Kim v. Kim

2019 BCSC 222 Kim v. Kim

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Kim v. Kim, 2019 BCSC 222 Date: 20190118 Docket: S120638 Registry: New Westminster Between: Soon Young Kim doing business as Han Song Korean Restaurant Plaintiff And Daesik Kim, 0732022 B.C. Ltd., 626923 B.C. Ltd., Agnew Bailiffs, and Financial Adjusters Ltd. Defendants Before: The Honourable Madam Justice Marzari Oral Reasons for Judgment (In Chambers) Counsel for the Plaintiff: K.J. Learn J.J. Jung Counsel for the Defendants, Daesik Kim, 0732022 B.C. Ltd., and 626923 B.C. Ltd.: L.C. Morrison Counsel for the Defendants, Agnew Bailiffs and Financial Adjusters Ltd.: No Appearance Place and Date of Trial/Hearing: New Westminster, B.C. December 6, 2018 Place and Date of Judgment: Vancouver, B.C. January 18, 2019 [1] THE COURT: On June 2, 2009, the plaintiff, Ms. Kim, was locked out of her restaurant by her landlord, the defendants 0732022 B.C. Ltd. and 626923 B.C. Ltd. (the "landlord"), for late payment of rent. The rent had been due on June 1, 2009. Less than two months later, fire destroyed the building. Ms. Kim argues that the defendants breached her lease in locking her out of her premises after only a day of unpaid rent and seeks damages for the value of the business, together with lost inventory in the range of $325,000 to $350,000. [2] While not contesting that it locked Ms. Kim out of the business premises prematurely in

June 2009, the landlord says that Ms. Kim suffered no losses as a result because the business had no value, and she failed to mitigate her losses by failing to remove any inventory or equipment of value from the premises prior to the fire. [3] Ms. Kim brought this claim by way of summary trial and, while acknowledging significant conflicts in the affidavit evidence, she argued those conflicts may be resolved by reference to reliable or documentary evidence, or are otherwise not necessary to resolve in order to determine the issues in this claim. [4] The landlord's position was that the matter is not amenable to summary trial as a result of these conflicts, which it says give rise to serious credibility issues on Ms. Kim's part. Alternatively, the landlord says that when viewed as a whole, Ms. Kim has not met her burden in this summary trial of establishing her losses or that those losses were caused by the landlord's repossession of the business premises. [5] I should note that after the summary trial, by way of supplementary argument submitted later in December 2018, Ms. Kim sought to withdraw her application for summary trial with respect to the damages issue, and to seek summary resolution on the issue of liability alone. The landlord does not consent or agree to this change in pleading and position and says that liability should not be severed from damages, and that if part

of the application is unsuitable, the entire summary trial application should be dismissed as unsuitable. [6] The critical question facing the court when hearing a summary trial application is whether the court can find the facts necessary to decide the disputed issues. Even where the court can find the necessary facts, it must still consider whether it would be just to decide the matter summarily by reference to factors such as the amount involved, the complexity of the matter, its urgency, any prejudice that may arise by reason of delay, the cost of taking the matter forward to a conventional trial, the course of the proceedings, and any other matters which arise for consideration: see Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R. (2d) 202 (C.A.) at 211 and 215, and Gichuru v. Pallai, 2013 BCCA 60, at paras. 30-31. [7] I have found that the plaintiff's application as filed is amenable to resolution by way of summary trial on the evidence before me, and given that this claim has been outstanding for more than nine years, it is in the interests of justice that it be determined without further delay. [8] At the outset of this summary trial, Ms. Kim advised that an agreement had been reached by consent for the discontinuance of the claim against the personal representative of the landlord, Mr. Daesik Kim, without costs to either party. I was also

