HONG KONG TELECOMMUNICATIONS (HKT) LTD v. SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT AND ANOTHER

HCAL 448/2018

[2018] HKCFI 2385

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 448 OF 2018

________________________

________________________

________________________

DECISION

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INTRODUCTION

1.  This is the Applicant’s application for leave to appeal against the court’s order dated 3 October 2018 dismissing the Applicant’s application for disclosure or production of various documents referred to in its summons dated 24 April 2018 (“the Disclosure Application”).

APPLICABLE PRINCIPLES

2.  The test for deciding whether to grant leave to appeal under Section 14AA of the High Court Ordinance, Cap 4, is well established.  Leave to appeal shall not be granted unless (a) the appeal has a reasonable prospect of success, or (b) there is some other reason in the interest of justice why the appeal shall be heard.  For this purpose, a reasonable prospect of success involves the notion that the prospect is more than “fanciful”, without having to be “probable” (see SMSE v KL [2009] 4 HKLRD 125, at paragraph 17 per Le Pichon JA).

3.  Further, “even if the threshold test of reasonable prospect of success is satisfied, the court still retains a discretion whether to grant leave, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion.  The court may refuse leave to appeal in the interests of procedural economy and proportionality” (see Waddington Limited v Chan Chun Hoo Thomas and Others, HCMP 1327/2017, 18 October 2017, at paragraph 9 per Kwan JA (giving the judgment of the Court of Appeal)).

DISCUSSION

4.  The background facts relevant to the Disclosure Application were set out in the court’s decision dated 3 October 2018 (“the Disclosure Decision”), to be read in conjunction with an earlier decision of the court dated 24 August 2018 relating to the Applicant’s application for interim relief, and will not be repeated here.  For the purpose of this decision, I shall adopt the expressions and abbreviations as defined in the Disclosure Decision.

5.  A total of 6 intended grounds of appeal are raised in the Applicant’s draft Notice of Appeal.

6.  Grounds 1 to 3 in the draft Notice of Appeal relate to the scope of the duty of candour on the part of the Respondents.  At paragraph 20 of the Disclosure Decision, the court held, following the decision of the Court of Appeal in Chu Woan Chyi v Director of Immigration [2009] 6 HKC 77, at paragraph 11(6) and (7), that the scope of the duty of candour is limited by reference to the issue or issues before the court, the determination of which must be based on the grounds of judicial review as raised in the Form 86.  This view is consistent with the recent decision of the English Divisional Court in R (Hoareau) v Secretary of State for Foreign and Commonwealth Affairs [2018] EWHC 1508 (Admin), at paragraph 20, where Singh LJ stated the following –

“The duty of candour and co-operation which falls on public authorities, in particular on HM Government, is to assist the court with full and accurate explanations of all the facts relevant to the issues which the court must decide.”

7.  On behalf of the Applicant, Mr Benjamin, SC argues that the duty of candour is not limited by or confined to the issues raised in the Form 86, but extends to the relevant facts and reasoning underlying the decision challenged.  In support of this proposition, Mr Yu relies on various general statements of principle, including R v Lancashire County Council, ex p Huddleston [1986] 2 All ER 941, at 945 per Sir John Donaldson MR, Belize Alliance v Department of the Environment [2004] UKPC 6, at paragraph 86 per Lord Walker of Gestingthorpe; Tweedes v Parades Commission for Northern Ireland [2007] 1 AC 650, at paragraph 4 per Lord Bingham of Cornhill; AHK v Secretary of State for the Home Department [2012] EWHC 1117, at paragraph 22 per Ouseley J; as well as a discussion paper prepared by Cranston and Lewis JJ for the Lord Chief Justice of England and Wales, Defendant’s Duty of Candour and Disclosure in Judicial Review Proceedings, at paragraphs 9 to 13, which I do not propose to set out in this decision.  In my view, the scope of the duty of candour in the public law context is a matter of considerable public importance.  The proposition advanced by Mr Yu has a “reasonable prospect of success” for the purpose of seeking leave to appeal, which is not a high threshold.  Also, I consider that authoritative guidance from the Court of Appeal on this matter would be helpful to judges at first instance, and thus leave to appeal ought to be granted.

8.  I should add that even if the Applicant is correct in law in relation to the scope of the duty of candour, it does not necessarily follow that the Applicant will be entitled to disclosure of a full, unredacted, version of the Plum Report, because the Applicant will still have to demonstrate that the relevant facts and the reasoning underlying the Decision have been obscured by the redaction of the Plum Report, and that disclosure ought to be made notwithstanding the issue of confidentiality.  These matters will, however, only arise if the Court of Appeal should agree with the Applicant’s contention regarding the scope of the duty of candour.

9.  Grounds 4 to 5 in the draft Notice of Appeal relate the complaint of “irrationality” (Ground 2 in the Form 86) and the complaint that the Authority failed to carry out a full “refarming” cost-benefit analysis under paragraph 4.4 of the SPF (Ground 3 in the Form 86).  For the reasons given in paragraphs 21 to 23 of the Disclosure Decision, I am not convinced that the redacted parts of the Plum Report are relevant to either of those complaints, and I do not consider that the proposed grounds of appeal are reasonably arguable or have reasonable prospects of success.

10.  Ground 6 in the draft Notice of Appeal relates to the adequacy or sufficiency of the proposed Confidentiality Ring.  As earlier mentioned, this matter will become relevant if the Applicant is correct in its contention regarding the scope of the duty of candour.  In the circumstances, I consider that leave to appeal should also be granted in respect of this ground.

11.  I appreciate that, depending on the timing of the hearing of the appeal, the outcome of the appeal, and (assuming that the appeal shall be successful) the information which may be derived from the full, unredacted, version of the Plum Report and possibly other documents to be disclosed, the Applicant may apply to amend the Form 86 and further evidence may have to be filed by the parties, with the consequence that the hearing in February 2019 may be derailed.  This will be regrettable.  There are, however, a number of different possible scenarios which it is not possible to predict at this stage with any degree of accuracy.  I do not consider that I should refuse to grant leave to appeal on the mere possibility that the substantive application may not be able to be heard in February 2019.

