CHINA TRENDS HOLDINGS LTD v. THE STOCK EXCHANGE OF HONG KONG LTD

CACV 425/2021, [2023] HKCA 705

On Appeal From [2021] HKCFI 2427

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 425 OF 2021

(ON APPEAL FROM HCAL NO 1158 OF 2021)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  There are 2 applications before the Court:

(1)  the Applicant’s summons dated 26 October 2022 (“the 1^st Summons”) seeking leave to, inter alia, (i) amend its Notice of Appeal dated 1 September 2021 (“the Notice of Appeal”) by replacing the existing 3 grounds of appeal by a single proposed new ground of appeal (“the New Ground”), (ii) amend the Form 86 by including the New Ground, and (iii) adduce new evidence in support of the New Ground; and

(2)  the Applicant’s summons dated 12 December 2022 (“the 2^nd Summons”) seeking leave to amend the 1^st Summons in order to preserve the existing Ground 1 in the Notice of Appeal.

2.  In essence, the new evidence that the Applicant proposes to adduce is that the Stock Exchange of Hong Kong (“Exchange”) pays the chairmen and members of the Listing Review Committee fixed annual fees of HK$125,000/HK$100,000 to perform their functions, while the Applicant is required to pay a fixed fee of HK$60,000 whenever it wishes to seek a review of a decision of the Listing Committee by the Listing Review Committee. In these circumstances, says the Applicant, a fair-minded and informed member of the public would not consider the Listing Review Committee to be independent and impartial (ie apparent bias). This constitutes the New Ground proposed to be argued by the Applicant in its appeal against the judgment of Coleman J dated 19 August 2021 dismissing its application for leave to apply for judicial review of a decision made by the Listing Review Committee on 10 August 2021.

3.  Having considered the papers before us, we consider that it is appropriate to deal with the 2 applications on the basis of written submissions only without a hearing pursuant to Order 59, rule 14A of the Rules of the High Court, Cap 4A.

BRIEF BACKGROUND FACTS

4.  The Applicant was a listed issuer on the GEM Board of the Exchange.

5.  On 19 June 2019, the Listing Division of the Exchange made a decision (“the Suspension Decision”) to suspend trading in the Applicant’s shares on the GEM Board pursuant to Rule 9.04 of the GEM Listing Rules, on the ground that the Applicant had failed to (i) carry out a sufficient level of operations, or (ii) have tangible assets of sufficient value and/or intangible assets for which a sufficient value can be demonstrated to the Exchange, to warrant the continued listing of its shares, contrary to Rule 17.26 of the GEM Listing Rules.

6.  On 13 November 2019, the GEM Listing Committee upheld the Suspension Decision.

7.  On 10 March 2020, the GEM Listing (Review) Committee upheld the GEM Listing Committee’s decision of 13 November 2019.

8.  On 29 April 2020, the Applicant made an application for leave to apply for judicial review of the GEM Listing (Review) Committee’s decision of 10 March 2020 in HCAL 818/2020 (“the 1^st JR”) on 2 grounds:

(1)  the GEM Listing (Review) Committee’s decision was unreasonable / irrational, and the GEM Listing (Review) Committee failed to take into account relevant considerations in reaching its decisions; and

(2)  the history and process by which the GEM Listing (Review) Committee reached its decision were deficient in applicable standards of procedural fairness including a want of adequate reasons for its decision.

9.  On 8 December 2020, the Court of First Instance, after a rolled-up hearing on 9 October 2020, granted the Applicant leave to apply for judicial review but dismissed the substantive application upon full consideration of the merits in the 1^st JR (“the 1^st CFI Judgment”).

10.  On 16 April 2021, the GEM Listing Committee made a decision (“the Delisting Decision”) to cancel the Applicant’s listing on the GEM Board on the ground that it had failed to comply with the conditions for resumption of trading.

11.  On 8 July 2021, the Court of Appeal dismissed the Applicant’s appeal against the 1^st CFI Judgment (“the CA Judgment”).

12.  On 26 July 2021, the Applicant filed a notice of motion in the Court of Appeal for leave to appeal against the CA Judgment.

13.  On 10 August 2021, the Listing Review Committee made a decision (“the Decision”) upholding the Delisting Decision.

14.  Pausing here, it may be noted that, prior to the changes to the review structure in relation to Listing Committee decisions which came into effect on 6 July 2019 (subject to certain transitional arrangements), decisions made by the Listing Committees/GEM Listing Committee were subject to review by the Listing (Review) Committee/GEM Listing (Review) Committee. After the Listing Rules changes coming into effect on 6 July 2019, the Exchange’s Listing Review Committee and GEM Listing Review Committee operate as an integrated committee, and references to the “Listing Review Committee” mean both the Listing Review Committees and GEM Listing Review Committee[1].

