PNC DC HOLDING, INC. v. RIGGS ASIA LTD AND OTHERS

HCMP 987/2024

[2025] HKCFI 1068

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 987 OF 2024

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DECISION

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1.  This is the application of PNC DC Holding, Inc. (the “Plaintiff”) by originating summons dated 12 June 2024 and amended on 25 September 2024 (“Amended OS”) to rectify the register of members (“ROM”) of Riggs Asia Limited (the “Company”) so that the Plaintiff can deregister or wind-up the Company as its sole shareholder.

2.  In outline, the key events leading to the present application may be summarised as follows:

(a)  The Company originally formed part of the “Riggs Group” and has been dormant since 1999. Its shares consist of one nominee share (the “Nominee Share”) and 3,899,999 remaining shares (the “Majority Shares”) (collectively, the “Shares”).

(b)  In 2005, the holding company of the Company was merged with a group of companies to which the Plaintiff belongs (the “PNC Group”). As a result, the PNC Group acquired the Shares in the Company. However, this was not reflected in the corporate filings.

(c)  The latest available annual return of the Company is dated 1999 (the “1999 AR”) but its ROM and register of directors can no longer be found. The Plaintiff seeks to update the ROM so that it can be registered as the Company’s sole shareholder.

3.  There are 3 defendants to this application, namely, (1) the Company; (2) the personal representatives of Mr Paul Cushman III (“Mr Cushman”), the intended holder of the Nominee Share from 1993; and (3) Mr Lee Hoi Ming, Raymond (“Mr Lee”), registered holder of the Nominee Share in the 1999 AR.

4.  This application is not opposed.

Relevant factual background

5.  The Plaintiff’s application is supported by an affidavit from George Philip Long III, one of the Managing Chief Counsel of The PNC Financial Services Group filed on 12 June 2024 from which the following facts are derived.

(a)  Incorporation to 1999

6.  The Company was incorporated in Hong Kong on 2 February 1989. The Return of Allotments in 1989 shows Riggs International Banking Corporation (“RIBC”) as holder of the Majority Shares. As the Companies Ordinance at the time required at least one natural person to be a shareholder, a nominee shareholder arrangement was put in place where an employee would hold the Nominee Share.

7.  Mr Lee, a former director of the Company held the Nominee Share on trust for RIBC from 21 July 1992 to 30 September 1993 when he resigned and the Nominee Share was transferred[1] to Mr Cushman[2]. However, the 1999 AR continued to show Mr Lee as holder of the Nominee Share, as the change had not been reflected in the corporate filings.

8.  By a special resolution of the members, the Company became dormant on 23 December 1999.

(b)  2004: Internal restructuring of the Riggs Group

9.  In 2004, Riggs Bank NA (“RBNA”), the sole shareholder of RIBC intended to dissolve RIBC by the year-end[3] by selling the Company to RBNA for its asset value for the purpose of allowing RBNA to hold the Company while it was being liquidated.

10.  There are draft board minutes dated 10 December 2004 (“draft Minutes”) recording that intention and a draft Stock Purchase Agreement in December 2004 regarding the Majority Shares (the “draft SPA”) (the “2004 Transfer”) to that effect. Contemporaneous emails (“2005 Emails”) show that Mr Rodgers, who then acted for RBNA, had (a) confirmed that the draft SPA been signed by RIBC and RBNA and was effective from 27 December 2004, and (b) requested the Company’s company secretary to update and forward the instrument of transfer and to take the necessary steps to record the 2004 Transfer.

11.  The recitals to the order[4] of the Board of Governors of the Federal Reserve System Washington DC of 27 January 2005 state, inter alia, that RIBC ceased to exist as a separate entity on 31 December 2004 and all of RIBC’s remaining operations and property had been transferred to RBNA.

12.  As recorded in the draft Minutes, the consideration for the 2004 Transfer was the net asset value of the Company[5]. As 11 February 2004, the only asset of the Company was a sum of $1,129,118.07 held at its account with the Riggs Bank.

13.  The trial balance and income statement for the Company as at 5 May 2005 was zero and no asset has been received or generated since that date[6].

(c)  2005: Merger with the PNC Group

14.  On 13 May 2005, PNC DC Assets, LLC (“PNC DC”) merged with RBNA, with PNC DC becoming the surviving limited company effective 20 May 2005.

(d)  2017: Internal restructuring of the PNC Group

15.  On 20 April 2017, PNC DC was dissolved and the Plaintiff became the surviving entity holding all the assets of PNC DC (including the assets of RBNA).

