Case Detail

CACV 425/2021, [2026] HKCA 95

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)

________________________

BETWEEN

	CHINA TRENDS HOLDINGS LIMITED	Applicant
	and
	THE STOCK EXCHANGE OF	Putative
	HONG KONG LIMITED	Respondent

________________________

Before:

Hon Barma, Au and G Lam JJA in Court

Date of Hearing:	10 May 2024
Date of Judgment:	10 May 2024
Date of Reasons for Judgment:	30 January 2026

________________________

REASONS FOR JUDGMENT

________________________

Hon Au JA (giving the Reasons for Judgment of the Court):

A. INTRODUCTION

1. This is the appeal of the applicant against the Order of Coleman J (“the Judge”) dated 19 August 2021 (“the Order”), dismissing the applicant’s application for leave to apply for judicial review. The Judge has set out his reasons for the Order in his written decision of the same date (“the Written Decision”)[1].

2. This appeal essentially concerns one single question as to whether the Judge erred in finding that the GEM Listing Review Committee (“Review Committee”) of the Stock Exchange of Hong Kong Limited (“the Exchange”) had taken into account the standby facility of HK$100 million dated 25 May 2021 (“Standby Facility”) issued to the applicant when making the decision dated 10 August 2021 to cancel the listing of the applicant’s shares (“theDelisting Decision”).

3. Further, by way of summons filed on 18 August 2023 (“the New Evidence Summons”), the applicant sought leave to adduce and rely on certain new evidence for the purpose of this appeal.

4. At the end of the hearing of the appeal, we dismissed both the appeal and the New Evidence Summons with written reasons to be handed down. These are our reasons.

B. BACKGROUND

5. This appeal has a long procedural history. As pointed out by Mr Victor Dawes SC (leading Mr John Cheung) for the Exchange, this is the 11^th attempt by the applicant to challenge the decision of the Exchange to suspend the trading of its shares and later cancel its listing.

6. The material background leading to the leave application for judicial review has been summarised by the Judge in his Written Decision at [11] - [25], which we gratefully adopt. For the purpose of this appeal, we further highlight the following.

B1. The applicant

7. 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 of the Exchange, with stock code 8171. The applicant and its subsidiaries are principally engaged in (a) trading in electronic technology and related products (“Trading Business”) and (b) media e-commerce platforms and media advertising services (“Media Business”).

B2. Suspension Decision

8. Trading in the applicant’s shares had been suspended since 11 March 2020, following a decision of the Review Committee that the applicant had failed to maintain “a sufficient level of operations” or “tangible assets of sufficient value” (respectively “the Sufficient Level of Operations Requirement” and “theTangible Asset Requirement”) as required under the relevant GEM Listing Rule 17.26 (“Rule17.26”)[2] to warrant its continued listing (“the Suspension Decision”).

9. The applicant applied for judicial review against the Suspension Decision. Following a rolled-up hearing, Chow J gave a judgment dated 8 December 2020 ([2020] HKCFI 3045) (“CFI Judgment”) and found that the intended application for judicial review was reasonably arguable and had a realistic prospect of success, but dismissed the substantive application upon full consideration of the merits.

10. The applicant appealed against the CFI Judgment to the Court of Appeal. By a judgment dated 8 July 2021 ([2021] 3 HKLRD 554) (“CA Judgment”), this court (Lam VP, Au and G Lam JJA) dismissed the applicant’s appeal. In the CA Judgment, this court held, among others, 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 relevant matters or taking irrelevant matters into account, the court should not interfere with such professional judgment. 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.

11. On 26 July 2021, the applicant applied to the Court of Appeal for leave to appeal against the CA Judgment. On 10 November 2021, the Court of Appeal refused to grant leave to appeal[3], and on 5 May 2022, the Appeal Committee of the Court of Final Appeal also 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.[4]

B3. Delisting Decision

12. Subsequent to the Suspension Decision, on 5 May 2020, the Listing Division of the Exchange (“Listing Division”) issued a letter to set out the resumption guidance for the applicant, in that the applicant should demonstrate its compliance with the requirements under Rule 17.26. The resumption deadline was 10 March 2021.

13. On 12 April 2021, the Listing Division informed the applicant that it would recommend to the GEM Listing Committee (“Listing Committee”) to cancel the applicant’s listing at its regular meeting on 15 April 2021, because the applicant had not complied with the Sufficient Level of Operations Requirement and/or the Tangible Asset Requirement before the expiry of the remedial period.

