建设·不动产
[Construction/Real Estate] In a case where a construction company that defaulted on its obligation to comply with responsibility for construction completion, subrogated the developer’s loan and attempted to seize the developer's right to implement the project, Barun Law obtains the dismissal of all preliminary injunctions seeking confirmation of the constructor’s shareholder status
1. Summary of the case a. Who did Barun Law represent?
Barun Law represented a developer of a low-temperature logistics warehouse.
b. Background of the case
(1) The creditor is a co-constructor of a low-temperature logistics warehouse development project. As the developer of the project, the client received a PF loan of approximately KRW 55 billion from a financial institution and pledged the shares held by the client's CEO and others as collateral (security interest).
(2) However, due to the commencement of the rehabilitation process for the joint contractor B, the contractor was unable to complete the construction by the required completion date. As a result, the contractor lost the time benefit of the loan agreement, subrogated the loan to the financial institution, and then received all rights and security rights under the loan agreement from the financial institution.
(3) Subsequently, claiming that it had become a shareholder of the client by executing the share pledge transferred from the financial institution, the contractor filed an application for a provisional injunction seeking confirmation of its shareholder status.
2. The court’s judgment
(1) Judgment of the Seoul Central District Court: The first instance court dismissed the provisional injunction application for the following reasons: (i) It would be a violation of the principle of good faith or an abuse of rights for the contractor to acquire control of the client by executing a security right transferred from a financial institution through subrogation. (ii) If the contractor is recognized as a shareholder, it becomes unfair for the client to lose the opportunity to pursue the contractor for damages arising from the contractor's failure to comply with its obligation to complete the construction, as the contractor acquires control of the client.
(2) Judgement of the Seoul High Court: Further, the court of second instance dismissed the appeal against the provisional injunction decision on the grounds that it was unreasonable to allow the contractor, which believed that it would earn a large profit from the project if it acquired the client's right to execute the project, to intentionally default on its responsibility for completion and to pay for the loan instead of the developer to the financial institution, thereby taking the project from the developer.
3. Our argument and role
We argued that (1) the contractor’s failure to comply with its obligations resulted in the acceleration of the loan agreement, (2) it is not interpreted that the contractor that failed to comply with its obligations under the loan agreement is allowed to seize the developer’s right to execute the project by exercising its pledge over the shares, and (3) if it is interpreted otherwise, the contractor may intentionally violate its obligations to comply with its obligations in a project that is expected to be profitable and seize the right to execute the project, which constitutes a violation of the principle of good faith and abuse of rights.
4. Significance of the decision
Recently, due to the deterioration of the real estate sector, many disputes have arisen regarding land management trust projects implemented under the responsibility of completion. If the PF loan agreement and trust agreement are interpreted solely according to the text therein, there is room for interpretation that a construction company that defaults on its obligation of responsible construction can subrogate the loan and take away the project implementation rights of the developer by executing security for shares. This case, therefore, is significant as a precedent in that the court determined that it is impermissible for a contractor that is responsible for defaulting on its obligation of responsible construction to exercise its rights under the subrogation of the debtor to acquire the right to execute the project, which is contrary to the principle of good faith.
□ Attorneys in charge: Koh Kyoung-hee and Seo Ho-seok
2024. 03. 31
重建·再开发
[Civil Execution] A case in which Barun Law obtains a final decision that an auction for a newly reconstructed apartment is valid on the premise that an ownership preservation registration made by the court’s request is valid for a reconstructed apartment, with regard to which construction completion has not been approved and a notice of transfer has not yet been made due to violation of the building act
1. Overview of the caseA reconstruction association established to demolish existing tenements and construct an apartment building and a neighborhood living facility entered into a contract for reconstruction work with a general contractor, N, around July 2008, under which the general contractor agreed to be transferred 10 out of 30 newly constructed apartment units and the entire neighborhood living facility in exchange for payment of the construction price.
