CHINA TRENDS HOLDINGS v. THE STOCK EXCHANGE OF HONG KONG

HCAL 1158/2021

[2021] HKCFI 2427

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 1158 OF 2021

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D E C I S I O N

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A.   Introduction

1.  The Applicant is a listed issuer on the GEM Board of the Stock Exchange of Hong Kong (“Exchange”), the Putative Respondent to these proceedings.  However, the Applicant’s shares have been suspended from trading for some time, and the Exchange takes the view that the Applicant has failed to comply with the conditions for resumption of trading, so that the Applicant should be delisted.

2.  Indeed, it is relevant to note at once that the Applicant appealed the decision that it shares be suspended from trading and, when that appeal failed, then made an application for leave to apply for judicial review.  Whilst leave to apply was granted, the substantive application for review was dismissed at first instance, and that dismissal was affirmed by the Court of Appeal.

3.  The relevant decision the subject matter of these proceedings is that of the GEM Listing (Review) Committee (“Review Committee”) of the Exchange dated 10 August 2021 (“Review Decision”), upholding the GEM Listing Committee’s decision made on 16 April 2021 (“GLC Delisting Decision”) to delist the trading of the Applicant’s shares.

4.  The Exchange has stated that it will issue an announcement on 19 August 2021, stating that 20 August 2021 will be the last day of the Applicant’s shares being listed.

5.  The Applicant has on 16 August 2021 filed a Notice of Application for Leave to Apply for Judicial Review (“Form 86”), seeking to challenge the Review Decision.

6.  The Applicant has also filed a summons dated 16 August 2021 seeking an order that the Exchange be restrained from (a) delisting the trading of the Applicant’s shares on the GEM Board, and (b) otherwise acting on the Review Decision until (i) 7 working days after determination of the application for leave for judicial review if leave is refused, or (ii) if leave is granted, 7 working days after the determination of the judicial review, if the judicial review is dismissed.

7.  The Injunction Summons also seeks, further or alternatively, an interim injunction in the same terms pending the determination of the Injunction Summons.  Therefore, at this hearing fixed by my direction as a matter of urgency, the Applicant seeks an ‘interim interim’ injunction.  The suggestion is that the Injunction Summons can then be adjourned to another substantive hearing, or be heard together with the underlying application for leave to apply for judicial review, on an early date.

8.  The Application is opposed by the Exchange.  By way of reference to the bigger picture, the Exchange points out that this application is the 8^th attempt by the Applicant to oppose decisions of the Exchange to suspend trading in its shares and/or to cancel the listing of it shares.  The Applicant had five opportunities to argue against the suspension of trading (three times before the Exchange and twice in Court), and another two times before the Exchange to argue against the cancellation of listing.

9.  The Exchange says that the Applicant cannot show that any of its proposed grounds of review are reasonably arguable, let alone satisfying the merits threshold of, as it is sometimes put, a strong prima facie case for obtaining interim relief in a public challenge.  So, the Exchange says, the application for leave to apply for judicial review can and should be dismissed at this hearing.

10.  Indeed, it seemed to me to be possible and appropriate to treat this hearing not just as an application for an ‘interim interim’ injunction pending an application for leave to apply for judicial review, but as constituting both an oral hearing of the application for leave and, if still relevant, an application for an injunction pending the substantive application for judicial review.  With the agreement of Counsel that that was potentially a course open to the Court, that is what I have done.

B.   Background

11.  On 7 February 2002, the Applicant was incorporated with limited liability under the laws of the Cayman Islands.  On 31 July 2002, the Applicant was listed on the GEM Board, with stock code 8171.

12.  The Applicant and its subsidiaries (together, “Group”) have two principal areas of business: (1) trading in electronic technology and related products (“Trading Business”) and (2) media and e-commerce platforms and media advertising services (“Media Business”).

13.  Trading in the Applicant’s shares has been suspended since 11 March 2020, following a decision of the Review Committee (“Suspension Decision”) that the Applicant had failed to maintain a sufficient level of operations or have tangible assets of sufficient value and/or intangible assets for which a sufficient potential value can be demonstrated under GEM Rule 17.26 to warrant the continued listing of it shares.