DISPOSITION

12.  For the foregoing reasons, I grant the Applicant leave to appeal limited to Grounds 1, 2, 3 and 6 of the draft Notice of Appeal.  The costs of this application shall be in the cause of the appeal, with certificate for 2 counsel.

13.  Lastly, it remains for me to thank counsel for their assistance rendered to the court.

Mr Benjamin Yu, SC and Mr Roger Beresford, instructed by Ms Baker & McKenzie, for the Applicant

Mr Abraham Chan, SC and Mr Joshua Chan, instructed by Department of Justice, for the 1^st Respondent

Mr Abraham Chan, SC and Mr Joshua Chan, instructed by Ms Eversheds Sutherland, for the 2^nd Respondent

HCAL 448/2018

[2018] HKCFI 2224

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 448 OF 2018

________________________

________________________

________________________

DECISION

________________________

INTRODUCTION

1.  By a summons dated 24 April 2018 (“the Summons”), the Applicant applies for (i) interim relief (“the Interim Relief Application”), and (ii) disclosure or production of various documents more particularly described below (“the Disclosure Application”).

2.  I gave my decision on the Interim Relief Application on 24 August 2018 (“the Interim Relief Decision”).  I now give my decision on the Disclosure Application.

BASIC FACTS

3.  A brief outline of the facts of this case was given in the Interim Relief Decision, and the same will not be repeated here. For the purpose of this decision, I shall adopt the expressions and abbreviations as defined in the Interim Relief Decision.

4.  In connection with the consultation process referred to in paragraph 8 of the Interim Relief Decision, the Authority provided to the Applicant a copy of a consultancy brief dated 19 October 2015 (“the Consultancy Brief”) issued to Plum Consulting (“the Consultant”), who was asked to provide consultancy services (“the Consultancy Services”) in relation to the re-assignment of the Spectrum in the 900 MHz and 1,800 MHz bands upon the expiry of the existing assignments, and invited the Applicant and the other three incumbent MNOs to meetings with the Consultant for the purpose of seeking information from them.

5.  It is provided, in Paragraph 3 of the Consultancy Brief, that the objectives of the Consultancy Services are to - (a) provide an independent and objective quantitative assessment of the impacts on service quality arising from the re-assignment of the Spectrum upon expiry of the existing assignments of the Spectrum in 2020/21; and (b) offer assistance and advice to the Authority in the analysis of technical issues as raised in the submissions received in response to the two rounds of public consultation to be launched by the Authority on the re-assignment arrangements of the Spectrum as well as all other submissions received by the Authority in relation to the re-assignment arrangements of the Spectrum during the period prior to the promulgation of the Authority’s final decision.

6.  In Paragraph 4.1 of the Consultancy Brief, it is provided that the Consultant shall conduct independent and objective quantitative analyses and assessment of the impacts on service quality arising from the adoption of each re-assignment option proposed in the first public consultation paper.  For each of the proposed options, the Consultant is required to take into account the various possible re-assignment scenarios, which may range from the status quo for all existing spectrum assignees in one extreme, to all existing assignees not being assigned with any of the Spectrum in another extreme, as well as other possible re-assignment scenarios in between.  The Consultant is also required to postulate, with justifications, the likely re-assignment scenarios under each proposed option.

7.  In relation to the issue of confidentiality, Paragraph 16.1 of the Consultancy Brief provides that:-

“All materials and data furnished by or on behalf of the [Authority] in connection with the Consultancy Agreement, Materials (defined in paragraph 23.10), and the terms and conditions of the Consultancy Agreement shall be treated as confidential information. The Consultant shall not, during the continuance of the Consultancy Agreement or at any time thereafter, disclose to any person … any confidential information, provided that the restrictions on disclosure contained in this paragraph shall not apply –

(d) to the disclosure of any information in circumstances where such disclosure is required pursuant to any law, regulation, rule of any relevant stock exchange, or order of a court or arbitral authority of competent jurisdiction”.

8.  Section 23(1) of the Communications Authority Ordinance, Cap 616, similarly imposes a duty of confidentiality in the following terms:-

“If a person has obtained or received any confidential information by virtue of the person’s position as—

(a) a member of the Authority or a committee appointed by the Authority;

(b) a person authorized by the Authority or a committee appointed by the Authority; or

(c) an employee, agent, service provider, contractor or adviser engaged by OFCA in connection with the performance of any functions of the Authority,

the person must not give or disclose the confidential information to any other person.”

9.  This duty, however, is also qualified by Section 23(2)(e) of the Communications Authority Ordinance, which provides that nothing in subsection (1) applies to –

“the giving or disclosure of information in accordance with an order of a court, or in accordance with a law or a requirement made under a law”.

10.  On 14 February 2017, the Respondents published their Second Consultation Paper: “Arrangements for the Frequency Spectrum in the 900 MHz and 1800 MHz Bands upon Expiry of the Existing Assignments for Public Mobile Telecommunications Services and the Spectrum Utilisation Fee”. Accompanying the Second Consultation Paper was a redacted version of what has been referred to as the “Plum Report” prepared by the Consultant in September 2016, which was also the version given to the Applicant.

11.  The Respondents relied on the findings of the Consultant contained in the Plum Report in relation to the issue of “Customer Service Continuity” upon re-assignment of the Spectrum in their Decision as embodied in the Joint Statement dated 19 December 2017.  Relevantly for the present purpose, the following is stated in the Joint Statement:-

“Ensuring Customer Service Continuity

29. Insofar as customer service continuity is concerned, the Re-assignment of the 900/1800 MHz Spectrum will have an impact on the provision of 2G services in the whole territory. It is not expected to affect the provision of 3G services in general since 3G services are primarily provided by using the spectrum in the 1.9 – 2.2 GHz band. In relation to the provision of 4G services in areas other than the Remaining MTR Stations, given that spectrum in the 1.9 – 2.2 GHz, 2.3 GHz and 2.5/2.6 GHz bands is also used by MNOs for 4G services, it is not expected that the provision of 4G services will be affected by the present spectrum re-assignment exercise. In addition, the findings of the Study reveal no general adverse impact on service quality post spectrum re-assignment, except for the possible marginal service degradation in high traffic areas on the 3G network of an MNO in 2021, and on the 4G networks of this and another MNO in 2023 if some of the 900/1800 MHz Spectrum is acquired by a new entrant. The marginal service degradation could be effectively mitigated by the affected MNOs implementing remedial measures such as migrating more 3G traffic to the 4G network, increasing the number of antenna sectors and offloading more traffic to the Wi-Fi networks.

