Starcoin Group Ltd v. The Stock Exchange of Hong Kong Ltd

HCAL 822/2026

[2026] HKCFI 3324

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 822 OF 2026

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REASONS FOR DECISION

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A.  Introduction

1.The Applicant (“Company”) is or was a company listed on the Putative Respondent, The Stock Exchange of Hong Kong Limited (“Exchange”).

2.By Form 86 dated 29 April 2026, the Company challenged the decision (“LRC Decision”) made by the Listing Review Committee (“LRC”) of the Exchange upholding the decision of the Listing Committee (“LC”) to suspend trading in the Company’s shares on the Main Board of the Exchange.

3.The Company sought an order of certiorari to bring up and quash the LRC Decision, or alternatively, an order of mandamus directing the Exchange to rescind, or alternatively to reconsider, the LRC Decision.

4.On 29 April 2026, upon ex parte application by the Company, I granted an ‘interim-interim’ injunction to restrain the Exchange from suspending the trading of the Company’s shares on the Main Board of the Exchange and otherwise act on or take any steps to implement the LRC Decision until the determination of the inter partes hearing for leave to apply for judicial review and interim injunctive relief, which hearing was fixed for 5 May 2026 (three working days later).

5.At the hearing, the Company was represented by Mr Jenkin Suen SC and Mr Paul Law of Counsel, and the Exchange was represented by Mr Victor Dawes SC and Mr Joshua Chan of Counsel.

6.The Company further sought an interim injunction to restrain the Exchange from suspending trading in the Company’s shares pending determination of the judicial review application.

7.At the end of the hearing, I refused the application for leave to apply for judicial review and accordingly denied the grant of any interim relief, with reasons to be handed down later.

8.These are my Reasons for Decision.

B.  Background

B.1  The Company

9.On 23 August 2000, the shares of the Company were listed on the Main Board of the Exchange, pursuant to Chapter 8 of the Listing Rules.

10.In 2014, Clear Rich international Limited, a wholly-owned subsidiary of the Company and Extrawell (BVI) Limited (“Extrawell”) entered into an agreement as purchaser and vendor respectively for the sale and purchase of 51% interest in the share capital of Smart Ascent Limited (“Smart Ascent”) at the consideration of HK$780,000,000 (“Acquisition”). Smart Ascent and its subsidiaries were engaged in the research and development (“R&D Business”) of an “oral insulin enteric-coated soft capsule, which is classified as a pharmaceutical product” for use on patients with type 2 diabetes (“Product”).

11.According to the Circular relating to the Acquisition dated 26 June 2014, Phase I, Phase II and Part A of Phase III of the clinical trials in relation to the Product had been completed, and it was expected that Part B of the Phase III clinical trials would be completed in March 2015, and commercialisation of the Product would commence in November 2015.

12.At all material times thereafter, the core business of the Company remained the R&D Business.

13.However, the development of the Product did not follow the announced timeframe. By August 2019, Part B of the Phase III clinical trials had not even commenced, the R&D Business did not generate any revenue in the financial year ended 31 March 2019, and the Company incurred net losses of HK$260 million for that financial year.

B.2  First Show Cause Letter

14.On 9 August 2019, the Exchange issued a “Show Cause” letter regarding the Company’s compliance with a new Rule 13.24 of the Listing Rules. In that letter:

(1)  The Exchange noted that the amended Rule 13.24 would take effect on 1 October 2019 and stated its preliminary view that, based on the published information then available, the Company might not comply with the amended Rule upon its effective date.

(2)  The Exchange stated that, absent written submissions showing cause as to compliance, the Company would be afforded a transitional period of 12 months from the effective date to take appropriate steps to comply with the amended Rule 13.24, failing which the Exchange might decide that the Company had failed to comply and suspend trading in its shares under Rule 6.01(3).

(3)  The Exchange stated it had “concerns on the progress and prospect of the R&D of the Product and whether the Company is able to commercialise the Product, being the sole product of the Research and Development Business”.

(4)  The Exchange further noted that the Group’s other business, namely the trading of beauty equipment and products, operated on a small scale and had generated only modest segment profits, while the securities-investment segment had been loss-making.

15.On 30 September 2019, the Company’s then solicitors (“MLC”), provided a written response addressing the Exchange’s concerns, namely that:

(1)  Phase III of the clinical trial comprised two parts. Part A, a multicentred, randomised, double-blinded and placebo-controlled trial of the Product in Type 2 diabetes, had already been completed in 2013 with satisfactory results. Part B was an extended clinical trial with a larger sample of patients.

(2)  Concrete steps were being taken to advance Part B notwithstanding delays, including (a) engagement of a contract research organisation in the PRC, (b) detailed milestone-based payment arrangements for the CRO linked to patient enrolment and completion of the experimental report, (c) renewal and extension in November 2018 of the Tsinghua University Collaboration Agreement, and (d) an updated timetable under which the Certificates from the then CFDA and commercialisation were expected by mid-2021 and January 2022 respectively, supported by an estimated budget of approximately RMB50 million for hospital engagement and trial supervision to be funded by advances from the Company and Extrawell.

(3)  The Company would be able to comply with the amended Rule 13.24, principally on the basis of the expected contribution from the R&D Business once the Product was commercialised.

(4)  The Product once commercialised was expected to generate revenue of RMB 4.3 billion, RMB 9.2 billion and RMB 9.5 billion in 2022, 2023 and 2024 respectively..

16.On 25 October 2019, the Exchange sent a further letter seeking additional information, to which MLC replied on 7 February 2020 with additional details of the clinical programme.

17.On 17 April 2020, MLC provided a further update to the Exchange, explaining that the outbreak of COVID-19 had severely disrupted operations at participating hospitals, leading to a temporary suspension of research projects including the clinical trial and delays in patient selection and enrolment. MLC further set out a revised timetable with expected completion of clinical testing in the fourth quarter of 2021 and launch of the Product in the fourth quarter of 2022 “subject to the coronavirus situation improving”.

18.On 26 May 2020, the Exchange informed the Company that it had no further comments about the Company’s compliance with Rule 13.24 (“May 2020 Letter”).