14.  The Suspension Decision was the culmination of events flowing from an original letter dated as long ago as 20 March 2019, in which the Exchange’s Listing Department expressed its preliminary view that the Company might have failed to maintain sufficient operations or assets as required under Rule 17.26.  The expressed concern was that both the Trading Business and the Media Business were of no substance and not viable and sustainable as (i) the profit margin of the Trading Business, which operated on an indent basis with little value added, was thin and the profit generated was not sufficient to cover the Applicant’s corporate expenses, and (ii) none of the Applicant’s business plans for the Media Business since 2009 had materialised.

15.  In the Suspension Decision, the Review Committee noted that:

(1)  With regard to its scale of operations, the Applicant had over the years only generated revenue from the Trading Business the scale of which was limited, with recorded net losses or limited profit (excluding non-recurring expenses) over the years.  The Media Business on the other hand had generated no revenue.  The situation did not appear to be a temporary downturn or decline.

(2)  The Applicant’s level of assets also might not enable it to carry out businesses with sufficient level of operations to justify the continued listing of its shares.

(3)  The Review Committee had considered the Applicant’s submission that (i) it had conducted the Trading Business for more than 10 years without the Exchange raising any issue, and (ii) its financial performance outperformed many GEM listed issuers and it was operating without any debt.  However, the test under Rule 17.26 was a qualitative one and taking into account the specific facts and circumstances of the case, the Review Committee considered that the Applicant had failed to demonstrate that it had a viable and sustainable business or sufficient assets that enable it to have a viable and sustainable business.

16.  The Applicant applied for judicial review of the Suspension Decision.  Following a rolled-up hearing, Chow J (as Chow JA then was) gave a Judgment dated 8 December 2020 [2020] HKCFI 3045. He found that the intended application for judicial review was reasonably arguable and had a realistic prospect of success, but that the substantive application should be dismissed upon full consideration of the merits.

17.  In dismissing the substantive application, Chow J held:

(1)  The two requirements under the (then applicable version of) Rule 17.26 of “a sufficient level of operations” or “tangible assets of sufficient value and/or intangible assets for which a sufficient potential value can be demonstrated to the Exchange” were to be read disjunctively. The Review Committee had considered both requirements and taken the view that the Applicant failed to satisfy either.

(2)  The Applicant’s business was clearly not viable or sustainable in light of, amongst other things, the small-scale and low profitability of the Trading Business.

(3)  The Review Committee’s qualitative assessment on the viability or sustainability of the Applicant’s business was a professional one which it was entitled to take, and there was no valid or sufficient basis for the Court to interfere with that assessment.

(4)  With regard to the “failure to take into account relevant considerations” ground, the Applicant had sought to repeat arguments already advanced before the Review Committee as regards its financial position by reference to its “assets”, “revenue” and “profit” in support of the contention that the Review Committee’s decision was Wednesbury unreasonable.  This was an impermissible attempt to turn the judicial review into a merits review, and was unmeritorious in any event.

(5)  The procedural grounds of legitimate expectation and inadequate reasons were similarly unmeritorious.

18.  The Applicant appealed to the Court of Appeal. By its judgment dated 8 July 2021 [2021] HKCA 980, the Court of Appeal (Lam VP, Au and G Lam JJA) dismissed the appeal.  In doing so, it noted that (1) the continued listing of a company without a viable and sustainable business of substance would attract speculation on their possible acquisitions in the future and lead to opportunities for market manipulation, insider trading and unnecessary volatility in the market which are not in the interest of the investing public, and (2) that is obviously a different consideration from the financial health of the company in terms of its solvency since a ‘blue sky company’ can be financially stable and solvent.

19.  The Court of Appeal also emphasised that questions of viability and sustainability are to be examined in the context of a qualitative assessment as to whether an issuer has a viable and sustainable business which warrants the continued listing of its shares, and that qualitative assessment is a matter of professional judgment for the members of the Listing Division, the Listing Committee and the Review Committee. Therefore, in the absence of any error of law or failing in taking into account of relevant matters or taking irrelevant matters into account, the court should not interfere with such professional judgments.  Further, when conducting a qualitative assessment, it is inherent in such an exercise that it is inappropriate to single out one or two aspects pertaining to the finance of the company and rigidly applying some qualitative benchmarks as conclusive.