advised that the plaintiff was not pursuing the claim against the two remaining defendants, Agnew Bailiff and Financial Adjusters Ltd., and that a discontinuance of the claim against those two defendants would be forthcoming. [9] I note also that Ms. Kim narrowed the scope of the claim for the purposes of pursuing the summary trial to a claim based on wrongful termination of the lease, while reserving the right to pursue other bases of liability and heads of damages only should this matter be determined not to be suitable for summary trial. Issues [10] The issues that remain to be resolved in this summary trial are therefore: a) On the issue of liability, did the landlord wrongfully terminate Ms. Kim's lease? b) If so, has Ms. Kim proven that she suffered losses caused by the wrongful termination of her lease, and specifically: i. Did Ms. Kim establish any such damages or losses, and in what amount? ii. Was the landlord's wrongful termination of the lease the cause of Ms. Kim's losses? c) If so, has the landlord established that Ms. Kim failed to mitigate some or all of those losses by failing to remove her inventory, equipment, and other moveable improvements? [11] With respect to each of the above issues, I have also considered whether its resolution is amenable to determination by way of summary trial as a whole or in part, and if only in part, whether it is appropriate to

sever the determination of that issue. Preliminary Matters [12] At the outset of the summary trial, the landlord raised a number of preliminary issues which were resolved during the course of the hearing. [13] The first issue was resolved by consent before the hearing commenced. It related to the admissibility of the third affidavit of Ms. Kim that raised for the first time, three weeks before the summary trial, the allegation that the landlord's action caused her mental and physical illness, and attached a two‑page letter from her doctor in this regard. The landlord objected to admissibility and relevance of this affidavit on the basis that it related to a new issue and head of damages that had not been pled in any of the nine years since the claim arose. Ms. Kim advised that she consented not to rely upon this affidavit or letter in the summary trial, although reserved the right to pursue this line of evidence and argument should the matter proceed to trial. [14] The second issue was the admissibility of Ms. Kim's fourth affidavit, and specifically paragraphs 3 and 4, which was filed in reply a few days before the summary trial for the purpose of providing further evidence with respect to her damages claim, including an insurance policy for the business heretofore not disclosed to the landlord. The landlord objected that this was not proper reply, but an attempt to reopen the

plaintiff's case to supplement it, to the landlord's significant prejudice. Ms. Kim sought to admit this evidence on the basis that it was proper reply to the argument that she had not substantiated her claim in damages through evidence. She said that upon receiving this argument, it was proper for her to then look for more evidence and file it to substantiate her claim. [15] I found that these two paragraphs, if relevant, should have formed part of the plaintiff's case in chief and should have been disclosed long before the week of summary trial, and that the paragraphs were not proper reply to the evidence led by the landlord. I found that the landlord would be significantly prejudiced in the hearing of the summary trial if this evidence was admitted and that a delay of the summary trial was not appropriate, given the length of time this matter had been outstanding. I declined to allow Ms. Kim to reopen her case on the day of the summary trial over the objections of the landlord. I therefore found these two paragraphs to be inadmissible, along with the insurance policy attached. [16] Finally, the landlord argued that it was an abuse of process for this claim to proceed while Ms. Kim has a claim against her insurer under her business insurance policy that has been extant since 2010, and which claims for the same losses that are sought in this proceeding against the landlord,

but on the basis that the losses were caused by the fire. With respect to this issue, I directed that the summary trial proceed and that this objection would be considered in the context of the evidence and argument as a whole. Wrongful Termination of Lease [17] Ms. Kim states that she was locked out of her business premises on June 2, 2009, one day after her rent was due. [18] Her rent was paid in a series of post‑dated cheques, including one for June 1st that year. In her affidavit, she states that she had enough funds in her account to clear that cheque; however, on examination for discovery it was established that she did not. Specifically, while she adduced evidence in her affidavit that her bank account had more than enough funds on that date to clear the cheque, she admitted on that the rent cheque was not written on that account or at the same bank, and that although she argues she could have transferred funds from her personal account into the business account to cover the amount, she admits that she did not do so. [19] There is a dispute on the evidence as to the frequency with which Ms. Kim requested that the landlord not cash her cheques on the first day of the month and was late in paying her rent. The documentary evidence provided by the landlord of the dates the cheques were ultimately cashed indicates that this occurred very frequently during the course of the

