CHINA PUTIAN FOOD HOLDING LTD v. THE STOCK EXCHANGE OF HONG KONG LTD

HCAL 199/2025

[2025] HKCFI 3609

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 199 OF 2025

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D E C I S I O N

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A.  Introduction

1.  At the end of a rolled-up hearing on 25 March 2025, I dismissed the Company’s application for leave to apply for judicial review, with costs to the Exchange.

2.  The Company had sought leave to challenge the Review Decision dated 13 December 2024 made by the LRC of the Exchange, that the Company’s listing should be cancelled under Rule 6.01A of the Listing Rules.

3.  I gave my written Reasons for Decision on 27 June 2025, [2025] HKCFI 2713 (“Reasons”). In this decision, I adopt my definitions and abbreviations used in the Reasons.

4.  On 11 July 2025 – being the last possible day for so doing – the Company filed a notice of appeal (“NOA”) in CACV 486/2025 (“Appeal”).

5.  Now, by Summons dated 1 August 2025, the Company applies for an interim injunction to restrain the Exchange from cancelling the Company’s listing pending determination of the Appeal, and alternatively (if that is refused) an interim interim injunction pending the determination of a renewed application to be made to the Court of Appeal.

6.  The Summons was fixed to be heard on 13 August 2025, namely today. But, I note in passing, and where there is some time sensitivity, that I would have been able to hear it on a rather earlier date had the Company’s solicitors contacted my clerk to explain that time sensitivity.

7.  In any event, the Company has been represented by Mr Johnson Cheung of Counsel, with the benefit of prior written skeleton submissions. In summary, Mr Cheung submits that: (1) there are reasonable grounds of appeal with real prospect of success; (2) absent the injunction sought, irreparable harm will be suffered by the Company; and (3) the balance of convenience points in favour of the grant of the injunction.

8.  The Exchange has again been represented Mr Victor Dawes SC, who also filed prior written skeleton submissions. In summary, Mr Dawes submits that: (1) the Court must be satisfied that the Appeal has real prospects of success, before considering the balance of convenience; (2) the Appeal does not have real prospects of success on any of the grounds of appeal; and (3) in any event, the balance of convenience tilts firmly against the grant of injunctive relief.

9.  On applicable principles, I think it suffices to point out that they have been canvassed by me in Cai Zhenrong v Stock Exchange of Hong Kong Ltd [2021] HKCFI 2202, and approved by the Court of Appeal in the same case [2021] HKCA 1179. Though I do not rehearse those principles here, I have them in mind for application to the circumstances of this case.

10.  Having considered the written and oral argument, this is my Decision.

B.  The Grounds of Appeal

11.  Adopting Mr Cheung’s summary description and definitions, the NOA advances three grounds of appeal:

(1)  The Court erred in considering not even reasonably arguable that the Exchange had not accorded the procedural fairness that the Company was entitled to, so as to give the Company a reasonable opportunity to respond to the LD’s queries on the Company’s compliance with RG2 (“Procedural Unfairness Ground”).

(2)  The Court erred in considering not even reasonably arguable that the LRC had failed to properly consider whether the Company is in compliance with Rule 13.24 (“Proper Consideration Ground”).

(3)  The Court erred in considering not even reasonably arguable that the LRC had fettered its discretion and thus was unreasonable in refusing an extension of remedial period (“Fettered Discretion Ground”).

12.  I note the use of the phrase “not even reasonably arguable” in each of the grounds of appeal. Presumably, that is reflective of the fact that there was a rolled-up hearing, at which one possible outcome might have been the grant of leave to apply for judicial review, but the dismissal of the substantive application. It can be noted that the rolled-up hearing was directed in this case because of some time sensitivity, and because for all practical purposes the argument that would be canvassed on the application for leave to apply for judicial review and any substantive review would be essentially coterminous.

