[1] The meaning of "the day on which the purchaser of securities damaged by false descriptions in the business report, etc." under Articles 186-5 and 14 of the former Securities and Exchange Act, which is the starting point for the exclusion period of the right to claim damages against a corporation, director, etc., which is the person who submitted the business report, pursuant to Articles 186-5 and 16

[2] Whether not only the persons who have acquired securities in the issuance market but also those who have acquired securities in the distribution market by means of public offering or sale of the persons eligible to claim compensation for damages under Articles 186-5 and 14 of the former Securities and Exchange Act (affirmative)

[3] In relation to the establishment of liability for damages under Articles 185-5 and 14(1) of the former Securities and Exchange Act, the burden of proving that the purchaser of securities knew of the fact that there was a false entry or indication or an omission of important matters in the business report at the time of acquisition (=the company denying liability for damages, etc.)

[4] In a case where a purchaser of stocks claims compensation for damages caused by a false description in the business report against a stock-listed corporation, etc., the burden of proving the existence of causation between the false description in the business report and the occurrence of damages (=the stock-listed corporation, etc.) and the method and degree of proving the existence of causation

[5] In a case where a normal share price has been formed due to the removal of all the parts supported by false information after the fact of window dressing accounting was revealed, the existence of causation between the change of share price and window dressing accounting (negative), and the method of calculating the amount of damages in a case where the pertinent shares were sold after the normal share price formation date or where the pertinent shares were kept until

[6] The meaning of "invested property" and "debts with respect to invested property" under Article 530-9 (2) of the Commercial Act, which provide for the exclusion of joint and several liability for the company's obligations before the division

[7] The case holding that in the creditor protection procedure under Articles 530-9(4) and 527-5(1) of the Commercial Act, the company prior to the division cannot be deemed to be a "known creditor" by the company prior to the division, which individually states that the shareholders in the actual shareholder registry asserts that they suffered losses from the window dressing accounting of the company prior to the division

[8] Whether a creditor of a company may claim a joint and several liability for the company's obligations before the division to the company newly incorporated by the division, based on Article 530-3 (6) of the Commercial Act, which is prepared to protect shareholders in relation to the division or the merger after division of the company (negative)

[1] According to Articles 186-5 and 14 of the former Securities and Exchange Act (repealed by Act No. 8635 of Aug. 3, 2007, Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act), when a purchaser of securities suffers damage due to a false entry or indication or omission of important matters in a business report, the corporation which is the person who submitted the business report, its directors, etc. shall be liable to compensate for the said damage. According to Articles 186-5 and 16 of the said Act, the above liability for damages ceases to exist if the claimant fails to exercise the right to claim within one year from the date when he becomes aware of the relevant fact or within three years from the date when the business report became effective. In this context, the "date of knowing the relevant fact" is deemed to be the time when the claimant actually recognizes the fact of a false entry or omission in the business report, and if the general public can recognize the fact of a false entry or omission in the business report, it is reasonable to deem that the claimant actually recognized such fact,

[2] The former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635 of Aug. 3, 2007) has a system that allows an issuer of securities to make a prompt and accurate disclosure of the contents of securities and the contents of the company necessary for investors' judgment on investment, such as the assets, management status, etc. of the issuing company, in order to ensure fairness in securities transaction and protect investors. As a part of the disclosure system, Article 186-2 (1) of the same Act provides that "a corporation prescribed by Presidential Decree, such as stock-listed corporations, etc., shall submit its business report to the Financial Supervisory Commission, etc. within 90 days after the end of each business year." Article 186-5 of the same Act provides that Articles 14 through 16 of the same Act shall apply mutatis mutandis to the liability for damages caused by false entry, etc. in the distribution market such as false entry in the business report. Accordingly, a person entitled to claim damages pursuant to Article 14 of the same Act shall be included in the securities market.

[3] According to Articles 186-5 and 14(1) of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635 of Aug. 3, 2007), where the purchaser of securities knew of the fact that there is a false entry or indication or omission of important matters in the business report at the time of acquisition, the company, etc. is not liable for damages, but the burden of proving that the purchaser of securities knew of such fact is liable for damages.

