JADE ELECTRONICS CO LTD v. CHINA SILVER DRAGON GROUP LTD

HCCW 283/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 283 OF 2003

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J U D G M E N T

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1. On 26 March 2004, I made a winding-up order against China Silver Dragon Group Limited, formerly known as Cedar Base Electronic (Group) Limited ("the Company"), on a creditor's petition that the Company is unable to pay its debts.

2. Before the winding-up order is sealed and perfected, and on 30 March 2004, a notice of motion was issued jointly by the Company and a contributory, Duan Chuan Liang, to rescind the winding-up order. This court has inherent jurisdiction to rescind the winding-up order before it is sealed and perfected.

3. The grounds upon which the court will act to rescind a winding-up order where it is found that there is no dispute on the petitioning debt and the object of rescission is to secure the dismissal of the winding-up petition are well established, and they are as follows:

(1) the petitioning debt and sums owed to all supporting creditors have been paid or arrangements have been made to pay them immediately the petition is dismissed;

(2) it is established that the Company is solvent on the basis that it can pay its debts as and when they fall due; and

(3) the Official Receiver does not consider the affairs of the Company should require investigation and his costs are paid

(see Practice and Procedure of the Companies Court, by Boyle and Marshall, 1997 ed., para. 9.151; Re SY Engineering Company Limited [2000] 4 HKC 464 at 467D).

4. The Company has filed evidence in support of this application. The notice of motion was served on the petitioner, the Official Receiver, and the two creditors who have given notice of intention to appear and to support the petition and whose notices have not been withdrawn.

5. It would appear from the supporting affirmation that arrangements have been made to satisfy the petitioning debt and the costs of the petitioner as well as the debts of all the supporting creditors. There is exhibited a copy of the latest management accounts of the Company showing that the Company, in contradistinction to the Company and its subsidiaries, has net current assets of HK$9,080,141.00 as at 29 February 2004, and that the Company's net current liabilities as at 31 March 2003 stood at HK$2,990,505.00. There are also exhibited the bank statements of the Company showing a credit balance of over HK$10 million as at the end of February 2004.

6. I am given to understand by Mr Harris who appeared for the applicants that the reason why the financial position of the Company has improved is attributable to these matters. In October 2003 and February 2004, there have been two placing of new shares of the Company resulting in an increase of cash of around HK$9.5 million and HK$12 million respectively.

7. Further, adjustments have been made to the accounts of the group due to the winding up of a wholly owned subsidiary of the Company, namely, Cedar Base Electronic Limited. I am told that liabilities attributable to that subsidiary are in the region of HK$23 million.

8. The Official Receiver is not aware of any matters as of today as requiring investigation and has no objection to the rescission of the winding-up order. The petitioner likewise does not oppose this application.

9. It would appear that the grounds for rescinding the winding-up order have been made out. I therefore order that the winding-up order is to be rescinded and the petition presented by the petitioner be dismissed. The Official Receiver is at liberty to retain on account of his costs in the sum of HK$11,300.00 the deposit paid by the petitioner, unless such sum be paid by the Company and the contributory within 7 days hereof.