December 3, 2015

2. Of the costs of lawsuit, the part arising between the Plaintiff and the Defendants is borne by the Plaintiff’s succeeding Intervenor, and the part arising between the Plaintiff’s succeeding Intervenor and the Defendants are

The Plaintiff: (a) Defendant 1, Defendant 2, Defendant 3, Defendant 4, and Defendant 10 jointly and severally with the Plaintiff; (b) Defendant 5 jointly and severally with the Defendants listed in the above paragraph (1) KRW 300,000,000 out of the amount indicated in the above paragraph (1) and ③ Defendant 6, Defendant 7, Defendant 8, and Defendant 9 jointly and severally with the Defendants listed in the above paragraph (1) and jointly with the Defendants, KRW 100,000 out of the amount indicated in the above paragraph (1) and KRW 20% per annum from the day following the delivery of the duplicate of the complaint of this case to the day of full payment.

The Intervenor succeeding to the Plaintiff: ① Defendant 1, Defendant 2, Defendant 3, Defendant 4, and Defendant 10 jointly and severally with the Intervenor succeeding to the Plaintiff; ② Defendant 5 jointly and severally with the Defendants listed in the above paragraph (1) amounting to KRW 300,000,000 among the amount indicated in the above paragraph (1); ③ Defendant 6, Defendant 7, Defendant 8, and Defendant 9 jointly and severally with the Defendants listed in the above paragraph (1) amounting to KRW 100,000 among the amount indicated in the above paragraph (1) and each of them amounting to KRW 20% per annum from the day following the delivery of a copy of the complaint of this case to the day of full payment.

A. Status of the parties

1) The Intervenor succeeding to the Plaintiff (hereinafter “Successor”) was the Plaintiff’s Intervenor on November 14, 2012, but became the Plaintiff’s Intervenor due to the mutual change on November 14, 2012, and became the Plaintiff’s Intervenor; hereinafter “Successor Intervenor”) was a corporation established for the purpose of developing, manufacturing, and selling bio-mar drugs. As delineated below, Nonparty 1, etc. was delisted on August 23, 2012, and is the unlisted company as of the embezzlement, breach of trust, etc. of Nonparty 1.

2) The Defendants served as directors, in-house directors, outside directors, and auditors of the succeeding intervenor, and the specific period of service is as follows.

Defendant 1, 20.3 to 2, 208.29 to 2, 201.4 to 2, 201.3 to 24, 201 (director) Defendant 2, 2, 3, 201 to 3, 20.4 to 2, 2012, Defendant 2, and inside director (director 2, 2, 201 to 3, 208 to 3, 20.4 to 2, 208) Defendant 2, 1 to 3, 2, 201, 20 to 3, 208 (director 2, 2, 201 to 3, 24.4 to 2, 201) Defendant 2, 20 to 3, 24, 201 (director 2, 20 to 3, 201 to 3, 201 to 4, 214).

3) Meanwhile, Nonparty 1, as the president of the ○○○ Group, who substantially controlled KOSDAQ-listed companies, such as the succeeding intervenor, the Cathos Co., Ltd., the cathos, and the mera Forum, through the borrowed-name shares, operated the succeeding intervenor. Nonparty 2, from August 29, 2008 to March 24, 201, served as the succeeding intervenor’s representative director. Nonparty 3, under the direction of Nonparty 1, was killed by taking overall charge of the ○○ Group’s affairs.

B. Nonparty 2’s embezzlement and related criminal judgment

1) Nonparty 2 was indicted for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement). The main contents of the facts charged are as follows.

A) Embezzlements by paying and returning false advance payments

The succeeding intervenor received 23,154,920,740 won of the capital increase for new shares on March 24, 2010 from shareholders to promote medical services (hereinafter “the paid-in capital increase”). On March 26, 2010, Nonparty 2, in collusion with Nonparty 1, remitted KRW 500 million as advance payment for goods to Aatur Co., Ltd., a trader, and KRW 300 million to △△△△△△△△△△△△△△△△△△△△△, after receiving it from the succeeding intervenor’s employees to return it to the said ○○ Group’s head office, and embezzled KRW 23,100,000,000 of the above paid-in capital increase for existing bonds of ○○○ Group’s head office.

