Plaintiff (Law Firm Asia, Attorneys Kim Young-young et al., Counsel for plaintiff-appellant)

Defendant (Attorney Park Byung-chul, Counsel for the defendant-appellant)

June 15, 2018

Seoul Eastern District Court Decision 2014Gahap106128 Decided December 15, 2016

1. The judgment of the first instance, including the claims added and expanded in the trial, shall be modified as follows:

A. The plaintiff's main claim is dismissed.

B. Pursuant to the first preliminary claim, the Defendant shall pay to the Plaintiff 166,145,689 won and 150,000,000 won among them, 5% per annum from August 9, 2014 to July 13, 2018, and 15% per annum from the following day to the date of full payment.

C. The plaintiff's remaining preliminary claims and the second preliminary claims are all dismissed.

2. 60% of the total litigation cost shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

3. Paragraph 1-b. above may be provisionally executed.

1. Purport of claim

The defendant shall pay to the plaintiff 409,573,829 won with interest of 20% per annum from September 30, 2015 to September 30, 2015, and 15% per annum from the next day to the day of complete payment (the plaintiff extended the purport of the claim at the trial, and added the second preliminary claim).

2. Purport of appeal

The part against the defendant in the judgment of the first instance is revoked, and the plaintiff's claim corresponding to the revocation is dismissed.

1. Basic facts

A. On February 2012, the Plaintiff entered into an agreement with the Defendant to establish a foreign exchange account in a financial institution to divide 50% of the profits accrued from the Defendant’s operation and collection of money upon being entrusted with investment by the Plaintiff (hereinafter “instant agreement”).

B. Pursuant to the instant agreement, the Plaintiff opened three accounts (Account Number 1 omitted), Co., Ltd. (Account Number 1 omitted), (Account Number 2 omitted), (Account Number 3 omitted, and (Account Number 3 omitted) in total; hereinafter collectively referred to as “the instant flexible account”) and opened USD 1,113,605.17 in the United States dollars (hereinafter referred to as “$ 1,605.17”) in total; 2. On July 25, 2012, the Plaintiff opened the new account (Account Number 4 omitted; hereinafter referred to as “the instant new account”); 17,935.94 in the instant case; 3.13, Sept. 13, 2012; hereinafter referred to as “the Plaintiff’s account”) with an authorized certificate issued to the Defendant.

C. The Defendant invested the money deposited in each of the above accounts in a foreign exchange transaction, thereby making investments exceeding KRW 2 billion from February 2, 2012 to September 2013. The Plaintiff and the Defendant settled the investment profits each time the investment profits accrue during the said period, and divide them by 50%. The amount divided by the profits up to September 2013 is at least KRW 1,103,987,213 per week.

D. However, since the end of September 2013, the Defendant started to incur a loss of investment in each of the instant accounts operated by the Defendant.

E. On March 14, 2014, the Defendant paid USD 90,000 to the Plaintiff as compensation for losses.

F. The instant new account and the instant single investment account were closed on July 4, 2014, and the instant single investment account was closed on July 9, 2014.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 8, Gap evidence Nos. 11 through 15, 23 (if any, including branch numbers), the purport of the whole pleadings

2. Summary of the parties' arguments;

A. The plaintiff

For the following reasons, the Defendant is obligated to pay to the Plaintiff KRW 409,573,829 and damages for delay.

(1) Main claim: a claim for restitution of unjust enrichment;

A) Claim for return of unjust enrichment on the ground of invalidation due to a violation of the mandatory provisions

Since the instant agreement is null and void in violation of the mandatory provisions as follows, the Defendant is obligated to return all proceeds received from the Plaintiff, and the Defendant seeks partial claims KRW 409,573,829.

(1) The instant agreement aims to place the Plaintiff an investment on behalf of the Defendant. The Defendant is unable to operate a discretionary investment business because it did not engage in the registration of the financial investment business pursuant to Article 17 of the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”). Thus, the instant agreement is null and void in violation of the mandatory provisions.

