Digicel (Samoa) Ltd v Attorney General [2008] WSSC 15 (30 March 2008)

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IN THE MATTER: of an Order of the Regulator
(appointed under the Telecommunications Act 2005)
dated May 2007 prescribing Interconnection Rates

DIGICEL (SAMOA) LIMITED, a company duty
incorporated in and carrying on business in Apia and elsewhere in Samoa
Appellant

ATTORNEY-GENERAL for and on behalf of the
Regulator appointed pursuant to the Telecommunications Act 2005.
First Respondent

SAMOATEL LIMITED, a company incorporated in
and carrying on business in Apia and elsewhere in Samoa
Second Respondent

Counsel: N M Cooke QC, M M Varitimos (both of the Australian bar)
and T K Enari for the appellant,

P Almond QC (of the Australian bar) and R Wendt for the first respondent,
B P Heather-Latu for the second respondent

[1] The parties in these proceedings are Digicel (Samoa) Ltd a company duly incorporated and carrying on business in Apia and elsewhere in Samoa, the Regulator John, Morgan, appointed in July 2006 pursuant to the provisions of s.6 of the Telecommunications Act 2005 and Samoa Tel Ltd a company duly incorporated and carrying on business in Apia and elsewhere in Samoa.

[2] Digicel (Samoa) Ltd and Samoa Tel Ltd are service providers of telecommunications services in terms of the Telecommunications Act 2005. They are the only service providers for the time being in Samoa.

[3] A ‘service provider’ is defined in s.2 of the Act to mean a person that provides a telecommunications service to the public or that owns or operates a telecommunications network used to provide telecommunications services to the public.

[4] Both Digicel (Samoa) Ltd and Samoa Tel Ltd have been designated by the Regulator pursuant to s.34 of the Act as dominant service providers for interconnection purposes with Digicel (Samoa) Ltd as the dominant cellular service provider and Samoa Tel Ltd as the dominant fixed line service provider.

[5] There was debate towards the end of the proceedings between counsel for Digicel (Samoa) Ltd and counsel for Samoa Tel Ltd as to the appropriate way the Regulator should have been cited as a party. I do not wish to further prolong this judgment by dwelling on that debate and the reasons for the conclusion I have reached as the matter does not really affect the real issues in these proceedings. My conclusion is that the Regulator, John Morgan, should be cited as first respondent as "Attorney-General for and on behalf of the Regulator appointed pursuant to the Telecommunications Act 2005". The intitulement of all documents filed in these proceedings where the Regulator is cited as first respondent are deemed to be amended accordingly.

[6] As I understand Mr Almond who, on behalf of the Regulator, raised this matter as a "housekeeping matter", the amendment made is acceptable to him.

[7] These proceedings are concerned with an appeal brought by Digicel (Samoa) Ltd (Digicel) pursuant to s.11 of the Telecommunications Act 2005 (the Act) against the Attorney General for and on behalf o the Regulator appointed pursuant to the Act (the first respondent) to declare as unlawful the Order of the Regulator Number 2007/4 (Order 2007/4) setting interconnection rates/charges for the telecommunications dominant service providers Digicel and Samoa Tel Ltd (Samoa Tel).

"[The] physical and logical linking of telecommunications networks used by the same or a different service provider in order to allow the users of one service provider to communicate with users of the same or another serviced provider, or to access the facilities and/or services of another service provider, and includes ‘access’, meaning the making available of telecommunications facilities or services by one service provider to another for the purpose of providing telecommunications services".

[9] "Interconnection" is explained by Dr. John Philip Small, a consulting economist with more than sixteen years of experience in regulatory matters, called as an expert witness by Digicel, in paras 11 and 12 of his affidavit of 11 July 2007 as:

"11 [Interconnection] is what happens when telephone calls pass between two different networks. For example, when a Samoa Tel customer calls a Digicel customer, both networks are used to provide the call service. In this case Samoa Tel will charge its customer for the call, and pay some of that money to Digicel in consideration for its help in completing the call. The amount paid will be the interconnection rate".

"12. Interconnection between telecommunications networks is absolutely necessary if consumers are to benefit from competition in telecommunications. However, if there is only one phone company in a country (possibly with a fixed and a mobile network), interconnection is not needed within the country (though similar provisions are required for international calling)".

[10] "Interconnection" is also explained by the Regulator in para 6(a) of his affidavit of 8 August 2008 as:

" Interconnection is the interconnection of telecommunications networks and access by service providers to the telecommunications facilities of other service providers in order to permit interoperability of telecommunications services that originate or terminate in Samoa".

[11] One of the objectives of the Act as provided in s.3(g) is to promote efficient interconnection arrangements between service providers. Under s.8(1)(i), one of the functions and responsibilities of the Regulator is to regulate interconnection between telecommunications networks of different service providers.

[12] Part VII of the Act which contains ss.32 to 39 provides for interconnection of telecommunications network between service providers. This is necessary to ensure that service providers such as Digicel and Samoa Tel can link to the telecommunications network of each other and have access to the telecommunications facilities of each other to ensure interoperability of telecommunications services.

[13] " Interconnection changes" is explained by the Regulator in para 6(b) of his affidavit of 8 August 2007 as:

"6(b) Interconnection rates are charges for interconnection between telecommunications service providers. For example, Samoa Tel Ltd (Samoa Tel) pays Digicel (Samoa) Ltd (Digicel) an interconnection charge for each minute of traffic that is sent from its fixed line subscribers to a Digicel mobile customer (known as the Mobile Terminating Rate or MTR) while Digicel pays Samoa Tel an interconnection charge for each minute of traffic that is sent from Digicel customers to Samoa Tel fixed line subscribers (known as Fixed Terminating Rate or FTR)"

[14] Sections 32(c) and 33 require the Regulator to promote interconnection arrangements and to facilitate interconnection agreements between service providers. Such agreements would include an agreement for interconnection charges.

[15] If service providers are unable to reach agreement on interconnection charges, the Regulator may regulate prices for interconnection (s.32(f)) and may make an order specifying the terms of interconnection that shall be provided by one or more service providers (s.32(i)).

[16] Section 36(i) requires that interconnection charges of dominant services providers shall be cost-based. According to para 11 of the affidavit of 12 July 2007 by David Dillon, General Counsel for Digicel, this implies that the interconnection charges of a dominant provider shall be based on their costs of providing interconnection services and shall be economically viable.

[17] The process which the Regulator decided upon to determine cost-based charges is to be found in the document entitled "Request for Expressions of Interest: Evaluation of Interconnect Costing Models" and the document partially entitled "Contract No. OR-1-07" which are annexed to the affidavit of the Regulator of 8 August 2008. This was the contract between the Government of Samoa and Intercai Mondiale Ltd (IML), an international consulting firm based in the United Kingdom, which was selected by the Regulator as consultants to him and required IML to do certain things.

[18] The adopted process is summarized in the written submissions of counsel for the appellant Digicel. I can do no better than set out substantially the adopted process as set out in counsel’s written submissions:

(a) Submission by Digicel and Samoa Tel of bottom up cost models based on long run average increment cost (LRAIC) principles as required by the Samoan Guidelines issued by the Regulator on 11 January 2007.

(b) The engagement of an international consultant (IML) to evaluate the Interconnect cost models for the Regulator.

