[Fair Trade] A case in which it was judged that an agreement on the inclusion of wages for workers hired by a contractor in the unit price did not constitute an unfair special term prohibited by the Subcontracting Act, and therefore, the contractor was not liable for damages
1. Case summary ㅇ A defendant (i.e., a contractor) was a legal entity intended to engage in manufacturing parts for ships, and the plaintiffs were subcontractors who entered into a subcontracting agreement with the defendant. ㅇ In the past, some subcontractors had filed a civil suit against the defendant, claiming that they had entered into an agreement, pursuant to which the defendant would make up for wages, instead of directly hiring its workers, while the defendant had accepted a court’s decision on mediation or had applied for a decision on the recommendation of conciliation, with intent to promptly resolve the dispute. On the foregoing basis, the defendants filed this suit, claiming that the defendant had entered into an agreement, pursuant to which the defendant would make up for wages (the “Agreement”). ㅇ In addition, the plaintiffs filed a claim for default interest, additional tax and damages equivalent to penalties, claiming that they were to pay additional tax to VAT and penalties because the defendant had failed to timely pay the subcontracting prices to them. 2. Plaintiffs’ caseㅇ The plaintiffs asserted: the defendant is obliged to pay unpaid wages pursuant to the Agreement, and even if the plaintiffs had agreed to pay the wages, the Agreement should be invalid because it constitutes an unfair special term under the Subcontracting Act, and even if the Agreement is not invalid, the defendant’s act of making the unfair special term itself constitutes an illegal act, and therefore, the defendant should pay damages to the plaintiffs. ㅇ In addition, the plaintiffs asserted: since additional tax to VAT and penalties are ordinary damage, the defendant should pay damages to the plaintiffs that are equivalent to additional tax and penalties incurred to the plaintiffs due to the defendant’s delay in paying the subcontracting prices. 3. The court ruled that all the claim made by the defendant for damages caused by the breach of contract be accepted.ㅇ The court did not accept all the assertions made by the plaintiffs above, and dismissed all the claims for wages under the Agreement and damages equivalent to the sums of additional tax to VAT and penalties. ㅇ In regards to the plaintiffs’ claim for the Agreement, the court dismissed all the claim on the ground: △ the plaintiffs fail to provide objective evidence to the court, and △ the mediation decision and the reconciliation recommendation decision made in the previous cases have the different circumstances than this case. ㅇ The court also found that the evaluation guidelines for unfair special terms established by the Korean Fair Trade Commission, which the plaintiffs used as basis for their allegation of the unfair special term, are just internal judgement standards regarding unfair special terms prescribed in the Subcontracting Act, and even if the alleged agreement had been constituted an unfair special term, the court could not deny the judicial effect of the agreement made between the breaching contractor and the subcontractors. ㅇ Meanwhile, in regards to the plaintiffs’ claim for damages equivalent to the sums of additional tax to VAT and penalties, the court dismissed all the claim filed by the plaintiffs on the ground: as long as the plaintiffs are obliged to pay VAT, the additional tax and penalties were just imposed on them due to their failure to timely meet their tax payment obligation, there is no causal relationship between the alleged damages inflicted by the plaintiffs and the defendant’s delay in paying the subcontracting prices. 4. Our assistanceㅇ We aggressively asserted and substantiated that this case is essentially different from the previous cases for the following reason: the mediation decision and the reconciliation recommendation decision made in the previous cases are not intended to accept the Agreement, the Agreement in this case is delicately different from the agreement at issue in the previous cases, and the agreement on the unit prices at issue does not unfairly abuse or limit the plaintiffs’ interests. We also highlighted that it is the plaintiffs who are obliged to pay VAT, and therefore, there is no causal relationship between the plaintiffs’ obligation to pay the additional tax to VAT and penalties and the defendant’s delay in paying the subcontracting prices. ㅇ Attorneys in charge: Baek Gwang-hyun and Kim Ji-soo
2021. 09. 30
[Rehabilitation] A case in which we obtained a decision that the Debtor Rehabilitation Act should prevail over the Civil Execution Act in the case of conflicts between the two acts
