2019Da203514 Costs of goods

A Stock Company

Law Firm Domin, Attorney Park Dong-young

Attorney Go Tae-tae, Kim Young-young, Jeju-ho, and yellow

B

Law Firm Hun-Ga, Counsel for the plaintiff-appellant

Attorney Kim Young-tae, Justice Kim Young-young, Justice Seo-young, Counsel for the plaintiff-appellant

Busan High Court Decision 2017Na55629 Decided December 12, 2018

July 24, 2019

The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal are examined.

1. The liability for damages to a third party of a director under Article 401(1) of the Commercial Act is a requirement for the director to neglect his/her duties due to bad faith or gross negligence. Thus, the failure of the director to perform his/her duties merely due to an ordinary transactional act shall be deemed to have neglected his/her duties in bad faith or gross negligence. However, where a director’s act of loyalty and breach of duty of care is illegal as an act of violating duty of care, it shall be deemed that he/she neglected his/her duties in bad faith or gross negligence. It is reasonable to deem that the representative director neglected his/her duties in good faith or gross negligence (see, e.g., Supreme Court Decisions 200Da704019, Apr. 11, 2003; 2004Da704989, May 19, 201).

2. The reasoning of the lower judgment reveals the following facts.

A. On March 2015, the Defendant consented F to use the name of the representative director of C(hereinafter “C”) in the name of the company as the Defendant, and the registration of the corporate register was around that time, but the Defendant did not perform the duties as the representative of C, and F performed all internal and external affairs of C.

B. On October 2016, K, the representative director of the Plaintiff, obtained a loan by taking livestock products as security from F, and received a request from C to lend the name of the borrower, and the Plaintiff consented to prepare a contract, a statement of transaction, etc. containing the purchase of the instant livestock products in KRW 381,226,228 from Australia. The F submitted the said contract, etc. to D Co., Ltd. (hereinafter “D”) on October 21, 2016, and concluded two loans (a total of KRW 390,000,000) under the Plaintiff’s name, and received a corresponding loan.

D. However, the instant livestock products offered as security to FOD had already been offered as security for other loans, and D could not be able to exercise the security right through the instant livestock products, and the Plaintiff could not receive the instant livestock products normally.

3. We examine these facts in light of the legal principles as seen earlier. The F, while dealing with the internal and external affairs of the C, committed a tort in which the D and the Plaintiff’s representative director came to take loans from K and the obligation of the loan obligation belongs to the Plaintiff. The Defendant, a representative director of C, was negligent in neglecting the F’s above tort by failing to perform all duties as the representative, while leaving the F to all the management of C and performing duties as the representative. As a result, the Defendant, a representative director of C, was forced the Plaintiff to suffer the said damage.

The above-mentioned act of the defendant constitutes a case where he neglected his duties in bad faith or by gross negligence, and there is a proximate causal relation between the defendant's neglect of duties and the plaintiff's loss, so the defendant is liable to compensate the plaintiff for the loss.

Nevertheless, on the grounds indicated in its reasoning, the lower court determined that it is difficult to view that there was a proximate causal relationship between the Plaintiff’s damages, even if the Defendant could not be deemed to have neglected his/her duties in bad faith or gross negligence, or even if the Defendant neglected his/her duties as a director. In so doing, the lower court erred by misapprehending the legal doctrine on the liability for damages to a third party by a director under Article 401

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

The presiding judge shall keep the record of the Justice

Justices Lee Dong-won

Justices Park Jong-young

Justices Kim Gin-soo