13.  Indeed, in the context of the present Summons, it is of note that the NOA seeks only an order that leave to apply for judicial review be granted to the Company. But I agree with Mr Dawes that in this Summons the Company may be required to demonstrate not just a real prospect on the Appeal of obtaining leave to apply for judicial review, but the real prospect of persuading the Court of Appeal – or the Court of First Instance if the matter is remitted to it for substantive hearing – that its substantive judicial review application should succeed. This seems to me to be relevant both to the threshold question and also to the balance of the discretionary mix where time would necessarily be taken in having the Appeal hearing, and if leave is granted then dealing with the substantive judicial review matter in either Court.

14.  However, as it happens, I am not satisfied that the Appeal has real prospects of success, even if limited to the question of the grant of leave to apply for judicial review. I shall explain why. For what it is worth, if necessary it can be noted that I have already decided, by refusing the grant of leave to apply for judicial review, that there is no merit in the substantive argument.

C.  Lack of Merit in Grounds

C.1  Procedural Unfairness Ground

15.  Mr Cheung submits that the “main criticism” is that in the Reasons the Court did not ask the holistic question whether the Company’s opportunity to respond to the LD’s queries on the Company’s compliance with RG2 was hampered because of the various procedural issues. The Court should, he says, have considered the “cumulative effect” which the procedural unfairness matters would have had on the opportunity to address the issue of compliance with RG2.

16.  With respect, that main criticism is wholly misplaced. In my Reasons at §48, I pointed out that I had considered the individual complaints both individually and collectively. Contrary to Mr Cheung’s submission that the Court did not consider the holistic assessment, in fact I did.

17.  As to the other submissions, Mr Cheung is obviously correct when he says that the LD’s written submissions filed for the LRC before the hearing did not address the financial results which finally provided fulfilment of RG1. But that was simply because those results were not produced or published until 10:22pm on the night before the LRC hearing. Having produced them, albeit so late, the Company cannot have been under any illusion that an attempt to address their content would not be made at the LRC hearing. Indeed, the Company is now saying that it relies on the financial statements as having constituted “a clear change of circumstances”, so surely the Company would have been in a position to address those statements, and anyone else’s apparent view of what they show. It will not be forgotten that the Company must have had the financial statements at least in draft for some considerable time.

18.  In any event, as I pointed out in my Reasons, the LD was plainly entitled to have addressed the financial statements orally (and the Briefing Notes were in effect an aide memoir of the points), and the Company had the opportunity to address any reply points in its oral closing submissions and/or during the question-and-answer session. The Company did not suggest that it could not do so, and sought no adjournment. Further, the Company’s representative at the LRC hearing was well able to seek advice from the attending legal representatives and auditors, had it been thought necessary because of any language difficulty or lack of time, and for some extra time to be afforded (even if it was not to seek an adjournment to another day). Nor do I think the slight change in the LRC hearing date makes this point any more arguable.

19.  Nor do the suggested interpretation issues identify any reasonable prospect of appeal (individually or cumulatively with the other suggested issues). As I pointed out in the Reasons, the Exchange had expressly told the Company that it was free to engage and bring its own interpreter if it so desired. But it chose not to. Nevertheless, the Company attended with legal representatives and auditors who (between them) apparently understood both English and Mandarin – and the Company has not suggested otherwise. Further, the point on interpretation is not improved by referring to originals of documents which, it is said, the Company’s representative brought to the LRC hearing but did not produce. It was open to the Company to produce any documents which it thought relevant and helpful to its appeal.

20.  I do not accept the Procedural Unfairness Ground has merit such that it could be said that it is a reasonable ground of appeal with real prospect of success.

C.2  Proper Consideration Ground

21.  On this ground, Mr Cheung’s “main criticism” is that the Court deferred too readily to the LRC and did not recognise that the LRC had not “properly considered” all relevant and material factors in relation to the Company’s compliance with rule 13.24. On its face, as it is set out in the NOA and in the submissions on this Summons, this ground smacks as a merits challenge of the kind which is ordinarily not fertile ground for an intended judicial review challenge. At bottom, the complaint is that the LRC did not reach the same answer as the Company wanted it to. The next complaint is that the Court disagreed with the Company’s position that it should interfere with the decision of the LRC.

