[2] The degree of duty to explain borne by the selling company of investment trust beneficiary certificates under the former Indirect Investment Asset Management Business Act when it solicits customers to purchase beneficiary certificates

[2] When a dealer who sells beneficiary certificates of an investment trust in accordance with the former Indirect Investment Asset Management Business Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635 of Aug. 3, 2007) solicits customers to purchase beneficiary certificates, it has a duty of care to protect customers by clearly explaining the characteristics and major contents of the relevant beneficiary certificates, including the risks associated with the investment, so that customers may make reasonable investment decisions based on such information. When losses occur to customers as a result of breach of such duty of care, tort liability is established. However, in cases where an investor of beneficiary certificates is sufficiently aware of the contents of the beneficiary certificates, or where a dealer who specializes in the sale of beneficiary certificates is not an investment risk that can be reasonably predicted at the time of the investment recommendation, it cannot be said that

1. Regarding ground of appeal No. 1

A selling company under the former Indirect Investment Asset Management Business Act (amended by Act No. 8635 of Aug. 3, 2007 and repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act (amended by Act No. 8635 of Feb. 4, 2009; hereinafter “Indirect Investment Act”) has a duty of care to protect investors so that investors can make reasonable investment decisions based on information by providing correct information on the profit structure and risk factors of investment trust to investors. In addition, at the time of such investment recommendation, the seller’s duty to protect investors cannot be deemed excluded solely on the ground that the investor is not an ordinary investor, but an ordinary investor. However, the scope and degree of the investor’s duty to protect investors may be determined differently in consideration of the characteristics and risk level of investment trust properties, investment experience

In this regard, the court below is just in rejecting the defendant's assertion that professional investors, such as the plaintiff, who are insurance companies under the Insurance Business Act, are exempt from the duty to explain under the Indirect Investment Act, and there is no error of law by misapprehending the legal principles on the duty to explain borne by the selling company under the

2. Regarding ground of appeal No. 2

A. When a dealer who sells beneficiary certificates of an investment trust under the Indirect Investment Act solicits a customer to purchase beneficiary certificates, it has a duty to protect the customer by clearly explaining the characteristics and major contents of the relevant beneficiary certificates, including the risks associated with the investment, so that the customer can make a reasonable investment decision based on the information, and when losses are incurred to the customer as a result of the violation of such duty of care, the seller shall be held liable for tort liability. However, in cases where an investor of beneficiary certificates is sufficiently aware of the contents of the beneficiary certificates, or where an investment risk is not an investment risk that can reasonably be reasonably predicted at the time of the investment recommendation even as an investor specializing in the sales of beneficiary certificates, the seller cannot be held liable to explain such matters (see Supreme Court Decision 2010Da55699, Nov. 11, 2010, etc.)

B. The lower court acknowledged the following facts in full view of the admitted evidence.

(1) As a selling company under the Indirect Investment Act, the Defendant entered into a consignment sale contract with Free Asset Management Co., Ltd. (hereinafter “Seuri Asset Management”), which is an asset management company under the same Act, and sold the beneficiary certificates of “Seuri Skblu Special Investment Trust No. 1” (hereinafter “the Fund”). The Plaintiff is an insurer under the Insurance Business Act and is an investor who purchased the beneficiary certificates of the Fund from the Defendant.

(2) The Fund (hereinafter “instant bill”) purchases commercial papers (hereinafter “the Promissory Notes”) issued by Scarblue Ltd. (hereinafter “SPC”), special purpose corporations related to ETA (hereinafter “ATA aviation”), and (2) SPC purchases used aircraft (aircraft combinations and two engines; hereinafter collectively “instant aircraft”) and one engine engine in SPC, and provides them as collateral for the repayment of the Fund, and leases the instant aircraft, etc. to Thirway Co., Ltd., an affiliated company of ATA aviation (hereinafter “SA aviation”), and (3) SPC pays rent for the Aircraft import to SPC, etc., and redeems the instant bill as rent.