1. Case summary ㅇ Case background: Barun Law (attorneys in charge: Roh Seok-jun, Yi Min-Hoon and Kwon Eun-young) successfully advised on the merger and acquisition deal prior to the approval of a rehabilitation proceedings for Jeju Country Club engaging in the operation of a golf course in Jeju. The defendants completed the registration of ownership transfer regarding certain real estate owned by JCC after they had purchased and had paid for part of the real estate in the discretionally sale process taken place during the rehabilitation proceeding. ㅇ Litigation: Representing JCC, we claimed for the cancellation of the ownership transfer registration made in the name of the defendants, asserting that even though the defendants had paid for the real estate in the discretionally sale process, but the rehabilitation proceeding had been commenced before the dividend payout date, and thereafter, the rehabilitation plan for the debtor had been finally approved, and thus, the sale became invalidated and the ownership transfer registration became null and void. 2. Decisionㅇ On August 23, 2021, the Jeju District Court accepted all the claims filed by JCC, determining that a general injunctive order was issued for the plaintiff before the dividend payout date commenced with regard to the sale under the Debtor Rehabilitation Act and the rehabilitation proceeding was commenced thereunder, and therefore, the sale became invalidated, and the ownership transfer registration, which had been made in the sale in relation to the real estate, was null and void. 3. Our case and roleㅇ After thoroughly analyzing legal theory and precedents regarding the Debtor Rehabilitation Act, we obtained a confirmation that the ownership transfer registration based on the sale proceeding should be null and void by convincing the court that in relation to the suspension and invalidation of a sale, the Act on Rehabilitation and Bankruptcy of Debtor, which is a special law, prevails over the Civil Execution Act, which provides that a purchaser shall acquire title to real estate only when it has fully paid for the real estate in a sale made to foreclose a creditor’s security interest in the real estate (Articles 268 and 135 of the Civil Execution Act), and therefore any proceeding to compulsorily execute a creditor’s right arising from its rehabilitation claim or rehabilitation security interest should be suspended with regard to the debtor’s property when there is a general injunctive order or a decision on the commencement of a rehabilitation proceeding, and the suspended sale should be invalidated when there is a decision on the approval of a rehabilitation plan. 4. Implicationㅇ This decision has implications in that it specifically embodies the Supreme Court of Korea’s decision in which it confirms that the Act on Rehabilitation and Bankruptcy of Debtors prevails over the Civil Execution Act with regard to the suspension and invalidation of a sale proceeding in the case of conflicts between the two acts and the suspended sale proceeding should be invalidated when there is a decision on the approval of a rehabilitation plan, and it gives a clear conclusion regarding the ownership of a purchaser. It is expected that this decision will help resolve a dispute over precedence between a rehabilitation proceeding under the Debtor Rehabilitation Act and a sale proceeding under the Civil Execution Act in a more appropriate and expeditious manner. ㅇ Attorneys in charge: Roh Seok-jun, Yi Min-Hoon and Kwon Eun-young
2021. 09. 30
[Family] We helped a client, who filed for an appeal to the district court’ decision on the acceptance of the claim for divorce filed by a spouse at fault, to seek the cancellation of the district court’ decision and the dismissal of the claim for divorce filed by the spouse at fault by making our case through a parody to show the infidelity nature of the act of the spouse at fault and producing new evidence to the appeal court.
1. Who did Barun Law represent? ㅇ We represented a wife sued for divorce and property division from her husband having an affair with another woman 2. Litigation and our role ㅇ A district court accepted the husband’s claim for divorce and property division, stating that the husband had had an affair with another woman but the husband’s act was “not unfaithful” even though it was “inappropriate.” The wife filed an appeal and we represented the wife in the appeal. We proved that the husband was liable for divorce by using a parody and additional evidence to show the husband’s act of “dating” was clearly an act of infidelity beyond the appropriate level, and helped the client obtain a decision that the lower district court’s decision be cancelled and the husband’s claim for divorce and property division be dismissed. 3. Implications ㅇ In the midst of a growing acceptance of claims filed by a spouse at fault for divorce, the Korean Supreme Court of Korea declared on September 15, 2015 that a spouse at fault for divorce cannot file a claim for divorce. Since then, the district and the appeal level courts have maintained the position where a spouse at fault for divorce cannot file a claim for divorce. Despite this recent trend, the district court dealing with this case found that the relationship between the cheating husband and the incestuous woman was “inappropriate”, but “not an act of infidelity”, allowing the husband to get away with what he had done against his wife. Representing the wife in the appeal, we made our case by using the details of the husband’s relationship with the adulterous woman admitted by the district court and a parody in which the husband and the adulterous woman were replaced with the wife and a man having an affair with the wife. We made our case in a way of asking whether the court would make the same judgement that the alleged relationship was “inappropriate but not an act of infidelity” as the district court regarding the wife’s relationship with the adulterous man when the gender of a spouse having an affair with another was female, not male. We also collected and produced additional evidence showing that the husband was at fault. Eventually, we convinced the court to reverse the district court’s decision, and dismiss the husband’s claim for divorce and property division. Even though a claim for divorce filed by a spouse at fault is accepted, this case reaffirms the long-standing theory that the claim for divorce filed by a spouse at fault is hardly accepted. ㅇ Attorney in charge: Song Bong-jun