approximate two-and-a-half years that Ms. Kim leased the premises from the landlord, and that rent was more than a week late over half the time. [20] In any event, despite the inconsistencies and conflicts between the landlord's evidence and Ms. Kim's evidence, and indeed between Ms. Kim's affidavit evidence and her examination for discovery evidence, little turns on whether that post‑dated cheque was cashed or could or would have cleared. [21] This is because the landlord concedes that the Lands Transfer Form Act, R.S.B.C. 1996, c. 252, was applicable to this lease and specifically that, pursuant to s. 5 and Schedule 4 of that Act, the terms of the lease provided for repossession of the business premises by the landlord only after 15 days of the rent being unpaid. It is conceded that in June 2009, repossession occurred one day after the rent was unpaid and not 15 days. While the landlord does not concede that it breached this term of the lease, it does not provide any legal grounds or justification for repossessing the property one day after the rent was due, contrary to this provision. [22] Therefore, despite the conflicts in the evidence, I find that this issue is resolvable by way of the evidence on the summary trial and that it is appropriate to do so. I find that the landlord did wrongfully repossess Ms. Kim's business premises on June 2, 2009, contrary to the terms of

her lease. Damages [23] Ms. Kim seeks damages in the amount of approximately $350,000 in this summary trial application. She says that the loss of the value of the business was between $173,000 and $198,000, and the loss of inventory and equipment was another $150,000. A. Did Ms. Kim establish her damages or losses, and in what amount? [24] Ms. Kim's damages claim is for the loss of a capital asset, her business, and not for loss of profits. This is not surprising, as the evidence establishes that her restaurant business was not profitable. [25] Overall, Ms. Kim's financial statements indicate that the business was operated at a considerable loss. The business lost $109,930 in 2006, $51,351 in 2007, and $58,836 in 2008. In the first five months of 2009, the financial statements indicate that the business showed a loss of $45,353 to that date, which indicates that the restaurant was likely on track to suffer greater losses in 2009 than it had in the immediately preceding years. [26] Ms. Kim argues damages for breach of contract need not be for loss of profits, but may also be for loss of a capital asset of the business. She relies on Roe, McNeill & Co v. McNeill, [1998] 7 WWR 175 (BCAC) in this regard. [27] The landlord agrees that value of a capital asset is an appropriate basis for an award of damages for breach of lease, but says that in this case the business also had no

value. [28] In 1413910 Ontario Inc. v. Select Restaurant Plaza Corp, [2006] OJ No. 5309 (Ont. S.C.J.), the court thoroughly canvassed the law with respect to the availability of damages for the breach of a lease by a landlord. As in this case, a tenant restaurant business sought damages for loss of its investment in a restaurant after an unlawful eviction. In that case, the restaurant had not yet been profitable after less than a year. [29] In 1413910, the court held that damages for the lost investment could only be awarded if the business would have generated sufficient revenue to recover the investment: see paragraph 38. The onus is on the defendant to establish that the business would not have generated revenue sufficient to recover that amount. [30] The landlord says that the evidence in this case establishes that Ms. Kim's investment would not have been recouped and the business had no capital value. [31] Ms. Kim says that she has established through her evidence that, as a result of the wrongful termination of her lease, she lost the entire value of her business. Her primary evidence with respect to the value of her business is the amount she was seeking to sell it for at the time of the breach ($198,000) or the amount she paid for the business in 2005 ($173,000, plus the value of her inventory). [32] Her contract to purchase the business in 2005 indicates that this

value was allocated as follows at that time: a) leasehold improvements: $73,000; b) equipment and furniture: $30,000; and c) goodwill: $70,000; [33] The contract provided that at the close of the possession date in 2005, Ms. Kim would purchase any inventory from the vendor still remaining at the cost paid by the vendor. In this regard, I understand that inventory would include food and drinks, including alcohol. In examination for discovery, Ms. Kim agreed that the inventory when she purchased the business as a going concern was between $10,000 and $17,000. [34] With respect to the value of the business at the time that she was locked out, Ms. Kim says this is established by her financial statements for the business. In the financial statement from May 31, 2009, which I note was prepared in December 2010, after the landlord terminated the lease, after the fire, and after this claim was commenced, the value of the business assets were listed as follows: a) inventory: $12,000; b) goodwill: $70,000 (unchanged since the purchase of the business); c) equipment: $34,667 (unchanged from the previous financial statements since 2005); d) Leasehold improvements: $73,000 (unchanged from the purchase agreement and previous financial statements since 2005); and e) Sign: $5,240 (unchanged from the previous financial statements in 2006 when it was first recorded). [35] The financial statement

