court was being asked to assume on the face of the present (and deliberately restricted) affidavit evidence, but in any event the plaintiff wished to contend that even if, qua interconnecting network, what the defendant actually did in 'refiling' terms was held to fall within the 1995 Determination, nevertheless the payments as made remained payments under a mistake of fact, in that had it then been known to the plaintiff what the defendant was doing, it would not have paid the 'delivery fees' in question but instead would have sought an earlier Determination from the regulatory authority.

34. In addition, said Mr Field, whilst the Statement of Claim in its current form had "been left alone in light of the pending summons", nevertheless the case had now moved on, and notwithstanding any finding adverse to the plaintiff on the meaning of the 1995 Determination, the plaintiff also now would seek to amend and to further maintain that such 'refiling' of calls in any event was outwith the 1995 Determination, and accordingly that the claim entitlement was vitiated by such 'refiling' - which was itself an issue bearing directly upon the defendant's counterclaim for the allegedly wrongfully withheld $94 million. When the Statement of Claim originally had been settled, submitted Mr Field, the plaintiff had only been able to plead lack of termination, and had not been in the position to allege refiling. However, an alternative plea (for which leave duly would be sought) to allege that on a proper construction of the 1995 Determination, 'delivery from' necessarily connoted receipt from the gateway without refiling was not an issue embraced by paragraph 17 as now drawn, so that any adverse construction based upon the contents of that pleaded paragraph in its present form manifestly would touch only part of the picture, and would not mean that the claim would fail in toto, as the defendant had suggested.

35. The question of amendment to plead an alternative case or cases consequent upon the material thus far revealed does not seem to me to be an inappropriate circumstance for the court now to take into account, and in this regard I decline to accept Mr Henderson's riposte that, absent sight of the proposed amendment, little weight should be accorded to this argument. In my view, it is singularly ambitious to cavil at the lack of a formulated amendment when the plaintiff is not only entitled to review its pleaded case in light of what has emerged at the conclusion of discovery (and latterly in the witness statements), but when the defendant itself demonstrably has but lately shifted its own ground on this application, choosing to abandon the questions in the original Order 14A Notice in response to which this application was prepared, and substituting at the eleventh hour paragraphs culled from the Statement of Claim.

36. In my judgment the natural caution felt by any court when faced with an Order 14A application in what is evidently a complex case is more than justified in this instance, since it is not until the trial takes place that the court will have the whole picture available for its consideration. To jump the gun at this early stage, on the basis of assumed facts and absent discovery is, in my view, a signally unwise course to adopt.

37. Which brings me to the second significant consideration which has weighed in the decision to refuse this application; indeed, arguably it is the other side of the same coin. Despite Mr Henderson's efforts to argue the contrary, I remain unconvinced that it is possible adequately to factually "desensitize" this case so as to circumvent the dangers of "deciding questions of legal principle without knowing the full facts", to use the well-known words of Sir Thomas Bingham M.R. In this case I do not believe that it is possible to reach the position wherein it can safely be said that there are no issues of fact necessarily interwoven with the legal issues raised, notwithstanding Mr Henderson's willingness presently to accept the adverse matters alleged against his client in the evidence.

38. In this connection, it was accepted by both leading counsel that in order to construe the 1995 Determination, the court may properly look at the context of that Determination, which in turn would be revelatory of the relevant policy. The problem, however, as Mr Field pointed out, is that there is clearly a factual dispute as to what was the predominant policy in respect of the payment of the delivery fee, and that in order to get home on his argument - and, more to the point, to sidestep the contents of earlier Telecommunications Authority Statements which were clearly unhelpful to his case - Mr Henderson had been obliged to maintain that something fundamental had occurred between May and September 1995, so that the September 1995 Review of Delivery Fees posited a structural change which embraced the concept of FTNS operators earning delivery fees via the so-called process of "intermediate delivery". This was in any event wrong, asserted Mr Field - the Review could not be construed as indicative of OFTA's intention to change the basis of entitlement, and what lay behind the Review was simply his client's desire to delink outgoing calls from the so-called "accounting rate". But for present purposes resolution of this particular argument was nothing to the point : what was or was not the relevant policy, both economic and regulatory, and thus what constituted the true context for the 1995 Determination (which in turn governed what documents could properly be looked at as an aid to construction), was no more than one of the many specific facts which was required to be found by the court at trial. I agree.

39. It is at this point, also, that the issue of the expert evidence looms into view, namely that of Dr Ure, on behalf of the plaintiff, and that of Dr Wood for the defendant. The plaintiff's contention is that the 1995 Determination contains technical terms which are terms of art - there had, for example, been a dispute on the face of the evidence between these two experts as to the meaning to be accorded to the term 'delivery' - and whilst Mr Henderson appeared late in the argument to be driven to the position that, for present purposes, he would accept Dr Ure's formulation as to 'delivery', nevertheless it is clear to me that if expert evidence is to be used at trial to assist the court in resolving this dispute, then equally clearly the court should have the opportunity of considering the evidence of these witnesses (who in any event would have to canvass the issue of 'delivery' in the refiling context) untrammelled by any fetter that an Order 14A construction on the presently premised basis might provide.

40. Such expert evidence will also, no doubt, assist upon another unresolved factual matter, the question of the allegedly proscribed Type B "call back" calls, Mr Field maintaining, I think justifiably, that any construction of the issue now mooted would not resolve the call back issue (which in turn also impacted upon the defendant's counterclaim), and which again underpinned the clear necessity for a trial and the desirability of delaying any judicial declaration of the legal position until all relevant facts have been found. Again I accept this contention.

ORDER

41. This defendant's application is dismissed.

42. As to costs, I make an order nisi that the costs of and occasioned by the application be to the plaintiff in any event, to be taxed if not agreed. In so far as may be necessary, I certify the application as fit for two counsel.

FINALLY

43. This application has effectively caused this action to be stalled for a full six months. The delay and the expenditure of what doubtless are very considerable costs is regrettable. It is clearly desirable that this action should now proceed to trial with a minimum of further interlocutory disruption. Absent agreement thereon, the court will make all necessary procedural directions at an early date to be fixed.

44. I thank counsel for their assistance.

	(William Stone)
	Judge of the Court of First Instance

Representation:

Mr Richard Field, QC, leading Mr Paul Shieh, instructed by Messrs Herbert Smith, for the Plaintiff

Mr Roger Henderson, QC, leading Mr Barry Barlow, instructed by Messrs Deacons, Graham & James, for the Defendant

Defendant's two appeals dismissed by Court of Appeal. Please refer to CACV150/2000 and CACV243/2000 dated 6 March 2001

19466-EN-1999-12-22

CABLE & WIRELESS HKT INTERNATIONAL LTD. v. NEW WORLD TELEPHONE LTD.

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