The apartment building was fully constructed around May 2015, but the general contractor had not received the completion certificate from the competent government office for a long time due to its violation of the building law by constructing and selling an office building in the place where the neighborhood living facility was supposed to be located. In the meantime, the registration of ownership preservation in the name of the rebuilding association was completed at the request of the court following the creditors' application for an injunction against real estate disposal and foreclosure. Since 2014, creditors continued to apply for forced and voluntary auctions of the real estate, and several auction proceedings were initiated.
However, on March 18, 2022, the judicial assistant of the Seoul Central District Court decided to cancel all the auction proceedings and dismiss the auction applications on the grounds that the auction proceedings were initiated based on the title preservation registration in violation of the Urban and Residential Environment Maintenance Act and its registration procedures.
2. Our argument and role
In response, our attorneys filed an appeal with the Seoul Central District Court on behalf of the creditors who had applied for the arbitrary auction of the properties, arguing that (i) the auction court does not have the authority to determine the invalidity of the registered deeds for each of the properties in this case, and therefore, the decision of the judicial assistant on the premise that it can determine otherwise is illegal; (ii) since the reconstruction association acquired the ownership of the building in question in the first place, the registration of the preservation of ownership in the name of the reconstruction association by the court’s request is valid; and (iii) the application for auction by the keun-mortgagee of the land before the separate ownership of the collective building was established was legal.
On June 22, 2023, the appellate court accepted the arguments set forth in (ii) above and reversed the first instance decision for the following reasons: when a project developer receives approval for the completion of an improvement project and notifies of the transfer, it is required to register the land and buildings directly and collectively pursuant to Article 56 of the former Urban Maintenance Act and Article 5 of the former Urban and Residential Environment Maintenance Rules, but, as in this case, if the building is completed and the building can become an object of ownership, but the transfer notification has not yet been made, the registration procedure under the former Urban Maintenance Act cannot be said to apply, and therefore, if there is a request for registration of a restriction on disposal from the court, there is no restriction on the registrar of deeds to register the preservation of ownership of the building ex officio as a prerequisite for registering the restriction on disposal, and the registration of preservation of ownership by the court’s request is legal.
In response, the reconstruction association appealed to the Supreme Court. However, on January 8, 2024, the appeal was dismissed and the decision of the appellate court was affirmed.
3. Significant of the decision
Article 56(1) of the former Urban Maintenance Act (now Article 88 of the Urban Maintenance Act) (Registration Procedures and Restrictions on Changes in Rights) stipulates that “the project developer shall, without delay, request or apply for registration of the land and buildings at the competent district court or registry office upon notification of transfer pursuant to Article 54(2).” In the absence of a clear Supreme Court ruling on this, there have been views that, in consideration of the public nature of a reconstruction project, it is not possible to register the preservation of ownership rights in the name of a reconstruction association by a court's request, regardless of whether a transfer notification has been made, and that only registration by request or application by the reconstruction association, which is the project developer, is possible. There are also cases in which relevant registration precedents are understood of the same effect.
However, this ruling is significant as it is the first precedent to clarify that the old Urban Maintenance Act only applies to cases where there is a transfer notice, but not to cases where the transfer notice is not made because the completion approval has not been received. However, just like this case, when the title is registered under the Urban Maintenance Act, the existing mortgage registration is transferred at the same time in accordance with Article 88(3) of the same Act. There have been cases in which reconstruction associations have delayed the notification of transfer for a long period of time to evade liability and continued to enjoy the use of the property, but this case has made it possible to prevent such bad practices.
□ Attorney in charge: Son Heung-soo
2024. 03. 31
企业刑事
[Corporate Criminal] A case in which Barun Law defends the CEO of a pharmaceutical company charged with violating the Tax Offences Punishment Act and obtains the dismissal of the charge without prejudice
1. Overview and issues of the case
While running a pharmaceutical company, the client decided to outsource the sales of pharmaceutical products and established a pharmaceutical sales promotion agency to manage his customers. The client registered a business license for a company ("Company B") with the client's relative Mr. A as its representative. Company B was legally engaged in the business of drug sales promotion, but the local tax office imposed excessive taxes on Mr. A and Company B on the ground that some business expenses were not accounted for. Company B failed to pay the taxes and went out of business, and Mr. A also failed to pay the taxes and became a credit delinquent. A then requested the client to pay the taxes and remove the credit delinquent status from him. Mr. A filed a lawsuit against the client, alleging that the client violated the Tax Offenses Punishment Act by registering a business under another person's name for the purpose of evading taxes. The issue in this case was whether the factual circumstances of the case constituted the offense of “registering a business using another person’s name or operating a business using a business registration in another person’s name" under Article 11(1) of the Tax Offenses Punishment Act.