(d) IML were to engage in separate iterative processes with Samoa Tel and Digicel to confirm the accuracy and robustness of the models and to refine the data as may be required to ensure that each cost model accurately presented costs for call origination and termination in an efficiently designed and operated framework.

(e) IML was to provide the Regulator and the Ministry of Finance with a report summarizing the consultant’s findings from the analysis of each cost model and indicating any adjustments made to ensure accuracy of the presented costs. The report was required to confirm that the resulting costs had been adequately substantiated to by submitting parties and that they allowed a fair and equal comparison of costs between the different networks.

(f) IML was to review the weighted average costs of capital (WACC) submissions of Digicel and Samoa Tel and presented recommendations to the Regulator and the Ministry of Finance for reasonable rates of return based on international best practices.

(g) IML was to prepare recommendations for cost-based interconnection rates intended to remain in effect for at least three years. The interconnection rates were to be based on the agreed final cost models and rates of return and may result in parity between fixed and mobile terminating rates should costs be equal for each type of service.

[19] In preparing the chronology of events, leading up to Order 2007/4 by the Regulator, I rely primarily on the affidavits by the Regulator and Mr Dillon, General Counsel for Digicel.

[20] In October 2006, the Regulator was advised by Digicel and Samoa Tel that they were unable to reach an agreement in relation to interconnection charges and therefore requested the Regulator to set interim interconnection charges.

[21] On 15 October 2006, the Regulator provided Digicel and Samoa Tel with guidelines for the development of cost models. These cost models are computer-based spreadsheets containing a detailed breakdown of all costs for installation and operation of a telecommunications network.

[22] The guidelines provided by the Regulator were in the form of a Danish paper of the Danish Telecommunications Regulator entitled "LRAIC Model Reference Paper: Common Guidelines for the Top-Down and Bottom-Up Cost Analyses" ("the Danish Paper")

[23] The Danish Paper provided a summary of both top-down and bottom-up approaches to costing and was given to Digicel and Samoa Tel to provide an example of the methodologies to be applied to establish the basic methodology to be used when preparing their cost studies.

[24] On 30 October 2006 at a meeting attended by the Regulator, representatives of Samoa Tel, and Mr Dillon and another representative of Digicel, it was agreed that the cost models would be completed within four and a half months. That would be about mid-March 2007. Digicel’s representatives advised in that meeting that Digicel would be able to provide its cost model within one month whilst the representatives of Samoa Tel requested two months for Samoa Tel to provide its cost model.

[25] Following the meeting of 30 October 2006, the Regulator issued Interim Order No. 2006/4 setting interim interconnection rates/charges effective from 31 October 2006. This was intended to be an interim solution pending the establishment of long-term interconnection charges.

[26] Interim Order 2006/4 was sent by the Regulator to Michael Johnstone, the chief executive officer of Samoa Tel, and Mr Dillon of Digicel under cover of a letter dated 1 November 2006. In that letter the Regulator noted that a failure by either company to comply with the timeline set out by him for the establishment of long-term interconnection charges may result in the establishment of those charges by a unilateral decision of himself as the Regulator since it is not in the public interest to prolong the rating process. This statement was included in the Regulator’s covering letter of 1 November 2006 in accordance with a request made by Mr Dillon at the meeting held on 30 October 2006.

[27] Under Interim Order 2006/4, Digicel was required to pay Samoa Tel 8.2 sene per minute for traffic originating in the Digicel mobile network and terminating on the Samoa Tel fixed network. Similarly, Samoa Tel was required to pay Digicel for traffic originating on the Samoa Tel fixed network and terminating on the Digicel mobile network at 25 sene per minute for off-peak traffic and 45 sene per minute for peak-hour traffic.

[28] By letter dated 2 November 2006, attaching a copy of Interim Order 2006/4, to the Minister of Communications and Information Technology, the CEO of the Ministry of Communications and Information Technology and others, the Regulator advised that the charges/rates be kept confidential as Digicel had requested that they be held in confidence as they represent only an interim solution and do not reflect long term cost based rates.

[29] In the affidavit of 12 July 2007 by Mr Dillon, he says that the Danish Papers given by the Regulator to Digicel were incomplete, and following a request from Digicel, the Regulator emailed on 14 November 2006 two further Danish papers to Digicel and Samoa Tel. The first paper was entitled "Revised Draft LRAIC Bottom-Up Model Reference Paper: Guidelines for the Bottom-Up Cost Analysis" and the second paper was entitled "Revised Draft LRAIC Top-Down Model Reference Paper: Guidelines for the Top-Down Cost Analysis (together referred to as "the Outstanding Danish Papers").

[30] In the Regulator’s email of 14 November 2006, he pointed out that the "bottom-up approach" might be a bit quicker to carry out and requested comments in that regard.

[31] According to the Regulator in his affidavit of 8 August 2007, the Outstanding Danish Papers were provided to Digicel and Samoa Tel to give broad guidelines for long-term costing methodology and were indicative of the Samoan guidelines that would eventually be issued by him for the process of setting interconnection charges.

[32] In the affidavit of 12 July 2007 by Mr Dillon, he says that the Outstanding Danish Papers were voluminous and complex and the time in which it was necessary to review those Papers was unreasonably short.

[33] On 23 November 2006, Digicel provided by email to the Regulator its comments on the Danish Paper and the Outstanding Danish Papers and highlighted several difficulties with their applicability to Samoa. Digicel also stressed the fact that the Danish Paper and the Outstanding Danish Papers related to cost models applicable to fixed operators only and not to mobile operators.

[34] Digicel also attached to its email of 23 November 2006 a document entitled "A Response to the Samoan Telecommunications Regulator’s LRAIC Model Reference Paper" prepared by Ovum Consulting ("the Ovum Report").

[35] The Ovum Report recommended that benchmarking was a better method for setting interconnection charges than cost studies. However, as pointed out by the Regulator, benchmarking was considered during the process of setting the interim interconnection charges and rejected since it is contrary to the requirement in s.36 of the Act that interconnection charges shall be cost-based.

[36] During November and early December 2006, according to the Regulator’s affidavit of 8 August 2007, the Regulator, on a number of occasions, discussed with Mr Dillon on the telephone a number of issues regarding the timeframe in which Digicel would have to prepare its cost model after the guidelines for the cost-based interconnection charges for Samoa were issued. During that period, the Regulator informed Mr Dillon that the guidelines for Samoa were under review.

[37] On 11 January 2007, the Regulator issued the document entitled "Cost Based Interconnection Rates for Samoa: Cost Study Guidelines" ("the Samoan Guidelines"). Copies of this document were sent to Samoa Tel and Digicel on the same date, 11 January 2007. In his covering email, the Regulator asked both parties whether they had any questions regarding the Samoan Guidelines and provided an address for queries. It appears there were no queries from Digicel.

[38] Mr Dillon in his affidavit of 12 July 2007 says that Digicel was at no time provided with an opportunity to comment on a draft of the Samoan Guidelines prior to their issuance.

[39] Both the Regulator and Mr Dillon are in agreement that the time in which the Samoan Guidelines were issued affected the timeframe set out in Interim Order 2006/4 for the cost-based rating process. However, the Regulator says that this should not have affected the timeline for Digicel’s subsequent response.