B) embezzlement of 6 billion won for capital increase issued in the form of a cover note

In collusion with Nonparty 1 and Nonparty 3, on March 29, 2010, Nonparty 2 issued a cover note in the name of the Intervenor succeeding to rights, which was cashed in the name of the Intervenor succeeding to rights, and provided to Nonparty 5 with the real object of the cover note as a security for KRW 2 billion borrowed from Nonparty 5. ② On June 11, 2010, the Intervenor’s employees, etc. issued the cover note in the name of the Intervenor succeeding to rights, cashed KRW 2 billion from Nonparty 6, a bondholder, to Nonparty 6, and embezzled the real object of the cover note as security. Nonparty 2 billion from Nonparty 6’s employees, etc. offered the cover note as security to Nonparty 6’s head office; ③ on June 23, 2010, the Intervenor’s employees, etc. offered the cover note KRW 2 billion to Nonparty 26 billion in the name of the Intervenor succeeding to rights, using the cover note as security.

2) On August 1, 2012, the first instance court (Seoul District Court Decision 2012Gohap107) rendered a judgment guilty of all the charges, and sentenced Nonparty 2 to two years and six months of imprisonment. The appellate court (Seoul High Court Decision 2012No308) rendered a judgment dismissing Nonparty 2’s appeal on January 30, 2013, and Nonparty 2 withdrawn the appeal on February 20, 2013 (Supreme Court Decision 2013Do201).

C. Nonparty 1’s embezzlement and breach of trust, and relevant criminal judgment

1) Nonparty 1 was prosecuted for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. The main contents of the embezzlement and breach of trust related to the succeeding intervenor are as follows.

A) Part of the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement)

(1) Embezzlements through payments and return of false advance payments (criminal facts1)

The succeeding intervenor received KRW 23,154,920,740 from shareholders on March 24, 2010 for the purpose of promoting medical services, and received KRW 23,154,920,740 from shareholders. On March 26, 2010, in collusion with Nonparty 2, Nonparty 1 embezzled KRW 800,000 out of KRW 23,154,920,740, out of the above price for capital increase for capital increase to be paid to the head office of the ○○ Group by transferring KRW 500,000 and KRW 300,000 to the △△△△△△△, as advance payment for goods, after receiving the return from the succeeding intervenor to the said ○○ Group by providing the said ○○ Group's head office

(2) Embezzlement 6 billion won for capital increase issued in the form of a cover note (criminal charge 2)

In collusion with the non-party 2 and the non-party 3, on March 29, 2010, the non-party 1 issued a cover note with the non-party 2 billion won out of the subscription price for capital increase to the non-party 2 and the non-party 3, and then offered the real object to the non-party 5 as a security for the non-party 2 billion won borrowed from the non-party 5 to the non-party 5. The non-party 1 provided the non-party 2 billion won out of the subscription price for capital increase to the non-party 6, the non-party 6, the non-party 6, the company, etc., issued the cover note in the name of the non-party 6, the non-party 6, and embezzled the real object of the cover note by providing the non-party 2 billion won out of the subscription price for capital increase to the non-party 6's head office on June 23, 2010.

(3) Embezzlements for the purpose of acquiring shares in the O20 Savings Bank (criminal facts 3)

On March 25, 2010, Nonparty 1, in collusion with Nonparty 3, deposited KRW 3.5 billion out of the subscription price for new shares with the check form, and deposited it into the account in the name of Nonparty 7, a director of the item wals, which is another KOSDAQ listed company controlled by Nonparty 1 on the same day, and embezzled it for the purpose of acquiring stocks of the O20, etc. on the same day.

(4) Embezzlements (criminal facts4) useful for the purpose of supporting the Megafor.

