KINNON and KINNON v HONG [2023] NZHC 1988 [27 July 2023]
Contents
Introduction[1]
Issues[7]
Procedural history[9]
Background[15]
The Cedar Lodge Trust[15]
The purchase of the Property[20]
The transfers[22]
Subsequent disciplinary proceedings[23]
Who is the beneficial owner of the Property?[24]
Plaintiffs’ case[24]
Mr Hong’s interpretation of events[33]
Legal principles[40]
Discussion[43]
What evidential issues arise?[43]
Are the disciplinary proceedings’ records admissible?[50]
Is the Trust the beneficial owner of the Property?[56]
Did Mr Hong breach his fiduciary duties?[59]
Plaintiffs’ claim[59]
Legal principles[64]
Discussion[70]
Relief[78]
Declaratory relief[78]
Orders to convey the Property to the plaintiffs and repay commission[82] Equitable loss and/or account of profits[84]
Exemplary damages[91]
Did Mr Hong commit Land Transfer Act 1952 fraud?[97]
Plaintiffs’ claim[97]
Legal principles[102]
Discussion[107]
Did Nominees and Trustees Ltd knowingly receive the Property?[117]
Plaintiff ’s claim[117]
Discussion[121]
Interest and costs[126]
Decision[128]
Introduction
[1] Douglas Kinnon and Avryl Kinnon, as trustees of the Cedar Lodge Trust, claimed that their former solicitor, Boon Hong, transferred their property at
75 Rangitane Loop Road, Kerikeri (the Property) to a company that Mr Hong controlled called Nominees and Trustees Ltd (NTL) and then to himself without their knowledge. Mr Hong had been Mr Kinnon and Ms Dyer’s lawyer since the 1990s and lawyer for the Trust since 2001. He became a trustee on 30 October 2001 and remained in that role until 13 June 2007 when he retired. On this date he was replaced by BGH Trusteeship Ltd (BGH), a company variously controlled by Mr Hong and his wife. Mr Kinnon and Ms Dyer had been married but have since separated.
[2] In 2005 the plaintiffs agreed to purchase the Property. There was a dispute, immaterial to the present proceedings except for as background, that delayed settlement. Due to the delay, Mr Kinnon and Ms Dyer had since invested in another property so raising the finance needed to purchase the Property became complicated. On 31 July 2008, Mr Hong made what he described as an “unsolicited benevolence on the conscience loan” or “benevolence loan” of the balance of the purchase price to either the Trust or Mr Kinnon and Ms Dyer personally. On 6 August 2008, Ms Dyer agreed to transfer the Property to BGH. Then on 4 August 2011, Mr Hong transferred the Property from BGH to NTL. On 12 December 2012, he transferred the Property from NTL to himself. Following that, on 17 December 2012, Mr Hong registered a mortgage with ASB…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Kinnon v Hong [2023] NZHC 1988
Case
[2023] NZHC 1988
Decision Date
CaseChat Overview and Summary
The case of Kinnon v Hong, heard by Harvey J in the High Court of New Zealand, involved a complex dispute over the transfer of a property from the Cedar Lodge Trust to Boon Gunn Hong and subsequently to Nominees and Trustees Limited (NTL). The plaintiffs, Douglas and Avryl Kinnon, alleged that Mr Hong, their former solicitor and trustee, breached his fiduciary duties and committed fraud by transferring the property to himself and NTL without their knowledge. The plaintiffs sought various remedies, including a declaration of fraud, restitution of the property, and damages.
The court found that Mr Hong acted in breach of his fiduciary duties by transferring the property from BGH to NTL and subsequently to himself. The transfers were made without the consent of the co-trustee and were adverse to the plaintiffs' interests. The court declared that Mr Hong acted fraudulently in equity by these transfers. However, the court did not find sufficient evidence to establish that Mr Hong acted with dishonest intent in a land transfer fraud context, as required under the Land Transfer Act 1952.
Regarding NTL, the court held that it was liable in knowing receipt since it had the same knowledge as Mr Hong. NTL became a deemed trustee and breached its fiduciary duties by transferring the property to Mr Hong. The court ordered NTL to account for any profits derived from the property.
The court declined to award exemplary damages to the plaintiffs, finding that the conduct, while egregious, did not reach the level of seriousness required for such an award. Interest and costs were to be determined at a later stage.
In summary, the court found that Mr Hong and NTL breached fiduciary duties and acted fraudulently in equity but did not establish land transfer fraud. The property was declared to be held on constructive trust for the Cedar Lodge Trust, and Mr Hong and NTL were ordered to account for any profits derived from the property.