[40] In the preparation of the Samoan Guidelines, the Regulator says that he considered the guidelines contained in the Danish Paper, the Outstanding Danish Papers and the Ovum Report.

[41] The Regulator also says that in light of the two month timeframe in which Samoa Tel and Digicel were to provide their cost models following the issuance of the Samoan Guidelines, Samoa Tel and Digicel had until 11 March 2007 to provide their cost models.

[42] On 7 February 2007, the Regulator sent an email to Samoa Tel and Digicel asking them to advise when they expected to complete their interconnection cost studies.

[43] On 8 February 2007, Mr Dillon emailed the Regulator and informed him that he would have to check with his finance people who were preparing Digicel’s cost model and then respond.

[44] On 21 February 2007, the Regulator wrote to Samoa Tel and Digicel and, among other things, asked to be provided with a firm date by which their companies would be able to submit their cost studies. In the same letter, the Regulator noted that dates beyond 15 March 2007 would not be acceptable in view of commitments made by both parties during the meeting on 30 October 2006.

[45] Following the letter of 21 February 2007 from the Regulator, Mr Dillon responded by email of 26 February 2007 advising that his colleague who was working on Digicel’s cost model in Trinidad and Tobago was away and he would revert to him.

[46] By email of 27 February 2006, the Regulator requested Mr Dillon to revert to him as soon as his colleague returned.

[47] Then in an unspecified date in March 2007, the Regulator engaged IML to undertake an independent analysis of the cost models to be presented by Samoa Tel and Digicel and to recommend cost-based interconnection rates. According to the Regulator the engagement of such a consultant was discussed at the meeting held on 30 October 2006.

[48] On 5 March 2007, the Regulator sent an email to Samoa Tel and Digicel in which he outlined a number of matters which were to be included in their cost studies. The Regulator also reminded the parties in the same email that their cost studies were to be completed by 15 March 2007.

[49] The Regulator, on the same day, 5 March 2007, sent another email to Mr Dillon asking him to confirm the timing for Digicel’s cost study and advising him again that delays beyond 15 March 2007 could result in best guess estimations of Digicel’s costs rather than actual costs.

[50] On 6 March 2007, Mr Dillon by email advised the Regulator that Digicel’s in-house economist had resigned and that this was going to cause some serious delays as he was the only person who had thus far been involved in the preparation of Digicel’s cost study, and the worst case scenario was that that could lead to four weeks delay.

[51] On 8 March 2007, the Regulator sent an email to Mr Dillon in which a one week’s extension of up to 22 March 2007 was granted to Digicel to submit their cost study. In the same email, the Regulator suggested to Mr Dillon to consider using Digicel’s local senior finance staff to complete their cost study if Mr Dillon was unable to gain the services of his economist from Trinidad within a reasonable time frame.

[52] In Mr Dillon’s affidavit of 12 July 2007, he refers to the complexity of cost modeling exercises and the necessity for professionals that have experience to be involved in such exercises. Mr Dillon further states that Digicel did (and does) not have such experienced staff in its operations in Samoa.

[53] The Regulator in his affidavit of 8 August 2007 states that the reason why he made the suggestion about getting Digicel’s local senior finance staff to complete the cost study was that he believed that a local senior staff member would have had some involvement in the preparation of Digicel’s cost model and could provide some further information for the consulting company IML to consider during the analysis process. The Regulator also believed that Digicel’s local finance staff would have been responsible for collecting the basic cost information.

[54] On 19 March 2007, Samoa Tel submitted its cost model for its fixed network to the Regulator.

[55] On 22 March 2007, Samoa Tel submitted a revised cost model of its fixed network to the Regulator.

[56] Both cost models submitted by Samoa Tel to the Regulator were not, as claimed by Digicel, disclosed by the Regulator to Digicel. It is also claimed on behalf of Digicel that it was not given any opportunity by the Regulator to correct, contradict or comment on Samoa Tel’s cost models.

[57] On 22 March 2007, and again on 23 March 2007, the Regulator sent an email to Mr Dillon seeking Digicel’s cost study as it had not then been provided to the Office of the Regulator.

[58] On 23 March 2007, Mr Dillon replied by email that his colleagues were working "flat out" on Digicel’s cost model but that it would not be ready until 26 or 27 March. He stressed that the task was simply impossible to complete by today, that is, 23 March 2007, and that he had escalated the cost modeling exercise to Digicel’s CEO level in the Pacific and the Caribbean to ensure that the deadline of 26 or 27 March was met.

[59] By email of the same date, 23 March 2007, to Mr Dillon, the Regulator granted Digicel a further extension until 26 March 2007 to submit their cost study. In the same email the Regulator expressed concern on the further delay on Digicel’s part. He also mentioned that a previous extension of time had been granted with great reluctance to 22 March 2007. The Regulator also said to please note that any delay beyond 26 March 2007 would not be acceptable and that if Digicel’s cost study was not received by 26 March 2007 he would have no option but to instruct IML to proceed on the basis of using their best estimates of Digicel’s capex and apex as stated in his previous correspondence.

[60] In the morning of 27 March 2007, the Regulator sent an email to Mr Dillon again requesting Digicel’s cost study. Shortly after, Mr Dillon submitted Digicel’s cost model via an email which stated: "Please find attached our cost model for Samoa which is sent to you on a confidential basis".

"48. I submitted the cost model prepared by Digicel on a confidential basis. This did not preclude the Regulator from requesting my permission to provide inter alia, (i) this confidential cost model to external legal and or economic advisors of Samoa Tel, subject to the necessary and traditional safeguards being effected to protect such information; and or (ii) a non-confidential version of this cost model to Samoa Tel

"49. Indeed, Digicel was expecting such a request given that Digicel and/or our external legal and economic advisors were expecting access to Samoa Tel’s cost models. My expectation is evident by my email of 16 April 2007...to Mr Morgan enquiring as to when Digicel would obtain a copy of Samoa Tel’s cost models. From my experience, I always expected that Digicel would be given access to Samoa Tel’s cost models, or at least Digicel’s external, legal and economic advisors would be given access".

[62] In the afternoon of 27 March 2007, the Regulator received an email from Chris Pollard of IML requesting supporting documentation from Digicel for the cost model it had submitted.

[63] On 28 March 2007, the Regulator sent another email forwarding to Mr Dillon the email from Mr Pollard requesting from Digicel supporting documentation for its cost model. In the same email, Mr Dillon was advised that an IML consultant would be in Samoa the following week and had asked whether a meeting could be organised between representatives of IML, Digicel and the Regulator on Wednesday, 4 April 2007. The Regulator had also discussed the arrival of the IML representatives with Mr Dillon in telephone conversations prior to 28 March 2007.

[64] By email of 29 March 2007, Mr Dillon advised the Regulator that none of Digicel’s economists who constructed their cost model was available over the next two weeks as the economist who constructed the cost model was going on two weeks holiday on 30 March 2007 and his colleague who assisted him would be working in other countries. Mr Dillon suggested a meeting in London between the IML representative and Digicel’s economist towards the end of the week of 16 April.

[65] On 30 March 2007, the Regulator informed Mr Dillon that IML would still be looking for a meeting on Wednesday 4 April 2007 to review the system aspects of Digicel’s network and would Mr Dillon confirm who from Digicel would be able to attend that meeting.