(2) Under the instant agreement, the Plaintiff paid 50% of the investment profits to the Defendant. This is not merely a receipt of contingent remuneration that is linked to the performance of operations, and thus is null and void in violation of Article 98-2 of the Capital Markets Act.

(3) At the time of the instant agreement, the Plaintiff and the Defendant agreed not only to distribute profits but also to bear 50% each loss when the loss occurred. However, the Defendant asserts that there is no agreement on the apportionment of losses. If only the agreement on the apportionment of profits as alleged by the Defendant exists, and there is no agreement on the apportionment of losses, such agreement constitutes the Defendant’s conclusion of an unfair contract by using the Plaintiff’s old-age, rashness, and experience, and thus, it is null and void in violation of

B) Claim for restitution of unjust enrichment against the money received in excess of the agreement to bear loss

At the time of the agreement of this case, the Plaintiff and the Defendant agreed not only to make profits but also to bear 50% of the losses. However, as net income is KRW 1,439,9,658, 205,465,441,333, and net income is KRW 1,439,49,658, the amount of profit to be received by the Defendant is KRW 719,970,837. Nevertheless, the Defendant received 1,232,720,749,829,829 as profits, the difference was unjust enrichment. The Defendant returned USD 90,000 (103,176,000,000,000) on March 14, 2014. Accordingly, the Defendant should return the remaining amount of profit to the Defendant.

(b) First preliminary claim: A claim for the amount agreed upon under the agreement on the apportionment of losses; and

At the time of the instant agreement, the Plaintiff and the Defendant agreed not only to make a profit but also to bear 50% of the loss at the time of occurrence of the loss. However, as the Defendant’s investment management led to the Plaintiff’s final loss of USD 909,340.91, the Defendant is obligated to pay USD 456,670.955, out of the Plaintiff’s loss.

(iii) Second preliminary claim: A claim for the amount adjusted under a contract for the same business;

The instant agreement constitutes a partnership business agreement, and Article 711(2) of the Civil Act provides that the ratio of distribution for profit or loss shall be presumed to be common to profit or loss. Therefore, the Defendant is obliged to pay 50% of the investment loss amount generated from discretionary investment as USD 909,340.91.

B. Defendant

1) The parties to the instant arrangement are Pacific Investment Advisory Co., Ltd., an investment advisory company established and operated by the Defendant in Singapore (hereinafter “PIC company”), not the Defendant, and only the Plaintiff paid investment advisory fees to PIC.

2) Even if the parties to the instant agreement are the Defendant, the Defendant did not agree on the apportionment of losses, and even if such agreement was made, it is null and void in violation of Article 55 of the Capital Markets Act, which is a mandatory provision.

3. Determination

A. As to the party to the instant agreement

The fact that the Defendant established and operated an investment advisory company in Singapore is not a dispute between the parties, and the Defendant made a request to the Plaintiff for payment of the profits accrued from the discretionary investment in each of the instant accounts to the PIC account on June 2012, comprehensively taking account of the entire purport of the arguments in Gap evidence Nos. 7 and Eul evidence No. 4, the fact that the Plaintiff transferred the profits accrued from the discretionary investment in each of the instant accounts to the PIC account on March 27, 2012, USD 11,872.22 on March 27, 2012, USD 3,826.46 on March 31, 2012, USD 18,988.03, USD 22,705.22 on June 26, 2012 to the PIC account.

However, in full view of the evidence mentioned above, Gap evidence No. 10, Eul evidence No. 13, fact-finding inquiry about Han Bank Co., Ltd. at the court of first instance, and the purport of the entire pleadings, the plaintiff transferred most of the profits from the discretionary investment in each of the accounts of this case to one bank account in the name of the defendant, or directly linked to the defendant). The defendant mainly connected to the Internet as domestic IP, and made a discretionary investment in each of the accounts of this case. The defendant offered real estate to the non-party No. 1 as security for the return of principal and interest, and it was hard to view that the defendant did not have any losses to the new account of this case since September 18, 2015 as the result of the request for investment advisory agreement, and the defendant did not appear to have any losses to the new account of this case. The defendant did not appear to have been able to submit the request for investment advisory agreement to the non-party No. 1 on September 22, 2014.

