SUNEVISION HOLDINGS LTD v. HONG KONG SCIENCE AND TECHNOLOGY PARKS CORPORATION

HCAL 1890/2018

[2020] HKCFI 1162

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 1890 OF 2018

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DECISION ON COSTS

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1.  Following my judgment of 26 March 2020 dismissing the application for judicial review,[1] SUNeVision has applied to vary the costs order nisi. The sole issue that arises is whether SUNeVision should be ordered to pay all of Global Switch’s costs (as stated in the order nisi which Global Switch seeks to maintain) or only 20% (or some other percentage) of them (as SUNeVision submits).

2.  The general approach relevant to the question is not in dispute.  As submitted by counsel, it may be summarised as follows:

(1)     Costs are always in the discretion of the court, and there can be no hard and fast rules.[2] It has indeed been observed that, “as in all questions to do with costs, the fundamental rule is that there are no rules”.[3]  That said, there is guidance laid down in the decided cases which illuminates the way in which the discretion should be exercised.

(2)     The starting point is that an unsuccessful party in an application for judicial review which is opposed by more than one party should generally not have to pay more than one set of costs.[4]

(3)     Where several parties appear having the same interest in the proceedings, the general rule is that the unsuccessful party should not have to pay more than one set of costs, the rationale being that an unsuccessful party should not have to pay for costs which have been unnecessarily incurred.  Different parties with the same interest can engage the same solicitors and counsel or they can adopt the position of one of the other parties.[5]

(4)     It is for the additional respondent, interested party or intervener to justify his participation in the proceedings.[6]

(5)     The mere fact that a party has the necessary locus standi to appear in judicial review proceedings does not by itself entitle that party to an order for costs should the outcome be successful.[7]

(6)     Where, however, the party can show that there is a separate issue on which he was entitled to be heard, being an issue not covered by the other party or parties in the proceedings, he would be entitled to his costs.[8]

(7)     The fact that the outcome of the application for judicial review would have a far‑reaching practical impact on an interested party will be a relevant factor to take into account when awarding costs. However, it cannot be the decisive factor.  The real issue is whether the interested party has an interest which requires separate representation.[9]

3.  I refer to my Judgment on the application for judicial review and adopt the abbreviations used therein.  The background leading to the decision challenged is set out in paragraphs 1 to 54.  The more significant steps in these proceedings are described in paragraphs 55 to 59.  The pleaded case for judicial review is summarised in paragraphs 60 to 73.  These matters will not be repeated here.

4.  It seems to me that so far as relevant for present purposes, the course of these proceedings falls into two stages.  When the proceedings were begun, quite apart from the challenge to the Corporation’s May 2018 Letter, which was a response to SUNeVision’s complaint that the Corporation had condoned breaches of lease in the TKOIE and failed to take enforcement actions, there was a very significant dispute as to whether the proposed increase of the plot ratio for Site C — Global Switch’s site — should be allowed to proceed.  While the increase was not specified as the decision challenged, the relief sought in the Form 86 then included a declaration that the grant of the increased plot ratio would be unlawful and an interim order that there be a stay of the decision to grant the increased plot ratio or that such decision shall not take effect pending the challenge.  Global Switch was not named in the Form 86 as an interested party but was directed by the court, when leave was given, to be served as such, since it would plainly be directly affected by the application as it then stood.[10] It was ordered that Global Switch be at liberty to take such part in the proceedings as it might be advised.

5.  SUNeVision’s applications for interim injunction and interim stay were unsuccessful and eventually, on 19 June 2019, the leave given in relation to the ground that referred to the increase of plot ratio was set aside by consent.

6.  In my view, the primary target of the challenge to the increase of plot ratio for Site C was Global Switch, with whom SUNeVision was (and still is) a competitor.  In fact, Global Switch had already contracted with the Corporation to acquire the additional plot ratio.  Global Switch’s legal rights, not only its commercial interests, would be fundamentally affected by that challenge.  The questions of how Global Switch could and would be using the extra floor space and what Global Switch had done in reliance on the grant of additional plot ratio, were matters peculiarly within Global Switch’s province which could not be expected to be adequately covered by the Corporation.  During this stage, it seems to me that there were matters concerning primarily Global Switch which justified its participation in the proceedings through separate representation.

7.  In my view, the fact that upon successfully resisting the application for interim injunction and stay, Global Switch obtained orders for its costs in full reflected Global Switch’s entitlement separately to contest those applications and the application for judicial review (at least to the corresponding extent).  Indeed, by letter of 9 August 2019, SUNeVision’s solicitors stated to Global Switch’s solicitors that in view of the fact that the decision concerning plot ratio was no longer an issue in the judicial review, Global Switch had no further role to play, and put them on notice that SUNeVision would contest any claim that Global Switch might make “for any costs incurred from the date of this letter”.  The stance taken seems to me to recognise that Global Switch’s participation in the first stage had been legitimate.

8.  Further, at that stage, where Global Switch was so particularly and vitally interested in the outcome, significant extra costs would have had to be incurred even if it were to consider alternative ways of participating, whether by instructing the same legal representatives as the Corporation or instructing its own lawyers to prepare evidence and arguments for use by the Corporation, as recognised by Hartmann J in Cathay Pacific Airways Flight Attendants Union v The Director‑General of Civil Aviation & another (unrep, HCAL 19/2005, 6 December 2005), §28.

9.  Even so, it can be said, with justification in my view, that there was some overlap between the opposition raised by the Corporation and by Global Switch respectively, and that it would be unfair to SUNeVision not to take account of that duplication.  Taking everything in the round, it seems to me fair and just that SUNeVision should pay 75% of Global Switch’s costs up to 19 June 2019.

10.  During the second stage of the proceedings, after 19 June 2019, when the increase of plot ratio was no longer the subject matter of the litigation, the position of Global Switch in the judicial review became much closer to that of the two other grantees who also feature in the application, namely, NTT and HKCOLO, neither of whom has taken any part in these proceedings. 

11.  It is submitted on behalf of Global Switch that even so, it had a direct interest in the outcome of these proceedings.  As acknowledged by SUNeVision, however, the application for judicial review was not about whether the grantees had in fact acted in breach of their respective leases (see Judgment §71(6); Evidence Decision §§7 and 17).  It was about whether the Corporation was labouring under misdirections in law or misapprehension of its own policies or had failed or refused to take reasonable or necessary actions in relation to the complaint of alleged breaches of lease by the three grantees.  The relief sought, namely, a certiorari to quash the May 2018 Letter and a mandamus requiring the Corporation to come to a fresh decision in accordance with law, do not have any direct legal effect on the grantees including Global Switch. 

12.  Although Global Switch and the Corporation are counterparties to the lease and their interests as lessor and lessee respectively may potentially conflict, their position on the principal issues arising from the Amended Form 86, including what the relevant policies were, the proper interpretation of those policies and the adequacy of enforcement steps, were aligned.  This is clear not only from the affidavits filed but also from their written and oral submissions made at the hearing.

13.  For the substantive hearing of the judicial review, Global Switch’s counsel lodged full written submissions.  In oral submissions, Mr Man SC who spoke for about 3 hours addressed this court mainly on the history of the matter from his client’s point of view, the shifting of the focus of the judicial review from exclusive possession to occupation, why his client’s business model fell within the terms of the lease, and the court’s discretion to refuse relief in any event.  As acknowledged by Global Switch, much of its submissions overlapped with those of the Corporation.

14.  Global Switch submits that it did raise a separate and distinct material issue for the determination in the judicial review, namely, that the court should in any event exercise its discretion to refuse to grant relief even if SUNeVision established that the Corporation had committed a public law wrong.  It is, however, self‑evidently a secondary issue.  Global Switch did not limit its participation to that question. Further, as I said in the Judgment at §202, the issue boiled down to a narrower submission that the Corporation should not be directed to come to a fresh decision that would have the effect of impugning or repudiating Global Switch’s pro forma service agreement which had previously been approved by the Corporation.  As explained in the Judgment at §203, on my conclusions on the grounds raised for judicial review, the issue did not actually arise.

15.  In these circumstances, it seems to me that the proportion of 20%, as proposed by SUNeVision, reflects in a broadbrush the extent to which Global Switch’s participation in the second stage was justified and therefore the extent to which SUNeVision should be required to pay Global Switch’s costs.

16.  For the above reasons, the order nisi will be varied as follows:

(1)     SUNeVision do pay 75% of Global Switch’s costs up to 19 June 2019.

(2)     SUNeVision do pay 20% of Global Switch’s costs thereafter.

17.  Given SUNeVision’s substantial success in its variation application, it seems to me on a nisi basis that it should have 75% of the costs of the application, to be taxed if not agreed, with a certificate for two counsel.

HCAL 1890/2018

[2020] HKCFI 548

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 1890 OF 2018

____________

________________________

_________________

J U D G M E N T

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A.     Background

A1.    The parties

1.  These judicial review proceedings concern the policies of the respondent and their enforcement in relation to data centres in industrial estates.  The applicant, SUNeVision Holdings Ltd (“SUNeVision” or “Applicant”), is a company within a group that operates five data centres in different districts in Hong Kong outside the industrial estates.

2.  The respondent, the Hong Kong Science and Technology Parks Corporation (“Corporation”), is a statutory body established in 2001 by the Hong Kong Science and Technology Parks Corporation Ordinance (Cap 565), merging and thus replacing the Hong Kong Industrial Estates Corporation, the Hong Kong Industrial Technology Centre Corporation and the Provisional Hong Kong Science Park Company Limited. 

3.  The Corporation’s purposes are set out in s 6(1) of that Ordinance as follows:

“ (a) to establish or develop any premises where activities related to the purposes prescribed in paragraph (b), (c) or (d) are, or are to be, carried out, and to manage and control the land and other facilities comprised in such premises;

(b) to facilitate the research and development and application of technologies in manufacturing and service industries in Hong Kong;

(c) to support the development, transfer and use of new or advanced technologies in Hong Kong;

(d)  to engage in such activities or to perform such functions as the Chief Executive in Council may, after consultation with the Corporation, permit or assign to it by order published in the Gazette.”

4.  The Corporation’s mission is to stimulate the growth of local technology businesses through intensive research and development activities and to attract new technology‑based investments, with a view to facilitating the broadening of Hong Kong’s economic base and upgrading its technology levels.

5.  By s 7 of the Ordinance, the Corporation is to conduct its business according to prudent commercial principles.  For the purpose of discharging its functions, the Corporation is conferred wide powers under s 8, which include the power to sell, let, sublet or otherwise dispose of land or any facilities in any specified premises (subject to the terms and conditions contained in the land grant) on such terms and conditions as its Board of Directors considers appropriate.

6.  The Corporation is governed by its Board of Directors, which is empowered to establish and delegate functions to such committees as it considers appropriate.  The Business Development and Admission Committee (“BDAC”) is one such committee established by the Board of Directors with the function, inter alia, to approve or reject applications for admission as tenants or grantees into the Corporation’s premises, and to approve or reject requests from tenants or grantees for the renewal or modification of relevant agreements.

7.  The Corporation owns land at three industrial estates in Tai Po, Yuen Long and Tseung Kwan O respectively, on which it allows firms to construct facilities and operate their businesses at rates which are generally much lower than the market rates for land elsewhere in Hong Kong. These proceedings concern the Tseung Kwan O Industrial Estate (“TKOIE”).

8.  The interested party, Global Switch Hong Kong Ltd (“Global Switch”), is a company within a group trading under the brand name “Global Switch” which develops and operates data centres in Europe and Asia‑Pacific.  It is building and operating a data centre in a site in TKOIE.

A2.    Data centre business

9.  Information technology (“IT”) operations are a crucial aspect of most organisational operations around the world today. For most IT operations, business continuity and information security are critical.  Since installing the necessary equipment within their own premises is not viable for many companies (not least because of the power requirements and the need for presence of fuel for generator and cooling agent which might be dangerous for ordinary buildings), the business has emerged of providing data centre service.

10.  A data centre is a building or dedicated space within a building used to house information and communication technologies (“ICT”) equipment, typically computer systems and associated components such as telecommunications, computing system and electronic data-storage systems in a secure and controlled environment.  But it is not an ordinary building or a warehouse.  A data centre would typically be developed with special electrical and mechanical infrastructure to provide a reliable physical environment required for the operation of ICT equipment.  The sophistication level of the technology involved depends on the level, or “tier” (see §14 below), of the data centre in question.

11.  There are different ways of classifying data centres.  The kind of data centres with which these proceedings are concerned is based on a “colocation” model, whereby the data centre operator provides space for the customer to house or “colocate” its own ICT equipment with a range of services in respect of this equipment.  This may be distinguished from a data centre set up by a company purely for its own IT purposes, as well as a model (called “managed hosting”) in which the data centre operator supplies dedicated servers and associated hardware to a customer and then manages those systems on the customer’s behalf.

12.  In these proceedings, SUNeVision contends that colocation data centres fall into one of two models: the “wholesale colocation model” and “retail colocation model”. 

(1)  In the wholesale colocation model, the data centre operator designates specific space within the centre for use by a customer, and grants control over that space to the customer.  This model is typically preferred by large customers who have the internal resources to manage and maintain their equipment in their own dedicated space.  SUNeVision says that the major part of its own data centre business follows the wholesale model and involves the provision of designated space to customers giving them absolute control over the premises.

(2)  In the retail colocation model, different customers’ equipment is housed in the same shared space and no customer would have the exclusive use or control of any space in the data centre.  This model generally caters for customers who need only limited space to set up network Point‑of‑Presence[1] or to house ICT equipment.  The data centre operator will also provide “managed services” such as internet connectivity and bandwidth, network monitoring, and system management.  As their “MSP” (managed services provider), the data centre operator requires unrestricted access to the customers’ ICT equipment.

13.  This description of and distinction between the two models are not accepted by either the Corporation or Global Switch, who consider that it mis‑characterises the data centre industry in Hong Kong.  As explained in a previous interlocutory decision and in section G below,[2] this classification is in my view not helpful in the context of determining whether a particular arrangement in a data centre infringes the Data Centre Policy (defined below) or the lease.

14.  Data centres may also be classified according to the level of services they provide.  One such system is the “Tiers Classification System”, which divides data centres into four tiers (Tiers I to IV), from the most basic to the most sophisticated and reliable.  A Tier III data centre, for example, in addition to having all the Tier I and Tier II capabilities, requires no shutdowns for equipment replacement and maintenance, with N+1 redundant infrastructure,[3] 72 hours power outage protection, and achieves 99.982% “uptime” (as opposed to “downtime”).  A Tier IV infrastructure has all the capabilities of the previous Tiers, with 2N+1 fully redundant infrastructure, 96 hours power outage protection, and “fault tolerance” so that individual equipment failures or distribution path interruptions would have no impact on ICT operations, delivering 99.995% uptime.

15.  The services or facilities typically provided by a data centre include:

(1)  Power.  An uninterrupted and steady power supply is of vital importance, especially to mission‑critical, highly sensitive ICT equipment of high‑end customers.  There must be sufficient power supply as data centres consume an enormous amount of electricity, and also infrastructure to cater for power outage (such as multiple uninterruptible power supplies and back‑up generators) and inconsistencies in the supply such as power surge and frequency fluctuations.  An example is the DRUPS (Diesel Rotary Uninterruptable Power Supply) system used by Global Switch, which combines an electro‑mechanical flywheel and a diesel generator.  Elements of the electrical system are typically provided with redundancy.  There is therefore much more involved than simply connecting the premises with the general electricity grid.

(2)  Cooling.  This requires equipment to monitor and ensure that the temperature and humidity are kept within a specified range which are critical to the operation of ICT equipment.  The system needed is far more sophisticated than simply installing air-conditioning units.  For example, in Global Switch’s data centre, the extensive plant required for the cooling system alone occupies two floors of Buildings 1 and 2.

(3)  Fire protection — this requires fire detection systems and sophisticated fire extinguishing systems that would minimise damage to the ICT equipment in case they are triggered, such as those that use electrically non‑conductive fire suppressing agents.

(4)  Security — this requires security systems with 24/7 monitoring and control of visitors.

(5)  Network connectivity — this involves the provision of network infrastructure (including cabling and facilities for central connection hubs) which enables the ICT equipment housed to connect to telecommunications services providers, local and international.

(6)  Monitoring and troubleshoot — this involves round‑the‑clock, 24/7 monitoring professionals to maintain constancy in the physical environment and network connectivity, usually through a network operation centre within the data centre.

16.  These services have been labelled “DC Services” in the Corporation’s evidence though the term is not a term of art in the industry.  These services are central to the data centre operator’s business and, at least for high‑end data centres, involve highly sophisticated and specialist infrastructure as well as round‑the‑clock, real‑time management and monitoring, taking up a very significant part of the operator’s capital investment, overhead and manpower.  This is a far cry from simply providing fitted out space with power sockets, air‑conditioners and internet connection.

17.  In addition, data centres may also offer further services for customers including:

(1)  offering web‑based business applications thereby saving customers’ cost of investing in software for its IT operations;

(2)  outsourced management of the customers’ ICT equipment, including IT infrastructure design, implementation, monitoring and maintenance support;

(3)  security management for the customers’ networks; and

(4)  providing the data centre’s own cloud infrastructure as computing platform for customers to develop and host their own software applications.

18.  The Corporation has in its evidence labelled such additional and separate services as “Subscribed Services”, which again is not a term of art.

A3.    The Corporation’s policies

19.  As would be expected, for the purpose of discharging its functions, the Corporation has formulated various policies.  In relation to the admission of a firm into an industrial estate, ie granting a lease to a firm, the general selection criteria applied by the Corporation, originally formulated with manufacturing industries in mind, are that the project must be of a nature that effectively prohibits it from being carried out in an ordinary multi-storey industrial or commercial building available in the open market in Hong Kong, it must not be classified as an offensive trade under relevant regulations, and the primary activity must not be storage or warehousing.

20.  The Corporation has also advertised that the most welcome projects would involve new or improved products or services, new or upgraded technology, high added value using local material and manpower, products or services for which there is strong demand from local industry, substantial contribution to Hong Kong’s exports, significant investment particularly in new machinery and equipment, and employment at a higher level of skill. 

21.  In relation to the leasing of land, the Corporation has a general policy against its lessees parting with possession or permitting third parties to occupy premises within an industrial estate.  The rationale is that land in the industrial estates, granted at preferential rates 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 be used for rental gain.  This policy is reflected in the Corporation’s standard lease for individual sections in the industrial estates, which provides in clause B(11)(a) (with the marginal note “alienation”[4]) as follows:

“ [the lessee covenants] … not to assign mortgage charge demise underlet or part with possession of the said premises or any part thereof or otherwise dispose of the said premises or any part thereof or any interest therein or enter into any agreement so to do nor to permit any other party by way of a licence or otherwise to occupy the said premises or any part thereof.”

I shall refer to this provision as the “No Alienation Clause”and the policy reflected in it as the “Lease Restriction Policy”.

22.  Following the recommendation by the Focus Group on Professional Services, Information & Technology and Tourism established by the Chief Executive of Hong Kong in 2007 to promote Hong Kong as a data centre hub in the region, a consultancy study was commissioned by the Innovation and Technology Commission and completed in March 2009, concluding that, in anticipation of new approaches and opportunities to the industry, the Government might need to take further steps to facilitate its future development, and that the Government’s land administration should not impose particular constraints on the data centre sector, and recommending that the Government facilitate development of high profile and mega data centre projects as part of the broader efforts to promote Hong Kong as a location for high technology, high value industries.

23.  Given that TKOIE had been identified to be an ideal location for data centres (because, inter alia, it is a hub of connectivity with four submarine cable landing stations and is equipped with a 150 MVA power substation), the Corporation had initially considered whether to revise the No Alienation Clause and its policies to allow subletting within certain limits, and had included three sites in TKOIE in an “Expression of Interest” exercise in June 2008, to gauge market interest. 

24.  At a meeting of the BDAC on 24 July 2009, the Corporation’s management expressed the view that the user description and restriction in future documents should be simplified to state that lessees within the industrial estates would be permitted “to operate a data centre to provide collocation services (as well as Internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management) to end‑users” but should not part with possession of the lot or any part thereof.  It was considered that the grantee and the operator of the data centre should be the same person.

25.  In October 2009, the Corporation held meetings with OFTA,[5] OGCIO,[6] the Innovation and Technology Commission and InvestHK to discuss issues relating to, inter alia, colocation data centres in cable landing stations in industrial estates.  It was noted that it was popular for multinational content and application providers and multinational corporations to locate their backup platforms in cable landing stations for easy access to the submarine cable systems.  As it was the Government’s policy to facilitate the development of data centres in Hong Kong, it was considered necessary to see what administrative measures could be taken to allow the land available within the industrial estates to be used for operation of data centres.  In November 2009, the Permanent Secretary for Commerce and Economic Development (Communication and Technology) wrote to the Chairman of the Corporation asking the Corporation to expedite action to enhance the evaluation and admission arrangements for suitable applicants in the data centre sector.

26.  Following further meetings with the Government in December 2009 and having obtained further legal advice from the Corporation’s legal advisers (Mayer Brown JSM) to evaluate the implications of the lease provisions, the Corporation’s management prepared a paper for the BDAC to consider at its meeting on 9 February 2010 (“February 2010 BDAC paper”), putting forward the view that:

“ 22.  … the “stipulated use” as approved by BDAC on 24 July 2009 remains valid except for the intention to restrict the customer level to ‘end user’ as described … above.  Management recommends taking away the words ‘to end users’ at the end of the description … above and the revised version becomes:

•  The use shall be to operate a data centre to provide collocation services as well as internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management.

•  The grantee/lessee shall not part with possession of the lot or any part thereof.

23.  If a data centre applicant meets our scrutiny against the above two bullet requirements, we would be inclined to consider that there is no breach of the restriction against alienation.  As such, there is no need to amend the lease condition to suit the operation mode of such data centre use.”

27.  In the context of the general admission criteria, the paper also illustrated how, in terms of value added, a high‑end data centre would command a much higher level of revenue than subletting floor space.  It was noted that the pure subletting of industrial floor space could only score $6‑$8 per ft² and a data centre with base building facilities only $20 or $30 per ft², whereas a data centre with enhanced facilities and the associated management could command $200‑$300 per ft², and upwards of $600 per ft² including network services and outsourced services.  It was considered that, to be admitted into an industrial estate, a data centre operator should carry out substantial amounts of facility management, system management and network management.

28.  In the end, the BDAC endorsed the approach for the evaluation of applications for data centre operation proposed by management, expressed as follows:

“ (a) The current Admission Criteria shall remain in force for the evaluation of data centre applications taking into account the factors as suggested by JSM … above, namely,

• Exclusive possession shall be retained by the grantee.

• The provision of managed services shall be the dominant element of arrangement.

• Right of access shall remain [within] the control of the grantee at all times.

(b)  As described … above, the Approved Use shall be to operate a data centre to provide colocation services as well as internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management. [Please note that the previous referral to ‘end-users’ has been removed.]

(c) Further, we shall maintain our lease restriction on alienation in that the grantee/lessee shall not part with possession of the lot or any part thereof.

(d) As described … above, total investment of new data centre projects should at least exceed the average investment of all projects on the Industrial Estates at $12,500 per m² and hopefully can tally with the average for other IT and T projects on the Estates at around $48,945 per m².” (original italics)

Points (a) and (b) above have been described by the Corporation in these proceedings as its “Data Centre Policy”.

29.  In conjunction with this policy decision, the standard lease used by the Corporation has been adapted for use in relation to data centres by the addition of a sub‑clause (b) into the original clause B(14), which provides:

“ (b) The operations in the said premises shall be in accordance with the purpose referred to in the Second Schedule hereto and shall be governed by a proforma Service Agreement to be made between the Lessee and its customers if colocation is involved. Such proforma Service Agreement shall be upon such terms and conditions as first be approved in writing by the Corporation.”

The Second Schedule is to specify the purpose for which the premises may be used, as described in the grantee’s application and supporting documents.  Further, as decided at the BDAC meeting of 9 February 2010, no amendment of clause B(11)(a) — the No Alienation Clause — need be made, so that it remains in the lease to be used for data centres.

A4.    Correspondence with participants in the industry

30.  On 2 June 2010, in his letter to a company which had previously responded in the Expression of Interest exercise, Mr E Anthony Tan, the then CEO of the Corporation, stated, in relation to the admission of data centres into industrial estates:

“ The rationale for controlling subletting remains here in that the grantee should be the one who undertakes the approved use in the premises. In essence, we will consider an application based on our normal admission criteria taking into account all the relevant circumstances of the application including the following factors:

• Exclusive possession shall be retained by the grantee.

• The provision of managed services including internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management, system management and the like shall be the dominant element of the operation in the premises.

• Right of access to the premises shall remain within the exclusive control of the grantee at all times.”

31.  At around the same time, it appears that SUNeVision and certain data centre operators had expressed concerns to the Government about what they perceived as the Corporation’s interference with the market by allowing other data centres to be operated within the industrial estates. Their letter was passed to the Corporation and replied to by Mr Tan on 9 July 2010 in these terms:

“ HKSTP does not consider it necessary to make any change to our admission criteria in the evaluation of data centre application and that it is not necessary to relax the lease restriction on subletting. In essence, HKSTP will consider an application from a data centre operator based on our established admission criteria taking into account all the relevant circumstances of the application including the following factors: [and the three bullet points in the letter dated 2 June 2010 are set out].”

The letter attached a one‑page document headed “Supplemental Information for Policy and Practice Review”, which stated:

“ … In general, we understand that by virtue of this operation, it may require a client placing its equipment in the premises to enjoy the services provided by the grantee; the latter being the dominant element of the operation of a data centre. Data centre operators as well as other manufacturers who consider that they can meet our admission criteria and lease conditions are welcome to apply for sites on the Industrial Estates.

For argument sake, the licensing of a grantee’s own printing and food processing machinery to others for printing / making their own products is in breach of our lease conditions as the grantee is not carrying out the approved use itself.  Similarly, a data centre grantee that does not carry out the approved use in the premises will be in breach of the lease conditions.”

32.  This was followed by a letter from the Applicant and its associates in September 2010, in which they apparently claimed that ordinary multi‑storey industrial or commercial buildings in Hong Kong could meet the requirements of all tiers of data centre.  The Corporation responded on 20 October 2010 questioning that claim, and also stated in relation to “restriction on subletting” that “the basic test factors” the Corporation had been using to address the specific nature of data centre operation had been explained in the letter of 9 July 2010.

33.  On 1 June 2011, the Corporation issued an invitation to tender for a lot with an existing building in TKOIE, stating:

“ Operators in manufacturing / service industries whose projects meet admission criteria are welcome to apply for sites. Applications are requested to note our standard lease restriction on alienation in that the grantee shall not part with possession of the lot or any part thereof. In effect, no subletting shall be allowed and the grantee shall always retain exclusive possession of the premises including the control of access right. Further, for data centre / collocation centre projects, the dominant operation in the premises shall be the provision of managed services including internet connectivity and networking services, managed and outsourcing services on facilities, data centre management and system management and the like.”

34.  Subsequently, iAdvantage Ltd, a subsidiary of SUNeVision, wrote to the Corporation on 5 December 2011 referring to the criteria used by the Corporation in the Data Centre Policy.  On 14 December 2011 the Corporation replied as follows:

“ I am pleased to see that you are well aware of the criteria we have been using on the Industrial Estates to address the specific nature of data centre operation. You are also correct in suggesting that a simple landlord‑tenant relationship would not meet those criteria.

Since our last letter to you on 20 October 2010, there has not been any change to our admission policy for data centre. According to our standard lease and in particular the restriction on alienation, the Grantee shall not part with possession of the lot or any part thereof.  Accordingly, … the Grantee shall always retain exclusive possession of the premises including the control of access.  In assessing data centre applications, we would expect that the dominant element will be the provision of managed services, networking and outsourcing services etc in respect of facilities, data centre management and system management and the like. …”

35.  It should be noted that as used in the Data Centre Policy, the services that should be a dominant part of the operation cover a range of services, including “managed and outsourcing services on facilities” and “data centre management”.  The Corporation includes both DC Services (§16 above) and Subscribed Services (§18 above) within that concept.[7]  As I understand the position, however, this would not necessarily include the provision of base facilities but what the Corporation regarded as high‑value‑added Facility Management (see §27 above).

A5.    Tender of Site C

36.  TKOIE is situated at Tseung Kwan O Town Lot No 39 and the Extensions thereto, under New Grant No 21680 (“Land Grant”) made by the Government to the Corporation’s predecessor for a nominal premium.  The land has been divided into various sub‑lots which the Corporation in turn leases to its “grantees”, ie firms admitted into TKOIE and to whom leases are granted.  In early 2012, the Corporation decided to make available three contiguous vacant pieces of land on the waterfront of TKOIE, namely Sections B, C and RP of Sub‑Section 5 of Section Q of Tseung Kwan O Town Lot No 39 and Extensions thereto, for application (Section B and Section C will be referred to as “Site B” and “Site C” respectively).  The invitation for application was issued by the Corporation in January 2012 to, among others, a number of data centre companies.  The premiums for the grant of the sites were fixed and specified in the invitation (being, in the case of Site C, $81,760,000, or $3,800 per m² for 21,516 m²).  Instead of competing on price, the invitees were in effect to compete in terms of other parameters including the level of their proposed investment.

37.  In particular, the invitation for application for Site C stated:

“ Applicants are also requested to note our standard lease restrictions on alienation in that the grantee shall not part with possession of the lot or any part thereof. In effect, no subletting shall be allowed and the grantee shall always retain exclusive possession of the premises including the control of access right. Further, for data centre projects, the dominant element in the premises shall be the provision of managed services including internet connectivity and other networking services, managed and cloud services, outsourcing services on facilities, data centre management and system management etc.”

38.  Four conforming bids, including one submitted by SUNeVision via its subsidiary, Wealth Up Development Ltd (“Wealth Up”), and another submitted by Global Switch, were received for Site B and Site C in February 2012.  Wealth Up’s bid involved a proposed investment of $700m or $32,534 per m² which was only about a quarter of the proposed investment by Global Switch.  Further, Global Switch’s bid included a pro forma service agreement to be entered into with its customers, whereas Wealth Up’s bid did not.

39.  As part of the process of considering the bids, the Corporation asked the tenderers a number of questions.  In a questionnaire in April 2012, one of the questions asked of both the Applicant and Global Switch was this:

“ Please elaborate how your operation model will not violate our standard lease restriction on alienation in that the grantee shall not part with possession; and that the dominant element of your operation in the premises shall be the provision of managed and cloud computing services. [If possible, you may submit a proforma service agreement for our reference. If your project is approved by us, it will be stipulated in the lease that the operations shall be governed by a proforma Service Agreement to be approved by us].”[8]

40.  Wealth Up answered on 18 April 2012:

“ This new data centre is designed to primarily focus on a Co‑location model under an ecosystem to support Cloud Computing Services and hence there will not be any lease elements in our service agreements, and we will retain the right to control access to the data centre. …” (original italics)

In response to the enquiry in square brackets, Wealth Up stated it did not have a readily available pro forma service agreement at that stage and did not submit one.