[66] By email of 30 March 2007, Mr Dillon responded that it was simply impossible to get the persons who prepared Digicel’s cost model to Samoa for the meeting on 4 April. In addition the person who prepared the model was on holiday. Mr Dillon then requested whether there was any opportunity for a meeting in London.

[67] By email of 3 April 2007, the Regulator advised that the IML consultants had noted that the Digicel cost expert may not be available but they also wished to meet with someone familiar with Digicel’s network design.

[68] Mr Dillon responded that Digicel would be sending its Samoan chief technical officer but he would not be questioned on financial or other elements of the business as he was anxious about it.

[69] On 4 April 2007, Frank Nugent, the Samoan chief technical officer of Digicel met in Apia with Max Kelsey, a representative of IML. At that meeting, Mr Nugent was given a list of questions that IML had in relation to detailed technical issues and other areas of Digicel’s cost model on which answers were required from Digicel.

[70] By email of 4 April 2007, Mr Dillon sent to the Regulator three pages of background information. Mr Dillon noted in that email that the background information paper which was attached had been prepared in the limited timeframe permitted.

[71] In the Regulator’s affidavit of 8 August 2007, he says that between 11 April 2007 and 29 April 2007, Mr Pollard of IML was working in Apia as part of this project and Mr Pollard requested to meet with representatives of Samoa Tel and Digicel to discuss the cost models. Representatives of Samoa Tel met with Mr Pollard on a number of occasions to discuss Samoa Tel’s cost model. It seems from this that apart from the meeting between Mr Nugent and Mr Kelsey on 4 April 2007, there was no meeting between Mr Pollard and a representative of Digicel.

[72] This is evident from what the Regulator says in his affidavit that he had informed Mr Dillon in a number of telephone conversations about Mr Pollard’s visit to Apia and IML’s request for Digicel to arrange an appropriate person to meet with Mr Pollard and Mr Dillon’s response by email of 16 April 2007 that he was unable to arrange this but suggested a meting in London between the Digicel economist and Mr Pollard upon the latter’s return to London.

[73] In the same email of 16 April 2007, Mr Dillon requested the Regulator as to when Digicel would be able to review the cost model of Samoa Tel.

[74] By email of 17 April 2007 the Regulator asked Mr Dillon two questions: "when will we get the rest of the supporting documentation for your cost study?" and "when will your expert be here to carry out the review of your cost model?"

[75] Mr Dillon responded by email of 17 April 20087 saying that the Regulator had told him to let him (the Regulator) know what dates the IML consultants could meet with Digicel in London as that might be the simplest solution. Mr Dillon then said that if that was not possible then to give him a list of dates for meetings in Samoa. Mr Dillon also advised that Digicel’s economist would not be available next week.

" As you will appreciate, the delay in our submission was due to the considerable effort in preparing a model which would generally have taken several months to prepare. The briefing document was supposed to be our final document. If you have further queries, however, please let me know".

[77] The Regulator responded by email of 17 April 2007 saying: "I was also under the impression that the briefing documents you sent was an interim effort due to lack of detail". The Regulator then said: "We are assuming that your cost submission contains confidential information hence we have no plans to disclose it to Samoa Tel or vice versa".

[78] In an email of 20 April 2007, the Regulator advised Mr Dillon that his comment in his email of 17 April 2007 about the "considerable effort in preparing a model" seems a bit out place as the model supplied referred to Trinidad in the main body. The Regulator also pointed out that the three page document provided by Mr Dillon three weeks or so before was hardly in keeping with international practices for supporting such a model. The Regulator in the same email enquired as to when he could expect the information requested by Mr Kelsey of IML from Mr Nugent of Digicel and whether Digicel was preparing any further supporting information. The Regulator was also critical of the "lack of co-operation" by Digicel in providing information for the analysis of their cost model.

[79] On 30 April 2007 the Regulator sent an email to Mr Dillon attaching IML’s preliminary report providing general comments on Digicel’s cost model.

[80] A meeting between IML and Digicel representatives scheduled to be held in London during the week commencing 30 April 2007 to discuss aspects of the cost model did not go ahead as a representative of Digicel was unable to attend and requested an extension of time for the meeting to be held on 8 May 2007. The extension was granted.

[81] It appears that prior to the scheduled meeting on 30 April 2007, the Regulator had already instructed IML to construct its own model of Digicel’s costs on a Fully Allocated Cost (FAC) basis. This was probably done by the Regulator on 27 or 28 April 2007. Digicel was unaware of this instruction by the Regulator to IML to construct its own model on a FAC basis. The FAC model is very different from the LRIC model published in the Samoan Guidelines which was issued by the Regulator on 11 January 2007.

[82] According to the affidavit of 11 July 2007 of Dr. Small, the consulting economist called by Digicel as an expert witness, the FAC model is done on a top-down manner which is very different in structure from the Long Run Incremental Cost (LRIC) model which is done on a bottom-up basis. This is the LRIC model published in the Samoan Guidelines issued on 11 January 2007 to Digicel and Samoa Tel.

[83] On 2 May 2007, IML submitted to the Regulator a draft report and interim recommendations for the interconnection charges order. Digicel was unaware of this report and interim recommendations. The Regulator says in his affidavit of 8 August 2007 that he had instructed IML to resort to using its own model rather than a model provided by Digicel because of Digicel’s failure to provide adequate information despite his requests.

[84] On 8 May 2007, an IML consultant met in London with a Digicel economist to discuss Digicel’s cost model and IML’s treatment of it. It would appear that at that meeting, Digicel was not informed that the model had been changed from LRIC to FAC

[85] On 15 May 2007, IML finalised its report (Final Report) which contains recommendations and submitted it to the Regulator. This Final Report and its recommendations was based on the FAC model constructed by IML on instruction from the Regulator but without the knowledge of Digicel.

[86] Digicel says that it was not given a copy of IML’s Final Report to the Regulator and therefore had no opportunity to comment on it.

[87] The Regulator considered that Final Report and being satisfied with it, adopted it without change.

[88] The Regulator says in his affidavit that the information used by IML to populate its FAC model was taken directly from the information provided by Digicel. But the limited supporting material forced IML to adopt some assumptions in order to complete its analysis in a timely manner.

[89] Dr. Small says in his affidavit of 11 July 2007 that the FAC model involves the making of far more assumptions than the LRIC model and is generally regarded by economists as grossly inferior to the LRIC model.

[90] By email of 16 May 2007, the Regulator sent "Order of the Regulator Number 2007/4: Fixed and Mobil Network Interconnection Rates" (Order 2007/4) to Samoa Tel and Digicel.

[91] Then on 6 June 2007, the Regulator sent an email to Mr. Dillon with two documents which provided background information on the cost study and Order 2007/4. In that email, the Regulator said: "Please note that we will not be releasing the full report of the consultant nor the detailed findings since both contain company confidential information from the other party". The Regulator also said, "I am satisfied that the consultants analysis was carried out in full keeping with international best practices therefore their recommendations for rates were adopted without change".

