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Coping with frustration: does Coronavirus pandemic (Covid-19) provide a legal justification for a commercial tenant to not pay rent?

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Like the rest of the world, Hong Kong is struggling with the impact caused by the Coronavirus in different facets.  The pandemic is not only taking away lives, but also ravaging the economy without mercy.  For business owners, did you rent premises you thought you would be able to afford until the Coronavirus changed everything?  Are you planning to get out of the tenancy agreement by reason of the Coronavirus?  In this article, we will list out some frequently asked questions and provide you with our answers, so that you might have a grasp of what impact a public health emergency (like the Coronavirus) may have on the rights and obligations of landlords and tenants. 

Click to jump to answer

Question 1: Has anyone ever brought a case to Court to terminate the tenancy agreement / get out of his/her rental obligations by reason of a virus outbreak? ↓
Question 2: Does the judgment in Li Chun Wing debar future tenants from claiming frustration by reason of the Covid-19 pandemic? ↓
Question 3: So, how can tenants seek immediate termination of tenancy and request for refund of prepaid rental / deposit? ↓
Question 4: In light of the above, what actions should landlords take? ↓
Question 5: What should I pay attention to if I am contemplating to enter into a new tenancy agreement? ↓
 

Question 1: Has anyone ever brought a case to Court to terminate the tenancy agreement / get out of his/her rental obligations by reason of a virus outbreak?

Answer:
Yes, but in the context of a domestic tenancy.

In 2003, Hong Kong was devastated by the outbreak of severe acute respiratory syndrome (SARS), which infected 8,096 worldwide and killed 744.  Block E of Amoy Gardens (淘大花園), a private housing multi-storey estate in Hong Kong, was unfortunately hard hit in the epidemic as there were 107 people infected there.  In view of the severe situation, the Government imposed a 10-day isolation order on Block E and all the residents therein had to be evacuated.  Subsequently, scientific investigations suggested that the U-traps in the sewage systems had been left dry which allowed the virus to pass from the building sewage system back to the apartments.  

The unfortunate tenants of Block E of Amoy Gardens were faced with a dilemma: given the situation, was there a legal justification for them to terminate the tenancy agreements?  Or should they continue to stay in the premises which seemed to be unsafe for many after the expiry of the isolation order?

This question went before the District Court of Hong Kong in the case of Li Chun Wing v Xuan Yi Xiong [2004] 1 HKLRD 754.  In this case, a tenant of Block E (“T”) terminated the 2-year rental agreement after the isolation order lapsed, and the landlord (“L”) applied for summary judgment against T for the accrued rent and damages arising from the alleged repudiation of the tenancy agreement.  The question for the Court was therefore whether T was entitled to terminate the tenancy agreement. 

The main argument that T relied on was the doctrine of frustration.  The general doctrine of frustration would kick in when there is an supervening event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the outstanding contractual rights and/or obligations from which the parties could reasonably have contemplated at the time of its execution such that it would be unjust for the parties to further perform the contract.  The supervening event, however, must not merely increase the burden of the contracting parties but must be so substantial to discharge the parties from the contract entirely.   In considering the argument of frustration, the Court in Li Chun Wing commented that the 10-day isolation order in the case was “quite insignificant in terms of the overall use of the Premises”, as the term of the tenancy agreement in question was 2 years.  Therefore, the Court rejected the argument of frustration and held that the lease was not frustrated by the isolation order.

Another argument by T was that there should be an implied covenant for the premises to be fit for human habitation. The Court rejected such argument also because it was unusual for the Court to imply such a term in tenancy, and in any event there was just no evidence to suggest Block E continued to be unsafe for human habitation after the expiry of the isolation order.

Question 2: Does the judgment in Li Chun Wing debar future tenants from claiming frustration by reason of the Covid-19 pandemic?

Answer:
Not necessarily.  

In Li Chun Wing, the Court stressed that “an event which causes an interruption in the expected use of the premises by the lessee will not frustrate the lease, unless the interruption is expected to last for the unexpired term of the lease, or at least, for a long period of that unexpired term.”  