30. The above analysis demonstrates that if 2 x 10 MHz of spectrum in the 1800 MHz band is to be re-assigned to each of the incumbent spectrum assignees through the offer of a right of first refusal under the revised hybrid approach (ie Option 3 as proposed in the Second Consultation Paper), it can be expected to adequately address the concerns about customer service continuity in relation to the 4G services at the MTR premises, particularly in the Remaining MTR Stations, as well as the continuous provision of 2G services in the territory.”

12.  It is the Applicant’s case that it has been unable to give intelligent consideration to the Plum Report in relation to the issue of customer service continuity, or meaningful response to the Consultant’s conclusions on that issue, in view of the extensive redaction of the report.

13.  The Applicant’s request for the disclosure of an un-redacted version of the Plum Report was rejected by the Authority.  For the present purpose, it is not necessary to set out the course of the correspondence between the parties during the period from February 2017 to May 2017.

14.  The Applicant now applies for disclosure or production of (i) the full unredacted version of the Plum Report, and (ii) all communications to the Consultant comprising the instructions, terms of reference, facts and/or assumptions of facts upon which the Plum Report is based, subject to a “Confidentiality Ring” to be established in the terms of a draft Confidentiality Order annexed to the Summons.  At the hearing on 22 August 2018, Mr Benjamin Yu, SC (on behalf of the Applicant) informed the court that the Applicant would narrow down the Confidentiality Ring by removing all the names under “Internal team” in Part A of the Schedule to the draft Confidentiality Order with the exception of Chris Cheng (Chief Legal Counsel). The remaining members of the Confidentiality Ring on the Applicant’s side consist of “External counsel”, “External solicitors” and “External consultants”.

DISCUSSION

15.  In support of the application, Mr Yu argues that there is and can be no suggestion that the redacted parts of the Plum Report are not relevant or necessary for the reader to understand the report, and relies on two principles which are said to be relevant here:

(1) A party has a basic right to be given sufficient information to enable proper representations before a decision is taken that potentially affects his rights (see Fordham, Judicial Review Handbook, 6^th Ed, at paragraph 60.7).

(2) Once judicial review proceedings have commenced, a defendant public authority comes under a duty of candour and has to make full and fair disclosure of all relevant materials which are relevant or assist the applicant, even on “some as yet unpleaded grounds”.

In support of these propositions, Mr Yu refers the court to Fordham, Judicial Review Handbook, 6^th Ed, at paragraphs 60.7 and 10.4 respectively.

16.  The Disclosure Application is resisted by Mr Abraham Chan, SC on behalf of the Respondents primarily on the ground that the documents sought by the Applicant are irrelevant to the issues in dispute in the present application for judicial review, and are not necessary for the fair and just disposal of the proceedings.  The Respondents also rely on the confidentiality of the information contained in the redacted parts of the Plum Report and the communications to the Consultant referred to in the Summons. That there would be real confidentiality concerns flowing from the disclosure sought by the Applicant cannot, I believe, seriously be disputed, bearing in mind the circumstances in which, and the basis on which, commercially sensitive information was provided by the incumbent MNOs to the Authority/Consultant, and the fact that those MNOs (of which the Applicant is one) are keen competitors of each other in the mobile telecommunications market in Hong Kong. It is common ground, however, that “confidentiality” is not in itself a sufficient ground to bar the application for disclosure or production (unlike a claim for public interest immunity, which the court is not concerned with here), although the fact that the documents sought contain confidential and/or commercially sensitive information is a matter which the court may take into account in the exercise of its discretion whether to order disclosure, and also when considering what, if any, safeguard(s) against improper use or dissemination of the information ought to be provided if it decides to order disclosure or production of the documents.

17.  Logically, the issue which the court should first consider is whether to order disclosure or production of the documents sought by the Applicant, before it considers the sufficiency of the Confidentiality Ring proposed by the Applicant.

18.  In so far as the Applicant is relying on the principle mentioned in paragraph 15(1) above, the complaint that the version of the Plum Report disclosed to the Applicant is so heavily redacted that it has been unable to give intelligent consideration to the Plum Report in relation to the issue of customer service continuity, or meaningful response to the Consultant’s conclusions on that issue, is already being advanced under Ground 10 of the present application for judicial review.  It seems to me to be clear that this ground of judicial review can be advanced by the Applicant without seeing the redacted parts of the Plum Report.  The communications to the Consultant sought by the Applicant is ancillary to the application for disclosure of the full unredacted version of the Plum Report and does not require separate consideration.

19.  In so far as the Applicant is relying on the principle mentioned in paragraph 15(2) above, the duty of candour in the public law context was comprehensively considered by the Court of Appeal in Chu Woan Chyi v Director of Immigration [2009] 6 HKC 77, at paragraphs 11 to 14. The following principles, at paragraph 11(6) and (7) of the judgment of Ma CJHC (as he then was), are relevant here:-

“(6) The obligation to be full and frank in the discharge of the duty of candour is of course not an open‑ended or imprecise concept. What in any given case may constitute the fulfilment of that duty is entirely dependent on the issue or issues that are before the court. The court will be astute in judicial review proceedings not to permit so called ‘fishing’ expeditions by applicants in the hope of unearthing material to enable a challenge to be mounted: see Tweed at 664A‑B (paragraph 31). In my view, the court will, in most judicial review proceedings, not make a general order for discovery based on Peruvian Guano principles because in most cases, there will simply be no necessity for such an order. This will explain why there is no automatic discovery in judicial review proceedings; if discovery is required, a separate application must be made: RHC O.53, r.8.