20.  By Notice of Motion dated 26 July 2021, the Applicant has applied for leave to appeal to the Court of Final Appeal. The Notice of Motion puts forwards two proposed questions, said to be of great general public importance.  As I understand it, no date has yet been fixed for the hearing of that application before the Court of Appeal.  If leave to appeal is refused by that Court, I anticipate that a renewed application would be made to the Appellate Committee of the Court of Final Appeal.

21.  In the meantime, on 5 May 2020, the Listing Division issued a letter to set out resumption guidance for the Applicant, namely that the Applicant should “demonstrate its compliance with Rule 17.26”.  The resumption deadline was 10 March 2021.  On 12 April 2021, the Listing Division informed the Applicant that it would recommend the GEM Listing Committee to cancel the Applicant’s listing at its regular meeting on 15 April 2021, because there had not been compliance with the resumption guidance before the expiry of the remedial period.  On 16 April 2021, the Applicant was informed of the GLC Delisting Decision.

22.  The Applicant appealed from the GLC Delisting Decision to the Review Committee.  On 10 August 2021, the Review Committee made its decision (ie. the Review Decision), upholding the GLC Delisting Decision to delist the trading of the applicant’s shares under GEM Rules 9.14A and/or 9.14.

C.   The Review Decision

23.  The Review Decision includes the following paragraphs under the section headings shown:

Listing Review Committee’s views

29.  The Listing Review Committee noted that it was essentially tasked with considering, on the basis of all the materials before it including oral submissions made, whether the Company had demonstrated it carried out a “business with sufficient level of operations and assets of sufficient value to support its operations” under GEM Rule 17.26 so as to warrant the continued listing of the Company’s shares.

30.  The Listing Review Committee noted that the relevant note to GEM Rule 17.26 sets out that compliance with GEM Rule 17.26(1) is a qualitative test and gives guidance on how it should be applied.  In this regard it was important for the Listing Review Committee to assess and consider the Company’s position based on the specific facts and circumstances of the Company and its business. As part of this, the Listing Review Committee observed that it needed to consider whether the Company had demonstrated a sufficient level of operations in the context of the Company’s own business.  This included appropriate consideration of, among other factors, the business model, operating scale and history, source of funding, size and diversity of customers and suppliers, profit margins and general value added.  The Listing Review Committee did not consider the Company’s comparisons with other GEM listed issuers to be pertinent given the nature of the qualitative test which needed to be applied based on the specific facts and circumstances of the Company itself.

31.  In light of the parties submissions and other information, the Listing Review Committee came to the following views concerning the Company’s businesses:-

(i)  With respect to its Trading Business, whilst the Company had been in business for 10 years, in 2020 it was clear that approximately 84% of its sales were to a single customer and that 83% of its products came from a single supplier.  The Company therefore had a very concentrated business.

(ii)  The Company was to a large extent dealing with Cisco branded products in its Trading Business.  The Company had not demonstrated to the Listing Review Committee that it was adding overall value (such as for example design input or production engineering) in its role as a supply chain company in its Trading Business.  The Listing Review Committee took note that the Company’s profit margin was low being only 2.9% in FY2019 and FY2020.  The Listing Review Committee also noted that the Company’s profits had not been sufficient to cover the Company’s corporate expenses in FY2019 and FY2020.  In addition, the Company had suffered a loss after tax of HK$3.4 million in the first quarter of 2021 (the Company stated this was due to the incurrence of certain litigation expenses) and had not met its forecast.  The Listing Review Committee noted that the Company had asserted it was adding value in terms of the financing service and the bulk buying capability it was offering, however the Listing Review Committee considered that higher profit margins would not be feasible or achievable given the overall business model of the Company as presented.  The Listing Review Committee considered the Company was effectively operating and trading on an indent basis.