On April 14, 2010, Nonparty 1, in collusion with Nonparty 3, remitted KRW 3.3 billion out of the subscription price for new shares via a short-term loan to Ampic Investment Co., Ltd. on or around April 15, 2010, with redemption of KRW 300 million from Ampic Investment on or around May 28, 2010 on the following day, he/she embezzled the remainder of KRW 3 billion by delivering it to Ampic Investment Co., Ltd. in the form of purchasing the convertible bonds of a de-listing company with another KOSDAQ listed company controlled by Nonparty 1 under the name of Ampic Investment Co., Ltd.

(5) Embezzlements under the pretext of short-term loans (crimes 5)

In collusion with Nonparty 3 on May 24, 2010, Nonparty 1 withdrawn KRW 1.41 billion in total, including KRW 510 million under the pretext of short-term loans to Nonparty 8 and KRW 510 million with Nonparty 9 on the pretext of short-term loans to Nonparty 9, and on June 26, 2010, Nonparty 1 embezzled KRW 510,000,000 in total with interest and interest collected from Nonparty 8 on July 23, 2010, respectively. At around that time, Nonparty 1 embezzled KRW 1.41 billion with interest and interest collected from Nonparty 9 on a short-term basis.

B) Part of the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation of Trust) (Article 6)

The non-party 1 violated his/her duty to make appropriate decisions for the economic interest of the succeeding intervenor and not to bear the obligation against the company's interest, even though he/she has an occupational duty as a person who actually operates the succeeding intervenor and has overall control over the accounting and financial affairs, the non-party 1 violated his/her duty to demand the repayment of the obligation with respect to the debt of KRW 3350 million which he/she personally assumed to the non-party 4 on February 16, 2012, and the succeeding intervenor breached his/her duty by requiring the succeeding intervenor to pay the debt of KRW 3350 million until September 30, 2012.

2) On June 10, 2015, the first instance court (Seoul District Court Decision 2014Gohap104, 217, 259, 279, 279, 2015Gohap6, 21) found that Nonparty 1 was aware of the circumstances that Nonparty 1 abused his power of representation and caused the succeeding intervenor to assume the obligation of joint and several liability for the individual obligation, and thus, the succeeding intervenor’s act of joint and several liability is null and void. Accordingly, in a civil suit instituted against the succeeding intervenor, the succeeding intervenor was ruled not guilty on the ground that Nonparty 4 was ruled not guilty on the ground that the said judgment became final and conclusive upon receiving a judgment against the Plaintiff in whole against the succeeding intervenor, and all of the charges of the remaining criminal facts 1 through 5 were sentenced to an additional collection of imprisonment for 7 years and 338,950,91 won.

3) On December 11, 2015, the appellate court (Seoul High Court 2015No361) rendered a not-guilty verdict on the part of the criminal facts in Article 2 (1) of the Criminal Act on December 11, 2015, on the grounds that it is difficult to deem that Nonparty 1 had an intention to acquire unlawful acquisition that the said KRW 2 billion was arbitrarily useful. On the criminal facts of the first instance court rendered a not-guilty verdict on the non-party 1, the succeeding intervenor found the non-party 1 guilty on the ground that the succeeding intervenor was subject to restrictions on the exercise of property right due to the joint and several guarantee agreement, and that the succeeding intervenor was also convicted of the

4) The instant case is currently pending in the final appeal (Supreme Court Decision 2016No372).

D. The assignment of claims by the plaintiff and the succeeding intervenor

1) On November 27, 2014, the succeeding intervenor transferred the claim for damages against the Defendants by the succeeding intervenor to the Plaintiff. At that time, the succeeding intervenor notified Defendant 1, Defendant 3, Defendant 6, Defendant 8, Defendant 9, and Defendant 10 by content-certified mail, and notified Defendant 2, Defendant 4, Defendant 5, and Defendant 7 of the above transfer by delivery of the duplicate of the instant complaint.

2) In regard to the Plaintiff’s lawsuit, the Defendants asserted that the lawsuit is a trust of lawsuit, and on June 10, 2015, the Plaintiff and the succeeding intervenor rescinded the agreement on the transfer of the above damage claim between the Plaintiff and the succeeding intervenor. At that time, the said fact was again notified to the Defendants.