B. As to the nature and content of the instant agreement

1) Whether the instant agreement can be deemed as a partnership agreement under the Civil Act

According to the above facts, the agreement of this case is an investment trust agreement with the purport that the Plaintiff will entrust the Defendant with the investment transaction of the foreign exchange investment account in which the Plaintiff deposited the investment money and pay 50% of the investment proceeds as the remuneration, which constitutes a comprehensive investment delegation agreement. It is difficult to view that the agreement of this case is a partnership agreement with the Plaintiff and the Defendant, or that the Plaintiff and the Defendant formed an association for joint business.

2) As to the existence of an agreement to share losses

A) From February 2012, the Plaintiff and the Defendant agreed to share losses incurred from discretionary investment with the Defendant, it is insufficient to accept the agreement only with the evidence submitted by the Plaintiff. Rather, according to each of the aforementioned evidence, Gap evidence Nos. 17 and Eul evidence Nos. 9 and 15, the Plaintiff opened a foreign exchange trading account with Samsung Futures Investment Co., Ltd. from November 201, 201, prior to the conclusion of the instant agreement, and made considerable profits while making foreign exchange investments with the Defendant’s advice and suggestions. After that, the Plaintiff concluded the instant agreement with the Defendant on February 2012, and filed a criminal complaint with the Defendant by fraud (Seoul District Public Prosecutor’s Branch Office, Incheon District Public Prosecutor’s Office, 2017, Nos. 799), and under investigation, the Plaintiff did not appear to have made an agreement with the Plaintiff as to losses incurred by the Defendant at the time of entering into the instant agreement.

B) However, according to the aforementioned evidence, from the end of September 2013, the Plaintiff was suffering from losses due to the Defendant’s investment, and the Plaintiff was aware of losses, and the Defendant agreed to compensate the Plaintiff for the principal with respect to the transaction arising from the instant new account on February 14, 2014, and again, on March 7, 2014, to compensate for the principal and to compensate for 50% of the principal losses with respect to the instant new account. The Defendant paid USD 90,000 to the Plaintiff on March 14, 2014. The Defendant agreed to complete all transactions by the end of June 2014 with respect to the transaction of the instant new account and one-use account. Accordingly, according to the agreement, the Defendant agreed to compensate for losses with respect to the instant new account on March 14, 2014.

Furthermore, the Plaintiff asserts that the Defendant agreed to compensate for 50% of the loss even for the instant flexible account transaction at that time, but it is insufficient to recognize it only by the evidence submitted by the Plaintiff (the Plaintiff’s dialogue with the Defendant on March 7, 2014, because the Plaintiff’s new account or single-use account has broken down and trust, it goes against the internal line due to the Plaintiff’s failure to pay losses (Evidence 1-1), and the transaction between a single-use account and a single-use account (Evidence 1-1). The Defendant clearly bears the burden of loss as to the new account and a single-use account (Evidence 1, 8, 11). However, on July 8, 2014, the Plaintiff urged the Defendant to bear the burden of loss (Evidence 8-1).

C. Judgment as to the plaintiff's main claim

In this part, the reasons for this court's reasoning are as follows, and it is identical to the part concerning "the judgment as to the primary cause of claim" from 10 to 8th 7 of the judgment of the court of first instance, except for the cases where the judgment is timely made or the judgment is added as follows. Thus, it is acceptable in accordance with the main sentence of Article 420 of

○ In accordance with Part 13 of the 6th judgment of the first instance court, "In the case of Singapore, the 'PIC company' shall be changed and entered.

○ Along with the 7th sentence and 8th sentence of the first instance court, paragraph 4) shall be added as follows.

4) Claim for restitution of unjust enrichment against the money received in excess of the agreement to bear the loss

This part of the Plaintiff’s assertion is premised on the existence of an agreement between the Plaintiff and the Defendant on the apportionment of losses arising from discretionary investment at the time of the conclusion of the instant agreement. However, as seen earlier, it cannot be deemed that the agreement was concluded at the time of the conclusion of the instant agreement, such as the Plaintiff’s assertion cannot be accepted.