(iii)  The Listing Review Committee noted that as at 31 December 2021, the Company had total assets of HK$120.7 million and did not carry debt.  The Company had accordingly argued that it clearly did have sufficient assets for the purposes of GEM Rule 17.26 and the Company also pointed out the Group had substantial revenue of not less that HK$150 million.  However, the Listing Review Committee noted that its assessment of the Company’s position under GEM Rule 17.26 needed to be made by reference to the particular operation and trading model of the Company.  In this instance the Company continued to derive very low profit margins from its Trading Business and had not explained to be Listing Review Committee’s satisfaction how it might improve its position in the future.  Even on the assumption that the Company could achieve a full utilization of its cash and other assets or obtain financing to scale up its business, this would still not be satisfactory given the margins involved and very large scale that would be required.  The Listing Review Committee also noted that a significant portion of the Company’s assets were in the nature of receivables which might not be utilized or allow financing efficiently.

(iv)  The Listing Review Committee considered that the various steps taken by Company including its cooperation agreements with Innovation Future and China Express, and its recent initiative to secure a reverse takeover of a Main Board company had not demonstrated to the Listing Review Committee’s satisfaction that the Company would be able to achieve improvement in its Trading Business with any certainty in the future.  Overall, in this regard the Listing Review Committee also did not consider that the Company’s situation fell within exceptional circumstances such that an extension to the remedial period would be warranted.

(v)  The Listing Review Committee noted that the Company’s Media Business was not contributing to the Company’s financial performance and that no revenue had been generated from the Media Business for the year ended 31 December 2020 as confirmed by the Company.

32.  The Listing Review Committee noted that the Company stated that it had been shocked when it had originally received the Listing Division’s decision on 10 June 2019 to suspend its shares on the basis of GEM Rule 17.26.  However the Listing Review Committee also noted that the Company had had a period of over two years since then, but had failed to achieve any noticeable improvement in the position of its businesses in that time.  The Listing Review Committee also considered that it was incumbent upon listed companies and their directors to keep abreast of changes to the GEM Rules and their application.  There had been a consultation concerning the application of GEM Rule 17.26 (and MB Rule 13.24) followed by a formal guidance letter issued in June 2018, and the modified rule together with its detailed note was introduced in October 2019.

33.  In view of all the matters outlined above, Listing Review Committee came to the view that the Company had failed to demonstrate compliance with the provisions of GEM Rule 17.26 so as to warrant the continued listing of its shares.

Decision

34.  The Listing Review Committee considered that given the Company’s failure to resume trading by 10 March 2021, and the Company’s failure to comply with GEM Rule 17.26 that the Company should be delisted under GEM Rule 9.14A and/or 9.14.  In so doing the Listing Review Committee upheld the GEM The Listing Committee’s Decision.

24.  Naturally, as §29 says, the focus of the decision was whether or not the Applicant had demonstrated compliance with the resumption guideline that it showed a business with sufficient level of operations and assets of sufficient value to support its operations under GEM Rule 17.26 so as to warrant the continued listing of the shares.

25.  But the Review Decision is not limited to the paragraphs quoted above.  Amongst other things, there is a recitation of parts of the submissions made by the parties in writing and at the hearing, and it seems to me that the choice of which parts to recite would indicate, amongst other things, those submissions which the Review Committee plainly had firmly in mind.  The transcript of the hearing before the Review Committee is also available to assist with an understanding of the matters specifically canvassed orally in general submissions, and in answer to specific questions raised by members of the Review Committee.

D.   The Intended Challenge

26.  The Form 86 puts forward three proposed grounds for judicial review, headed as follows:

(1)  Ground 1: Illegality and/or the failure to ask the right question;

(2)  Ground 2: Wednesbury unreasonable; took into account irrelevant factors and failed to take into account relevant factors; inadequate reasons;

(3)  Ground 3: Illegality and/or error of fact and/or ultra vires.