Applicable legal principles

16.  Section 633 of the Companies Ordinance, Cap 622 provides as follows:

“Power of Court to rectify register

(1) If –

(a) the name of any person is, without sufficient cause, entered in or omitted from the register of members of the company; or

(b) default is made or unnecessary delay takes place in entering into the register the fact of any person having ceased to be a member,

a person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register.”

17.  The remedy is entirely discretionary.

18.  It has been exercised in a case where the 2^nd defendant held a share for the applicant under a declaration of trust but neither he nor the instrument of transfer nor the bought and sold notes could be located: see Re Quesco Systems Limited, unrep, HCMP 81/2007, 10 October 2007.

19.  In Nilon Limited v Royal Westminster Investments SA [2015] UKPC 2 the Privy Council held that the statutory provision in the BVI providing for a procedure similar to RHC Order 85 could only be used for a summary determination of an applicant’s right to an order for rectification.

20.  In Re Brightex Corp Ltd [2016] 4 HKLRD 20 Harris J did not consider the decision in Nilon relevant where the application was not contested. Harris J granted the declaration sought[7] notwithstanding that the applicant had no present right to rectification and ordered the Registrar of an instrument of transfer for the conveyance of the legal title in the share to the applicant and rectification of R3’s ROM.

21.  Factually, the facts in the present case are materially different from those in Nilon. As in Re Brightex, the present application is also uncontested, rendering Nilon not relevant.

22.  Further, in Re Ingredients Plus (Hong Kong) Limited, unreported, HCMP 2454/2015, 10 March 2016, this Court has held (at §26) that the Privy Council decision is not binding in Hong Kong.

Devolution of the Shares in the Company

23.  The 1999 AR shows Mr Lee as the holder of the Nominee Share which, for reasons explained, does not reflect the true position. The 2005 Emails show that the Nominee Share was originally held in trust for RIBC. That is clear from Mr Rodgers email dated 27 January 2005 to Tricor (the company secretary) as regards the Nominee Share stating that

“Among Riggs’ records were found “Form of Transfer”, “Bought Note”, and “Declaration of Trust and Power of Attorney” forms purporting to transferred the one share owned by [Mr Lee] to [Mr Cushman]. All the forms appear to bear official Hong Kong tax and transfer stamps.”

24.  When RIBC was dissolved in 2004 as a result of the internal restructuring of the Riggs Group, the Nominee Share would have devolved in the same manner as the Majority Shares.  

25.  The Plaintiff submits that it now owns the Shares:

(a)  RBNA was the beneficial owner of the Majority Shares by the time of the 2005 Merger, evidenced by the draft minutes, the draft SPA and the 2004 Transfer referred to in §10 above. That conclusion is reinforced by the 2005 Emails.

(b)  When RIBC was dissolved, all its assets (including the Nominee Share) would have been transferred to RBNA.

(c)  Following the 2005 Merger and the PNC Group’s internal restructuring in 2017, all the assets of RBNA vested in the Plaintiff.

26.  In light of the evidence adduced, I accept that the Plaintiff owns the Shares and is entitled to be registered as the sole shareholder of the Company.

Conclusion

27.  The draft order submitted seeks declarations that the Plaintiff is the sole beneficial owner of the Majority Shares and the Nominee Share and, pursuant to section 633 of the Ordinance, the following relief:

(i)     The new blank register of members be rectified by inserting the name of the Plaintiff as the holder of 3,900,000 ordinary shares in the Company.

(ii)    The Company do forthwith issue and deliver to the Plaintiff a share certificate in respect of the ordinary shares held by it;

(iii)   The Plaintiff be authorised to rectify the Company's register of members for carrying this order into effect;

(iv)   A declaration be made that the share certificates issued by the Company previously were null and void; and

(v)    Notice of the rectification be given to the Registrar of the Companies pursuant to section 633(4) of Cap. 622.

28.  The fact that the Company is dormant is not an insuperable impediment to the remedy of rectification in an appropriate case. In Re Tele-art Limited, unrep., HCMP 26/2006, 4 August 2006, it was held (at §32 (2)), that rectification can be ordered even if the company is in liquidation.

29.  In the present case, as no other party is asserting an interest in the Shares and the Company has been dormant for many years with no identifiable asset, granting rectification would not cause any prejudice to other parties. I consider it appropriate to grant the declarations sought.

30.  As regards the relief set out in §3 of the draft order, it is similar to the relief granted in Re Vanseuk Investments Limited, unrep., HCMP 856/2017, 23 May 2017 (at § 15) and Re C.B.S. Investment Limited, unrep., HCMP 1651/2007, 7 November 2007 (at §§18-19).

31.  Accordingly, I make an order in terms of the draft order.