41.  On 25 May 2012, the BDAC decided that Site C would be offered to Global Switch for the establishment of a “mega data centre”. The company that submitted the second best bid was asked to consider Site B for the establishment of a cloud services data centre but in the end decided not to pursue it.  The formal offer of Site C was made by the Corporation on 18 June 2012.  The offer letter drew specific attention to, inter alia, clause B(14) of and the Second Schedule to the Lease, as provisions that “stipulate the type of processes and operations permitted on the Site”.  The Corporation approved Global Switch’s pro forma service agreement on 9 November 2012, as referred to in clause B(14)(b) of the Lease (see §77 below).  The formal Agreement for Lease for Site C, annexing the agreed form of Lease, was entered into by the Corporation and Global Switch on 13 November 2012.

42.  The Second Schedule in the Lease for Site C, which sets out the permitted user, reads as follows:

“ To establish and operate a large scale, carrier neutral, multiple customer data centre to provide managed services, cloud enabling services and other colocation services (including the provision of services to support the placement, installation and maintenance of the Lessee’s and customers’ computer, switch, communications, networking and data storage equipment and the placement, installation and maintenance of connections within the said premises and with cable, antennas and other telecommunications systems and facilities outside the data centre) as set out herein and in the Lessee’s application and supporting schedules, copies of which are annexed to the Lessee’s Proposal Form referred to in the said Agreement for Lease.”

43.  Global Switch intends to operate a data centre comprising 5 buildings at Site C.  Buildings 1 and 2 were completed in December 2017 and currently serve a customer, Daily‑Tech Hong Kong Co Ltd (“Daily‑Tech”).  Building 3 was completed in around October 2019, and Buildings 4 and 5 are still under construction and projected to be completed in two phases this year.

A6.    Other data centres in TKOIE

44.  There are also data centres in TKOIE that are operated on sites granted originally for different purposes.  In those cases, it appears that the leases were formally varied so as to allow data centre use based on proposals submitted by the intended operators.  Thus, on 22 July 2010, the lease for a site in TKOIE[9] was assigned by the former grantee with the Corporation’s consent to HKCOLO.NET Ltd (“HKCOLO”).[10]  At the same time, a deed of variation of lease was entered into between the Corporation and HKCOLO that specified the permitted user of the land as being for

“ a Colocation Centre to serve the IT industry especially in the telecommunication, submarine cable, IP, data, cloud computing and data service market to make Hong Kong a hub centre and concept centre in the world as described in pages nos. #A568‑1 to A568‑48 in HKCOLO Limited’s application dated 29^th January 2010 and supporting schedules (copies of which were annexed to the Proposal Form).”[11]

By the same deed, the lease was also varied to require that the operations in the premises in accordance with the above purpose shall be governed by a pro forma colocation agreement to be made between HKCOLO and its customers containing such terms and conditions as subject to the prior written approval of the Corporation.

45.  Another data centre operator in TKOIE is NTT Com Asia Ltd (“NTT”) which was the grantee of land under an Agreement for Lease dated 6 October 2010 as amended.[12] (NTT has another data centre in the Corporation’s industrial estate in Tai Po which is not relevant to these proceedings).

A7.    SUNeVision’s acquisition of land outside industrial estates

46.  Having failed in its bid for Site C, in 2013 SUNeVision acquired through open tender a plot of land in Tseung Kwan O (near but outside TKOIE) through a subsidiary at the price of HK$428m to construct a data centre there which can include within its business the subletting of part of the premises to its customers.  The data centre was completed and went into business in 2017.  In January 2018, SUNeVision through a subsidiary acquired another piece of land in Tsuen Wan through open tender at the price of $725.8m for developing a similar data centre. 

A8.    Further correspondence with the Applicant and others in the industry

47.  In November 2012, the Applicant and certain data centre operators began lodging complaints with the Corporation that certain data centres in TKOIE (eg the one operated by HKCOLO) were operating in a way that infringed the No Alienation Clause and Lease Restriction Policy.  This chain of correspondence with the Corporation is described in §198 below.

48.  On 24 February 2016, SUNeVision wrote to the Corporation alleging that subletting or attempts at subletting had escalated in recent months, urging the Corporation to take stronger actions to prevent non‑value generating acts such as subletting of land in the industrial estates.  On 21 March 2016, the Corporation replied that it did not consider the customers placing their equipment in the data centres to avail themselves of the services provided to be subletting, and stated:

“ Therefore, in our open invitation for applications, we always draw applicants’ attention to our standard lease restriction on alienation in that the grantee shall not part with possession of the lot or any part thereof. In effect, no subletting shall be allowed and the grantee shall always retain exclusive possession of the premises including the control of access right. In assessing data centre applications, we would expect that the dominant element will be the provision of managed services, networking and outsourcing services in respect of facilities, data centre management and system management and the like.”

49.  In April and June 2016, the Applicant wrote to the Corporation again suggesting that letters of compliance or letters of representation be required to be issued by the grantees on a regular basis to confirm that they had not engaged in subletting.

50.  On 23 March 2017, Dr Elizabeth Quat, a member of the Legislative Council, made an enquiry with the Corporation regarding alleged subletting in TKOIE.  In its reply on the same date, the Corporation stated:

“ For data centre operation, we understand that it may involve customers placing their equipment in the data centres to avail themselves of the services provided by the DC operator. We do not consider this as a breach of lease condition on subletting. In our view, subletting can be defined as ‘subleasing space to other companies as a service’. To ascertain that this is not the case, we would apply the following three (3) tests to demonstrate compliance of our standard lease restriction on alienation in that [the three criteria of exclusive possession, control of access right and the provision of managed services etc being the dominant element of operation were set out].”

A9.    Increase of plot ratio for Site C

51.  Under the Land Grant, any building on the lot or any sub‑lot is subject to a maximum plot ratio of 2.5.  The Corporation had plans to apply for a modification of the Land Grant to increase the plot ratio limit of some of the sites within TKOIE as there were other parts of the land which were under‑utilised or would not be built on.  Global Switch took the opportunity to apply for an increase of the plot ratio for Site C in June 2016, and the Corporation decided to grant an increase from 2.5 to 3.3 for a premium in November 2016.  The formal agreement was entered into between the Corporation and Global Switch in May 2017.  In October 2017, the Corporation formally submitted a modification proposal to the Lands Department seeking approval to increase the plot ratio of eight sites within TKOIE including Site C. This was approved at the District Lands Conference in March 2018.  In November 2018 the District Lands Office proposed basic terms for lease modification, which were accepted by the Corporation on 18 December 2018.  The entirety of the design for Buildings 4 and 5 of Global Switch’s data centre is based on the increased plot ratio of 3.3, the construction of which had started in July 2018.  As stated below, SUNeVision attempted unsuccessfully to expand the scope of this judicial review to attack the Corporation’s decision to allow additional plot ratio for Site C.

A10.  The decision challenged

52.  By a letter from its solicitors, Woo Kwan Lee & Lo (“WKLL”), to the Corporation dated 6 April 2018, SUNeVision complained that there had been an apparent change of policy by the Corporation as shown in its failure or refusal to take steps to enforce lease restrictions or it had adopted a policy of condonation of such breaches, contrary to SUNeVision’s legitimate expectation.  Six incidents, some dating back to 2011 and 2012, were set out in which three grantees in TKOIE had been allegedly acting in breach of the Corporation’s policies and the No Alienation Clause:

(1)  In January 2018, NTT successfully bid for the provision of data centre services to an international search and cloud computing enterprise that amounted to subletting or licensing part of its premises to the customer for its exclusive use and occupation.  Certain alleged terms in the tender issued to all bidders were cited in support.

(2)  In November 2017, Global Switch entered into an arrangement with Daily‑Tech and China Telecom Global Ltd (“CTG”), securing CTG as an “anchor tenant” and allowing Daily‑Tech to occupy the premises as a “partner”.

(3)  In late 2012, HKCOLO entered into an arrangement with IBM which allowed IBM to occupy floor space of 15,000 ft² contrary to the lease restrictions.

(4)  In September 2011, HKCOLO successfully bid for the provision of data centre services to a public authority on terms that involved HKCOLO not retaining exclusive possession and the public authority occupying part of the premises, contrary to the lease restrictions.  Certain alleged tender terms were cited.

(5)  In October 2011, HKCOLO successfully bid for the provision of data centre services to a financial institution on terms which suggested the financial institution had overriding control of the designated area, the right to man its own staff working at that area and the right to exclude HKCOLO’s staff from entering into the area, contrary to the lease restrictions.

(6)  In March 2015, NTT won a bid to provide data centre services to a financial institution on terms which suggested the financial institution would occupy part of the premises for storage and office space and would be in control of access within the designated space, which was likely to be contrary to the lease restrictions.

53.  SUNeVision demanded that the Corporation take immediate steps to stop the change in policy or the policy of condonation by publicly re‑affirming its original policy and taking measures to inquire into breaches of lease restrictions and to ensure the discontinuation of all existing breaches.

54.  The Corporation replied by letter of its solicitors, Wilkinson & Grist, dated 28 May 2018 (“May 2018 Letter”).  Parts of the letter will be quoted below in relevant sections.  In summary, the Corporation replied that:

(1)  There had been no change in the relevant policies and no policy of condonation of breaches.  The three tests (as set out in the Data Centre Policy) continue to govern the admission and lease management of data centres.

(2)  The practice of customers placing their equipment in the data centre to avail themselves of the services provided by the data centre operators, the latter being the dominant element of the operation of the data centre, is not as such considered to give the customers exclusive possession of the space where the equipment is placed or a licence to occupy the space.  This is to be distinguished from the subletting, licensing and/or sharing of space as a service such as the provision of space by grantees to their customers for the storage of unpowered equipment for a rental.

(3)  A data centre operator may bundle its services with telecommunication, network, cloud or other service providers to enhance the total package of offers to its customers.  This would not necessarily be considered as a breach of the lease restrictions.

(4)  The Corporation had consistently enforced the lease restrictions.  Intended grantees are required to provide a pro forma draft service agreement with their potential customers, which the Corporation examines to ensure that the grantees retain exclusive possession and that the arrangements do not amount to subletting, licensing and/or occupation of space as a service.  After the commencement of operation of a data centre, regular inspections are carried out by the Corporation and any suspected breach of lease is promptly dealt with.

(5)  As regards the specific cases mentioned by SUNeVision:

“ Based on [the Corporation’s] regular site inspection at the industrial estates, [the Corporation] is unaware of the alleged breach of the Restriction by the Grantees. As stated … hereabove, [the Corporation] shall continue to carry out regular inspections to the industrial estates to ensure compliance with the Agreement and Lease. If and when our client becomes aware of any irregularities in the industrial estates through the regular site inspection, our client would immediately take steps to investigate into the irregularities, including but not limited to seeking explanations from the Grantees, industrial operators and/or data centre operators. If it is confirmed that a Grantee is in breach of the Agreement and/or the Lease, our client would take appropriate enforcement actions accordingly.”

(6)  The Corporation denied that it had acted in contravention of any alleged legitimate expectation of SUNeVision.  It will continue to monitor the operations of data centres in the industrial estates and ensure that the terms of the grantees’ leases are complied with.

B.     The judicial review proceedings

55.  On 10 September 2018, SUNeVision issued its Form 86 to seek leave to apply for judicial review.  The decision in respect of which relief is sought is specified to be:

“ The decision of [the Corporation] by letter dated 28 May 2018 … from Messrs Wilkinson & Grist not to take immediate steps to rectify the failure or refusal to take reasonable steps to enforce restrictions on leases against subletting, parting with possession and/or sharing of occupation in the Tseung Kwan O Industrial Estate …, the reasons therefor being provided in the 28 May 2018 Letter.”

As will be seen, this is not an accurate description of the Corporation’s position as indicated in the May 2018 Letter.

56.  Leave to apply for judicial review was granted on 9 October 2018 based on consideration of the papers alone. 

57.  On 29 October 2018, SUNeVision issued a summons for stay of the Corporation’s decision to grant the increased plot ratio for Site C (see section A9 above) pending the determination of the judicial review.  Subsequently, on 4 February 2019, it issued a further summons for an interim injunction to prevent the Corporation from executing documents for granting the increased plot ratio pending the application for stay.  The application for interim injunction was dismissed by Chow J on 21 February 2019.[13] The application for stay was subsequently abandoned as a consequence.

58.  By summons dated 6 March 2019, SUNeVision put forward a number of amendments to its Form 86 but only a small portion of the contentious amendments were allowed by this court: see the decision dated 9 May 2019 (“Amendment Decision”).[14]  SUNeVision’s application for leave to appeal was dismissed by this court[15] and by the Court of Appeal.[16]

59.  Further, SUNeVision sought to adduce expert evidence and further factual evidence for its application for judicial review. By a decision dated 12 July 2019 (“Evidence Decision”),[17] this court refused leave to adduce expert evidence, and granted leave to SUNeVision to adduce part of the factual evidence.  SUNeVision’s application for an extension of time to seek leave to appeal was dismissed by this court.[18]

C.     The pleaded case for judicial review

60.  SUNeVision pleads that the Corporation’s relevant policy is that (1) lessees are prohibited from (i) parting with possession of the leased premises or any part thereof whether by subletting or otherwise, and (ii) permitting any third party to occupy the leased premises or any part thereof whether by licence or otherwise; and (2) the provision of managed services including internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management, system management and the like shall be the dominant element of the operation in the premises, and the grantee should be the one who undertakes the provision of managed services in the premises.[19]

61.  SUNeVision relies on clause B(11)(a) of the standard lease for individual sections in the industrial estates, the Corporation’s letters of 2 June 2010 and 9 July 2010, as well as the tender invitation dated 1 June 2011 (see section A4 above), as evidencing the policy.[20]

62.  On the basis and as a result of the policies, SUNeVision says that it has since 2010 had the legitimate expectation (the “Legitimate Expectation”) that:[21]

(1)  “Grantees who are data centre operators in the Industrial Estates are NOT allowed to sublet or part with possession of the leased premises or to license or allow third parties to occupy part of the premises”.

Four examples of prohibited acts are then set out in the Form 86: (i) sublet buildings, floors or caged spaces in the leased premises to as third parties; (ii) let third parties have control on who can access the leased premises including by implementing their own security measures; (iii) let third parties station their staff or have office space or set up office in the leased premises; (iv) let third parties provide managed services; and

(2)  the Corporation will enforce the lease restrictions and will not tolerate or condone any breach.

63.  SUNeVision says that relying on its Legitimate Expectation, in making the application for Site C in 2012 and based on the retail model, it tailor‑made a new business model of providing cloud computing services, which was then a nascent market.  Without the lease restrictions, SUNeVision would have been prepared to put forward a higher amount of proposed investment in its bid.  After its bid failed, and relying on the Legitimate Expectation, in 2013 SUNeVision acquired a piece of land in Tseung Kwan O at market price to construct a data centre based on the wholesale colocation model, and in January 2018 acquired another piece of land in Tsuen Wan again at market price for developing a wholesale model data centre.  It is said that if the Corporation had not adopted the policy, SUNeVision would not have been prepared to pay the prices it paid for these two pieces of land.[22]

64.  SUNeVision says that by reason of events over the past few years, it has become concerned that the Corporation has not been enforcing the lease restrictions against what SUNeVision suspects to be breaches thereof.  The six incidents set out in WKLL’s letter of 6 April 2018 (see §52 above) are then repeated in the Amended Form 86.[23]  It is said that despite requests, the Corporation failed to take any action against the grantees or take steps to investigate the breaches. 

65.  Concerned that there had been a change in policy or a new policy of condonation, the Applicant issued the letter of 6 April 2018 through WKLL to the Corporation setting out its demands.  Parts of the May 2018 Letter are then set out in the Amended Form 86, from which, the Applicant says, it is evident that the Corporation has adopted certain positions.[24] The specific grounds for challenge are then set out in sections C1 to C4 of the Amended Form 86,[25] which may be summarised as follows.

66.  First, it is said that due to the errors and breaches of public duty by the Corporation particularised in Grounds 2 to 4, the Corporation had not in fact been enforcing the lease restrictions in accordance with the law and had therefore breached the Applicant’s Legitimate Expectation, which led to substantial unfairness to the Applicant (Ground 1(1)).[26]  It is also said that in approving the pro forma service agreement of Global Switch (whose terms are, it is said, inconsistent with the lease restrictions and the Corporation’s policy), the Corporation had misconstrued, misapplied or departed from its own policies (Ground 1(2)).[27]

67.  Ground 2 is that the Corporation made certain errors of law or misdirected itself in law:

(1)  First, insofar as the Corporation treated the question of exclusive possession as a question of discretion or policy or on the basis of a “trade practice”, it had misdirected itself ((Ground 2(1)).[28]

(2)  Secondly, it was an error of law to think that the lease restrictions would not be breached so long as (a) services had been provided, (b) the data centre operator had the right to “allocate different areas in the granted site for the installation of their customers’ servers or to relocate the same”, or (c) the relationship between the grantee and its customer was governed by terms in the form of the pro forma service agreement of Global Switch ((Ground 2(1)(a), (b), (c)).[29]

(3)  Thirdly, it would be a misdirection insofar as the Corporation assumed that the provision of colocation of services in the data centre industry necessarily required the operator to part with possession ((Ground 2(3)).[30]

(4)  Fourthly, the Corporation erred in law in thinking that all breaches of the lease restrictions were capable of remedy. Subletting would constitute a fundamental breach incapable of remedy ((Ground 2(4)).[31]

68.  By Ground 3, it is said that the Corporation failed to appreciate that its policy was in effect to allow the grantees to operate a typical retail colocation model but not under a typical wholesale colocation model, and failed to take into consideration the terms between the grantees and their customers which conferred right to possession or right of occupation as well as the fact that the grantees had allowed their customers possession or occupation of the premises.[32]

69.  By Ground 4, it is said that despite SUNeVision had drawn attention to the specific alleged breaches by NTT, Global Switch and HKCOLO, the Corporation failed or refused to take reasonable or necessary steps to inquire into the facts and to take necessary actions.[33]

70.  The only relief sought in the Amended Form 86 is an order of certiorari to quash the May 2018 Letter and an order of mandamus to direct the Corporation to reconsider its decision in accordance with law.[34]

71.  The grounds summarised above will be separately considered in turn below.  Having regard to the arguments the Applicant has sought to raise, however, a preliminary observation is called for, namely that it is of vital importance to focus on the true scope of the judicial review as pleaded.  Several points must be borne in mind in that regard:

(1)  The only decision attacked is the May 2018 Letter, not the entire course of conduct of the Corporation from 2010 onwards in relation to data centres within its industrial estates.

(2)  Specifically, there is no suggestion that there was anything wrong done by the Corporation in formulating the Data Centre Policy in the way it did to cater for the novel data centre user in the industrial estates.  SUNeVision has made no application to impugn the Data Centre Policy as being unreasonable or inconsistent with the No Alienation Clause and the Lease Restriction Policy.

(3)  Nor is there any application to challenge the Corporation’s decisions to approve the pro forma service agreements of Global Switch, HKCOLO and NTT respectively, or the decisions to grant them their respective leases for sites in TKOIE, which were taken many years ago.

(4)  There is also no application to challenge any previous decision of the Corporation on the incidents raised by the Applicant, such as the alleged breaches by HKCOLO.

(5)  The Corporation’s position taken in the May 2018 Letter can only be judged with reference to the matters before it at the time. Information and materials that have subsequently emerged are prima facie irrelevant to the review of the May 2018 Letter.

(6)  As acknowledged by SUNeVision, the present case is not a contest about whether the grantees have in fact breached the terms of their respective leases, which is a private law question as between the Corporation and each grantee, but whether the Corporation committed the alleged public law wrongs.  In fact, none of the grantees referred to was named in the Form 86 as an interested party.  Two of the grantees concerned (HKCOLO and NTT) have not been joined or taken any part in these proceedings.[35]  The actual arrangements in their data centres are matters for the Corporation to inquire into where appropriate, not an issue on which any finding should or can be made in these proceedings.

(7)  Nor is this application about the actual meaning and effect of the terms of the leases of Global Switch, HKCOLO and NTT.  For that, the entire lease documentation would have to be examined and construed as a whole against the factual matrix in each case, to be determined between the parties in question.  The Second Schedule to each Lease, which sets out the permitted user, refers to the grantee’s original application and supporting schedules as annexed to its proposal form.  Each lease also refers to the pro forma service or colocation agreement that required the prior approval of the Corporation.  Quite apart from the fact that HKCOLO and NTT are not privy to these proceedings, none of the initial application, supporting schedules or proposal form of these grantees, nor the approved pro forma agreements (except that of Global Switch), was available as part of the evidence in these proceedings.  Nor is the court apprised of the entire factual background relevant to the construction of each Lease.

72.  Order 53 rule 6(1) provides that no grounds shall be relied upon or any relief sought at the hearing except the grounds and relief set out in the Form 86.  Judicial review is a focussed process for reviewing the legality, procedural propriety and rationality of a specifically identified administrative decision based on pleaded grounds, and must not be allowed to mutate into a general inquiry over administrative conduct with a roving ambit as new materials emerge or arguments come to mind. In the light of some of SUNeVision’s arguments, it is, with respect, necessary to remind oneself of the danger of the application becoming “portals to a playground of infinite possibilities” so famously deprecated by Litton PJ in Lau Kong Yung (an infant suing by his father and next friend Lau Yi To) & Others v Director of Immigration (1999) 2 HKCFAR 300 at 340G. 

73.  The comments of Stock J in Hong Kong Aircrew Officers Association v Director of Civil Aviation (unrep, HCAL 51/1999, 28 October 1999) are also apposite to the present case:

“ There is an increasing tendency for judicial review to become a ‘free for all’, with boundaries ever widening whenever new evidence is filed. Judicial review is not a vehicle for an infinite process of contestation. It is not an occasion where once the foot is in the door by reason of leave given on grounds originally filed, the court is then available, not merely for the purpose for which leave was extended but becomes an open house for whatever points counsel, upon closer examination or further thought, can extract from the evidence as it emerges. …”

D.     Ground 1(1) — legitimate expectation

74.  Ground 1(1) is based on legitimate expectation.  It is said that from the May 2018 Letter, SUNeVision learnt that due to the errors and breaches of public duty by the Corporation particularised in Grounds 2 to 4, the Corporation had not in fact been enforcing the lease restrictions in accordance with the law and had therefore breached SUNeVision’s Legitimate Expectation, which led to substantial unfairness to SUNeVision.[36]  As such, Ground 1(1) is based on Grounds 2 to 4 and requires no separate treatment.

E.     Ground 1(2) — failure to adhere to policies

75.  Paragraph 73B in section C1 of the Amended Form 86 alleges that in approving the pro forma service agreement of Global Switch (whose terms are, it is said, inconsistent with the lease restrictions and the Corporation’s policy), the Corporation had misconstrued, misapplied or departed from its own policies.[37]  This is related to but not the same as paragraph 80A of the Amended Form 86 dealt with under Ground 2(2)(c) below. 

E1.    No application to impugn approval of pro forma service agreement

76.  As mentioned in section A5 above, Global Switch’s pro forma service agreement was already submitted as part of its bid for Site C.  Global Switch provided further explanation in April 2012 in response to the Corporation’s tender questionnaire on how its intended arrangements with customers differed from a lease or sub‑lease arrangement.  In the same response, Global Switch indicated it would abide by the requirements laid down by the Corporation and was willing to develop the pro forma service agreement to deal with any concerns the Corporation might have.

77.  Global Switch’s pro forma service agreement was eventually approved on 9 November 2012 with agreed revisions by the Corporation, before the Agreement for Lease was executed on 13 November 2012.  This is reflected in clause B(14)(b) of the Lease for Site C which provides:

“ The operations in the said premises shall be in accordance with the purpose referred to in the SECOND SCHEDULE hereto and shall be governed by a proforma Services Agreement … to be made between the Lessee and its customers if colocation is involved. The Lessee has submitted the Lessee’s proforma Services Agreement to the Corporation and prior to the execution of the said Agreement for Lease, the Corporation has approved the form of the proforma Services Agreement. For the avoidance of doubt, it is acknowledged by the Corporation that the Lessee does not need the approval of the Corporation to the grant of Services Agreements to customers whose provisions are substantively the same as those approved by the Corporation pursuant to this Clause B(14)(b). …”

78.  The first problem with the Applicant’s allegation in paragraph 73B is that it is not about a decision in the May 2018 Letter, but a decision taken on 9 November 2012.  As noted above, the only decision SUNeVision seeks to impugn by this judicial review is the May 2018 Letter.  The only relief sought is an order for certiorari to quash it and an order for mandamus to require re‑consideration.  There is no application to review the Corporation’s decision to approve Global Switch’s pro forma service agreement whether on the ground of misapplication of policies or otherwise.  That decision was made over seven years ago before Global Switch agreed to take the lease, and was referred to in the Lease which is a public document.

79.  Further, SUNeVision has consciously not applied for leave to challenge the approval of Global Switch’s pro forma service agreement, even after a copy of it was disclosed by Global Switch in these proceedings in December 2018.  There was no application whatever by SUNeVision to include the approval as a decision to be impugned in the judicial review even as it tried to include another decision as a target,[38] or to add any relief sought in relation to that approval or the pro forma service agreement.[39]  Had any such attempt been made, questions would of course have been raised regarding the delay in challenging that decision and the prejudice and unfairness to parties and persons who had been acting on it for years.

80.  Without an application to impugn the decision approving the pro forma service agreement of Global Switch, and having regard to the discussion on Ground 2(2)(c) below, it seems to me that the allegation in paragraph 73B is inconsequential and the point is not germane to this judicial review.

E2.    Whether departure from policy

81.  In case I am wrong on the above conclusion, I go on to consider whether the approval of Global Switch’s pro forma service agreement was indeed a departure from the Corporation’s policies.  For this purpose, it is necessary to consider the true relationship between Global Switch and its customers and the nature of the customers’ “presence” in the data centre under such an agreement.  The principal questions are whether the agreement is in substance a sub‑lease and, as a closely associated question, whether the customer is granted exclusive possession of the premises in question.  This depends on an objective construction of the agreement against the relevant factual background.  Needless to say, the agreement has to be read as a whole, even though for the purpose of exposition I only set out some of the more significant provisions below.

82.  The pro forma service agreement is the form of agreement intended to reflect substantially the terms on which Global Switch is to provide its services to its customers.  Under that agreement, the customer’s ICT equipment is to be placed in the “Customer Space”, defined in the agreement as:

“ the part or parts of the Facility comprising the area set out in the Particulars the boundaries of which are shown [ ] on the plan attached at Annexure 1 or located in such other place or places within the Facility as Global Switch shall from time to time designate pursuant to clause 14.”

The “Facility” means the data centre facility and in practice refers to the particular building or buildings in which the Customer Space is located.

83.  Clause 2.1 is the main provision that sets out the specific rights granted to the customer:

“ 2.1 Subject as herein contained and to the Customer paying the Service Fee, the Non‑technical Services Charge and all the other sums due under this Agreement and to the Customer complying at all times with the Facility Rules & Regulations Global Switch hereby grants to the Customer with effect from the Commencement Date for the duration of the Term the right:

(a) (subject to clause 4.7) to install and retain the Equipment in the Customer Space

(b) to use any cables installed by Global Switch in accordance with clause 6

(c) (subject to clause 4.3) to connect into the low voltage panel designated by Global Switch to serve the Customer Space for the purposes only of the provision of an electrical power supply to the Equipment

(d) to pass and repass at all times over the Common Areas; and

(e) to use the number of car parking spaces in such place or places as Global Switch shall from time to time designate.”

84.  For its part, under clause 3.1, subject, inter alia, to the customer paying the Service Fee, Global Switch as the data centre operator agrees to provide the Services to the customer, and further undertakes under clause 3.2 to perform the Services with reasonable care and skill.  The Services are grouped together under four defined categories and include (i) “Technical Services” covering the provision of uninterrupted power to low‑voltage panels with back‑up diesel generators in an “N+1” configuration, maintenance of air temperature between 20°C and 24°C, maintenance of ventilation with fresh and conditioned air so that the relative humidity lies between 40% and 60%, maintenance of a building management system to detect service interruption and measurement equipment including data‑logging equipment, and maintenance of a three‑layer physical security system (Facility boundary, Facility and Suite) and safety system; (ii) “Non‑technical Services”; (iii) “Managed Services”; and (iv) “Cloud Enabling Services”. 

85.  Managed Services and Cloud Enabling Services as described in Schedule 5 to the agreement include: 1. data storage, 2. network security, 3. managed connectivity, 4. networks, servers, firewalls, 5. monitoring and patch management, 6. Database management, 7. managed DDoS service, 8. managed shared storage, 9. additional consultancy and management services, 10. cloud services, 11. network operation centre, 12. facilities services and project management, 13. remote hands, 14. infrastructure cabling, and 15. global connectivity and reporting.  By clauses 3.3 and 7.3, Global Switch agrees to provide to the customer the Managed Services and Cloud Enabling Services that the customer notifies Global Switch it requires, subject to payment of the relevant fees.  It should be noted that Managed Services as referred to in this agreement have a narrower scope than the services that have to be the dominant element under the Data Centre Policy (see also §111 below).

86.  Clause 2.1(b) and clause 6 confer on the customer the “Cross Connect Right”, which is the right to request the data centre operator to install cables leading from the Customer Space to the equipment of any third party in the Facility.

87.  Clause 2.1(c), which confers the right to electrical power supply through the low voltage panel, is subject to clause 4.3, which requires the customer to comply with Global Switch’s technical and installation standards, electrical power management procedures, and methods statements on cable management and cable installation procedures and limits the power draw by the customer’s equipment to a specified total level and maximum density.  Those limits are backed by further provisions in clause 5 including the imposition on the customer of liability for liquidated damages should his equipment exceed the limit on power draw.

88.  Where “critical outage”, ie outage exceeding specified parameters in relation to cooling, humidity or power occurs, the customer is given “service credits” to be set off against the service fees payable to Global Switch.  This is however subject to the customer’s equipment not exceeding specified limits on total power draw and power density.

89.  While clause 2.1(a) permits the customer to install and retain the equipment in the Customer Space, clauses 4.1 and 4.2 require the customer:

“ 4.1 To keep and maintain in good and substantial repair and condition (damage by the Insured Risks excepted save to the extent that insurance moneys are irrecoverable as a result of the act or default of the Customer) the Customer Space.

   4.2    To maintain the Equipment in good working order and (save to the extent that the same is the responsibility of Global Switch in accordance with the Facility Rules & Regulations) to procure that the Customer Space is kept clean, tidy and safe at all times.”

90.  Clause 4.5 requires the customer:

“ Not to use the Customer Space except for the hosting of information technology equipment and uses ancillary thereto.”

91.  Further, clause 4.9 requires the customer to maintain a complete and accurate inventory of the equipment placed there and to provide Global Switch with a copy.  Clause 4.7 prohibits the customer from making any structural alteration in the Customer Space, or any non‑structural alteration in the Customer Space without the prior written consent of Global Switch (such consent not to be unreasonably withheld) and then only by engaging Global Switch to provide Supervisory Services.

92.  Although an area will have been specified at the outset as the Customer Space in respect of a particular customer, its location is not immutable.  Clause 14 provides for Global Switch’s power to designate some other place as the Customer Space and to require relocation of a customer’s equipment accordingly:

“ 14.1 Global Switch shall have the right exercisable on not less than three (3) months’ written notice to the Customer from time to time during the Term to require the Equipment to be moved from the Customer Space and to be installed in some other part of the Facility, and the Customer will comply with such request. All costs and expenses incurred in connection with such relocation of the Equipment shall be borne by Global Switch.

14.2  Without prejudice to the rights of Global Switch pursuant to clause 14.1, Global Switch agrees that, in specifying the time‑scale for any relocation of the Equipment, Global Switch shall use all reasonable endeavours to consult with the Customer and to specify a time‑scale that causes minimum disruption to the operation of the Equipment.”