That means, the duration of the epidemic, or more precisely the relative duration of the epidemic comparing to the length of the tenancy, is an important factor for deciding whether a tenancy has been frustrated. As experts of infectious diseases have pointed out, Covid-19 may not go away swiftly and we might have to fight a prolonged war against it.  This may be contrasted with the case of SARS epidemic which hit Hong Kong very hard at first but was swiftly alleviated within weeks. 

For tenants who have short leases, it may therefore be easier for them to claim frustration. However, this does not necessarily mean that long leases could never be frustrated at all as Li Chun Wing is only a decision by the District Court, being a court at a lower level in Hong Kong. On the other hand, in the recent English High Court case of Canary Wharf (BP4) T1 Limited & ors v European Medicines Agency [2019] EWHC 335 (Ch), it was suggested that it is not simply a question about the length of the tenancy. Instead, the Court should adopt a multi-factorial approach by looking at all the circumstances to decide whether the “common purpose” of the contract has been frustrated. This would require us to look beyond the four corners of the tenancy to consider also:-

–    The matrix or context when the tenancy was entered into
–    The parties’ knowledge, expectations, assumptions and contemplations, in particular as to risk, at the time of the contract
–    The nature of the supervening event; and
–    The parties’ reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances

Question 3: So, how can tenants seek immediate termination of tenancy and request for refund of prepaid rental / deposit?

Answer:
Unless otherwise provided by the contract, generally landlord and tenant do not have the right to terminate the tenancy anytime before the period contemplated in the contract lapses. In most cases, even if force majeure clauses apply, they would only allow rent suspension or abatement but not termination of the tenancy. However, besides the situation that may give rise to frustration as discussed above, under certain circumstances, where a “repudiatory breach” of the contract has arisen, the non-breaching party may have the right to terminate the tenancy.

Generally, a repudiatory breach would only arise if the breach of the contract is sufficiently significant so as to deprive the non-breaching party of “substantially the whole benefit” of the contract.  In the context of tenancy, where the landlord shut down the premises, it may be argued that the landlord has breached the implied covenant of quiet enjoyment where the shutdown is unilaterally decided by the landlord and not authorised by the tenancy.  But where the shutdown is mandated by the government, it is difficult to attribute fault to the landlord and claim there is a breach of the tenancy on the part of the landlord.

Insofar as the issue of prepaid rental or deposit that is advanced by the tenant (e.g. two months’ rent) is concerned, first of all, one must turn to the actual tenancy agreement and check if parties have agreed on how the deposit would be dealt with.  Where the contract is ambiguous or silent on the issue, it requires a case-by-case analysis of the tenancy agreements and the circumstances.  If it is a straight-forward case that the landlord has breached the tenancy agreement so as to give rise to a “repudiatory breach”, the tenant can almost certainly terminate the tenancy and request for refund of the deposit.  In contrast, if the tenant is the defaulting party, the landlord may just apply the deposit to cover the tenant’s default.

However, as discussed above, very often the answer is less than clear and the tenant may not be certain whether he/she is entitled to rescind or terminate the contract on other ground such as frustration (Please refer to the answer in Question 2 hereinabove).  This is where the tenants must be extra cautious because if it was later adjudicated that the breach is not a “repudiatory” one, they may be liable to compensate the landlord, amongst others, the outstanding rents, consequential losses and legal costs.

Question 4: In light of the above, what actions should landlords take?

Answer:
As for landlords, it is important to consider whether your right to collect rental payment has been impacted by Covid-19 before commencing any legal action to collect rent.  As discussed below, there may be contractual provisions (e.g. a force majeure clauses and “material adverse change” clauses) in your tenancy agreement that have contemplated the situation of an epidemic/pandemic and relieve the parties from the performance of the contract.  Of course, the answer would very much depend on the intention of the parties and other circumstantial factors. 

Question 5: What should I pay attention to if I am contemplating to enter into a new tenancy agreement?