2. Our argument and role After taking on the case, based on a number of lower court rulings, including Supreme Court precedents, we emphasized that, “another person” should be considered to mean only a “natural person”, so the act of “registering a business using the name of another person” does not include “registering a business as a legal entity using another person’s name as representative thereof”, and the act of “operating a legal entity using a business registration in the name of another person” does not include “operating a business using the business registration of a legal entity with another person’s name being registered as representative thereof”. In addition, we clearly demonstrated that “there was no intent to evade taxes” by elaborating on the circumstances under which the client had no choice but to establish a pharmaceutical sales promotion agency, the circumstances under which the client had no choice but to register a business with another person as its representative, the circumstances under which the client had been paying taxes and operating legally since the establishment of the company, and the circumstances under which the client had to pay additional taxes as a result of the tax investigation.
3. Result and significance During the investigation, the police had strong suspicions that the client had established and operated Company B to evade taxes. However, by choosing a law firm with excellent expertise in tax criminal law, our client was able to obtain a dismissal of the case at the police stage as a result of a sophisticated legal defense and thorough fact-finding.
□ Attorneys in charge: Cho Jae-bin and Lee Seo-in
2024. 03. 31
企业刑事
[Criminal] A case in which Barun Law obtains an acquittal for a defendant accused of defrauding a toy distributor of more than KRW 5 billion by deceptively entering into an exclusive supply agreement
1. Overview of the case
The client is a representative of a company engaging in the manufacture and supply business of toy products (“Company A”). The client entered into an exclusive supply and distribution agreement with a company, which is one of the leading toy distributors in Korea (“Company B”), for manufacture and supply of toy products, such as robots appearing the first series of a robot animation produced by an animation production (“Company C”) (the “Agreement”). Under the Agreement, Company B agreed to the initial minimum requirement of KRW5 billion.
Due to the failure of the first series of the animation, however, the sales of related robot products were sluggish, and Company B was left with a huge amount of inventory. Under these circumstances, it was decided that the robots of the first series would not appear in the second series. Company B claimed that when the client made a presentation and meeting with Company B officials regarding the animation series, the client stated that the robots appearing in the first series would continue to appear in the second series. Company B accused the client of violating the Act on Aggravated Punishment of Specific Economic Crimes (Fraud), alleging that the client deceived the officials of Company B and that Company B was misled into entering to the Agreement, thereby defrauding it of more than KRW5 billion. The prosecutor deemed the allegations admissible and prosecuted the client.
2. Argument and role of our attorneys
After being appointed as the defense counsel of the client at the first trial stage, we argued at the trial proceedings that the defendant was not guilty of deception on the following grounds:
① The client did not may any deceptive statements to Company B that the robots of the first series would continue to appear in the second series;
② Not only did Company B not mistakenly believe that the robots of the first series would continue to appear in the second series, but whether or not the robots of the first series would appear in the second series was not a factor determining the conclusion of the Agreement, so there was not causal relationship between the alleged mistake and the act of disposition; and
③ Even after it was confirmed that the robots of the first series would not appear in the second series, the defendant continued to negotiate with Company B and Company C so that the robots of the first series could appear in the second series.
In order to prove the client’s innocence, we carefully reviewed a vast amount of evidence and statements of the parties involved, including the Agreement, the presentation at the meeting regarding the animation series, and the client’s statements. We also cross-examined witnesses who were hostile to the client, eliciting testimonies favorable to the client or finding inconsistencies in their testimonies against the client. We persuaded the trial court by pointing out the unfairness of the prosecutor’s and Company B’s arguments through logical argument.