(3) On March 3, 2008, Nonparty 1, an employee of the Defendant, explained the structure, investment risk, and management plan of the instant fund to Nonparty 2, an employee of the Plaintiff, and issued the first investment proposal prepared by the Defendant to the Plaintiff. On March 7, 2008, Nonparty 1, an employee of the Defendant, issued the second investment proposal to the Plaintiff.

(4) On March 28, 2008, the Plaintiff prepared a review report on the investment of the Fund and decided to make an investment in the Fund of this case on the basis thereof, and on April 3, 2008, transferred KRW 9 billion to an account in the name of SPC opened in the Korea Exchange Bank, a trustee company of the Fund of this case, and acquired the beneficiary certificates of the Fund of this case by transferring the amount of KRW 9 billion to the account in the name of SPC, and on the other hand, the Korea Exchange Financial Co., Ltd. (hereinafter “Korea Exchange Financial”) directly lent KRW 9 billion to SPC, separate from the Fund of this case.

(5) On December 27, 2007, SPC purchased the instant aircraft, etc., and delivered the instant aircraft to Gangzho Aircroft Master and Engine Co., Ltd. (hereinafter “GAMF”), a Chinese repair business entity, and the Spanish engine to Eagle Services Support, a Singapore repair business entity, respectively (hereinafter “ESA”).

(6) On April 7, 2008, SPC paid 2,460,000,510 won for repair costs of the Aircraft, etc. from the previous balance of the loan and the Plaintiff’s investment, and our social loans. On May 2008, SPC notified Skystar of the need for additional costs due to the increase of repair costs from around May 2008. According to the results of the on-site inspection by visiting GAO and ESA between November 24, 2008 and November 26, 2008, the debt amount was 1,294,732 when remodeling of the Aircraft, and the remaining repair costs for Sky engine were 1,297,026, and the total expected amount to be paid at USD 260,000,000.

(7) Based on the claim for unpaid remodeling and repair costs, the GAO and the ESA notified that the aircraft’s premises and engines of this case were preserved, and the progress of the project using the aircraft, etc. was over a long period of time, on August 16, 2012, the GAO had already been in place in the Chinese customs laws and regulations, and that the said aircraft’s premises should be released from China until November 15, 2012, and if not, it would be seized and disposed of by the Chinese customs office. Our social and glass Asset Management notified that the aircraft’s premises were dismantled and sold to USD 180,000 in terms of parts and scrap by demolishing the aircraft’s premises in consultation with the GAOO.

(8) Meanwhile, Skystar arbitrarily attached and used the two engines of the instant aircraft to another aircraft, and the Incheon Metropolitan City Mayor exercises the right of retention on the two engines of the said aircraft based on the claims against Skystar and other special purpose corporations operated by Skystar, with respect to other aircraft-related special purpose corporations.

(9) On July 3, 2008, the Plaintiff received KRW 224,115,113 as well as KRW 226,575,256 as of October 6, 2008, and paid KRW 93,236,732 out of the sales price of the instant aircraft to the Korea Exchange Bank, and the glass Asset Management liquidated the instant fund. Accordingly, on December 2, 2013, the Plaintiff received KRW 16,150,602 as of December 2, 2013, deducting operating expenses from the liquidation amount.

C. Based on such factual basis, the lower court determined that: (a) SPC could not exercise its right to dispose of the instant aircraft, etc. until the completion of remodeling and repair of the instant aircraft, etc. in the structure of the Fund; (b) there exists a risk that the instant fund would not normally be repaid in the event that ATAA and Skystar fail to implement a cash supplement agreement; and (c) the instant vehicle engine could lose its effectiveness as a security for collecting the Fund’s funds; (b) the Defendant provided the Plaintiff with information as if the investment risk of the instant fund can be sufficiently managed without any explanation on such risk; and (c) provided the Plaintiff with information as if the investment risk of the instant fund could be sufficiently managed, the Defendant breached its duty to protect the Plaintiff by hindering the Plaintiff by providing the Plaintiff with information as if it did not provide any explanation about such risk; and accordingly, the Plaintiff did not have any obligation to compensate for damages incurred by the Plaintiff due to the violation of the duty to explain.