93.  Under clause 2.2, Global Switch reserves the right:

“ (a) to refuse access to the Facility or remove from the Facility any employees and sub‑contractors of the Customer whose admission or presence is or would be in the reasonable opinion of Global Switch detrimental to the security of the Facility or in respect of whom the Customer has failed to request a right of access from Global Switch and Global Switch will not be responsible for the consequences of any such refusal or failure or delay by the Customer in notifying it of its access requirements

(b) at all reasonable times and on reasonable notice (except in case of emergency) to enter the Customer Space in order to:

(i)  inspect and record the condition of the Customer Space or any other parts of the Facility

(ii)  remedy any breach of the Customer’s obligations under this Agreement

(iii)  repair, maintain, clean, alter, replace, install, add to or connect up to any Service Media [meaning sewers, drains, pipes, wires, cables, conduits and other conducting media]

(iv)  repair, maintain, alter or rebuild any part of the Facility

(v)  comply with any of its obligations under this Agreement.”

94.  Where a service interruption has occurred, under clause 8.3 Global Switch is entitled to “free access” to the Customer Space “at all times for so long as the Service Interruption persists” in order to carry out remedial works.

95.  Further, by clause 2.3, the customer acknowledges that Global Switch is entitled to:

“ (a)  disconnect or physically terminate or detach or remove cables laid by the Customer in breach of this Agreement and in particular in breach of clause 2.1(b)

   (b)  carry out such cleaning works in the Customer Space as Global Switch deems necessary in compliance with the Facility Rules & Regulations subject to Global Switch first giving notice of the same to the Customer.”

96.  Clause 13.1 provides that the customer shall not assign, novate or transfer the Customer Space or any part thereof or any of the customer’s rights under the agreement except as permitted by that clause.  Clause 13.2(b) provides that the customer may “grant access to the Customer Space or the Equipment to third parties, to enable such third parties to use the Services in accordance with the terms of this Agreement …”.

97.  An examination of the agreement in the context of Global Switch’s data centre, which, like all the other data centres admitted to TKOIE, is of Tier III or higher, shows that the placement of the ICT equipment in the Customer Space is not for the purpose of storage, but for the purpose of utilising and receiving the services provided by the data centre operator through the use of highly sophisticated electrical and mechanical infrastructure, including cables connection with third parties’ equipment, protection in a fault‑proof and ultra‑secure environment equipped with redundant facilities, and round‑the‑clock security and monitoring.

98.  The Service Fee is the consideration paid by the customer for the Services, not a rent.  As the February 2010 BDAC paper noted (see §27 above), within the fees that the kind of data centre such as Global Switch’s commands, only a trifling portion is attributable to the use of industrial floor space.  Global Switch, unlike a landlord, is not simply obliged to make space available and allow the customer to connect to the utilities, but has to provide services using sophisticated systems.  Service outage may result in the customer receiving “service credits” which are in essence liquidated sums to compensate for the failure to provide services.

99.  The customer is not granted a general right of occupation for all purposes, but only for the specified and limited purpose of hosting its inventoried ICT equipment and uses ancillary thereto (clause 4.5 & 4.9).  The customer’s use of the space is referable to the provision of services.  Thus the customer is not granted the space for the purpose of setting up a general office or warehouse.  The customer has an obligation to make sure that his equipment is in good working order (clause 4.2) and comply with Global Switch’s technical standards and procedures and in particular not to exceed the limits on power draw and power density (clauses 4.3 & 5).  These provisions underline the centrality of the element of services for the operation of the equipment.

100.  Further, the Customer Space is not fixed.  There is no part of the land or space which is absolutely designated for the customer during the term of the agreement.  The definition of Customer Space itself includes the provision that it may be located in such other place within the Facility as Global Switch may designate pursuant to clause 14.  Such an arrangement is an important indicator against exclusive possession being enjoyed by the customer: see Dresden Estates Ltd v Collinson (1987) 55 P & CR 47, 53 and Brennan v Lambeth London Borough Council (1997) 30 HLR 481, though by itself not necessarily conclusive: Crancour Ltd v Da Silvaesa (1986) 18 HLR 265, 273.

101.  SUNeVision argues that relocation does not commonly happen, but this does not gainsay the contractual arrangement that is in place. Nor does it indicate in any way that clause 14 is a sham or pretence: see Crancour, p 274.  Global Switch’s response to the tender questionnaire in April 2012[40] explained that the scale of the operations and the infrastructure required to provide the services means that full flexibility must be retained in the allocation of any space to customers.  Furthermore, the provision of contiguous space to a customer, a change in the nature of the usage by the customer or a change in the requirements of the technology employed, may result in the need to alter the location of a customer’s equipment.  In the context of Global Switch’s data centres which are intended to be in operation for many years, such a right seems to me to be a real one that caters for various eventualities which necessitate the movement of customers, such as where damage has occurred or substantial life‑cycle upgrades are needed.

102.  As the operator of the data centre, Global Switch controls access to the Facility.  Clause 2.2(a) reserves to Global Switch the right to admit and to remove any employees and subcontractors of the customer for security reasons or where the customer has not requested a right of access.  This control seems to cover access to and removal from the Customer Space which is part of the Facility.  The retention of the power to exclude people from the Customer Space is another indicator that Global Switch has not parted with possession.

103.  The customer cannot assign the whole or any part of the Customer Space or any rights under the agreement.  Such a provision is consistent with the rights granted being privileges personal to the customer rather than an estate in land that is transferrable to third parties, though I recognise that even leases properly so called may also contain non-assignment clauses.  While the customer can grant third parties access to the Customer Space or to his equipment, this is confined to the purpose of enabling such third parties to use the Services in accordance with the terms of the agreement, and the customer remains responsible to the data centre operator for the observance of his obligations under the agreement (clause 13).  Any such third parties obviously cannot gain any rights greater than those enjoyed by the customer or free from the rights and powers reserved to the data centre operator under the agreement.

104.  Global Switch also has the right to enter the Customer Space at reasonable times and on reasonable notice (except in case of emergency) under clause 2.2(b).  SUNeVision argues that the reservation to the grantor of limited rights of entry such as to view and repair and maintain the premises is not inconsistent with, and may even be indicative of, the grant of exclusive possession, citing Street v Mountford [1985] AC 809, 818C. But it seems to me that the right of entry under the agreement is wider than the kind of reservations referred to in Street v Mountford.  Global Switch may enter the Customer Space “to inspect and record the condition” of not only the Customer Space but also any other parts of the Facility (clause 2.2(b)(i)). This seems to me to be a very wide and flexible reason.  The word “condition”, which is not defined, ordinarily means the state something is in.  Thus this may include entry to measure and record the cooling, ventilation and humidity conditions to ensure the agreed standards are maintained and for compilation of reports which may be inspected by the customer upon request, as well as entry for inspection to detect commission of breach of agreement by the customer, for example, in relation to the use of cables and power draw.  Access may be obtained not only for planned maintenance but also for balancing the systems which affect areas not associated with the customer.

105.  Another reason — installing or connecting “Service Media” which include wires and cables (clause 2.2(b)(iii)) — would seem to be a prominent one for this business.  Depending on the services the customer has subscribed for, there will also be obligations for Global Switch that give occasion for it to enter the Customer Space (clause 2.2(b)(v)). As recognised in Street v Mountford, p 818A, where the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises, the occupier is a lodger, not a tenant.  The word “unrestricted” in this context has been said to be primarily concerned with the landlord’s need to go into and out of the lodger’s rooms at the convenience of the landlord and without the lodger being there to let the landlord in: Crancour, p 273.  In Huwyler v Ruddy (1996) 28 HLR 550, cleaning service provided over a period of 20 minutes per week, where the owner was obliged to enter into the premises as and when necessary, rendered the occupier a lodger rather than a tenant.

106.  Under the agreement in question, although reasonable notice is required (except in an emergency), there is no right for the customer to refuse entry.  The legitimate reasons for entry are not limited to the provision of attendance and services to the customer.  The evidence shows that, in practice, Global Switch accessed the Customer Space of a customer regularly and without notice.  For example, there were about 200 entries by Global Switch personnel into Daily‑Tech’s Customer Space between 1 August and 21 November 2018.

107.  It is not in dispute that physical security and data security are the central to a data centre’s operations.  Security is not necessarily indicative of exclusive possession.  As the enforcement actions taken against HKCOLO over the IBM incident show (see §188 below), the Corporation did not accept an arrangement in which the customer could refuse entry to the grantee to any area on the premises.

108.  Finally, I note that clause 2.4 provides that nothing in the agreement is intended to create any relationship of landlord and tenant between Global Switch and the customer.  Such a provision is of course not conclusive: if the agreement viewed objectively meets the requirements of a tenancy, then there is a tenancy notwithstanding that the parties have chosen for it a different label: Street v Mountford, 819F.

109.  On the basis of the provisions of Global Switch’s pro forma service agreement, I do not think that exclusive possession of the Customer Space is granted to the customer or, which virtually amounts to the same thing since the grant is for a fixed term at an annual payment, that a leasehold estate of the Customer Space is thereby demised to the customer.

110.  The customer under the agreement is not even like a lodger who is entitled to live in the house.  The customer cannot live there or move his office there.  All that he is entitled to do is to place his ICT equipment there to enjoy the Services provided and to use the space for uses ancillary thereto.  He may be relocated by the Global Switch.  He cannot call the place his own.

111.  Further, under the agreement the provision of “managed services including internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management, system management and the like” does seem to be the dominant element of the operation, and the right of access appears to remain within the control of the grantee as the data centre operator.  The Applicant says that the customer has an option whether or not to subscribe for managed services, which may therefore not be a dominant part of the relationship.  This argument elides two different concepts.  In fact, what the customer may choose from is the Managed Services (in addition to Cloud Enabling Services) as listed and described in Schedule 5 to the agreement.  Those Managed Services have a narrower scope than the services referred to in the Data Centre Policy which are required to be the dominant element of the operation.  In particular, as stated by the Corporation, DC Services (see §16 above), at least as comprising the high-technology and high-value-added aspects of facility management, are encompassed in the requisite services within the Data Centre Policy.  There is no pleaded allegation that this is a misunderstanding of the Corporation’s own policy.  Managed services as referred to in the Amended Form 86 also include “data centre management, system management and the like”.[41]  Moreover, the evidence is that the provision of Managed Services (as more narrowly defined in the pro forma agreement) was and remains the dominant purpose of Global Switch’s data centre in TKOIE.

112.  In approving Global Switch’s pro forma service agreement, therefore, there was no departure from or misapplication of the Data Centre Policy.

E3.    New allegation based on occupation

E3(a).  The allegation

113.  SUNeVision contends, however, that the Corporation has departed from or failed to apply the Lease Restriction Policy because the No Alienation Clause not only prohibits parting with possession but also prohibits permitting third parties to occupy any part of the premises by licence or otherwise.

114.  The latter part of the No Alienation Clause is a covenant not “to permit any other party by way of a licence or otherwise to occupy the said premises or any part thereof”.  While there would not be any difficulty with this in the case of a manufacturing facility in an industrial estate, one can immediately see that this gives rise to a conflict with the operation of a colocation data centre because the whole point of it is to allow customers to place their ICT equipment in the data centre for the equipment to function in the serviced environment within.  It would be a trespass to place objects on someone else’s land without a licence to do so: Clerk & Lindsell on Torts (22^nd ed), §19-02.  Indeed, one of the uses staunchly opposed by the Corporation in general is use of premises in the industrial estates as warehouse or for storage.  Colocation, including what the Applicant calls the retail model of colocation, inherently comprises the grant of a licence for occupation of the operator’s premises by the customer’s equipment.

115.  In fact, the Corporation recognised early on the concern arising from the No Alienation Clause due to the inherent nature of data centres.  It was considered by the BDAC at its meeting on 24 July 2009 that a data centre that provided colocation services (as well as internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management) to end‑users would be acceptable provided that the grantee did not part with possession of the lot or any part thereof.  At the BDAC meeting on 9 February 2010, after further consideration and obtaining further legal advice, it was decided that the user of operating such a data centre would remain valid without the restriction that the services be provided “to end‑users”.  The condition of not parting with possession of the lot or any part thereof was retained.  It is plain from a reading of the February 2010 BDAC paper that the position adopted was that the Corporation would not consider there to be a breach of the No Alienation Clause provided that the criteria set out in the Data Centre Policy were met to an extent that satisfied the Corporation for the grantee to be admitted, in particular that the grantee did not part with possession of the lot or any part thereof.

116.  The Data Centre Policy, adopted on 9 February 2010, was a policy to enable and promote the accommodation of colocation data centres in the Corporation’s industrial estates.  It would not be sensible to suggest that notwithstanding this policy, such data centres were impermissible because there was a covenant against third party’s occupation within the No Alienation Clause which the Corporation must enforce, and the installation of customers’ equipment in a data centre contravenes such covenant because it is a licence to occupy part of the premises.

117.  Indeed, even SUNeVision does not go that far. It accepts that colocation data centres are permissible under the No Alienation Clause and Lease Restriction Policy.  It accepts that customers’ equipment may, by the grantee’s licence, be placed within the data centre, however bulky and immovable the equipment may be and however much of the premises it therefore occupies, even though the space occupied is therefore necessarily excluded to others.  It accepts that customers can legitimately take up space to set up network points of presence and for housing their IT equipment in racks and even cages.  Indeed, the market research report relied upon by the Applicant stated that under the retail model, a customer may require a single rack, a private cage with dozens of racks, or even an entire pod.[42]

118.  What SUNeVision submits instead is that the Corporation has failed to appreciate that there is something in between, which lies beyond the occupation of the premises by the equipment, but which stops short of amounting to exclusive possession of the premises, that the lease and policy nevertheless prohibit.  This has been variously labelled “exclusive occupation”[43], “sole occupation”[44] or “sharing of occupation”[45] in SUNeVision’s submissions.  It is submitted that the Corporation erred in misinterpreting its own policies and in considering that the requirements of the Lease Restriction Policy are subsumed within the Data Centre Policy.[46]

E3(b).  The point is not open to SUNeVision

119.  This alleged error is not raised in the Amended Form 86 as a ground for judicial review.  The May 2018 Letter specifically referred to the criteria in the Data Centre Policy as the “3 tests” that “govern the admission and lease management of data centres”, and referred to the Corporation’s reply to Dr Elizabeth Quat dated 23 March 2017 which was to the same effect.  WKLL had in their letter of 6 April 2018 commented that this seemed to have disregarded the restriction against licensing of occupation (and this was mentioned again in paragraph 51 of the Form 86), but SUNeVision did not plead any such alleged error in section C of the Form 86 as a ground for judicial review.

120.  In the Corporation’s evidence in response to the judicial review, Mr Patrick Siu, then Chief Operating Officer of the Corporation, specifically stated in his affirmation of 18 December 2018 that the Corporation had

“ formulated the Data Centre Policy in good faith, and adopted the criteria in the Data Centre Policy as sufficient (within a range of different degrees of ‘exclusive possession’) for the purpose of complying with the No Subletting Policy and the No Alienation Clause.”[47]

121.  It is true that there are passages in the Amended Form 86 that refer to both the restrictions against subletting and against permission to occupy, but despite the Applicant put forward two successive draft amendments in February and March 2019, there was no attempt to allege that the Corporation made an error of adopting the Data Centre Policy as the criteria for compliance or to raise this as a ground for judicial review.  In common with the Corporation, the Applicant’s argument then regarded the policy as one of prohibition against parting with possession, which covered both sub-letting and permitting third parties to occupy.[48]  Nor is there any plea as to what “permit to occupy” means which does not preclude the occupation of space by equipment but which precludes something that satisfies the Data Centre Policy.  Such an attack, if it is to be made, ought to be made fairly and squarely in the pleaded case, not cobbled together from scattered phrases not pleaded for that purpose.

122.  Indeed, in the Amended Form 86 it is said (§67) the distinction between possession and occupation is “technical and elusive”: Akici v LR Butlin Ltd [2005] EWCA Civ 1296, §23.  The next paragraph (§68) refers to “sharing possession” and “sharing occupation” as equivalent without drawing any distinction, and refers to Tulapam Properties Ltd v De Almeida and others [1981] 2 EGLR 55 which was a decision based on a covenant not to “share possession” where the court found it appropriate to construe the word “possession” with reference to its “broader popular meaning” rather than its usual meaning in land law.  Clause B(8)(a) of the Corporation’s standard Agreement for Lease, which contains a prohibition against parting with possession but not against permitting third parties to occupy, is pleaded as containing a “similar provision” to clause B(11)(a) of the Lease without there being said to be any difference of any significance.[49]

123.  In argument the Applicant referred to Luganda v Service Hotels Ltd [1969] 2 Ch 209 for the submission that a lodger may be in exclusive occupation of a room notwithstanding that the landlady had a right of access at all times, but it was a decision based on the term “exclusive occupation” within the meaning of s 70(2) of the Rent Act 1968.  This is not a phrase that appears in the No Alienation Clause or even in the Amended Form 86 at all, although it seems to have taken on a significant role in the Applicant’s submissions.

124.  The Applicant pleads that the “content and rationale of the Policy” were stated in the letters of 2 June 2010 and 9 July 2010 (quoted in section A4 above),[50] and that in both letters Mr Tan confirmed that the Corporation’s admission policy for data centre operators was that the Corporation would consider an application based on its normal admission criteria taking into account all the relevant circumstances including the three factors set out in the Data Centre Policy.[51]  There is simply no mention of any alleged criterion based on occupation which is not captured in the Data Centre Policy.  The invitation for tender for Site C and the subsequent tender questionnaire in 2012 were to the same effect and understood by the Applicant’s subsidiary accordingly (see §§37-40 above).

125.  The passage in Mr Siu’s affirmation quoted in §120 above was alluded to at the hearing on 20 June 2019 of SUNeVision’s summonses for leave to adduce further evidence.  When the court asked which part of the Lease Restriction Policy was, on SUNeVision’s case, not already within the Data Centre Policy, the answer was that the Data Centre Policy only stated retention of exclusive possession as one of the factors to be taken into account, not as a necessary requirement.[52] It could therefore result in a case where the Corporation took into account that factor but nonetheless permitted the grantee not to retain exclusive possession; that, it was submitted, would be a misinterpretation of the policies.  The issue therefore centred round exclusive possession.  The point now sought to be made, based on occupation not amounting to possession, was not mentioned at all.

126.  The truth is that what has now taken centre stage in the Applicant’s submissions is an afterthought, a new point raised only in the skeleton argument for the substantive hearing.  No further amendment has been proposed to the Amended Form 86.  In these circumstances, having regard to the principles I have referred to in §§72-73 above, the point should not be entertained.

E3(c).   The Corporation did not misinterpret its own policies

127.  If I am wrong in the above, I am in any event of the view that the point has no merits.

128.  The interpretation of policy is a question of law.  But this does not mean that policy statements are to be construed as if they were legislative texts.  It is common ground that “a broader and wholly untechnical approach should prevail” (In re McFarland [2004] UKHL 17, §24) and that it is to be read in a “practical down-to-earth way” (R v Director of Passenger Rail Franchising,ex parteSave Our Railways [1996] CLC 589, 601; Shiu Wing Steel Ltd v Director of Environmental Protection (2006) 9 HKCFAR 478, §23).  Further, in interpreting a policy, the court should adopt a purposive approach, having regard to its context and purpose, and will presume that the drafter did not intend to produce consequences which are objectionable or undesirable, or absurd, or unworkable or impracticable, or merely inconvenient, or anomalous or illogical, or futile or pointless: Law Mei Mei v Airport Authority [2018] 4 HKLRD 312, §50 per Chow J.

129.  The genesis of the Data Centre Policy has been referred to in §§115-116 above.  It was specifically formulated in light of the lease restrictions and was the considered response on how to approach those restrictions in the case of data centre user.  In my view it is clear that the Corporation’s position, as reflected in the BDAC paper for the meeting of 9 February 2010, was that it would consider that the No Alienation Clause had been complied with provided that the criteria in the Data Centre Policy were met to their satisfaction (see also section E3(a) above).  The Corporation would welcome a business that was in substance the provision of high-value-added quality data centre services, but not a business more in the nature of subletting land (which would not be permitted).  It is to be recalled that the February 2010 BDAC paper stated that provided the conditions were met, the Corporation “would be inclined to consider that there is no breach of the restriction against alienation”and that the lease restriction would be maintained “in that the grantee/lessee shall not part with possession of the lot or any part thereof”.  In that way, although there was no amendment to the No Alienation Clause in the standard lease, when it comes to the Corporation’s policy of lease enforcement, the general Lease Restriction Policy has to be read subject to the specific Data Centre Policy.  It would not make sense for the Corporation to grant a lease toa data centre operator based on the Data Centre Policy, but then immediately to insist that it must cease its operations or forfeit the lease because, even though its operations comply with the criteria of being admitted (ie the Data Centre Policy), they nevertheless involve a breach of the Lease Restriction Policy.

130.  The BDAC paper was not a public document, but the published statements regarding the Corporation’s approach did not in my opinion deviate from the position adopted.  As mentioned above, in his letters dated 2 June 2010 and 9 July 2010 to stakeholders in the data centre industry including the Applicant, the CEO of the Corporation wrote in terms (quoted in section A4 above) specifically setting out the three factors in the Data Centre Policy.  The letter dated 20 October 2010 referred to them as “the basic test factors that [the Corporation had] been using to address the specific nature of data centre operation” (§32 above).  The correspondence in December 2011 shows that the Applicant was well aware of the criteria the Corporation been using to address the specific nature of data centre operation (§34 above).  The tender invitation for Site C, the tender query on 3 April 2012 and Wealth Up’s answer on 18 April 2012 were to the same effect (§§37-40 above). 

131.  In my view, therefore, the Applicant’s unpleaded new case that the Corporation has erred in treating the Data Centre Policy as sufficient for ensuring compliance with the Lease Restriction Policy is in any event not established. 

132.  The Applicant has not raised any challenge to allege that the Corporation was not entitled to adopt the Data Centre Policy or that it is a erroneous policy, but in effect the Applicant is trying to do that: it is saying that any data centre that permits customers to occupy space cannot be admitted, even though the grantee satisfies the Data Centre Policy.

133.  The Applicant submits that the restriction against permission to occupy remains in the No Alienation Clause in the actual leases.  However, as explained in §71(7) above, we are not concerned here with the interpretation of the terms of the lease, but with the Corporation’s policy as regards lease management and enforcement.  The meaning of each lease depends on the entire lease documentation, and the construction of clause B(11)(a) has to be undertaken in the context of the whole contract and the factual matrix, including the grantee’s application, supporting schedules and the approved pro forma agreement with its customers.

134.  Insofar as the Applicant says that the customers should not be setting up general offices for staff in the data centre premises, it appears that the Corporation does not take issue and has indeed been enforcing such restrictions: see the IBM incident in HKCOLO’s premises in §188 below.  Nor is there any dispute that the grantee should be the one who undertakes the approved use in the premises. 

135.  The Applicant complains in correspondence and submissions that the Corporation has not stated precisely what level of access or control the grantee needs to retain, and that it is unhelpful for the Corporation to say each case depends on its own facts or that whether there is a breach is a matter of fact and degree.  But there is no pleaded ground attacking the Corporation for failure to issue further guidance or explanation of its policies, nor is the legal basis for the complaint apparent.  On the basis of the Data Centre Policy as formulated, whether or not there is a breach is a matter that depends on the specific arrangements.  The Applicant itself pleads that exclusive possession depends on the question of “degree” of control over the premises.[53]

F.     Ground 2 — errors of law

136.  SUNeVision alleges that the Corporation misdirected itself in law in coming to its decision in the May 2018 Letter. There are four alleged errors of law under this Ground, the second one being subdivided into three allegations.

F1.    Ground 2(1)

137.  The May 2018 Letter contains the following passage:

“ 3. The Restriction is expressly stated in the letter for tender invitations for land applications as well as the offer letter to the intended Grantees issued by our client. You are well aware of the said practice of our client as you recognized in paragraph 16 of Your Letter that our client specifically drew the attention of the prospective tenderers to the Restriction in the invitation to tender for leasing an individual section in the Tseung Kwan O Industrial Estate … dated 1 June 2011. It is common ground that in the data centre operation industry, some customers may place their equipment in the data centre to make themselves avail of the services provided by the data centre operators, the latter being the dominant element of the operation of the data centre. Under such model, our client considers that these customers on the industrial estates do not have exclusive possession of the space in the data centre where their equipment is placed; nor are they licensed to occupy the space and has made it clear to all potential applicants accordingly. Such trade practice ought to be distinguished from the subletting, licensing and/or sharing of space as a service, such as the provision of space by Grantees to their customers for the storage of unpowered equipment, servers or racks for a rental.” (emphasis added)

138.  Relying on the words “considers” and “trade practice”, the Applicant alleges[54] that insofar as the Corporation treated the question of whether customers were granted exclusive possession as a question of discretion or policy or on the basis of an alleged “trade practice”, it had misdirected itself.  A similar allegation is made[55] that the Corporation took into account “trade practice” as an irrelevant consideration.

139.  In my view this argument takes the word “considers” out of context.  What was being referred to in the letter is the colocation model, where customers place their own equipment in a data centre in order to avail themselves of the services provided, with the provision of services being the dominant element.  The Corporation took the view that such a situation was to be distinguished from the subletting or licensing of space for the storage of unpowered equipment.  The word “considers” does not, in my opinion, show that the Corporation has treated the question of whether exclusive possession has been granted as a question of discretion or policy.  The Corporation’s evidence has confirmed that it regards the question of possession as a matter of fact and degree, not a question of discretion or policy.[56]

140.  Nor is the sentence, properly read, a suggestion that there is a “trade practice” or “industry custom”, certain and notorious, in the sense used in the law where a specific custom or usage may be relied upon for the construction of particular expressions in a legal document,[57] that alters what is otherwise the meaning of the policies on their true and proper interpretation in context.  It seems to me that the phrase “such trade practice” simply refers to the business model, described earlier in the passage, where the customers place their own equipment in the data centre to benefit from the services provided, as opposed, for instance, to the managed hosting model where the data centre provides the equipment itself (see §11 above) or the warehousing of equipment.

141.  There is therefore no substance in Ground 2(1). The Corporation did not misdirect itself in the way alleged.

F2.    Ground 2(2)

142.  The next ground alleges that the Corporation erred in law in considering that the lease restrictions would not be breached so long as certain conditions were present.  The complaint therefore is that the Corporation erred in treating each of these matters as sufficient in itself to ensure compliance.  This Ground is analysed below with reference to the three matters separately.

F2(a).  Ground 2(2)(a)

143.  The Applicant alleges that the Corporation erred in law in considering that the lease restrictions would not be breached as long as any services other than the provision of space were provided by the data centre operator to its customers.  It is said that the material question is the degree of control over the premises and their use retained by the Grantee, not whether any data centre services have been offered.

144.  It might be an error of law for the Corporation to direct itself in the way alleged, but it would in my view be a misreading of the May 2018 Letter to say that the Corporation in fact took that position.  In an earlier paragraph, the letter expressly stated that:

“ The following 3 tests continue to govern the admission and lease management of data centres:-

(i) exclusive possession shall be retained by the grantees …

(ii) the provision of managed services shall be the dominant element of the operation in the premises; and

(iii)  rights of access to the premises shall remain within the exclusive control of the Grantees at all times.”

145.  Quite apart from the emphasis on exclusive possession and right of access, there is a requirement that the provision of managed services shall be the dominant element.  The services required do not just mean any services.  As set out in the BDAC paper of 9 February 2010 (see section A3 above), the approved use shall be to operate a data centre to provide colocation services as well as internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management.  The paper indicated that the emphasis was on high-value Facility Management, System Management and Network Management.  As stated in the Corporation’s evidence, it has never been its position that “any service”, such as merely “the provision of cooling”, would by itself suffice for compliance.[58]

146.  Despite the Applicant’s attempt to trivialise what has been called the DC Services, as described in §15 above they can be based on highly sophisticated technology and represent a major component of the capital investment and operations of a data centre.  As mentioned in §§27-28 above, as part of its approach the Corporation required a substantial amount of high-technology and high value-added management services including facility management.

F2(b).  Ground 2(2)(b)

147.  The allegation is that the Corporation erred in law in considering that the lease restrictions would not be breached as long as the data centre operator had the right to “allocate different areas in the granted site for the installation of their customers’ servers or to relocate the same”.  The quoted words come from the following paragraph in the May 2018 Letter:

“ 6. To ensure compliance by the Grantees, the intended Grantees are requested to provide a proforma service agreement showing the service arrangement between the Grantees and their potential customers for our client’s prior approval. Our client requires that the Grantees shall retain exclusive possession to the land, including the right to allocate different area in the granted site for the installation of their customers’ servers or relocate the same in their service agreements. …”

148.  Again, it seems to me the Applicant has taken words from the letter out of context.  On no proper reading of the letter can one say that the Corporation regarded it as a sufficient condition for compliance thatthe data centre operator had the right to require their customers’ equipment to be relocated to different areas within the data centre. The word “including” shows that the power mentioned is among what the Corporation expects, and directly contradicts the alleged error.  There is no dispute that the right is a relevant matter to be taken into consideration in determining whether exclusive possession has been granted.

F2(c).   Ground 2(2)(c)

149.  The allegation is that the Corporation erred in law in considering that the lease restrictions would not be breached so long as the relationship between a grantee and its customer is governed by terms substantially in the form set out in Global Switch’s pro forma services agreement. 

150.  The evidence is that in the case of premises to be used for data centre, all intended grantees have to submit their pro forma service agreements with customers to the Corporation for vetting before the relevant grant is made.  A contractual provision is also included in leases for data centre in the form of clause B(14)(b) requiring the approval of pro forma service agreement (see §29 above). 

151.  In the case of Global Switch, its pro forma service agreement was approved by the Corporation on 9 November 2012.  That approval formed the basis upon which it entered into the Agreement for Lease with the Corporation on 13 November 2012.  A revised form of clause B(14)(b) was inserted into the Lease (see §77 above).  As such, the pro forma service agreement seems to me to be part of the factual matrix and, at least arguably, part of the contractual materials as between the Corporation and Global Switch which must be taken together and construed as a whole.  Obviously it could not have been intended by the parties that an arrangement conforming to that which had been expressly approved by the lessor could nevertheless be regarded as a breach of the lease.  I find it difficult, as at present advised, to see how the Corporation can possibly be expected to complain against Global Switch for breach of lease if its arrangements with customers are governed by terms substantially in the form of the approved pro forma services agreement (see also section J below).

152.  Furthermore, as mentioned in section E1 above, that approval is not challenged by this or any other application for judicial review.  Nor is there any challenge against the decision to grant the lease to Global Switch based on its pro forma services agreement.

153.  Accordingly, in my judgment, it would not be an error of law for the Corporation to take the view that the lease restrictions would not be breached so long as the relationship between Global Switch and its customer is governed by terms substantially in the form of Global Switch’s pro forma services agreement.  On the contrary, indeed, it would at least arguably be an error of law for the Corporation to conclude otherwise.

154.  SUNeVision’s allegation is not limited to Global Switch, but framed in terms of “a grantee”.  As far as HKCOLO is concerned, the lease as varied by a deed of variation in July 2010 provides that:

“ the operations in the Premises in accordance with the purpose referred to in Clause (A)(2) above [see §44 above] shall be governed by a proforma Colocation Agreement to be made between HKCOLO Limited and its customers. Such proforma Colocation Agreement shall be upon such terms and containing such conditions as subject to the prior approval in writing by the Corporation.”