Answer:
Besides express contractual provisions regarding termination of contract, parties have to pay attention to force majeure clauses and “material adverse change” (MAC) clauses. 

For a discussion of force majeure clause, please refer to the article written by our Senior Partner, Mr. Gordon Oldham: https://oln-law.com/are-you-frustrated-by-your-force-majeure-clause.  Parties may consider to provide a clear and unambiguous force majeure clause to contemplate the event of epidemic/pandemic.

In addition, very often the contracts would contain a MAC clause which expressly stipulates that certain events that materially change the business, operations, assets, liabilities, condition (e.g. financial condition) of a party may give rise to a right to terminate the agreement. Again, like a force majeure clause, the MAC clause must clearly contemplate the event of epidemic/pandemic if parties wish to rely on it.  If MAC clauses are drafted in a generic way, the Court will tend to construe the clause narrowly by excluding Covid-19 as a MAC event.  In determining whether a MAC clause is triggered, a case-specific analysis of the following circumstances will also have to be conducted:-

–    Intention of the parties
–    What the parties have discussed on the treatment of Covid-19;
–    What the market comparable is for the party’s business; and
–    How the party’s business performance is compared with that of the market comparable.

Concluding thoughts

With the uncertain development of the Covid-19 situation, we believe that there might be upcoming cases testing whether the doctrine of frustration could discharge tenants from tenancy agreements and if so under what circumstances it will happen.  Before a clear guidance is laid down, we suggest both landlords and tenants to keep track of the situation and review key tenancy agreements in order to assess what impact had Covid-19 caused to them specifically.  Similar to most other disputes, the best way of resolution is always to attempt amicable negotiation and discussion by taking into account various commercial reality and practicality. If the tenant finds it inevitable to renege on rental payments, we suggest that he/she approaches the landlord to initiate a discussion and try to sort out whether rental reduction / deferment would be feasible before taking any legal action. 

If you wish to obtain legal advice to assess your current situation, please don’t hesitate to contact any of us (at anna.chan@oln-law.com or martin.tse@oln-law.com) and we will be pleased to answer and assist.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Revised Departmental Interpretation and Practice Notes on E-commerce and Digital Assets – Part 2

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The Inland Revenue Department (the “IRD”) has recently revised and reissued Departmental Interpretation and Practice Notes 39 (the “DIPN 39 (Revised)”) since it was first published in July 2001. Amongst others, the IRD has now provide some guidance on how it is going to assess digital assets (including but not limited to cryptocurrencies, cryptoassets or digital tokens). The article aims to discuss the tax treatment of the digital assets under the DIPN 39 (Revised).

1. No Specific Legal Legislation for Digital Assets

Currently, there is no specific provision in the Securities and Futures Ordinance (Cap. 571) (the “SFO”) or other legislation which governs the digital assets or tokens. In general, if a digital token has terms and features that may qualify as “securities” as defined in the SFO, it will be subject to the regulation and scrutiny of the Securities and Futures Commission. For instance:-

1. Where a digital token offered in an initial coin offering (the “ICO”) represents equity or ownership interest in a corporation such as shareholders’ rights, i.e. the right to receive dividends and the right to participate in the distribution of the corporation’s surplus assets upon winding up, etc., such token may be regarded as “shares”;

2. Where a digital token is used to create or to acknowledge a debt or liability owed by the issuer, for example, an issuer may repay a token holder the principal of their investment on a fixed date or upon redemption, with interest paid to the token holder, such the digital tokens may be considered as a “debenture”; or

3. Where token proceeds are managed collectively by the ICO scheme operator to invest in projects with an aim to enable a token holder to participate in a share of the returns provided by the project, the digital tokens may be regarded as an interest in a “collective investment scheme”.

Payment tokens or utility tokens, however, are not subject to the regulation of the SFC.