27.  Ground 2 in essence repeats or incorporates by reference what is set out in Ground 1, and contends that the Review Decision was Wednesbury unreasonable.  Ground 3 suggests that the Review Decision to cancel the listing status was premised on the Applicant being suspended from trading, so that if the Applicant eventually succeeds in its intended final appeal in the other judicial review action, the Review Decision would be based on an error of fact.

28.  For present purposes, the Applicant accepts that Grounds 1 and 3 are premised upon the Applicant successfully overturning the Court of Appeal’s Judgment on the previous application seeking to challenge the Suspension Decision.  Accordingly, for the purposes of the injunction application, the Applicant relies solely on Ground 2.

29.  In passing, I would note that Ground 1 is set out at some length, over 8 pages of the Form 86, in 30 closely-typed paragraphs.  Those paragraphs are split into sections headed:

(1)  ‘The right question to be asked’ (4 paragraphs);

(2)  ‘On the facts, viable and sustainable business: The Trading Business’ (8 paragraphs);

(3)  ‘New contracts showing a viable and sustainable business’ (6 paragraphs);

(4)  ‘Sufficient assets and operation’ (6 paragraphs);

(5)  ‘Not an extreme case’ (4 paragraphs); and

(6)  ‘The Review Committee applied the wrong test and asked the wrong question; other failure to take into account relevant factors and wrongly considered irrelevant factors or questions’ (2 lengthy paragraphs with numerous sub- paragraphs).

30.  Ground 1 (and through incorporation by reference, Ground 2) also contains numerous references to detailed parts of the evidence, together with forensic tables.  It might be thought that the drafting of Ground 1 leaves little if anything else to be said in any subsequent written or oral submissions.  It can also be noted that Ground 1 commences only on page 13 of the Form 86, with the previous pages already having set out at length the factual background, the content of the decision under review, and the legal/regulatory context.

31.  Therefore, this is perhaps an occasion on which to remind applicants for judicial review of the need for appropriate procedural rigour in judicial review cases, including in the drafting of the Form 86.

32.  As was recently noted in a postscript to a decision of the Court of Appeal in England – see Dolan & Ors, R (On the Application of) v Secretary of State for Health and Social Care [2020] EWCA 1605 – there seems to have developed a culture in the context of judicial review proceedings for there to be excessive prolixity and complexity in what are supposed to be concise grounds for judicial review.  As often as not, excessively long documents serve to conceal rather than illuminate the essence of the case being advanced.

33.  I agree.  Further, excessively long applications for leave to apply for judicial review make the task of the court more difficult, rather than easier, and they are wasteful of costs as well as court time.

34.  Yet further, as in this case, numerous and lengthy references to the evidence placed before the maker of the decision under review are likely implicitly (if unintentionally) to suggest that the proposed challenge is more to the merits of the decision, rather than to any illegalities or irregularities in the decision-making process.

E.   Applicable Principles

35.  The principles governing the grant of interim relief in public law cases are well-established.  For example, they were summarised in Re Leung Chung Hang Sixtus [2018] 5 HKC 138 at §§12-14.

36.  The principles do not need to be set out in any great length for present purposes.  In essence, the well-known American Cyanamid principles are applicable, subject to necessary modifications to take account of the public law context.  For example, an applicant for interim relief in public law cases is required to demonstrate that he has a strong prima facie case, as that is a significant factor in the balance of considerations for or against the grant of an injunction.

37.  Further, when assessing the balance of convenience, the court takes a wider view than just the interests of the immediate parties to the application, and must take into account the public interest in the balancing exercise.  The degree of importance that may be attached to the element of public interest would depend on the nature of the decision under challenge.

38.  As always, the ultimate test is for the court to take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense of granting an injunction to a party who fails to establish his right at the trial or substantive hearing (or would fail if there was a trial or substantive hearing), or alternatively in failing to grant an injunction to a party who succeeds (or who would succeed) at the trial or substantive hearing.  Of course, each case will also turn on its own particular set of circumstances.

39.  It is further relevant to note that it will only be in exceptional circumstances that interim relief would be granted before the grant of leave to apply for judicial review has been obtained.