[92] Order 2007/4, which was issued to Samoa Tel and Digicel on 16 May 2007, was to be effective from 19 May 2007 for a minimum period of two years. Under the Order the fixed terminating rate Digicel was required to pay Samoa Tel for calls originating on Digicel’s mobile network and terminating on Samoa Tel’s fixed network was 11.8 sene per minute. This was 3.6 sene per minute more than the rate of 8.2 per minute Digicel had to pay Samoa Tel pursuant to Interim Order 2006/4 which had been effective from 31 October 2006. This rise of 3.6 sene per minute represented an increase of 43% which is substantial.

[93] Mr Dillon explains in his affidavit of 12 July 2007 that in consequence of Order 2007/4, Digicel would be expected to receive $2,856,000 per annum or $238,000 per month less in mobile termination charges for calls originating on Samoa Tel’s fixed network and terminating on Digicel’s mobile network. He then provided figures to justify his assessment of the impact of Order 2007/4 on Digicel and said those figures were a substantial under-estimate of the damage Digicel would suffer.

[94] Mr Dillon also explains that the rates in Order 2007/4 would affect the competitive balance between Digicel and Samoa Tel as they affect the costs Digicel and Samoa Tel would each incur in supplying calls to their customers.

[95] One of the principal complaints by Digicel is the non-disclosure by the Regulator of relevant materials to Digicel as a result of which Digicel did not have any opportunity to correct, contradict or comment on those materials.

[96] As pointed out by counsel for Digicel in their written submissions which they elaborated on orally, the Regulator at no time disclosed to Digicel prior to making Order 2007/4 a copy of the cost model submitted to the Regulator on 19 March 2007 by Samoa Tel or a copy of the revised cost model submitted to the Regulator on 22 March 2007 by Samoa Tel. As a result, the Regulator did not, prior to making Order 2007/4, give Digicel any opportunity to correct, contradict or comment on Samoa Tel’s cost model submitted to the Regulator on 19 March 2007 or the revised cost model submitted to the Regulator on 22 March 2007.

[97] Counsel for Digicel also pointed out in their written submissions that the Regulator did not disclose to Digicel, prior to making Order 2007/4, the report prepared by IML. This must be the Final Report by IML because the Regulator said that he sent a copy of the IML preliminary report to Mr Dillon on 30 Aril 2007. As a result of this non-disclosure, the Regulator did not give Digicel any opportunity to correct, contradict of comment on IML’s Final Report prior to making Order 2007/4.

[98] Counsel for Digicel also pointed out that the Regulator did not disclose to Digicel, prior to making Order 2007/4, the findings made by IML and as a result Digicel was not given any opportunity to correct, contradict or comment on those findings. It seems that these are the findings made by IML in its Final Report referred to in [97].

[99]] It was also pointed out on behalf of Digicel that the Regulator did not disclose to Digicel, prior to making Order 2007/4, the recommendations made by IML which the Regulator after consideration, adopted without change. These must be the recommendations contained in the Final Report from IML to the Regulator. As a result of that non-disclosure, Digicel was not given the opportunity to correct, contradict or comment on those recommendations.

[100] It was further pointed out that the Regulator did not provide to Digicel a draft Order or draft determination prior to making Order 2007/4 as a result of which Digicel did not have any opportunity to correct, contradict or comment on any draft Order or draft determination.

[101] One of the things that IML was required to do under its contract with the Government of Samoa (Contract No. OR-1-07) as part of the process for determining cost-based interconnection charges was to engage in separate iterative processes with Samoa Tel and Digicel to confirm the accuracy and robustness of the cost models and to refine the data as may be required to ensure that each cost model accurately presents costs for call origination and termination in an efficiently designed and operated network. Digicel claims that IML did not engage in a separate iterative process with Digicel or Samoa Tel to confirm the accuracy and robustness of each party’s cost model.

[102] Dr. Small explains in his affidavit of 15 August 2007 that an iterative process is a repetitive one which involves numerous consultations. For these consultation to be adequate and meaningful requires adequate exchange of information.

[103] One of the other things that IML was contracted to do as part of the process for establishing cost-based interconnection charges was to review the weighted average cost of capital (WACC) submissions of Digicel and Samoa Tel and present recommendations to the Regulator and the Ministry of Finance for reasonable rates of return based on international best practices.

"20. The WACC is of absolutely critical importance to cost estimation. It is the rate of return that the network owner will be allowed to earn on the capital it has invested which is a very large amount in Digicel’s case. Because it is such an important contributor to a cost estimate, the WACC generally attracts considerable attention and scrutiny in all instances of cost-based regulation, including interconnection rates in telecommunications.

"21. The WACC is a single number, but has numerous influences, all of which need to be considered if the final estimate is to be accurate. Some of the things that affect WACC include the dividend imputation arrangements in the relevant country, and the identity and circumstances of the marginal investor in the relevant country.

"22. As a result, the WACC is a source of considerable debate during regulatory processes. However, in the matter at hand, I understand that no information has been provided to the appellant (Digicel) on the Regulator’s views on the components of WACC. Even more striking is the fact that the WACC figure that IML used remains undisclosed to this day."

[105] The Regulator in his evidence given under cross-examination accepted that Samoa Tel, Digicel and the Regulator had made different estimates of the WACC.

[106] One of the matters which was the subject of some dispute between the evidence of the Regulator and the evidence of Dr. Small and Peter Jonn Stiffe, another telecommunications and regulatory consultant called by Digicel, is whether the Regulator should have given Digicel a draft Order prior to making the final Order 2007/4 so that Digicel would have the opportunity to correct, contradict or comment on such draft Order before the final Order was issued.

"62. While I understand that, in some jurisdictions, draft orders are provided to parties for comment, I am unaware of any Samoan law which required me to disclose a draft order. I sought comment from interested parties at a number of stages in the process...but formed the view that it was unnecessary to disclose a draft order for comment. In my opinion, sufficient opportunity had been provided to the parties at an earlier point in time to make relevant submissions."

"46. A failure to provide Digicel with an opportunity to review and comment upon Samoa Tel’s cost model, the IML reports, and a draft Order of the Regulator is not in accordance with standard and accepted procedures adopted by Regulators appointed under legislation in other jurisdictions around the world, including industries other than telecommunications"

"14. Finally, it is also accepted practice that, where the Regulator is to fix interconnection rates, the Regulator will provide a draft of its determination or order along with the detailed reasons which support its draft decision before making a final determination or order. This provides an opportunity for affected parties to view and comment on the reasons and assumptions that are the basis of the determination. This process generally improves the quality of regulatory decision making and reduces the risk of regulatory error."

"21. In conclusion, in regulatory matters, it is the normal procedure to allow parties affected by a Regulator’s determination a fair opportunity to review and comment on cost models and submissions submitted by other parties as well as reports, recommendations or findings made by consultants advising the Regulator, before making a final determination or order setting out in detail its preliminary assessment of the issues and the detailed reasons supporting that preliminary assessment..."

[110] One of the two issues in these proceedings is confidentiality and it was addressed at length in the evidence and submissions of counsel.

[111] The position of the Regulator is that it would not be appropriate for him to disclose to one party confidential information, including a cost model or commercially sensitive information, provided by another party.

"54. I decided that, in making Order No. 2007/4, I would not disclose any confidential information provided to me by Samoa Tel or Digicel as part of this process. The disclosure of such information would, in my opinion, give commercially sensitive information to competitors that may be used by the competitors to gain a competitive advantage. Due to the highly competitive nature of the industry in which they operate, the commercial interest of Samoa Tel and Digicel are such that disclosure could course great detriment could cause great detriment to that party whose information was disclosed. Furthermore, to disclose such information which has been provided in confidence would undermine the integrity of the Offence of Regulator."