14. On 16 April 2021, the applicant was informed by the Exchange of the decision of the Listing Committee, that the applicant’s listing would be cancelled (“GLC Decision”). The applicant appealed the GLC Decision to the Review Committee.

15. In the meantime, on 25 May 2021, by a letter issued to the applicant, the substantial shareholders agreed in writing to provide to the applicant the Standby Facility in the principal amount of not less than HK$100 million. It was specified in Clause 1.1 in the said letter that the Standby Facility must be used for the applicant’s investment or acquisition or restructuring other listed companies so as to increase business and assets.

16. On 14 July 2021, the Review Committee heard the review of the GLC Decision. On 10 August 2021, the Review Committee made the Delisting Decision, upholding the GLC Decision.

17. The Exchange had stated that it would issue an announcement on 19 August 2021, stating that 20 August 2021 would be the last day of the applicant’s shares being listed.

C. THE JUDICIAL REVIEW

18. On 16 August 2021, the applicant applied for leave to apply for judicial review to challenge the Delisting Decision and filed a summons seeking inter alia an order that the Exchange be restrained from cancelling the listing of the applicant’s shares (“Injunction Summons”).

19. The applicant raised three grounds of judicial review before the Judge. Those grounds may be broadly summarised as follows:

(1)  Ground 1: The Review Committee erred in law in finding that the applicant had failed to comply with Rule 17.26 when properly construed. (“JR Ground 1”)
(2)  Ground 2: The Review Committee was Wednesbury unreasonable in finding that the applicant had failed to comply with Rule 17.26, as the Review Committee failed to take into account relevant matters and took into account irrelevant matters. (“JR Ground 2”)
(3)  Ground 3: The Delisting Decision was premised upon the assumption that listing of the applicant’s shares has been suspended for a prolonged period. If the Suspension Decision is quashed or held to be unlawful, the Delisting Decision would also be unlawful as it was made based on an error of fact. (“JR Ground 3”)

See also Written Decision, [26] - [28].

20. For the purpose of the leave application, the applicant had assumed the correctness of the CA Judgment in the previous challenge to the Suspension Decision which focused on the interpretation of the relevant version of Rule 17.26.[5]

21. By the Written Decision, the Judge dismissed both the leave application and the Injunction Summons. The Judge’s reasoning that is relevant to this appeal can be summarized as follows:

(1)  JR Ground 1 and JR Ground 3 are wholly unarguable as (a)   the CA Judgment, which is binding on the applicant, has rendered those grounds unarguable as the applicant accepted that the merits of those grounds are premised upon the applicant successfully overturning the CA Judgment, and (b)   the applicant in effect has an alternative remedy and is already pursuing that alternative remedy.[6]
(2)  For JR Ground 2, it is not reasonably arguable that the Review Committee had failed to take into account various relevant matters, including the Standby Facility, as contended by the applicant[7]. Specifically relevant to the present appeal, in relation to the Standby Facility, the Judge found that the Review Committee had plainly taken it into account as[8]:
(a)    there was an express reference to the Standby Facility at paragraph 18 of the Delisting Decision, which must be read objectively in its proper context against all the applicant’s materials and submissions placed before the committee[9];
(b)     in any event, the possibility of a substantial loan under the Standby Facility would not alter the Review Committee’s focused analysis in the Delisting Decision[10] as to why the applicant had failed to demonstrate a sufficient level of operations in the Trading Business to warrant continued listing of its shares despite the availability of the Standby Facility.

D. THIS APPEAL

D1. Grounds of appeal

22. The applicant raised three grounds of appeal in its Notice of Appeal, which can be summarised as follows:

(1)  Ground 1: The Judge erred in ruling that JR Ground 2 is not reasonably arguable, because the Review Committee was Wednesbury unreasonable for its failure to take into account the Standby Facility when making the Delisting Decision. (“Appeal Ground 1”)
(2)  Ground 2: JR Ground 1 and JR Ground 3 would be arguable if the CA Judgment is overturned by the Court of Final Appeal. (“Appeal Ground 2”)
(3)  Ground 3: The appeal or the judicial review is not academic even though the Judge had not granted the interim injunction which resulted in the eventual delisting of the shares of the applicant. (“Appeal Ground 3”)

23. Pausing here, it should be mentioned that on 26 October 2022, the applicant filed a summons (“October Summons”) seeking to inter alia replace all the existing grounds of the appeal with a new ground and adduce fresh evidence. On 12 December 2022, the applicant issued another summons (“December Summons”), seeking to amend the October Summons to preserve the existing Appeal Ground 1 of the Notice of Appeal.

