TENWOW INTERNATIONAL HOLDINGS LTD (IN PROVISIONAL LIQUIDATION) v. THE STOCK EXCHANGE HONG KONG LTD (“SEHK”)

HCAL 2294/2020

[2020] HKCFI 2982

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 2294 OF 2020

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J U D G M E N T

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A. Introduction

1.  By notice of application for leave to apply for judicial review, dated 20 November 2020, the applicant (“Company”) seeks leave to challenge the decision (“Decision”) of the Listing Review Committee (“LRC”) of the Stock Exchange of Hong Kong Ltd (“SEHK”) made on 2 November 2020.  By the Decision, the LRC upheld the Listing Committee’s decision that an extension of time should not be given to the Company to address the resumption conditions previously imposed, and that the Company’s listing should be cancelled under Rule 6.01A of the Listing Rules.

2.  The Company was incorporated in the Cayman Islands on 25 August 2011.  The Company is an investment holding company, and with its subsidiaries (together “Group”) principally engages in the manufacture, distribution and trading of beverages, food and snacks in the PRC.

3.  The Company’s shares (“Shares”) were listed on the Main Board of the SEHK on 17 September 2013.

4.  On 13 August 2018, trading in the Shares on the SEHK was suspended at the request of the Company.

5.  After trading of the Shares was suspended, the SEHK imposed on the Company certain conditions (“Resumption Conditions”) that had to be met before the Shares could resume trading.  The Company says that it has engaged in various remedial actions to seek to meet the Resumption Conditions.  Amongst the activities were a proposed restructuring of the Group (“Restructuring”) involving inter alia (a) corporate restructuring, (b) debt restructuring, and (c) subscription and open offer.  The progress of the Restructuring has been adversely impacted by the Covid-19 pandemic.  However, on 12 February 2020, a term sheet was entered into between the proposed investor (“Investor”) and the Company providing for the framework for the restructuring and subscription of new shares to be issued by the Company.  On 15 October 2020, the Company executed a legally binding restructuring agreement with the Investor.

6.  Also on 12 February 2020, the Company applied for an extension of time for resumption, to the end of September 2020.  In May 2020, the Listing Division recommended to the Listing Committee that the Company’s listing be cancelled on the basis that the Company had failed to fulfil all the Resumption Conditions so as to resume trading by 12 February 2020, and that the Company’s situation did not fall within the exceptional circumstances in which an extension of time may be given.

7.  On 7 May 2020, the Listing Committee decided to cancel the Company’s listing under Rule 6.01A.  The Listing Committee further decided it would be inappropriate to grant extension of time for resumption.

8.  On 15 May 2020, the Company requested for the decision of the Listing Committee to be referred to the LRC for a review. The review comprised both written submissions and oral submissions at a hearing on 16 October 2020.

9.  By letter dated 2 November 2020, the LRC informed the Company of its Decision to uphold the Listing Committee’s decision that the Company’s listing should be cancelled under Rule 6.01A.

10.  The Company now seeks leave to apply for judicial review to challenge the Decision.

B.     Further Background

11.  The events (together, “Incident”) which led to the suspension of trading of the Shares include the following.

12.  Since 2 May 2018, the Company’s board of directors (“Board”) discovered that the then Chairman of the Board, Executive Director, Chief Executive Officer and a 64.6% shareholder of the Company, Mr Lin Jianhua (“Mr Lin”), had been absent from work and the Company had been unable directly to contact him.  The Company was given to understand that Mr Lin was assisting the relevant authority of the PRC in relation to an investigation.

13.  At around the same time, the relevant PRC authority also requested the Company to provide financial information relating to Nanpu Food (Group) Co Ltd (“Nanpu Food”), a major distributor, supplier and 49%-owned joint venture of the Company founded by Mr Lin.  Later in May 2018, the Shanghai Municipal Public Security Bureau imposed temporary freezes on certain parcels of land of the Group and equity interests in 11 subsidiaries of the Company held by the Group.  As a result of the freezing of those assets, the Group was unable to renew certain credit facilities respectively due on 4 and 8 June 2018.  The non-payment of the outstanding amount of the credit facilities triggered the cross-default of other facility agreements.