"56. While there are many circumstances where the submissions of parties may be circulated for discussion from other interested parties, in this case, it was not appropriate to circulate the cost models, which contained spreadsheet-based cost models...It was not appropriate, in my opinion, to circulate the cost models with information blanked out in these circumstances. As the submissions, were solely computer-based spreadsheet cost models, most, if not all, information would be blanked out as confidential, and effectively release a blank spreadsheet, or one devoid of any meaning...Furthermore, I did not consider it appropriate to disclose this commercially sensitive information to the other party’s advisers. I do not believe that third party advisers would be able to maintain full confidentiality in relation to cost models and still discuss the relevant issues with their client."

"58. [Digicel] I provided its cost model to me on a confidential basis and, in light of the procedure employed, I did not consider it appropriate to disclose this information to Samoa Tel. Likewise, I also was opposed to disclosing Samoa Tel’s cost model to Digicel, and did not do so..."

[113] In his email of 7 June 2007 to Mr Dillon, after Order 2007/4 had been issued on 16 May 2007, the Regulator took the same position on the issue of confidentiality. He said:

"Please note that we will not be releasing the full report of the consultant nor the detailed findings since both contain company confidential information from the other party."

[114] Mr Johnstone, the chief executive officer of Samoa Tel, seems to take the position as the Regulator on the issue of confidentiality. He says in his affidavit of 27 June:

"16, [Throughout] any extensive experience in the telecommunications industry, the sharing or unauthorized disclosure of commercially sensitive information to a competitor through the disclosure of information provided to an independent tribunal that had been provided to the appropriate authority for regulatory purposes is unheard of."

[115] Dr Small and Mr Stiffe take a very different view from the Regulator and Mr Johnstone on the issue confidentiality.

[116] In his affidavit of 11 July 2007, Dr Small after noting the concerns of Samoa Tel and Mr Johnstone over the release of their cost model to Digicel, says:

"42. The basic problem here is common to many if not most regulatory proceedings. Regulated firms need to supply information to the Regulator, but in order to consult meaningfully, some of that information must be released to a wider group. Faced with this exact same problem, it is normal and accepted practice for Regulators to seek a compromise position, something that allows consultation to proceed without breaching confidentiality.

"43. In my experience, in practice there are at least two compromise options adopted by Regulators. One is to release the model to Digicel’s professional (legal and economic) advisors rather than to Digicel itself. This approach secures virtually all of the benefits of consultation: it allows well-informed parties to raise detailed questions that can then be resolved and/or factored into the Regulator’s decision. At the same time, it can avoid the commercial risks that concern Samoa Tel and Mr Johnstone, by imposing strict confidentiality conditions on the advisors. This method is often used in New Zealand but was not used in the current case by the Regulator.

"44. An alternative, but somewhat less effective method, is to provide censored versions of the model directly to Digicel. For example, Samoa Tel could simply delete its confidential inputs from the model before providing it to Digicel. This would allow Digicel to scrutinise the logic of the model, and to insert its own expectations of the sensitive figures and the model’s predictions. If experimentation of this type indicated grounds of concern, Digicel could then raise these with the Regulator. This approach is sometimes used in New Zealand.

"45. Notwithstanding the concerns raised in Mr Johnstone’s affidavit about the release of commercially sensitive information, in my experience, Regulators are able to find ways of allowing those affected by regulation to have access to critical inputs into the Regulator’s decision. Without cross-checking of this nature, the quality of regulatory decisions will suffer, and invested capital will be exposed to substantial risks."

"46. A failure to provide Digicel with an opportunity to review and comment upon Samoa Tel’s cost model, the IML reports, and a draft Order of the Regulator is not in accordance with standard and accepted procedures adopted by Regulators appointed under legislation in other jurisdiction around the world, including industries other than telecommunications.

"47. The argument that cost models provided by Samoa Tel and expert analysis by the Regulator’s consultants IML should not be given to Digicel because of potentially catastrophic and dire consequences on its commercial rival would not, in my experience, be accepted as grounds to forego meaningful consultation, denying the provision of copies of such models and expert analysis to Digicel, by Regulators in jurisdictions with which I am familiar.

"48. The normal solutions and procedures in such circumstances are either to release information under strict confidentiality provisions to professional advisors rather than to the commercial rival itself, or to censor the truly confidential information and provide the balance to the affected party directly.

"49. Consequently, in this case, the Regulator could have preserved the confidentiality of Samoa Tel’s information while still consulting in a meaningful way. It would have been possible to respect and accommodate the concerns expressed by Samoa Tel and Mr Johnstone, yet still allow Digicel to exercise its rights to be heard in this matter."

[118] In his affidavit of 15 August 2007, Dr Small reiterates his position on the issue of confidentiality by saying:

"48. The Regulator failed in my opinion to engage in a meaningful consultation process, as explained above and in my earlier affidavit, or to ensure that his consultant IML did that on his behalf. Meaningful consultation in regulatory matters involves giving affected parties an opportunity to review and comment upon cost models, consultant’s reports and draft decisions of the Regulator.

"49. The Regulator could have preserved any confidentiality concerns of Samoa Tel, while also consulting in a meaningful way with Digicel and allowing Digicel an opportunity to review and comment on material relied upon by the Regulator in arriving at his decision."

[119] Mr Stiffe in his supplementary affidavit of 10 July 2007 refers to the practice and procedure of the Australia Competition and Consumer Commission and the approach of the New Zealand Commerce Commission to the treatment of confidential information as well as to his more than 15 years experience in regulatory proceedings in Australia and New Zealand and then says:

"20. In conclusion, in regulatory proceedings, it is the normal procedure to allow parties affected by a Regulator’s determination a fair opportunity to review and comment on cost models and submissions submitted by other parties, as well as reports, recommendations or findings made by consultants as reports, recommendations or findings made by consultants working either for those parties or the Regulator-even when such cost models and submissions contain information that is confidential and highly commercially sensitive to a particular party. This is despite arguments advanced by a party to such proceedings claiming that disclosure of confidential information would have ‘dire’ effects on the party’s ability to compete in the market. That did not happen in relation to Order 2007/4"

[120] It should be pointed that when Samoa Tel submitted its cost model to the Regulator on 19 March 2007 and its revised cost model on 22 March 2007, it was done on a confidential basis and the Regulator understandably accepted Samoa Tel’s cost models on that basis. So when Mr Dillon, on 16 April 2007, requested the Regulator as to when Digicel would be able to review Samoa Tel’s cost model, the Regulator did not disclose Samoa Tel’s cost model or revised cost model to Mr Dillon.

[121] It is evident that the Regulator accepted and respected without reservations Samoa Tel’s assertion of confidentiality without checking whether all the information in Samoa Tel’s cost models was in fact confidential.

[122] However, Mr Johnstone under cross-examination admitted that not all of the information contained in Samoa Tel’s cost models was confidential.

[123] There are basically two issues in these proceedings, procedural fairness and confidentiality. In these proceedings, procedural fairness and confidentiality overlap. There was no dispute that a breach of natural justice or procedural fairness constitutes a question of law for the purposes of an appeal under s.11 of the Act. I turn now to the relevant law.