The evidence is that there was a pro forma colocation agreement (as revised) which was approved by the Corporation in evaluating HKCOLO’s application for lease.

155.  In the case of NTT, the evidence likewise is that it was based, inter alia, on the standard form General Terms and Conditions and Special Conditions submitted by NTT that the Corporation granted it a lease in TKOIE.

156.  Naturally, and in my view quite properly, in determining whether HKCOLO and NTT have breached their respective leases or the Corporation’s policies, the Corporation would examine their arrangements with reference to their respective pro forma agreements.  As in the case of Global Switch, there would be nothing erroneous if the Corporation considered that HKCOLO and NTT had committed no breach provided the arrangements conformed to their respective approved pro forma agreements.  There is nothing to suggest that the Corporation took the alleged position, in relation to HKCOLO and NTT, that there would be no breach if they followed Global Switch’s pro forma service agreement. 

157.  Likewise, the Applicant has not in any way challenged the Corporation’s decision approving the pro forma agreements of HKCOLO and NTT respectively or the decision to grant them the leases or to permit data centre user in the leased premises on the basis of such pro forma agreements. Any challenge of that kind would now of course be inordinately out of time.

158.  Accordingly, this ground alleging an error of law also fails.

F3.    Ground 2(3)

159.  SUNeVision contends that “insofar as” the Corporation assumed that the provision of colocation services in the data centre industry necessarily required the operator to part with possession of the premises, then it had materially misdirected itself.  It is said that the typical retail colocation model would be compatible with the Corporation’s policy and would not be in breach of the No Alienation Clause.

160.  The alleged assumption would indeed be a misdirection, but the short answer is that the Corporation did not make this assumption whether in the May 2018 Letter or otherwise.  On the contrary, the Data Centre Policy, reiterated in the letter, shows that the Corporation considered that it was entirely possible to operate a colocation data centre without parting with possession.  This was one of the “basic tests” for admission under the policy.  The Corporation did not misdirect itself as alleged.

F4.    Ground 2(4)

161.  The allegation is that the Corporation erred in law in thinking that all breaches of the lease were capable of remedy as subletting would constitute a fundamental breach incapable of remedy.  The Applicant contends that it appeared from the May 2018 Letter that the Corporation would only take action against breaches if the grantee refused to take remedial actions.

162.  The relevant passages in the May 2018 Letter read as follows:

“ 7. … If it is confirmed that a Grantee is in breach of the Agreement and/or the Lease, our client would take appropriate enforcement actions accordingly.

8.  Pursuant to the terms and conditions of the Agreement and the Lease, our client is entitled to a number of rights and powers against the Grantees to ensure compliance, including in particular:-

…

(ii) If the Grantee shall be in breach of any of the terms and conditions, our client is entitled to demand that the Grantee shall pay additional premium for the period of the breach on a daily basis (… Clause 50 of Section B of the Lease); and

(iii) In case the Grantee has failed to perform and observe any of the stipulations or covenants, our client may serve upon the Grantee a notice of breach requiring the Grantee to remedy the breach within the specified time. If the Grantee has failed to remedy the breach to the satisfaction of our client, our client shall have the right to re‑enter upon and take possession of the said land (… Clause 1 of Section D of the Lease).

   9.  We refer to the statement made by Mr. Gregory So, the then Secretary for Commerce and Economic Development … in the Legislative Council on 25 March 2015 in relation to the general approach adopted by our client to enforce the terms of the Lease.  Our client would usually make enquiries to the Grantee about operations suspected of breaching the Restriction and demand the Grantee to cease the alleged breach.  If the Grantee is confirmed to be in breach and refuses to take remedial actions, our client would take appropriate actions according to the terms of the Lease.  Depending on the severity of the breach, our client may charge an additional premium.  Further, our client may exercise the right to initiate the re‑entry procedure.”

163.  The two clauses in the lease referred to in the letter provide as follows:

Clause B(51)

“ If the Lessee shall be in breach of any of the terms conditions and covenants … in respect of which notice of breach has been given by the Corporation and such breach shall not have been completely remedied to the satisfaction of the Corporation before such date or time limit specified in the said notice given by the Corporation, [the Lessee covenants] to pay to the Corporation on demand … a sum calculated at the rate of HK$20,645 per day as additional premium for the period from the date or time limit specified in the said notice … to the actual date on which such breach shall have been completely remedied to the satisfaction of the Corporation.”

Clause D(1)

“ … if there shall be any breach of any of the covenants by the Lessee herein contained, the Corporation may serve upon the Lessee notice of the breach and thereby requiring the Lessee to remedy the breach within such reasonable time as shall be specified in such notice and if upon the expiration of such reasonable time the Lessee has not remedied the breach to the satisfaction of the Corporation, then and in any such case the Corporation … may at any time thereafter enter into and upon the said premises or any part thereof in the name of the whole re‑enter repossess the same and enjoy as in their former estate but without prejudice to the rights, remedies and claims of the Corporation …”

164.  It seems to me that, in the above passages in the May 2018 Letter, the Corporation was reiterating the contractual procedures for the particular enforcement actions.  There is nothing erroneous in following the contractual provisions.  Furthermore, it would be inaccurate in law to say that a breach of the No Alienation Clause must necessarily be incapable of remedy.  While a breach in the form of actually granting a sublease might be difficult to remedy, there is no conceptual or practical difficulty to remedy if the breach is constituted by, for example, a customer having blocked certain area in the data centre to which the grantee has been excluded from access.  As stated by Neuberger LJ in Akici v LR Butlin Ltd, supra, at §73: “a breach of covenant against parting with possession or sharing possession, falling short of creating or transferring of legal interest, are breaches of covenant which are capable of remedy …”  Neither of the authorities cited in the Amended Form 86, namely, Woodfall, Landlord and Tenant, §17.132.1 andMerry, Hong Kong Tenancy Law (6^th ed), p 191, supports the contrary position.

G.     Ground 3

165.  According to SUNeVision’s classification, data centre colocations typically fall into either the retail or wholesale category, broadly as described in §12 above.  By this Ground, SUNeVision contends that the Corporation misunderstood its own policy and failed to appreciate that it was in effect to allow the grantees to operate a data centre under a typical retail colocation model but not a typical wholesale colocation model. 

166.  The Corporation’s Data Centre Policy, however, makes no reference to the particular business model of a data centre.  Nor was there any reference to any retail or wholesale model in the formulation of that policy as described in the BDAC paper of 9 February 2010.  As already mentioned, it was previously considered by the BDAC that the user was to be limited to colocation services provided by the grantees “to end-users”, but this interim internal position was expressly abandoned by the BDAC in the meeting of 9 February 2010.  As finalised and implemented, the Data Centre Policy was not framed with reference to the nature or level of the grantee’s customers at all and, in particular, whether or not such customers are end‑users.  In dismissing SUNeVision’s application for leave to appeal against this court’s decision not to allow an amendment of the Form 86 based on a limitation to end-users, the Court of Appeal stated:

“ … the ‘end‑users limitation’ as recorded in the Feb 2010 Paper is not only just an unpublished factor discussed at the BDAC’s ongoing meetings but has also been expressly excluded and replaced by the three matters adopted in the published policy. This once‑considered but expressly excluded factor cannot be relevant to inform the court as to the proper meaning of the Policy and the Lease Restrictions.”[59]

167.  Instead, the Data Centre Policy is framed in terms of exclusive possession, control over right of access, and the dominance of the provision of managed services.  General admission criteria include whether the activity can be carried out in an ordinary industrial building, the level of technology and the amount of investment involved.  There is no complaint in these proceedings about how these policies were formulated or expressed.

168.  SUNeVision appears to suggest that because wholesale customers “typically” require more control over the data centre premises, if a grantee has adopted a “typical” wholesale model and provided space to a wholesale customer, then it is more likely that the grantee has acted in breach of lease or in breach of the Data Centre Policy.  In my view, such reasoning is unhelpful and an unnecessary digression.  Whether there may be a breach depends on the particular arrangements between a data centre operator and its customer, not on the result of a forced classification of the general operations of a data centre into one of two so‑called “typical” models. 

169.  Nor is the classification determinative of the issue of possession and control.  There is no clear touchstone for the concepts of “wholesale” and “retail”.  As used by SUNeVision, they do not refer only or even primarily to the position of the grantee’s customer in the supply chain of data centre services, but to a host of matters not all of which have any necessary correlation to the degree of control over the premises.

170.  Furthermore, as SUNeVision recognises by including the word “typical” in its assertions, the implications for control of the premises depend on the specific arrangements.  The classification into typical wholesale and retail models is neither necessary nor sufficient for determining the issue of possession, and would simply give rise to arid questions as to whether or not certain arrangement is typical.

171.  As SUNeVision itself recognises,[60] whether, in a given situation, the grantee has parted with exclusive possession is a question “normally determined by examining the contractual provisions governing the relationship between the parties”.  Irrespective of whether one labels the business model as wholesale or retail, the question of possession depends on the actual arrangements rather than the label.

172.  In the market research report dated June 2017 relied upon by SUNeVision itself, it was stated[61] that the “wholesale and retail distinction continues to blur”, that “[i]n recent years, new data centre options that blur the lines between wholesale and retail have started gaining popularity”, and that there are “hybrid facilities”, thus recognising there could be a whole range of possible arrangements. 

173.  In any event, even if there exists something that is “typical” in the industry generally, there is no reason why the grantees in the industrial estates, in particular TKOIE, must follow any typical arrangements elsewhere, rather than enterprisingly devise and calibrate their operations to best position themselves in the market within the constraints that apply in the industrial estates.

174.  For these reasons, the Applicant’s attempt to re‑characterise the Corporation’s policy as one that permits a typical retail model of colocation data centre but not a typical wholesale model has, in my view, been shown on analysis to be misconceived.

175.  In addition, it is contended that the Corporation failed to take into consideration the terms and conditions between the grantees and their customers which conferred right to possession or right of occupation and the fact that the grantees had allowed their customers possession or occupation of the premises.[62]

176.  This contention does not assist the Applicant:

(1)  There is no factual basis to suggest that the Corporation did not take into account the terms and conditions between the grantees and their customers, since the Corporation did consider the terms of the pro forma service agreement of each intended data centre operator in vetting its application. 

(2)  The pro forma service agreements, with the revisions required by the Corporation, have been approved by the Corporation in decisions made many years ago.  In doing so the Corporation considered that they complied with its Data Centre Policy and the No Alienation Clause as applied pursuant to its policy.

(3)  As stated above, each of the approved pro forma service agreements formed part of the contractual setting between the Corporation and the grantee in question, and seems to me prima facie to be binding on the Corporation.

(4)  The Applicant is by this complaint trying through the backdoor to impugn the decision approving those pro forma service agreements.  For the reasons already explained, this is impermissible.

177.  The Applicant also alleges that it is apparent from the Corporation’s approval of Global Switch’s pro forma service agreement that the Corporation is prepared to sanction acts by its grantees that would result in the breach of its policy or the lease.[63]  This is an allegation that is, again, a disguised attack on the decision in 2012 to approve the pro forma service agreement.  For the reasons explained above (see eg sections E1 and F2(c)), this argument fails.

H.     Ground 4

178.  By this Ground, the Applicant alleges that despite it had drawn attention to the alleged breaches by NTT, Global Switch and HKCOLO, the Corporation failed or refused to take reasonable or necessary steps to inquire into the facts (thus failing to discharge its Tameside duty[64]) and to take necessary actions on the breaches. 

179.  It is not in dispute that the decision‑maker’s duty here was one to take reasonable steps to acquaint itself with the relevant information to enable it properly to perform the function in question.  It is for the decision‑maker, not the courts, to decide upon the manner, extent and intensity of the inquiry, though its position could be challenged if it was Wednesbury unreasonable[65]: Smart Gain Investment Ltd v Town Planning Board (unrep, HCAL 12/2006, 6 November 2007), §87; R (Khatun and others) v Newham London Borough Council [2005] QB 37, §35.  In Deng Suet Yan v Hong Kong Housing Authority [2017] 4 HKLRD 73 at §19, the Court of Appeal referred with approval to the principles set out by Hallett LJ in R (Plantagenet Alliance Ltd) v Secretary of State for Justice [2015] 3 All ER 261 at §100 including the following:

“ (3) The court should not intervene merely because it considers that further inquiries would have been sensible or desirable. It should intervene only if no reasonable authority could have been satisfied on the basis of the inquiries made that it possessed the information necessary for its decision (R v Kensington and Chelsea Royal London BC, ex p Bayani (1990) 22 HLR 406 at 415 per Neill LJ).

   (4)  The court should establish what material was before the authority and should only strike down a decision by the authority not to make further inquiries if no reasonable council possessed of that material could suppose that the inquiries they had made were sufficient (per Schiemann J in R v Nottingham City Council, ex p Costello (1989) 21 HLR 301; cited with approval by Laws LJ in (R (on the application of Khatun) v Newham London BC at [35]).”

180.  Wednesbury unreasonableness is of course a high threshold.  It is not satisfied simply because the court, if it were called upon to decide the question, might or would have come to some different conclusion.  It refers to a decision “so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it”.[66] 

181.  The gist of WKLL’s letter of 6 April 2018 has been referred to in §§52-53 above.  After setting out the six incidents, the accusation made against the Corporation was that there was a change in policy or the adoption of a policy of condonation.  SUNeVision demanded that the Corporation take immediate steps to stop the change in policy or the policy of condonation by re‑affirming its original policy and taking measures to inquire into and stop existing breaches.

182.  It is important to note what the response of the Corporation actually was.  In the May 2018 Letter, the Corporation confirmed there had been no change in policies and there was no policy of condonation, and re-affirmed its existing policy.  In relation to enforcement, it was stated:

“ 6. To ensure compliance by the Grantees, the intended Grantees are requested to provide a proforma service agreement showing the service arrangement between the Grantees and their potential customers for our client’s prior approval. Our client requires that the Grantees shall retain exclusive possession to the land, including the right to allocate different area in the granted site for the installation of their customers’ servers or relocate the same in their service agreements. If the service arrangement provides for or amounts to subletting, licensing and/or occupation of space by the intended Grantee as a service, such proposal would be screened off in the application stage. After the commencement of operation, regular inspections to industrial premises and data centres on the industrial estates are carried out by our client and any suspected breach of the Restriction is promptly dealt with.

7. We do not intend to engage in protracted arguments with you on the specific cases of individual Grantees mentioned in paragraphs 26 to 36 of Your Letter. Based on our client’s regular site inspection at the industrial estates, our client is unaware of the alleged breach of the Restriction by the Grantees. As stated in paragraph 6 hereinabove, our client shall continue to carry out regular inspections to the industrial estates to ensure compliance with the Agreement and the Lease. If and when our client becomes aware of any irregularities in the industrial estates through the regular site inspection, our client would immediately take steps to investigate into the irregularities, including but not limited to seeking explanations from the Grantees, industrial operators and/or data centre operators. If it is confirmed that a Grantee is in breach of the Agreement and/or the Lease, our client would take appropriate enforcement actions accordingly.

…

9. We refer to the statement made by Mr. Gregory So, the then Secretary for Commerce and Economic Development, in response to the Honourable Frederick Fung in the Legislative Council on 25 March 2015 in relation to the general approach adopted by our client to enforce the terms of the Lease. Our client would usually make enquiries to the Grantee about operations suspected of breaching the Restriction and demand the Grantee to cease the alleged breach. If the Grantee is confirmed to be in breach and refuses to take remedial actions, our client would take appropriate actions according to the terms of the Lease. Depending on the severity of the breach, our client may charge an additional premium. Further, our client may exercise the right to initiate the re‑entry procedure.

10. The above approach was also adopted by our client in the past against a Grantee who was in breach of the Restriction and the said Grantee had rectified the breach upon our client’s demand. …

…

14. Our client always strictly observes the terms of the Lease and also ensures that the terms of the Agreement are duly complied with.  Your client [may] rest assured that our client shall continue to monitor the operations of the data centres in the industrial estates and take appropriate and lawful steps in ensuring the Grantees’ compliance with the Agreement and the Lease.”

183.  The May 2018 Letter was, therefore, not a refusal to enforce the Data Centre Policy and the No Alienation Clause, nor a final and conclusive decision that there were no breaches.  On the contrary, by the letter the Corporation affirmed its commitment to their enforcement.  The Corporation stated it was not aware of the alleged breaches based on its regular site inspections, but would continue to carry out regular inspections to ensure compliance.  It was not a once and for all performance of the Corporation’s functions with regard to premises leased for data centre purposes.  The Applicant’s attack must be seen in the context of what the Corporation’s position actually was.  It was not a refusal to take reasonable steps to enforce the lease restriction against parting with possession, as the Applicant describes the May 2018 Letter in the Amended Form 86.

184.  Under the Corporation’s approach, at the application stage, all intended lessees or operators are asked to provide their pro forma service agreement with their potential customers for prior consideration and approval by the Corporation.  If what that agreement provides would give rise to an infringement it would be screened off at that stage.

185.  After the premises are leased out, the Corporation would monitor the operations of the data centres by conducting regular site visits and interviews with the operators.  Thus the estate supervisor carries out regular inspections of each factory including data centre, based on a designated schedule throughout the year, normally accompanied by a member of the Estate Management staff of managerial grade from the Corporation’s Headoffice.  The estate supervisor is able to check for changes in the set‑up and configuration of each data centre as between one visit and another, and compare the configurations of different data centres to check for irregularities.

186.  Besides, the Corporation’s Development Manager and the Chief Operating Officer would also conduct inspections.  The inspections thus conducted at the premises of NTT, HKCOLO and Global Switch in TKOIE by the Corporation’s senior management were as follows:

Names	Number of inspections
	2012	2013	2014	2015	2016	2017	2018	Total
NTT			1	2	3	2	1	9
HKCOLO	2	0	2	1	2	2	1	10
Global Switch							1	1

187.  Further, the Chief Operating Officer and his staff would undertake ad hoc inspections to check for irregularities and to address specific concerns that may arise from time to time, for example when complaints are drawn to their attention.

188.  On a previous occasion, the Corporation took steps to enforce compliance when it discovered a breach of lease.  During an ad hoc site inspection on 22 May 2013 following requests and demands made by the Corporation in correspondence, it discovered that at HKCOLO’s site,[67]inter alia: (i) IBM, a customer of HKCOLO, was occupying certain floor space on the ground floor of the building as their own security and check-in counter with its own name, logo and signs put up; and (ii) IBM occupied a supporting area on the second floor with a control room, conference room and office settings.  There was a complaint received that IBM, rather than HKCOLO, was operating a data centre.  Taking the view that these arrangements infringed the No Alienation Clause and went beyond HKCOLO’s approved pro forma colocation agreement, on 27 May 2013 the Corporation through its solicitors issued a notice to HKCOLO requiring the breaches to be remedied within one month failing which a daily additional premium would be payable pursuant to the lease.  This was followed by two further site inspections by the Corporation on 3 September and 11 November 2013, as well as further solicitors’ letters from the Corporation.  Eventually, the Corporation was satisfied in around July 2014 that HKCOLO had remedied the breaches.

189.  HKCOLO’s arrangement with IBM is in fact one of the six incidents raised in WKLL’s letter of 6 April 2018, as mentioned in §52 above, which the Corporation had investigated and was eventually rectified in 2014.  The other two incidents relating to HKCOLO referred to in WKLL’s letter related to two tenders both in 2011.

190.  The allegations in WKLL’s letter of 6 April 2018 were made without any proper supporting documentation or evidence.  For example, the allegations about the tender terms of NTT and HKCOLO were not supported by any tender document; only some newspaper articles were attached. Even in an affirmation filed in these proceedings in February 2019, SUNeVision only produced very heavily redacted copies of the tender documents which were said to be “highly commercially sensitive” and which SUNeVision was bound by confidentiality obligation not to disclose.  It was only on 13 September 2019 that SUNeVision produced to the Corporation substantially unredacted versions of those documents, whilst still withholding consent for the Corporation to show them to the grantees in order to seek their explanation.

191.  It is unnecessary for present purposes to deal with the contents of these tender materials which have since emerged.  What is clear is that it is necessary to see the entire substantive provisions of the applicable agreements before one can analyse and come to any conclusions on the nature of the relationship.

192.  Thus at the time of WKLL’s letter, the Corporation had examined the pro forma agreements of each of the three grantees and was given to understand that they applied to all their customers.  The Corporation had also been carrying out regular inspections (except for Global Switch’s data centre which had only recently been completed) and had previously examined HKCOLO’s arrangements with IBM which had been rectified to its satisfaction.  During that investigation the Corporation had sought to obtain the actual agreements entered into between HKCOLO and its customers but was told that they were confidential and the Corporation had no legal entitlement to them.

193.  The Corporation also conducts investigations when it receives complaints of any alleged breach of lease terms.  In relation to WKLL’s letter of 6 April 2018, the Corporation wrote on 24 May 2018 to Global Switch, HKCOLO and NTT asking them to clarify the situation with regard to SUNeVision’s allegations.  The three operators responded by letters shortly afterwards.  The Corporation then conducted further physical inspection into the data centres of Global Switch, NTT and HKCOLO on 19 June, 3 August and 9 October 2018 respectively.  While these steps were taken after the May 2018 Letter, this is unremarkable given that there was no final, once-and-for-all decision made by the Corporation in that letter and that, as noted in the letter, its lease enforcement is a continuing exercise.

194.  Based on certain emails dated 2013/14 and an email dated 2016 which SUNeVision obtained confidentially from an insider and disclosed in these proceedings by an affirmation in March 2019, it is now alleged that HKCOLO and one of its customer, KDDI, had at that time exploited the prior notice given by the Corporation of its inspections and adopted a practice of “on the run” (走鬼) to respond to the inspections. On this basis SUNeVision criticises the inspections as ineffective.  The following points may be noted in this regard:

(1)  These emails were not available to the Corporation at the time of the May 2018 Letter or even when these proceedings were commenced, but only in an affirmation filed on 22 March 2019.  As a result, they are not the subject matter of the May 2018 Letter, but of the ongoing investigations being undertaking by the Corporation.  The emails do not show there was a general, long‑standing or prevalent “on the run” practice among all the data centre grantees.

(2)  The grantees are reputable corporations and most of their data centre customers are also well‑established institutions with large-scale operations.  It is not readily to be expected that they would engage in plotting together to mislead the Corporation. Furthermore, there are arrangements, set‑up and configurations in data centres that are not easily removed or changed within a short period of time, which means that it would be difficult for any offending parties to cover all their tracks within a few days before the inspections.

(3)  Even if a grantee had adopted such practice with a customer, one cannot, with hindsight, and by reference to this alone, conclude that the enforcement procedures were so ineffective as to be Wednesbury unreasonable.

(4)  As a matter of fact, the Corporation was able to detect, through inspections, what it regarded as breaches of lease by HKCOLO in relation to its arrangements with IBM, as described in §188 above.

(5)  From the 2013/14 emails adduced by SUNeVision, it can be seen that the grantee actually understood that the Corporation would “severely check whether sub‑lease arrangement [had been] made” and that any breach could lead to the grantee being “disqualified”.  Far from it being evidence of any condonation by the Corporation, it was an indicator that the grantee knew that the Corporation took enforcement of the lease seriously.

195.  Further materials about the arrangements in the grantees’ premises have come to light after the May 2018 Letter, including materials that have emerged in the evidence filed in these proceedings.  They are however not directly relevant since the application for judicial review herein is concerned with the May 2018 Letter, which was a response to SUNeVision’s complaint dated 6 April 2018.  The focus of these proceedings is on that response, examined in the light of what was then before the Corporation, with reference to the specific grounds of challenge set out in the Amended Form 86.  This judicial review is not the forum to canvass such new materials for the first time.[68]  The Corporation’s investigations based on such new matters (including obtaining the grantees’ response on the new materials) are ongoing. 

196.  It would be a rare case where, after exhaustive examination in legal proceedings, it is impossible to think of some further or different, perhaps even more effective, methods or lines of inquiry, especially with the benefit of hindsight.  But this is not the question.  The court needs to beware that it is not the executive body concerned and must not usurp a landlord’s discretion in how its leases are to be managed and enforced.

197.  In all the circumstances, I am of the view that the Applicant has failed to show that the steps taken by the Corporation by way of inquiry and enforcement were Wednesbury unreasonable.  The allegation of breach of the Corporation’s Tameside duty therefore fails.

I.     Delay

198.  The Corporation further submits that there has been great delay in SUNeVision’s application for judicial review.  The following points are of note in this regard.

(1)  In 2010 the Corporation formulated and implemented the Data Centre Policy and made clear the criteria it would apply in admitting data centre operators into its industrial estates, in particular the three “basic test factors” to ensure compliance with the No Alienation Clause.

(2)  The Corporation approved HKCOLO’s and NTT’s pro forma service agreements probably in 2010 and approved Global Switch’s pro forma service agreement in 2012, as can be inferred from the leases in question which are public documents (see §§44-45 & 77 above).  There is a strong undercurrent in the Applicant’s submissions seeking to impugn the approval of these agreements, without facing up to the reality that any such challenge would be hopelessly out of time.

(3)  As early as on 16 November 2012, the Applicant had already instructed WKLL to lodge a complaint with the Corporation about suspected breaches of lease by HKCOLO, citing two incidents which were materially the same as two of the incidents referred to in WKLL’s letter of 6 April 2018 and now found in sections A.7.4 and A.7.5 of the Amended Form 86.  On 5 December 2012, Mayer Brown JSM replied on behalf of the Corporation that the case was the subject of enquiry in their normal monitoring even before receipt of WKLL’s letter.  By letter dated 13 August 2013, WKLL stated that the complained breaches were continuing and raised a further complaint that HKCOLO breached the lease by reason of its arrangements with IBM, which is of course another of the incidents referred to in WKLL’s letter of 6 April 2018 now found in section A.7.3 of the Amended Form 86.  On 21 August 2013, Mayer Brown JSM demanded that WKLL disclose the names of their clients but WKLL refused.  On 27 December 2013 Mayer Brown JSM replied that the Corporation “[had] always striven to actively monitor the compliance of Lease provisions by the grantees and [had] always taken compliance of Lease provisions by the grantees in the Industrial Estates very seriously”, but refused to provide further details since WKLL’s clients had refused to disclose their identities.  Meanwhile, on 11 September 2013, WKLL also complained on behalf of their clients to the Lands Department that there was a breach of the user restriction in the Land Grant itself on the ground that IBM was using part of the premises of HKCOLO as a commercial office.  On 23 January 2014, the Lands Department replied that after an inspection of the premises, they considered that the current use of the premises observed was not in breach of the Land Grant.  As stated above, the Corporation took steps to enforce compliance by HKCOLO in relation to IBM and the breaches were remedied to its satisfaction in July 2014.

(4)  On 20 February 2017, SUNeVision wrote to the Corporation, attaching a newspaper report and raising the concern that Global Switch was involved in subletting in its arrangements with Daily‑Tech and CTG.  This is one of the incidents referred to in WKLL’s letter of 6 April 2018 although that letter contained further developments.

(5)  In the reply to Dr Elizabeth Quat dated 23 March 2017, the Corporation made clear it “would apply the … three (3) tests to demonstrate compliance [with the] standard lease restriction on alienation …”.

199.  There has therefore in my view been much delay on the part of SUNeVision in relation to a considerable number of matters and allegations raised in its application.  This is something that the court can and, indeed, should take into account in relation to the question of relief. As Stock JA (as he then was) said in Lo Siu Lan v Hong Kong Housing Authority (unrep, CACV 378/2004, 17 December 2004), §39, where there are earlier challengeable decisions:

“ it is not then open, in the context of a factual matrix such as this, for applicants who could have challenged those earlier decisions, to sit upon their rights with no risk of leave being refused. Whilst in such a situation the latest decision may itself be amenable to challenge, that is not a fact that is to be looked at in isolation when the court comes to consider the issue of leave and, if leave be given, of relief. It must be looked at in the round, with due regard of course, as in Burkett,[69] to the nature of the earlier decisions and to the framework as a whole.”

200.  Section 21K(6) of the High Court Ordinance (Cap 4) provides that where there has been undue delay in making an application for judicial review, the court may refuse to grant, not only leave to apply for judicial review, but also any relief sought, if it considers that the granting of the relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration”.

201.  In the light of the conclusions on the grounds raised by the Applicant, however, it is unnecessary to consider the effect of delay further.

J.     Relief and discretion

202.  Global Switch submits that even if grounds are established for judicial review, relief should be refused.  In essence, the submission seems to me to be a narrower one that even if the Corporation’s policies and the No Alienation Clause in fact mean what SUNeVision says they mean, and Global Switch’s pro forma service agreement is inconsistent with them, the Corporation should not be directed to come to a fresh decision that would have the effect of impugning or repudiating the pro forma service agreement.

203.  On the basis of my earlier conclusions, this issue does not arise.  In particular, as explained in section F2(c) above, I find it difficult to see how the Corporation can properly, as landlord, resile from the pro forma service agreement which it approved and which arguably formed part of the contractual materials constituting the lease. 

204.  On behalf of Global Switch, Mr Man SC submits that in order to give effect to SUNeVision’s legitimate expectation, the court would be interfering with entirely lawful conduct by Global Switch who in no sense brought about this problem and who has acted throughout in good faith and in reliance upon the approval of its pro forma service agreement apparently properly granted.  What, he asks, of Global Switch’s legitimate expectations, even contractual rights?[70]

205.  In Shek Lai San v Securities and Futures Commission & another [2010] 4 HKC 168, A Cheung J (as he then was) rejected a challenge of the decision of the Securities and Futures Commission and the Hong Kong Monetary Authority to enter into a settlement agreement with 16 banks which had been involved in the sale and distribution of Lehman Brothers‑related minibonds, under which the banks agreed, among other things, to offer to repurchase from eligible customers all outstanding minibonds at prices discounted to their nominal values.  Refusing leave to apply for judicial review, his Lordship said:

“ 41. … the unravelling of the settlement agreement would potentially lead to the unravelling of the repurchase agreements. The relief sought in the Form 86 would have serious repercussions on the interests of third parties. The potential magnitude of the monetary impact is, as mentioned, enormous. In fact, the very existence of these proceedings would have a potential impact on these third parties. Until the conclusion of these proceedings, no eligible customer can safely assume that the payment he or she has received under a repurchase agreement from the bank involved may be used without the risk of being required to repay the same to the bank in the event that the repurchase agreement is subsequently disturbed, following a successful challenge to the decisions in issue.

42. The Court is entitled to take into account the potential impact of the relief sought on third parties. After all, relief in judicial review proceedings is discretionary. …

…

45.  In my view, as regards the first and second decisions, the potential impact of the relief sought in the present case is profound.  There is no realistic chance of the relief sought being granted at a substantive hearing.  I conclude that the applicant has not shown a reasonably arguable case for the relief sought in the Form 86.”

206.  Global Switch says that it took the precaution of submitting a pro forma service agreement, explaining to the Corporation in detail how its operation model would not violate the lease, seeking the Corporation’s approval of the pro forma service agreement before agreeing to take the lease, and procuring a revision to the standard lease so as to make express reference to the approved pro forma service agreement (see clause B(14)(b) quoted in §77 above).  On that basis it agreed to take on the lease, and proceeded to construct a data centre complex with a total investment of $6 billion. It would be wholly unjust to Global Switch if the Corporation were to enforce the lease in a way contrary to the pro forma service agreement and to the common understanding it had with Global Switch as to what would be permissible. 