14.  On 28 June 2018, the Board resolved to serve notice on Mr Lin to remove him as Chairman of the Board, Executive Director and Chief Executive Officer of the Company with immediate effect.  A Mr Lin Qi was appointed in his place as Chairman of the Board.

15.  After the removal of Mr Lin from his posts, the Board and senior management of the Group conducted internal checking on the records of the Group and discovered various abnormal transactions conducted in 2016 and 2017 (collectively, “Abnormal Transactions”).  In broad terms, the Abnormal Transactions involved the inappropriate use of a credit line, and the payment of significant sums to suppliers without receipt of the goods.

16.  As already indicated, trading in the Shares was suspended at the request of the Company on 13 August 2018.  On 27 August 2018, the Company announced that there would be a delay in publishing its interim results for the six months ended 30 June 2018.

17.  On 16 November 2018, the Cayman Court ordered the appointment of joint and several provisional liquidators for the Company.  The order was made following the presentation of a winding up petition by a creditor of the Company, and the Company’s application for the appointment of joint Provisional Liquidators on a ‘light touch’ basis for the purpose of restructuring.  The appointment of the Provisional Liquidators has been recognised by an order of the Hong Kong Court on 26 February 2019.  The hearing of the winding up Petition has been adjourned to be heard by the Cayman Court on 17 February 2021.

18.  After trading of the Shares were suspended, the SEHK imposed the Resumption Conditions as follows:

(1) conduct an appropriate investigation on the Incident in relation to the PRC investigation, the freezing of assets and the involvement of Mr Lin, Nanpu Food (and any related entities) and the Group, disclose details of the investigation(s), the findings and rectifying actions taken and to be taken by the Company, and the implications of the Incident on the Company’s financial positions and operations (“RC1”);

(2) conduct a forensic investigation on the Abnormal Transactions, disclose details of the investigation, the findings and rectifying actions taken and to be taken by the Company, and the implications on the Company’s financial positions (including but not limited to the financial results for the years ended 31 December 2016 and 2017) and operations (“RC2”);

(3) conduct an independent internal control review and demonstrate adequate internal control systems being in place to meet the obligations under the Listing Rules (“RC3”);

(4) demonstrate that there is no reasonable regulatory concern about the management integrity, and/or the integrity of any persons with substantial influence over the Company’s management and operations, which may pose a risk to investors and damage market confidence (“RC4”);

(5) publish all outstanding financial results and address any audit qualifications (“RC5”);

(6) demonstrate (with an appropriate level of professional assurance to the SEHK’s satisfaction) that the Company’s published financial results remain accurate and complete in all material respects and are not misleading or deceptive (“RC6”);

(7) have the winding-up order against the Company withdrawn or dismissed and the appointment of any liquidators discharged (“RC7”);

(8) demonstrate compliance with Listing Rule 13.24 (“RC8”); and

(9) inform the market all material information (including but not limited to the Incident and the Abnormal Transactions) for shareholders and other investors to appraise the Company’s position (“RC9”).

19.  The Company says it has taken various remedial actions following the removal of Mr Lin in June 2018.  First, there were changes to the composition of the Board, including the appointment of new independent non-executive directors and non-executive directors possessing professional accounting or legal qualifications.  A new chief financial officer was also appointed with effect from 25 April 2019.

20.  The parcels of land frozen in the PRC were announced by the Company on 14 June 2019 to have been released.  Further, an independent board committee (“IBC”) comprising all three independent non-executive directors was reconstituted in February 2019, and appointed legal advisers in relation to the forensic investigation (“Forensic Investigation”) of the Abnormal Transactions.  Those lawyers in turn engaged a forensic accountant (“Forensic Accountant”) to conduct the Forensic Investigation.

21.  On 20 September 2019, the Company announced the key preliminary findings of the Forensic Investigation.  The final report on the Forensic Investigation was submitted to the SEHK on 7 January 2020.  It identified internal control deficiencies and other audit irregularities and recommended remedial measures, which the Board subsequently resolved to take.