19.On 28 July 2023, the Company announced in its Annual Report that there would be further delays in the development and commercialisation of the Product due to a number of factors arising out of the COVID-19 pandemic.

20.On 25 June 2024, the Company issued a business update on the commercialisation of the Product, and reported that Part B of the Phase III clinical trial was underway. It was predicted that launch would be expected in the first quarter of 2026.

21.According to the CRO’s progress report dated 29 September 2025, 402 patients had been enrolled, and complete enrolment of all 650 patients was estimated by June 2025, with trial completion by December 2027.

B.3  Renewed Enquiry and Second Show Cause Letter

22.On 2 August 2024, the Exchange issued a letter requiring the Company to provide an explanation as to why the timetable for the development of the Product had been delayed.

23.On 7 August 2024, the Company responded and explained (a) the specific reasons leading to the deviation from the previous timetable, in particular how COVID-19 had affected the progress of the clinical trial (i.e. the impact of changes in patient habits after COVID-19), and (b) severe interference with sample drug production after the pandemic. The Company further provided an updated timetable for commercialisation of the Product.

24.On 7 July 2025, the Exchange issued an enquiry letter requesting inter alia information on the Company’s continued compliance with Rule 13.24.

25.On 15 July 2025, the Company announced proposed subscriptions under its general mandate to issue new shares to raise approximately HK$28 million for its general working capital. On 29 July 2025, the Exchange informed the Company that it would not grant listing approval for any issue of new securities, including the proposed subscriptions, unless and until the Company had satisfactorily demonstrated compliance with Rule 13.24.

26.On 26 September 2025, the Exchange issued a second “Show Cause” letter stating that it was not satisfied that the Company complied with Rule 13.24 and was minded to suspend trading in the Company’s shares under Rule 6.01(3).

27.On 30 July 2025, the Company’s replacement solicitors (“CLKW”), submitted a written response to the Exchange’s queries, and stated:

(1)  Based on the updated plan, completion of the clinical trial was now expected in the second quarter of 2027, with data analysis and outcome reporting to follow, and that commercialisation of the Product was deferred to the third quarter of 2028.

(2)  In parallel with the R&D Business, the Group had broadened its Trading Business beyond beauty products into pancreatic-health supplements.

(3)  The valuation report provided by Masterpiece Valuation Advisory Limited stated that the fair value of the Group’s intangible asset relating to the Product was approximately HK$1 billion.

28.On 14 November 2025, the LD issued its decision letter. It concluded that the Company had failed to maintain a sufficient level of operations and assets of a sufficient value to support its operations to warrant the continued listing of its shares under Rule 13.24, and decided that trading in the Company’s shares should be suspended under Rule 6.01(3). In doing so, the LD noted in particular that:

(1)  The Company’s operation scale has “remained low with its revenue generated from the Trading Business only. With the repeated delays of the clinical trial and commercialisation of the product, the Group has not recognised any revenue from the R&D Business…”

(2)  The Exchange further complained about the progress in commencing the clinical trial or commercialisation of the Product. It further questioned the Company’s ability to address these issues, and noted that the commercialisation of the Product would still be subject to the results of the clinical trials being able to meet the required standards and the grant of new medical certificate and manufacture permit from the National Medical Products Administration (“NMPA”).

B.4  The LC Decision

29.On 24 November 2025, the Company requested a review of the LD’s Decision to suspend trading in the Company’s shares under Rule 6.01(3).

30.On 24 December 2025, DLA Piper Hong Kong (“DLA”), the Company’s solicitors, filed its submissions to the LC which included the following:

(1)  The R&D Business for the development, clinical trial and ultimate commercialisation of the Product has been and will continue to be the Company’s core and principal business with sufficient operations, viability and sustainability.

(2)  Although not listed under Chapter 18A of the Listing Rules, the Company’s business model was in substance that of a biotech issuer and should be addressed by reference to the characteristics the Exchange itself has recognised for such companies, including lengthy development cycles and pre-revenue status during R&D.

(3)  Enrolment of all 650 patients was targeted to complete by June 2027, with trial completion by December 2027, data analysis and reporting in early 2028 and an anticipated product launch in the third quarter of 2028.

31.On 30 January 2026, following a review hearing held on 13 January 2026, the LC decided to uphold the LD’s Decision to suspend trading in the Company’s shares under Rule 6.01(3) (i.e. the LC’s Decision). In particular, the LC expressed uncertainty regarding the Company’s ability to comply with the proposed timetable, ensure commercialisation and generate the projected annual revenue respectively. The LC further noted that the Company’s forecasted gross profit was insufficient to cover its operating expenses, which cast doubt on the viability and sustainability of the businesses. As regards the Company’s submissions relating to its nature as a biotech company, the LC said as follows:

The Company submitted at the Review Hearing that the R&D Business was its only core business and that the Company was practically a Biotech Company as defined under Chapter 18A of the Listing Rules, and reiterated in its final oral submission that it was a Biotech Company. Given that the Company was not a Chapter 18A company and was not subject to the initial and ongoing listing requirements applicable to such companies, the Listing Committee did not consider that the Company’s submission would warrant the application of a different standard of compliance with the requirements of Rule 13.24.

C.  The LRC Decision

32.On 10 February 2026, the Company submitted a request for the LC Decision to be referred to the LRC for review pursuant to Rule 2B.06(2) of the Listing Rules.

33.On 2 March 2026, DLA filed its submissions on behalf of the Company, namely that:

(1)  The LC failed to give adequate consideration to the unique and direct impact of the COVID-19 pandemic on clinical trials, which are a core subject matter of the Company’s R&D Business.

(2)  The uncertainty noted in the LC’s decision was inherent in scientific R&D, particularly for first-in-class products such as the Product, rather than evidence of a lack of substantive business.

(3)  The Company further complained that the LC had prematurely dismissed its contentions that it was analogous to a Biotech company as defined under Chapter 18A of the Listing Rules.

(4)  Investors familiar with R&D-driven businesses understand and accept the risks of long development cycles, and the Company’s value lies in eventual commercial success rather than interim revenue. It further pointed out that it had consistently provided full and frank public disclosure of its performance and that, given the continued trading of its shares, the market evidently still perceived value in its business and that this market view should be respected.