[4] In a case where a purchaser of stocks claims compensation for damages caused by a false entry in a business report against a stock-listed corporation, etc. on the ground of the provisions of Article 14 of the former Securities and Exchange Act applied mutatis mutandis pursuant to Article 186-5 of the same Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635 of Aug. 3, 2007), the purchaser of stocks does not need to prove the existence of causation between the false entry in the business report and the occurrence of losses pursuant to Article 15(2) of the same Act, and the stock-listed corporation, etc. must prove the non-existence of causation to exempt the liability of the stock-listed corporation. The proof of the "non-existence of a causal relationship" under Article 15(2) of the same Act is the method of directly or indirectly proving that the unlawful act, such as the pertinent false disclosure, etc., did not have any influence on the occurrence of damages, or it can be inferred that the price of the pertinent illegal act fell in the market prior to the price increase.

[5] In general, if the normal share price is formed after the window dressing accounting has been revealed and the shock arising therefrom has come and all of the parts supported by such false information have been removed, the share price change after such normal share price formation date does not have any causal relationship with the window dressing accounting, barring any special circumstances. Thus, in a case where the sale of the pertinent shares after such normal share price formation date or where it is confirmed that the pertinent shares have been held until the closing date of oral argument, among the damages under Article 15 (1) of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635, Aug. 3, 2007), the difference between the above normal share price and the actual disposal price (or the market price at the closing date of oral argument) among the damages under Article 15 (1) of the former Securities and Exchange Act shall be deemed to have been proved by the absence of causal relationship under Article 15 (2) of the same Act. In this case

[6] In a case where a company is divided, the company established through the division or the company surviving the division is jointly and severally liable for the company’s obligations before the division (Article 530-9(1) of the Commercial Act). However, in a case where a company to be divided is incorporated by a resolution approved by the general meeting of shareholders by a resolution that is approved by the general meeting of shareholders, at least two-thirds of the voting rights of shareholders present at the division plan pursuant to Article 530-3(2) of the Commercial Act and at least one-third of the total number of issued and outstanding shares, the company to be incorporated is excluded from the joint and several liability of the company to be incorporated (Article 530-9(2) of the Commercial Act). Here, the term “invested property” refers not to a specific property of the company to be divided, but to a specific business and property necessary for its business, and the term “debts related to invested property” includes not only obligations directly related to the business, but also all positive obligations related to the property necessary for its business.

[7] The case holding that in the creditor protection procedure under Articles 530-9(4) and 527-5(1) of the Commercial Act, a company prior to the division cannot be deemed to be a "known creditor" by the company prior to the division, which individually states that some shareholders in the actual shareholder registry claiming that they suffered losses from the window dressing accounting of the company prior to the division

[8] Article 530-3(6) of the Commercial Act provides that "in cases where the liability of shareholders of each company relating to the division or the merger through division is increased due to the division or the merger through division, the consent of all such shareholders shall be required in addition to the resolution under paragraphs (2) and (5). This provision provides for protecting shareholders in relation to the division or the merger through division of a company, and is not provided for protecting creditors who change the company's responsible property due to the division or the merger through division. Therefore, the creditors of the company cannot claim that the newly incorporated company due to the division of a company is jointly and severally liable for the obligations of the company prior to the division.

[1] Article 14 (1) (see current Article 162 (1) of the Financial Investment Services and Capital Markets Act), Article 16 (5) (see current Article 162 (5) of the Financial Investment Services and Capital Markets Act), Article 186-5 (see current Article 162 (5) of the Financial Investment Services and Capital Markets Act) of the former Securities and Exchange Act (Act No. 8635, Aug. 3, 2007); Article 14 of the former Securities and Exchange Act (see current Article 162 (1) and (2) of the Financial Investment Services and Capital Markets Act; Article 186-2 (1) (see current Article 159 (1)) of the former Financial Investment Services and Capital Markets Act; Article 186-5 (3) of the Financial Investment Services and Capital Markets Act) / [2] Article 5 of the former Securities and Capital Markets Act (amended by Act No. 8635, Aug. 3, 2007); Article 16-5 (2) of the former Securities and Capital Markets Act