(7) However, once the critical issue is identified in judicial review proceedings and where the resolution of this issue requires that the court be provided with adequate material (by way of discovery or otherwise), I believe the court will in principle be more, not less, inclined to make the necessary orders…”

20.  It is clear from the above judgment of the Court of Appeal, which is of course binding on me, that the scope of the duty of candour is limited by reference to the issue or issues before the court, the determination of which must, in my view, be based on the grounds of judicial review as raised in the Form 86.  I am therefore unable to accept Mr Yu’s submission that the duty of candour would require the public authority to disclose documents which may be relevant to unpleaded grounds.

21.  In the present case, as pointed out by Mr Chan, the accuracy or rigor of the analysis in the Plum Report is not a critical issue in dispute in these proceedings, and none of the Applicant’s 13 Grounds of challenge are founded on the assertion that the analysis in the Plum Report is unreasonable or incorrect.  I do not propose to examine the 13 Grounds of challenge raised in the Form 86 individually.  On their face, the grounds which may have some connection with the Plum Report are Ground 2 and Ground 10 (which I have already dealt with above).  In so far as Ground 2 is concerned, the Applicant’s complaint is that the Authority acted irrationally in having regard to service continuity only in respect of 2G and a limited part of 4G service.  It is significant, however, that the Applicant is not making any complaint about the Consultant’s analysis in relation to the issue of customer service continuity in the Plum Report.  The Applicant’s case, as stated in paragraph 138 of the Form 86, is that:-

“The Authority’s decision to recognise the need for service continuity in relation to 2G and a limited part of 4G services, but not in relation to 3G or the bulk of the operators’ 4G services was irrational and unreasonable. The Authority said (at Decision, paragraph 14): ‘While the 900/1800 MHz Spectrum constitutes only 31% of the spectrum deployed for the provision of 3G and 4G services, the provision of 2G services is supported solely by spectrum in the 900 MHz and 1800 MHz bands’ and (at Decision, paragraph 29): ‘[the Re-assignment of the 900/1800 MHz Spectrum] is not expected to affect the provision of 3G services in general since 3G services are primarily provided by using the spectrum in the 1.9-2.2 GHz band.’ These two sentences taken together are incoherent and irrational: it is incoherent and irrational to accept that the relevant spectrum constitutes a third of the spectrum deployed for 3G and 4G and then to conclude that the reassignment of the spectrum is not expected to affect the provision of 3G services (4G and 5G services apparently being overlooked altogether).”

22.  It has not been demonstrated by the Applicant that the redacted parts of the Plum Report are relevant to its complaint under Ground 2 as advanced in the Form 86.

23.  In the course of his submissions, Mr Yu also referred to Ground 3 (“The Authority erred in refusing and failing to carry out a full ‘refarming’ cost-benefit analysis under [Radio Spectrum Policy Framework] (‘SPF’) paragraph 4.4”).  Whether the Authority was required, but failed, to do so should be readily apparent from the relevant provisions of the SPF and the Joint Statement.  Again, the Applicant has failed to pin-point how the redacted parts of the Plum Report are or might be relevant to the complaint under Ground 3 as advanced in the Form 86.

24.  Overall, I consider that the Applicant can adequately advance the 13 Grounds of judicial review in the Form 86, as indeed it has done so, without in any way being hampered by the redaction of the Plum Report.  Bearing in mind also the harm which may arise from the disclosure of undoubtedly confidential and commercially sensitive information relating to the businesses of the Applicant’s competitors to the Applicant, I am not prepared to make the disclosure/production order sought by the Applicant.

DISPOSITION

25.  For the foregoing reasons, I dismiss the Disclosure Application.  I further make an order that the Applicant shall pay the Respondents’ costs in relation to the Disclosure Application, to be taxed if not agreed with certificate for 2 counsel.

26.  Lastly, it remains for me to thank counsel for their assistance rendered to the court.

Mr Benjamin Yu, SC and Mr Roger Beresford, instructed by Ms Baker & McKenzie, for the Applicant

Mr Abraham Chan, SC and Mr Joshua Chan, instructed by Department of Justice, for the 1^st Respondent

Mr Abraham Chan, SC and Mr Joshua Chan, instructed by Ms Eversheds Sutherland, for the 2^nd Respondent

HCAL 448/2018

[2018] HKCFI 1976

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 448 OF 2018

________________________

________________________

________________________

DECISION

________________________

INTRODUCTION

1.  By a summons dated 24 April 2018 (“the Summons”), the Applicant applies for:-

(1)   an interim stay of the Respondents’ decision (“the Decision”) contained in a “Joint Statement” dated 19 December 2017, including but not limited to (i) the offer of right of first refusal in the second half of 2018, and (ii) the auction which is expected to take place around the end of 2018 pursuant to the Decision, pending the final determination of this application for judicial review (“the Interim Relief Application”); and

(2)   disclosure of (i) the full unredacted version of what has been referred to as the “Plum Report” prepared by Plum Consulting (“the Consultant”) in September 2016, and (ii) all communications to the Consultant comprising the instructions, terms of reference, facts and/or assumptions of facts upon which the Plum Report is based, subject to a “Confidentiality Ring” to be established in the terms of the draft Confidentiality Order annexed to the Summons (“the Disclosure Application”).

2.  In view of the fact that the deadline for acceptance of the said offer of right of first refusal will fall on 10 September 2018, I shall first rule on the Interim Relief Application, and deal with the Disclosure Application separately.

BASIC FACTS

3.  The underlying facts of this case are of some considerable complexity.  For the purpose of disposing of the Interim Relief Application, the following brief summary should suffice.

4.  The mobile telecommunications market in Hong Kong is highly competitive, with 4 mobile network operators (“MNOs”), namely, HKT (“the Applicant”), China Mobile, Hutchinson Telephone (under the name “3”) and SmarTone Mobile, currently operating in Hong Kong.  As at September 2017, the number of mobile service subscribers in Hong Kong, with a population of some 7.3 million, was 18.25 million, representing one of the highest penetration rates in the world at about 247%.

5.  Under Section 32H(1) of the Telecommunications Ordinance, Cap 106 (“the Ordinance”), the Communications Authority (the 2^nd Respondent, “the Authority”) may assign frequencies and bands of frequencies in all parts of the radio spectrum used in Hong Kong.  Under Section 32I(2) of the Ordinance, the Secretary for Commerce and Economic Development (the 1^st Respondent, “the Secretary”) may by regulation prescribe the level of spectrum utilization fee (“the SU Fee”) or the method for determining the SU Fee.