lists the total value of plant and equipment at $112,907. [36] In addition, the financial statement lists a line of credit at $20,000, and long‑term debt through an RBC mortgage loan of $303,213 accumulated over the course of the life of the business. [37] I note that the financial statements contain a significant proviso with respect to their accuracy. In a notice to reader, the certified general accountant who prepared the statement states that he has not performed an audit or review of the financial statements, and accordingly expresses no assurance with respect to them. This does affect the weight that can be given to the statements. [38] Taking this into account, I find on all the evidence that the business was operating at a consistent loss, that it had a very significant long‑term debt, and that the stated value of assets in the financial statements with respect to goodwill, equipment, and leasehold improvements were largely taken from the purchase amounts in 2005 and did not reflect current values in 2009. [39] Both parties agree that the business was struggling financially and that Ms. Kim was attempting to sell the business and to have the lease assigned. In this regard, her affidavit evidence is that towards the end of 2008, and continuing to 2009, she was trying to sell the business. She states in her affidavit that she had originally listed the business for sale at

$295,000 plus inventory but did not have "much luck". She later changed her realtor and listed the price of the business at $198,000 plus inventory. [40] This evidence is somewhat contradicted by the real estate listing that Ms. Kim attaches to her affidavit, which shows a listing with her original realtor at $198,000 with the list date of September 2008, and an earlier list price of $228,000. In addition, in her examination for discovery, she stated that her attempts to sell the property commenced in 2007 or 2008. This evidence suggests a much longer time on the market than stated in her affidavit, and either a lower original list price or more than one drop in list price. [41] In any event, both parties agree that no offer to purchase was made for the business at any of the above amounts, or at all. Ms. Kim states that she had "several prospective purchasers" but blames the landlord for interfering with those prospects by refusing to agree to assign the lease. This is an area where Ms. Kim's evidence contradicts the landlord's representative, who says that no prospective purchasers approached him to assign the lease. However, Ms. Kim essentially concedes in her examination for discovery that she had no direct knowledge of any such requests or refusals and that the prospective purchasers were supposed to make these inquiries to the landlord directly. Her evidence of any

refusals and her alleged reasons for the refusals are based entirely on hearsay evidence that is inadmissible for the purposes of proving those facts. She has no evidence of any offers being made, and no direct knowledge of any inquiries to the landlord regarding assignment of the lease. I therefore accept the landlord representative's evidence that he received no requests for assignment of the lease by prospective purchasers as being the only direct evidence on this point. [42] In any event, both parties agreed that the lease was going to expire in December 2009. While Ms. Kim had an option under the lease to extend for another five years, the rent after that point would have had to be agreed to by the parties or arbitrated. They both also agreed that Ms. Kim was required to provide 90 days' notice of intent to exercise that option, and that she had not done so as of June 2009. Furthermore, any assignment of the lease to a new purchaser required the consent of the landlord (consent not to be unreasonably withheld). [43] In her affidavit, Ms. Kim states that she was "considering the option of exercising the optional term for five years" but that she was trying to sell the business first. She states that if she could not sell the business she "was intending to renew the lease and continue the business at the premises," and to arbitrate any significant rent increases. She also

states that in the event that she was unsuccessful in arbitrating reasonable rent, she would have relocated her business to a new location, "taking with me all of the equipment and furniture, stock, and leasehold improvements as all of the interior leasehold improvements other than the floor and ceiling were removable and reusable elsewhere." [44] With respect to the value of these items, I find that the best evidence of the value of the equipment is an appraisal prepared for counsel for Ms. Kim in 2010 by Loves Auctioneers and Appraisers Limited listing and attaching each of the items of equipment that Ms. Kim claimed were taken from the premises by the landlord. This appraisal establishes that the total value of this equipment if it had been in clean working condition was $6505. It also establishes that the current value of this equipment was "Nil". I find on the basis of all the evidence, including the photographs attached, and the correspondence between counsel for the parties, that this latter figure is because all of that equipment was present in the premises and damaged by the fire. [45] I prefer this evidence over the evidence in the financial statements that the value of the equipment was just over $30,000. The financial statements appear to reflect only the value assigned to the equipment in 2005, are not accompanied by any evaluation or assessment, and show no