2. Tax Treatment of the Digital Tokens and Cryptocurrency Business

As explained in the DIPN 39 (Revised), the nature of the digital tokens issued in an ICO (i.e. the rights and obligations associated with the digital tokens) will determine the taxability of the proceeds from the ICO. If “security” tokens are offered in an ICO, the proceeds thereof will be capital in nature and hence not taxable from the perspective of the issuer.  On the other hand, if utility tokens are offered in an ICO, the IRD is of the view that such proceeds could be taxable under section 14 of the Inland Revenue Ordinance (Cap. 622) as the proceeds represent prepayment by the token holders for future benefits or services.

As for digital token holders, if it can be established that the tokens are capital assets rather than trading stock, any profits from the disposal of the tokens will not be chargeable to profits tax. The well-established 6 badges of trade will be relied on by the IRD in determining whether a digital token is a capital asset or a trading stock. The IRD has also made it clear that it will apply the broad guiding principle in determining the source of profits arising from cryptocurrency transactions, i.e. the nature of the profits in question, the relevant operations that produced the profits in question and the place where those profit-generating operations were carried out.

3. Our Observations

Notwithstanding the inclusion of a new section for the taxation of digital assets and cryptocurrency businesses under the DIPN 39 (Revised), little concrete or additional guidance (save and except for the part on security tokens) has been provided when it comes to the determining of the nature of a digital asset and the source of profits for cryptocurrency businesses.  The over-reliance on the 6 badges of trade and the basic charge under the IRO to tax an emerging industry which involves blockchain technology is likely to cause many ICO issuers and cryptocurrency businesses to be subject to tax review by the IRD and give rise to tax disputes. It is high time for the blockchain businesses to get prepared for the IRD’s stricter scrutiny for a tax perspective.

If you have any questions on the above, please contact one of the members of our Tax Advisory Team.

Shall you be interested to download this article as a brochure, please click on the following link: Revised Departmental Interpretation and Practice Notes on E-commerce and Digital Assets – Part 2

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Hong Kong’s Tax Treatment on the Emerging E-commerce Business and Digital Assets – Part 1

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Technological advancement and shifting consumer patterns have contributed to the increasing trend of businesses or exchange done virtually. The current form of Inland Revenue Ordinance (Cap. 112) (the “IRO”), however, contain no specific provisions to deal with the taxation of e-commerce and / or digital assets businesses. To cope with such change of circumstances and to fill the gap, the Inland Revenue Department (the “IRD”) issued the Departmental Interpretation and Practice Notes 39 in July 2001 to provide clarity on its taxation of e-commerce businesses. Such Departmental Interpretation and Practice Notes was recently revised and issued by the IRD in late March 2020 (the “DIPN 39 (Revised)”). In gist, it adopts the general approach (as provided for under section 14[1] of the IRO and at common law) in determining whether a person is chargeable to Hong Kong Profits Tax for those businesses. The sharp difference between e-commerce businesses and traditional trading and manufacturing businesses prompted the IRD to revisit the relevant tax position and issue additional guidelines thereon. The article aims to discuss the notable changes under the DIPN 39 (Revised).

1. What does that mean by carrying on an e-commerce business in Hong Kong?

Previously, the IRD was of the view that the mere presence of a server in Hong Kong (even if the server was capable of concluding contracts, processing payments or delivering digital goods without the involvement of human activities) would not generally be considered as carrying on a business in Hong Kong.  The IRD would adopt a totality of fact approach to consider a basket of factors (including but not limited to where the goods are stored, where services were rendered, where contracts were made and where payments were made, etc.) in concluding whether or not a person was carrying on an e-commerce business in Hong Kong. 

Further, given that the server did not fall within the scope of “a branch, management or other place of business”, the mere presence of a server in Hong Kong did not constitute a permanent establishment (the “PE”) for non-resident persons and hence, those non-resident persons would not be considered as carrying on an e-commerce business in Hong Kong solely by that reason. Such position taken by the IRD was contrary to the view of the Organization for Economic Cooperation and Development (the “OECD”).

The IRD has now adopted a substantially different position as stated in the DIPN 39 (Revised). The DIPN 39 (Revised) clearly provides that if the core operations and support activities atypically seen in an e-commerce model (see paragraph 7 of the DIPN 39 (Revised)) are performed in Hong Kong, the person concerned will be considered as carrying on an e-commerce business in Hong Kong.