6.  Currently, 552 MHz of the radio spectrum (“the Spectrum”) in four different frequency bands, including the “900 MHz band” and “1,800 MHz band”, are assigned to the 4 MNOs for the provision of public mobile telecommunications services in Hong Kong.

7.  Of the 198.6 MHz of the Spectrum in the 900 MHz and 1.800 MHz bands, representing some 36% of the total available Spectrum, which have been assigned to the 4 MNOs:-

(1)   the assignments of 49.8 MHz of the Spectrum in the 900 MHz band are due to expire on dates between 19 November 2020 and 11 January 2021; and

(2)   the assignments of 148.8 MHz of the Spectrum in the 1,800 MHz band are due to expire on 29 September 2021.

8.  The Decision concerns the arrangements to be made for the said 198.6 MHz together with 1.2 MHz of additional spectrum (currently vacant), making a total of 200 MHz, upon the expiry of the existing assignments.  The Respondents began the consultation process in February 2016 in relation to the said arrangements, and the Decision, in the form of the Joint Statement, was made on 19 December 2017.  It was decided, inter alia, that:-

(1)   an offer (“the Offer”) of a right of refusal (“RFR”) would be made to each of the 4 incumbent MNOs of up to 20 MHz (ie up to a total of 80 MHz) of the Spectrum in the 1,800 MHz band; and

(2)   the balance of the Spectrum, of at least 120 MHz, would be put up for auction (“the Auction”) to be held at the end of 2018, subject to caps on the amount of the Spectrum that could be acquired, to minimum prices that had to be paid, and to other rules.

9.  On 19 March 2018, the Applicant made an application for leave to apply for judicial review of the Decision.  The Form 86 raises a total of 13 grounds of challenge to the Decision, which it is not necessary to recite here.  On 23 March 2018, the court granted leave to the Applicant to apply for judicial review of the Decision on consideration of papers alone.  On 24 April 2018, the Applicant issued the present Summons for, inter alia, interim relief.

10.  On 16 July 2018, the Authority made the Offer to the Applicant of a right of first refusal for re-assignment for a new term of 15 years starting from 30 September 2021 of 2x10 MHz of the Spectrum (“Relevant FRF Spectrum”), with a deadline for acceptance of the Offer falling on 10 September 2018.  Two other features relating to the Offer should be mentioned here:-

(1)   The Offer expressly provides that, should the Applicant decide to exercise the right of first refusal, the Applicant is required to return its existing licence for incorporation of a new SC 10.4 on phasing out of the second and other generations of mobile services (which is the subject of complaint under Ground 9 in the present application for judicial review).

(2)   The Offer also expressly provides as follows –

“the re-assignment of the Relevant RFR Spectrum upon acceptance of the offer contained in this letter remains conditional upon there being no judicial order or direction, legislation or other legal impediment which would otherwise prevent [the Authority] from re-assigning the Relevant FRF Spectrum to you. In such circumstances, [the Authority] shall return the standby letter of credit to you and it shall have no further liability to you whatsoever resulting from [the Authority’s] inability to effect the re-assignment of the Relevant RFR Spectrum and you agree not to pursue any claims for damages or losses in that regard.”

11.  In so far as the Auction and the subsequent assignments of the “Auctioned Spectrum” are concerned, the Authority’s current timetable is as follows:

(1)   September 2018: the Authority will gazette terms and conditions of the Auction and issue an “Information Memorandum” to invite applications for participation in the Auction;

(2)   November 2018: the pre-qualification process of the applicants will be completed and the Authority will give notification to the qualified bidders;

(3)   December 2018/January 2019: the Authority will conduct the Auction and upon completion of the Auction, announce the result;

(4)   End of 2020: the Authority will grant the licences with assignment of the Auctioned Spectrum in the 900 MHz band (to take effect from 12 January 2021) after receiving payment of the relevant SU Fees from the successful bidders; and

(5)   3^rd Quarter of 2021: the Authority will grant the licences with assignment of the Spectrum in the 1,800 MHz band (to take effect from 30 September 2021) after receiving payment of the relevant SU Fees from the incumbent MNOs (for the RFR Spectrum) and the successful bidders (for the Auctioned Spectrum).

12.  The substantive judicial review application has been fixed to be heard on 12 February 2019, with 4 additional days reserved.

DISCUSSION

13.  The applicable principles relating to the grant of interim relief in public law cases are not in dispute.  I have recently had an opportunity to consider them in 梁頌恆v立法會主席[2018] HKCFA 1869 (14 August 2018), at paragraphs 12 to 14, and do not propose to repeat what was said in that decision.  Specifically in relation to the present case, the following additional points should be mentioned:-

(1)   Since the present case does not involve any challenge to the validity of primary legislation, the Applicant does not have to satisfy the higher threshold of a “strong prima facie case” on the merits before the court will consider granting interim relief.

(2)   Nevertheless, it has been said that “[t]he public interest is strong in permitting a public authority to continue to apply its policy when ex hypothesi it is acting in the public interest.  That wider public interest cannot be measured simply in terms of the financial or individual consequences to the parties” (see R (Medical Justice) v Secretary of State for the Home Department [2010] EWHC 1425 (Admin), at paragraph 12 per Cranston J).

(3)   The above judgment of Cranston J was referred to with approval by Andrew Baker J in R (Association of British Insurers) v Lord Chancellor [2017] EWHC 106 (Admin), who said at paragraph 62 that “… the public interest referred to by Cranston J at [12] is a strong one in this case.  That is to say the public interest in permitting a public authority to apply its policy and be free to act as it proposes to do in the public interest in a particular sphere of activity as it judges that interest.”  I would add that the strength of such public interest must of course depend on the nature, or subject matter, of the policy.  The assignment of radio spectrum in the mobile telecommunications market is a “polycentric” issue involving broad evaluations and discretionary judgment calls which the court generally has neither the mandate nor the relevant expertise to make, and thus the public interest in permitting the Authority to apply its policy and be free to act as it proposes to do in the public interest is also a strong one in the present case.