D. However, the lower court’s determination is difficult to accept for the following reasons.

(1) Review of the reasoning of the lower judgment and the record reveals the following circumstances.

① On October 2007, prior to the investment of the instant fund, the Plaintiff invested KRW 4.5 billion in the Fund No. 5 (hereinafter “closed Fund”). The structure of the undisclosed Fund was designed to purchase corporate bills issued by the TPPA LLC, SPC, and to lend and operate the aircraft to Skone Star Limited Company, and to repay the corporate bills with its flight fees income. As the said corporate bills were refined and redeemed early, the Plaintiff had experience in receiving investment profits from the said Fund.

② The fact that SPC purchased the instant aircraft, etc. and thereafter leased it to Skystar through remodeling and repair by the repair company was scheduled from the stage of the Fund design, and the Plaintiff was already aware of the investment proposal and the Defendant’s explanation before the investment decision was made.

③ The reason why the repair company exercised the lien on the Aircraft’s premises and Spanish engines is that, due to the Berne Olympic Games, there was a problem in the procurement of parts, and serious defects in the engine during the repair process, the required period and cost were increased more than anticipated, and SPC failed to pay repair costs from the repair company on time due to financial reasons.

④ In the structure of the Fund, SPC could not generate profits before the Aircraft, etc. was used for its operation, and SPC concluded a monetary loan agreement with the content of borrowing funds from ATAA and Skystar in order to prepare for the risks of the repayment of the Fund and the shortage of all expenses. However, even though SPC was unable to pay repair fees for the Aircraft, etc. to the repair company, the ATA aviation and Skystar could not lend insufficient funds to SPC due to the deterioration of the management situation.

⑤ Meanwhile, as Skystar arbitrarily attached and used the aircraft’s dynamic engine to another aircraft, the Plaintiff’s exercise of rights by other aircraft-related creditors lost effectiveness as a collateral asset of the Fund.

(2) We examine the above facts in light of the legal principles as seen earlier.

Among the investment risks subject to the violation of the duty to explain, the risk that SPC could not exercise its right to dispose of the aircraft, etc. of this case as it exercised a lien by the repair company, and the risk that the engine of this case would lose its effectiveness as a security for collecting funds of this case is not the risk that the Defendant, the selling company, could have reasonably anticipated at the time of soliciting the Plaintiff to invest in the funds of this case, or the risk that the Defendant, at the time of managing the funds of this case, was the breach of trust of Skystar, and the Plaintiff, the investor, also, cannot be said to be the investment risk that was considered as important for the investment decision

Meanwhile, the agreement on loans to SPC by ATA aviation and Skystar is a kind of personal security for the shortage of funds by SPC. In the case of personal security, repayment can be made within the scope of the person liable for security. Therefore, it is difficult to view that there is a risk of not being fully repaid if the person liable for security falls short of the funds. Furthermore, it is difficult to reasonably presume that the Defendant could have reasonably predicted that the situation could not occur where the Plaintiff could not lend insufficient funds to SPC due to the aggravation of the management conditions of ATA aviation and Skystar, the person liable for security, at the time of soliciting the Plaintiff to invest in the funds in this case.

Ultimately, the investment risk subject to the duty of explanation that the court below acknowledged by the defendant as violating the duty of explanation is not a risk that the defendant could have reasonably anticipated at the time of investment recommendation of the fund of this case, or that the plaintiff, an investor, was fully aware of its contents, and thus, it cannot be said that the defendant, a beneficiary certificate dealer, bears the duty of explanation to the plaintiff, who is a professional investor.

(3) Nevertheless, solely on the grounds stated in its reasoning, the lower court determined that the Defendant violated the above duty to explain investment risks. In so determining, it erred by misapprehending the legal doctrine on the scope of the duty to explain borne by the selling company of indirect investment securities, thereby adversely affecting the conclusion of the judgment.

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the part against the defendant among the judgment below is reversed, and the case is remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench

Justices Ko Young-han (Presiding Justice)