[1] [1] [2/3/4/5] Supreme Court Decision 2008Da31751 Decided November 27, 2008 [1/4/5] Supreme Court Decision 2006Da16758, 16765 Decided October 25, 2007 (Gong2007Ha, 1806) / [1] Supreme Court Decision 96Da41991 Decided September 12, 1997 / [6] Supreme Court Decision 2008Da74963 Decided February 25, 2010 (Gong2010Sang, 623)

Plaintiff 1 and six others (Law Firm Daw, Attorney Kang Jong-soo, Counsel for the plaintiff-appellant)

Suwon Shipbuilding Marine Co., Ltd. and three others (Law Firm Hybn & one other, Counsel for the plaintiff-appellant)

Defendant 5 and one other (Law Firm B&C et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2004Na66911 Decided November 6, 2008

All appeals are dismissed. The costs of appeal between the plaintiffs and the defendants 5 and 6 are assessed against each party, and the costs of appeal between the plaintiffs and the remaining defendants are assessed against the plaintiffs.

The grounds of appeal are examined.

1. As to the misapprehension of legal principles as to the starting point of the exclusion period of the claim for damages

According to Articles 186-5 and 14 of the former Securities and Exchange Act (repealed by Act No. 8635 of Aug. 3, 2007, Article 2 subparagraph 1 of the Addenda to the Financial Investment Services and Capital Markets Act, hereinafter “former Securities and Exchange Act”), where a purchaser of securities suffers damage due to a false entry or indication or failure to enter or indicate important matters in the business report, the person who submitted the business report, the corporation and its directors, etc. shall be liable to compensate for such damage. According to Articles 186-5 and 16 of the same Act, the above liability for compensation ceases to exist if the claimant fails to exercise the right within one year from the date on which he becomes aware of the fact, or within three years from the date on which the business report becomes effective. The phrase “the date on which he knows of the fact” in this context shall be deemed to be the time when he actually recognizes the fact of omitting a false entry or omission in the business report, and if the general public can recognize the fact of omitting such entry or omission, barring any special circumstance.

Examining the reasoning of the judgment below in light of the above legal principles and records, the court below did not have sufficient evidence to acknowledge that the general public had been able to recognize the fact that the accounting of the accounting of the accounting of the accounting of the accounting of the accounting of the treatment Heavy Industries prior to the corporate division (hereinafter “treatment Heavy Industries”) was divisible beyond the judgment that the financial resources of the accounting of the company prior to the corporate division were not good before October 23, 1999, which was one year prior to the filing of the lawsuit in this case, and rather, the general public, including the plaintiffs, had known that the accounting of the accounting of the accounting of the accounting of the accounting of the accounting of the accounting of the accounting of the accounting of the medical Heavy Industries was about October 26, 199, and there was no other circumstance to deem that the plaintiffs knew the fact that the accounting of the accounting of the accounting of the accounting of the accounting of the accounting of the accounting Heavy Industries prior to the filing of the lawsuit in this case before October 26, 199. The judgment of this case is legitimate, and there were no errors in the misapprehension of the grounds for exclusion of the judgment.

2. As to the misapprehension of legal principles as to the scope of application of Articles 14 and 15 of the former Securities and Exchange Act

Article 186-2(1) of the former Securities and Exchange Act provides that “The corporation prescribed by Presidential Decree, such as a stock-listed corporation, etc., shall submit a business report to the Financial Supervisory Commission, etc. within 90 days after the end of each business year,” and Articles 14 through 16 of the same Act shall apply mutatis mutandis to the liability for damages caused by false statements in a securities registration statement with respect to false statements in a securities registration statement and other fraudulent statements in a distribution market in order to ensure fairness in securities transaction and protect investors. Accordingly, a person eligible to claim damages pursuant to Article 14 of the same Act is not limited to those who have acquired securities in the securities market by "public offering or sale," but also includes those who have acquired securities in the distribution market (see the above Article 208Da31751, Apr. 1, 2008).