14.  On the merits of the Applicant’s case, when granting leave to apply for judicial review, I was satisfied that the application for judicial review was reasonably arguable and had a realistic prospect of success.  The parties have, understandably, not made any sustained submissions on the merits of their respective cases at the hearing on 22 August 2018, although Mr Benjamin Yu, SC (for the Applicant) did make some brief submissions on two of the grounds of judicial review, namely, Ground 1 (failure to follow the Spectrum Policy Framework) and Ground 3 (refusal or failure to carry out a full “refarming” cost-benefit analysis under paragraph 4.4 of the Spectrum Policy Framework).  The Respondents have yet to file their evidence in opposition to the substantive application for judicial review.  On the materials before me, I have no difficulty in coming to the view that the Applicant has demonstrated a “serious issue to be tried”, but I am unable to reach any firmer view on the merits of the application.

15.  In relation to the issue of the balance of convenience, Mr Abraham Chan, SC (for the Respondents) submits, and Mr Yu agrees, that the court should only take into account the potential harm to the parties between the date of the application and the date of the first instance judgment.  Having regard to the dates of the substantive hearing which have already been fixed (12-18 February 2019) and the complexity of the evidence (including expert evidence of economists) and the grounds of judicial review raised in the Form 86, for the present purpose, I shall proceed on the assumption that the court will give its judgment in around April/May 2019.

16.  The first part of the balance of convenience consideration relates to the potential harm or damage which the Applicant would or may suffer should the court make a “wrong” decision to refuse to grant the interim relief now sought by the Applicant.  Potential harm to the public is not irrelevant and should not be ignored even though, as pointed out by Mr Chan, it seems obvious that the Applicant is making the present application not to promote any public interest but to advance its own private commercial interests, which it is of course entitled to do.  By way of general observation, it should also be noted that the Decision does not affect the Applicant’s existing licences, which will continue to run their full courses. I pause to add that it has not been suggested that the Applicant has any legal right to renew or extend its existing licenses.

17.  Four main points are relied upon by Mr Yu in relation to the harm or loss which may result from a refusal of the interim relief sought by the Applicant:-

(1)   There is a risk of the application for judicial review becoming academic if no interim relief is granted because, if the Auction proceeds in December 2018 and third parties acquire rights under the Auction in January 2019, there will be 2 consequences –

(a)   it can be said that it would be meaningless to grant an order to quash the Decision since it has already been implemented; and

(b)   third parties would have acquired rights under the RFR and the Auction.

There is also a risk or possibility that the court may, in the exercise of its discretion, refuse to grant remedies in this judicial review application on the ground that third party rights or interests are involved.

(2)   Even if the transactions can strictly be unwound, in order to do so, the Applicant may have to take legal actions against third parties, thereby resulting in a proliferation of litigation.

(3)   To proceed with the Auction in the midst of the uncertainty created by the present challenge to the validity of the Decision would give rise to a risk of inefficient assignment of spectrum occurring because (i) some bidders may decide not to incur the costs of preparing for and participating in the Auction if they believe that there is a real risk of the outcome being invalidated, and (ii) bidders may also be reluctant to submit bids that reveal their true valuations if they believe there is a risk that the authorities could exploit this information in any subsequent second auction, such as by setting higher reserve prices for the spectrum (see the 2^nd Affirmation of Mr Paul Nicholas Reynolds, paragraph 12).

(4)   Allowing the Auction to go ahead may result in implementation costs incurred by the Authority and other market participants subsequent to the Auction being wasted should the court ultimately find in favour of the Applicant that the Decision is invalid.  Also, a delay in the implementation of the Joint Statement may lead to an overall reduction in the potential costs of implementation due to the impending release of the 5G spectrum.

18.  In my view, the first 2 points raised by Mr Yu can be adequately addressed by the Authority’s proposal to include a provision similar to the one contained in the Offer (referred to in paragraph 10(2) above) in the terms and conditions of the Auction to be gazetted such that any rights which may be acquired by any parties under the Auction would be subject to the court’s determination of the present judicial review application.  This proposal was, I understand, first made in Mr Chan’s Skeleton Submissions dated 20 August 2018, at paragraph 60(4)(a).  Mr Yu argues that the proposal is not found in the evidence filed on behalf of the Respondents and the court should only act on evidence properly filed.  Since the Respondents are public officers or authorities who can be trusted to act responsibly and in good faith, I am prepared to accept the statement or undertaking given by Mr Chan on their behalf that the terms and conditions of the Auction will include the aforesaid provision so that any third party which takes part in the Auction will know that any rights which he may acquire from the Auction are contingent upon, or subject to, the outcome of this judicial review application.

19.  In respect of the 3^rd point, I accept that the uncertainty caused by the present litigation may have an impact on the Auction as suggested by Mr Reynolds.  However, that is a risk which the Authority is prepared to bear.  The Authority is the statutory body tasked by the legislature to promote the efficient allocation and use of the radio spectrum as a public resource of Hong Kong under Section 32G of the Ordinance.  It has specialised knowledge and insight into the mobile telecommunications market in Hong Kong which the court lacks, and is much better placed than the court to judge the behaviour of the market participants, in particular how their interests and bidding strategies in or at the Auction may be affected by the cloud of uncertainty created by the present litigation.  I consider that the court ought to accord considerable weight to the judgment of the Authority that the Auction should proceed notwithstanding the perceived risk of an inefficient assignment of spectrum in such circumstances.

20.  In respect of the 4^th point, in so far as the costs which may be incurred by the Authority are concerned, they are not insignificant but cannot, in the scheme of the matter, be said to be very substantial.  Mr Reynolds has estimated costs of between £250,000 and £500,000 for an authority to obtain advice on auction design and implementation of the auction.  There are other costs which are more difficult to quantify, such as the costs of the necessary legislative amendments.  In so far as the MNOs, bidders and new assignees are concerned, they are, or are likely, to be substantial commercial enterprises and will no doubt appropriately balance the risk of a wasted outlay of capital against the reward of a potentially lucrative business venture in the mobile telecommunications market in Hong Kong.

