CAI ZHENRONG v. THE STOCK EXCHANGE OF HONG KONG LTD

CACV 359/2021

[2021] HKCA 1179

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 359 OF 2021

(ON APPEAL FROM HCAL NO 2337 OF 2020)

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BETWEEN

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J U D G M E N T

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1.  I have before me an application for an interim injunction pending appeal to prohibit The Stock Exchange of Hong Kong Limited (the putative respondent in an application for leave to seek judicial review; “SEHK”) from proceeding to cancel the listing of Blockchain Group Company Limited (“the Company”) on the Exchange. The matter arose in this way.

2.  On 9 July 2021, Coleman J handed down his decision^[1] (“JR Leave Decision”) refusing to grant leave to the applicant Cai Zhenrong, who is a shareholder holding directly and directly 25.13% of the shares of the Company, to apply for judicial review to challenge the decision of the Listing Review Committee (“LRC”) of SEHK dated 16 November 2020, in which LRC upheld the decision of the Listing Committee to cancel the listing of the Company under Rule 6.01A of the Listing Rules.

3.  On 22 July 2021, the applicant filed a notice of appeal against the JR Leave Decision and issued a summons on 23 July 2021 in the court below for an interim injunction pending appeal. The application was heard by the judge on an urgent basis on 26 July 2021 as SEHK agreed to withhold the delisting of the Company only until 28 July.  The judge gave a comprehensive decision on 26 July^[2] (“Injunction Decision”) setting out the applicable principles^[3], his views on the merits of the intended appeal and the balance of convenience (the test in American Cyanamid should be slightly modified in the context of judicial review).  Importantly, he declined to grant a limited injunction in the interim period pending the making of an application to the Court of Appeal for the same injunctive relief, even recognising the reality was that the applicant would just apply to the Court of Appeal with some urgency, as he is not satisfied the intended grounds of appeal are even arguable and he also decided that the balance of other matters points against the grant of an injunction. In those circumstances, he found it difficult to see why the status quo should be maintained even for a short extended period pending the revisit of an interim injunction by the Court of Appeal.

4.  In light of the applicant’s indication that he would renew his application before the Court of Appeal, SEHK agreed to withhold the delisting of the Company until 4 August 2021.  On 3 August 2021, the applicant requested SEHK to extend withholding the delisting to 13 August, claiming that time was insufficient for the preparation of his application to the Court of Appeal.  When his request was refused by SEHK on 4 August, he lodged the papers for an injunction to the Court of Appeal in the late afternoon on the same day requesting in his counsel’s written submissions for the court to dispose of his application on paper.

5.  The request to dispose of the application on paper on 4 August is wholly impracticable, as the court would only have the written submissions of one party.  I declined to hold an urgent hearing after normal sitting hours on 4 August, as I could discern no valid reason why the applicant’s legal team, who has been acting for him throughout, was unable to make such an application during 27 July to 3 August.  The impression I gained from the papers is that the applicant is quite used to delay making his application to the court in an attempt to delay or prevent the delisting of the Company.

6.  On 5 August 2021, SEHK made an announcement that the listing of the Company’s shares will be cancelled with effect from 9 am on 10 August 2021 under Rule 6.01A.

7.  I gave directions on 6 August that the summons for an interim injunction pending appeal is to be dealt with on paper and gave leave to SEHK to lodge submissions by 9 August 10 am.

8.  It is unnecessary to repeat at length the relevant principles.  For such an injunction to be granted, I must be satisfied first of all that the appeal has reasonable grounds of appeal with a real prospect of success.  Further, I need to consider the balance of convenience.  If the risk of the Court of Appeal not being 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.

9.  Having read the papers, I am in full agreement with the judge that the grounds of appeal – the Systemic Challenge Ground, the Standing Ground and the Regulating Order Ground – are not reasonably arguable.  I see no merit in the contentions of the applicant, which are basically the arguments advanced before the judge and rejected by him in the Injunction Decision with detailed reasons.  I do not propose to rehearse the same arguments.  The applicant has not shown the judge had made any material error of law in the JR Leave Decision.  That is sufficient to warrant refusal of an injunction.

10.  I should mention I agree also with the judge on his assessment of the lower risk of injustice if this injunction is wrongly refused.  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.  No such evidence is adduced before the Court of Appeal, despite the judge’s criticism in the Injunction Decision.

11.  I do not accept the applicant’s further contention that where the main focus of the challenge against the LRC decision is in the nature of a systemic challenge, the prejudice that may be caused by the inability to delist the Company pending appeal would not be as great as in the case where the main focus of the challenge is against the substantive merits of the LRC decision.  Irrespective of the focus of the challenge, delaying the delisting process is contrary to the policy of SEHK 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. In the present situation, the delisting of the Company has been delayed by more than a year past the original deadline.

12.  As to the contention that withholding the delisting of the Company pending this appeal would only go to enhance Hong Kong’s reputation as an international financial centre, this has only to be stated to be rejected.  To the contrary, the grant of an interim injunction in these circumstances would have adverse impact on the effectiveness of the current delisting regime, not to mention the reputation of the Hong Kong stock markets.

13.  I refuse to grant an interim injunction pending appeal.  I make an order nisi the applicant is to pay the costs of SEHK of this application on an indemnity basis, with a certificate for two counsel, as this application is clearly devoid of merits.  If the applicant should wish to vary the costs order nisi, he may apply within 7 days of the handing down of this judgment, in which event leave is given to SEHK to serve a reply within 7 days thereafter.