207.  In my view there is no valid answer to this.  First, SUNeVision submits that because Global Switch, in resisting the interlocutory application for an injunction to restrain the grant of increased plot ratio (see §57 above), has promised to abide by the court’s ruling on the interpretation and application of the restrictions in the lease, it cannot therefore complain of any prejudice when in the end it is required to do so. This argument fails to address that, in determining what Global Switch’s lease requires, the Corporation’s approval of the pro forma service agreement and the modus operandi of the mega data centre as explained by Global Switch is of vital importance.  Global Switch’s promise at the interlocutory stage does not preclude it from asking the court to take into account the actual contractual materials and factual matrix between it and the Corporation.

208.  Secondly, the Applicant argues that Global Switch was fully aware of the No Alienation Clause when it took the lease of Site C. Global Switch must, of course, be taken to have been aware of the clause, but there is in addition an express provision in its lease that the operations in the leased premises shall be in accordance with the purpose referred to in the Second Schedule to the Lease and governed by the pro forma service agreement approved by the Corporation.  The Second Schedule (see §42 above) in turn refers to the materials comprised in Global Switch’s application for the site.  It would be a mistake to look at the No Alienation Clause in isolation in a vacuum as the Applicant suggests.

209.  Thirdly, the Applicant submits that Global Switch has already obtained a benefit in that its breaches of the No Alienation Clause have been condoned by the Corporation in the past.  The “prejudice” in having to comply with the No Alienation Clause is simply loss of a benefit that it should never have had in the first place.  In my view, this takes the argument no further as it begs the question of what Global Switch’s lease requires.  The case of R v Oxby [1997] EWCA Civ 2960 relied upon by the Applicant turns upon wholly different facts.

210.  Fourthly, it is said that Global Switch’s investments would not be wasted if the No Alienation Clause is properly applied in future because Global Switch could still use its data centre to provide colocation service under a retail model in a way that is compliant with the lease.  I have already pointed out that the Applicant’s fixation on the distinction between wholesale and retail model is misconceived (see section G above).  In fact, from the outset Global Switch had informed the Corporation that their data centre was intended to be a “wholesale carrier-neutral data centre”, providing “wholesale managed services” to its customer base which would include major IT players and telecommunication companies — customers that provide technology solution as their core business.[71]  It was on the basis of, inter alia, these materials that the Corporation offered the lease to Global Switch and approved its pro forma services agreement.

211.  Finally, the Applicant’s suggestion that the court should simply grant relief in these proceedings without regard to any prejudice to Global Switch, and leave it to pursue private law remedies or perhaps even another application for judicial review against the Corporation, seems to me to be a course only calculated to create further uncertainty, which of course will benefit no one except Global Switch’s competitors including the Applicant.

K.     Unfairness

212.  SUNeVision says that the consideration paid by the grantees within the industrial estates was a fraction of what it had to pay for land outside, based on the GFA that can be built, and that there was therefore some unfair competition against it.  Whether the decision to allow data centres to be set up within industrial estates in the first place is a fair one and whether the Data Centre Policy strikes a fair balance are not questions raised in this judicial review and not questions for the court.  It is, however, relevant to note that there are significant differences between land in the industrial estates and elsewhere: (1) the land acquired by SUNeVision was perceived by the market as perpetual, whereas leases in the industrial estates have a definite expiry date in 2047 renewal of which is uncertain;[72] (2) there is a narrowly defined restriction on user for each lease in the industrial estates, whereas land use elsewhere is regulated by more general town plans and government leases; (3) there is no restriction against subletting in SUNeVision’s sites and no control over the form of agreements with customers; (4) there are restrictions on mortgages and charges for land in the industrial estates;[73]  (5) SUNeVision’s sites are freely transferrable, like other land in private ownership in Hong Kong, whereas leases in the industrial estates have to be offered to be surrendered to the Corporation at specified consideration before they can be assigned;[74] (6) there are provisions which mandate capital investment commitments for land in the industrial estates.  It may also be noted that a very large part of a data centre operator’s investment is not land cost: in the case of Global Switch, the premium for Site C was about $88m[75] (while SUNeVision paid $428m for its land in Tseung Kwan O), but Global Switch’s total investment when all five buildings are completed would come to some $6 billion.  All this does not, in my view, mean that data centres within the industrial estates can only operate under a retail model or that they would be competing unfairly if they operate on a different model (as SUNeVision alleges), for reasons already explained.

L.     Conclusion

213.  For the above reasons, the grounds raised for the application for judicial review are not made out and the application is accordingly dismissed.  There will be an order nisi that the Applicant do pay the costs of the Corporation and Global Switch, to be taxed if not agreed, with certificates for two counsel.

HCAL 1890/2018

[2019] HKCFI 3051

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 1890 OF 2018

________________________

________________________

________________________

D E C I S I O N

________________________

1.  Now there are parts of three affirmations or affidavits that are in issue before me which the respondent seeks to rely on and adduce for the purpose of the substantive judicial review hearing but which the applicant opposes.

2.  In relation to the second affirmation of Mr Patrick Siu which was filed some time ago (on 29 January 2019), the paragraphs in question are 24, 25 and 26.  They are objected to on the basis that they contain argument and submissions.  It is, in my view, to some extent true that the paragraphs contain arguments and submissions, particularly paragraphs 24 and 25.  But in relation to paragraph 26, there are also matters of fact mingled with language that may be said to be argumentative, and in an application such as this, at such a stage of the proceedings, it is not profitable to conduct a microscopic analysis.  I will therefore allow paragraph 26 to be relied upon.  

3.  The same, I think, applies to paragraphs 14 and 15 of Mr Siu’s third affirmation which was made in March 2019.  It seems to me there are matters of fact there although there are also words or sentences that may be said to be submissions in nature.  In the circumstances, it is again inappropriate to go into a detailed dissection exercise, and therefore those two paragraphs are also to be admitted.   

4.  In respect of the fifth affirmation of Mr Siu, the paragraph in issue is paragraph 11.  The applicant takes the position that for that paragraph to be admitted, the respondent should be required to make disclosure of the complete chain of correspondence between MBJSM and the solicitors of HKCOLO.NET Limited as well as the records referred to in paragraph 11(7) of the affirmation based on which Mr Siu said the breach identified had been remedied to the Corporation’s satisfaction in July 2014. 

5.  Mr Wong SC argued that the paragraph was adduced to deal with the new evidence in Mr Raymond Tong’s third affidavit which refers to certain emails in 2013 in particular, based on which he alleges there was an “on‑the‑run” (走鬼) practice by the grantees or the occupiers of the premises in question in the light of the inspection procedures of the respondent.  Mr Wong submitted that the allegation must be looked at in context and that seen in context, the complaint was about the alleged lack of reaction or lack of action on the part of the respondent in relation to the six specific incidents mentioned in the Form 86 despite that the respondent’s attention had been drawn by the applicant to them.    

6.  It seems to me that the action that eventually led to the respondent being satisfied that the breach had been remedied is a relevant matter and that was specifically adverted to by Mr Siu as early as in his first affirmation. This is elaborated upon in the fifth affirmation on the basis of the respondent’s records which show, according to Mr Siu, that the breach had been remedied to the respondent’s satisfaction in July 2014.  As Miss Tong submitted, in relation to such an averment, one would normally expect the documentary source of the information to be disclosed.  It seems to me the document is also potentially discoverable under Order 24 rule 10.  Therefore, I think that the respondent should disclose the records referred to in paragraph 11(7) evidencing the basis on which the respondent was satisfied that the breach had been remedied.  

7.  I do not, however, think that there is justification for requiring the complete chain of correspondence to be disclosed.  The fact that the applicant has obtained leave for judicial review does not mean that it has an entitlement to get a detailed account from the respondent of each and every step and each and every aspect relating broadly to the decision challenged.  One must have regard to the issues in question and be astute to prevent a fishing expedition.  It seems to me that for the reasons submitted by Mr Wong, there should not be a requirement for the disclosure of the complete chain of correspondence.

8.  There was some complaint of lateness on behalf of the applicant.  We are indeed getting quite close to the substantive hearing of the judicial review but I am satisfied that the investigations referred to by Mr Siu would have taken time.  Bearing in mind that the respondent is normally entitled to the last word in judicial review proceedings and that the matters in paragraph 11 relate to the dealings between the Corporation and a third party to which the applicant was not privy, I consider that the evidence should go in.

(Submissions on costs)

9.  Having regard to the late stage of this application and the fact that each side has had some measure of success in upholding the position they contend for, I think costs should be in the cause.  That applies to both the costs of the application and the hearing.

HCAL 1890/2018

[2019] HKCFI 2178

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 1890 OF 2018

____________

________________________

________________________

D E C I S I O N

________________________

1.  By the Decision [2019] HKCFI 1752 handed down on 12 July 2019 (“Decision”), I dismissed the applicant’s (“SUNeVision”) application for leave to adduce expert evidence and allowed parts of SUNeVision’s application for leave to rely on certain affirmations at the substantive hearing of the judicial review, dismissing the other parts.

2.  Under the rules, SUNeVision had 14 days, ie up to 26 July 2019, in which to apply for leave to appeal against my decision.  On 25 July 2019, SUNeVision took out a summons, not for leave to appeal, but for an order pursuant to RHC Order 59 r 2B(6) extending the time for it to apply for leave to appeal to the expiry of 28 days after the final determination of the judicial review application in these proceedings (“the extension summons”).  SUNeVision also wrote to this court seeking directions for its application to be dealt with on paper.  By letters dated 26 July 2019, both the respondent (“Corporation”) and the intervener (“Global Switch”) opposed the application, noting that it was within SUNeVision’s rights to make an application for leave to appeal by 26 July if it wished to do so.  These letters came in at a time when I was on leave.  Upon my return, on 5 August 2019 I gave directions for the extension summons to be dealt with based on written submissions to be lodged.

3.  On behalf of SUNeVision it is submitted that since the substantive hearing of the application for judicial review has been fixed to be heard on 16‑19 December 2019, the extension summons is issued in order to avoid disruption to the progress of these proceedings and to save time and costs.  Heavy reliance is placed on Daimler AG v Leiduck, Herbert Heinz Horst [2013] 5 HKC 242, where Recorder Lisa KY Wong SC (as she then was) agreed to adjourn an application for leave to appeal against her interlocutory decision on certain expert evidence made during the trial,[1] and on the decision of Wilson Chan J in Tao Soh Ngun v HSBC International Trustee Limited (HCA 3246/2016 & HCA 355/2018) on 30 November 2018 to extend time for leave to appeal against a decision made during the trial to refuse leave to adduce expert evidence.[2]

4.  SUNeVision submits that depending on the outcome of the judicial review, it may become unnecessary for it to appeal against the Decision or any such appeal may become academic.  It is for the Corporation and Global Switch to demonstrate exceptional circumstances why SUNeVision must pursue the intended application for leave to appeal now and before the substantive hearing of the judicial review.  To require SUNeVision to pursue an appeal at this stage would be contrary to the court’s usual approach, given that the Decision is not in any way decisive of the outcome of the judicial review and the appeal may become unnecessary or academic.  Further, should it eventually become necessary for SUNeVision to appeal against the Decision, it is likely that the additional evidence that would be admitted if SUNeVision succeeded on that appeal would be admitted as additional evidence in SUNeVision’s appeal against the substantive decision in the judicial review (assuming the interlocutory appeal was determined before the substantive appeal itself).  Since the Court of Appeal can consider such new evidence, a rehearing of the judicial review will be unlikely to be necessary even if SUNeVision’s appeal against the Decision is subsequently allowed.  SUNeVision also submits that if it is required to pursue its application for leave to appeal now, and if leave is granted, it may mean that the substantive hearing of the judicial review fixed in December 2019 may have to be adjourned pending the appeal process, which would not be desirable.

5.  The extension summons should, in my view, be rejected.  Both Daimler and Tao Soh Ngun seem to me to concern a materially different situation, where the interlocutory decision is made in the course of the trial or the substantive hearing of the underlying proceedings. In such a situation the court will bear in mind that interlocutory appeals in the course of a trial, necessitating an adjournment of the trial, are entertained only in exceptional circumstances.

6.  This is not such a case.  The Decision was handed down more than 5 months before the scheduled substantive hearing of the judicial review.  If a party wishes to appeal against an interlocutory order, it is normally incumbent upon it to issue an application for leave to appeal within the time prescribed, and to prosecute it with diligence.  I do not accept that it is for the Corporation and Global Switch to justify why SUNeVision should pursue an application for leave to appeal forthwith, let alone that they need to show exceptional circumstances in order to do so.  In my view, the onus falls squarely on SUNeVision to demonstrate why time for application for leave to appeal should be extended in the way it suggests.

7.  It is far from a foregone conclusion that, if SUNeVision had duly applied for leave to appeal, and leave was granted, the appeal would have had to lead to an adjournment of the substantive hearing of the judicial review.  Even if time is relatively short, this is a very different situation from one where an appeal is proposed against an interlocutory decision made during a trial which has already commenced and risks being adjourned part‑heard.

8.  A relevant consideration for deciding whether to extend time is the merits of the proposed appeal.  SUNeVision has not put forward its intended grounds of appeal.  Even in its submissions all that has been said is that it intends to appeal by reason of several briefly stated matters.

9.  The time available between the Decision and the substantive hearing of the judicial review is ample for at least considering whether leave to appeal should be given.  If there are merits in the intended appeal and leave to appeal is granted, the courts, including in particular the Court of Appeal, will then have the opportunity of assessing how the judicial review proceedings and the appellate proceedings should best be conducted, having regard to the case management powers available to the courts.  On the approach that SUNeVision has chosen to adopt, however, one cannot even tell now whether the intended appeal — an appeal against a case‑management type of decision concerning expert evidence and further evidence — has any reasonable prospect of success.

10.  SUNeVision says that depending on the outcome of the substantive decision on the judicial review, it may become unnecessary or academic to appeal against the Decision.  This may be so, but this may be said of many appeals against interlocutory decisions and is hardly a compelling reason for taking the unusual course of extending time for application for leave to appeal against an interlocutory decision to the stage after the substantive judgment.  I reject SUNeVision’s contention that avoiding a potentially unnecessary interlocutory appeal should, as a matter of principle, be regarded as a valid reason to allow the intended appellant to defer seeking leave to appeal until after judgment in the substantive matter.

11.  SUNeVision’s submission that if time is extended and even if it is ultimately successful in appealing against the Decision, a rehearing of the judicial review itself will be unlikely to be necessary, presumes that in that scenario the Court of Appeal will be prepared to receive and consider, on its own and for the first time, not only the further evidence adduced by SUNeVision, but also any further evidence that the Corporation and Global Switch may be permitted to adduce in response.  SUNeVision argues that “there is no reason why the CA will not be in a position to consider any new evidence from the parties in any substantive appeal”, but this seems to me to go against the general reluctance of an appellate court to consider factual and evidential aspects for the first time.

12.  Putting it in another way, SUNeVision’s approach, if acceded to, would deprive the Court of Appeal of the opportunity of case‑managing the interlocutory appeal (if leave is given for it to be brought) so that it can be conducted in the way the Court of Appeal considers most appropriate.  It may be noted that in relation to its application for leave to appeal against another interlocutory decision of mine (namely, the decision not to allow certain amendments to the Form 86: [2019] HKCFI 1253), which may equally become academic or unnecessary if SUNeVision succeeds in the judicial review on the basis of the present Amended Form 86, SUNeVision has on 19 June 2019 applied for leave to appeal and asked the Court of Appeal to determine the leave application and the substantive appeal (if leave is granted) on an urgent basis.

13.  In all the circumstances I am not prepared to accede to the extension summons.

14.  At the end of its submissions, SUNeVision asks, if the extension of time sought is not granted, that this court grants a short extension of 7 days for SUNeVision to issue an application for leave to appeal against the Decision.  This request is declined.  It is a new application not part of the extension summons.  It is SUNeVision’s own deliberate decision to take out the extension summons only one day before expiry of time, and (in the face of vigorous opposition to any extension) not to put in an application for leave within time.  There is no explanation why SUNeVision had not adopted an alternative approach of, for example, issuing an application for leave within time and then applying for deferral of determining the leave application or applying for leave to appeal diligently and, if leave is granted, seeking case management directions for the appeal itself.

15.  The extension summons is accordingly dismissed, with an order nisi that SUNeVision do pay the costs of the Corporation and Global Switch, with a certificate for two counsel.

Written submissions by Mr Benjamin Yu SC and Ms Sara Tong, instructed by Woo, Kwan, Lee & Lo, for the Applicant

Written submissions by Mr Wong Yan Lung SC, Ms Eva Sit SC and Ms Esther Mak, instructed by Wilkinson & Grist, for the Respondent

Written submissions by Mr Bernard Man SC and Mr Justin Ho, instructed by King & Wood Mallesons, for the Interested Party

HCAL 1890/2018

[2019] HKCFI 1752

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO 1890 OF 2018

____________

____________

______________________

D E C I S I O N

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1.  I have before me two interlocutory applications made on behalf of the applicant (“SUNeVision”) in these proceedings, namely: (1) an application for leave to adduce expert evidence on certain specified questions (“the Expert summons”); and (2) an application for leave to rely on a number of affirmations at the substantive hearing of the judicial review (“the Evidence summons”).

Background

2.  The background to these proceedings has been set out in §§2‑14 of my decision dated 9 May 2019 [2019] HKCFI 1253 on SUNeVision’s application to amend its Form 86 (“Amendment Decision”), which, for ease of reference, I quote here:

“ 2.  SUNeVision is a company within a group which has been providing data centre services in Hong Kong.  It operates 5 data centres, including one in Tseung Kwan O. 

3. The respondent, the Hong Kong Science and Technology Parks Corporation (“Corporation”), is a statutory body established by the Hong Kong Science and Technology Parks Corporation Ordinance (Cap 565).  Under s 6(1) of that Ordinance, its purposes are to facilitate the research and development and application of technologies and support the development, transfer and use of new or advanced technologies in Hong Kong, and also to “establish or develop premises” where activities related to the above purposes are or are to be carried out, and “to manage and control the land and other facilities comprised in such premises”.

4. The Corporation operates 3 industrial estates in Hong Kong, in Tai Po, Yuen Long and Tseung Kwan O respectively, on land granted by the Government at a nominal premium.  It is therefore in a position to, and does, grant parts of the industrial estates to specific persons, including data centre operators, at rates much lower than the market rates for equivalent space elsewhere in Hong Kong.  These proceedings concern the industrial estate in Tseung Kwan O (“TKOIE”). 

5. Global Switch Hong Kong Ltd (“Global Switch”) is a company within a group that uses the brand name “Global Switch” which develops and operates data centres in Europe and Asia‑Pacific.  In 2012 Global Switch successfully tendered for, and became the Corporation’s lessee of, Site C of TKOIE.  SUNeVision also tendered through a subsidiary but its bid was unsuccessful.  Global Switch intends to operate a data centre comprising 5 buildings at Site C. Buildings 1 and 2 were completed in December 2017 and currently serve a customer, Daily‑Tech Hong Kong Co Ltd (“Daily‑Tech”).  The other buildings are under construction.

6. A data centre is a building or space within a building used to house information and communication technology equipment and is generally equipped with the necessary infrastructure such as power supply, cooling facilities and security systems.  According to SUNeVision, data centres fall into one of two colocation models: the “wholesale colocation model” and “retail colocation model” (though it should be noted that this description of and distinction between the two models are not accepted by either the Corporation or Global Switch, who consider that it mis‑characterises the data centre industry in Hong Kong).

(1) In the wholesale colocation model, the data centre operator designates specific space within the centre for the use for a customer, and grants control over that space to the customer.  This model is typically preferred by large customers who have the internal resources to manage and maintain their equipment in their own dedicated space.

(2) In the retail colocation model, different customers’ equipment is housed in the same shared space, such in racks or cages, and no customer would have the exclusive use or control of any space in the data centre.  This model generally caters for customers who need only limited space to set up network Point‑of Presence or to house IT equipment.  The data centre operator will also provide “managed services” such as internet connectivity and bandwidth, network monitoring, and system management.  As their “MSP” (managed services provider), the data centre operator requires unrestricted access to the customers’ IT equipment.

7. It is not in dispute that the Corporation has, so far as relevant for present purposes, 2 published policies in respect of its industrial estates, as follows:

(1) The first policy applies to lessees of land in the industrial estates generally (and therefore also to lessees who are data centre operators) and is a policy against subletting or parting with possession.  This policy is reflected in clause B(11)(a) of the Corporation’s standard lease which requires the lessee

‘ not to assign mortgage charge demise underlet or part with possession of the said premises or any part thereof or any interest therein or enter into any agreement so to do nor to permit any other party by way of a licence or otherwise to occupy the said premises or any part thereof.’ (“Lease Restrictions”)

(2) The second policy is the admission policy for data centre operators (“Data Centre Policy”) adopted at the meeting of the Business Development and Admission Committee (“BDAC”) of the Board of the Corporation at its meeting on 9 February 2010.  This has the following elements:

(a) Exclusion possession shall be retained by the grantee.

(b) The provision of managed services shall be the dominant element of the operation in the premises.

(c) Right of access to the premises shall remain within the exclusive control of the grantee at all times.

(d) The approved use for data centre in the lease shall be “to operate a data centre to provide colocation services as well as Internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management”.

8.   On the basis and as a result of the policies, SUNeVision says that it has since 2010 had the legitimate expectation (the “Legitimate Expectation”) that:

(1)  ‘ Grantees who are data centre operators in the Industrial Estates are NOT allowed to sublet or part with possession of the leased premises or to license or allow third parties to occupy part of the premises’.

   4 examples of prohibited acts have been set out in the Form 86: (i) sublet buildings, floors or caged spaces in the leased premises to as third parties; (ii) let the parties have control on who can access the leased premises including by implementing their own security measures; (iii) let the parties station their staff or have office space or set up office in the leased premises; (iv) let third parties provide managed services; and

(2)   the Corporation will enforce the Lease Restrictions and will not tolerate or condone any breach of them.

9.   SUNeVision says that relying on its Legitimate Expectation, it acquired through a subsidiary in 2013 a plot of land in Tseung Kwan O at a full market price of HK$428 million to construct a data centre there which can include subletting or licensing part of the premises to its customers and in January 2018 another plot of land in Tsuen Wan again at full market price for developing a similar data centre. 

10.   SUNeVision says that by reason of events over the past few years, it has become concerned that the Corporation has not been enforcing the Lease Restrictions against what SUNeVision suspects to be breaches thereof.  Six events that took place between September 2011 and January 2018 are then set out in the Form 86 (§§35‑45).  Essentially SUNeVision alleged that several of the Corporation’s lessees in TKOIE had been acting in breach of the Lease Restrictions:

(1)  In January 2018, NTT Com Asia Ltd (“NTT”) offered services to a cloud computing enterprise that amounted to subletting or licensing part of its premises.

(2)  In April 2017, Global Switch entered into an arrangement with Daily Tech and China Telecom Global Ltd that was or was highly likely to be in breach of the Lease Restrictions.

(3)  In late 2012, HKCOLO.NET Ltd (“HKCOLO”) entered into an arrangement with IBM that was or was likely to be contrary to the Lease Restrictions.

(4)  In September 2011, HKCOLO successfully bid for the provision of data centre services to a public authority on terms which suggested HKCOLO would not retain exclusive possession — an arrangement that was or was highly likely to be contrary to the Lease Restrictions.

(5)  In October 2011, HKCOLO successfully bid for the provision of data centre services to a financial institution on terms which suggested HKCOLO would not retain exclusive possession — an arrangement that was or was highly likely to be contrary to the Lease Restrictions.

(6)  In March 2015, NTT won a bid to provide data centre services to a financial institution on terms which suggested the financial institution would be in control of access within the designated space — an arrangement that was or was highly likely to be contrary to the Lease Restrictions.

11. SUNeVision had set out the same events in a pre‑action letter from its solicitors to the Corporation dated 6 April 2018, which stated it had to conclude that there had been a change in policy or a continuous policy of condonation in respect of the Lease Restrictions, and demanded that the Corporation take immediate steps to stop the change in policy or the policy of condonation by publicly reaffirming its relevant policy and taking reasonably effective measures to ensure the discontinuation of all existing breaches of the Lease Restrictions.

12. In addition, the solicitors’ letter stated that SUNeVision was aware that Global Switch and the Corporation were in advanced negotiations for an increase of plot ratio for Global Switch’s site in TKOIE. It was said that if, as a result of a change in policy or a policy of condonation, the Lease Restrictions were no longer taken into account in deciding whether more space should be granted to Global Switch, then SUNeVision would contend that the decision was irrational and in breach of the Corporation’s statutory duties and SUNeVision’s Legitimate Expectation and liable to be challenged under judicial review.

13. The Corporation replied by its solicitors’ letter dated 28 May 2018 (“28 May 2018 Letter”) to the effect that:

(1) There had been no change in the relevant policies and no policy of condonation of breaches.

(2) In the data centre industry

‘ some customers may place the equipment in the data centre to make themselves avail of the services provided by the data centre operators, the latter being the dominant element of the operation of the data centre. Under such model, our client considers that these customers on the industrial estates do not have exclusive possession of the space in the data centre where the equipment is placed; nor are they licensed to occupy the space and has made it clear to all potential applicants accordingly. Such trade practice or to be distinguished from the subletting, licensing and/or sharing of space as a service such as the provision of space by Grantees to their customers for the storage of unpowered equipment, servers or racks for a rental.’

(3) The intended Grantees are required to provide a pro forma draft service agreement between the Grantees and their potential customers, which the Corporation examines to ensure that the Grantees retain exclusive possession and that the arrangements do not amount to subletting, licensing and/or occupation of space as a service.

(4) After the commencement of operation, regular inspections are carried out by the Corporation and any suspected breach of the Lease Restrictions is promptly dealt with.

(5) As regards the specific cases mentioned by SUNeVision:

‘ Based on [the Corporation’s] regular site inspection at the industrial estates, [the Corporation] is unaware of the alleged breach of the Restriction by the Grantees. … [The Corporation] shall continue to carry out regular inspections to the industrial estates to ensure compliance with the Agreement and Lease. If and when our client becomes aware of any irregularities in the industrial estates through the regular site inspection, our client would immediately take steps to investigate into the irregularities, including but not limited to seeking explanations from the Grantees, industrial operators and/or data centre operators. If it is confirmed that a Grantee is in breach of the Agreement and/or the Lease, our client would take appropriate enforcement actions accordingly.’

(6) The Corporation denied that it had acted in contravention of any alleged legitimate expectation of SUNeVision.

14.   The Form 86, dated 10 September 2018, specified the decision in respect of which relief is sought to be:

‘ The decision of [the Corporation] by letter dated 28 May 2018 … from Messrs Wilkinson & Grist not to take immediate steps to rectify the failure or refusal to take reasonable steps to enforce restrictions on leases against subletting, parting with possession and/or sharing of occupation in the Tseung Kwan O Industrial Estate …, the reasons therefor being provided in the 28 May 2018 Letter.’ ”

3.  It is of fundamental importance to note that this judicial review concerns the decision embodied in the 28 May 2018 Letter, which was in turn a response to the letter dated 6 April 2018 of SUNeVision’s solicitors.  These proceedings are for the review of that decision in May 2018, not of the Corporation’s stance upon subsequent developments or new allegations or facts being brought to its attention.

4.  Thus in §§57 and 58 of the Amended Form 86, SUNeVision sets out passages from the 28 May 2018 Letter and identifies, based on its understanding of the contents, the responses it considers objectionable.

5.  The grounds for challenge are then set out in §§60‑93 of the Amended Form 86.  It is worth reminding oneself of the specific grounds for judicial review,[1] which have been summarised in §15 of the Amendment Decision and may be described again as follows:

(1) First, it is said that from the 28 May 2018 Letter, one sees that due to the errors and breaches of public duty by the Corporation particularised in Grounds 2 to 4, the Corporation had not in fact been enforcing the Lease Restrictions in accordance with the law and had therefore breached SUNeVision’s Legitimate Expectation, which led to substantial unfairness to SUNeVision.[2]  It is also said that in approving the pro forma Services Agreement of Global Switch (whose terms are, it is said, inconsistent with the Lease Restrictions and the Policy), the Corporation had misconstrued, misapplied or departed from its own policies.[3]

(2) Secondly, it is said that the Corporation made certain errors of law or misdirected itself in law:

(a) First, insofar as the Corporation treated the question of exclusive possession as a question of discretion or policy or on the basis of a “trade practice”, it had misdirected itself.[4]

(b) Secondly, it was an error of law to think that the Lease Restrictions would not be breached so long as services had been provided, or the data centre operator had the right to “allocate different areas in the granted site for the installation of their customers’ servers or to relocate the same”, or the relationship between the grantee and its customer was governed by terms in the form of the pro forma Services Agreement of Global Switch.[5]

(c) Thirdly, it would be a misdirection insofar as the Corporation assumed that the provision of colocation of services in the data centre industry necessarily required the operator to part with possession.[6] 

(d) Fourthly, the Corporation erred in law in thinking that all breaches of the Lease Restrictions were capable of remedy. Subletting would constitute a fundamental breach incapable of remedy.[7]

(3) Thirdly, it is said that the Corporation misconstrued its own policy and failed to appreciate that the policy was in effect to allow the Grantees to operate a typical retail colocation model but not under a typical wholesale colocation model, and failed to take into consideration the terms and conditions between the Grantees and their customers which conferred right to possession and/or right of occupation.[8] 

(4) Fourthly, it is said that despite SUNeVision had drawn attention to the specific alleged breaches by NTT, Global Switch and HKCOLO, the Corporation failed or refused to take reasonable or necessary steps to inquire into the facts and to take necessary actions.  It is also said that insofar as the Corporation took into account any “trade practice” to be distinguished from subletting, licensing and sharing of space, it took into account an irrelevant consideration.[9]

6.  The focus of the complaints is therefore on the proper understanding of the relevant policies, whether the Corporation took the positions alleged and (if it did) whether those positions were errors of law or misdirections in law, whether the Corporation misconstrued its own policies, and whether, on the basis of the materials before it as at May 2018, the Corporation had failed to take steps to inquire and to take necessary actions.

7.  It is also important to bear in mind that, as acknowledged by counsel for SUNeVision, the present case is not a contest about whether the grantees have in fact breached the terms of their respective leases, but whether the Corporation made the alleged errors of law in applying its policies or misconstrued its own policies.  In fact, none of the grantees referred to was named in the Form 86 as an interested party.  When leave was given, this court directed that Global Switch be served as an interested party since SUNeVision then sought relief in the form of an interim stay of the Corporation’s decision to grant an increase of plot ratio to Global Switch.  As things stand, two of the other grantees mentioned (HKCOLO and NTT) have not been joined or taken any part in these proceedings.

The Expert summons

8.  The Expert summons was issued on 1 April 2019, just before the hearing on 3 April 2019 which was to deal with a number of applications including an application to amend the Form 86 and the Evidence summons.  At that hearing, a further hearing date of 20 June 2019 was fixed for the Expert summons, and the Evidence summons adjourned to the same date.

9.  The expert issues as set out in the Expert summons are as follows:

“ 1. The common practice in the data centre industry regarding colocation including wholesale and retail collocation models.