22.  The Company also took other steps, such as engaging an internal control adviser, and taking action to address the high risk deficiencies identified by that adviser and its recommendations.  The follow-up internal control review originally scheduled in January 2020 was substantially delayed because of lockdown measures and travel bans in response to the Covid-19 pandemic, but a follow-up review and final internal control review report was issued on 31 August 2020.

23.  Since the appointment of new auditors in April 2019, the Company has published: (a) on 11 October 2019, the annual results for the year ended 31 December 2018; (b) on 5 December 2019, the unaudited financial information for the six months ended 30 June 2019; and (c) on 31 December 2019, the unaudited financial information for the six months ended 30 June 2019.  Publication of audited financial information of the Group for the year ended 31 December 2019 was disrupted by the Covid-19 pandemic and subsequent lockdown measures and travel restrictions.  But on 31 March 2020, the Company published the unaudited financial information for the year ended 31 December 2019.

24.  The Company also says that despite significant challenges, the Group has continued to focus on its well-established products in key markets, and tactically maintained its relationship with key third-party brands.  It says the Group’s operation had gradually recovered from the liquidity crisis in 2018 and maintained a stable business operation throughout 2019.  Since the resumption of work and gradual relaxation of lockdown measures in March/April 2020, the Group has seen gradual recovery in business.

25.  The proposed Restructuring of the Group flows from the entering on 30 September 2019 of a non-legally binding memorandum of understanding on potential investment in the Company’s shares and participation in the Group affairs in relation to the reorganisation.  Due diligence by the Investor commenced in October 2019.  In short, after completion of the Restructuring, the general business model of the Restructured Group would remain largely unchanged, there would be an implemented debt restructuring, and there would be a subscription of new shares by the Investor, as well is an open offer to enable the existing shareholders to participate in the Restructuring.

26.  As previously indicated, a term sheet was entered into on 12 February 2020, and on 15 October 2020, the Company executed a legally binding restructuring agreement with the Investor.

27.  However, on 7 May 2020, the Listing Committee decided to cancel the Company’s listing, and refused an extension of time for resumption.  There followed the request for a review by the LRC.

28.  In its application, the Company rehearses some of the submissions made to the LRC, in particular as to how it submitted that it had satisfied various Resumption Conditions, and how there had been significant impact from the Covid-19 outbreak in meeting those various requirements.  There is no need for present purposes to rehearse those submissions at any length.

C.     The Decision

29.  The Decision of the LRC clearly contains significantly more material than that set out in the body of the Company’s application, which quotes only §§38-41 under the heading ‘Listing Review Committee’s views’.  In the light of various aspects of the proposed challenge to the Decision, the expression of those views needs properly to be considered in context.

30.  After an introductory section (§§1-8) dealing with the background facts, by reference to the Incident, the Abnormal Transactions, the suspension of trading and the Resumption Conditions, as well as subsequent key developments, the LRC set out (§§9-11) the Resumption Plan of the Company put forward by the Company on 24 December 2019, supplemented by the submission of 12 February 2020 and announcement of 18 February 2020.  The LRC then set out (§§12-17) the applicable Listing Rules and guidance before identifying (§§18-19) the Listing Committee decision.

31.  The LRC then set out in detail the submissions made to it by the Company (§§20-30) and by the Listing Division (§§31-37).

32.  The LRC specifically recorded the basis upon which the Company submitted that it had dealt with each of RC1 to RC9.  It also recorded that, in the written submission made by the Company dated 31 August 2020, the Company said it expected to fulfil all the resumption conditions/guidance by February 2021, whereas at the hearing (on 16 October 2020) the Company sought and asked for further time until September 2021.

33.  The LRC recorded the Listing Division’s response in respect of various of the Resumption Conditions, and the general submission that the Listing Division was not satisfied that the Company’s failure to fulfil all the resumption guidance by the resumption deadline could be attributable to Covid-19 as alleged, and that it considered it inappropriate to extend the resumption deadline as requested or at all.

34.  The explanation of the LRC’s views which followed (§§38-41) was as follows:

38. Trading had not resumed by 12 February 2020 or by the date of the hearing, so the Company’s listing could be cancelled under Rule 6.01A.