3. Decision
The court of first instance accepted our arguments and acquitted the client, stating:
① Based on the description of the presentation and the remarks made by the client at the meeting regarding the animation series, it cannot be said that the client meant that the robots of the first series would continue to appear in the second series;
② Given that the Agreement, which was executed after prolonged negotiation, did not contain any provisions regarding whether the robots of the first series would appear in the second series, and that the Agreement stipulated that oral agreements other than those contained in the Agreement were invalid, the appearance of robots was not a determining factor in the conclusion of the Agreement, and therefore, it could not be said that Company B entered into the Agreement in error due to the defendant’s statement;
③ In view of the fact that there was no prior agreement that the robots of the first series would not appear in the second series, and that the Company C, not Company A or the client, had the authority to decide the appearance of robots in the animation series in the first place, there is no causal relationship between the alleged acts of deception, mistake and disposition; and
④ If the client had intended to defraud Company B, there was no reason for the client to notify Company B that the robots of the first series would not appear in the second series before the order and payment for the products of the first series were completed, so it is difficult to say that the client was guilty of defrauding Company B. Therefore, the client’s criminal offense was not proved beyond a reasonable doubt.
The prosecutor appealed the acquittal of the first instance. On appeal, the prosecutor filed a motion to amend the indictment to add a preliminary charge that “the defendant committed deception by omission, failing to notify company B of the appearance of robots of the first series in the second series despite its obligation to do so”. We argued against this preliminary charge on the grounds that (i) the appearance of the robots in the second series was not a material factor for Company B to decide to enter into the Agreement, given the wording of the Agreement and the circumstances before and after the Agreement was signed; and (ii) even if different robots would appear in the second series, since it had no effect on the legal status of Company B under the Agreement, the defendant could not be found to have an obligation to notify. In addition to citing the reasons for the trial court’s ruling, the appellate court also accepted our defense on the preliminary charge of the case, found the client not guilty and dismissed the prosecutor’s appeal.
4. Significance of the decision
The court’s ruling in this case can be seen as a deterrent to the practice of industry dominant companies suing small and medium enterprises and their representatives for fraud, alleging deception in order to pass on their losses caused by the failure of a contract that they entered into based on their own business judgment. It is also significant in that this ruling shows that even in unfavorable circumstances, such as the witnesses being hostile to the client in court, it is possible to obtain an acquittal by logically convincing the tribunal through careful review of evidence and thorough preparation of witness examination.□ Attorneys in charge: Ryu Jong-myounga and Yi Jai-jeon
2024. 03. 31
控告及应对调查
[Criminal] A case in which a defendant charged with defamation by making false statements was acquitted for the prosecutor’s lack of proof regarding the defendant’s falsity and awareness thereof
1. Overview of the casea. Who did Barun Law represent? Barun Law represented Mr. A who was charged with the offence of defaming a victim by intentionally making false statements about the victim. b. Background of the case: Alleging that the defendant Mr. A went to Mr. C’s place of business and showed a link to a new article and a picture of a signboard of a company (“Company X”), and said to Mr. C “Mr. A on the broadcast because he sold Chinese-made products disguised as domestic products,” even though Company X was not mentioned in the news article and had nothing to do with the content of the news article, the prosecutor charged Mr. A with defamation of the victim by making false statements to Mr. C and five others and implying that Company X was the company covered in the news article. 