24. By a decision dated 9 June 2023, the Court of Appeal (G Lam and Chow JJA) dismissed the October Summons and made no order regarding the December Summons in respect of amending the October Summons ([2023] HKCA 705).

25. Mr Hectar Pun SC (leading Mr Anson Wong Yu-yat)[11] for the applicant has since confirmed both in his written[12] and oral submissions that the applicant only pursued Appeal Ground 1 in support of this appeal. The Court therefore needed only to consider Appeal Ground 1 in this appeal.

D2. Discussion

26. Appeal Ground 1 is directed at the Judge’s decision to refuse to grant leave for judicial review under JR Ground 2. In essence, under this ground, the applicant complained that the Judge erred in finding that the Review Committee did not fail to take into account the Standby Facility in making the Delisting Decision. The applicant contended that, had the Review Committee properly considered the Standby Facility in its proper context, it might have come to a different view as to the applicant’s sufficiency of assets and/or operations. Thus, JR Ground 2 is at least reasonably arguable.

27. In support and in elaboration, Mr Pun further submitted that:

(1)  The Standby Facility (which would provide substantial finance to the applicant for its business)  must plainly be a relevant factor relating to whether or not the applicant could satisfy Rule 17.26 by being in good financial health and being able to achieve a sufficient level of operation with the new funds.
(2)  This is further supported by the new evidence sought to be adduced under the New Evidence Summons which demonstrates that the significant sum to be provided under the Standby Facility would enable the applicant to acquire substantial shares in a Main Board listed company and thus expand its business scope[13].
(3)  However, in coming to the Delisting Decision, the Review Committee had failed to “advert to” the Standby Facility in its reasoning as it had not (a)  referred to it specifically in its reasons, and/or (b)  provided any proper reasons as to why the Standby Facility could not satisfy the committee that it could help the applicant improve its level of operation.
(4)  Alternatively, if the Review Committee did turn its mind to the Standby Facility but decided to give it no weight, the lack of reasons for giving the Standby Facility no weight also suggests the irrationality in doing so despite the obvious materiality of the Standby Facility, in particular when considered in light of the following context:
(a)  the Delisting Decision would bring serious consequences to the applicant, which had been listed since 2002 and had run the Trading Business for over 11 years;
(b)  by virtue of GEM Listing Rule 9.01, protection of investors is an important consideration when making a Delisting Decision because it would affect the interest of minority shareholders of the applicant.
(5)  In the premises, the Judge was plainly wrong or erred in finding JR Ground 2 not reasonably arguable with a realistic prospect of success and in refusing to grant leave to apply for judicial review thereunder.

28. The above contentions have no merit. As explained below, when the Delisting Decision is properly read, it is clear that the Review Committee had taken the Standby Facility into consideration when coming to the conclusion that it would not assist the applicant to show that it would be able to maintain a sufficient level of operation in its Trading Business (ie, to satisfy the Sufficient Level of Operations Requirement).

29. First, as a starting point, the Delisting Decision must be read in light of the following context:

(1)  The Review Committee made it clear at the outset of the Delisting Decision that it had “carefully considered all the facts and evidence and all the submissions (written and oral)  presented by the [applicant] and the Listing Division”.
(2)  After reciting the background and the applicable Listing Rules and Guidance, the Review Committee went on to summarise the submissions made by the applicant (at paragraphs 13 - 21)  and the Listing Division (at paragraphs 22 - 28).
(3)  The Review Committee then set out its views and analysis in paragraphs 29 - 34 of the Delisting Decision as to why it was not satisfied that the applicant would be able to comply with the requirement under Rule 17.26. In particular, the Review Committee at paragraph 29 noted that “it was essentially tasked with considering, on the basis of all the materials before it including oral submissions made, whether the [applicant] 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 [applicant’s] shares”.