depreciation for their four years of use. [46] With respect to the inventory, including food and alcohol, the evidence available indicates a value ranging between $12,000 as stated in the 2009 financial statements, and the affidavit evidence of Ms. Kim in which she "estimates" the inventory was worth between $150,000 and $200,000. [47] I find Ms. Kim's estimate in her affidavit to be wholly unreliable. Ms. Kim states that all of her records were destroyed in the fire so it is unlikely that better evidence will become available. Although it has limitations, I accept the evidence in Ms. Kim's financial statements which were prepared after the claim arose and list the inventory at $12,000. This amount was reported consistently over the course of Ms. Kim's operating the business, and is in the range of the amount of inventory on hand when she purchased the business as a going concern. [48] With respect to the value of the leasehold improvements and the goodwill of the business, Ms. Kim has not provided any appraisal or other evidence as to their value, except for the financial statements. While the financial statements are an acceptable basis for determining inventory values that can be expected to be fairly constant in their turnover and replacement and not to depreciate, the determination of the value of the leasehold improvements and goodwill of the business requires something

more. [49] As stated above, the financial statements appear to reflect the value paid by Ms. Kim for the business in 2005, no more, no less. I find that this is not an adequate basis to establish the value of these aspects of the business in 2009. Instead, I find that Ms. Kim has not established that these aspects of the business had anything more than a nominal value as of June 2009 when she was locked out of the premises. I make this finding on the basis of the consistent and significant losses suffered by the business together with Ms. Kim's failure to obtain any verifiable offers to purchase the business at any price despite her best efforts over a long period of time. I also find that there was no prospect that Ms. Kim was going to recoup the value of her investment to date through future profits. [50] Given that Ms. Kim has had over eight years to obtain evidence of the value of her business and improvements, and has pursued two lawsuits over this time for these losses, I find that it is just and appropriate to make this determination by way of summary trial on her evidence and her application. [51] On the basis of the evidence before me, I find that at the time that Ms. Kim was prematurely locked out of her business, she was deprived of $12,000 in inventory and $6,505 worth of equipment. I find that it is not possible for me to determine the value of her leasehold

improvements, nor is it necessary for the reasons that follow. B. Was the landlord's wrongful termination of the lease the cause of Ms. Kim's losses? [52] Ms. Kim and the landlord are consistent in their position that the time at which Ms. Kim's losses crystallized for the purposes of determining damages was at the time of the breach of her lease on June 2, 2009: see Dosanjh v. Liang, 2015 BCCA 18 [Dosanjh]; and Rougemount Capital Inc. v. Computer Associates International Inc., 2016 ONCA 847 [Rougemount]. [53] However, the landlord says that the cause of the loss of her business, including the leasehold improvements, equipment, and inventory, was the fire that occurred two months later. [54] Ms. Kim has two inconsistent pleadings regarding the cause of her losses: In this claim, she says that her losses were caused by the landlord locking her out and removing the equipment that she had by taking it away in a truck. In her claim against her business insurance, she claims that all her restaurant equipment was lost in the fire, and swore an affidavit as to the truth of those allegations. [55] I find that, based on Dosanjh and Rougemount, Ms. Kim's damages in this claim must be assessed at the time she was locked out on June 2, 2009. I find that the landlord caused her to be locked out. Therefore, the fact that a fire occurred two months later is not a factor in assessing her