2. The common understanding in the data centre industry of the term “end‑users” and “intermediaries”.

3. The relevant business models of data centre operators that involve end‑users and non‑end‑users as customers.

4. The services typically provided at data centres or for data centre operations.

5. The typical requirements of customers in the data centre industry under different business models for the use or sharing (including exclusive use) of space within a data centre.”

10.  On 24 April 2019, SUNeVision filed an affirmation in support of the Expert summons exhibiting a copy of a draft expert report of Mr Tam Wing Yiu (“Mr Tam” and the “Draft Report”).  The application therefore is to adduce an expert report in relation to the proposed expert issues and substantially in the form of that draft.

11.  The Corporation opposes the application, submitting that the proposed expert issues are not relevant to the real issues in these proceedings, that expert evidence is in any event unnecessary or not helpful to the court, that the Draft Report purports to adjudicate upon the final issues for the court, that it has not been shown that there is a recognised body of knowledge on data centres’ operation, and that Mr Tam has connections with SUNeVision and does not have expertise concerning data centres within TKOIE.

12.  Global Switch also opposes the Expert summons, on the grounds that the proposed expert evidence is irrelevant to the issues and, even if possibly relevant, unnecessary for the determination of the judicial review, that Mr Tam is not independent and that case management considerations militate against granting the application.

13.  The principles and proper approach regarding the admission of expert evidence have recently been discussed by the Court of Appeal in Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd[2018] HKCA 408.  There the court set out three conditions for admissibility of expert evidence:

(1) The subject matter of the opinion must fall within an area in which expert evidence may properly be given.  In this connection, the Court of Appeal quoted from the judgment of King CJ in R v Bonython (1984) 38 SASR 45:

“ … This first question may be divided into two parts: (a) whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area, and (b) whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organized or recognized to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court.”

(2) The witness must be qualified as an expert to give the evidence of the type in question.

(3) His evidence must be relevant to the issues being litigated.  In this regard the Court of Appeal referred to the observations of Evans-Lombe J in Barings plc v Coopers & Lybrand [2001] PNLR 22 at §45:

“ … Evidence meeting [the first condition] can still be excluded by the Court if the Court takes the view that calling it will not be helpful to the Court in resolving any issue in the case justly. Such evidence will not be helpful where the issue to be decided is … one on which the Court is able to come to a fully informed decision without hearing such evidence.”

14.  The Court of Appeal also emphasised that the giving of expert directions is a matter of case management, and pointed out that after the implementation of the Civil Justice Reform, the courts can take account of the probative value of an expert report in exercising case management power; see Shenzhen Futaihong, at §7.

15.  SUNeVision submitted, by reference to Wong Hoi Fung v American International Assurance Co (Bermuda) Ltd & another [2002] 3 HKLRD 507, that if the court is in doubt as to the relevance of proposed expert evidence, it should grant leave for it to be adduced at the trial.  Insofar as this submission is at variance with the approach recommended by the Court of Appeal in Shenzhen Futaihong at §§12 and 40 (as set out below), it is the latter that I should follow:

“ 12. … the court will not give directions for expert evidence to be adduced (carrying with it the incidence of substantial costs being incurred on its preparation and court time spent on the same) simply on the basis that the court cannot rule out a possibility of such evidence being relevant and helpful in the sense as discussed above. If the applicant for expert directions fails to persuade the court on relevance and necessity of such evidence, the application should be dismissed.”

“ 40. … in the absence of concrete evidence from the BYD Parties demonstrating the relevance and necessity of expert evidence to resolve the pleaded issues on those paragraphs, the Judge was entitled to refuse to direct that expert evidence on (ii) to be obtained which would only lead to proliferation of unhelpful expert issues that could lengthen the trial and increase the costs of the litigation.”

16.  Monitoring attempts to introduce expert evidence is not just a power of the court but its duty in exercising its case management functions.  It is particularly important in applications for judicial review for the court to be vigilant.  Expert evidence is unusual in judicial review proceedings which are concerned with public law wrongs, not private law rights.  The court’s supervisory jurisdiction is directed at the legality and rationality of a decision and the process, not its substantive merits.  The expert evidence that an applicant seeks to adduce in such proceedings is ex hypothesi not material that was put before the public authority in reaching the decision under attack.  The nature and limits of judicial review must be borne in mind in assessing whether expert evidence would be relevant, of probative value and needed for the proper resolution of the case.

17.  As stated above, the present case is not about whether or not, based on all the materials one can now possibly find, the grantees have in fact breached the terms of their respective leases, but whether the Corporation made the alleged public law errors.

18.  I shall first deal with the arguments on the substance of the expert issues by examining them in turn, and then deal with the arguments concerning the independence of Mr Tam and case management considerations separately which apply equally to all the issues.

Proposed expert issue 1 – The common practice in the data centre industry regarding colocation including wholesale and retail collocation models

Proposed expert issue 5 – The typical requirements of customers in the data centre industry under different business models for the use or sharing (including exclusive use) of space within a data centre

19.  These two proposed expert issues have been grouped together by SUNeVision in its argument.

20.  In support of its application, SUNeVision has, in an annex to its skeleton argument, juxtaposed various paragraphs in its Amended Form 86 where mention is made of one matter or another and various paragraphs in the evidence of the Corporation and Global Switch against the proposed expert issues.  In my view, it is necessary to bear in mind the real issues in these proceedings and look more closely than simply to see whether there is superficial disagreement on certain assertions.

21.  These are public law proceedings concerning the Corporation’s policies relating to data centres within the TKOIE.  There are, in particular, the Lease Restrictions and the Data Centre Policy, referred to in my Amendment Decision at §7 which has been quoted above.  When I asked counsel for SUNeVision which part of the Lease Restrictions is, in SUNeVision’s submission, not subsumed in the Data Centre Policy, his answer was that the Data Centre Policy only stated that one of the factors the Corporation would take into account was “exclusion possession shall be retained by the grantee”.  Based on the materials I do not understand that to be the Corporation’s approach with regard to the Data Centre Policy, nor is there any complaint in the Amended Form 86 on this basis. 

22.  But leaving that aside, it is important to note for present purposes that neither the Lease Restrictions nor the Data Centre Policy is formulated by reference to the business models of the grantee (whether wholesale, retail or otherwise) or the “level” of customers of the grantee (whether end‑users, non‑end‑users or otherwise).  Instead, the policies are framed in terms of exclusive possession, control over right of access, and the dominance of the provision of managed services.  There is no complaint in these proceedings about how the policies were formulated or expressed.

23.  One of the original five grounds for judicial review has fallen away, leaving four.  The first ground (§§69‑74 of the Amended Form 86) is breach of legitimate expectation, but it is clear from paragraph 73 that the complaint is that, due to the errors and breaches of public duty particularised in the second to the fourth grounds, the Corporation had not been enforcing the Lease Restrictions in accordance with the law.  This ground is therefore to be read with the other three grounds.  Further, like the policies, the Legitimate Expectation, as pleaded, is an expectation that the Corporation will enforce its policies as formulated.

24.  As SUNeVision itself states in the Amended Form 86 (at §§62‑63), in a given situation, whether the grantee parted with exclusive possession in breach of the Lease Restrictions and Data Centre Policy depends, as an important factor, on “the degree of control over the premises and their use retained by the owner” — a question “normally determined by examining the contractual provisions governing the relationship between the parties”.

25.  The question of exclusive possession is one that is familiar to the law, to be resolved by an examination of the arrangements in question.  It is usually not a matter on which expert evidence is required.  I fail to see how any “common practice” in the industry with regard to collocation business models, or any “typical requirements” of customers can be relevant to the question.  In fact it is SUNeVision’s contention that (i) it would be a misdirection in law to think that the question of exclusive possession is to be determined on the basis of some “trade practice”, and (ii) it would be an irrelevant consideration to take into account “trade practice”, which are among the grounds of complaint herein.[10] 

26.  SUNeVision appears to suggest (broadly) that because wholesale customers “typically” require more control over the premises, if a grantee has adopted a “typical” wholesale colocation model and provided space to a wholesale customer, then it is more likely that the grantee has acted in breach of the Lease Restrictions in its own lease with the Corporation or in breach of the Data Centre Policy.  In my view, such reasoning is unhelpful and an unnecessary digression from the real issue.  As stated above, whether there may be a breach is a function of the particular arrangements between a data centre and the customer themselves, not the result of a forced classification of the general operations of a data centre into one of two so‑called “typical” models. 

27.  Nor is the classification determinative of the issue of possession and control.  There is no clear touchstone for the concepts of “wholesale” and “retail”.  As used by SUNeVision, they do not refer only to the position of the grantee’s customer in the supply chain of data centre services, but to a host of features not all of which have any necessary correlation to the degree of control over the premises. 

28.  Furthermore, as SUNeVision recognises by including the word “typically” in the assertions concerned, the implications for control of the premises depend on the specific arrangements.  Thus, for example, the Draft Report states that in the case of the retail model, while typically the data centre operator would have pre-agreed access right to the racks, “it is really subject to individual customers’ requirements and agreement between the operator and the customers”.[11]  As such, the classification into wholesale and retail models is neither necessary nor sufficient for determining the issue of control and possession, and would give rise to arid questions as to whether or not certain arrangement is typical.

29.  It is difficult to see how this taxonomy is really helpful for the purposes of these proceedings when SUNeVision itself recognises that the question of possession is ordinarily approached by an examination of the contractual arrangements.  It may be noted, for example, that while Mr Tam has suggested that wholesale customers typically restrict the data centre operator’s access to their data hall and racks, he also states that wholesale customers typically require these access restrictions to be included as a provision in their contract with the data centre operator.[12] Likewise, access in a retail colocation model is also a matter that depends on the parties’ agreement.[13]  It seems to me that ultimately, irrespective of which of these broad labels one puts on the arrangements, the questions of possession and right of access and control depend on the arrangements rather than the label.

30.  SUNeVision’s own materials show that there is a whole range of possible arrangements.  In the market research report dated June 2017 relied upon by SUNeVision itself in its Amended Form 86,[14] it was stated that the “wholesale and retail distinction continues to blur”, that “[i]n recent years, new data centre options that blur the lines between wholesale and retail have started gaining popularity”, and that there are “hybrid facilities”.  Similarly, while Mr Tam states that data centre colocation typically falls within the two models, he also says that data centre operators may position themselves between these two ends of the spectrum.[15]

31.  Even if there exists something that is “typical” in the industry, there is no necessary reason why the grantees in the industrial estates run by the Corporation, in particular TKOIE, must necessarily follow any typical arrangements elsewhere.  Within TKOIE, they are subject to restrictions and policies that have no general application outside the industrial estates.  The focus in these proceedings should be on the Corporation’s actions or non-actions with respect to what it perceives to have taken place in the data centres in TKOIE.  Evidence on the practice outside has little probative value for the real issues in the case.  This also raises a related question as to whether Mr Tam has sufficient expertise in relation to data centres operating within the Corporation’s industrial estates, having regard to his experience as described in §§50-51 below.

32.  SUNeVision argues that it is not the Corporation’s case that the arrangements of the relevant grantees in TKOIE were atypical.  As I understand the Corporation’s position (and Global Switch’s), however, they contend that it is simply irrelevant and hence unnecessary to assess whether the arrangements were so‑called “typical” or not.

33.  A quick glance at the proposed evidence shows that these digressions are more likely to confuse than to enlighten one’s mind for the purposes of dealing with the real issues in the case.  Thus in addition to the wholesale and retail dichotomy, it is said that whether the grantee’s customer is an “end‑user” may also affect the question of access and control, giving rise to four different permutations: (i) wholesale model where the customers are non‑end‑users; (ii) wholesale model where the customers are end‑users; (iii) retail model where the customers are non‑end‑users; and (iv) retail model where the customers are end‑users. Although it seems to have been suggested that in the retail model, the grantee’s customer typically has no control over the space in question, the Draft Report states that if the customer is not the end‑user, then the data centre operator would typically not have unrestricted access to the customer’s space.[16]

34.  In my view these matters are unnecessary, unreliable and unwarranted proxies for the actual parameters used in the policies as formulated and promulgated.

35.  SUNeVision also alleges that the Corporation’s policies are in effect to allow the grantees to operate under a typical retail collocation model but not under a typical wholesale collocation.[17]  What SUNeVision means by these two so‑called “typical models” has been set out in the Amended Form 86.[18] Whether the policies draw such a distinction is a matter of construction for the court, and not one to which the proposed expert evidence is really relevant.

36.  It is submitted for SUNeVision that it was the Corporation which first prayed in aid industry practice.  SUNeVision refers to the following passage in the 28 May 2018 Letter from Wilkinson & Grist:

“  The Restriction is expressly stated in the letter for tender invitations for land applications as well as the offer letter to the intended Grantees issued by our client.  You are well aware of the said practice of our client as you recognized in paragraph 16 of Your Letter that our client specifically drew the attention of the prospective tenderers to the Restriction in the invitation to tender for leasing an individual section in the Tseung Kwan O Industrial Estate (“TKOIE”) dated 1 June 2011.  It is common ground that in the data centre operation industry, some customers may place their equipment in the data centre to make themselves avail of the services provided by the data centre operators, the latter being the dominant element of the operation of the data centre.  Under such model, our client considers that these customers on the industrial estates do not have exclusive possession of the space in the data centre where their equipment is placed; nor are they licensed to occupy the space and has made it clear to all potential applicants accordingly.  Such trade practice ought to be distinguished from the subletting, licensing and/or sharing of space as a service, such as the provision of space by Grantees to their customers for the storage of unpowered equipment, servers or racks for a rental.”

SUNeVision argues that the Corporation has itself relied on “trade practice” as a relevant factor in determining whether in a given case exclusive possession had been passed to the customers.

37.  In my view, this argument takes the sentence out of context.  What was being referred to was the simple fact that there may be customers who place their equipment in a data centre in order to avail themselves of the services provided, with the provision of services being the dominant element.  The Corporation took the view that such a situation was to be distinguished from the subletting or licensing of space for the storage of unpowered equipment.  The sentence, as I read it and as Mr Wong, who appears for the Corporation, has confirmed, is not a suggestion that there is a “trade practice” or “industry custom”, in the proper sense, that alters what is otherwise the meaning of the policies on their true interpretation.  I refer also to SUNeVision’s own contention about reliance on trade practice, as mentioned in §25 above.

38.  Counsel for SUNeVision also relies on a sentence in the first affirmation of Mr Siu (“Siu 1^st”), the Chief Operating Officer of the Corporation, at paragraph 15, which states “it is important to have proper understanding of what a data centre is, in order to appreciate (i) why [the Corporation] formulated its policies in the way it did …”.  This seems to me to refer generally to what data centres do.[19] I do not think that in that or the other parts of the Corporation’s evidence reliance is being placed on any particular business models or any “trade custom” or “trade practice”.

39.  In my view, therefore, even assuming the proposed evidence forms part of a body of knowledge which is sufficiently organized or recognised to be accepted as a reliable body of knowledge, and therefore falls within an area capable of being the subject matter of expert evidence, it is not relevant to the real issues and will not assist in their determination.

Proposed expert issue 2 — The common understanding in the data centre industry of the term “end‑users” and “intermediaries”

Proposed expert issue 3 — The relevant business models of data centre operators that involve end‑users and non‑end‑users as customers

40.  These two proposed expert issues have been grouped together by SUNeVision in its argument.

41.  As for proposed expert issue 2, since Mr Tam states that “intermediaries” is actually not a common term used in the industry,[20] that part falls away.  As for “end‑users”, it seems to me to be an ordinary phrase whose meaning is plain.  According to the Draft Report, an end‑user is a customer of the data centre operator who utilises space or racks rented from the data centre operator for the customer’s own use, whereas a non‑end‑user does not use space or racks itself but lets others use them.  Such meaning of “end‑users”does not appear to be in dispute.  There is no basis for adducing expert evidence.

42.  The proposed expert issue 3 is supposed to deal with different business models of data centre operators again, this time with reference to whether the customers are end‑users or non‑end‑users.  The short answer to this is that, as I have already explained in my Amendment Decision (see §§48‑49), the policies as promulgated are not framed in terms of or with reference to the nature or “level” of the customers of the grantee and, in particular, whether or not such customers are end‑users. A previous internal position that took into account whether or not the customers were end‑users was expressly not adopted or promulgated as part of the policies (as shown in the paper for the 9 February 2010 BDAC meeting).  On that basis it seems to me quite unnecessary to have expert evidence on the proposed expert issue 3.

43.  In any event, ultimately the basic objection is the same as in the case of the proposed expert issues 1 and 5 above.  Whether there is a breach of the policies depends on the parameters set out in the policies themselves, such as exclusive possession, which in turn depend on an examination of the arrangements.  It is not only unnecessary to force the arrangements into a binary classification of the customers, but also unhelpful, because the Draft Report itself describes the features as what one would “typically” find.  I refer to my reasoning in relation to the proposed expert issues 2 and 3 above.

44.  Accordingly, I consider that the proposed expert evidence, even if within a recognised expert area, is not relevant or of probative value.

Proposed expert issue 4— The services typically provided at data centres or for data centre operations

45.  As formulated, proposed expert issue 4 is quite unnecessary.  The parties have in their affirmations referred to the range of services that may be provided at data centres in general, on which there is little disagreement.  There is no need for expert evidence to supply such information.

46.  In his argument, Mr Yu SC, who appeared for SUNeVision, submitted that there is disagreement as to what “managed services” are, and drew a comparison with the technical memorandum and the environmental impact assessment study brief in Shiu Wing Steel Ltd v Director of Environmental Protection & Airport Authority (No 2) (2006) 9 HKCFAR 478, §23. Reference was also made to Shaw v Director of Public Prosecutions [1962] AC 220 where it was held, on a charge of, inter alia, corrupting public morals and publishing an obscene article, that evidence given by prostitutes as to the special meaning of abbreviations and phrases used in the booklet in question was admissible.

47.  This is not what proposed expert issue 4 suggests but, more importantly, on the question of “managed services”, the Data Centre Policy itself contains a definition or description. As stated in §9(2) of the Amended Form 86, the relevant part of the policy was that

“ the provision of managed services including Internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management, system management and the like shall be the dominant element of the operation in the premises, and the grantee should be the one who undertakes the provision of managed services in the premises.”

48.  Mr Yu submits that this is an inclusive definition.  So it is.  But SUNeVision has not pointed to any additional aspects which are not covered by the definition and require expert evidence to supplement, or any part of the definition whose meaning is technical and unclear and requires expert evidence to elucidate.  SUNeVision has not explained how the expert evidence is supposed to assist in light of the definition. 

49.  The deficiency is highlighted by the contents of the Draft Report.  There Mr Tam does not engage with the definition in the policy at all.  Instead, he has devised the term “Basic Services” to cover power, cooling, fire protection and security system services, which he says are the basic infrastructural services that every data centre provides to its customers.[21] He spends many paragraphs discussing what services a data centre operator would “typically” provide under the wholesale and retail colocation models respectively.  He supplies his own understanding of what are called by the industry “managed services”, without referring to the definition in the policy,[22] and does not deal with the inclusion of “managed and outsourcing services on facilities, data centre management … and the like” in that definition.  He purports to review the arrangements that Global Switch may have with its customers and to conclude that they do not have the provision of managed services as the dominant element.[23]  It seems to me that the Draft Report, as formulated in relation to this proposed expert issue, is not relevant, not of probative value, even goes beyond the issue as proposed and purports to opine on ultimate questions.

Connections of expert

50.  Mr Tam joined iAdvantage Ltd in 1999, was promoted to the post of Director and Chief Operating Officer in 2000, Managing Director in 2004 and Chief Executive Officer in 2006, and left in 2007.  iAdvantage Ltd is and was at all material times a wholly owned subsidiary of SUNeVision, and appears to have been the group’s operating arm for its “core data centre business”.

51.  From 2011 to March 2019, Mr Tam was Managing Director of Equinix Hong Kong Ltd, a data centre firm which had apparently taken a 10‑year (from 2017) lease of an entire block from iAdvantage Ltd’s Tseung Kwan O data centre, which seems to be the data centre complex of SUNeVision’s group referred to in the Amended Form 86.[24]  He was therefore until a few months ago the management head of a firm which could be said, broadly, to be a competitor of the Corporation’s grantees in TKOIE such as HKCOLO, Global Switch and NTT.  Equinix would presumably be paying market rent to iAdvantage Ltd and as such has a similar interest in supporting the allegation of distortion of competition made by SUNeVision in these proceedings.

52.  As submitted by Mr Man SC on behalf of Global Switch, such connections on the part of the expert are not in themselves an absolute bar to admissibility of his opinion evidence: Tang Ping Choi & Another v Secretary for Transport [2004] 2 HKLRD 284, §§14-16; Helm Hong Kong Ltd v Au Tat Kei Decky (unrep, HCA 1517/2006, 4 June 2010), §§13‑14.  It is, however, a matter that, in this case, significantly detracts from the weight that can safely be put on any part of the evidence that is contentious, and ultimately from its probative value and usefulness.

Case management considerations

53.  On behalf of Global Switch Mr Man also emphasised its concerns about the lateness of SUNeVision’s application for leave to adduce expert evidence (after having received the Corporation’s and Global Switch’s affirmation evidence by 20 December 2018) and the potential impact on the substantive hearing fixed for December this year.  In the light of my views expressed above, it is not necessary to rely on these further matters.

The Evidence summons

54.  By the Evidence summons, SUNeVision applies for leave to rely on five affirmations at the substantive hearing, namely:

(1)   the 1^st affirmation of Martin Chan (Chan 1^st);

(2)   the 2^nd affirmation of Martin Chan (Chan 2^nd);

(3)   the 3^rd affirmation of Martin Chan (Chan 3^rd);

(4)   the 2^nd affidavit of Raymond Tong (Tong 2^nd); and

(5)   the 3^rd affidavit of Raymond Tong (Tong 3^rd).

55.  Since the proposed amendments of the Form 86 relating to the grant of increased plot ratio to Global Switch were disallowed, SUNeVision has confirmed that it does not seek leave to rely on those parts of the affirmations in question that relate to that matter.

56.  The Corporation primarily opposes the application in relation to Chan 3^rd and Tong 3^rd.  Global Switch opposes the application in relation to a number of specified paragraphs in Chan 2^nd, Chan 3^rd, Tong 2^nd and Tong 3^rd.

57.  RHC Order 53 rule 6(4) provides for the filing of affidavits by a respondent after leave to apply for judicial review has been given, but does not confer on the applicant the right to file any further affidavit.  Practice Direction SL3 stipulates, at §15, that Order 53 does not envisage excessive use of affidavits but recognises (as does Order 53 rule 6(3)) that the court has power to allow the use of further affidavits by the applicant at the substantive hearing.  There needs to be justification for having such further evidence, beyond the mere fact that the applicant still disagrees with the respondent and disagrees with the respondent’s evidence.  This procedural structure is not surprising, as judicial review is generally concerned with the legality of administrative decisions and the decision‑making process, rather than the merits of any underlying dispute, and having regard to the complementary duty of candour placed on the respondent “to make full and fair disclosure of the decision‑making process, laying before the court all the relevant facts and reasoning underlying the decision challenged”.[25]  Under this regime, as Godfrey J said in Shun Fat Container Service Co Ltd & Others v Commissioner for Transport [1989] 2 HKC 301, 310:

“ And applicants for a judicial review should bear in mind that, except in most unusual circumstances and only by the leave of a judge, the respondent’s evidence is the end of the evidence. The idea that evidence on a judicial review can be allowed to proliferate by affirmations and affidavits winging their way from one side to the other until the date of the hearing is one of which all applicants and respondents ought now, and finally, to be disabused.”

58.  As I have emphasised at the beginning of this decision, the application for judicial review in the present case is directed at the 28 May 2018 Letter, which was a response to SUNeVision’s complaint dated 6 April 2018.  The focus of these proceedings is on that Decision, examined in the light of what was before the Corporation, with reference to the specific grounds of challenge set out in the Amended Form 86.  What SUNeVision has sought to do, in many instances in the affirmations in question, is to put forward further matters or explanations, not mentioned in the original complaint of 6 April 2018 or even in the Form 86, which it however regards as indicative of the grantees’ breaches of lease, and to argue that there have been breaches.  Whether or not they may perhaps be ammunition for a further complaint by SUNeVision and the subject matter of a further decision by the Corporation, I need not inquire, but they are prima facie irrelevant to these proceedings. Quite apart from the fact that these are not proceedings to determine whether or not there have in fact been breaches of lease by the grantees, it would be to usurp the function of the Corporation for such matters to be canvassed for the first time in these proceedings, and to confuse the supervisory jurisdiction of the court in judicial review with that of an appellate tribunal on the merits with power to admit new evidence.  It was on the basis of these principles that in my Amendment Decision at §§52‑53, I refused to allow certain additions to the Form 86 with reference to such new matters.  There was no attempt to appeal against that part of my decision.

59.  Counsel for SUNeVision invited the court to take the approach of letting everything go in, on the basis that at the substantive hearing the parties would focus only on what is germane to the real issues.  I decline this invitation.  It would lead to the wastage not only of legal costs but also of the time and energy of public officials, and also of the court’s resources in the substantive hearing, and would be contrary to proper case management in the circumstances of these proceedings.  It is for an applicant to justify the unusual course of having further affidavit evidence after the respondent’s evidence.

60.  It is in my view especially important in the present kind of case, which involves a decision not to take action following a complaint, to draw a firm line, owing to the nature of judicial review which I have already emphasised above.  As has been famously said by Litton PJ in Lau Kong Yung (an infant suing by his father and next friend Lau Yi To) & Others v Director of Immigration (1999) 2 HKCFAR 300 at 340G, Order 53 rule 3 should not be allowed to become “the portals to a playground of infinite possibilities where the administrators could then be made to leap through more and more hoops of fire”.

61.  It needs to be emphasised that an applicant is not entitled to file further evidence simply because he disagrees with the respondent’s evidence.  The applicant has to have regard to the issues arising from the grounds of judicial review advanced to justify the need to file further evidence.  It is not sufficient simply to refer to apparent disagreements on the existing evidence.

62.  With the above in mind I turn to consider the five affirmations or affidavits in question.

Chan 1^st

63.  This is an affirmation filed by SUNeVision in support of its summons dated 4 February 2019 for an interim injunction relating to the grant of additional plot ratio. Everything in it except paragraph 35 has fallen away.  Paragraph 35 sets out three documents which SUNeVision proposed to plead in its Amended Form 86 at paragraph 37B(1)‑(3).  Because, inter alia, they all post‑date the Corporation’s Decision which is the subject matter of these proceedings, leave to add these matters to the Form 86 was refused: see the Amendment Decision at §§52 & 56. Accordingly, Chan 1^st should be excluded in its entirety.

Tong 2^nd

64.  This affirmation was filed in support of SUNeVision’s summons dated 29 October 2018 for an interim stay in relation to the increase of plot ratio.  Paragraphs 2 to 10 and 18, which concern solely the stay application, have fallen away.  Paragraphs 11 and 12 which provide information about land prices may be allowed in as a supplement.  Paragraphs 13 to 17 concern a newspaper clipping (Ming Pao Daily) dated 18 November 2018.  It post‑dates the Decision and is not said to have been available to the Corporation for its decision‑making process, and should as such be excluded.

Chan 2^nd

65.  This affirmation, with 59 paragraphs, was filed in support of, inter alia, SUNeVision’s 1^st draft amended Form 86 and its application for interim injunction in relation to the increase of plot ratio.  The parts that are now sought to be relied upon by SUNeVision are: paragraphs 15‑17, 19‑21, 22-30, 32-43, 45-47, 48-55.

66.  Paragraphs 15‑17: Paragraphs 15 and 16 regurgitate parts of the BDAC paper for February 2010 and the minutes for an earlier BDAC meeting held in July 2009.  I have explained in the Amendment Decision at §§46‑49 why the amendments relating to the BDAC paper for February 2010 were not allowed.  The views in the earlier minutes and in the quoted parts of the BDAC paper relied on by SUNeVision had been superseded by the policies adopted and promulgated.  In any event paragraphs 15‑17 seem to make forensic argument.  They are in the nature of submissions rather than facts.  They should be excluded.

67.  Paragraphs 19‑21: Paragraphs 19 and 20 are not opposed and are allowed.  I consider that paragraph 21 which on a subsequent article in Ming Pao Daily referred to in §64 above should not be included.

68.  Paragraphs 22‑30: There is no opposition to paragraphs 22‑28.  As for paragraph 29, it follows on from the preceding paragraphs.  I consider that save as to the last sentence which is based on an SCMP article dated 20 July 2018 which post‑dates the Decision, it may be allowed in. Paragraph 30 seems to me simply to make a comment on an existing document and should not be allowed.

69.  Paragraphs 32‑42: These paragraphs concern certain agreements (the Agreement for Services and the Services Agreement involving Global Switch and Daily‑Tech) which it would appear were not before the Corporation at the time of the Decision.  The amendment to the Form 86 to mention those agreements was allowed on a very limited basis, to show that the arrangements complained of were continuing — see §§53‑54 of the Amendment Decision.  On that basis, these paragraphs which seek to impugn the substance of the actual agreements should be excluded.

70.  Paragraphs 45‑47: As a response to Siu 1^st in relation to SUNeVision’s application for land in the TKOIE by way of background, I would allow these paragraphs.

71.  Paragraphs 43 & 48‑55: These paragraphs relate to what SUNeVision has produced subsequent to the Decision to support its allegation that Global Switch had been breaching the terms of its grant, including the Sky News article dated 10 January 2019, Global Switch’s media release dated 3 July 2018, the Jiangsu company’s public disclosure statement dated 15 November 2018, and the current FAQ page from Global Switch’s website, which SUNeVision tried unsuccessfully to include in its Form 86 at §37B: see the Amendment Decision, §52.  For the same reasons, these paragraphs in Chan 2^nd should be excluded.

Tong 3^rd

72.  This affidavit, in 14 pages containing 34 paragraphs, was filed in reply to Siu 1^st and also the second affirmation of Mr Siu, in relation to the substantive judicial review proceedings.

73.  Paragraphs 9‑13 of Tong 3^rd deal with the relationship between HKCOLO and KDDI (ie that KDDI holds 50% shareholding in HKCOLO).  They should be admitted to provide the context for the subsequent paragraphs which I also allow. 

74.  Paragraphs 14‑16 set out the terms of a Services Schedule entered into between KDDI and a customer and §§27‑28 set out certain matters from KDDI’s website.  These are not matters placed before the Corporation at the time of the Decision and should not ordinarily be admitted.  They are, however, part of the allegations of the inadequate enforcement steps taken by the Corporation referred to in the paragraph below and may be included on that basis.

75.  Paragraphs 17‑33 set out the matters based on which it is said that the Corporation’s enforcement measures were insufficient and ineffective, which may be read together with Chan 3^rd §§62‑67. Essentially the allegations are that: (i) the Corporation’s inspection was ineffective as an enforcement measure in that the Corporation would give prior notice to the grantee, which enabled the grantee to make arrangements with its customers in response to circumvent the inspections;[26] (ii) the Corporation’s inspections were just routine and cursory;[27] (iii) the Corporation had failed to check the grantees’ business and operation from public sources;[28] (iv) the Corporation had failed to check that the agreements actually signed by the grantees with their customers strictly follow the approved pro forma services agreements;[29] and (v) accepting the bare assertions of the grantees.[30]

76.  These matters seem to me to fall within the scope of Ground 4 raised in the Amended Form 86, namely, that the Corporation failed to take all reasonable or necessary steps to inquire into the facts and to take necessary actions on the breach.[31]  The fact that the Corporation did not have knowledge of the emails between KDDI and the customers relating to the inspections is not an impediment in this context, because the very complaint is that the Corporation gave advanced notice of its inspections, thus enabling the grantees and their customers to adopt the practice of “on‑the‑run” (走鬼) without the knowledge of the Corporation.