40.  When the proposed injunctive relief would have the effect of stalling or going in a contrary direction to what the primary authority in a given regulatory domain has established in good faith based on its assessment of the public interest, the court will be exceptionally slow to intervene by way of interim relief: see Ng Wing Hung v The Council of the Law Society of Hong Kong [2021] HKCFI 341 at §§14-15.

41.  In the particular context of an injunction to restrain the Exchange from delisting an issuer, reference can be made to my decision in Cai Zhenrong v SEHK [2021] HKCFI 2202, and the subsequent decision of Kwan VP in the same case [2021] HKCA 1179.

42.  In the latter decision, Kwan VP accepted the need first to be satisfied of the appropriate threshold merits, in that case that there was an appeal with reasonable grounds of appeal with a real prospect of success.  Then there was the need to consider the balance of convenience.  As she put it:

If the risk of the Court of Appeal not been able to do justice between the parties if the injunction is wrongly refused is lower than the risk of injustice if the injunction is wrongly granted, the court should refuse to grant an injunction.

43.  Kwan VP also agreed with my own assessment of the lower risk of injustice if the injunction were to be wrongly refused in that case.  She pointed out that it is insufficient merely to assert that the appeal would be rendered nugatory if no injunction is granted and the company is delisted.  If it is contended that irreparable harm would likely be occasioned as a result of the delisting, this needs to be analysed properly, to whom would such harm be brought, and proper evidence on the impact of the delisting should be adduced.

44.  Though with the necessary modifications to take account of the fact that this particular application involves a proposed first instance challenge, rather than an appeal to the Court of Appeal, the same general principles can be applied.

F.   The Merits

45.  For the purposes of this application, Mr José Maurellet SC, leading Mr Tom Ng, assumes the correctness of the Court of Appeal’s decision in the previous challenge to the Suspension Decision, which focused on the interpretation of an older version of Rule 17.26.

46.  But he submits that, even on the basis and approach adopted by the Court of Appeal and giving full weight to the professional judgment of the Exchange and the Review Committee, there is nonetheless a good arguable case that there has been a “failure in taking into account of relevant matters or taking irrelevant matters into account”, and that the present case is not an extreme case warranting delisting.

47.  The submission is based on a number of arguments:

(1)  First, the Exchange failed to take into account the various new agreements entered into by the Group.  Mr Maurellet also suggests it should be noted that one of the agreements relates to the Media Business and not the Trading Business, and the fact that the Group was able to enter into new agreements is “arguably relevant” to the viability and sustainability of the business.

(2)  Second, there has been a failure to take into account the standby facility provided by substantial shareholders of the Applicant.  Mr Maurellet says those shareholders are able to provide a standby facility, and on 25 May 2021 issued a consent letter to the Applicant in relation to the provision of the standby facility in the principal amount of HK$100 million.  Whilst the Applicant recognises the Exchange’s guidance, which suggest that a company may not have a viable business if there is “material reliance” on the financial position of its controlling shareholder, Mr Maurellet submits that is not the case here, as the standby facility has not been invoked.

(3)  Third, there is a failure to recognise that part of the expenses was non-recurring, leading the Review Committee wrongly to place weight on the fact that the profits had been insufficient to cover the corporate expenses in FY2019 and FY2020.  In fact, the financial performance of the Trading Business has been on an upward trend.  Excluding non-recurring expenses mainly attributable to legal fees relating to certain litigation and the professional fees relating to resumption and the judicial review, there were adjusted net profits, the Group remained profitable in 2018 to 2020, and the profitability of the Group also improved.

48.  Mr Maurellet submits that all those matters must be relevant to the viability and sustainability of the business, and the sufficiency of the Applicant’s operation.

49.  Further, he submits that the Exchange failed to give adequate consideration to the various new agreements and to whether the profits were sufficient to cover the expenses, when the relevance of those factors cannot be seriously disputed.

50.  Mr Maurellet says that the Applicant fully recognises that there are a number of authorities to the effect that the Court would usually defer to the Exchange’s qualitative assessment, including recent decisions of my own.  But he says that the Court of Appeal recognised in its decision relating to the challenge to the Suspension Decision that there would be scope for judicial intervention if there was a failure in taking account of relevant matters or taking irrelevant matters into account.