30. Second, the Review Committee firmly had in its mind the context that Mr Pun had emphasized as summarized at [27(4)(a)(b)] above at paragraphs 1 - 2, 7 and 15 of the Delisting Decision as follows:

“1. The Company’s shares have been listed on GEM since 2002.
2. The Company’s key businesses, both started since 2009, are:
(i)  Trading Business – trading of electronic technology and related products such as routers for networking, components and LCD/LED for mobile terminal products; and
(ii)  Media Business – provision of media and e-commerce platforms and media advertising services. In 2016, the Company started developing an e-commence platform (Wealthstorm Platform).
...
7. GEM Rule 9.14 makes it clear that pursuant to GEM Rule 9.01, the Exchange may cancel the listing of an issuer at any time and may do so in any circumstance including (but not limited to)  those set out in GEM Rule 9.04 and in circumstances where the securities of an issuer have been continuously suspended for a prolonged period without the issuer taking adequate action to obtain a restoration of the listing.
...
15.  The Company submitted that the Trading Business of the Group since its inception had continued to improve and was a viable and sustainable business. The Company had 2,000 shareholders who would suffer the loss of a public trading platform for their shares. Furthermore the Group’s financial results were better than a large number of peers among GEM issuers in Hong Kong. It was submitted that the results of the Company for FY2020 outperformed 96 to 257 of the 367 GEM listed issuers.”

31. Third, as rightly accepted by the applicant, the Review Committee in fact had expressly referred to the Standby Facility and the intended use of that facility to acquire a Main Board listed company at paragraphs 18 and 25 of the Delisting Decision as follows:

“18. With respect to sufficiency of assets, the Company confirmed that the Group had approximately HK$120.7 million as at 31 December 2020. This was submitted to be assets of sufficient value to warrant the continued listing of its shares. Furthermore on 25 May 2021, two substantial shareholders of the Company had issued a consent letter for the provision of a standby facility of HK$100,000,000 with the same in due course to be utilized for investment or acquisition.
...
25. The Listing Division indicated that it had received a copy of a draft announcement of the Company regarding a proposal to buy certain listed shares in another listed company and to enter into any agreement to subscribe to convertible bonds. The Listing Division noted amongst other matters that this company was a long suspended company and subject to a winding up order. This would not appear to assist the Company to re-comply with GEM Rule 17.26.” (emphasis added)

32. In the premises, considering the Delisting Decision as a whole in light of the context set out above, we agree with Mr Dawes that the Review Committee was clearly alive to the Standby Facility and its intended use when making the Delisting Decision.

33. We do not accept the applicant’s submissions that such reference to the Standby Facility was only part of the summary of the applicant’s submissions and did not feature in the reasoning of the Review Committee. In this respect, it is pertinent to take note of the Review Committee’s reasons in upholding the GLC Decision at paragraphs 29 - 33 as follows:

“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 than 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 the 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 positon 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.”

34. It is thus plain that the Review Committee was aware that source of funding was one of the factors to be taken into account in considering whether the applicant had demonstrated a sufficient level of operations (paragraph 30). Moreover, in its analysis at paragraph 31(iii), the Review Committee further assumed that the applicant could obtain financing to scale up its business.

35. The applicant’s real complaint under this ground of appeal is thus that the Review Committee had allegedly given little or no weight to the Standby Facility when it was so “obviously material” to the Delisting Decision. The applicant contended that the Standby Facility would be relevant to the assessment of the sufficiency of assets (ie, the Tangible Asset Requirement) which in turn would allow the applicant to expand its operations and business (ie, under Sufficient Level of Operations Requirement).

36. For the following reasons, we are unable to agree.

37. To start with, as Lam VP already pointed out in the CA Judgment,[14] under the statutory framework and the GEM Listing Rules, whether the applicant had complied with Rule 17.26 is a matter of professional judgment for the members of the Listing Division, the Listing Committee and the Review Committee. When the Review Committee had clearly taken into account the Standby Facility when making the Delisting Decision, the Court would not lightly interfere with its qualitative assessment, unless the Review Committee had acted beyond the range of responses reasonably open to it.

38. In this respect, as pointed out by Mr Dawes, in the premise of the Review Committee’s concern about the level of operations of the applicant, the Review Committee had sufficiently analysed the Standby Facility but came to a view that it could not assist in its level of operations to warrant the continued listing.