39. The Company had furthermore failed to fulfil all the resumption conditions weather as at the date of Listing Committee’s hearing of the date of this hearing.  In this regard, it was explicitly admitted by the Company in the course of its submissions (and in its PowerPoint presentation) during the hearing that the company had completed only five (the Listing Division disputing whether, apart from RC4, the other for RCs having been fulfilled) out of nine resumption conditions and had yet to: (1) publish its audited financial statements for FY2019 and address the audit modifications for its financial statements for FY2018 and FY2019, (2) complete the onshore bankruptcy administration proceedings and have the winding up petition against the Company withdrawn, and (3) appoint new directors upon completion of the Restructuring to demonstrate that there was no reasonable regulatory concern about management integrity.

40. Regarding the Company’s compliance with Rule 13.24, it remained a concern of the Listing Review Committee as to whether the Restructuring would enable the Company to re-comply with Rule 13.24.  In particular, the Listing Review Committee noted that the Restructured Group would only retain one main production facility in Wuhan and one bottled water production facility in Huzhou and a trading subsidiary in Shanghai to outsource production to factories in the Eastern China Region.  The Restructured Group would not include the subsidiaries in Shanghai and the Group would be operating under a new business model without the production facilities of the subsidiaries (thus the retained subsidiaries’ production capacity being significantly reduced). It was still unknown whether the Group’s operation of business under this new model would be viable and sustainable.  Further, notwithstanding the Company’s submission at the hearing that the Company had entered into a legally binding Restructuring Agreement, the Restructuring was subject to various conditions precedent, including shareholders’ approval, creditors’ approval, resumption of trading in the shares of the Company and their having no material adverse change to the Company’s position prior to completion (now expected to be in September 2021).  The successful completion of the Restructuring was still clouded with uncertainty.

41. On the question of whether or not to grant the Company further time to address and fulfil the resumption guidance and resumed trading, the Listing Review Committee noted the Company had failed to achieve various milestones set out in its written submissions (e.g. those listed out in paragraph 6.6 in the Company’s submission dated 31 August 2020) and based on the Company’s submissions at the hearing, many more months were required before the Restructuring could be completed.  In the Company’s submission of 31 August 2020, it had sought an extension of the remedial period to February 2021. At the hearing in October 2020, the Company sought a further extension of the deadline to resume trading to September 2021 (effectively a further 11 months from the date of the hearing).  The Listing Review Committee did not consider that such a long extension could be considered “short”, as contemplated by paragraph 19(b) of GL95-18.  Further, given the various issues (not being merely procedural in nature only) that remained to be addressed and resolved in order to fulfil the outstanding resumption conditions, the Listing Review Committee considered that the Company’s situation did not fall within the exceptional circumstances in paragraph 19 of GL95-18, and that the grant of an extension of the remedial period was not warranted.

35.  Hence, the LRC stated (§42) that it therefore decided to uphold the Listing Committee’s decision that the Company’s listing should be cancelled under Rule 6.01A.

D.     Grounds of Proposed Review

36.  So as to seek leave to challenge the Decision, the Company relies on four proposed grounds of review:

(1) the LRC failed to give adequate reasons for its Decision;

(2) the LRC failed to take into account irrelevant considerations;

(3) the LRC erred in law and/or unlawfully fettered its discretion;

(4) the LRC’s Decision was Wednesbury unreasonable and/or irrational.

37.  Each ground can be considered in turn.

E.     The Regulatory Framework

38.  But it is first appropriate to consider the relevant regulatory framework.  That framework cannot be a matter of any real controversy.

39.  The SEHK is a recognised exchange company under section 19 of the Securities and Futures Ordinance Cap 571 (“SFO”). Section 21 of the SFO imposes on the SEHK an overriding duty not only to ensure an orderly, informed and fair market, but also to act in the interest of the public, particularly the investigating public.  The interest of the public is to prevail when it conflicts with the interest of the recognised exchanged company.

