Kim v Kwon Ca126/01
[2002] NZCA 374
•24 April 2002
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA126/01 |
| BETWEEN | CHANG DO KIM, YONG WOOK KIM, SOO-YEAL LEE AND YEUN HEE LEE |
| Appellants |
| AND | HYUCK PIL KWON (ALSO KNOWN AS DAVID KWON) |
| First Respondent | |
| AND | MOUNTAIN VIEW GOLF 1999 LIMITED |
| Second Respondent |
| Hearing: | 24 April 2002 |
| Coram: | Gault J Doogue J Fisher J |
| Appearances: | M H Benvie for Appellants WGC Templeton and M Pitch for Respondents |
| Judgment: | 24 April 2002 |
| JUDGMENT OF THE COURT DELIVERED BY FISHER J |
Introduction
In the High Court the appellants (“the Kim-Lee group”) were ordered to pay the respondents (“Mr Kwon” and “Mountain View”) $15,000 for wrongfully terminating the lease of a golf driving range near New Plymouth. The Kim-Lee group appeal against the quantum of damages. Mr Kwon and Mountain View cross‑appeal seeking restoration of possession. The critical question is whether Mountain View ever lost the right to possession.
Factual Background
In 1999 Mount Taranaki Golf (NZ) Limited (“Mt Taranaki”) was the owner of a golf driving range. The shareholders were Mr and Mrs Kim and Mr and Mrs Lee (the Kim-Lee group) along with two others who later dropped out of the picture.
In early 1999 Mt Taranaki leased the property to Mountain View. One of the guarantors was Mountain View’s principal shareholder, Mr Kwon. The lease was for four years from 1 March 1999 with two rights of renewal for five and two years respectively. The lease was subject to a licence to a Mr Owens in respect of a pro golf shop on the property.
In January 2000 Mt Taranaki sold the property to the Kim-Lee group as individuals. It is not now disputed that they acquired the property subject to the lease to Mountain View. Arguments over rent arose between Mountain View and the Kim-Lee group. These culminated in the Kim-Lee group taking possession on 14 February 2000 for alleged non-payment of rent.
High Court Proceedings
Mountain View as lessee brought proceedings in the High Court. For reasons which are not entirely clear, Mr Kwon was joined as an applicant. The application to the Court materially provided:
… the Applicant WILL MOVE the Court at Auckland FOR ORDERS
1.Granting relief against forfeiture on such terms as the Court thinks fit, including an order directing reinstatement of the applicants’ lease dated 29 January 1999.
2.Awarding the applicant damages and costs as are appropriate in the circumstances and/or
In the alternative:
3.Granting specific performance of the partially performed agreement to lease held by the applicants dated 29 January 1999.
UPON THE GROUNDS
1.That the applicants lessee are not in breach [of] their lease dated 29 January 1999.
2.That the respondents in any event were not at the material time the correct lessors to give notice and had in any event accepted rent on account in acceptance of the lease.
3.The respondents as alleged lessors issued a notice of alleged breach of lease/tenancy dated 12 February 2000 claiming non payment of rent and evicted the applicants without giving the applicant as the lessee any reasonable time from the date of the notice to remedy the alleged breach.
After a hearing conducted on affidavits Robertson J gave his principal judgment on 16 August 2000. He found that Mountain View’s lease had been validly executed on behalf of Mt Taranaki as lessor. Nothing in the subsequent sale to the Kim-Lee group affected the validity of the lease. They purchased only the reversion. The lease was valid and enforceable.
The Kim-Lee group sought to justify their subsequent re-entry on the ground that Mountain View had failed to keep up its rental payments. Robertson J found that “any non-payment is primarily attributable to the attitude of [the Kim-Lee group] and not to any failure on the part of [Mountain View]” and, further, that “non performance if there was any was in my view a direct result of the [the Kim-Lee group’s] acts and omissions”. In consequence he went on to hold that “I am satisfied … that [Mountain View] as at February 2000 had a right to possession under the January 1999 document and that no acts or omissions on their part justified their removal from the premises”. (See paras 86, 90 and 94 of the judgment.) There has been no appeal against those findings. As to remedy, the Judge concluded “if it is necessary I will hear further evidence on the question of the relief to be granted.”
The parties being unable to resolve the question of relief, a further hearing took place on 15 December 2000. In his second judgment of 21 December 2000 the Judge began by repeating his substantive finding:
In a reserved decision delivered on 16 August, I concluded that the applicants as at February 2000 had a legal right to possession of the golf course and driving range at Bell Block near New Plymouth under a January 1999 document and that no acts or omissions on their part justified their removal.
However the remainder of his judgment proceeded on the assumption that the Court was exercising a jurisdiction in equity to relieve lessees against the consequences of their breaches.
The Judge noted that it was possession that Mountain View was seeking:
The position of the applicants now and at all times has been that they seek reinstatement to their position as lessees.