39. From the Delisting Decision, it is clear that the Review Committee after reviewing all the materials and submissions presented to it held, amongst others, that the applicant had not been able to demonstrate a sufficient level of operations in the context of its Trading Business in light of its business model, operating scale and history, source of funding, size and diversity of customers and suppliers, profit margins and general value added. In support and in particular, the Review Committee highlighted that (a) the applicant had a very concentrated trading business operation in that 84% of the applicant’s sales were to a single customer and 83% of its products came from a single supplier, (b) in light of that and its low margin business model, the applicant was effectively operating and trading on an indent basis, and it would still not be satisfactory even if the applicant was able to utilize its cash and other assets or “obtain financing seeking to scale up its business” (which must objectively be read as a reference to the Standby Facility and its intended use), and (c) the applicant’s indicated initiative to secure a reverse takeover of a Main Board listed company (again, objectively, this must also be a reference to the intended use of the finance to be provided under the Standby Facility) did not provide any certainty that there would be improvement in its Trading Business in the future[15].

40. In our view, it is plainly reasonably open to the Review Committee to come to the above conclusion with the materials before it, and there are no public law ground justifications for the court not to defer to it.

41. In the premises, the Judge was correct in finding that the Standby Facility would not alter the Review Committee’s analysis that the applicant had insufficient level of operations to warrant its continued listing. See [52] - [53] of the Written Decision.

42. For completeness, we should also mention that, in the context of the applicant’s contention that the Review Committee had committed a public law error in failing to take into account the Standby Facility, Mr Dawes for the Exchange submitted that it is trite that the failure to take into account a relevant consideration can only be established if the decision maker has failed to take into account a consideration which he is bound to take into account in making that decision. Absent a statutory code of compulsory considerations, a decision maker is entitled to decide what is and what is not a relevant consideration to make a decision. Likewise, the weight that should be given to that factor is a matter for the decision maker (BH v Director of Immigration [2015] 4 HKC 107, [63] - [65]). Mr Dawes therefore further submitted that the Judge was correct in finding that the Review Committee had taken into account the Standby Facility and that the Standby Facility would not alter the analysis in terms of the level of operations.

43. In this respect, Mr Pun, relying on the authority of R (Friends of the Earth Ltd) v Secretary of State for Transport [2021] PTSR 190 at [116] - [120] per Lord Hodge DPSC and Lord Sales JSC, submitted that even though there is no express legislative obligation to take into account a consideration, this case falls within a situation where a consideration may be so “obviously material” to a decision that it would be irrational not to take it into account.

44. In light of our above conclusion (as also held by the Judge) that the Review Committee had taken into account the Standby Facility when making the Delisting Decision and it was entitled to find that the intended finance to be provided under it would not help the applicant to show that it could satisfy the Sufficient Level of Operations Requirement, R (Friends of the Earth Ltd) v Secretary of State for Transport does not assist Mr Pun.

45. Appeal Ground 1 is therefore without merit and must be dismissed.

E. THE NEW EVIDENCE SUMMONS

46. By the New Evidence Summons, the applicant asked for leave to adduce and rely on the 2^nd Affirmation of Xiang Xin dated 17 August 2023 and the exhibits therein (all of which were dated in 2023) (“the New Evidence”) for the purpose of this appeal.

47. As summarized by Mr Pun, the New Evidence in essence shows that:

(1)  First, the Standby Facility enabled the applicant to acquire 100% shareholding in Harvest Rise Investments Limited, the largest shareholder (holding 29.82% shareholding)  of China Innovation Investment Limited, a company listed on the Main Board of the Exchange (with stock code 1217), at a consideration of HK$190,884,923.05.[16] As noted by the Review Committee, the applicant’s total assets as at 31 December 2021 were only HK$120.7 million. This demonstrates that the Standby Facility allowed the applicant to expand its assets and operations.
(2)  Secondly, the applicant has an adjusted net profit of HK$395,000 for the year ended 31 December 2022 (“FY2022”)  after deducting non-recurring expenses.[17] Similarly, the total bank and cash balance of the applicant for FY2022 increased from the previous year.[18]
(3)  Importantly, the applicant’s financial results of FY2022 were assessed by Mr Warren Lee, Managing Director of Yu Ming Investment Management Limited (a licensed corporation to conduct Type 6 regulated activities (advising on corporate finance))  to have out-performed about two-thirds of the GEM listed issuers in Hong Kong.[19]

48. Mr Pun submitted that the evidence therefore supported the argument that the Review Committee was Wednesbury unreasonable in not taking into account the Standby Facility.