40.  Section 23 of the SFO empowers the SEHK to have made the Listing Rules.

41.  Rule 6.01 of the Listing Rules materially provides that:

Listing is always granted subject to the condition that where the Exchange considers it necessary for the protection of the investor or the maintenance of an orderly market, it may at any time direct a trading halt or suspend dealings in any securities or cancel the listing of any securities in such circumstances and subject to such conditions as it thinks fit, whether requested by the issuer or not.  The Exchange may also do so where:

…

(3) the Exchange considers that the issuer does not carry on a business as required under rule 13.24; or

(4) the Exchange considers that the issuer or its business is no longer suitable for listing.

42.  Rule 6.01A(1) provides that:

Without prejudice to its power under rule 6.01, the Exchange may cancel the listing of any securities that have been suspended from trading for a continuous period of 18 months.

43.  Rule 13.24(1) provides that:

An issuer shall carry out, directly or indirectly, a business with a sufficient level of operations and assets of sufficient value to support its operations to warrant the continued listing of the issuer’s securities.

44.  The SEHK’s Guidance Letter HKEX-GL95-18 (“GL95-18”) gives further guidance to suspended issuers on the operation of the delisting rules, including as follows:

12. Under the Rules, the Exchange would cancel the listing of a long suspended issuer upon the expiry of the remedial period (prescribed or specific) if the issuer has not remedied the issues causing the suspension and re-complied with the Rules.  This remedial period sets a deadline referenced to the resolution of the relevant issues and resumption of trading, as opposed to submission of a resumption proposal as in the previous regime.

…

19. To ensure the effectiveness and credibility of the delisting framework and prevent undue delay of the delisting process, the Listing Committee may only extend the remedial period in exceptional circumstances.  It may do so where:

(a) an issuer has substantially implemented the steps that, it has shown with sufficient certainty, will lead to resumption of trading; but

(b) due to factors outside its control, it becomes unable to meet its planned timeframe and requires a short extension of time to finalise the matters.  The factors outside the issuer’s control are generally expected to be procedural in nature only.

This may happen where, for example, an A1 application has been approved by the Exchange but, due to a delay in the court hearing for approving a scheme of arrangement, the issuer requires additional time to implement the relevant transactions.  The Exchange envisages that if an extension of time is given on the expiry of the remedial period, the Listing Committee would not normally extend the remedial period for a second time.

45.  It is also not in dispute that a listed issuer may request the decision of the Listing Committee to be referred to the LRC for a further and final review.  Such review hearings are heard de novo, and the LRC will consider the decision of the previous decision making body and state the reasons for its own decision.  The LRC will also address the prior decision (and the basis therefor) in its own decision, whether it is upholding or overturning that prior decision.

F.     Ground 1: failure to give adequate reasons

46.  I accept that the benefits of imposing a duty on a decision maker to give reasons for the decision made are well-established. It imposes a desirable intellectual discipline and concentration on the relevant issues, demonstrates that the tribunal has carried out its task properly, promotes and enhances consistency in decision-making, and demonstrates to the community that the tribunal is functioning properly and so would engender public confidence: see, for example, Oriental Daily Publisher v Commissioner for Television and Entertainment Licensing Authority (1997-1998) 1 HKCFAR 279 at 290E-H.

47.  There is also a clear judicial trend towards an insistence on greater openness in decision-making, and greater recognition of a general duty for an administrative body to give reasons, unless there is a proper justification for not doing so.  The reasons ought to enable a reader to understand why the matter was decided as it was and what conclusions were reached on the principal important controversial issues.  This also enables a person adversely affected by a decision to know whether the decision-maker has addressed his grievance, and whether there may be any basis for challenging the decision.

48.  In this case, the Company suggests that the LRC reached the Decision essentially on two grounds: first, that the Company had failed to fulfil four of the Resumption Conditions (§39); second, that the successful completion of the Restructuring is clouded with uncertainty, together with the LRC’s concern as to whether the Restructuring would enable the Company to re-comply with Rule 13.24 (§40).  But, the Company submits that its principal contention was that it had substantially implemented the steps that would lead to resumption and that the non-fulfilment of any conditions was due to the unprecedented outbreak of Covid-19 and the consequential restrictive measures, which resulted in the serious delay.