The decision of the court below to the same purport is just, and there is no error in the misapprehension of legal principles as to the scope of application of Articles 14 through 16 of the former Securities and Exchange Act as otherwise alleged in the ground of appeal by

3. As to the misapprehension of the legal principle as to the transaction causation and damage causation under the former Securities and Exchange Act

A. According to Articles 186-5 and 14(1) of the former Securities and Exchange Act, if the purchaser of the securities knew of the fact that there is a false entry or indication or omission of an important matter in the business report at the time of acquisition, the company, etc. is not liable for damages, but the burden of proving that the purchaser of the securities knew of such fact is liable for damages (see the above Decision 2008Da31751, supra).

The court below, after compiling the adopted evidence, found the facts as stated in its holding. The plaintiffs' 36th business report of the Daewoo Heavy Industries was submitted to the Korea Stock Exchange and announced publicly on March 31, 1998, and it is difficult to recognize that the plaintiffs acquired the shares of the Daewoo Heavy Industries from the date of November 4, 1999 to October 25, 199 when the result of the inspection of the Daewoo Heavy Industries was officially announced as a result of the official announcement, and there is no evidence to prove that the plaintiffs acquired the shares even though they knew that the business report was falsely entered, the court below determined that the causation between the window dressing Heavy Industries' 36th business report and the plaintiffs' acquisition of the shares cannot be denied.

In light of the above legal principles and records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to causation between window dressing accounts and stock acquisition, as otherwise alleged in the ground of appeal by Defendant 5.

B. Under Article 14 of the former Securities and Exchange Act applied mutatis mutandis pursuant to Article 186-5 of the same Act, where a purchaser of stocks claims compensation for damages incurred by false statements in a business report against a stock-listed corporation, etc., the purchaser of stocks does not need to prove the existence of causation between false statements in a business report and the occurrence of damages pursuant to Article 15(2) of the same Act, and to exempt the stock-listed corporation, etc. from liability. In addition, the proof of “non-existence of causation in damages” under Article 15(2) of the same Act can be made by the method of proving that such unlawful acts, such as false statements, etc. directly or indirectly at issue, did not affect the occurrence of damages, or by the method of proving that the damages occurred in whole or in part due to other factors than the pertinent unlawful acts, such as false disclosure, etc. In this case, it is possible to presume that unlawful acts such as false disclosure, etc. were purchased based on the data disclosed before the market, and it can not be seen that the price drop in excess of the profit rate of 2000 per se.

Examining the reasoning of the judgment below in light of the above legal principles and records, the court below recognized the facts of the judgment after compiling the adopted evidence, and judged that the press reports on October 26, 1999 on the window dressing accounting facts of the Daewoo Heavy Industries did not have a statistically meaningful influence on the share price of the Daewoo Heavy Industries cannot be viewed as having proved that there was no causation between the window dressing accounting facts of the Daewoo Heavy Industries and the damages suffered by the plaintiffs, with only the result of analysis using the research method of the case, and there was no error in the misapprehension of legal principles as to causation between window dressing Heavy Heavy Industries and damages, or in the misapprehension of legal principles as to causation between window dressing accounting and damages, as otherwise alleged in the ground of appeal by Defendant 5.

4. As to the misapprehension of legal principles as to the calculation method of damages and normal stock price under the former Securities and Exchange Act

Generally, in a case where a normal share price is formed as a result of the occurrence of the window dressing accounting after the fact of window dressing accounting has been revealed, and the shock from all of the parts supported by such false information, the share price fluctuation after such normal share price formation date does not have any causation with the window dressing accounting unless there are any special circumstances. Thus, in a case where it is confirmed that the pertinent shares were sold after the normal share price formation date or held until the closing date of oral argument, there is proof of the absence of causation under Article 15 (2) of the former Securities and Exchange Act with respect to the difference between the above normal share price and the actual disposal price (or market price at the closing date of oral argument) among the damages under Article 15 (1) of the former Securities and Exchange Act, the amount of damages in this case shall be the amount calculated by deducting the share price on the date of the formation of the above normal share price from the purchase price (see the above Decision 2006Da16758, 1675, 208Da31751,