3) A successor intervenor filed an application for succession intervention on July 7, 2015. The Plaintiff failed to obtain consent from the Defendants to withdraw from the lawsuit.

[Ground of recognition] Facts without dispute, Gap's entries in Gap's 1 through 9, 12, 24, 28 through 32, 35 through 37, Eul's 1, 2, Eul's 3, 4, Eul's 1 and 2 (including each number; hereinafter the same shall apply), and the purport of the whole pleadings

2. Determination as to the claims of the succeeding intervenor

A. The successor's assertion

(i)an act in question;

A) In relation to Nonparty 1’s criminal facts 4 and 5, the successor intervenor pretended to have been recovered in the amount of KRW 3 billion for Nonparty 1’s embezzlement of KRW 4.41 billion in 2010, and then, it is deemed that KRW 900,000,000,000,000 for the non-party 1’s loans were collected, and that the non-party 8’s loans were recovered in the amount of KRW 2.1 billion, and that the remaining amount of KRW 3 billion was paid in the first balance with the above amount of KRW 2.1 billion. The successor pretended to have been recovered in the amount of KRW 9,510,000,000,000 for the last balance of KRW 5.1 billion,000,000,000,000 for the embezzlement of Nonparty 1’s loans. This is the window dressing accounting for the embezzlement of Nonparty 1.

B) Regarding the criminal facts of Nonparty 1 and Nonparty 2, Nonparty 1 and Nonparty 2, the cover notes issued a large amount of cover notes and used them for embezzlement, even though the company did not have any profit, because of the very exceptional and low interest rate as the method of storage of the listed company.

C) On March 24, 2010, the succeeding intervenor loaned KRW 30 million to E-Mad Co., Ltd. on March 29, 2010, or extended or guaranteed the existing lending over ten times only in 2010, including lending KRW 30 million to E-Mad Co., Ltd., Ltd., and extended or guaranteed the existing lending. However, the succeeding intervenor continued to lend money to affiliated companies without paying the loan amounting to KRW 5 billion from E-Mad Co., Ltd., even though the succeeding intervenor borrowed money from E-Mad Co., Ltd., and most of the loans were not collected.

D) On June 23, 2011, the successor intervenor extended 1 billion won to Hangle-Tex Co., Ltd.’s joint guarantee, and extended or guaranteed the existing lending of money to affiliated companies over several occasions only in 2011, including extending the joint and several guarantee of Hangle-T. However, most of the above loans were not recovered.

E) On January 4, 2012, the succeeding intervenor disclosed KRW 850 million to Nonparty 10, without permission, and returned KRW 450 million among them, and used it as attorney’s fee. In relation to Nonparty 1’s criminal facts 6, the succeeding intervenor continued to manage the funds necessary for Nonparty 4, including, on February 23, 2012, the joint and several surety with Nonparty 4’s personal debt amounting to KRW 3.3 billion and the performance lawsuit was filed against Nonparty 4.

2) Liability of the Defendants

A) Although the board of directors of the succeeding intervenor was actually not convened, the minutes of the board of directors were prepared as if the directors and auditors were present. The Defendants were unable to perform their duty of ordinary minimum surveillance on the part of directors and auditors, including the absence of a request for attendance of the board of directors. Moreover, the succeeding intervenor was fully fluored by Nonparty 1, but the succeeding intervenor was not able to considerably check out the outflow of the company’s funds related to the embezzlement related to Nonparty 1 if the Defendants performed their general surveillance duty as directors and auditors. The succeeding intervenor, as listed companies, was disclosed through the disclosure system of the Financial Supervisory Service, was given public notice of most of the data, and the Defendants were not able to fully know the circumstances of the abnormal loans of the company, etc., even if they were not able to perform the duty of minimum surveillance duty. The Defendants were negligent in performing their general loyalty, care, and surveillance duty, thereby making it possible for the succeeding intervenor to commit a tort as described in Article 2(a)(1) of the succeeding intervenor, which eventually led to delisting.