49.  So, the Company asserts, the LRC failed to give adequate reasons for refusing to grant the Company further time to address the remaining Resumption Conditions.  This is said to be because:

(1) The purported reasons given by the LRC failed to show that the LRC had considered and addressed the principal contention.

(2) In particular, the LRC did not provide any reason on why the delay caused by the outbreak and the consequential lockdown measures, both of which were unprecedented in scale and in scope, would not amount to exceptional circumstances justifying the grant of further time for the Company to address and fulfil the remaining Resumption Conditions.

(3) Covid-19 was not even mentioned in the very brief reasons given by the LRC at §§38-41 of the Decision.  Therefore, the Company has no way of knowing (i) whether the LRC considered the issue of Covid-19, (ii) if it did, on what basis the LRC rejected the Company’s contentions about the delay, and (iii) whether there may be a basis for challenging the LRC’s decision to reject the Company’s contentions. 

50.  As previously intimated, this ground is based upon criticism which ignores the totality of the Decision outside of the chosen focus on only §§38-41.  Fairly read, it can be seen that the Decision in fact specifically addressed the Company’s principal contention relating to delays caused by the unexpected outbreak of Covid-19, as well as the Listing Division’s response to that argument.  The LRC also specifically referred to the slippage in timetable, and the Company’s failure to have met its own various milestone dates, leading to what it regarded as substantial necessary further delay.  The reasoning that such a further delay could not be considered “short”, and that the various issues remaining were not merely procedural in nature is express.  Added to the expressed concern that any grant of time might well not lead anywhere because of the remaining uncertainty over the restructuring, this is what led to the LRC’s conclusion that the Company’s situation did not fall within the exceptional circumstances in §19 of GL95-18.

51.  It seems to me that proposed Ground 1 is more a criticism of the merits of the decision, rather than any proper complaint as to adequacy of reasoning.  Ground 1 is not reasonably arguable.

G.     Ground 2: failure to take into account relevant considerations

52.  The requirement that a decision should take into account relevant matters, and if it fails to do so is liable to be set aside by the court, is well settled.  Of course, the relevancy of a particular consideration is a matter for the decision-maker, but the court will intervene to quash a decision if no reasonable decision-maker would have failed to take such a matter into account.

53.  The Company submits that, in reaching its Decision that no further time should be given to the Company to address the remaining Resumption Conditions, the LRC failed to take into account:

(1) The delay in fulfilling the remaining Resumption Conditions was due to the unprecedented pandemic and the consequential lockdown measures adopted by the PRC government.

(2) The Company has taken extensive remedial measures to resolve the issues giving rise to the suspension of trading of the Shares in the first place, with significant progress made in the recovery of its business performance since the Incident as well as in the Restructuring of the Group.

54.  The Company says those matters are, on the face of §19 of GL95-18, plainly material to the question of whether time should be extended.  But it says that it does not appear from the Decision (particularly at §41) that the LRC had taken those matters into account.

55.  Ground 2 also has no merit.  The express rehearsal by the LRC in its Decision of these very points made on behalf of the Company in its written and oral submissions clearly identifies that these matters were taken into account.  Again, focusing on only one paragraph (§41) of the Decision to seek to make good the suggestion that these points were not taken into account is an unfair and inappropriate ignoring of the remainder of the Decision.

H.     Ground 3: error of law and/or fettering of discretion

56.  The Company rightly accepts that it is legitimate for a decision-maker to whom a discretion has been entrusted to adopt a policy to guide his exercise and implementation of the discretion. But, the Company also points out that a misinterpretation or misapplication of a policy may render the decision flawed as if the policy had been overlooked and altogether ignored.  As to what policy means, its meaning can ordinarily be established by the court and the decision maker can be held to it.

57.  I also accept that a decision-maker must not maintain a policy so rigidly to affect a fettering of its discretion in individual cases.  Nor must the policy be blindly applied; the decision-maker must always be willing to listen to anyone with something new to say.