Examining the reasoning of the judgment below in light of the above legal principles and records, the court below is just in holding that since the fact of window dressing accounting was published on November 9, 199 when 10 transaction days elapsed since the fact that the financial statements of the business report were falsely recorded and published on November 9, 199, the share price supported by the false public notice was all removed due to the false public notice. Thus, the judgment below is reasonable in holding that it is reasonable to consider the share price of KRW 1,960 (priority share price of KRW 1,710), which was formed on November 9, 199, as the share price of the Daewoo Heavy Industries's 1,960 (priority share price of KRW 1,710), which was supported by the false public notice, as the normal share price was removed, and there is no error in the misapprehension of legal principles as to the amount of damages and the method of calculating normal share price as

5. As to the misapprehension of legal principle as to the limitation of liability ratio

The fact-finding or the ratio of limitation of liability for offsetting negligence or fair burden of damage in a damage compensation case belongs to the exclusive authority of the fact-finding court unless it is deemed that it is remarkably unreasonable in light of the principle of equity (see, e.g., Supreme Court Decisions 90Meu3062, Apr. 25, 1990; 2007Da16007, Jan. 28, 2010).

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the lower court’s fact-finding or its determination on the grounds for limitation of liability is within the acceptable scope, and it does not seem considerably unreasonable in light of the principle of equity. Defendant 5’s ground of appeal on this part cannot

6. As to the misapprehension of legal principles as to the scope of succession to obligations of a newly incorporated company at the time of corporate division

In the event of a division of a company, the company established or surviving after the division is jointly and severally liable for the obligations of the company prior to the division (Article 530-9(1) of the Commercial Act). However, where the company to be divided is to be incorporated by the division in the number of two-thirds or more of the voting rights of shareholders present at the division plan pursuant to Article 530-3(2) of the Commercial Act and one-third or more of the total number of issued and outstanding shares, a resolution approved by the general meeting of shareholders is adopted, the company to be incorporated shall be exempted from joint and several liability of the company to be incorporated (Article 530-9(2) of the Commercial Act). The term "property invested" in this context refers not to the specific property of the company to be divided, but to a specific business and property necessary for such business (see Supreme Court Decision 2008Da74963, Feb. 25, 2010). The term "liability related to the property invested" includes not only the obligation related to the business itself, but also the relevant business.

According to the reasoning of the judgment below, the court below acknowledged the facts as follows. The contents of the division plan of this case are as follows. It is hard to see that the damages liability for the plaintiffs, who are shareholders, due to the division accounting of the division plan of this case, was about the business assets of the divided company or the machinery division of the divided company, which was transferred to the newly incorporated company pursuant to Article 9 (1) of the division plan of this case, was newly established by succeeding to the consolidated machinery division (hereinafter "the defendant Treatment Sea"), and the remaining business division belongs to the treatment Heavy Industries. The remaining business division of this case can not be viewed as the damages liability for the defendant's newly incorporated company of this case since the division of this case cannot be viewed as the damages liability for the defendant's newly incorporated company of this case, which was directly related to the business assets of the newly incorporated company of this case. Thus, the court below determined to the purport that the damages liability for the defendant's newly incorporated company of this case cannot be viewed as the damages liability for the defendant's newly incorporated company of this case.