The IRD’s position on “server” has also been aligned with that of the OECD. The IRD’s current view is that the server may constitute a fixed place of business (and hence a PE) if an essential and significant part of the e-commerce business (as distinguished from preparatory or auxiliary activities) is conducted via the server. This literally means that a non-resident person, who owns or rents a server in Hong Kong which is capable of concluding contracts, processing payments or delivering digital goods in Hong Kong even without the involvement of human activities in Hong Kong, might be considered as having a PE in Hong Kong for Profits Tax purposes. While the IRD clarifies that that the sub-contracting to a HK service provider which so happens hosts the non-resident’s website via a server located in HK would not constitute an establishment of PE by that non-resident per se (as long as the server is not at the disposal of the non-resident), it is noteworthy that a non-resident without a PE in HK might still be subject to the Hong Kong Profits Tax if it is regarded as carrying on a business in Hong Kong. All relevant facts and circumstances would be examined before any conclusion could be made.

2. Is the profit of the e-commerce sourced in Hong Kong?

Instead of merely looking at the location of the server, the IRD makes it clear that the correct approach in determining the source of profits of an e-commerce business should be identifying the core operations of the e-commerce business generating the profits and determining where those core operations take place.  In that respect, the IRD has provide 2 illustrations in the DIPN 39 (Revised):-

Illustration 1:If a person, resident in Hong Kong, performs all the core operations and support activities of an e-commerce business in Hong Kong apart from operating a server, intelligent or otherwise, which is at the person’s disposal and located outside Hong Kong for e-commerce purposes, the profits from the person’s e-commerce transactions will be fully charged to profits tax as profits derived from Hong Kong.
  
Illustration 2:If a person, resident in a territory which has concluded a double tax agreement with Hong Kong, performs most of the operations and support activities of an e-commerce business outside Hong Kong apart from operating merely a server with essential and significant activities which is at the person’s disposal and located in Hong Kong (i.e. the server constitutes a permanent establishment in Hong Kong), profits attributable to the server permanent establishment having regard to the functions the server performs in Hong Kong will be charged to profits tax in accordance with the general principles in section 14.

The logical conclusions to be drawn from the illustrations are that (1) if all the core operations and support activities of an e-commerce business are performed in Hong Kong, the profits generated therefrom will be subject to Profits Tax, irrespectively of the residency of the person, the location of the server and whether or not the server is at the disposal of the person; and (2) a server in Hong Kong at the disposal of a non-resident person might constitute a PE of that non-resident person, giving rise to chargeable profits attributable to that server “activities” in Hong Kong.

3. Our Observations

The IRD’s initiative to revise the rules on the taxation of e-commerce business to be aligned with international tax rules and standards is certainly welcome. The changes as contained in the DIPN 39 (revised) do provide more clarity on how the IRD is going to assess e-commerce businesses. 

Having said that, from a practical point of view, given the fast pace in the development of e-commerce businesses (e.g. crowdfunding, dashboard solutions, drop shipping, online marketplace or flexible payment solutions) and their ever-changing models, it is believed that more e-commerce businesses (whether Hong Kong resident entities or non-Hong Kong resident entities) will be subject to the review by the IRD in terms of chargeability or offshore claims for the following reasons:-

(a) it is of utmost difficulty in determining (1) whether the business activities carried out by a person engaged in an e-commerce represent core operations and support activities of a business or merely constitute preparatory activities; and (2) whether or not the activities conducted via a sever represents an essential and significant activities of the relevant e-commerce business, as all of these are judgmental and might vary between different e-commerce businesses; and

(b) it is never easy to fully comprehend an innovative e-commerce business or its model (e.g. when blockchain business first emerged) and it seems to us that the IRD and the assessors are still analyzing such business and its model in a conventional way.             