D. Judgment on the plaintiff's first preliminary claim

1) At the time of the conclusion of the instant agreement, it cannot be deemed that there was an agreement between the Plaintiff and the Defendant on the apportionment of losses incurred by discretionary investment. However, around March 2014, when the Defendant incurred losses from discretionary investment, the Defendant agreed to compensate the Plaintiff for all principal losses for the instant new account transaction, and 50% of principal losses for the instant single account transaction, as seen earlier. Therefore, the Defendant is obligated to compensate the Plaintiff for losses pursuant to the instant agreement on the apportionment of losses.

2) Furthermore, we examine the Defendant’s loss amount.

The principal of the instant new account transaction is USD 177,935.94 for the principal, USD 600 for the principal transaction, USD 600,00 for the principal transaction, and the new account and one account for the instant case are concluded on July 4, 2014 as seen earlier. According to the aforementioned evidence, it is recognized that the balance of the instant new account was USD 44,976.12 at the time of the closing of transaction, USD 356,83.56 for the balance of the instant single account.

Therefore, on July 4, 2014, in which the transaction of the instant new account and the single-class account became final and conclusive, the loss of principal due to the transaction of the instant new account as of July 4, 2014 is USD 132,959.82 ($ 177,935.94 - USD 44,976.12). The loss of principal due to the transaction of the instant single-class account is USD 243,166.44 (= USD 600,00 - USD 356,83.56). Thus, the loss to be paid by the Defendant to the Plaintiff is USD 254,543.04 ($ 132,959.82) due to the transaction of the instant new account + USD 50% of the principal loss due to the transaction of the instant single-class account + USD 121,583.22).

Meanwhile, the fact that the Defendant paid USD 90,00 to the Plaintiff as compensation for losses on March 14, 2014 is as seen earlier. However, if the Plaintiff deducts the above amount, the Defendant’s apportionment of losses to be paid to the Plaintiff is USD 164,543.04. Furthermore, on July 4, 2014, the fact that the transaction base rate for USD 1,009 was a significant cause for 1,009. As such, the Defendant’s apportionment of losses to the Plaintiff is 16,145,689 (= USD 164,543.04 + USD 164,543.04 + KRW 1,000).

3) Judgment on the defendant's defense

(A) the invalidity of the agreement on the apportionment of losses

As seen earlier, the Defendant’s assertion that the instant agreement is null and void as it goes against the Capital Markets Act is not applicable. As such, the Defendant’s assertion that the loss apportionment agreement is null and void is rejected.

(b) argument that the investment funds of the single investment account are investment funds of Nonparty 2, and thus it is not subject to an agreement for loss apportionment;

The defendant asserts that USD 600,000 investment funds in one investment account is funds of the plaintiff's mother and is not subject to an agreement for loss apportionment.

In full view of the purport of the argument in Eul evidence No. 10, it is recognized that the plaintiff received funds from the non-party 2, his own mother, and deposited them in the Hancom Account. Meanwhile, according to the evidence mentioned above, the defendant, despite being aware of such fact, agreed to bear 50% of the principal loss incurred from the transaction of Hancom Account on March 2014, as seen earlier, and therefore, it cannot be deemed that the defendant is not subject to an agreement for loss apportionment solely on the ground that the money of non-party 2 was deposited in the Hancom Account. This part of the defendant's assertion is not acceptable.

C) Claim that the Plaintiff incurred loss by voluntary settlement of each of the accounts of this case

The defendant recommended the plaintiff to maintain the investment of each of the accounts of this case with a more market situation and change, but asserts that the plaintiff suffered loss by arbitrarily settling the transactions of each of the accounts of this case.