34.On 31 March 2026, the LRC heard the Company’s application for a review of the LC Decision.

35.By letter dated 8 April 2026, the Company requested that:

(1)  The LRC indicate as a matter of priority, the anticipated timeline for handing down the LRC Decision;

(2)  The LD consent to withhold or stay any suspension of trading in the Company’s shares; and

(3)  The LRC stay the implementation of the LRC Decision for at least 7 business days to enable the Company to issue proceedings and seek such interim relief as may be necessary pending the resolution of the intended judicial review proceedings.

36.On 8 April 2026, the Exchange verbally informed the Company’s solicitors that it would accommodate a stay of 14 days after handing down of the LRC decision, so as to allow potential judicial review proceedings to be commenced. But on 13 April 2026, it seems that the Exchange resiled from that position pointing out that in the event that the LRC decision would be adverse to the Company, it would not be the Exchange’s practice voluntarily to withhold suspension. It identified the reasons why it would not generally be appropriate for the Exchange to refrain from implementing a suspension decision.

37.Those reasons included references to: (1) court authority that applications for judicial review do not generally operate as a stay of regulatory process; (2) that save in exceptional circumstances applications for interim relief in judicial review proceedings may only be granted if leave to apply for judicial review has been obtained; and (3) that suspension of trading is a temporary measure which may be lifted if the Company demonstrates compliance with rule 13.24 and/or succeeds in overturning any suspension decision by way of judicial review.

38.The letter also pointed out that, as at that time, no evidence or any specifics of any alleged irreparable damage to ongoing commercial negotiations and arrangements, capital raising efforts and market confidence had been provided. Further, it was unclear why the implementation of any suspension decision should result in irreparable harm to the Company, given that the Company had already announced the original decision to suspend trading in the Company’s shares and the fact that this was upheld by the Listing Committee. Further, the Company would be obliged to announce any further decision of the LRC to uphold the Listing Committee’s decision even if there were to be an intended application for leave to apply for judicial review of that decision.

39.By its written decision dated 28 April 2026 (i.e. the LRC Decision), the LRC upheld the LC Decision. The LRC’s findings included, amongst other things, as follows:

(1)  The LD admitted that the nature of the Company’s business is in biotech.

(2)  The Company had failed to demonstrate that it carried on a business with a sufficient level of operations and had assets of sufficient value to support its operations to warrant the continued listing of its securities, within the meaning of Rule 13.24.

(3)  In reaching this conclusion, the LRC found that (a) the R&D Business had “been stagnant for a substantial period of time”, (b) even if the Company achieved its target of enrolling 433 patients by June 2026, it would fall “well short of the 650 target” and no plans or details had been provided for recruiting the remainder, (c) there was “insufficient certainty” as to whether the clinical trial would be completed by the end of 2027 and whether approval from the NMPA would follow, and (d) the supplemental businesses remained preliminary and had not generated meaningful revenue.

(4)  The Company’s submission that a different standard of compliance with Rule 13.24 should apply to biotech companies was rejected, and instead the LC’s finding was accepted. The LRC stated that Chapter 18A issuers are also required to demonstrate compliance with Rule 13.24 by virtue of Rule 18A.09, and that the remedial period for Chapter 18A issuers is 12 months compared to 18 months for Chapter 8 issuers.

(5)  The Company would have 18 months to remedy the matters giving rise to its non-compliance with Rule 13.24, failing which the Exchange may proceed to cancel the Company’s listing.

D.  Relevant Framework

40.The relevant applicable framework is found in the Listing Rules and regulations promulgated by the Exchange.

41.The overarching principle of the Listing Rules is to reflect currently acceptable standards in the market place, and to ensure investors have and can maintain confidence in the market with reference to fairness and equality: see Rule 2.03.

42.The Exchange defines “Biotech” as “the application of science and technology to produce commercial products with a medical or other biological application. A “Biotech Company” is “a company primarily engaged in the research and development, application and commercialisation of Biotech Products”.

43.Under Rule 6.01, the Exchange may at any time direct a trading halt or suspend dealings in any securities or cancel the listing of any securities in such circumstances and subject to such conditions as it thinks fit, whether requested by the issuer or not. Rule 6.01(3) further provides that the Exchange may also do so where the Exchange considers that the issuer does not carry on a business as required under Rule 13.24.

44.Rule 18A.03 provides for certain requirements which must be satisfied by companies who have applied for listing under Chapter 18A:

An applicant that has applied for listing under this Chapter must:-

(1)  Demonstrate that it is both eligible and suitable for listing as a Biotech Company;

(2)  Have an initial market capitalisation at the time of listing of at least HK$1.5 billion;

(3)  Have been in operation in its current line of business for at least two financial years prior to listing under substantially the same management; and

(4)  Ensure that it has available sufficient working capital to cover at least 125% of the group’s costs for at least 12 months from the date of publication of its listing document (after taking into account the proceeds of the new Company’s initial listing). These costs must substantially consist of the following:

(a)  General, administrative and operating costs (including any production costs); and

(b)  Research and development costs.

Note 1: The Exchange would expect that the issuer would use a substantive portion of the proceeds from its initial listing to cover these costs.

Note 2: Capital expenditures do not need to be included in the calculation of working capital requirements for the purpose of this rule. However, where capital expenditures are financed out of borrowings, relevant interest and loan repayments must be included in the calculation. For the avoidance of doubt, Biotech Companies must include research and development costs, irrespective of whether they are capitalised, in the calculation of working capital requirements for the purpose of this rule.

45.Rule 13.24 is as follows:

(1)  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.

Note: Rule 13.24(1) is a qualitative test. The Exchange may consider an issuer to have failed to comply with the rule in situations where, for example, the Exchange considers that the issuer does not have a business that has substance and/or that is viable and sustainable.

The Exchange will make an assessment based on specific facts and circumstances of individual issuers. For example, when assessing whether a money lending business of a particular issuer is a business of substance, the Exchange may consider, among other factors, the business model, operating scale and history, source of funding, size and diversity of customer base and loan portfolio and internal control systems of the money lending business of that particular issuer, taking into account the norms and standards of the relevant industry.

Where the Exchange raises concerns with an issuer about its compliance with the rule, the onus is on the issuer to provide information to address the Exchange’s concerns and demonstrate its compliance with the rule.