In light of the above legal principles and records, the above judgment of the court below is just, and there is no error of law by misunderstanding the legal principles as to the scope of succession to obligations of the newly incorporated company and the interpretation of legal acts when a company is divided under Article 530-9 (2) of the Commercial Act, as otherwise alleged in the ground of

7. As to the misapprehension of legal principles as to the procedure for protecting creditors when a company is divided

According to the reasoning of the judgment below, the court below found the ratio of capital division by 481 minor shareholders of Daewoo Heavy Industries to the issue of the division ratio of capital related to the division of this case. On February 29, 2000, upon filing a complaint with the directors of Daewoo Heavy Industries under the suspicion of breach of trust, etc. and filing an application for provisional disposition of suspension of the validity of provisional general shareholders' meeting, and agreed on May 22, 2000 to raise the ratio of capital with the above minority shareholders. However, there is no evidence to find that the plaintiffs were 481 common shareholders, and it is merely the ratio of capital division and did not claim damages due to the division accounting like the claim of this case. Thus, the court below determined that Daewoo Heavy Heavy Industries was aware of the plaintiffs as the creditor's creditor, even if the plaintiffs were to be registered as the shareholder's shareholder's shareholder's shareholder's shareholder's shareholder's shareholder's shareholder's shareholder's shareholder's name and the number and status of the shareholders' general shareholder's shareholder's shareholder.

In light of the records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the creditor protection procedure and known creditor under Articles 530-9 (4) and 527-5 (1) of the Commercial Act, as otherwise alleged in the ground of appeal by the plaintiffs.

8. As to the misapprehension of legal principles as to abuse of legal personality, violation of the good faith principle and abuse of rights

After recognizing the facts as stated in its holding, the court below held that the division of the company of the Daewoo Heavy Industries was conducted through consultation with the creditor financial council, etc. for the prompt normalization of the Daewoo Heavy Industries, and thus, it cannot be deemed that there was no purpose of evading obligations in the company division, and rejected the plaintiffs' assertion that the division of the company of the Daewoo Heavy Heavy Industries constitutes abuse of corporate personality and violation of the good faith principle, and there is no error in the misapprehension of legal principles as to abuse of corporate personality, the good faith principle and abuse of rights as otherwise alleged in the grounds of appeal by the plaintiffs.

9. As to the misapprehension of legal principle as to shareholder protection procedure and joint and several liability of a newly incorporated company when a company is divided

Article 530-3(6) of the Commercial Act provides that "where the liability of shareholders of each company relating to a division or a merger through division is increased due to such division or merger through division, the consent of all such shareholders shall be required in addition to the resolution under paragraphs (2) and (5)." This provision provides for the protection of shareholders in relation to the division or merger through division of a company, and is not provided for the protection of creditors who change the company's responsible property due to such division or merger through division. Thus, the creditors of the company cannot assert, based on the above provision, that the newly incorporated company due to such division is jointly and severally liable for the obligations of the company prior to such division.

Examining the reasoning of the judgment below in light of the above legal principles, the court below's rejection of the plaintiffs' assertion that since the company was established as a newly incorporated company from the Treatment Heavy Industries without the consent of all the shareholders including the plaintiffs in the process of corporate division, the defendant Treatment Heavy Industries is responsible for jointly and severally discharging the compensation liability of this case for damages from the defendant Treatment Heavy Industries, and there is no error in the misapprehension of legal principles as to the protection procedure of shareholders and the joint and several liability of the newly incorporated company, as otherwise alleged in the ground of appeal by the plaintiffs.

10. As to the misapprehension of legal principles as to causation between tort and damage under the Civil Act

The parties who claim damages due to illegal acts under the Civil Act against the company, claiming that they suffered damages in the course of stock transaction due to the window dressing accounting for the company's financial statements, shall be liable to assert and prove the causal relationship between the window dressing account and the losses.

Examining the reasoning of the judgment below in light of the above legal principles, it is just that the court below rejected the plaintiffs' conjunctive claim of this case on the grounds that there is insufficient proof of causation between the false business report required in damages claim based on the civil law and the damages caused by the stock price decline, and there is no error of law by misapprehending the legal principles as to causation between tort and damage under the

11. As to the appeal by Defendant 6

Defendant 6 did not submit a statement of grounds of appeal within the submission period and did not state the grounds of appeal in the petition of appeal. Therefore, the above Defendant’s appeal should be dismissed pursuant to Article 429 of the Civil Procedure Act.

12. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Sung-tae (Presiding Justice)