B) Defendants 1, 2, 3, and 4 were employed as directors over the preceding period from 2010 to 2012, and Defendant 5 was employed as outside directors from February 26, 2010 to March 24, 2011. Defendant 6, Defendant 7, Defendant 8, and Defendant 9 were employed as an internal director or outside director of the succeeding intervenor in 201, which was 201 after the centralized embezzlement of Nonparty 1 took place. Defendant 10 was employed as an succeeding intervenor’s internal director or outside director from March 20 to August 31, 2012.

C) Accordingly, pursuant to Articles 399 and 414 of the Commercial Act, Defendants 1, 2, 3, 4, and 10 are jointly and severally liable to pay 500,000,000 won among the above 50,000,000 won, jointly and severally with Defendants 1, 2, 3, 4, and 10,000 won among the above 50,000,000 won, and jointly and severally with Defendants 6, 7, 8, and 8, and 9, jointly and severally with Defendants 1, 2, 3, 3, and 4, and 10,000 won among the above 50,00,000 won among the above 50,000,000 won, and each of the above 20% amount from the day following the delivery of a copy of the complaint of this case to the day of complete payment.

B. Determination

1) Relevant statutes and legal principles

A) Article 399 of the Commercial Act provides, “If a director intentionally or negligently commits an act in violation of Acts and subordinate statutes or the articles of incorporation or neglects his/her duties, he/she shall be jointly and severally liable for damages to the company.” Article 414 of the Commercial Act provides, “If an auditor neglects his/her duties, he/she shall be jointly and severally liable for damages to the company. If an auditor is jointly and severally liable for damages to the company or to a third person, the auditor and the director shall be jointly and severally liable for such damages.”

B) In a case where a stock company claims damages against a director due to nonperformance of duties or tort on the ground of a violation of duties against a director, the duty of a director in the performance of duties is not a result of preventing damage to the company, but a director has to take necessary and appropriate measures for the benefit of the company as a good manager. If a director performed his duties in good faith for the benefit of the company, under the circumstances at that time, the business judgment is within the permissible scope of discretion, unless there is any significant unreasonable in the decision making process (see Supreme Court Decision 2001Da52407, Jun. 14, 2002, etc.). The director of a stock company is not only a member of the board of directors, but also a member of the board of directors, but also a director has an overall duty to monitor the performance of duties of other directors as well as the performance of duties. Thus, if a director neglected to perform his duties, he suffers from the required director’s duty of care or supervision, and thus, he cannot be exempted from liability for damages (see Supreme Court Decision 2007Da65647467, Feb. 207, 20074.

Each of the liability for damages prescribed in Articles 399, 414, 401, and 415 of the Commercial Act, and Articles 750 and 760 of the Civil Act due to an act of neglecting a director or auditor’s duty in violation of the Acts and subordinate statutes, Articles of 399, 414, 401, and 415 of the Commercial Act, and Articles 750 and 760 of the Civil Act, are recognized as limited to the damage in proximate causal relation with the act of violation (see, e.g., Supreme Court Decision 2001Da38692, Sept. 28, 2001). However, even if a director or auditor’s procedural defect in the process of performing his/her duty is found to be a legitimate business judgment or where a proximate causal relation is not recognized between the loss and the result that occurred, the liability for damage of the

2) Determination

A) In light of the following circumstances acknowledged by comprehensively taking account of the overall purport of the pleadings, the evidence submitted in the instant case alone is difficult to deem that the Defendants neglected to perform duties as a director or auditor, or caused damage in proximate causal relation to the succeeding intervenor due to such violation.

① The succeeding intervenor actually operated Nonparty 1, the president of the ○○ Group, Nonparty 2, and Nonparty 3, the representative director of the succeeding intervenor, who was in charge of the affairs of the ○○ Group, and the board of directors did not have been actually called up and did not have been called up to the Defendants. The succeeding intervenor also recognized that the minutes of the board of directors meeting (materials) submitted in this case are neither directly affixed seals nor affixed seals to the Defendants nor affixed seals to the succeeding intervenor. The succeeding intervenor did not demand the Defendants to be present at the board of directors. The succeeding intervenor did not expect the Defendants to act as a director and auditor, and did not provide them with an opportunity to act as a director and auditor.