initial losses for the purposes of the breach of the lease. [56] Ms. Kim says that a significant aspect of her loss was caused by the landlord removing the equipment and inventory from the property in mid to late June 2009, after locking her out. [57] There is contradictory evidence on this point, however, I find that I do not require cross-examination to resolve it. The documentary evidence together with the correspondence between the parties' counsel, establish that Ms. Kim's restaurant equipment was not removed from the business premises prior to the fire. This is also consistent with Ms. Kim's own affidavit evidence in her claim against the insurance company. [58] Ms. Kim's only evidence to the contrary in this regard is the affidavit of one of her former employees stating that sometime in mid June 2009 she saw people with trucks removing food and equipment from the premises. She does not describe the equipment, and I find that the evidence that the equipment remained on the premises is overwhelming. It is very likely that this employee did observe the removal of food, as this was acknowledged by the landlord on the basis of hygiene and health issues. On all the evidence, I find that the landlord removed inventory from the premises sometime in mid to late June 2009. [59] I find that the landlord's wrongful termination of the lease was the initial cause of Ms. Kim's loss of

$12,000 in inventory, $6,505 worth of equipment, and the value of her leasehold improvements, and that the landlord is responsible for those losses, subject to Ms. Kim's duty of mitigation. C. Has the landlord established that Ms. Kim failed to mitigate her losses? [60] Ms. Kim states in her affidavit that had she been unable to renegotiate her lease beyond December 2009, she would have relocated the business elsewhere, including all of the interior leasehold improvements (other than the floor and ceiling), her equipment, furniture, stock etc. In her affidavit, she states that her plans to do this could not be materialized "due to the fire which destroyed the building. Coupled with the defendant landlord's act of taking the goods from the premises, I have lost everything from my business as I could not salvage anything from the premises." [61] As I stated above, the landlord provided Ms. Kim with a letter on June 18, 2009 asking her to arrange for the removal of her goods. Ms. Kim did not do so. [62] I therefore find that Ms. Kim failed to mitigate her losses with respect to her restaurant equipment and moveable leasehold improvements, which she says constituted the majority of the improvements held by the business (other than the floor and the ceiling). I find that the landlord gave Ms. Kim the opportunity to remove all of these materials well before the fire occurred and that

she did not. [63] The one exception to this finding is Ms. Kim's inventory. Ms. Kim was operating a restaurant and the evidence establishes an over two‑week period where she did not have access to her restaurant to recover her inventory. I have found that ultimately some of this had to be removed for health reasons, but that was not caused by Ms. Kim. I also recognize that the inventory in this case was food stuffs and drinks, and at least some portion of it would have spoiled in the period after Ms. Kim was locked out, but before she was granted access to the building. [64] I would assess her loss in inventory at $10,000 taking into account that some portion of that inventory was alcohol and dry goods that could and should have been recoverable. General Damages [65] I also find that Ms. Kim suffered some loss due to the breach that is not recoverable through the award with respect to her inventory, but that those losses are not determinable on the evidence before me. In this respect, this case is similar to Ross v. Whitson, 2001 BCSC 941, where this court awarded nominal general damages in the amount of $15,000 to a tenant restaurant for breach of their lease. That business was also not profitable and the value of the improvements was also not sufficiently proven. In addition, though that business had been listed for sale, no offers had been received. [66] I find that this is

an appropriate case for an award of a similar amount of general damages. The evidence establishes that the landlord wanted to end the lease for reasons beyond the difficulty in collecting rent, and indeed had an offer to purchase the building subject to the tenancy ending. Although that sale apparently did not go through, the lease was wrongfully terminated before that occurred. [67] In these circumstances, I award Ms. Kim $15,000 in general damages as against the landlord. Conclusion [68] I have found that it is just and appropriate to determine this summary trial on the evidence before me. Although the evidence contains some contradictory evidence, that evidence was fairly easily reconcilable applying the rules of evidence. In addition, this is a claim that is now more than nine years old, and it is highly unlikely that substantially better evidence would be available to the court at trial. [69] The landlord defendants shall pay to Ms. Kim $25,000 in damages for the breach of her tenancy contract, with the appropriate application of any pre‑ or post‑judgment interest. [70] As this award is within Small Claims jurisdiction, I would not award costs to Ms. Kim, subject to any submissions by the parties in relation to costs. "Marzari J."