22.  But, in any event, in the Reasons it was made clear that this question was approached holistically. Also, the LRC expressly took into account the various factors which it is now said it did not “properly” consider. There was no focus on only one factor. Further, as to the criticism of looking at solvency, it would be rather surprising if it is said that the LRC was not entitled to take into account the uncertainty as to the Company’s solvency as one of the factors within the holistic assessment required under Rule 13.24.

23.  With respect, there also appears to have been a misreading or misunderstanding of what I said in §68 of the Reasons. Far from apparently accepting that the LRC had not properly considered the financial results, I actually stated that such a criticism was misplaced. It is clear that the LRC in fact did address the financial results, with the benefit of the LD’s submissions and those made for the Company. I dismissed the notion that the submissions were merely “recorded” rather than being “properly considered”. When referring to the Company not asking for an adjournment, I was simply making the point that if the Company thought that there had not been sufficient time for the LRC properly to consider its extremely lately produced financial results, then the Company could have pointed that out and asked for an adjournment, but it did not.

24.  The Proper Consideration Ground has no merit such that it could be said that it is a reasonable ground of appeal with real prospect of success.

C.3  Fettered Discretion Ground

25.  On this ground, the “main criticism” is that the Court has not recognised at least a reasonably arguable case that the LRC’s exercise of discretion whether to grant an extension of remedial period was fettered in that the LRC only considered whether conditions in §§22-23 of GL95-18 were fulfilled. The argument is that even if the case was thought to fall outside §§22-23, the LRC should have nonetheless considered whether to grant any time extension.

26.  However, this submission appears to overlook that §23 itself contains the Exchange’s recognition that, in assessing whether exceptional circumstances exist to warrant a time extension, there is no limit to the description given in §22, and the Listing Committee or LRC will still consider the specific facts of the issuer’s case in deciding whether to extend the limitation period. This is undoubtedly what the LRC in this case did, as I traversed in the Reasons at §78.

27.  I did not think that there was any reasonable argument as to irrationality, and I do not think that the Fettered Discretion Ground identifies any reasonably arguable point of appeal with realistic prospect of success.

D.  Balance of Convenience

28.  On my view that the grounds of appeal do not raise a reasonably arguable appeal with real prospects of success, there is no need to go on to consider the balance of convenience. However, and in any event, it seems to me that any assessment of the balance of convenience identifies that it points firmly against the grant of the injunctive relief sought by the Summons.

29.  I accept Mr Dawes’ submission that the following points are now well-established:

(1)  In the event that the appeal is dismissed, the grant of injunctive relief would result in harm to the investing public, in that it would result in the continued listing of an unsuitable issuer after the 18-month remedial period and would thus adversely impact both the effectiveness of the current delisting regime and the reputation of the Hong Kong stock markets – a point given some emphasis both by myself and by the Court of Appeal in the Cai Zhenrong case.

(2)  On the other side of the balance, delisting does not necessarily result in permanent and irreversible loss of the issuer’s listing status, as a delisted company can apply for a relisting of its shares.

30.  Therefore, the burden lies on the Company to show that it will suffer some other form of irremediable prejudice if no injunctive relief is granted and the Appeal succeeds, and that that harm outweighs the harm to the investing public in the event injunctive relief is granted and the Appeal fails.

31.  Mr Cheung relies on the following points of submission:

(1)  Crucial to the Company’s debt restructuring plan are two agreements – the First SPA and Second SPA – which are both conditional upon the resumption of trading of the Company. Both agreements have a long stop date of 27 February 2026, after which they would cease to carry any effect. Therefore, if the Company is delisted (even if the Appeal succeeds) more time would be necessary to restore the listing status and resume trading of shares, making it more likely that the Company could not resume trading by 27 February 2026. Alternatively, the two agreements might be terminated by reason of anticipatory breach.