(2)  Proprietary trading and/or investment in securities by an issuer and its subsidiaries (other than an issuer which is an investment company listed under Chapter 21) are normally excluded when considering whether the issuer can meet rule 13.24(1).

Note: This rule would not normally apply to proprietary securities trading and/or investment activities carried out in the ordinary and usual course of business by a member of an issuer’s group that is:

(a)  a banking company (as defined in rule 14A.88);

(b)  an insurance company (as defined in rule 14.04); or

(c)  a securities house (as defined in rule 14.04) that is mainly engaged in regulated activities under the SFO. It should be noted that proprietary securities trading and/or investment is not a regulated activity under the SFO and accordingly, this exemption is not available where proprietary securities trading and/or investment constitutes a significant part of the business of the securities house.

46.In China Trends Holdings Ltd v The Stock Exchange of Hong Kong Ltd [2021] 3 HKLRD 554, the Court of Appeal helpfully analysed the application of GEM Rule 17.26, which is identical in form to Rule 13.24. The principles might be summarised as follows:

(1)  The rule requires issuers to maintain a sufficient level of operations or assets of sufficient value to warrant the continued listing of their securities. Without quantitative criteria for sufficiency, this rule calls for a qualitative test and is assessed based on the specific facts and circumstances of individual cases.

(2)  Rule 13.24 is intended to maintain overall market quality. Issuers that fail to meet this rule may be ‘blue sky companies’ that would attract speculation on their possible acquisitions in the future and lead to opportunities for market manipulation, insider trading and unnecessary volatility in the market which are not in the interest of the investing public.

(3)  To balance public shareholders’ ability to access the market to trade in the securities with the need to maintain market quality, the Exchange will only suspend trading in an extreme case. When making the assessment, the Exchange takes into account the current regulatory concerns and acceptable standards in the market.

(4)  Cases with the following characteristics are treated as extreme cases warranting suspension:

(a)  A very low level of operating activities and revenue;

(b)  The current operation does not represent a temporary downturn and the issuer has been operating at a very small scale and incurring losses for years; and

(c)  The assets do not generate sufficient revenue and profits to support a continued listing.

(5)  Rule 13.24 does not merely involve a ‘counting exercise’ under which the assets and revenue of the issuer are measured against a quantitative or comparative benchmark, but rather a qualitative assessment with reference to the specific facts and circumstances of each issuer. The ultimate question is whether the issuer can demonstrate, by reference to its level of operations or assets, that it has a viable and sustainable business so as to warrant continued listing.

(6)  The fact that an issuer’s assets exceed its liabilities does not mean that it automatically complies with Rule 13.24. Likewise, the fact that the issuer’s business turned a net profit is also not necessarily sufficient.

(7)  Once suspended, the issuer is given a remedial period to submit a resumption proposal to demonstrate that it has a viable and sustainable business to re-comply with Rule 13.24. If the issuer fails to do so, it may be delisted according to the delisting procedures under Rules 9.14 and 9.14A.

47.Whether the threshold of viability and sustainability warranting continued listing has been met is a matter of professional judgment for the members of the LD, LC and LRC. In the absence of any error of law or failure in taking account of relevant matters or taking irrelevant matters into account, the court should not intervene with such professional judgments: see China Trends at §49.

48.As the Court of Appeal held at §51, there is a great deal of flexibility in the application of Main Board Listing Rule 13.24. As stated, the assessment of whether the obligation under Main Board Listing Rule 13.24 has been satisfied is primarily a matter for the relevant committees of the Exchange, which comprise experienced professionals in various aspects relevant to the operations of the Exchange. This approach is in line with the general principle that the Court should accord a wide margin of discretion to the decision of a professional body where the decision in question is based on an exercise of professional judgment and expertise, and should not interfere in such decision save in a compelling case.

E.  Intended Grounds of Review

49.The Company put forward six intended grounds of review, being:

(1)  The Exchange misconstrued Rule 13.24 by not applying the qualitative standard required by that Rule in a way that properly reflects the recognised characteristics of a genuine pre-revenue biotech R&D business, and instead treating the absence of current revenue and long development timelines as effectively determinative of non-compliance (“Misconstruction of Rule 13.24 Ground”).

(2)  As the Exchange operates, in practice, a “different standard of compliance” for Chapter 18A Issuers, it should have disclosed that approach. The failure to do so is said to have deprived the Company of the ability to make informed representations by reference to it and to plan and structure its business accordingly (“Failure to Publish Policy Ground”).

(3)  The Exchange erred in failing to apply the “different standard of compliance” to the Company on the arbitrary basis that it is not a Chapter 18A issuer (“Different Standard Ground”).

(4)  The Exchange failed to take into account plainly relevant considerations (“Relevant Considerations Ground”).

(5)  The LRC’s Decision was so unreasonable that no reasonable decision-maker, properly directing itself, could have reached it (“Wednesbury Unreasonableness Ground”).

(6)  The May 2020 Letter, gave rise to a legitimate expectation, which was breached by the LRC’s Decision (“Legitimate Expectation Ground”).

50.Though each of the intended grounds can be considered separately, there is considerable overlap amongst them. Though I may not expressly draw attention to the fact when dealing with each ground, I take into account the various overlapping aspects in my analysis.

F.  ‘Interim-Interim’ Stay

51.Before I turn to consider the individual grounds of review, I can rehearse my reasons for granting the ‘interim-interim’ stay of the LRC Decision between 29 April 2026 and 5 May 2026 (which reasons I also gave ex tempore).

52.I noted that the LRC Decision was handed down shortly before 5 pm on the 28 April 2026. Within an hour after that, the Exchange required the Company to issue a letter requesting suspension of its own shares with effect from 9 am on 29 April 2026, which the Company understood is an ordinary requirement, being the direct consequence of the decision to suspend trading under listing rule 6.01(3). Obviously, the Company chose not to issue that letter, but instead made the application for ‘interim-interim’ relief – which, if not granted, and if the Company continued not to request suspension of its own shares, then the suspension would take effect from essentially the opening of market trading hours that morning.