In light of the changes under DIPN 39 (Revised) which is likely to be further revised by the end of 2020 upon the finalization of the report on digitalization by the OECD, clients should review their e-commerce businesses and make changes to the models to reduce any adverse tax implication or bearing thereof or better prepare themselves for the IRD’s enquiries on the e-commerce business. If you have any questions on the above, please contact one of the members of our Tax Advisory Team.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

[1] Section 14 of the IRO provides that a charge to Profits Tax will arise when the following three conditions are satisfied: (a) the person must carry on a trade, profession or business in Hong Kong; (b) the profits to be charged must be from such trade, professional or business carried on by the person in Hong Kong; and (c) the profits must be “profits arising in or derived from” Hong Kong.

Notarization amidst the Pandemic

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Introduction

Since the Covid-19 outbreak, one practice that has remained relatively stable is our notarial services. 

This can be easily explained as a lot of flights have now been cancelled and people are now unable (or unwilling) to travel overseas whether for business or for their private affairs, yet because of certain contractual or legal duties that they have to fulfil, they need to get legal documents signed or submitted be it affirmations for ongoing court cases, contracts for sale and purchase of assets, documents in support of emigration applications or even updated company documents to comply with their filing duties with relevant foreign authorities. 

Whilst there are some online notaries who conduct notarization by video conference, this is not a universally accepted method (certainly not in Hong Kong) largely because the notary is unable to satisfactorily verify the identity of the person as he will not be able to meet the client physically and to check that the identification document he/she holds and produces is likely to be genuine or not. Another issue is the notary cannot actually confirm the document he saw signed in a video is the one he eventually receives and notarizes. At best, he can just compare and believe it is likely to be the same document. As such, this method is not ideal and definitely not encouraged. 

What is notarization? 

In short, notarization is the process where a Notary Public prepares or authenticates certain legal documents by signing his signature and affixing his notarial seal on them. Such documents are intended to be used overseas (save for Mainland China where similar processes are conducted by a China Appointed Attesting Officer). A Notary Public in Hong Kong needs to first qualify as a Hong Kong Solicitor before he/she can take the notarial exam and be appointed by the High Court. At the moment, Hong Kong has around 400 qualified Notary Public out of more than 10,000 qualified solicitors in Hong Kong. 

What is Legalization? 

Whilst some countries seem to accept notarized documents as valid (mostly the Commonwealth countries) without being legalized, the general rule is that the signature and seal of a Notary Public should be authenticated.  This process takes place at that country’s consulate in Hong Kong to ensure that the Notary Public is a qualified person to do the job. We normally need to be first registered at the consulate before we can assist the client with the legalization process. Depending on the consulate, the process can sometimes be complicated and tedious. 

What is Apostille?

You may have come across this term before in your business dealings or personal affairs and scratched your head in puzzle. This is actually a simplified version of legalization where the documents are authenticated by apostilles issued by the High Court of Hong Kong. The documents that require authentication by apostille are normally used for signatory states or territories to The Hague Apostille Convention although a lot of non-signatory states and territories also require documents to be apostilled prior to legalization. The purpose of the Convention was to streamline the process of legalization. 

If you or your organization have questions or issues relating to this topic, please contact Selwyn Chan, Partner and Notary Public at selwyn.chan@oln-law.com. 

For more information about Selwyn Chan, Partner of Oldham, Li & Nie, please visit the following link: https://oln-law.com/selwyn-chan.  

Disclaimer:  This article is for reference only.  Nothing herein shall be construed as legal advice.  Oldham Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

OLN Ranked again as Employer of Choice by Asian Legal Business 2020

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We are delighted to announce Oldham, Li & Nie has again to be ranked in the 2020 Employer of Choice, Asia’s Best Law Firms to Work For, by Asian Legal Business for two consecutive years. The ALB Employer of Choice Rankings were compiled taking into account responses from more than 2500 private practice lawyers across Asia, ranging from managing partners to paralegals, as well as ALB’s market knowledge. 