49. Mr Pun (in support) and Mr Dawes (in opposition) respectively contended that the New Evidence did or did not satisfy the three conditions in Ladd v Marshall as to why this court should allow or refuse the admission of the evidence. In particular, Mr Dawes submitted that the New Evidence has no relevance to (let alone an “important influence” on) this appeal, and hence fails to meet the second condition of Ladd v Marhsall.

50. On the other hand, we note it may be arguable that the New Evidence relates to “matters which have occurred after the date of the trial or hearing” (see Order 59 rule 10(2) of the Rules of the High Court, Cap 4A) as all the relevant exhibits sought to be relied upon are dated in 2023. In the premises, it may be considered that the Ladd v Marshall principles do not apply, and the relevant applicable principles should be instead those set out in EBS v NTCD[2023] HKCA 425 at [23]:

“(1)  The Court of Appeal has a wide discretion in relation to admitting such fresh evidence but it should always be exercised sparingly with due regard to the need for finality in litigation: Hughes v Singh, The Times, 21 April 1989.
(2)  It is impossible to produce an exhaustive list of considerations relevant to the exercise of that discretion, but the following factors will always be material:
(a)  the extent to which the fresh evidence may affect the award of damage; the greater the extent the more likely and ready the Court of Appeal should be to admit the evidence;
(b)  the time element; it is not necessary that the fresh evidence should emerge before the case would ordinarily reach the Court of Appeal, but the closer to the date of trial the more likely it is that the evidence will be admitted; and
(c)  the conduct of the parties; any inequitable conduct on the part of a litigant will plainly be relevant, and other conduct may also be relevant.
(3)  The evidence should be admitted in all cases where it would be an affront to one’s sense of fairness not to admit it. In applying that test the court takes into account all the circumstances, before, during and after trial: Hughes v Singh.
(4)  The new evidence must substantially affect a basic assumption made at the trial: the matter is one of degree.”

51. In our view, the New Evidence is clearly not relevant to this appeal and would have no material impact on the arguments made in support of Appeal Ground 1:

(1) First, the sole question in the appeal is whether the Review Committee had taken into account the Standby Facility in making the Delisting Decision. Plainly, evidence subsequent to the Delisting Decision (and the Judge’s Decision) cannot be relevant to the determination of this appeal. The applicant is not entitled to adduce evidence that was not placed before the decision-maker to support an ex post facto argument that the Review Committee was Wednesbury unreasonable (Yu Chee Yin v Commissioner of ICAC [2001] 2 HKC 91 at 104C).
(2) Second, in any event, for the reasons we have explained above, the Review Committee in arriving at the Delisting Decision did take into account the Standby Facility and had given justifiable and legitimate reasons to explain why the finance available under the facility for the stated intended purpose did not show that the applicant could improve its level of operation to an extent that could satisfy the Sufficient Level of Operations Requirement.

52. In the premises, there was no proper basis, whether under the principles of Ladd v Marshall or EBS v NTCD, to allow the New Evidence to be adduced in this appeal and we refused the application.

F. DISPOSITION

53. For all the above reasons, we dismissed the applicant’s appeal and the New Evidence Summons.

54. As a matter of record, we should also note that after we dismissed the applicant’s appeal at the hearing, Mr Pun orally further asked this Court to also dismiss Appeal Ground 2 and Appeal Ground 3 for the same reason as set out in the CA Judgment in case this appeal was to be taken further.

55. Mr Pun’s request, which was opposed by Mr Dawes, was not justified and inappropriate. As mentioned at the hearing (and above), Mr Pun had made it clear at paragraph 3 of his written submissions (and had confirmed the same in the hearing) that the applicant would only pursue Appeal Ground 1 in this appeal. In the circumstances, there was simply no basis for Mr Pun to ask this Court to also dismiss those appeal grounds which were expressly not pursued by Mr Pun.

56. To be fair to counsel, upon taking further instructions, Mr Pun eventually withdrew this application at the hearing.

57. We see no reasons why costs should not follow the event. Accordingly, we make an order nisi that the applicant shall pay the costs of the Exchange for this appeal and for the New Evidence Summons, and such costs shall be taxed if not agreed. This order nisi shall become absolute 14 days from today unless any of the parties applies by summons to vary it.