21.  The other side of the balance of convenience consideration relates to the potential harm to the public should the court make a “wrong” decision to grant the interim relief sought by the Applicant.  Two points are made by Mr Chan on behalf of the Respondents, with emphasis being placed on the first one:-

(1)   If an interim stay is granted, the MNOs and new entrants will have insufficient “lead time” to optimally configure and/or roll out their telecommunications networks before the scheduled new term of the Spectrum reassignment in 2021.

(2)   The grant of an interim stay will delay the wider public benefits of the reassignment of the Spectrum by auction.

22.  In respect of the 1^st point, Mr Chan refers to and relies on, inter alia, the following statement in paragraph 84 of the Joint Statement:

“Taking into account the preparatory work required to implement the decisions of the [Authority and Secretary] in relation to the FRF Spectrum and Auctioned Spectrum, including amendments of the subsidiary legislation; gazettal of the auction reserve prices and the terms and conditions of the auction; issue of the information memorandum for auction; invitation for bidding; etc., the auction is expected to be conducted around the end of 2018. This will provide incumbent MNOs and new spectrum assignees a transitional period of about two years following completion of the auction to reconfigure their existing networks and/or to roll out a new network infrastructure, as the case may be, so that the Auctioned Spectrum could be put to immediate use at the beginning of the new term of the spectrum assignments.”

23.  Two matters arising out of this statement are of note.  First, the Authority and the Secretary consider that the Auctioned Spectrum should be put to immediate use at the beginning of the new term of the spectrum assignments.  The importance of the MNOs and new assignees being able to do so is obvious, having regard to the fact that (i) the radio spectrum is a valuable, but limited, public resource of Hong Kong, and (ii) the Auctioned Spectrum would make up at least 120 MHz (21.74%) of the total of 552 MHz of radio spectrum which has been assigned for the provision of public mobile telecommunications services in Hong Kong.

24.  Second, the Authority and the Secretary consider that a transitional period of about 2 years following the completion of the Auction is required.  As earlier mentioned, the new term of the spectrum assignments will take effect from 12 January 2021 (for the 900 MHz band) and 30 September 2021 (for the 1,800 MHz band).  If a transitional period of about 2 years is required, the Auction will need to be conducted in late 2018 or early 2019.

25.  Mr Yu, on behalf of the Applicant, disputes the length of the transitional period mentioned in the Joint Statement, and refers to paragraph 86 of the Affidavit of Mr Sanda Cheuk, Assistant Director in the Office of the Communications Authority, who states that “the [Authority] would expect the MNOs to take at least 1.5 years to deal with the coordination work which the adjustments to their spectrum would involve”.  That paragraph must, however, be read in the light of the immediately preceding paragraph 85, where Mr Cheuk reiterates that the current timetable incorporates a transitional period of about 2 years following the completion of the Auction.  As explained by Mr Cheuk in paragraph 86 of his affidavit, the estimate of 1.5 years is based on the Authority’s experience from carrying out an earlier 1.9-2.2 GHz Spectrum Re-assignment exercise in 2016, but the current re-assignment exercise is technically more complicated than the previous one.  Mr Cheuk also says that any unsatisfactory transitional arrangement for the current re-assignment exercise in 2021 (involving 2G, 3G and 4G services) will have a greater impact on the mobile telecommunications services provided to the general public as compared with the one in 2016 (involving mainly 3G services).

26.  Mr Yu also refers to the estimated timeframe given by China Mobile (“the Right of First Refusal and Auction periods need to be completed by early to mid-2019 at the latest in order to allow for a sufficient transitional period before the expiry of the existing assignments between November 2020 and September 2021”) in support of the contention that a transitional period of about 1.5 years would be sufficient.  As for the estimated timeframe given by SmarTone (“[t]he reason for putting the re-assignment of spectrum in place by the end of 2018 is to give the current operators and any new licensee(s) time to reconfigure and prepare for re-assignment with a 2-year buffer before the earlier 900 MHz assignment expires” in HFW’s letter dated 24 April 2018), Mr Yu submits that this timeframe takes into account the possibility of an appeal from this court’s judgment which, as is common ground, should not form part of the consideration when determining the issue of balance of convenience.  It seems to me, however, that although HFW did refer to the likelihood that the outcome of the present challenge to the Decision might not be determined “until 2019 and beyond” because of the possibility of appeals potentially to two levels of appellate court, when HFW referred to the “2-year buffer” period, they were focusing on the time required by the current operators and any new licensee(s) to reconfigure and prepare for re-assignment.

27.  The transitional period following the completion of the Auction which is required to enable the MNOs and new licensees to put to immediate use the Auctioned Spectrum is not a matter that can be determined with scientific precision.  It seems clear that a period of at least 1.5 years is required for them to reconfigure their existing networks and/or to roll out a new network infrastructure.  On the assumption that the court is able to deliver a judgment in this judicial review application in April/May 2019, it would, I consider, be unrealistic to believe that the Auction can be conducted immediately after the date of handing down of the judgment (in the event that the application is refused).  Inevitably, time will be required to prepare for the actual conduct of the Auction, proper notice of the Auction has to be given to the potential bidders, and pre-qualification vetting has to be carried out to determine the qualified bidders.  Again, the Authority, with its experience in conducting a similar re-assignment exercise recently in Hong Kong and its specialised knowledge of the technical and practical issues which may be encountered by the MNOs and new assignees to reconfigure their existing networks and/or to roll out a new network infrastructure, is much better placed than the court to judge what would be the necessary transitional period in relation the present re-assignment exercise.  The court should, I believe, accord considerable weight to the considered opinion of the Authority on this matter.  Moreover, in a matter as important as the provision of mobile telecommunications services to the public, it would be reasonable for the Authority and Secretary to err on the side of caution to ensure a smooth transition to the regime under the new spectrum assignments.