51.  In response, Mr Jin Pao SC, leading Mr Martin Ho, submits that the Applicant is now effectively seeking to re-argue the very same points (both factual and legal) as were advanced before and roundly rejected by Chow J and the Court of Appeal in the previous review proceedings challenging the Suspension Decision.

52.  Moreover, Mr Pao submits that the suggestion that the Review Committee was unaware of the three factors now put forward by the Applicant, or failed to take them into account, is plainly wrong and unarguable.  He points out that:

(1)  The Review Committee expressly took into account the new contracts entered into by the Group and the recent initiative to secure a reverse takeover of a Main Board company, but was not satisfied that those agreements or initiative would enable the Applicant to achieve improvement in its Trading Business with any certainty in the future.

(2)  There was express reference to the standby facility, but against a focus on the Applicant’s failure to demonstrate a sufficient level of operations to warrant continued listing of it shares, the possibility of a substantial loan would not alter the analysis in terms of level of operations.

(3)  The Review Committee was clearly aware of the non-recurring expenses point, because it referred to the adjusted net profit figures, and its statement was factually accurate.  What weight to give was a matter for the Review Committee.  Further, the conclusion that Rule 17.26 had not been complied with was upheld by Chow J and by the Court of Appeal.

53.  I agree with those points, and I do not accept Mr Maurellet’s oral submission that §31(4) of the Review decision should be properly read in context as containing only a conclusion, without reasoning or analysis.  That does not seem to me to be a fair criticism of the Review Decision.

54.  Mr Pao also submits that this is a case clearly falling within the professional judgment of the Exchange, as was also made clear by the Court of Appeal in the context of the challenge to the Suspension Decision.

55.  As to the criticism that the Review Committee did not give adequate reasons – to be fair, a point only faintly put by Mr Maurellet – I see no merit in that whatsoever.  His second argument is to an extent a criticism of the reasoning, because whilst accepting there was express reference in the Review Decision at §18 to the submissions making the relevant point, Mr Maurellet says that there is little in the analysis paragraphs at §§31-32.  But, it seems to me that there were full written reasons, and the Applicant cannot be in any doubt as to the reasoning behind the Review Decision.

56.  As to the other points, Mr Pao submits that it is inappropriate for the Applicant now to invite this Court to engage with a collateral challenge to the determinations of the Court of Appeal in the previous review proceedings relating to the Suspension Decision.  That is particularly so, since the matter is currently the subject of an extant application by the Applicant for leave to appeal.

57.  Indeed, the Court of Appeal’s decision seems to me to have two effects, each of which is fatal to the Applicant’s desire to argue either Ground 1 or Ground 3.  First, unless and until the Court of Appeal decision is overturned, it is binding on the Applicant, and indeed on this Court.  Second, the Applicant in effect has an alternative remedy, and is pursuing that alternate remedy.

58.  In short, Ground 1 and Ground 3 are wholly unarguable, and I do not think that Ground 2 is reasonably arguable with any real prospect of success.

G.   Balance of Convenience

59.  As to balance of convenience, Mr Maurellet accepts – no doubt in the light of my comments in the Cai case, which were upheld by Kwan VP – that there may be some prejudice to the Exchange, in delaying the delisting process which would be contrary to the policy of the Exchange to create a fixed deadline for resumption of trading to ensure that listed companies whose shares have been suspended from trading for a lengthy period should have the listing cancelled, and where an interim injunction would have an adverse impact on the effectiveness of the delisting regime, as well as the reputation of the Hong Kong stock markets.

60.  Mr Maurellet also accepts that it is not sufficient merely to assert that the intended application will be rendered nugatory if no injunction is granted and the Applicant is delisted.  But he submits that, if an injunction were refused, then the Applicant potentially cannot meaningfully apply for any judicial review of the Review Decision, or will suffer the delisting for a period of time even if it were later decided that the Review Decision should be quashed.  Further, he says the Applicant’s evidence is that delisting “may” lead to tangible financial harm.  However, I do not think that evidence is of any real weight.  It is essentially little more than vague assertion, and does not meet the need for proper analysis on the impact of delisting.

