SUNeVision Welcomes the Court of Appeal's Ruling on Potential Breaches of Lease Conditions of Data Centers in HKSTP Industrial Estates

HONG KONG SAR - Media OutReach - 6 June 2022 - On 31 May 2022, the Court of Appeal allowed the appeal against the first instance judgement lodged by SUNeVision in a judicial review application, quashing the decision of the Hong Kong Science and Technology Parks Corporation (HKSTP) not to take immediate steps to rectify its failure or refusal to take reasonable steps to enforce restrictions in its leases against the operators of the data centers in the industrial estates it manages to sublet the leased premises or to allow third parties to occupy the leased premises.

The Court of Appeal held that HKSTP has misconstrued the Occupation Restriction under its own Lease Restriction Policy and that it has also breached its duty of making reasonable inquiry when handling the complaints from SUNeVision. The Court of Appeal also directs HKSTP to reconsider SUNeVision's complaints in accordance with the meaning of the Occupation Restriction in the Lease Restriction Policy as found by the Court.

1. SUNeVision welcomes the recent ruling of the Court of Appeal, which is positive for the long-term development of Hong Kong's innovation and technology (I&T) sector. SUNeVision has been a strong supporter of Hong Kong's vision to become an international I&T hub. The recent judgement of the Court of Appeal will help to create a healthy environment for the I&T industry in Hong Kong, in line with the National 14th Five-Year Plan.

2. Land resources in Hong Kong are scarce and precious. The government has allocated more than 200 hectares of land to HKSTP to operate three industrial estates in Tseung Kwan O, Yuen Long and Tai Po. HKSTP should properly and effectively utilize the land resources to support the I&T sector. As paragraph 11 of the judgement mentions, "the rationale behind the Lease Restriction Policy is that land in the industrial estates, granted at a preferential rate for the purpose of fostering the lessees' development of industries or businesses which the Corporation has seen fit to promote, should be dedicated to such purposes and not used for rental gain".

3. Some data center operators in Tseung Kwan O Industrial Estate have been operating in a way that involves subletting or permitting third parties to occupy the leased premises. Paragraph 104 of the judgement points out that "the Possession Restriction and the Occupation Restriction should be construed in such a way as to prohibit a grantee from running or operating a business in the Corporation's property that amounts to in substance subleasing or subletting and a business that would not foster and facilitate the growth of local technology through intensive research and development activities".

4. HKSTP must take all reasonable measures to enforce the lease conditions and prohibit operators from subletting the premises or allowing third parties to occupy the leased premises. In reality, the breaches of lease conditions by the lessees did not just happen recently, nor have the breaches been confined to data center operators. The breaches have taken place over a long period of time, as recent cases and prosecutions have shown. HKSTP should immediately rectify the problems to ensure tenants strictly comply with the lease conditions, otherwise the tenants must return their sites to the HKSTP or the government for proper use.

5. HKSTP is a statutory authority with substantial public land resources at its disposal. It is a critical organization tasked with fostering the development of Hong Kong's innovation and technology. Hence, the HKSTP Board and management should undertake a thorough review to ensure all of its land is put to proper use for innovation. This is not just about ensuring that there are no breaches of the lease restrictions. It is also about utilizing the land more effectively. It is a fact that a significant number of sites in the industrial estates is lying idle or under-utilized. It is also a fact that some sites in the industrial estates are occupied by tenants that no longer serve any purpose in fostering innovation in Hong Kong. HKSTP must reallocate such sites to serve Hong Kong's latest needs in research and innovation, and help nurture young and promising new companies. If there is excess land that HKSTP cannot properly utilize, it should be returned to the government for other important uses, such as public housing.

6. The National 14th Five-Year Plan clearly states its support for Hong Kong to develop into an international I&T hub. We sincerely hope HKSTP will work together with the industry to strengthen the city's I&T sector.

About SUNeVision

SUNeVision (SEHK: 1686), the technology arm of Sun Hung Kai Properties (SEHK: 0016), is the largest data center provider in Hong Kong. We provide industry-leading carrier and cloud-neutral data center services with Asia's number one connectivity. We connect providers of telecommunications, cloud, ISP, CDN, OTT from local, mainland China and global with enterprises of different businesses on our Asia leading data center ecosystem.

SUNeVision forms MEGA Campus by extending the connectivity edge from highly connected MEGA-i to other high-tier data centers, including MEGA Gateway, MEGA IDC, MEGA Plus and MEGA Two. Facilities on MEGA Campus are interconnected through a dedicated dark fibre network and around 15,000 cross-connects. Together with City PoPs of major submarine cables in our facilities, we enable our customers for direct connections to multi-cloud platforms and multi-cloud exchanges with the best connectivity in town. We are committed to supporting Hong Kong as a regional information hub and a strategic gateway to mainland China.

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