(2)  More importantly, the relevant escrow agreement has resulted in the payment of HK$28 million in total, under terms that entitle those who paid the amounts to ask for their return if the Company fails to obtain resumption approval on or before 30 December 2025. Hence, if the Company is delisted, whether or not its listing status can be subsequently restored, the escrow amounts would be immediately repayable and the restructuring plan will be subject to further uncertainty as to whether those who deposited the escrow sums would be willing to pay up.

(3)  From the perspective of the government of Chengxiang District, Putian City, the listing status of the Company came with social value and symbolic image for the local area, such that delisting would lead to “devalue” and various coordinated support policies provided by the government authorities and financial institutions based on the Company’s listing status would likely be unsustainable. In other words, actual delisting would lead to loss of local governmental support.

(4)  The Company has also received a letter from a 4.24% shareholder, requesting that it take all practicable measures to maintain its listing status because he has used a margin facility to hold the shares, and in the case of delisting his brokers would likely not be able to use the shares as collateral for financing. Mr Cheung recognised that the shareholder is perhaps more distant than the company itself, but said it was a relevant form of prejudice as potential prejudice to shareholders flows naturally from prejudice to the Company.

32.  However, as to these points:

(1)  It seems to me that Mr Cheung’s submission needs to be seen against the context that the Company had already had the entirety of the 18-month remedial period and the further period of time up to the LRC hearing, yet the debt restructuring was still at the stage of continuing negotiation, with a number of hurdles perhaps including regulatory approvals yet to be overcome.

(2)  In any event, the commercial terms of the First SPA and the Second SPA were negotiated and agreed by the Company, knowing that its listing status was at least under scrutiny, and that there must have remained a risk of (for example) the escrow arrangements being triggered.

(3)  I also accept Mr Dawes’ submission that the alleged prejudice is more illusory than real in the circumstances of the (presumably) still ongoing negotiation. There is also real force in Mr Dawes’ submission that the chance of success within the time required for resumption of trading is doubtful.

(4)  The concern about loss of governmental support or favourable treatment is a repetition of the submission that the Company’s listing status confers certain commercial and reputational advantages. That concern needs to be seen against (a) the ability to apply for re-listing, and (b) the underlying premise that long-suspended issuer’s should not be in the position to retain listed status, irrespective of whether that confers commercial or other advantages.

(5)  The alleged harm to the commercial interests of a shareholder is not a relevant form of prejudice. As has been pointed out before, investors must be deemed to take the risk of investing in listed shares, including as to fluctuations in value and possible delisting. It would not be a proper use of the Court’s equitable jurisdiction to grant injunctive relief, in effect to enable such investors to take the benefits of their shareholding in the Company without the associated risks. It seems to me to be even less relevant to take into account that a particular shareholder may have taken margin loans against that shareholding.

33.  I take into account Mr Cheung’s submissions that the Company is not one in liquidation, but one with an improved financial position, with governmental and creditor support. However, I do not accept on the facts of this case that the Exchange’s policy of removing long-suspended listed companies is outweighed by the sustainability and business development of the Company.

34.  I also think that calling for the maintenance of the status quo is probably misplaced. The true status quo is that the specialist committee of the Exchange, namely the LRC, has concluded that the Company – which indisputably failed to comply with the Resumption Guidance within the remedial period – is not entitled to the exercise of the discretion for an extension of that remedial period.

E.  Result

35.  In conclusion, I do not accept that the Company has shown the kind of exceptional circumstances as would justify the grant of the injunctive relief sought.

36.  Lastly, for similar reasons, I am not persuaded to grant the interim interim injunction sought in the alternative by the Summons. I say so, again in recognition of the practical reality that the Company will simply make a further application to the Court of Appeal. But, of itself that should not matter if the analytical answer to the Summons is that the claimed injunction should not be granted.

37.  In the circumstances, I dismiss the Summons.

38.  I see no reason why costs should not follow the event, and so be payable by the Company to the Exchange to be summarily assessed by me on paper.