15.  On 16 August 2021, the Applicant made an application for leave to apply for judicial review of the Decision in HCAL 1158/2021 (“the 2^nd JR”). 3 grounds of judicial review were raised. The 1^st and 3^rd grounds were premised on the Applicant successfully overturning the CA Judgment in the Court of Final Appeal, while the 2^nd ground contended that the Decision was Wednesbury unreasonable, in that the Listing Review Committee took into account irrelevant factors and/or failed to take into account relevant factors, and failed to give adequate reasons for the Decision.

16.  On 19 August 2021, Coleman J dismissed the Applicant’s application for leave to apply for judicial review of the Decision in the 2^nd JR (“the 2^nd CFI Judgment”).

17.  On 23 August 2021, the Applicant was delisted.

18.  On 1 September 2021, the Applicant filed the Notice of Appeal against the 2^nd CFI Judgment. In the Notice of Appeal, the Applicant essentially maintained the 3 grounds of judicial review raised in the 2^nd JR.

19.  On 10 November 2021, the Court of Appeal refused to grant the Applicant leave to appeal against the CA Judgment.

20.  On 5 May 2022, the Appeal Committee of the Court of Final Appeal dismissed the Applicant’s further application for leave to appeal against the CA Judgment under Rule 7 of the Hong Kong Court of Final Appeal Rules, Cap 484A.

THE PRESENT APPLICATIONS

21.  On 26 October 2022, the Applicant issued the 1^st Summons seeking leave to, inter alia:

(1)  amend the Notice of Appeal by replacing the existing 3 grounds of appeal by the New Ground, as follows -

“Potential members of the GEM Listing (Review) Committee must first be nominated by the Listing Nominating Committee, comprising three non-executive directors of the Respondent, and the Chairman and two Executive Directors of Securities and Futures Commission.

The Respondent offers a fixed annual fee (around HK$100,000 for each regular member and around HK$125,000 for each of the Chairmen) on account of attendance at, and preparation for, review meetings.

Further, the Applicant/Appellant paid a fee of HK$60,000 to the Respondent to request for a review. The Respondent (a) generated significant sums from issuers’ request for review, and (b) had to pay significant sum to the members or chairmen of the Listing Review Committee. In other words, monies were paid to the decision-makers by one of the parties (i.e. the Respondent) which such a party had reimbursed itself out of the monies it collected from the opposing parties (i.e. the Applicant/Appellant) in the same case.

In the premises, the tribunal would not be considered by a fair-minded and informed member of the public to be independent and impartial.”

(2)  adduce new evidence, in the form of the Affirmation of Chi Yee Shan, Esa, a non-executive director of the Applicant, dated 26 October 2022 (“the Chi Affirmation”), in support of the New Ground.

22.  On 12 December 2022, the Applicant issued the 2^nd Summons seeking leave to amend the 1^st Summons in order to preserve the existing Ground 1 in the Notice of Appeal (which relates to 2^nd ground of judicial review raised in the 2^nd JR).

DISCUSSION

23.  In order to run the New Ground, the Applicant must first obtain the Court’s leave to adduce new evidence in the form of the Chi Affirmation.

24.  It is common ground that, to obtain leave to adduce the Chi Affirmation as new evidence, the Applicant has to satisfy the 3 Ladd v Marshall conditions[2], the first of which requires the Applicant to show that the proposed new evidence could not have been obtained with reasonable diligence for use at the hearing below.

25.  As stated by Mr Johnny Mok, SC on behalf of the Applicant, in gist, the new evidence sought to be adduced (and the new point to be raised) shows that the decision-makers were paid fixed annual fees by the Exchange[3].

26.  The other facts or matters relied upon by the Applicant in support of its argument of apparent bias were known to the Applicant prior to the date of filing of the Form 86 in the 2^nd JR:

(1)  At §8(a) of the Chi Affirmation, Ms Chi alludes to the fact that the Applicant paid the fixed fee of HK$60,000 in June 2019, November 2019 and April 2021 in relation to its previous requests to review decisions of the GEM Listing Committee.

(2)  At §14 of the Chi Affirmation, Ms Chi accepts that the Applicant knew, at the time when the Form 86 in the 2^nd JR was filed on 16 August 2021, that potential members of the Listing Review Committee must first be nominated by the Listing Nominating Committee, comprising 3 non-executive directors of the Exchange[4].

27.  Ms Chi says that the Applicant did not know that the Exchange offers a fixed annual fee of around HK$100,000 and HK$125,000 to each member/chairman of the Listing Review Committee on account of attendance at, and preparation for, review meetings. According to Ms Chi, the new evidence “only came to the Applicant’s/Appellant’s attention recently when the Applicant’s/Appellant’s financial adviser drew this fact to the Applicant’s/Appellant’s attention in around September 2022”[5].