The ranking was recently published by ALB magazine April 2020 Asia Edition. Please find the following link for the publication: 

https://www.legalbusinessonline.com/sites/default/files/e-magazines/ALB-APR-2020/viewer/desktop/index.html?doc=5FF43EE4533154DF180E7194791EADB0

Interruption Notice – Operation of HK Intellectual Property Department

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Due to the recent outbreak of novel coronavirus in the community, the Hong Kong Intellectual Property Department (“IPD”) has issued the fourth notice of interruption in the operations of Patents Registry, Designs Registry and Trade Marks Registry in Hong Kong since 28 January 2020.

The IPD will review the situation on weekly basis to ascertain whether further notice of interruption will be issued. 

Under the current interrupted period, the IPD will maintain limited services as follows:

  • Online search – public can conduct search via Public Online search System
  • E-filing – e-filers can file applications or other documents electronically via E-Filing System
  • Publication of the Hong Kong Intellectual Property Journal on every Friday
  • Public Service Counter on 24/F, Wu Chung House, but the operation hours will start from 1:00 p.m. to 5:45 p.m. on 17 (Mon), 19 (Wed) and 21 (Fri) of February only
  • Enquiry Hotline at 2961 6901/2961 6820

Documents sent to the Trade Marks, Designs and Patents Registries on 24/F Wu Chung House by post will not be affected by the interrupted period.

Points to note during the interrupted period:

Trade Marks Registry

  • Notice of deficiencies

The deadline to remedy deficiencies originally set out in a Registrar’s deficiency notice issued under rule 11 of the Trade Mark Rules will be extended to a date specified in the Notice of Interruption, which will be the Registry’s first business day next following the day which interruption ends.

Pursuant to the Notices of Interruption issued in 2020 recently on 28 January, 1 February, 8 February and 14 February respectively (“said Notices of Interruption”), if the deadline falls on any day between 29 and 31 January, 3 and 7 February, 10 and 14 February, or 17 and 21 February 2020, it will be extended to 24 February 2020 (“New Deadline”).

  • Notice of Registrar’s opinion

Likewise, the deadline originally set out in the Registrar’s notice of opinion will be extended as indicated above.  The deadline is extendable under Trade Marks Rule 13(3) and (5), the request for extension of time is likewise extended to the New Deadline.  The applicant is reminded to take the appropriate actions by the New Deadline to keep the application pending.

  • Opposition proceedings

The deadline to be observed in opposition proceeding is not necessarily be extended during the interrupted period.  If the original deadline falls on a date which is covered in such Notice, the deadline will be automatically extended to the first business day next following the day which interruption ends (“New Deadline”).

However, if the original deadline is a non-extendible time limit under the Trade Marks Rules, the parties to the proceeding are reminded to take the appropriate actions by the New Deadline to preserve their right in the proceeding. 

  • Serving of documents on other party

For contentious matters, e.g. opposition, the deadline is determined by reference to the date of receipt of a document from the other party (e.g. for filing a counter-statement under rule 17(1) of the Trade Mark Rules), the deadline would begin to run from the date of receipt of the document (i.e. the notice of opposition).  Hence, whether or not the date of receipt falls on a date covered in a Notice of Interruption should not be affected on the computation of the deadline for the other party take in the next step.

Patents and Designs Registries

Generally, the deadline for patent and design matters will be extended to the first business day of the Patents / Designs Registry next following the day which the interruption ends.  Notwithstanding of the extension of deadline during the interrupted period, if the maintenance / renewal fee is paid via the e-filing system after lapse of the original deadline but before the lapse of the extended deadline, the applicant/owner is still required to pay an additional fee for the “late” payment due to the electronic system constraint under the e-filing system.   However, it is possible to request for refund of such addition fee by written request.

Entries in the online registers

While the IPD will try their best to update the entries in the online registers of patents, designs and trade marks, there may still be discrepancies in exceptional cases of those entries.  In case the status of particular patent, design or trade mark application or registration is not correctly shown on the online register of patents / designs, the party can contact the IPD so that they could look into case and update the entries accordingly.

Should you have any queries relating to the article, please feel free to contact Evelyne Yeung (evelyne.yeung@oln-law.com).