77.  The Corporation argues that the allegation that the enforcement measures are ineffective is at best a complaint of maladministration and not a public law wrong.  As I understand his position, Mr Yu on behalf of SUNeVision accepts that policing and enforcement measures are matters of administration for the Corporation, but it is arguable that where the actions or omissions in question were Wednesbury unreasonable, they render the consequent decision susceptible to judicial review.

78.  The Corporation also argues that there is no allegation in the Amended Form 86 which covers the evidence in question. I accept the matters as summarised above are more particularised than the general allegation in §92 of the Amended Form 86, but I think they fall within that paragraph and are a direct response to the Corporation’s explanation in Siu 1^st §§61‑79 which deals extensively with the enforcement measures.  I appreciate that the Corporation may need to make further response to these matters but it seems to me to be an exaggeration to say that there would have to be a “completely different factual inquiry” from that which the Corporation has already undertaken.

Chan 3^rd

79.  Chan 3^rd was filed on 22 March 2019 partly in reply on the application for leave to amend the Form 86 and partly in reply to the Corporation’s and Global Switch’s affirmations in relation to the judicial review.  It is 54 pages long with 118 paragraphs.  The last three sections (§§108‑117) have fallen away.  The main substantive paragraphs that the present application is concerned with are §§12‑107.

80.  It seems to me many of those paragraphs consist of a roving general commentary on the respondent’s evidence, interspersed with arguments and submissions which have no place in an affirmation, and observations based on Mr Chan’s own experience, and are as such unnecessary and objectionable.

81.  The paragraphs fall into the following groups:

Paras	Broad nature	Whether should be admitted
13-22	Chan speaks of how racks are arranged, the area called “white space”, typical layers of access control in a data centre.  He draws a distinction between “building access” and “room access”.	The Corporation argues that these paragraphs raise a new case concerning the so-called “white space”.  However, SUNeVision did complain to the Corporation and also in the Form 86 about “designated space” or “designated area” in respect of which the grantees are said to have given overriding control to their customers.[32] It seems to me the question of exclusive possession of the premises made available to the customers, or any part thereof, cannot be answered simply by examining the control of access to the building in which the premises are located.  While §79 of the Form 86 refers to degree of control over the “premises”, it does not mean that, if part of the premises is transferred into the customer’s exclusive possession, there would not be a breach by the grantee.  To the extent there is any misunderstanding by the Corporation of SUNeVision’s original complaint and its case in the Form 86, it seems to me that these paragraphs should, exceptionally, be permitted so as to clarify the position and so that the Corporation can respond accordingly.
12, 23-26	Chan speaks of the implications of the wholesale and retail models.	As explained in §22 above, the policies are not formulated with reference to this distinction.  Furthermore, no need has been demonstrated for further affirmation evidence on this matter.
27-34	Chan speaks of the types of services provided by data centre operators.	These paragraphs are allowed as part of the background in response to Siu 1st.
35-40	Chan speaks of Facility Related Services in the context of wholesale and retail models.	These paragraphs are not allowed, being matters of comment on what Chan says happens in the wholesale and retail models which are not the proper focus anyway.
41-44	Chan comments on certain definitions used by Corporation and Global Switch.	These paragraphs are matters of comment and submissions, and not allowed.
45-47	Chan comments on the provision of “subscribed services” to wholesale customers.	These paragraphs are not allowed, being matters of comment on what Chan says happens in the wholesale model which is not the proper focus anyway.
48-52	Chan comments on the Lease Restrictions and the Data Centre Policy.	These paragraphs are not allowed, being simply comments based on the contents of documents.
53-61	Chan speaks of the genesis of the Data Centre Policy.	§53 is a needless regurgitation of certain exhibits to Siu 1st, namely, “PS‑5” to “PS‑12”.  §§54‑61 primarily contain arguments related to the removal of the words “to end‑user” decided at the BDAC meeting, which, for reasons explained above and in the Amendment Decision, was not the real issues.
62-67	Chan complains of the enforcement steps taken by the Corporation.	For the reasons stated below in relation to Tong 3rd, these paragraphs may be included.
68-73	Chan complains of unfair competition caused by the Corporation’s decisions.	§§68, 69, 70 and 73 are simply arguments and rhetorical questions, and not allowed.  §§71‑72 set out certain facts about land prices which supplement the information given in the initial evidence and may be included.
74-76	Chan responds to Siu 1st in relation to SUNeVision’s application for land in the TKOIE.	These paragraphs may be included as an explanation of the matters raised in Siu 1st.
78-81	Chan says the documents submitted by Global Switch to the Corporation in 2012 and the pro forma services agreement show breaches of the Lease Restrictions.	These paragraphs seem to me simply to be submissions and comments on documents and should not be included in the evidence.
82-83	Chan speaks of the differences between the pro forma services agreement and the actual agreements entered into by with Daily‑Tech.	As explained in the Amendment Decision at §53, the Corporation had not seen the actual agreements or made a decision on them.  They are not materials before the Corporation when a Decision under challenge was made.  These paragraphs should be excluded.  In any event they consist of comments on documents.
84-88	Chan speaks on the cooperation model between Global Switch, Daily‑Tech and China Telecom.	See conclusions relating to Chan 3rd §§82‑83, mutatis mutandis for the Cooperation Framework Agreement.
89	Chan comments on the actual agreements between Global Switch and Daily‑Tech.	See conclusions relating to Chan 3rd §§82‑83.
90-93	Chan comments that Global Switch has no unrestricted access to the Daily‑Tech Space.	See conclusions relating to Chan 3rd §§82‑83.
94-99	Chan comments on the services provided by Global Switch.	§95 refers to Chan 2nd §§33‑39 which in turn comment on the actual agreements between Global Switch and Daily‑Tech and which have not been admitted into evidence (see §69 above).  §§96‑99 supply comments and arguments why it is “likely” that Global Switch only provides facility‑related services, which were not before the Corporation at the time of the Decision.  These paragraphs should be excluded.
100	Chan suggests that causes in the actual agreements between Global Switch and Daily‑Tech similar to clauses in typical commercial leases.	See conclusions relating to Chan 3rd §§82‑83.
101-106	Chan speaks of Global Switch’s own admission of subletting.	These paragraphs seem to me simply to be submissions and comments on documents and should not be included in the evidence.
107	Chan compares the agreements between Global Switch and Daily‑Tech and HKCOLO’s breach	This paragraph consists simply of comment on other evidence, and should be excluded.

Conclusion

82.  For the above reasons:

(1)  The Expert summons is dismissed.

(2)  On the Evidence summons, there will be an order that SUNeVision do have leave to rely on the following at the hearing of the application for judicial review:

(a) Tong 2^nd — paragraphs 11 and 12;

(b) Chan 2^nd — paragraphs 19, 20, 22-28, 29 (except the last sentence), 45-47;

(c) Tong 3^rd — the entire affidavit; and

(d) Chan 3^rd — paragraphs 1-11, 13-22, 27-34, 62-67, 71-72, 74-76.

The remainder of the Evidence summons is dismissed.

83.  On a nisi basis:

(1)  SUNeVision is to pay the Corporation and Global Switch the costs of and relating to the Expert summons, with certificate for two counsel, to be taxed if not agreed.

(2)  There will be no order as to costs on the Evidence summons.

HCAL 1890/2018

[2019] HKCFI 1253

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
 1890 OF 2018

____________

____________

_____________________

D E C I S I O N

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Background

1.  This is an application by the applicant (“SUNeVision”) for leave to amend its Notice of Application for Leave to Apply for Judicial Review (Form 86) in these proceedings.

2.  SUNeVision is a company within a group which has been providing data centre services in Hong Kong.  It operates 5 data centres, including one in Tseung Kwan O. 

3.  The respondent, the Hong Kong Science and Technology Parks Corporation (“Corporation”), is a statutory body established by the Hong Kong Science and Technology Parks Corporation Ordinance (Cap 565).  Under s 6(1) of that Ordinance, its purposes are to facilitate the research and development and application of technologies and support the development, transfer and use of new or advanced technologies in Hong Kong, and also to “establish or develop premises” where activities related to the above purposes are or are to be carried out, and “to manage and control the land and other facilities comprised in such premises”.

4.  The Corporation operates 3 industrial estates in Hong Kong, in Tai Po, Yuen Long and Tseung Kwan O respectively, on land granted by the Government at a nominal premium.  It is therefore in a position to, and does, grant parts of the industrial estates to specific persons, including data centre operators, at rates much lower than the market rates for equivalent space elsewhere in Hong Kong.  These proceedings concern the industrial estate in Tseung Kwan O (“TKOIE”). 

5.  Global Switch Hong Kong Ltd (“Global Switch”) is a company within a group that uses the brand name “Global Switch” which develops and operates data centres in Europe and Asia-Pacific.  In 2012 Global Switch successfully tendered for, and became the Corporation’s lessee of, Site C of TKOIE.[1] SUNeVision also tendered through a subsidiary but its bid was unsuccessful.  Global Switch intends to operate a data centre comprising 5 buildings at Site C.  Buildings 1 and 2 were completed in December 2017 and currently serve a customer, Daily‑Tech Hong Kong Co Ltd (“Daily‑Tech”).  The other buildings are under construction.

6.  A data centre is a building or space within a building used to house information and communication technology equipment and is generally equipped with the necessary infrastructure such as power supply, cooling facilities and security systems.  According to SUNeVision, data centres fall into one of two colocation models: the “wholesale colocation model” and “retail colocation model” (though it should be noted that this description of and distinction between the two models are not accepted by either the Corporation or Global Switch, who consider that it mis‑characterises the data centre industry in Hong Kong).

(1)  In the wholesale colocation model, the data centre operator designates specific space within the centre for the use for a customer, and grants control over that space to the customer.  This model is typically preferred by large customers who have the internal resources to manage and maintain their equipment in their own dedicated space.

(2)  In the retail colocation model, different customers’ equipment is housed in the same shared space, such in racks or cages, and no customer would have the exclusive use or control of any space in the data centre.  This model generally caters for customers who need only limited space to set up network Point‑of Presence or to house IT equipment.  The data centre operator will also provide “managed services” such as internet connectivity and bandwidth, network monitoring, and system management.  As their “MSP” (managed services provider), the data centre operator requires unrestricted access to the customers’ IT equipment.

7.  It is not in dispute that the Corporation has, so far as relevant for present purposes, 2 published policies in respect of its industrial estates, as follows:

(1)  The first policy applies to lessees of land in the industrial estates generally (and therefore also to lessees who are data centre operators) and is a policy against subletting or parting with possession.  This policy is reflected in clause B(11)(a) of the Corporation’s standard lease which requires the lessee

“ not to assign mortgage charge demise underlet or part with possession of the said premises or any part thereof or any interest therein or enter into any agreement so to do nor to permit any other party by way of a licence or otherwise to occupy the said premises or any part thereof.”  (“Lease Restrictions”)

(2)  The second policy is the admission policy for data centre operators (“Data Centre Policy”) adopted at the meeting of the Business Development and Admission Committee (“BDAC”) of the Board of the Corporation at its meeting on 9 February 2010.  This has the following elements:

(a) Exclusion possession shall be retained by the grantee.

(b) The provision of managed services shall be the dominant element of the operation in the premises.

(c) Right of access to the premises shall remain within the exclusive control of the grantee at all times.

(d) The approved use for data centre in the lease shall be “to operate a data centre to provide colocation services as well as Internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management”.

8.  On the basis and as a result of the policies, SUNeVision says that it has since 2010 had the legitimate expectation (the “Legitimate Expectation”) that:[2]

(1)  “ Grantees who are data centre operators in the Industrial Estates are NOT allowed to sublet or part with possession of the leased premises or to license or allow third parties to occupy part of the premises”.

4 examples of prohibited acts have been set out in the Form 86: (i) sublet buildings, floors or caged spaces in the leased premises to as third parties; (ii) let the parties have control on who can access the leased premises including by implementing their own security measures; (iii) let the parties station their staff or have office space or set up office in the leased premises; (iv) let third parties provide managed services; and

(2)  the Corporation will enforce the Lease Restrictions and will not tolerate or condone any breach of them.

9.  SUNeVision says that relying on its Legitimate Expectation, it acquired through a subsidiary in 2013 a plot of land in Tseung Kwan O at a full market price of HK$428 million to construct a data centre there which can include subletting or licensing part of the premises to its customers and in January 2018 another plot of land in Tsuen Wan again at full market price for developing a similar data centre. 

10.  SUNeVision says that by reason of events over the past few years, it has become concerned that the Corporation has not been enforcing the Lease Restrictions against what SUNeVision suspects to be breaches thereof.  Six events that took place between September 2011 and January 2018 are then set out in the Form 86 (§§35‑45).  Essentially SUNeVision alleged that several of the Corporation’s lessees in TKOIE had been acting in breach of the Lease Restrictions:

(1)  In January 2018, NTT Com Asia Ltd (“NTT”) offered services to a cloud computing enterprise that amounted to subletting or licensing part of its premises.

(2)  In April 2017, Global Switch entered into an arrangement with Daily Tech and China Telecom Global Ltd that was or was highly likely to be in breach of the Lease Restrictions.

(3)  In late 2012, HKCOLO.NET Ltd (“HKCOLO”) entered into an arrangement with IBM that was or was likely to be contrary to the Lease Restrictions.

(4)  In September 2011, HKCOLO successfully bid for the provision of data centre services to a public authority on terms which suggested HKCOLO would not retain exclusive possession — an arrangement that was or was highly likely to be contrary to the Lease Restrictions.

(5)  In October 2011, HKCOLO successfully bid for the provision of data centre services to a financial institution on terms which suggested HKCOLO would not retain exclusive possession — an arrangement that was or was highly likely to be contrary to the Lease Restrictions.

(6)  In March 2015, NTT won a bid to provide data centre services to a financial institution on terms which suggested the financial institution would be in control of access within the designated space — an arrangement that was or was highly likely to be contrary to the Lease Restrictions.

11.  SUNeVision had set out the same events in a pre‑action letter from its solicitors to the Corporation dated 6 April 2018, which stated it had to conclude that there had been a change in policy or a continuous policy of condonation in respect of the Lease Restrictions, and demanded that the Corporation take immediate steps to stop the change in policy or the policy of condonation by publicly reaffirming its relevant policy and taking reasonably effective measures to ensure the discontinuation of all existing breaches of the Lease Restrictions.

12.  In addition, the solicitors’ letter stated that SUNeVision was aware that Global Switch and the Corporation were in advanced negotiations for an increase of plot ratio for Global Switch’s site in TKOIE. It was said that if, as a result of a change in policy or a policy of condonation, the Lease Restrictions were no longer taken into account in deciding whether more space should be granted to Global Switch, then SUNeVision would contend that the decision was irrational and in breach of the Corporation’s statutory duties and SUNeVision’s Legitimate Expectation and liable to be challenged under judicial review.

13.  The Corporation replied by its solicitors’ letter dated 28 May 2018 (“28 May 2018 Letter”) to the effect that:

(1)  There had been no change in the relevant policies and no policy of condonation of breaches.

(2)  In the data centre industry

“ some customers may place the equipment in the data centre to make themselves avail of the services provided by the data centre operators, the latter being the dominant element of the operation of the data centre. Under such model, our client considers that these customers on the industrial estates do not have exclusive possession of the space in the data centre where the equipment is placed; nor are they licensed to occupy the space and has made it clear to all potential applicants accordingly. Such trade practice or to be distinguished from the subletting, licensing and/or sharing of space as a service such as the provision of space by Grantees to their customers for the storage of unpowered equipment, servers or racks for a rental.”

(3)  The intended Grantees are required to provide a pro forma draft service agreement between the Grantees and their potential customers, which the Corporation examines to ensure that the Grantees retain exclusive possession and that the arrangements do not amount to subletting, licensing and/or occupation of space as a service.

(4)  After the commencement of operation, regular inspections are carried out by the Corporation and any suspected breach of the Lease Restrictions is promptly dealt with.

(5)  As regards the specific cases mentioned by SUNeVision:

“ Based on [the Corporation’s] regular site inspection at the industrial estates, [the Corporation] is unaware of the alleged breach of the Restriction by the Grantees. … [The Corporation] shall continue to carry out regular inspections to the industrial estates to ensure compliance with the Agreement and Lease. If and when our client becomes aware of any irregularities in the industrial estates through the regular site inspection, our client would immediately take steps to investigate into the irregularities, including but not limited to seeking explanations from the Grantees, industrial operators and/or data centre operators. If it is confirmed that a Grantee is in breach of the Agreement and/or the Lease, our client would take appropriate enforcement actions accordingly.”

(6)  The Corporation denied that it had acted in contravention of any alleged legitimate expectation of SUNeVision.

14.  The Form 86, dated 10 September 2018, specified the decision in respect of which relief is sought to be:

“ The decision of [the Corporation] by letter dated 28 May 2018 … from Messrs Wilkinson & Grist not to take immediate steps to rectify the failure or refusal to take reasonable steps to enforce restrictions on leases against subletting, parting with possession and/or sharing of occupation in the Tseung Kwan O Industrial Estate …, the reasons therefor being provided in the 28 May 2018 Letter.”

15.  The grounds for challenge are set out in §§69‑97 of the Form 86.  First, it is said that the Corporation had not in fact been enforcing the Lease Restrictions and had therefore breached SUNeVision’s Legitimate Expectation, which led to substantial unfairness to SUNeVision.[3]  Secondly, it is said that the Corporation erred in law in considering that the Lease Restrictions would not be breached so long as services had been provided, and that exclusive possession would be retained as long as the data centre operator had the right to “allocate different areas in the granted site for the installation of their customers’ servers or to relocate the same”.  It is said that it would be a misdirection insofar as the Corporation assumed that the provision of colocation of services in the data centre industry necessarily required the operator to part with possession.[4]  Thirdly, it is said that the Corporation misconstrued its own policy and failed to appreciate that the policy was in effect to allow the Grantees to operate under the retail colocation model but not the wholesale colocation model, and failed to take into consideration the terms and conditions between the Grantees and their customers which conferred right to possession and/or right of occupation.[5]  Fourthly, it is said that despite SUNeVision had drawn attention to the specific alleged breaches by NTT, Global Switch and HKCOLO, the Corporation failed or refused to take steps to inquire into the facts and to take necessary actions.[6]  Fifthly, it is said that the grant of an increase of plot ratio and extra gross floor area to Global Switch in circumstances where Global Switch would be using such extra gross floor area in effect for subletting would not be an exercise of power for the purposes sanctioned by the Ordinance and would be a breach of the Legitimate Expectation or Wednesbury unreasonable.[7]

16.  Leave was granted based on consideration of the papers alone on 9 October 2018.

17.  On 29 October 2018, SUNeVision issued a summons for a stay of the Corporation’s decision to grant an increase in plot ratio to Global Switch pending the determination of the application for judicial review. Subsequently, after being informed on 28 January 2019 that the Lands Department have provided a notification letter to the Corporation for execution, on 4 February 2019 SUNeVision issued a summons for an interim injunction to prevent the Corporation from executing documents for granting increased plot ratio to Global Switch pending the application for stay.  The application for interim injunction was dismissed by Chow J on 21 February 2019.  I shall return to that decision below.  As a result, SUNeVision abandoned its application for stay.

18.  In the course of the application for interim injunction, SUNeVision sought leave to amend its Form 86 in accordance with a draft annexed to its summons dated 19 February 2019 (“1^st draft amended Form 86”).  On 6 March 2019, SUNeVision issued another summons effectively seeking leave to amend its Form 86 in accordance with a revised draft (“2^nd draft amended Form 86”).  The various proposed amendments will be discussed below.  The paragraphs referred to are those in the 2^nd draft amended Form 86.

Proposed amendments to Form 86

19.  As to the approach to amendments in judicial review proceedings, counsel who appeared for the Corporation and Global Switch referred me to AA and Another v Securities and Futures Commission (unrep, HCAL 41/2016, 16 June 2017) where Zervos J (as he then was) stated:

“ 3. Once leave to apply for judicial review is granted, a line in the sand is drawn as to the terms and scope of the proceedings. Bearing in mind the nature and ambit of the judicial review jurisdiction, dealing with issues relating to public administration brought on before the courts within a strict time frame, a material amendment of the grounds for review should rarely occur.[8]

4. In deciding whether to grant leave to amend a Form 86, will ultimately turn on what is fair and appropriate in all the circumstances so that the real dispute between the parties can be determined.[9] However, where the application is late the threshold is high, although the reason for it being late would be a relevant factor.[10] Other factors that may be taken into account, are the nature and substance of the amendment (including whether it is a pure point of law or a mixed point of fact and law, or a pure factual point), the lack of merit of the amendment, the relevance or significance of the amendment to the key issue of the judicial review upon which leave was granted, and the existence of an alternative procedure to deal with the matter.[11]” (original footnotes)

20.  It is relevant in the present case to note that, while Order 53 rule 6(2) confers on the court a general power to allow amendment of the Form 86, where the amendments seek to impugn a different decision, they are to that extent effectively an application for leave to apply for judicial review of that different decision, and should be subject to the strictures attendant upon an application for leave.

21.  The proposed amendments, except stylistic and minor changes, fall into 3 main groups which will be discussed in turn below.  The Corporation opposes all 3 groups, while Global Switch opposes only the amendments relating to the decision to grant additional plot ratio, taking a neutral stance on the other amendments.

Amendments to attack the decision to grant extra plot ratio

22.  First, SUNeVision seeks to add a new decision to be challenged, namely, the decision of the Corporation to grant Global Switch an increased plot ratio from 2.5 to 3.3, representing gross floor area of 17,213 m², for its leased premises in TKOIE (“the plot ratio decision”).  I have no doubt that this attempt must be rejected.

23.  No leave has previously been given to challenge the plot ratio decision.  As stated above, the Form 86 as originally filed only named the decision in the 28 May 2018 Letter.  It is incumbent on an applicant to set out precisely the decision it seeks to attack.  Leave was given ex parte on consideration of papers alone to apply for judicial review, and must properly be regarded as restricted to the decision expressly made the subject matter of the intended judicial review. 

24.  The decision to grant additional plot ratio to Global Switch (from 2.5 to 3.3, equivalent to GFA of 17,213m²) was in fact made by BDAC on 21 November 2016, in response to Global Switch’s application dated 24 June 2016.  On 6 March 2017 the Corporation wrote to Global Switch stating the BDAC had approved the proposed increase of plot ratio subject to Lands Department’s approval and 3 conditions: (i) to carry out a technical study if required by the Lands Department or the Corporation; (ii) to pay land premium of over $127m; and (iii) to execute the necessary lease modification documents at its expense.  Global Switch was asked to signify its acceptance by countersigning and returning a copy of the letter together with two cheques for $80,000 and $52,300 respectively failing which the approval indicated would become null and void.  On 4 May 2017 Global Switch countersigned in acceptance of the terms and conditions offered.

25.  In October 2017 the Corporation submitted a consolidated modification proposal to the Lands Department seeking approval for an increase of the plot ratio for 8 sites.  This was approved at the District Lands Conference on 29 March 2018, subject to final scrutiny by Legal Advisory & Conveyancing Office.  On 21 November 2018 the District Lands Office proposed basic terms to the Corporation for lease modification, which were accepted by the Corporation on 18 December 2018.  On 28 January 2019 the Corporation’s solicitors wrote to SUNeVision’s solicitors stating that the Corporation intended to execute the modification letter with DLO on 11 February 2019 and only then would the Corporation be in a position to execute a lease modification with Global Switch.

26.  Despite the processes involving the Lands Department, it is clear that as far as the Corporation was concerned, the decision had long been made, more than 2 years ago, pending only the formal approval of the Director of Lands.  The proposed attack on it now is hopelessly out of time. 

27.  Moreover, Global Switch has acted on the decision for some 2 years already.  Not only has it given the two cheques to the Corporation upon acceptance of the offer, it has also entered into a construction contract with Gammon in August 2018 (with a preceding letter of agreement dated 25 July 2017) for Buildings 4 and 5 (which were designed on the basis of and make use of the additional plot ratio).  Construction works had commenced for these buildings in July 2018, with a contract sum of approximately $2.5 billion.  The Corporation’s approval of increased plot ratio for Global Switch was clearly not a provisional arrangement but, to all intents and purposes, a done deal subject to formal “sign‑off” by the Lands Department of the increase of plot ratio for a number of sites in the TKOIE.

28.  SUNeVision said it was “kept in the dark”.  This is in my view not an accurate way of putting it, for SUNeVision was not a party concerned with the transaction and there was nothing to require the Corporation or Global Switch at the time to disclose the plot ratio negotiations or decision to SUNeVision.  Further, SUNeVision knew enough to assert in its original Form 86 (at §95) that the Corporation “has entered into advanced negotiations” with Global Switch for an increase of the plot ratio for Global Switch’s site at TKOIE.  It was further stated in the Form 86 there that:

“ It appears from the Chief Executive’s Statement in 2017 Annual Report and the 2017 Base Prospectus of Global Switch’s group of companies that [the Corporation] may have already decided to grant the increased plot ratio to Global Switch.”

That relevant part of the 2017 Annual Report dated 6 April 2018 read:

“ I am pleased to announce that this week the District Land Council of Hong Kong has approved the application by the Hong Kong Science and Technology Park Corporation to increase the plot ratio of some of the sites within the Tseung Kwan O Industrial Estate, including our site, thereby allowing Global Switch to increase the size and scale of its development.”

29.  In any event, time starts to run for the purposes of judicial review not from the date when an applicant knows of the ground, but from the time when the ground for challenge arises: Order 53 rule 4(1); Lo Siu Lan v Hong Kong Housing Authority (unrep, CACV 378/2004, 17 December 2004), at §40.

30.  Although there was a mention of the increase of plot ratio in the body of the original Form 86, SUNeVision consciously confined the decision challenged to the 28 May 2018 Letter as set out in §14 above and did not include any decision on plot ratio (which it inferred had been made) in its application for leave to apply for judicial review.

31.  It was only in the 1^st draft amended Form 86 placed before Chow J in connection with the interim stay application heard in February 2019 that SUNeVision first sought to attack the plot ratio decision.  It is notable that in that draft, the plot ratio decision sought to be impugned was described as the decision of the Corporation through its BDAC made on 21 November 2016 to grant Global Switch an increased plot ratio.  As part of his reasons for refusing an interim injunction on 21 February 2019,[12] Chow J noted that “the Plot Ratio Decision was made a long time ago (on 21 November 2016)” and “much has happened since that decision was made” (§35).

32.  In the 2^nd draft amended Form 86, without any explanation the decision attacked has been changed to the “decision to execute a lease modification agreement or document with Global Switch … communicated to the Applicant by letter dated 28 January 2019 from Messrs Wilkinson & Grist”.  This is, with respect, simply a device to bring the date of decision forward to a more recent time.  There was in fact no further substantive decision in January 2019.  The execution of a modification document was only to complete what was already decided by the Corporation in November 2016 and agreed with Global Switch in May 2017.

33.  I reject the submission that there was no challengeable decision until 2 January 2019 because the 2016 decision was unreviewable for being conditional.  Plainly there was a substantive decision which, albeit conditional on Lands Department’s approval, was neither provisional nor tentative.  Moreover, the increase was offered to and accepted by Global Switch.  The submission is also flatly contradicted by the stance taken in the 1^st draft amended Form 86 placed before Chow J (signed by leading and junior counsel) which sought judicial review of the decision made on 21 November 2016.  Affirmations and submissions were put forward on behalf of SUNeVision at that stage in support of the proposed attack on the 2016 decision.  Chow J did not reject that attack on the ground that the 2016 decision was not amenable to judicial review for being conditional or provisional.

34.  In Lo Siu Lan vHong Kong Housing Authority (unrep, CACV 378/2004, 17 December 2004), at §39, Stock JA said that even where the latest decision may itself be amenable to challenge, that is not to be looked at in isolation when the court comes to consider the issue of leave.  “It must be looked at in the round, with due regard of course … to the nature of the earlier decisions and to the framework as a whole”.

35.  When the process for the increase in plot ratio is looked at in the round, it is plain that the decision had been made in November 2016 and an agreement made in May 2017.  SUNeVision cannot circumvent the reality by seizing upon the final link which followed inexorably by way of fulfilment of the decision and agreement.

36.  Furthermore, the proposed attack lacks substantive merits.  The central plank of SUNeVision’s case is its alleged Legitimate Expectation that data centre operators in the TKOIE would not be allowed by the Corporation to sublet or part with possession of the leased premises or to license or allow third parties to occupy them.  On this point, Chow J held in his decision refusing an interim stay:

“ 27. … I do not see how it can be argued that Sunevision has any legitimate expectation that the Corporation would not grant increased plot ratio, or permissible gross floor area, to its lessees in respect of sites currently occupied by them. It is significant that the Corporation’s position is that it remains committed to its policy of maintaining the Lease Restrictions in respect of sites which it grants to its lessees in the TKO Industrial Estate. The principal difference between the parties, as I see it, lies in the proper interpretation and/or application of the Lease Restrictions. Should Sunevision ultimately succeed in this judicial review on those issues, it is to be expected that the Corporation, as a statutory body, would act in accordance with the court’s judgment as regards the true interpretation and proper application of the Lease Restrictions against the lessees. What it means is that Global Switch will not be permitted to conduct its business at the GS Site, including any additional gross floor area acquired under the Lease Modification Documents, in a manner which is inconsistent with the Lease Restrictions. I do not, however, see any basis for the court to find the Lease Modification Documents to be invalid, or the increased plot ratio granted in respect of the GS Site to be unlawful.”

37.  SUNeVision also alleges in the proposed amendments that Global Switch “had used and was likely to use the GS Site with the increased plot ratio” in breach of the Lease Restrictions.  (In the original Form 86 it was stated that Global Switch “would be using [the] extra floor space” in breach of the Lease Restrictions.  In the 1^st draft amended Form 86 placed before Chow J, it was stated that Global Switch “has been using and will continue to use the GS Site” in breach of the Lease Restrictions.)  As to this, Chow J stated:

“ 30. … I agree with the submissions of Ms Sit and Mr Man, SC on behalf of Global Switch and the Corporation respectively that there is simply no basis to support the supposition that Global Switch will continue to use the GS Site in a manner in breach of the Lease Restrictions after this matter has been ruled by the court. On the contrary, both of them have made it clear that their clients would act in accordance with the court’s determination at the substantive hearing of this application for judicial review regarding the interpretation and application of the Lease Restrictions, although I should add that as a matter of public law, there is no principle that a policy once fixed must remain immutable forever.”

38.  The evidence shows:

(1)  Buildings 4 and 5 are being constructed.  The additional floor space will not be fully operational until end of 2020.  How that floor space (and indeed the space within other data centres in TKOIE) may be used will depend on the Corporation’s and the lessees’ actions in the light of the outcome of these proceedings.

(2)  There is nothing to suggest that, assuming SUNeVision prevails in the judicial review, Global Switch will not abide by the determination of the court or that the Corporation will not take enforcement action if it acts in breach.  On the contrary, Global Switch has stated that it will abide by the court’s eventual determination and, if necessary, amend their business model and operations accordingly. 

