Lawyer Boon Hong was struck off in 2020 for disgraceful conduct after taking ownership of a client’s Kerikeri property without the client’s knowledge and contrary to his client’s interests. Three years on, the High Court has ruled Hong keeps title, but as trustee, and has to pay damages yet to be assessed.
Mr Hong had been Douglas Kinnon’s family lawyer since the 1990s. In 2005, Mr Kinnon and his then wife agreed to buy a property on Rangitane Loop Road at Kerikeri as their family home. Things got complicated. Final settlement was delayed nearly three years in a dispute over the final price, while the family variously lived at the property or rented it out. With the family short of cash to complete settlement, Mr Hong provided about $600,000 to finalise the purchase. There was some talk of Mr Hong becoming part owner. Nothing came of initial discussions.
After settlement, title was taken in the name of a family trust with Mr Hong as one of the trustees.
The High Court was told title to Rangitane Loop was later transferred with approval of his fellow trustee into the name of a nominee trust company controlled solely by Mr Hong. This was for administrative reasons, he explained; to better manage numerous trusts of which he was a professional trustee.
Subsequently, Mr Hong transferred Rangitane Loop from the nominee trust company into his own name and borrowed money from ASB Bank on security of the property. Mr Hong justified these steps to a Law Society disciplinary hearing on grounds that he ‘needed the money.’ The High Court was to later state that Mr Hong bizarrely rationalised his actions on the basis that he held a common law mortgage over Rangitane Loop in respect of his $600,000 loan and that the property was now his; this loan having been ‘repaid’ with notional rent charged the Kinnon family for their occupation of Rangitane Loop offsetting the loan. Justice Harvey pointed out that if a loan is repaid, the debt is then cleared. There can no longer be any claim over an asset supposedly available as security.
The High Court was asked to rule on who has ownership of Rangitane Loop. Justice Harvey ruled title remains in the name of Mr Hong, but he holds ownership as trustee of the Kinnon family trust. As trustee, he has to account for any personal benefit enjoyed.
A later court hearing is needed to identify what the ASB loan was used for. This loan was made to Mr Hong personally but secured over a trust asset. If these funds generated a profit, this profit belongs to the family trust, not Mr Hong.
Mr Hong provided $600,000 to purchase Rangitane Loop as a trust asset. He has a claim against trust assets for repayment.
Kinnon v. Hong – High Court (27.07.23)
23.121