[124] This Court has accepted in several cases the classification of the grounds or principles of judicial review into illegality, procedural impropriety and irrationality stated by Lord Diplock in Council for Civil Service Unions v Minister for the Civil Service [1985] AC 374 at pp 410-411: see Keil v Land Board [2000] WSSC 41: Kirisome v Attorney-General [2002] WSSC 3: Keil v Minister of Natural Resources and Environment [2003] WSSC 54; Lokeni-Lepa v Public Service Commission [2006] WSSC 14.

" The principle of procedural propriety is concerned with fair decision-making standards. Thus in considering the application for judicial review in this case, the Court is concerned with fairness of the procedural standards that were adopted when the decision was made by the first respondent on the recommendation of the second respondent to retire the applicant Moalele. The Court is not concerned with what that decision ought to have been. For the Court to be so concerned may result in the Court substituting its own decision for that of the respondents. But that is not the function of the Court in proceedings for judicial review."

"The fundamental rule is that a statutory authority having power to affect the rights of a person is bound to hear him before exercising the power (Twist v Randwick Municipal Council [1976] HCA 58; (1976) 136 CLR 106, at p.109; Heatly v Tasmanian Racing and Gaming Commission [1977] HCA 39; (1977) 137 CLR 487 at p.499). The application of the rules is not limited to cases where the exercise of the power affects rights in the strict sense. It extends to the exercise of a power which affects an interest or a privilege (Banks v Transport Regulation Board [1968] HCA 23; (1968) 119 CLR 222) or which deprives a person of a ‘legitimate expectation’ to borrow the expression of Lord Denning MR in Schmidt v Secretary of State for Home Affairs [1969] 2 Ch 149, at p.170, in circumstances where it would not be fair to deprive him of that expectation without a hearing (Salemi v MacKellar [No.2] [1977] HCA 26; (1977) 137 CLR 396, at p.419)"

[127] I accept the submission of Mr Almond for the Regulator that the duty to accord procedural fairness comprises a duty on the part of an administrative decision-maker to observe fair procedures when decisions are made that affect or may affect a person’s rights, interests privileges, or legitimate expectations. The hearing rule, which is one aspect of procedural fairness, entitles a person whose interests may be affected by an administrative decision to be given a fair opportunity to present his case and to be provided with notice of matters relevant to the decision.

[128 The requirements of the hearing rule which forms one aspect of the duty to accord procedural fairness are not inflexible. As Cooke P said in delivering the judgment of the Court of Appeal in Ah Chong v Legislative Assembly of Western Samoa [1996] WSCA 2:

"The rules of natural justice are not hard and fast. They depend on all the circumstances of a case."

[129] In Hunt v Attorney-General [1994] WSSC 40, this Court after referring to some of the leading cases in England, Australia and New Zealand on natural justice or the duty to act fairly said:

"[It] is also now clear from Furnell v Whangarei High Schools Board [1973] 2NZLR 705, 708 with the reference to what Tucker LJ said in Russell v Duke of Norfolk [1949] 1A11 ER 109, 118 that the requirements of natural justice or fairness depend on circumstances of each case including the subject matter under consideration."

[130] The circumstances which will inform the content to the duty of accord procedural fairness would include the statute which confers the power on the decision-maker, the nature of the subject-matter, the nature of the inquiry, and the circumstances of the case.

[131] In respect of the requirements of adequate consultation which Digicel contends forms part of the duty to accord procedural fairness in this case, counsel for Digicel cited the case of Telstra Corporation Ltd v Australian Competition and Consumer Commission, (No.2) – BC 20072362 where Bennett J in the Federal Court of Australia said:

"[236] As Finn J observed in Tobacco Institute of Australia v National Health and Medical Research Council [1996] FCA 1150; (1996) 71 FCR 265 at 274, the Courts have indicated in a variety of contexts that ‘consultation is no empty term nor a mere formality’. The Commission has been given extensive powers which have been granted and affirmed in the context of certain conditions. The statutory process of consultation envisaged by s.151 AKA (9) and (10) is rendered ineffective if the recipient is not given adequate and appropriate information in order to make an informed response.

"[237] Telstra was not afforded the opportunity to address issues relevant to the issue of the Competition Notice. Procedural fairness required that Telstra have that opportunity, whether such natural justice was in accordance with the statutory regime or common law principles.

"[241] The seriousness of the consequences of a decision is relevant to the content of the requirement for procedural fairness."

[132] Even though Telstra was concerned with a statutory consultation process, at common law the contents of the duty to accord procedural fairness depend on the circumstances of each case including the nature of the subject-matter under consideration. They are not fixed or comprise of ‘hard and fast rules’: Ah Chong v Legislative Assembly of Western Samoa [1996] WSCA 2 per Cooke P.

[133] In R v Secretary of State for Social Services, ex parte Association of Metropolitan Authorities [1986] 1 WLR 1, Webster J said at p.4 about the general requirements of consultation:

"[In] any context the essence of consultation is the communication of a genuine invitation to give advice and a genuine consideration of that advice. In my view it must go without saying that to achieve consultation sufficient information must be supplied by the consulting to the consulted party to enable it to tender helpful advice. Sufficient time must be given by the consulting to the consulted party. Sufficient, in that context, does not mean ample, but at least enough to enable the relevant purpose to be fulfilled. By helpful advice, in this context, I mean sufficiently informed and considered information or advice about aspects of the form or substance of the proposals, or their implications for the consulted party, being aspects material to the implementation of the proposal as to which the party consulted might have relevant information or advice to offer."

[134] In respect of the relationship between the demands of procedural fairness and the preservation of confidentiality, counsel for Digicel and Samoa Tel cited a number of authorities. Without discourtesy, I do not propose to refer to all those authorities.

[135] Counsel for the Regulator referred to Johns v Australian Securities Commission (1993) 178 CKL 408 where McHugh J said at p.472:

"The need to preserve the confidentiality of [an] investigation does not exclude procedural fairness, but reduces its content, perhaps [as Brennan J noted in the passage quoted in [58] in some circumstances to nothing."

[136] In the next case of Ansett Transport Industries Ltd v Secretary, Department of Aviation (1987) 73 ALR 205, Lockhart J in the Federal Court of Australia said at p.218:

"The fact that confidential material is involved in the decision-making process....does not negate the application of the rules of natural justice; rather it narrows the field of their operation."

[137] Counsel for Digicel, on the other hand, referred to the following authorities. In Judicial Review of Administrative Action 3rd ed by Aronson, Dyer and Groves, the learned authors say at p.510:

"In some cases disclosure may have the potential to cause harm to some person or to the public interest. In such circumstances, disclosure of the substance, but not the detail, of the material will often effect satisfactory compromise between the demands of disclosure and confidentiality. Other means of compromise include disclosure of the material to the professional advisers of the person concerned."