2021. 09. 30
[Construction] A case in which we represented a representative subcontractor of a group of co-subcontractors in the lawsuits filed by them against the representative subcontractors for damages of about KRW215 billion and helped the client to win the lawsuits both in the district and the high courts
1. Who did Barun Law represent? ㅇ It represented Hyundai Construction, Engineering representing a group of co-subcontractors of a large-scale project to install boilers. 2. Information on the case ㅇ A plaintiff formed a group of subcontractors to participate in a bidding for the installation of boilers and to conduct the installation project which had been launched by Korea Southern Power Co., Ltd. Accordingly, the defendant was authorized to play a role of managing the overall conduct of the project by the other subcontractors as a company representing the group of the subcontractors. The subcontractors participating in the associated group agreed to jointly perform the project, but the defendant would have 51% of interests in the project while the plaintiff would have 49%. As a representative, the defendant participated in the bidding after calculating a proper bidding price by taking into account of the possibility of winning the project and profitability of the project in regards to the task of submitting a proposal for the bidding. Ultimately, the group of the subcontractors was selected as a preferential negotiating partner, and entered into a contract with the owner of the project. During the project, the subcontractors filed for arbitration against the owner as the budget had exceeded the contract price, claiming that additional construction cost was incurred to them due to the owner’s fault. The arbitrator granted part of the claim filed by the subcontractors. In or around 2015, the plaintiff filed this suit against the defendant for damages, alleging that it had suffered damage equivalent to the sums of the difference between a contract price that the defendant could have proposed if it had fully met its fiduciary duty and the amount which the plaintiff and the defendant would receive from the owner, and construction cost incurred due to the defendant who set the construction period shorter than required. We were granted all the claims for the defendant both in the district and the high courts. 3. Litigation ㅇ Decision As all the appeal, the primary and the elective claims, and the 1st, the 2nd and the 3rd preliminary claims were dismissed and/or denied, the defendant won the lawsuits in all respects. ㅇ Basis The appeal court explained: Even if the plaintiff has to share construction cost, and thereby damage occurs to the plaintiff, which is an associated member, due to the breach of fiduciary duty by the defendant, since the damage is not one that the plaintiff personally suffers irrespective of the group of the subcontractors, the plaintiff cannot seek damage under the personal status irrelevant to the associated relationship. It cannot find evidence, based on which it could see that the defendant intentionally proposed a low bid even with knowledge that they would lose money as the construction cost would exceed the contract price or that the defendant set the contract price at the price extremely low in violation of fiduciary duty as a manager of the association, or that the defendant set the construction price that was unrealistically short. Thus, the defendant is not obliged to pay the alleged damages or return the alleged unjust enrichment. 4. Our case and role ㅇ On the basis of legal theory regarding an association under the Civil Code, we asserted that a member of an association was not entitled to individually claim a general manager of the association for damages allegedly suffered by the member or the association. While asserting that the bid calculated by the defendant was proper, we explained the uniqueness of the task for the bidding for a construction project. We also clarified that the construction cost had not increased due to the defendant’s fault. We organized the circumstances behind the increase in the construction cost by construction item by using a table to help the court easily understand the circumstances. 5. Implications ㅇ The decision will serve as a leading precedent in relation to cases where members of an association organized by co-subcontractors file a claim for damages against the general manager of the association, alleging the breach of fiduciary duty by the general manager. Also, the decision has an implication in that it is compatible with the purpose of the joint subcontracting scheme (i.e., sharing profits and risks from a construction cost) by clearly identifying a party holding a right to claim damages caused by the breach of fiduciary duty against a general manager of an association for a construction project and how to exercise the right. ㅇ Attorneys in charge: Kim Jae-hwan, Kim Ji-hee, Park Jun-gyu and Lee Seo-in