53.In previous cases, I have dealt with the relevant principles applicable to applications of this nature. In China Trends Holdings v The Stock Exchange of Hong Kong [2021] HKCFI 2427, I identified the applicable principles in §§36 to 44. I identified that:

The ultimate test is for the court to take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense of granting an injunction to a party who fails to establish his right at the trial or substantive hearing (or would fail if there was a trial substantive hearing), or alternatively in failing to grant an injunction to a party who succeeds (or who would succeed) at the trial or substantive hearing.

54.But I also pointed out that each case will turn on its own particular set of facts. I further noted that (1) it is only in exceptional circumstances that interim relief would be granted before the grant of leave to apply for judicial review has been obtained, and (2) when the proposed injunctive relief would have the effect of stalling or going in a contrary direction to what the primary authority in a given regulatory domain has established in good faith based on its assessment of the public interest, the Court would be exceptionally slow to intervene by way of relief.

55.Though that case was concerned not with the ‘interim-interim’ position, it seemed to me that broadly the ultimate test I referenced in that decision may be applicable in the circumstances of an application for an ‘interim-interim’ relief.

56.Further, I had canvassed the principles applicable in that situation in my subsequent decision of Chong Kin Group Holdings Limited v The Stock Exchange of Hong Kong Limited [2022] HKCFI 1439. There, I thought it was unattractive, where trading in the company’s shares had already been suspended, to require the lifting of the suspension for a short period, when the suspension might be reimposed if I were either (a) to refuse to grant leave to apply for judicial review, or (b) to grant leave but decline to order any interim injunctive relief pending the substantive application.

57.In that case, I declined to grant any ‘interim-interim’ relief on the urgent basis, in part because I would be able to deal with the leave application and, if still relevant, an application for interim injunctive relief on an early date after only one further trading day. I noted that dealing together with an application for leave to apply for judicial review and the related application for interlocutory injunctive relief would be in accordance with my usual practice.

58.In the particular circumstances of this case, the Company’s shares had not been suspended already, and there was therefore a degree of difference between the situation in this case and that in the Chong Kin Group Holdings Limited case. However, similarly to that case, I was able to deal with a substantive leave application, and if relevant, an application for interim injunctive relief on an inter partes basis on an early date, after (only) three further days of trading.

59.I did not think that the proposed grounds of judicial review set out in a draft Form 86 were necessarily strong potential grounds for judicial review. But it did seem to me that they identified sufficient basis for me to exercise my discretion on the relevant balance, including on that ultimate test, to grant a short period of ‘interim-interim’ injunctive relief pending my ability to consider matters more fully with the benefit of inter partes argument at a hearing which could take place in the very near future.

60.I also took into account that, on the basis of what I had been told, the Exchange appeared originally to have indicated that it would be content to allow a relatively short, perhaps 14-day period after the provision of the LRC Decision to allow the Company to consider the possibility of judicial review proceedings, and for there to be a stay of that decision during that period. Although the Exchange subsequently appeared to have changed its mind, that was perhaps understandable prior to being able to see either the LRC Decision or any suggested grounds for review of that decision.

61.I also took into account (1) that concerns about the Company’s compliance with rule 13.24 have existed since 2019, though those concerns may have been allayed for a period of time, and (2) that but for the bringing of the applications for review up to and including the LRC, the suspension would have taken effect on the 26 November 2025.

62.Therefore, it seemed to me that the balance was in favour of the grant of a very short period of ‘interim-interim’ relief. By reference to the ultimate test, that seemed to carry the lower risk of injustice.

G.  Ground 1: Misconstruction of Rule 13.24 Ground

63.The Company submitted that the Exchange erred in law in its construction and application of Rule 13.24, by failing to apply the qualitative standard mandated by that rule in a manner that properly accommodates the recognised characteristics of a genuine pre-revenue biotech R&D business.

64.Mr Suen submitted that a proper application of Rule 13.24 to a genuine biotech R&D issuer requires the decision-maker to ask whether, taking the accepted features of such biotech R&D issuers into account, the issuer has a viable and sustainable business model and sufficient assets and funding to support that model, rather than to treat the absence of those factors as evidence of non-compliance.

65.Mr Suen asserted that the error manifested in three ways:

(1)  The LRC’s assessment of the Company’s compliance with Rule 13.24, which is based on the “current status of the Company and the existing scale of its business”, is ill-suited and misleading in the context a genuine pre-revenue biotech issuer, whose core business necessarily consists in pharmaceutical research and development rather than revenue-generating operations.

(2)  The LRC conflated inherent scientific and regulatory uncertainties in the clinical trial process with “non-viability”, which is fundamentally inconsistent with the Exchange’s own published understanding of biotech companies.

(3)  The LRC disregarded or failed to properly weigh certain factors that would (in Mr Suen’s submission) have demonstrated “positive indicators of viability and sustainability that are particularly probative in the biotech context”, namely that (a) the Company was conducting a live Phase III clinical trial and had enrolled 413 of the 650 patients required, (b) there was a detailed timetable projecting trial completion by December 2027 and filings in NMPA thereafter, (c) there were continued collaboration agreements with Tsinghua University and Johns Hopkins University School of Medicine (“Johns Hopkins”), (d) a funding back-stop from the Company’s largest shareholder specifically directed to completing the trial and commercialisation, and (e) an independent valuation attributing a value of approximately HK$1.076 billion to the Product as at March 2025.

66.I accept Mr Suen’s submission that the Exchange has recognised that pre-revenue biotech companies exhibit distinctive characteristics that distinguish them from conventional revenue-generating businesses. It is well recognised by the Exchange that biotech companies are in many instances without revenue or profit, and there is a level of uncertainty as to whether those companies will in the future be able successfully to commercialise its products: see for example the HKEX June 2017 Concept Paper on New Board.

67.However, simply because the Exchange recognises such a distinction does not mean it applies a different standard to those companies. Indeed, it seems to me that biotech companies must nevertheless fulfil the minimum requirements to list on the Main Board.