[138] In James Aviation Ltd v Air Services Licensing Appeal Authority [1979] 1NZLR 481, Vautier J said at p.500:

"No reported case was cited to me, nor I have been able to find any case which provides support for the view that information of the kind contained in this report or indeed any such material as that referred to by Mr Graham which, although considered of such relevance as to warrant its being included in a report to the Licensing Authority in terms of s.16(2), should at the same time in the public interest be withheld from the parties concerned in the application in question. It has to be remembered that the Courts will be assiduous to assist in preventing misuse of information made available for the purpose and only for the purpose, of it being adduced or available to be adduced in litigation. This is exemplified by such cases as Distillers Co (Biochemicals) Ltd v Times Newspapers Ltd [1975] 1 AIIER41; [1975] QB 613. Moreover, undertakings can readily be obtained from counsel to achieve restrictions in the use of which information of the kind here under consideration is put and in practice the production before licensing and planning tribunals of what is obviously in the nature of confidential information, has not - so far as I am aware occasioned any great difficulties in the past.

"I accordingly take the view that the failure to give the plaintiffs the opportunity to be heard with regard to the report furnished by the Air Services Policy Branch in this case resulted in a breach of the rules of natural justice and that the decision of the Appeal Authority should be quashed on this ground also."

[139] In some circumstances, disclosure to a party or his advisors of the substance of the material, which is pre-judicial to the party’s interests, would be what is needed to meet the requirements of procedural fairness: see, for example, Dagnayasi v Minister of Immigration [1980] 2 NZLR 130 per Cooke J at p.145.

[140] In the case of Veal v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 72; (2005) 225 CLR 88, the High Court of Australia (Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ) in a joint judgment said at p.100:

"That public interest, and the need to afford procedural fairness to the appellant, could be accommodated. They were to be accommodated, in this case, by the Tribunal telling the appellant what was the substance of the allegations made in the letter and asking him to respond to those allegations. How the allegations had been given to the Tribunal was not important. No doubt the appellant’s response to the allegations would then have had to be considered by the Tribunal in light of the fact that the credibility of the person who made the allegations could not be tested. And that may well leave the Tribunal in a position where it could not decide whether the allegations made had substance. But the procedure outlined would be fair to the appellant and it could be a procedure which accommodated what Brennan J described in Kioa [1985] HCA 81; (1985) 159 CLR 550 at 529 as the ‘problem of confidentiality’. Although it may be accepted that the Tribunal sought to act fairly, the procedure it in fact adopted was not fair."

[141] After careful consideration, I have decided to accept the evidence given by the witnesses Dr Small and Mr Stiffe about the procedures that should have been followed prior to the issuance of Order 2007/4 by the Regulator. Not only do these witnesses have enormous experience in regulatory proceedings, but their evidence was also well supported. It shows that in certain significant respects the Regulator did not follow what is normal and standard procedure in regulatory proceedings.

[142] Essentially what those witnesses said is that it was not in accordance with normal, standard and accepted practices and procedures in regulatory proceedings for the Regulator not to provide Digicel with Samoa Tel’s cost models, the final report and recommendations by the consultants IML and a draft Order, in order to give Digicel an opportunity to review and comment on those matters prior to the making of Order 2007/4 which sets the telecommunications interconnection charges.

[143] The Regulator had also instructed his consultants IML to construct a cost model based on FAC principles which is very different from the LRIC cost model published by the Regulator in the Samoan Guidelines issued to Digicel and Samoa Tel on 11 January 2007.

[144] At no time prior to the making of Order 2007/4 was Digicel informed by the Regulator about the change from the LRIC model to the FAC model so that Digicel did not have any opportunity to correct, contradict or comment on the change. But this is a crucial and significant change in cost models and Order 2007/4 issued by the Regulator is based on that change.

[145] As also explained by Mr Dillon for Digicel, Order 2007/4 will have a significant and detrimental impact on Digicel particularly in financial terms and Digicel’s ability to compete in the market.

[146] Evidently, the Regulator wanted to establish the telecommunications interconnection charges for the dominant service providers Digicel and Samoa Tel as promptly as possible. He considered that it was in the public interest to do so. So he was very proactive in that regard and one cannot criticize but feel sympathy for the Regulator for being very proactive. However, there were delays on the part of Digicel for reasons already mentioned in this judgment.

[147] In consequence, the Regulator informed Digicel that he might have to act unilaterally and establish the interconnection charges himself with the advice and assistance of the consultants IML.

[148] However, even if the Regulator had to act unilaterally as he evidently did by changing the basis of the cost model from LRIC to FAC without telling Digicel or Samoa Tel, he was still required to act fairly and accord procedural fairness to the parties whose interests would be affected by his unilateral action. Procedural fairness did not cease to apply to the Regulator when he decided to unilaterally change the model from LRIC to FAC.

[149] As for the claim of confidentiality in relation to Samoa Tel’s cost model and revised cost model, there are also difficulties for the Regulator. With respect, it does not seem that the Regulator had considered whether all of the information contained in Samoa Tel’s cost models were in fact confidential. He simply accepted the assertion of confidentiality made by Samoa Tel just as he accepted the assertion of confidentiality made by Digicel in relation to the information contained in its cost model. However, Digicel informed the Regulator that it was expecting to see Samoa Tel’s cost model.

[150] As it turned out during the hearing of this appeal, the chief executive officer of Samoa Tel admitted under cross-examination that not all of the information contained in the cost model provided by Samoa Tel to the Regulator was confidential.

[151] There are also ways in which the Regulator could have accommodated the concerns for confidentiality and the requirements of procedural fairness. The Regulator could have disclosed the requested information to Digicel’s advisors under strict confidentiality arrangements or block out the confidential information and disclose the rest of the information to Digicel or its advisors. Alternatively, the Regulator could have disclosed only the substance but not the detail of the material sought. However, no such confidentiality arrangement seems to have been considered and none was made.

[152] It is also evident that the consultation process in this matter was severely inadequate. Most significantly, there was no consultation between the consultants IML and Digicel on the FAC model which formed the basis of the cost model constructed by IML on instruction from the Regulator. Digicel was simply not informed about the change from the LRIC model to the FAC model. No draft Order was also provided to Digicel for comment prior to the issuance of Order 2007/4.

[153] Such matter like the weighted average cost of capital (WACC) number which Dr Small said was of critical importance to cost estimation was not discussed between IML and Digicel. In fact Digicel claims that it was not informed of the WACC used by IML in constructing the FAC model upon which Order 2007/4 is based and up to now Digicel seems not to be aware of the WACC used by IML.

[154] Notwithstanding the best attempts by the Regulator to ensure that the interconnection charges for the telecommunications service providers Digicel and Samoa Tel were established promptly, I am satisfied that the procedure that he followed was not fair. In other words the Regulator failed to accord procedural fairness.

[155] It was not enough to be prompt; it was also necessary to be fair at the same time: see Veal v Minister of Immigration and Multilateral and Indigenous Affairs [2005] HCA 72; (2005) 225 CLR 88 at p.100.

[156]	[1]	The appeal is allowed.
[157]	[2]	Order 2007/4, effective from 19 May 2007, is declared to be unlawful.
[158]	[3]	Counsel to file written submissions as to costs by 1 April 2008 if agreement cannot be reached

[159] It is to be noted here that these conclusions had already been stated to counsel and the parties on 18 March 2007 with the indications that my written judgment will be made available in due course.

[160] I wish to thank all counsel for their submissions and citations of authorities which have been very helpful.

Supreme Court of Samoa

Digicel (Samoa) Ltd v Attorney General [2008] WSSC 15 (30 March 2008)