2021. 09. 30
[Criminal] A case in which we helped our clients be clear of suspicion that they had smuggled Chinese seaweed and had sold it by deceiving the country of origin as domestic products
1. Case summary ㅇ Summary of allegations: Allegations of violation of the Act on Origin Labeling and the Act on Labeling and Advertising of Food – The suspected were the former and current officers and employees of a company engaging in processing of fishery products. It was known that they had exported local half-finished seaweed to China and had smuggled the processed seaweed to Korea from China. In this process, they were alleged that they had mixed and had smuggled Chinese seaweed leaves with the processed Korean seaweed from China. Then, they had dried the mixed products and had supplied them to local food manufacturers, falsely indicating that the origin of the products was Korea. – They were also alleged that they had not indicated the fact that they had processed seaweed with calcium chloride on the labels. ㅇ A decision on non-prosecution was made on August 30, 2021. 2. The content and basis of the decision ㅇ Regarding the alleged false indication of the country of origin – Judicial police officers decided to send the case to prosecutors, determining that the suspects had imported Chinese seaweed leaves without making a proper declaration by making a false report that they had imported 30 kg per sack in the import declaration even though 35kg of seaweed leaves had been actually contained in a sack, which had been the mixture of local seaweed leaves processed in China and Chinese seaweed leaves. – It was found that the findings were partly consistent with defenses made by the suspects as, according to the measurement data of processed seaweed, a certain amount of dehydration occurred during storage and export of salted seaweed. – No difference in DNA could be found between the seaweed produced by the suspects’ company, from which white hair was found, and the seaweed of other companies processed and sold in Korea. In addition, no scientific method was developed to distinguish Chinese seaweed from domestic seaweed. – It was determined that the suspects were clear of suspicion due to the insufficiency of evidence. ㅇ Regarding the alleged failure to indicate the existence of calcium chloride – It was confirmed that the seaweed sold by the suspects’ company had similar chlorine and calcium contents to those produced by other companies that do not wash seaweed with calcium chloride. It was also difficult to see that the calcium chloride used by the company in the washing process fell under the category of “food additives” for which the component and content must be labeled. – It was determined that the suspects were clear of suspicion due to the insufficiency of evidence. 3. Our argument and role ㅇ Regarding the alleged false indication of the country of origin – It was true that 35 kg of seaweed leaves that had been processed were contained per sack, but since moisture was lost during storage and customs clearance, the weight was reduced in consideration of the dehydration rate when the company made the import declaration. The company did not import Chinese seaweed leaves without making a declaration. – No scientific method was developed to distinguish Chinese seaweed from domestic seaweed. ㅇ Regarding the alleged failure to indicate the existence of calcium chloride – According to the interpretation of the relevant laws and regulations, there was no obligation to label the composition and content of calcium chloride for washing. Seaweed sold by the company had similar chlorine and calcium contents to those produced by other companies 4. Implications held by the non-prosecution decision ㅇ There was a serious blow to the sales of the company and one of its customers, which is one of the leading food companies in Korea, due to the media coverage of the allegations. They could shed off the allegations through the decision that they were free from suspicions. ㅇ Attorneys in charge: Park Sung-keun, Kim Jun-Kyu, Seol Jae-sun, Park Jun-Gyu, and Lee Chang-min
2021. 09. 30
[Advisory] Providing overall legal advice necessary for the M&A process as a legal advisor to Samjong KPMG, a lead manager in the rehabilitation case of Jico Co., Ltd.
Attorneys Noh Seok-jun and Yi Min-hoon had successfully obtained approval for the M&A rehabilitation plan as a legal advisor to Samjong KPMG, the lead manager for the sale of the Jico, a KOSPI listed company before Jico’s rehabilitation proceeding was approved. Accordingly, the management rights to Jico were transferred to Samra Midas Co., Ltd. (“SM Group”), and Samra Midas completed the payment of a total of KRW 23.6 billion for acquisition according to the rehabilitation plan.
Jico was established in 1961 and listed on the KOSPI in 1994. As a partner of Hyundai Mobis, Hyundai Motors, and Kia Motors, Jico specializes in manufacturing auto parts (e.g., water pumps, front cases, auto parts, al cylinder heads, etc.).
As a legal advisor to the lead manager, we provided overall legal advice necessary for the pre-authorization of the M&A process, including public sale, finalization of an acquirer, negotiation of acquisition conditions, conclusion of investment contracts, and preparation of a rehabilitation plan.
2021. 09. 01