68.Mr Dawes proposed that the proper approach to be taken was that, as the Company is in fact not a Chapter 18A issuer, other parts of the listing rules, including Rule 13.24, are still applicable. Therefore, the best judge would be the decision-maker himself, i.e. the LC, LD and/or the LRC. As canvassed above, a key element of Rule 13.24 is that the Exchange must make the assessment based on “specific facts and circumstances” of the relevant issuer. There is no reason to think that the LRC Decision did not do this. There is no basis supporting the Company’s submission that the LRC disregarded the nature of its business, and I therefore agree that Ground 1 effectively precedes on a factual premise which is simply untrue.

69.As to the second point above, Mr Suen pointed to the LRC’s decision that there was insufficient certainty as to (a) whether the Company would complete the clinical trial by the end of 2027 and (b) whether approval from NMPA would be forthcoming at the conclusion of the clinical trial.

70.On the other hand, Mr Dawes contended that there was no evidence that the LRC applied such an approach. Mr Dawes further submitted that the Company’s reformulated argument that the LRC failed to take proper account of and factor in the recognised features of biotech businesses” was in the realm of a merits challenge, rather than one which related to the construction of Rule 13.24.

71.I note that it was said at §21(e) of the LRC Decision that:

While the Company is not listed under Chapter 18A of the Listing Rules, its business model is substantively identical to an R&D intensive biotech company. Traders who are accustomed to trading shares of R&D-driven businesses should understand and accept the risks of long development cycles and should clearly recognise that the value of the Company lies in eventual commercial success (which is not, and cannot be, guaranteed), not interim revenue prior to the successful development of the product. Accordingly, the Company submitted that a company whose value largely derives from its R&D potential should be assessed using principles aligned with that business reality.

72.It is evident the Exchange explicitly considered the Company’s business nature and found it was “substantively identical” to Chapter 18A issuers. I accept that the Exchange recognises that there is a difference between regular issuers on one hand and long-term pre-revenue biotech companies on the other hand. However, that of itself does not imply any “alternative standard” which applies to the latter.

73.Mr Dawes argued that the basis of the LRC’s decision, being uncertainty as to when the product would be commercialised and the size of the Company’s liabilities, does not mean it disregarded the nature of the Company’s business. I agree. Indeed, there must come a time where it might reasonably be concluded that the business is no longer viable and/or sustainable. Mr Suen also properly acknowledged that the Company does not contend that a biotech business could never properly be found wanting under Rule 13.24, or that the Exchange must wait until commercialisation is demonstrably impossible.

74.Irrespective of the above, it was further held at §31(f) of the LRC Decision that the biotech nature of the Company’s business did not warrant the application of a different standard of compliance with the requirements of Rule 13.24. Rule 13.24 applies irrespective of the Chapter under which the issuer is listed.

75.Ultimately, as Mr Dawes submitted, once it is clear there is no such separate regime or standard regarding biotech companies, Ground 1 falls and what is left are factors of weight, which weighing exercise was for the LRC to perform and which largely falls outside of this Court’s supervisory jurisdiction.

76.Ground 1 is not reasonably arguable with any realistic prospect of success.

H.  Ground 2: Failure to Publish Policy Ground

77.Ground 2 is premised on the basis that there exists a different standard which applied to Chapter 18A companies in relation to compliance with Rule 13.24, which was allegedly not published, articulated or otherwise disclosed.

78.There is no general duty to publish relevant policies, but where the power is conferred in terms capable of giving rise to genuine doubts as to the basis of its exercise and thus preventing or significantly hampering the making of such representations in particular cases, a public law duty may arise requiring the publications or disclosure of relevant criteria or reasons: see Ghulam Rbani v Secretary for Justice [2014] 17 HKCFAR 138 at §77.

79.Mr Suen submitted that there is in practice a different standard of compliance applied to Chapter 18A biotech issuers, and the Exchange therefore operates an “unpublished two-tier regime” as between Chapter 18A biotech issuers and other issuers. Had this alleged regime been articulated, he said, affected issuers would be able to understand the criteria and make sufficient representations as to their application.

80.Mr Suen further argued that the distinction drawn is arbitrary in effect. As Chapter 18A was introduced in 2018, the Exchange is essentially drawing a distinction “based solely on the historical timing and chapter of listing” rather than any substantive difference in the nature of the business. I accept that the Company was listed well before the existence of Chapter 18A, and there is no apparent mechanism allowing for the Company to re-designate itself as a Chapter 18A issuer.

81.However, Rule 13.24 is generally applicable to all issuers listed under the Main Board. As I accepted earlier, there is no such different standard which is applicable to Chapter 18A issuers. Notwithstanding that, the Company is not a Chapter 18A issuer. Therefore, the question of whether there is a different standard which applies to Chapter 18A issuers is simply irrelevant and academic.

82.The contention that the LRC’s reasoning necessarily presupposes the existence of a different standard of compliance applicable to Chapter 18A issuers is also flawed. I accept Mr Dawes’ submission that, properly understood, the LRC was simply rejecting the Company’s argument that it should be treated in the same way as an issuer listed under Chapter 18A. The LRC simply decided that the Company was not a Chapter 18A issuer, and therefore the standard applicable to such issuers (whatever that might be) did not apply to the Company.

83.Ground 2 is not reasonably arguable with any realistic prospect of success.

I.  Ground 3: Different Standard Ground

84.Ground 3 is essentially an extension of or alternative to Ground 2, in that if the alleged alternative policy for Chapter 18A issuers existed, the Exchange erred in law by refusing to apply it to the Company even though it was carrying on a biotech-type research and development business.

85.Mr Suen submitted this was a matter of form rather than substance, in that the alleged policy must be directed at the nature of the business being assessed instead of the chapter under which the issuer is originally listed.

86.Mr Suen pointed to the fact that the Company, which has been listed since 2000 and has carried on its R&D Business since the 2014 Acquisition, could not possibly have listed under Chapter 18A as it was only introduced in April 2018. But there is force to Mr Dawes’ argument that the fact there is no mechanism for an issuer to re-designate itself as a Chapter 18A company is neither here nor there.

87.I also agree with Mr Dawes that one cannot “mix and match” different parts of the regulatory regime on the basis that the Company’s business is “similar in nature” to a Chapter 18A biotech company. Simply put, it either is or isn’t a Chapter 18A company. Even so, there is no such different policy that applies to Chapter 18A issuers. As such, even if in principle the Company were in substance a Chapter 18A company, it must nevertheless satisfy the requirements of Rule 13.24.