(3)  Global Switch says that the operating model currently used in the GS Site is specific to the existing customer, Daily‑Tech, and that Global Switch intends to have a wide spectrum of customers with different operating models, and therefore that it is not correct to say the existing model will necessarily apply to the entire facility.

39.  Mr Yu SC, who appeared for SUNeVision on the present application but not before Chow J, submitted that Chow J only dealt with an application for a short interim injunction pending the determination of SUNeVision’s application for stay, and therefore his decision was provisional and not reached with the benefit of full evidence or argument.  But his Lordship plainly gave his considered views on the merits on the particular point, and concluded that SUNeVision had not shown a “serious issue to be tried”, still less a reasonably arguable case, in relation to the plot ratio decision. I respectfully agree with Chow J’s reasoning.

40.  Mr Yu further submitted that Chow J focused on the issue of legitimate expectation but SUNeVision’s case is also based on error of law or misdirection in law on the part of the Corporation in that it had misconstrued or misapplied its own policy in making the decision to grant additional plot ratio to Global Switch.  In fact, Chow J also dealt with that point, as follows:

“ In respect of the first matter [referring to SUNeVision’s case of an error of law on the part of the Corporation and/or a misapplication of the Corporation’s policy in making the decision], it is important to appreciate that the alleged error of law or misapplication of policy relates to the “use” of the increased plot ratio, or gross floor area, of the GS Site, not the “grant” of such increased plot ratio, or gross floor area. It is by no means clear to me that the alleged error or law or misapplication of policy should have the effect, in public law, of vitiating the grant itself. In any event, the court has a discretion whether to grant remedy even where a ground of judicial review has been made out, and I do not at the moment see why the court would exercise its discretion to quash the Plot Ratio Decision, or declare it to be unlawful, in circumstances where the increased gross floor area can be used by Global Switch in a manner consistently with the Lease Restrictions.”

41.  With this I also respectfully agree.  In the 2^nd draft amended Form 86, SUNeVision has added complaints about failure to take a relevant fact into account and failure to make reasonable inquiries, but in my view these do not take the matter further.

42.  In the 2^nd draft amended Form 86, SUNeVision seeks a declaration that the plot ratio decision is unlawful, an order of certiorari to quash it, and an order of mandamus that the Corporation reconsider the plot ratio decision.  It is not shown, however, how this can have any effect on the concluded agreement with Global Switch to grant plot ratio and the lease modification which are binding upon the Corporation in private law.  Mr Yu suggested that as possible relief, if SUNeVision prevailed at the end, the Corporation could be asked to sell by tender the additional plot ratio.  This seems to be a suggestion that, even though SUNeVision failed to obtain any interim stay, Global Switch could somehow be deprived of the plot ratio already granted, and then forced to demolish a few floors from one or more of the buildings on its site, and the plot ratio could then somehow be put out by the Corporation to tender — a theory that was wholly unexplained. 

43.  In fact, SUNeVision’s solicitors’ letter of 6 April 2018 asked the Corporation to confirm that any increased gross floor area should only be granted through open tender or that the premium should be paid at full market rate, and in response, the 28 May 2018 Letter had stated in response that it was not possible to grant the increased GFA by way of open tender:

“ … we are instructed by our client that it is legally and practically impossible to grant the increased GFA by way of open tender. The plot ratio of an industrial estate is fixed under the land grant of the same. Subject to Government’s approval, our client may re—allocate the unused GFA to a site when the maximum plot ratio of such industrial estate has not been exhausted. Such shifting of GFA cannot be granted in respect of the land outside industrial estate which is under a separate land grant or twin entity which is not a Grantee.”

There was no mention of thisin the Form 86.  The lack of prospect of such relief is a matter that can be taken into account in refusing lave: ShekLai San v Securities and Futures Commission [2010] 4 HKC 168, §44.

44.  Furthermore, SUNeVision is not a lessee of any site in TKOIE, and cannot receive any additional plot ratio whether taken from Global Switch or otherwise.  Its standing in this judicial review is derived from the alleged Legitimate Expectation regarding the use of space in the TKOIE against the Lease Restrictions.  Thus even if the Corporation’s decision to allow additional plot ratio was made in a way that was deficient as alleged, in the absence of any viable complaint that the additional floor spare would be used in breach of the Lease Restrictions, there is nothing that SUNeVision can, with sufficient interest, complain about the grant of space.

45.  In my view SUNeVision has not passed the requisite threshold for leave.  This amendment must therefore be rejected.

The February 2010 Paper for BDAC

46.  The second group of amendments (paragraphs 17A, 17B and 73A) relate to the BDAC meeting of 9 February 2010.  At a previous meeting held in July 2009, the BDAC had considered that if a lessee of the Corporation was to provide data centre access to an entity which was not itself an end-user but which in turn provided data centre services to its customers, there would be a breach of the Lease Restrictions. Accordingly, the BDAC at that stage considered that the user of a site within the industrial estates for data centre should be:

“ to operate a data centre to provide collocation services (as well as Internet connectivity and other networking services, managed and outsourcing services on facilities, data centre management and system management) to end‑users.” (emphasis added)

At its meeting on 9 February 2010, the BDAC, after taking legal advice and after further deliberation, decided to remove the phrase “to end‑users” from the policy to be promulgated.  

47.  SUNeVision seeks to rely on the paper relating to the 9 February 2010 meeting to suggest that the Corporation’s policies, properly construed, had the effect of restricting customers of data centres to end‑users only.  SUNeVision seeks to argue that in deciding to remove the end‑users limitation at that meeting, the BDAC and hence the Corporation misconstrued the Lease Restrictions or misdirected itself in relation to their effect.

48.  This seems to me to be misconceived.  SUNeVision has not advanced any case based on a policy of an end‑users limitation.  The only policy alleged to exist based on the Lease Restrictions does not expressly contain the end‑users limitation.  There is no suggestion that the previous resolution that included the end‑users limitation had been published.  It was simply part of the ongoing deliberation process within the Corporation.  It was open to the Corporation to decide what policy to adopt provided they made no error of law.

49.  It was SUNeVision’s case that the Corporation erred in law in construing and applying its own policies as promulgated and the Lease Restrictions, and that their meaning is a matter for the court: Shiu Wing Steel Ltd v Director of Environmental Protection and Airport Authority (No 2) (2006) 9 HKCFAR 478, §§26‑30.  On that case it is not useful to refer to an internal, temporary position previously taken by the BDAC, which is not relevant to the court’s determination of the question of law.  It seems to me the proposed amendments would simply lead to obfuscation of the real issues.  Accordingly, these amendments should also be rejected.

Amendments concerning the 6 specific instances

50.  The third group of amendments appear in the section of the Form 86 dealing with the 6 specific instances of alleged breach of the Lease Restrictions by 3 different Grantees.

51.  The proposed paragraph 37A pleads extracts from a document submitted by Global Switch to the Corporation in April 2012, which consisted of clarification of information in relation to the Global Switch’s application for land in TKOIE submitted in February 2012.  However, whether or not there were breaches of the Lease Restrictions by Global Switch depends on the arrangements with the customers as appear to the Corporation, not on the particular wording of a 2012 document.

52.  The proposed paragraph 37B(1) pleads extracts from an article from the Sky News website dated 10 January 2019.  Such statements are of little value.  Paragraph 37B(2) pleads a news release published by Global Switch dated 3 July 2018 in which it described its business, but it is a general description that does not assist in the examination of the actual arrangements in Hong Kong.  Paragraph 37B(3) pleads a disclosure document published by a Mainland Chinese company which is a major shareholder of Global Switch dated 15 November 2018 containing certain general description of Global Switch’s business.  Again, such general description of the business of Global Switch which is an international company with at least 8 data centre campuses worldwide is of no assistance in the present case.  The proposed paragraph 37B(4) pleads the current FAQ page of Global Switch’s website which suggests that Global Switch cannot access the dedicated areas that house customer servers.  All 4 documents post‑date the Decision, which means they could not have been relevant to the decision‑making process.

53.  Paragraph 37C pleads an agreement entered into between Global Switch, Daily‑Tech and Daily‑Tech HK and another agreement entered into between Global Switch and Daily‑Tech HK both dated 22 January 2016.  These agreements have been disclosed in the evidence filed.  Insofar as SUNeVision seeks to say that they were permitted by the Corporation even though (on SUNeVision’s case) they involved breaches of the Lease Restrictions, this is without basis because the uncontroverted evidence is that the Corporation did not have knowledge of these agreements until these proceedings.  The Corporation has not yet made a decision on what position and steps to take in relation to these agreements.  Accordingly, paragraphs 37F, 46(2), 73B(2) and 90A(2), which seek to impugn a non-existent decision not to raise objection to these agreements, should be rejected.  Mr Yu’s further amendment to paragraph 37F, proposed orally during his submission, cannot salvage these paragraphs whose gist is an attack on a decision that in fact has not yet been made.

54.  Provided the above is clearly borne in mind, however, I do not think paragraph 37C should be excluded since it sets out the actual agreements entered into between Global Switch and Daily‑Tech.  The proposed paragraph 46(2) also refers to the agreements to say that the arrangements are continuing, while the proposed paragraph 46(1) says the tender terms accepted by NTT and HKCOLO would suggest the arrangements are also continuing.  It seems to me these paragraphs should be allowed.

55.  The proposed paragraphs 37D, 73B(1), 80A and 90A(1) relate to the pro forma services agreement provided by Global Switch to the Corporation, which was approved by the Corporation in November 2012.  This seems to me to be a relevant part of the material to be considered because it was on the basis of, inter alia, this form of agreement that the Corporation concluded there had been no relevant breach of the Admission Policy or Lease Restrictions.  Ms Sit who appeared for the Corporation submitted that it is clear that the terms of the pro forma agreement are in no way inconsistent with the Corporation’s policies or the Lease Restrictions. However, in the circumstances of this case, when in particular there is still argument on the scope of the evidence that may be relevant to the interpretation of the policies, this is in my view a matter for the substantive hearing of the judicial review.

56.  I consider therefore that paragraphs 37C, 37D and 37E[13] and paragraphs 46(1) & (2), 73B(1), 80A and 90A(1) should be permitted, but not paragraphs 37A, 37B, 37F, 73B(2), and 90A(2).

Conclusion

57.  There will therefore be an order giving leave to SUNeVision to amend its summons of 19 February 2019, and to amend its Form 86, limited as set out above as well as in terms of the unopposed minor amendments proposed in the 2^nd draft amended Form 86.  Subject as aforesaid, the application to amend the Form 86 is dismissed.

58.  As an order nisi, SUNeVision is to pay (i) the costs of and occasioned by the amendments; (ii) 80% of the Corporation’s costs of and relating to the application to amend (ie SUNeVision’s summonses dated 19 February 2019 and 6 March 2019 respectively); and (iii) Global Switch’s costs of and relating to the application to amend.  There will be a certificate for two counsel.

HCAL 1890/2018

[2019] HKCFI 539

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 1890 OF 2018

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D E C I S I O N

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INTRODUCTION

1.  I have before me a summons taken out by Sunevision Holdings Ltd (“Sunevision”) on 4 February 2019 (“the Interim Injunction Summons”) seeking an interim injunction to restrain Hong Kong Science and Technology Parks Corporation (“the Corporation”) from signing or executing:

“any document (including but not limited to any lease modification agreement) with [Global Switch] to give effect to [the Corporation’s decision] to grant increased plot ratio for more allowable gross floor area to [Global Switch] in Tseung Kwan O Industrial Estate, Sai Kung, New Territories”

pending the final determination of the Applicant’s summons dated 29 October 2018 (“the Substantive Injunction Summons”).

BASIC FACTS

2.  For the purpose of disposing of the Interim Injunction Summons, the relevant facts can briefly be summarized as follows.

3.  Sunevision is a provider of data centre services and operates 5 data centres in Hong Kong, including one at Tseung Kwan O.  As a data centre service provider, Sunevision offers colocation services which provide space and facilities for customers to house their computer services and IT equipment, as well as cooling, power supply and other services to support the customers’ computer servers and other IT equipment.

4.  According to Sunevision, there are two business models which may be adopted by a data centre service provider, namely, “wholesale colocation model” and “retail colocation model”.

(1)   In the case of the wholesale colocation model, the data centre service provider would designate a specific space within the data centre for the use of a single customer, and grant absolute or sole control over that space to the customer.

(2)   In the case of the retail colocation model, the data centre service provider would house the customers’ equipment in the same shared space, such as a rack or cage, and no customer would have the exclusive use or control of any space in the data centre.  Such business model generally caters for customers with a smaller operating scale.

(3)   Data centres operating under the retail colocation model would provide “managed services” to their customers and require unrestricted access to their customers’ IT equipment for such purpose, while data centres operating under the wholesale colocation model would not provide such managed services and thus would not enjoy unrestricted access to the customers’ designated spaces.

(4)   Global Switch Hong Kong Limited (“Global Switch”), a competitor of Sunevision, carries on its business under the wholesale colocation model.

I should mention that both the Corporation and Global Switch challenge the distinction drawn by Sunevision between “wholesale colocation model” and “retail colocation model”, and consider the purported distinction to be misleading or mischaracterize the data centre industry in Hong Kong.  This is not, however, a matter which I need to further deal with in this decision.

5.  The Corporation is a statutory body established by the Hong Kong Science and Technology Parks Corporation Ordinance, Cap 565. By Section 6(1) of that Ordinance, the purposes of the Corporation are:

(a)   to establish or develop any premises where activities related to the purposes prescribed in paragraph (b), (c) or (d) are, or are to be, carried out, and to manage and control the land and other facilities comprised in such premises;

(b)   to facilitate the research and development and application of technologies in manufacturing and service industries in Hong Kong;

(c)   to support the development, transfer and use of new or advanced technologies in Hong Kong;

(d)   to engage in such activities or to perform such functions as the Chief Executive in Council may, after consultation with the Corporation, permit or assign to it by order published in the Gazette.

6.  Under Section 8(2)(c) of the Ordinance, the Corporation has general powers to sell, let, sublet or otherwise dispose of land or any facilities in the “specified premises”, which include the Tseung Kwan O Industrial Estate, Sai Kung, New Territories (“the TKO Industrial Estate”), on such terms and conditions as its board considers appropriate.

7.  The Corporation currently operates 3 industrial estates in Hong Kong on lands granted by the Government, including the TKO Industrial Estate, at a nominal premium.  For this reason, it is in a position to, and does, grant individual sections of the industrial estates to its clients, including data centre service providers, at substantially subsidized rates in comparison with the market rate.

8.  According to Sunevision, it is the published policy (“the Policy”) of the Corporation in respect of its industrial estates that its lessees are prohibited from:

(1)   parting with possession of the leased premises or any part thereof, whether by way of subletting or otherwise; or

(2)   permitting any third party, including its customers, to occupy the lease premises or any part thereof, whether by granting a licence or otherwise in any practical sense (“the Lease Restrictions”).

9.  Such Policy, says Sunevision, is evident from the Corporation’s standard form lease as well as its process for tender applications for sites in the TKO Industrial Estate (including letters sent by the Corporation to stakeholders in the data centre industry including Sunevision, and the tender invitations issued by the Corporation in 2010 and 2011).  Sunevision further contends that:

(1)   the wholesale colocation model is clearly incompatible with the Policy and would be in breach of the Lease Restrictions, while the retail colocation modal would be in line with the Policy and the Lease Restrictions; and

(2)   as a result of the implementation of the Policy by the Corporation, Sunevision has a legitimate expectation that data centre service providers operating in the TKO Industrial Estate under grants made by the Corporation would not be allowed to sublet or part with possession of the leased premises, or to license or allow third parties to occupy the same.

10.  In 2012, Sunevision submitted an application to the Corporation for leasing a site (“the GS Site”) in the TKO Industrial Estate based on the retail colocation model because of the Corporation’s published Policy, although it would have been commercially more attractive to make an offer based on the wholesale colocation model.  Sunevision’s application was not successful, and the GS Site was eventually granted by the Corporation to Global Switch, which has since been carrying on business as a data centre service provider at the GS Site.

11.  Sunevision later found out that various data centre service providers, including NTT, Global Switch and HKCOLO, in the TKO Industrial Estate had acted in breach of the Lease Restrictions by subletting, licensing or parting with possession of their leased premises to their customers.  Since no later than November 2012, Sunevision had, through its solicitors (Woo Kwan Lee & Lo), raised complaints with the Corporation about the breaches of the Lease Restrictions.  Eventually, by a letter dated 6 April 2018, Woo Kwan Lee & Lo demanded the Corporation to take immediate steps to enforce the Lease Restrictions against the lessees.  By a letter dated 28 May 2018, the Corporation refused Sunevision’s demand, on the basis that there was no breach of the Lease Restrictions as alleged by Sunevision.  I should add that, according to Mr Siu Chik Hung (the Chief Operating Officer of the Corporation), there was previously one instance occurring in 2013 where a breach of the Lease Restrictions was discovered but the matter was eventually resolved outside court to the satisfaction of the Corporation.

12.  On 10 September 2018, Sunevision applied for leave to apply for judicial review of the Corporation’s decision contained in the said letter of 28 May 2018 “not to take immediate steps to rectify the failure or refusal to take reasonable steps to enforce restrictions in leases against subletting, parting with possession and/or sharing of occupation in [the TKO Industrial Estate]” (“the May 2018 Decision”).

13.  On 9 October 2018, Mr Justice G Lam granted leave to apply for judicial review on consideration of papers alone.  The learned Judge also ordered that Global Switch be served with the papers as an Interested Party, and be at liberty to take such part in the proceedings as it might be advised.

THE INJUNCTION APPLICATIONS

14.  On 24 June 2016, Global Switch applied to the Corporation for an increase of the permissible plot ratio, or gross floor area, in respect of the GS Site for the purpose of business expansion.  In order to do so, the Corporation would itself require an increase of the permissible plot ratio in respect of the GS Site (from 2.5 to 3.3) under the Corporation’s head lease with the Government.  On 21 November 2016, the Corporation approved Global Switch’s application and decided that it should be granted a total of 17,213 m² of spare gross floor area subject to approval by the Director of Lands (“the Plot Ratio Decision”).  The Corporation’s offer to Global Switch dated 6 March 2017 was countersigned by Global Switch on or about 4 May 2017.

15.  It is Sunevision’s position that:

“[t]he grant of an increased plot ratio and extra gross floor area in effect for subletting would not be an exercise of power for the purposes sanctioned by the Ordinance, and would in any event be a breach of the legitimate expectation and/or Wednesbury unreasonable” (see paragraph 97 of the Form 86).

16.  In the Form 86, Sunevision sought an interim order under Order 53, rule 3(10)(a) that:

“there be a stay of the decision of [the Corporation] whether to grant increased plot ratio for more allowable gross floor area for [Global Switch] in [the TKO Industrial Estate] or, alternatively, if such decision had already been made in favour of Global Switch, that such decision should not take effect until the Applicant’s challenge is determined”.

17.  On 29 October 2018, Sunevision issued the Substantive Injunction Summons seeking the interim relief mentioned in paragraph 16 above.

18.  On 21 November 2018, the District Lands Office offered to the Corporation certain basic terms on the proposed lease modification of the head lease in respect of the TKO Industrial Estate.  On 18 December 2018, the Corporation informed the District Lands Office of its acceptance of the basic terms.  Wilkinson & Grist (on behalf of the Corporation) also informed Woo Kwan Lee & Lo of the Corporation’s acceptance of the basic terms offered by the District Lands Office by a letter of the same date.

19.  On 3 January 2019, Mr Justice G Lam gave directions concerning the further conduct of the Substantive Injunction Summons.  As recorded in the Judge’s Order, those directions were given upon the Corporation’s undertaking as follows:

“(a) in the event that a lease modification letter affecting [the GS Site] is issued by the District Lands Office (the ‘Lease Modification Letter’) to [the Corporation] for signing, [the Corporation] shall upon receipt of the same give notice (“the ‘Notice’) to the solicitors of all parties to these proceedings no later than 7 business days thereof; and

(b)   in the event that the issuance of the Lease Modification Letter takes place prior to the substantive hearing of [the Substantive Injunction Summons], [the Corporation] shall not proceed with the execution of any lease modification agreement or document with [Global Switch] in relation to the GS Site within the period of 14 days from the time when the Notice is given to the parties”.

The Substantive Injunction Summons has now been fixed to be heard before Mr Justice G Lam on 3 April 2019.

20.  By a letter dated 28 January 2019, Wilkinson & Grist informed Woo Kwan Lee & Co that:

(1)   the District Lands Office had on 22 January 2019 provided to the Corporation an undated modification letter for execution with respect to the Corporation’s application to vary the plot ratio of 8 sites within the TKO Industrial Estate, and expressly stipulated that the Corporation had to execute the modification letter on or before 11 February 2019;

(2)   the Corporation intended to execute and return the modification letter to the District Lands Office on 11 February 2019; and

(3)   after the modification letter had been executed by the Corporation and the District Lands Office and registered at the Lands Registry, the Corporation would be in a position to execute any lease modification agreement or document with Global Switch (“the Lease Modification Documents”).

21.  This letter from Wilkinson & Grist dated 28 January 2019 prompted Sunevision to take out the Interim Injunction Summons on 4 February 2019.  The Interim Injunction Summons first came before me on 13 February 2019.  Up to that time, the only decision under challenge in this application for judicial review was the May 2018 Decision.  The hearing of the Interim Injunction Summons was part-heard on 13 February 2019 and adjourned to today (21 February 2019), for reasons which it is not necessary to set out here.

22.  On 19 February 2019, the Applicant issued a summons seeking to amend the Form 86 in order to mount a challenge to the Plot Ratio Decision as well.  The amendment summons has been adjourned to be dealt with by Mr Justice G Lam on 3 April 2019.  I shall come back to the Applicant’s proposed challenge to the Plot Ratio Decision later in this decision.

DISCUSSION

23.  The principles for granting interim relief pending the substantive hearing of an application for judicial review are not in dispute.  Essentially, the court applies the American Cyanamid approach and considers (i) whether there is a serious issue to be tried, (ii) whether damages would be an adequate remedy, and (ii) the balance of convenience.  However, in the context of judicial review and depending on the nature of the decision under challenge, the question of balance of convenience, involving a consideration of not just the interests of the immediate parties to the proceedings but also the wider public interest, could become centrally important when considering whether interim relief should be granted.  See Re Lung Chun Hang Sixtus [2018] 5 HKC 138, at paragraphs 12 to 13.

24.  On the other hand, where the court is concerned with an application for “interim interim relief”, ie interim relief pending the substantive hearing of a summons for interlocutory injunctive relief, the court’s primary concern is to do practical justice on the balance of fairness. In China Shanshui Cement Group Ltd v Zhang Caikui[2018] HKCA 409, Lam VP (giving the reasons for judgment on behalf of the Court of Appeal), stated as follows:

[13]   … It has to be reiterated that interim relief is meant to be an urgent temporary stop-gap measure and the circumstances were such that the court has to do practical justice on the balance of fairness even though it may not have sufficient time to consider the matter fully: see NPYJ v SMRC [2018] 1 HKLRD 573 at [3] and [4].

[17] The extent to which a judge give weight to the merit on an issue in a particular case depends very much on the context and there are obviously other factors at play including the effect of the grant or refusal of the relief and the subject matter at stake. It is a multi-facet assessment and, as we said, an exercise with high discretionary margin accorded to the first instance judge.

25.  I should add that there is also a distinction to be drawn between the merits of the underlying or substantive cause, and the merits of the summons for interlocutory injunctive relief pending the determination of the underlying or substantive cause.  If an applicant cannot show that he has a reasonable prospect of success in the summons for interlocutory injunctive relief, it would be difficult to justify granting “interim interim relief” pending the determination of that summons.

26.  On behalf of Sunevision, Ms Tong argues that:

(1)    as the court has already granted leave to apply for judicial review, it must be taken to have met the threshold of showing a serious issue to be tried;

(2)    the refusal of the interim injunction sought by Sunevision may render the Stay Summons entirely nugatory should the Corporation proceed to give effect to the decision to grant increased plot ratio by executing the Lease Modification Documents with Global Switch;

(3)    if the Lease Modification Documents are executed:

(a)   it may become meaningless to grant an order to declare the Corporation’s decision to grant the increased plot ratio to Global Switch to be unlawful (being one of the relief sought in the substantive judicial review);

(b)   Global Switch would acquire contractual/legal rights under the modified lease even before the legality of such decision has been determined in the substantive judicial review;

(c)   Global Switch would be able to leverage upon the formal grant of increased plot ratio to gain further unfair advantage over other data centre service providers based on their current business model, thereby aggravating the distortion of competition in the industry;

(4)    should Sunevision ultimately succeed in this judicial review, any steps taken by the Corporation to implement its decision to grant increased plot ratio in respect of the GS Site would potentially have to be unwound, and the execution of the Lease Modification Documents would complicate the process and create uncertainty; and

(5)    neither the Corporation nor Global Switch would suffer any harm or damage from a grant of the interim relief.

27.  In my view, the present application can be disposed of on a simple basis.  Even if one assumes, for the sake of argument, that:

(1)    Sunevision has a “legitimate expectation” in the public law sense that data centre service providers operating in the TKO Industrial Estate under grants made by the Corporation would not be allowed to sublet or part with possession of the leased premises, or to license or allow third parties to occupy the same; and

(2)    the manner in which various lessees, including Global Switch, conduct their business is inconsistent with the Lease Restrictions,

I do not see how it can be argued that Sunevision has any legitimate expectation that the Corporation would not grant increased plot ratio, or permissible gross floor area, to its lessees in respect of sites currently occupied by them.  It is significant that that the Corporation’s position is that it remains committed to its policy of maintaining the Lease Restrictions in respect of sites which it grants to its lessees in the TKO Industrial Estate.  The principal difference between the parties, as I see it, lies in the proper interpretation and/or application of the Lease Restrictions.  Should Sunevision ultimately succeed in this judicial review on those issues, it is to be expected that the Corporation, as a statutory body, would act in accordance with the court’s judgment as regards the true interpretation and proper application of the Lease Restrictions against the lessees.  What it means is that Global Switch will not be permitted to conduct its business at the GS Site, including any additional gross floor area acquired under the Lease Modification Documents, in a manner which is inconsistent with the Lease Restrictions.  I do not, however, see any basis for the court to find the Lease Modification Documents to be invalid, or the increased plot ratio granted in respect of the GS Site to be unlawful.

28.  As earlier noted, Sunevision now proposes to include a challenge to the Plot Ratio Decision in its draft Amended Form 86.  The basis of such challenge is encapsulated in paragraph 74A thereof, as follows:

“[The Corporation]’s decision to grant increased plot ratio to Global Switch pursuant to the Plot Ratio Decision proceeded on an error of law and a misapplication of [the Corporation’s] own policies, and in circumstances where Global Switch has been using and will continue to use the GS Site in breach of the Lease Restrictions. This has the effect of compounding [the Corporation’s] error of law, and would have the effect of allowing Global Switch to gain further unfair advantages over other data centre operators operating outside [the TKO Industrial Estate], and is a breach of [Sunevision’s] Legitimate Expectation”.

29.  It seems clear that Sunevision’s challenge to the Plot Ratio Decision rests on two matters:

(1)    an error of law on the part of the Corporation and/or a misapplication of the Corporation’s policy in making the decision; and

(2)    a supposition that Global Switch has used and, more importantly, will continue to use the GS Site in breach of the Lease Restrictions.

30.  In respect of the second matter, I agree with the submissions of Ms Sit and Mr Man, SC on behalf of Global Switch and the Corporation respectively that there is simply no basis to support the supposition that Global Switch will continue to use the GS Site in a manner in breach of the Lease Restrictions after this matter has been ruled by the court.  On the contrary, both of them have made it clear that their clients would act in accordance with the court’s determination at the substantive hearing of this application for judicial review regarding the interpretation and application of the Lease Restrictions, although I should add that as a matter of public law, there is no principle that a policy once fixed must remain immutable forever.

31.  In respect of the first matter, it is important to appreciate that the alleged error of law or misapplication of policy relates to the “use” of the increased plot ratio, or gross floor area, of the GS Site, not the “grant” of such increased plot ratio, or gross floor area.  It is by no means clear to me that the alleged error or law or misapplication of policy should have the effect, in public law, of vitiating the grant itself.  In any event, the court has a discretion whether to grant remedy even where a ground of judicial review has been made out, and I do not at the moment see why the court would exercise its discretion to quash the Plot Ratio Decision, or declare it to be unlawful, in circumstances where the increased gross floor area can be used by Global Switch in a manner consistently with the Lease Restrictions.

32.  In all, I am not satisfied that Sunevision has shown a “serious issue to be tried”, still less a reasonably arguable case, in relation to the Plot Ratio Decision.

33.  In any event, I am only dealing with an application for “interim interim relief” pending the determining of the Substantive Injunction Summons.  Assuming that the Corporation and Global Switch should proceed to execute the Lease Modification Documents in the meantime, it is obvious that Global Switch will not be in a position to start using the newly acquired gross floor area at the GS Site in breach of the Lease Restrictions prior to the determination of the Substantive Injunction Summons due to be heard on 3 April 2019, bearing in mind the time required for the construction of Buildings 4 and 5 of Global Switch’s data centre (to which the additional plot ratio is attributed) which it is estimated will only become 30% operative from mid-2020 and fully operative at the end of 2020.  In other words, I do not see that any injustice will be caused to Sunevision by the refusal of the interim interim injunction sought by it, or why the matter cannot be left until the hearing of the Substantive Injunction Summons on 3 April 2019.

34.  On the other hand, I accept the submissions of Mr Man and Ms Sit respectively that there is considerable public interest in promoting the development, transfer and use of new or advanced technologies in Hong Kong, and any unnecessary delay to that process which prevents the TKO Industrial Estate from being put to its maximum or optimum use, such as delaying the implementation of the Plot Ratio Decision, would be detrimental to the public interest.

35.  Lastly, there is also the consideration that the Plot Ratio Decision was made a long time ago (on 21 November 2016), and there is evidence that Global Switch has acted and incurred substantial effort and expenses in reliance upon the Plot Ratio Decision (see paragraphs 25 of the 2^nd Affirmation of Mr Damon Ward Reid).  Sunevision says that it only became aware of the Plot Ratio Decision for the first time from the 1^st Affirmation of Mr Siu filed by the Corporation on 18 December 2018.  However, Sunevision was well aware that the Corporation had entered into advanced negotiations with Global Switch for an increase of plot ratio for the GS Site.  As stated in paragraph 95 of the Form 86: “It appears from the Chief Executive’s Statement in the 2017 Annual Report and the 2017 Base Prospectus of Global Switch’s group of companies that [the Corporation] may have already decided to grant the increased plot ratio to Global Switch”. In any event, even if Sunevision has a good reason for not seeking to challenge the Plot Ratio Decision earlier, it remains the case that much has happened since that decision was made, and it is far from clear that the court will, in the exercise of its discretion, grant relief in respect of the Plot Ratio Decision, particularly where, as mentioned above, the additional gross floor area made available to Global Switch under the Plot Ratio Decision can be used in a manner consistently with the Lease Restrictions.

36.  There are other minor matters relied upon by Ms Tong on the issue of balance of convenience which I do not consider take Sunevision’s case much further.  In all, I am not satisfied that this is a proper case to grant interim interim relief as sought by Sunevision.

DISPOSITION

37.  For the foregoing reasons, the Interim Injunction Summons is dismissed.  I shall now hear the parties on the question of costs.