June 2020

A data centre houses information and communication technologies equipment in a secure and controlled environment. With the exponential growth of information technology operations, recent years have seen a surging demand for data centre services. Some data centre operators provide space for customers to house their own equipment with a range of services in respect of such equipment, while some others supply and manage servers and hardware on customers’ behalf. In the former case, it seems possible to categorise the relationship between data centre operators and customers as landlords and tenants. Whether there exists such tenancy relationship depends on the true relationship between the data centre operator and the customer. This issue was considered by the Court of First Instance in SUNeVision Holdings Ltd v Hong Kong Science and Technology Parks Corporation [2020] HKCFI 548.


The Hong Kong Science and Technology Parks Corporation (“HKSTP”) owns industrial estates which have been leased out below market rates for the establishment and operation of data centres. It adopts a general policy against its lessees parting with possession or permitting third parties to occupy the premises. In line with the said policy, the standard lease for such premises contains a clause (the “No Alienation Clause”) that the lessees shall not “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”. The lessees are also required to submit pro forma service agreements for the approval by HKSTP.

The applicant in these proceedings, SUNeVision Holdings Ltd, belongs to a group of data centre operators in Hong Kong. In 2018, it lodged a complaint to HKSTP alleging, among other things, that the service agreements (“Service Agreements”) between its lessees (being data centre operators) and their customers are in breach of the No Alienation Clause. It later commenced judicial review proceedings against HKSTP for its failure or refusal to enforce the No Alienation Clause.


The Court considered whether the Service Agreements departed from HKSTP’s policies as reflected in the No Alienation Clause. This in turn leads to two associated questions, namely (i) whether the substance of the Service Agreements is a sub-lease; and (ii) whether the customers were granted exclusive possession of the premises under the Service Agreements.

The Court considered the construction of the Service Agreements and answered both questions in the negative. The use of the premises by the customers under the Service Agreements is referable to the provision of services. The Court made the following observations::

(a) The mere label that no relationship of landlord and tenant is intended to be created is not conclusive and binding on the Court. The Court should view the Service Agreement objectively as a whole to determine whether the requirements of a tenancy are met.

(b) The customers were granted a limited right of hosting their equipment but not a general right of occupation.

(c) The customers placed their equipment at the data centres for the managed and cloud enabling services rendered by the lessee involving technical and highly sophisticated and specialist infrastructure.

(d) The customers are obliged to maintain their equipment in good working order and in compliance with the lessee’s technical standards and procedures.

(e) The provision of the managed services forms the dominant element of the Service Agreements and accounts for a substantial portion of the consideration payable to the lessee under the Service Agreements. The main consideration is service fee (rather than rent).

(f) Customers are entitled to “service credits” in the event of service outage for the lessee’s failure in service provisions.

(g) Under the Service Agreements, the lessee has unrestricted access to and use of the premises.

(h) The lessee may re-designate the customer space where ICT equipment is placed and require the customers to relocate the same.


The Court of First Instance decided that the data centre operators in this case had not sublet or parted with possession of the premises by virtue of the Service Agreements. The judge did not deal with private law questions (i.e. whether the lessees breached the terms of the leases) in these judicial review proceedings, but the approach for the categorisation of the data centre operators-customers relationship should be equally applicable in the context of the law of tenancy. In view of this case, data centre operators may wish to check their leases and service agreements as to whether the service agreements are in compliance with the leases (in particular, the non-alienation clause, if any).