88.The Company’s challenge under Ground 3 simply falls away in the absence of any alleged special policy.

89.Ground 3 is not reasonably arguable with any realistic prospect of success.

J.  Ground 4: Relevant Considerations Ground

90.The Company submitted that the LRC failed to take into account relevant considerations when assessing the Company’s compliance with Rule 13.24.

91.Mr Suen pointed to five specific factors which he alleged the Exchange neglected to consider, being:

(1)  The recognised characteristics of biotech businesses.

(2)  Proper weight being given to the concrete indicators of the continuing viability of the R&D Business, particularly the renewal of the collaboration agreement with Tsinghua University and the new collaboration agreement with Johns Hopkins.

(3)  The impact of COVID-19 on the clinical trial, namely the disruption of patient recruitment and retention, disruption of sample drug production and generally rendering compliance with the pre-pandemic timetable a practical impossibility.

(4)  The Exchange’s own prior assessment of the Company’s compliance with Rule 13.24 as reflected in the May 2020 Letter.

(5)  The circular effect of the Exchange’s own decision in blocking practical capital-raising channels when assessing financial sustainability, i.e. refusing to grant listing approval for a proposed subscription of approximately HK$28 million in new shares, then relying in part on concerns about the Company’s financial sustainability and access to funding which arose in part from that earlier refusal when concluding Rule 13.24 was not complied with.

92.As to the impact of COVID-19, Mr Suen contended the LRC only engaged with this factor on a superficial level, and treated the delays as if they were of the Company’s own making rather than an extraordinary external event completely outside of the Company’s control.

93.On the other hand, Mr Dawes submitted that this was in reality a challenge to the merits of the decision, rather than any public law dispute. I agree.

94.Anyway, the LRC did look at the characteristics of the Company.

95.I further note that the Company did not mention the collaboration agreements with Tsinghua University and Johns Hopkins in its own submissions to the LRC. Mr Suen’s argument is therefore a retrospective one, in that the LRC could not have possibly taken it into consideration where it was not aware of such a factor in the first place.

96.As to the alleged failure to consider COVID-19, it is clear the LRC took this into account when considering the R&D Business. Although brief, the LRC found at §31(c) of the LRC’s Decision that “even taking into account the effects of the COVID-19 pandemic, the [LRC] considered that limited progress had been made on the clinical trial since the 2019 Show Cause Letter”. I also accept Mr Dawes’ point that it was plainly open to the LRC to decide whether to take this factor into account as well as the weight to be afforded.

97.Overlapping with Ground 6, the Company’s submission made as to the Exchange’s 26 May 2020 Letter seems to me to be based upon a misreading of that letter.

98.Lastly, as to the alleged contradiction in assessing the Company’s financial sustainability, it is correct that the Exchange took into consideration the Company’s assertion that refusal to grant approval for the issue of new shares severely restricted the Company’s financial ability. However, this was merely one factor amongst many others that was considered by the Exchange when it reached that conclusion.

99.As stated above, this was a holistic exercise. The Exchange was entitled to examine how the assets have actually been deployed in the past and the likely use of those assets in the future in connection with the actual business. Equally, it is relevant to consider the Company’s net losses and negative operating cash flows from previous years: see China Trends at §55.

100.More importantly, it was the LRC’s finding that the Company could not demonstrate its core business (i.e. the R&D Business) was viable and/or sustainable, especially in light of its lengthy delays, failure to adhere to projected timetables and general perception of stagnation.

101.On the Company’s own case as to its “core” R&D Business, that had been effectively stagnant for more than 11 years. At the time of the Acquisition in July 2014, it was projected that Part B of the Phase III clinical trials would be completed by March 2015. However, even as at the date of the LRC Decision in April 2026, the Company had not even completed the enrolment of patients for Part B of the Phase III clinical trials. As Mr Dawes put it, the fact that an issuer is engaged in research and development in the biotech field does not mean it can standstill indefinitely without falling foul of Rule 13.24.

102.As to overall financial sustainability, the LRC also found the Company’s supplemental businesses were insufficient to generate sufficient working capital to support the R&D Business (and therefore the overall economic future of the Company itself), and its assets were of insufficient value to support its operations. I also find force in Mr Dawes’ argument that the Exchange did not actually deny the Company the ability to raise capital, and it was open to the Company to raise funds by other means.

103.Ground 4 is not reasonably arguable with any realistic prospect of success.

K.  Ground 5: Wednesbury Unreasonableness Ground

104.The Company’s argument under Ground 5 is one of Wednesbury unreasonableness. It is trite that a decision is Wednesbury unreasonable or irrational in circumstances where the decision is such that no reasonable authority could ever have come to it. It is also trite that establishing irrationality is a high hurdle to overcome, although for the purposes of a leave application one only needs to demonstrate that the argument of irrationality is reasonably arguable.

105.One facet of irrationality takes place where a decision-maker fails to adhere to the principle of equality, as illustrated in Director of Immigration v QT (2018) 21 HKCFAR 324 at §22-23:

22. The principle of equality is an important aspect of such rationality. Writing for the Privy Council in Matadeen v Pointu, Lord Hoffmann stated:

“... treating like cases alike and unlike cases differently is a general axiom of rational behaviour. It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational.”

23. Thus, as Baroness Hale of Richmond noted, discrimination is the antithesis of rational equal treatment: “Treating some as automatically having less value than others” is “the reverse of the rational behaviour we now expect of government and the state”. Violation of the principle of equality may therefore sustain an application for judicial review on the ground of Wednesbury unreasonableness.

106.Mr Suen submitted that Rule 13.24 is directed at “blue sky” companies, i.e. companies with where public investors have no or little information about their business plans and prospects, leaving much room for the market to speculate on their possible acquisitions and thus creating opportunities for market manipulation. As such, Mr Suen argued it was irrational for the LRC to treat the Company as if it were a “blue sky” company.

107.However, I agree with Mr Dawes that the Company’s argument incorrectly presupposes that only “blue sky” companies fall foul of Rule 13.24. But, as he said, that confuses the paragraph or typical case of breach with the test or definition for breach.

108.Mr Suen further relied on the following four factors as evidence of irrationality:

(1)  The LRC failed to appreciate or take into account the biotech nature of the Company.