61.  Further, the Applicant’s only evidence is from a company secretary.  But, Mr Maurellet makes the general point – which he says is based on logic – that delisting will have an adverse effect on a company and its shareholders (at least the public shareholders).  That is because of the two ways to raise capital, being through debt or equity, any delisting would remove the ability to obtain public equity, or at least reduce the size of the ‘pool’ of people from whom equity financing might be raised. Further, public shareholders will themselves be prejudiced through losing the only practical means for them to dispose of their shares.

62.  As to the first point, leaving aside whether the point does logically follow, it seems of little relevance in this case where the share price has been very low, and where there was very low trading volume.  As to the second point, it is not the delisting itself which might deprive shareholders of the ability to dispose of their shares, where there has been a lengthy period of suspension of trading already imposed (and where the numerous challenges to that suspension have been unsuccessful).  There is also the point, which is an echo of the one I made in the Cai injunction decision at §§39-40, that any investment in shares in a listed company bears a risk, including the potential that the value of the shares can go down as well as up, and value might go down for a variety of reasons including that the company is unable to comply within the remedial period with any resumption guidance or conditions set so as to permit resumption of trading in its shares, when all listing comes with conditions and possibilities identified in the Listing Rules.

63.  It is also argued that this is not an injunction in aid of an appeal after the CFI has dismissed the application for leave, unlike the Cai case.  But I agree with Mr Pao that that is a ‘truistic’ submission, making a distinction without a difference.  I do not think the particular timing of the application for injunctive relief should or does fundamentally alter the approach in evaluating the balance of convenience of the injunction sought.

64.  Further, Mr Maurellet says there is no conceivable material prejudice which could arise for the Exchange in continuing the status quo which has been in place since March 2020.  But that submission is, with respect, of the kind which Kwan VP said need only be stated to be rejected.  Indeed, it also seems to me to be the very opposite of the point which Mr Maurellet has elsewhere accepted, namely that there is prejudice in delay to delisting after the failure to meet resumption compliance within the required remedial period.

65.  The Applicant has already availed itself of all avenues of challenge against the decision to suspend its shares, all unsuccessful.  The Applicant has also twice challenged the decision to delist its shares, both unsuccessful.  The Exchange’s concern was raised as long ago as March 2019, and the Applicant’s shares have been suspended since March 2020. Indeed, even earlier, in January 2019, the Exchange had written to the Applicant noting that its share price had been trading at HK$0.01 since mid-September 2018.  Even as at August 2021, the Applicant has been unable to demonstrate to the Exchange that it has complied with the resumption guidance.

66.  Though I note the point about whether it is practically possible simply to ‘re-list’ following a delisting, it must be correct that it would always remain open for the Applicant to apply for a fresh, renewed listing if it felt that it was able to meet the appropriate requirements.  Of course, if it did not feel it was able to meet the appropriate requirements, when the Exchange’s clear view is that it does not currently meet those requirements, it is difficult to see why it should continue to be listed now.

67.  Therefore, even if there were sufficient merits, I think the balance of convenience points firmly against the grant of an injunction.

H.   Result

68.  In the circumstances where there are no merits on either Ground 1 or Ground 3, and I take the view that Ground 2 is not reasonably arguable with real prospects of success.  It follows that the application for leave to apply for judicial review is dismissed.

69.  It also follows that any application for an injunction is bound to fail, and I dismiss that application.

[discussion on costs]

I.   Costs

70.  As to costs, I see no reason why costs should not follow the event.  Therefore, I order the Applicant to pay the Exchange’s costs, with certificate for two Counsel, to be summarily assessed and be payable forthwith.

71.  Summary assessment of costs will be performed by me on the papers.  The Exchange shall file its Statement of Costs for Summary Assessment on or before 27 August 2021.  The Applicant will file any Objections to that Statement of Costs on or before 3 September 2021. Unless I subsequently direct otherwise, there will be no further provision of materials relating to the assessment of costs, and I will simply go on to make the assessment.