② As Nonparty 1’s friendship, Defendant 1 was employed as a director or internal director of the succeeding intervenor at the request of Nonparty 1. Defendant 2, as a formal representative director of Catho Co., Ltd., an affiliate of the succeeding intervenor, was employed as a director or an internal director of the succeeding group, but was excluded from the role as a director. Defendant 3, as Nonparty 2’s non-party Nonparty 2’s introduction, was involved only in the document signed by Nonparty 2 or employees. Defendant 5 was requested to provide technical advice on the product production and quality control of the exempted cell therapy, which was developed by the succeeding intervenor, and gave guidance to the Intervenor on the examination, and continued technical guidance thereafter. Defendant 6 was an outside director at the request of the succeeding intervenor, and most of the successors did not act as outside director of the succeeding intervenor, and did not act as outside director in the field of management. Defendant 6 did not act as outside director of the succeeding intervenor as the research and advisory director of △△ Hospital and outside director director of the succeeding university as the succeeding researcher’s research and advisory director of the succeeding.

③ As recognized above, Nonparty 1 and Nonparty 2 committed a criminal act, such as remitting money under the name of advance payment for goods to a trader or affiliate company, withdrawing the money, and manipulating accounting by recovering it. In a case where the representative director, etc. intentionally acted in the accounting for the purpose of concealing his criminal act while committing the above criminal act, it is difficult to expect the successor’s director or auditor to monitor and discover it. Moreover, there was no special circumstance to suspect the embezzlement, breach of trust, etc. by Nonparty 1, Nonparty 2, and Nonparty 3 prior to the first half of 2012, which began to be an issue of criminal act, such as embezzlement, breach of trust, etc. by Nonparty 1, Nonparty 2, and Nonparty 3. In this regard, the successor did not assert and prove against Defendant 10 the responsibility under Article 414 of the Commercial Act against him/her, as well as by asserting that he/she is liable.

B) In addition to the assertion that the Defendants neglected to perform their duties in relation to the criminal acts committed by Nonparty 1 and Nonparty 2, the succeeding intervenor asserted that the succeeding intervenor either lent money to an affiliate company or extended the existing lending or guaranteed the performance of supervision duty at ordinary times. However, there is no assertion or proof as to what losses incurred to the succeeding intervenor due to the lending of money, etc., and whether there was any circumstance to suspect that the execution of duties by Nonparty 1, etc. was illegal, and whether there was proximate causal relation between the Defendants’ breach of duties and the damage. Furthermore, the period in which the succeeding intervenor served as the director or auditor of the succeeding intervenor is different, and the succeeding intervenor did not specify each of the offenses committed by the succeeding intervenor by the term of office of the Defendants.

C) In full view of the foregoing circumstances, it is difficult to deem that the Defendants intentionally or negligently committed a violation of the statutes or the articles of incorporation as a director or auditor, or neglected to perform their duties, or that there was a proximate causal relation with the succeeding Intervenor due to such violation, etc., the Intervenor’s claim against the Defendants cannot be accepted.

3. Judgment on the plaintiff's claim

The plaintiff submitted a written withdrawal from a lawsuit after the successor's application for intervention by succession, but the plaintiff's claim and the succeeding intervenor's claim are valid as ordinary co-litigation (see, e.g., Supreme Court Decision 2002Da166729, Jul. 9, 2004). However, on June 10, 2015, the plaintiff cancelled the agreement on the transfer of the damage claim against the succeeding intervenor and the succeeding intervenor's claim against the defendants on June 10, 2015, and notified the defendants of the cancellation of the agreement at that time. Accordingly, the plaintiff has no right to claim damages against the defendants. Accordingly, the plaintiff's claim against the defendants is without merit.

4. Conclusion

Therefore, all the claims of the plaintiff and the successor are dismissed as it is without merit. It is so decided as per Disposition.

Judges Jeon Jong-Un (Presiding Judge)