(2)  The Exchange applied or acknowledged a different standard of compliance under Rule 13.24 for Chapter 18A issuers, but refused to extend that standard to the Company as it was listed under Chapter 8.

(3)  The unreasonableness is reinforced by the LRC’s failure to consider certain factors, including the alleged recognised characteristics of biotech businesses, collaborations with Tsinghua University and Johns Hopkins, the impact of COVID-19, the Exchange’s prior confirmation of compliance, and the circular effect of the Exchange’s own actions when examining the Company’s financial sustainability.

(4)  The LRC did not engage with the question of alternatives to immediate suspension, and therefore reflects a failure to weigh the severity of suspension against its (allegedly) marginal regulatory benefit in the Company’s case.

109.With respect, it seems to me that the factors above are essentially reruns of the previous grounds, namely the Different Standard Ground and the Relevant Considerations Ground. Those arguments, as I previously held, have no merit, nor do they benefit from a reassessment in the context of irrationality.

110.Moreover, as was my finding above, this seems to me to be an indirect challenge to the merits, albeit framed as an irrationality challenge. At its core, the Company is essentially saying those factors should have led the Exchange to conclude that the Company’s business was viable and sustainable. The merits on the weighing exercise was a matter for the LRC, deploying its combined experience and expertise.

111.The Form 86 went further to argue that the failure to consider alternatives to suspension went to issues of proportionality. It was submitted that suspension of trading is the most drastic step second only to delisting, and there were less restrictive alternatives available. Therefore, the Company submitted, a reasonable decision-maker would at least have considered whether a less drastic measure was sufficient to protect investors. However, this is no longer a relevant consideration where I have found the Company’s claim of irrationality is unsubstantiated.

112.Ground 5 is not reasonably arguable with any realistic prospect of success.

L.  Ground 6: Legitimate Expectation Ground

113.In the absence of any overriding reason of law or policy excluding its operation, situations may arise in which persons may have a legitimate expectation of a substantive outcome or benefit, in which event failing to honour the expectation may, in particular circumstances, result in such unfairness to individuals as to amount to an abuse of power justifying intervention by the Court. Generally, speaking, a legitimate expectation arises as a result of a promise, representation, practice or policy made, adopted or announced by or on behalf of a public authority: see Ng Siu Tung and others v The Director of Immigration and others (2002) 5 HKCFAR 1 at §92.

114.To succeed in a legitimate expectation challenge, one must first establish the existence of a legitimate expectation. That expectation may arise from a promise or representation, which must be clear and unambiguous. Where a representation is perhaps reasonably susceptible of competing constructions, the correct approach is to accept the interpretation applied by the public authority, subject to the application of the Wednesbury unreasonableness test.

115.The May 2020 Letter is in full as follows:

Based on the information provided, we have no further comments about the Company’s compliance with Rule 13.24. Nevertheless, we would like to draw your attention that Rule 13.24 imposes a continuing listing obligation on a listed issuer. We will closely monitor the status of the Company including the progress of the Plan and the development of the Product. Should there be any new developments that would otherwise raise concerns on the Company’s compliance with Rule 13.24 in the future, we will take appropriate actions as and when necessary.

Further, we note that the Company has formulated the Plan with specific timetable for the clinical trial and commercialization of the Product. To enable its shareholders to make a properly informed assessment of the Company, the Company should provide periodic and timely update about the progress of the Plan and the development of the Products by way of announcements or disclosure in the Company’s financial reports.

116.It is the Company’s suggestion that the above was a clear, unambiguous and unqualified representation that the Company’s business model was compliant with Rule 13.24. Mr Suen submitted that the Company’s business model has not materially changed since May 2020. Mr Suen further argued that the LRC accepted, or at minimum did not dispute, that there had been no substantive changes in the R&D Business or its financial position since 2019. Secondly, Mr Suen argued the “further delays” indicated in the LRC’s Decision are attributable to COVID-19 and its aftermath, which he said the Exchange could not rely on, given it was already aware of that factor and had taken it into account before issuing the May 2020 Letter.

117.With respect, I think Mr Suen has conflated “business” with “business model”. Rule 13.24 requires the issuer to show the business is viable and sustainable, rather than the business model. Indeed, there may be no material change to the business model of an issuer, but its substantive business (i.e. its commercial activity) may, for a variety of reasons, face ups and downs.

118.Reading the May 2020 Letter in its ordinary wording, there is no such representation as alleged by the Company. To the contrary, the Exchange expressly stated it would continue to monitor the status of the Company, and more importantly would take “appropriate action” where there were developments (or perhaps a lack thereof) that would “raise concerns” as regards to compliance with Rule 13.24. That is all the more so true where the Company’s main business (being the R&D Business) is, after five years following the May 2020 Letter, still speculative and in a pre-revenue stage. That would certainly warrant the aforementioned concerns of the Exchange. In any case, any potential dispute as to interpretation lies in favour of the Exchange.

119.Ground 6 is not reasonably arguable with any realistic prospect of success.

M.  Refusal of Leave and Interim Relief

120.For the reasons given above, I dismissed the Company’s application for leave to apply for judicial review. The Company failed to identify any reasonably arguable public law ground of review with any realistic prospect of success. A number of the intended grounds of review also seemed to me to be challenges as to the merits of the decision, which is plainly within the purview of the decision-maker. This is all the more so in light of China Trends.

121.Where leave to apply for judicial review has been refused, there was no basis upon which to grant any interim relief. This is because there will not be any substantive hearing, so that there is no interim period between the date of the application for that relief and any substantive hearing.

N.  Costs

122.I reserved the question of costs to be dealt with in this Reasons for Decision.

123.As to costs, I see no reason why they should not follow the event, and therefore I order the Company to pay the Exchange’s costs, to be taxed if not agreed. Nevertheless, I will make this order first on a nisi basis, which will become absolute after 14 days unless a prior application is made to vary this order. Any variation application will be dealt with on paper.

Mr Jenkin Suen SC and Mr Paul Law, instructed by DLA Piper, for the Company

Mr Victor Dawes SC and Mr Joshua Chan, instructed by MinterEllison, for the putative respondent