28.  Mr Yu also complains that the tight timeframe is a matter of the Authority’s own making.  While I accept that the current timetable is laid down by the Authority, the commencement dates of the new assignments have to take into account, or be synchronised with, the expiry dates of the existing assignments, namely, between 19 November 2020 and 11 January 2021 for the 900 MHz band and on 29 September 2021 for the 1,800 MHz band.  Taking into account the proposed commencement date of the new assignments in the 900 MHz band, namely, 12 January 2021, the proposed Auction date at the end of 2018 would, I consider, be appropriate or necessary on an objective view of the matter.

29.  In all the circumstances, I consider that granting the interim stay sought by the Applicant would create a significant risk that the MNOs and new licensees may not be able to put the Auctioned Spectrum to immediate use at the beginning of the new term of the spectrum assignments.  There is some discussion about the possibility of an administrative extension of the existing spectrum assignments.  However, such extension would require mutual agreement of the parties and inevitably would involve a degree of uncertainty.  I do not consider that the possibility of an administrative extension should be entered into the equation when considering the issue of balance of convenience.

30.  The 2^nd point relied upon by Mr Chan is, I believe, more controversial on the evidence.  I do not propose to place any weight on it in the balancing exercise.

31.  In my view, the risk of public harm as a result of the MNOs and new assignees not being able to put the Auctioned Spectrum to immediate use at the beginning of the new term of the spectrum assignments outweigh the risks of inefficient assignment of spectrum and of wastage of implementation costs which may be incurred by the Authority and other market participants referred to in paragraph 17(3) and (4) above.  In other words, the balance of the risk of injustice favours a refusal of the interim relief sought by the Applicant.

DISPOSITION

32.  For the foregoing reasons, I dismiss the Interim Relief Application.  I further make an order that the Respondents’ costs in relation to the Interim Relief Application shall be in the cause of this application for judicial review, to be taxed if not agreed with certificate for 2 counsel.

33.  Lastly, it remains for me to thank counsel for their assistance rendered to the court.

HCAL 448/2018

[2018] HKCFI 929

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 448 OF 2018

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D E C I S I O N

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1.  The present application for judicial review concerns a decision made by the Respondents on 19 December 2017 to offer to renew the assignment of 40% of the existing 200 MHz radio spectrum to the incumbent assignees, of which the Applicant is one, and to put the rest up for auction with a view to it being withdrawn from the market and re-allocated according to the auction results (“the Decision”). As I understand it, under the Respondents’ current timetable, the auction shall be completed in the second half of 2018, and there are many steps to be taken before and after the auction in the run up to the expiry of the current assignments in 2020 and 2021.

2.  The present application for judicial review was made on 19 March 2018.  The Form 86 raises a total of 13 grounds of challenge to the Decision, and the evidence filed in support of the application consists of 13 lever-arch files of exhibits.  Leave to apply for judicial review was granted on 23 March 2018, and the court appointed a directions hearing on 27 April 2018 (ie today) to deal with how the application for judicial review should be taken forward in the event that agreement of the parties could not be reached.

3.  On 24 April 2018, the Applicant took out a summons seeking, inter alia, an interim stay of the Decision and also disclosure of an un-redacted version of what has been referred to as the Plum Report subject to a proposed Confidentiality Ring.

4.  I shall first deal with the application for interim stay.  The application is not supported by any affidavit.  The Respondents submit that they ought to be given time to file evidence in response to the application.  The Applicant insists, however, that the court should deal with the application today, without the Respondents being given any opportunity to file evidence in response, arguing effectively that no evidence, or meaningful evidence, can properly be adduced by the Respondents to oppose the application.

5.  When it was pointed out by Mr Chan on behalf of the Respondents that the application is not supported by any evidence, Mr Beresford on behalf of the Applicant responded by saying that the Applicant has already filed voluminous evidence (in the form of the affidavit in support of the application for judicial review and the 13 bundles of exhibits).  I consider this approach to be unacceptable.  A proper application for an interim stay ought to be supported by evidence directed at or focused on the need for the interim stay.  Also, despite Mr Beresford’s able submissions, I am unable to see any urgency in having the interim stay application being dealt today without the Respondents being giving a proper opportunity to consider the application and to file evidence in opposition to the application.  I am also not satisfied that no meaningful evidence can be filed by the Respondents to oppose the application.  There could obviously be substantial practical and technical implications arising from a stay of the Decision which could be relevant to the court’s exercise of its discretion whether to grant an interim stay.  On the other hand, the Applicant has failed to explain why it is essential to have an interim stay of the Decision today.  In my view, the position taken by the Applicant is unreasonable, and I am not prepared to deprive the Respondents a proper opportunity to deal with the interim stay application in the manner suggested by the Applicant.

6.  For essentially the same reasons, I do not consider that the Respondents should be deprived of a proper opportunity to put in evidence to respond to the disclosure application.  In any event, it is for the Applicant to make out a proper case for disclosure of the un-redacted version of the Plum Report.  No evidence has been filed in support of the application, and I am far from satisfied, on the materials presently available before me, that it would be right to order the Respondents to disclose the un-redacted version of the Plum Report now.

7.  In all, I decline to deal with the two applications today.  Since Mr Beresford has confirmed that the Applicant does not intend to file any further evidence in support of the applications but would ask for leave to file evidence in reply (if so advised) within 7 days, I give the following directions:

(1)  leave to the Respondents to file evidence in opposition to the summons dated 24 April 2018 within 21 days from the date hereof;

(2)  leave to the Applicant to file evidence in reply (if so advised) within 7 days thereafter;

(3)  no further evidence be filed without leave of the court; and

(4)  the summons be adjourned to a date to be fixed for substantive argument, with 1 day reserved.

8.  Lastly, in relation to the time-table for the substantive application for judicial review, I direct that:-

(1)  leave to the Respondents to file evidence on or before 3 July 2018;

(2)  leave to the Applicant to file evidence in reply on or before 3 August 2018; and

(3)  the parties shall on or before 2 May 2018 inform the court of the available dates of their counsel or leading counsel for a 5-day hearing during the period from August 2018 to March 2019.

9.  The court shall take into account counsel’s diaries but will not be bound by the same when fixing the dates for the substantive hearing of the judicial review.

[Further submissions were made by the parties on the issue of costs.]

10.  I order that 60% of today’s costs be to the Respondents, with the balance 40% being in the cause of the application for judicial review.