2. DecisionUijeongbu District Court Decision 2022Kodan3542, dated February 16, 2024 3. Basis of the decision(i) Regarding the facts allegedly stated by the defendant, the court held that it was difficult to find that the defendant said “Company X was on the broadcast” in light of the fact that five people, including Mr. C, stated differently about the facts allegedly stated by the defendant, and that the fact that the name of Company X or Mr. B did not appear in the news could be easily identifiable through a quick glimpse of the news article, but it was admissible that the defendant said “Company X is selling a Chinese-made product, which was on the broadcast, as ‘Product Y’”. (ii) The court, as to whether the above facts allegedly stated by the defendant were false and whether the defendant recognized them as false statements, noted that whether the Chinese products in the broadcast were the same as Product Y sold by Mr. B was a decisive factor in determining whether the alleged facts were false or true, but the investigative agency did not seem to have conducted any further investigation into the truthfulness of the statements on the premise that the defendant had told Mr. C and five others that “Company X was on the broadcast”, and the evidence submitted by the prosecutor was insufficient to prove both that the alleged statements were false and the defendant made the statements with knowledge that they were false. (iii) Finally, as to whether the defendant was guilty of factual defamation, the court held that, in light of the witnesses’ statements, the facts allegedly stated by the defendant could be said to be a matter of public concern and interest, as they could lead to a loss of confidence in the industry as a whole, and that the defendant’s statements to Mr. C and the five others were in the public interest for the purpose of detecting illegal acts, and that even if there was a personal purpose or motive implied, it was only incidental, making it difficult to exclude the application of Article 310 of the Criminal Code. 4. Our role and argumentOn behalf of Mr. A, we examined five witnesses, including Mr. C, and argued that Mr. A did not state false facts as stated in the indictment, nor did he had any false perception, as he only said that “Product Y sold by Mr. B is the same product made in China in the broadcast”. Further, by submitting the notification of the customs’ investigation results regarding Product Y as evidence, and examining Mr. D, an operator of a company manufacturing products damaged by Product Y sold by Mr. B, as a witness, we argued that even if the facts allegedly stated by Mr. A are likely to infringe on the social value or evaluation of Mr. A, they are true facts and are in the public interest, and therefore, illegality is carved out of the alleged statements under Article 310 of the Criminal Code. 5. Significance of the decisionThe decision is significant in that it reaffirms the legal principle that “in a case of defamation by false publication of facts under Article 307(2) of the Criminal Code, the prosecution must prove that the stated facts are those undermining a person’s social reputation, that the stated facts are false because they do not objectively conform to the truth, and that the defendant is aware that the stated facts are false.” □ Attorneys in charge: Park Sung-ho, Baek Jong-deok and Sim Hyun-A
2024. 03. 31
M&A/公司治理结构
[Advisory] Barun Law successfully advises on the sale of shares in YTN
Attorneys Jeong Kyoung-ho, Choi Jae-woong, Cho Seo-jin, Lee Hye-jun, Kim Jun-young, Park Hyun-jin and Lee Sung-jun successfully advised Kepco KDN Co., Ltd. (“KDN”) (holding 21.43%) and Korea Racing Authority (“KRA”) (holding 9.52%) on the sale of a total of 13,000,000 shares (accounting for 30.95%) in the outstanding shares of YTN, a publicly traded company listed on the KOSDAQ market, through an open competitive bidding process.This was a large-scale transaction involving a change in the largest shareholder and a total sale price of KRW320 billion. In particular, the complex legal and procedural restrictions under laws relating to public contracts applicable to public corporations KDN and KRA needed to be carefully considered throughout the bidding and sale process. In addition, as the target company, YTN, is a broadcasting company and a publicly traded company, various legal restrictions had to be carefully considered, including strict governance restrictions under the Broadcasting Act, restrictions on procedures for changing shareholders and licenses, restrictions under the Capital Markets act and exchange regulations, and disclosure issues. This transaction is a unique case in terms of legal procedural requirements among competitive bidding sales of shares conducted through a lead manager.Barun Law preemptively reviewed various restrictions and risks, and advised on the overall procedure and plan from the beginning of the sale process, considering the specificity of the deal. We also advised and assisted the sellers in establishing and conducting procedures, reviewing all documents such as bidding documents, agreements and arrangements, and consulting with the sellers and relevant administrative agencies throughout the sale process. As a result, the deal was successfully completed, and the sellers were able to sell all of the target shares at a premium price of approximately three times the market price at the exchange.As such, Barun Law has successfully advised on the sale of shares in a unique and unprecedent deal, based on its extensive experience and expertise as a large law firm in Korea.ㆍRelated News Article [Money Today] Eugene Group Completes Acquisition of YTN Equity...Becoming the largest shareholder - February 15, 2024□ Attorneys in charge: Jeong Kyung-ho, Choi Jae-woong, Cho Seo-jin, Lee Hye-jun, Kim June-young, Park Hyun-jin and Lee Seong-jun
2024. 03. 31