(Aarif Barma)	(Thomas Au)	(Godfrey Lam)
Justice of Appeal	Justice of Appeal	Justice of Appeal

Mr Hectar Pun, SC and Mr Anson Wong Yu-yat, instructed by Chiu & Co, for the applicant

Mr Victor Dawes, SC and Mr John Cheung, instructed by Hogan Lovells, for the putative respondent

[1] [2021] HKCFI 2427.

[2] Relevantly, the GEM Listing Rule 17.26(1) which took effect from 1 October 2019 reads: “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.”

[3] [2021] HKCA 1673.

[4] See the Court of Appeal judgment [2023] HKCA 705, referred to at [24] below.

[5] [45] of the Written Decision.

[6] [28] and [57] of the Written Decision.

[7] [47] - [49], [52] - [55] of the Written Decision.

[8] [52(2)] and [53] of the Written Decision.

[9] [24] - [25] of the Written Decision.

[10] See eg, paragraphs 30 and 31 of the Delisting Decision.

[11] Mr Pun and Mr Wong did not appear for the applicant before the Judge.

[12] See paragraph 3 of the Skeleton Argument of the applicant.

[13] See 2^nd Affirmation of Xiang Xin filed in support of the New Evidence Summons, at paragraph 7.

[14] China Trends Holdings Ltd v Stock Exchange of Hong Kong Ltd [2021] 3 HKLRD 554, [49].

[15] Paragraphs 30 and 31 of the Delisting Decision.

[16] See paragraphs 6 and 7(1) of 2^nd Affirmation of Xiang Xing; the Shares Transfer Agreement dated 19 July 2023; and the Disclosure of Interests on the website of the Exchange.

[17] See paragraph 7(3) of 2^nd Affirmation of Xiang Xing; the applicant’s 2022 Annual Report published on 24 July 2023 at p.3; and the letter from Yu Ming Investment Management Limited dated 4 August 2023.

[18] See paragraph 7(4) of 2^nd Affirmation of Xiang Xing; and the applicant’s 2022 Annual Report at p.20.

[19] See paragraph 7(5) of 2^nd Affirmation of Xiang Xing; and Yu Ming’s letter dated 4 August 2023.

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)

________________________

BETWEEN
	CHINA TRENDS HOLDINGS LIMITED	Applicant
	(中國趨勢控股有限公司)
	and
	THE STOCK EXCHANGE OF HONG KONG LIMITED	Putative Respondent

________________________

Before:

Hon G Lam and Chow JJA in Court

Dates of Written Submissions:	28 December 2022 and 11 & 20 January 2023
Date of Judgment:	9 June 2023

_______________

J U D G M E N T

_______________

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^stLadd 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.

(Godfrey Lam)
Justice of Appeal

(Anderson Chow)
Justice of Appeal

Mr Johnny Mok, SC, and Mr Tom Ng, instructed by Chiu & Co., for the Applicant

Mr Victor Dawes, SC, and Mr Martin Ho, instructed by Hogan Lovells, for the Putative Respondent

[1] See the Exchange’s announcement titled “New Review Structure for Listing Committee Decisions and Appointment of Inaugural Listing Review Committee” dated 5 July 2019 (Tab 7 of Exhibit “JRW-1” to the Affidavit of Jonathan Richard Witts dated 9 November 2022).

[2] See §7 of the Appellant’s submissions dated 28 December 2022 and §12 of the Respondent’s skeleton submissions dated 11 January 2023.

[3] §2 of the Appellant’s submissions.

[4] Ms Chi omits to mention that, in addition to 3 non-executive directors of the Exchange, the Listing Nominating Committee also includes the chairman and 2 executive directors of the SFC.

[5] §§13 and 14 of the Chi Affirmation.

[6] Tab 3 of Exhibit “JRW-1”, Chapter 3, §89.

[7] Tab 5 of Exhibit “JRW-1”, Chapter 2, §35.

[8] Tab 6 of Exhibit “JRW-1”.

[9] Tabs 8 and 9 of Exhibit “JRW-1”.

[10] See §13 of the Chi Affirmation.

[11] On 9 August 2021, the Court of Appeal refused to grant an interim injunction against the Exchange to proceed with the delisting process in respect of Blockchain Group Company Limited pending Cai’s appeal against the judgment of Coleman J ([2021] HKCA 1179).

[12] See Exhibit “CYSE-3” to the Chi Affirmation.

[13] See Form 86 dated 16 August 2021.

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

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