58.  Here, the Company submits that it is plain (focusing again particularly on §41) that in its Decision the LRC did not seriously consider the special circumstances inherent in the Company’s application for extension of time.  Where the crux of the LRC’s reasoning was that the extension sought by the Company could not be considered “short” and that the issues remaining to be addressed were not merely procedural in nature, the LRC in effect found that the circumstances of the case did not fall within the four corners of the narrow confines of §19 of GL95-18, so that the LRC proceeded to refuse the application for further time without considering whether there were other exceptional circumstances.

59.  The Company simply repeats the same circumstances, namely the unprecedented outbreak of Covid-19 and its consequences, as well as the taking of extensive remedial measures fulfilling a substantial part of the Resumption conditions.

60.  But that repetition merely identifies that Ground 3 is really only a slightly different way of expressing the previous two Grounds.  In my view, there was clearly no misapplication of the policy, nor was there any failure to consider the overall circumstances in deciding whether or not they were exceptional so as to justify the grant of extension of time.  Nor can it reasonably arguably be said that the LRC unlawfully fettered its discretion by adopting a rigid policy precluding it from taking into account the individual circumstances.  The LRC took into account the specific individual circumstances relied upon by the Company.

I.     Ground 4: arbitrariness, irrationality and/or Wednesbury unreasonableness

61.  The Company accepts that a high threshold needs to be cleared before a Wednesbury challenge can succeed.  The decision maker needs to have acted so unreasonably that no authority properly directing itself on the relevant law and acting reasonably could have reached that decision.  Nevertheless, as I accept is correct, when dealing with a Wednesbury challenge the court must still examine the reasons and justifications relied upon to see whether they are capable of supporting the conclusion: see Li Chiu Wah Joseph v Hong Kong Society of Notaries [2020] HKCFI 1789 at §86.

62.  The Company also relies on the idea that the Wednesbury principles involves a sliding scale of review, more or less intrusive according to the nature and gravity of what is at stake: see, for example, R v Department of Education and Employment, ex p Begbie [2000] 1 WLR 1115 at 1130B.

63.  The Company submits that the Decision has a significant adverse impact on the Company, its creditors and the public investors.  In particular, it states that the immediate delisting of the Company will adversely affect its future business operations, as well as jeopardising its previous effort in restructuring the Company, as the Investor would likely withdraw its investment if the Company is delisted by the SEHK. Therefore, the Court should assess the rationality and reasonableness of the Decision with an increased level of scrutiny.

64.  Essentially, the Company then repeats the same two main points that (1) extensive steps to remedy the issues had already been taken, and (2) delay had been caused in fulfilling the remaining Resumption Conditions by the unprecedented outbreak of Covid-19 and its consequences.  So, the Company submits that an increased level of scrutiny should lead to the conclusion that a decision immediately to delist was irrational and/or Wednesbury unreasonable and contrary to the interests of public investors.

65.  I do not think Ground 4 is reasonably arguable.  Irrespective of the level of scrutiny to be applied to the Decision, it does not seem to me that the Decision was arguably irrational or Wednesbury unreasonable.  Nor can it reasonably be argued that a decision to delist the Company was, in the circumstances, contrary to the interests of public investors.  As the Decision identifies, despite the significant passage of time, and even taking into account the circumstances of Covid-19 and its consequences, there remained significant uncertainty as to whether the Restructuring would enable the Company to re-comply with the Listing Rules.  It was also pointed out that a number of the aspects of the restructuring were subject to various conditions precedent, some of which were in effect subject to other conditions having been previously satisfied.  One obvious example is that the Restructuring was subject to the resumption of trading in the Shares, but the resumption of trading in the Shares was itself sought based upon the Restructuring having been satisfactorily and fully completed.

66.  It does not seem to me to be reasonably arguable to suggest that the LRC acted irrationally or Wednesbury unreasonably in reaching its conclusion that the Company’s situation did not fall within the exceptional circumstances in §19 of GL95-18 as might warrant the grant of an extension of the remedial period.

J.     Result

67.  In the circumstances, there being insufficient merit in any of the proposed Grounds for review, I dismiss the application for leave to apply for judicial review.

68.  I do not think that I would, in the circumstances of this case, be assisted by any oral hearing, and I exercise my discretion to dismiss the application on the papers.