That was the sole relief which they sought in their initial proceedings which were filed in April. They are not seriously interested in the alternative of equitable damages for the wrong done to them.
He also noted that Mountain View had paid outstanding rent and costs into a trust account pending the outcome of the proceedings and that in the normal course this would justify restoration of possession to a lessee. However, he declined restoration of possession in the present case given the special position of Mr Owen. After ousting Mountain View, the Kim-Lee group had purported to lease the whole property to Mr Owen. He had since put considerable money and effort into improving it. He had also had a poor relationship with Mr Kwon. That would create difficulties if Mountain View were restored to possession.
In those circumstances the Judge decided that Mountain View and Mr Kwon should be limited to damages. On that subject each party had called accounting evidence. The question was what Mountain View would have gained had the lease continued. The Judge accepted that Mr Owen had suffered an operating loss since taking over the enterprise. However, in view of Mr Owen’s rising turnover there was a reasonable expectation that profits would be attainable in the future. Damages of $40,000 were appropriate on that account. After deducting rent arrears of $25,000, the Judge awarded Mountain View and (curiously) Mr Kwon net damages of $15,000.
Relief against forfeiture or unlawful eviction?
For Mountain View Mr Templeton argues that the judgment in the court below proceeded on a false premise. His point was raised for the first time in a memorandum filed in this court two days ago. The Judge had assumed that the Court was exercising its discretion in equity to give relief against forfeiture. Relief against forfeiture arises only where the lessee was in breach of its lease. In fact, the Judge had already found that Mountain View had not breached its lease. Consequently when it came to relief, Mountain View was entitled to possession coupled with damages for wrongful eviction.
We agree that the assumption that the case concerned discretionary relief against forfeiture was misplaced. Once it was found that Mountain View was in possession pursuant to a valid lease, and that it had never lost that right, it was entitled to restoration of possession as of right. Relief against forfeiture has no application where, at law, the lessor had no right to re-enter in the first place.
On the other hand, we would not approach the matter on the basis proposed by Mr Templeton, namely that his client was entitled to specific performance of a mere contractual right. That too would involve a discretionary remedy.
Mountain View’s leasehold interest in the property was a proprietary interest recognisable at law. It has not been suggested in either court that Mountain View’s proprietary interest was lost due to the supervening proprietary interest of a third party. There has been no suggestion, for example, that Mr Owen took priority as a bona fide purchaser for value without notice of an existing unregistered leasehold interest. It was common ground that he had notice of Mountain View’s interest. That leasehold interest has continued uninterrupted down to the present day.
In those circumstances we do not think that the Court had any discretion to exercise. It was not exercising an equitable jurisdiction to relieve against forfeiture, or even to grant specific performance. Mountain View’s leasehold interest was a legal one. As such it fell to be vindicated in law, not equity. The right to possession was inherent in Mountain View’s unbroken proprietorship of the leasehold estate. Having been wrongly denied possession, Mountain View was entitled to an immediate order for possession. In fairness to the Judge, it ought to be said that the case does not appear to have been put to him with sufficient clarity.
Change of circumstances re Owen
Even had the matter required the exercise of a discretion, a coincidental change of circumstances between trial and appeal would have warranted a fresh approach. The only substantial ground on which the Judge had declined Mountain View’s possession was Mr Owen’s continued occupation of the property. It is common ground that Mr Owen has since left. Had it been necessary to do so, we would have intervened on that ground (for appellate recognition of supervening events in appropriate circumstances see Mulholland v Mitchell [1971] AC 666 (HL)). But for reasons by now given, Mountain View does not need to resort to that ground.
Appeal against quantum
Net damages of $15,000 had been awarded against the Kim-Lee group on the basis that Mountain View would be kept out of possession. Given that Mountain View will now be restored to possession, the damages award must be vacated. The appeal against the quantum of those damages is otiose.
The ultimate financial accounting between the parties remains to be determined. On the one hand Mountain View will be entitled to damages for being wrongfully kept out of possession since 14 February 2000. On the other, the Kim-Lee group will be entitled to rent arrears. There is insufficient evidence before us to say which will exceed the other. It will be in the interests of both parties to have those issues resolved as soon as possible.
Result
The appeal is dismissed and the cross appeal allowed. There will be an order for immediate possession in favour of the second respondent Mountain View. The existing judgment for damages in favour of the respondents is vacated. The questions of liability for rent arrears and damages for wrongful interference with Mountain View’s right to possession are remitted to the High Court for hearing.
Although the respondents have substantially succeeded in this court, there will be no order as to costs. Much of the difficulty appears to have stemmed from the way in which the respondents’ case was presented.
Solicitors
Kathryn Webber, Takapuna, Auckland for Appellants
Patrick McGuire, Auckland for Respondents
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