28.  The fact that the Exchange pays a fixed annual fee of HK$100,000/HK$125,000 to each member/chairman of the Listing Review Committee was a matter in the public domain prior to August 2021:

(1)  In the Exchange’s Consultation Paper titled “Review Structure in relation to Listing Committee Decisions” dated August 2018[6], and Consultation Conclusions titled “Review Structure in relation to Listing Committee Decisions” dated January 2019, it was stated that an “honorarium” would be paid to each of the members and chairmen of the proposed re-structured Listing Review Committee[7].

(2)  In the Exchange’s announcement titled “Listing Nominating Committee Seeks Candidates for Inaugural Listing Review Committee” dated 25 January 2019, it was stated that “The Exchange is currently reviewing the most appropriate honorarium to give Listing Review Committee members in acknowledgement of their contribution and will announce the result of this review in due course”[8].

(3)  In the Exchange’s announcements seeking candidates for the Listing Review Committee dated 10 January 2020 and 6 January 2021, it was stated that “The Exchange currently offers a fixed annual fee of $100,000 for each regular member and $125,000 for each of the Chairmen on account of attendance at, and preparation for, review meetings”[9].

29.  As earlier mentioned, Ms Chi alleges that the Applicant only came to have knowledge of the “new evidence” (a reference to the fact that the Exchange paid a fixed annual fee to each of the members/chairman of the Listing Review Committee) in September 2022 when its financial adviser drew the Applicant’s attention to “this fact”[10]. This allegation is a bare assertion. There is no information given as to when the financial adviser came to know that the Exchange paid a fixed annual fee of HK$100,000/HK$125,000 to each of the members/chairman of the Listing Review Committee, nor is there any explanation provided as to what prompted the Applicant’s financial adviser to inform the Applicant of this matter in September 2022.

30.  Ms Chi also says that the Applicant knew that potential members of the GEM Listing (Review) Committee must first be nominated by the Listing Nominating Committee because of Coleman J’s decision in Cai Zhenrong v Stock Exchange of Hong Kong Ltd [2021] HKCFI 1899[11] handed down in July 2021 and shortly before the Form 86 in the 2^nd JR was filed. In that decision, Coleman J explained the composition of the Listing Review Committee in detail, stating that it consisted of 20 members (or such greater number as the Board of the Exchange might from time to time agree) comprising (i) at least six individual members representing the interest of investors, and (ii) the remaining members representing a suitable balance of representatives of listed issuers and market practitioners, including lawyers, accountants, corporate finance advisers and Exchange Participants (or their officers), and who had experience and expertise in Listing Rule matters, or were familiar with the work of the Listing Committee (§59). It was also mentioned in that decision that the members of the Listing Review Committee mostly worked on a part-time basis in relation to the business of the committee (§101(6)). The Applicant was represented by solicitors and/or financial advisors in relation to various applications for review of decisions of the GEM Listing Committee [12]. The Applicant was also represented by leading/junior counsel and solicitors in the 2^nd JR[13]. In our view, having regard to the nature, composition and functions of the Listing Review Committee, it must have been obvious to the Applicant or its solicitors or financial advisor that there was at least a likelihood or possibility that the Exchange would pay a fee or honorarium to the members or chairmen of the Listing Review Committee. The Applicant has failed, however, to explain what, if any, efforts had been undertaken by them prior to the filing of the Form 86 in the 2^nd JR to find out about such information which, as earlier noted, was in the public domain.

31.  In our view, it is clear that the Applicant has failed to show that the proposed new evidence could not have been obtained with reasonable diligence for use at the hearing below. The Applicant having failed to satisfy the 1^st Ladd v Marshall condition, we refuse to grant leave to the Applicant to adduce the Chi Affirmation as new evidence.

32.  It follows that the Applicant’s application to amend the Notice of Appeal under the 1^st Summons should likewise be refused, and the 2^nd Summons falls by the wayside.

DISPOSITION

33.  The 1^st Summons is dismissed. No order is made in respect of §1 of the 2^nd Summons. The Applicant shall pay the costs of the Exchange in respect of the 2 summonses, to be summarily assessed, with certificate for 2 counsel. The Applicant shall have leave to file a statement of objections to the “Putative Respondent’s Statement of Costs for Summary Assessment” dated 11 January 2023 (limited to 2 pages) within 14 days from the date of this judgment. Upon the expiration of the 14-day period and subject to such further directions as may be given, the Court will proceed to assess the Exchange’s costs summarily without further notice to the parties.