In light of the above facts, since the end of September 2013, the losses occurred due to discretionary investment in each of the instant accounts. Around March 2014, the Defendant agreed to compensate for the principal amount for the instant transactions, and the 50% of the principal amount losses for the instant single-use account. Moreover, the Defendant agreed to complete all of the instant new-use and single-use transactions by the end of June 2014. According to the aforementioned evidence, the Plaintiff was not good for the Plaintiff, and the time for arranging the account was delayed. However, according to the Defendant’s proposal, the Plaintiff refused to make an investment and demanded to arrange the account at will, and the Defendant did not accept the Plaintiff’s new-use transactions from July 1, 2014 to July 4, 2014, the Plaintiff’s assertion that the instant new-use account was closed at will, and the Defendant did not accept the Plaintiff’s allegation that it did not reach an agreement with the Plaintiff on July 20, 2014.

D) Offset Claim

(1) Summary of the defendant's assertion

The Plaintiff: (a) promised Nonparty 1, one of his high school residents, to voluntarily compensate for losses; (b) induced the Plaintiff to make an investment in the foreign exchange investment account in the name of Nonparty 1; and (c) incurred losses incurred in conducting foreign exchange investment transactions under the authority to make an investment. However, on May 18, 2015, the Plaintiff forced Nonparty 1 to compensate for the investment losses incurred by Nonparty 1; and (c) paid KRW 300,000,000 to Nonparty 1 on May 18, 2015. This constitutes a tort, which constitutes a tort, set off the Defendant’s damage liability amounting to KRW 30

(2) Determination

Unlike the Defendant’s assertion, Nonparty 1 was working for an investment in the Defendant, and the Defendant incurred a loss of investment while making a foreign exchange investment in the account in the name of Nonparty 1, and on May 18, 2015, paid KRW 300,000 as compensation for losses to Nonparty 1 on May 18, 2015, as seen earlier, and it is difficult to view otherwise solely based on the evidence submitted by the Defendant, such as the evidence No. 12, etc. The Defendant’s assertion on this part is rejected.

4) Sub-determination

Ultimately, with respect to the Plaintiff KRW 166,145,689 and KRW 150,000 among them, the Defendant is obligated to pay damages for delay calculated at each rate of 15% per annum as stipulated in the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings, from August 9, 2014 following the date of service of a duplicate of the complaint in this case, to the remainder of KRW 16,145,689, and from February 22, 2017 following the date of service of a duplicate of the application for modification of the purport of the claim and the cause of the claim, to the Plaintiff, for the existence and scope of the Defendant’s obligation to perform, from February 24, 2017 to July 13, 2018, which is the date of the final judgment of the competent court, to the day of full payment.

E. Judgment on the second preliminary claim by the Plaintiff

Since the agreement of this case should be deemed to constitute a delegation contract under the comprehensive discretionary investment agreement, the plaintiff's second preliminary claim based on the premise that the agreement of this case is the association agreement cannot be accepted.

4. Conclusion

Thus, the plaintiff 1's preliminary claim shall be accepted within the above scope of recognition, and all of the plaintiff's primary claim, the remainder of the first preliminary claim, and the second preliminary claim shall be dismissed as it is without merit. The judgment of the court of first instance shall be modified as above, and it is so decided as per Disposition.

Judges Jeong Jae-won (Presiding Judge)

1) After May 22, 2014, the account was transferred to Hyundai Futures Corporation.

2) The Defendant asserted that the amount of profit accrued from each of the instant accounts is KRW 2,465,41,33, and that the amount of profit distributed is KRW 1,232,720,667 (the Defendant’s preparatory documents as of January 9, 2015). The Plaintiff asserted that the amount of profit distributed is KRW 1,103,987,213 (the Plaintiff’s preparatory documents as of March 9, 2016). However, the Defendant asserted that the amount claimed by the Defendant is the amount of profit distributed by the Plaintiff as of March 9, 2016, while the Defendant invoked the amount claimed by the Plaintiff. In light of this, there is no dispute between the parties as to the fact that at least KRW 1,103,987,213 was paid as the amount of profit distributed.

3) With respect to the amount of profit distribution that the Plaintiff paid to the Defendant, there is no dispute over the fact that the Plaintiff paid at least KRW 1,103,987,213 to the Defendant. However, the amount transferred to the account of the PIC company is merely USD 57,391.93 ($ 51,826,635 if the amount was converted to KRW 903,000 at the end of June 2012).

4) The first instance court accepted the Plaintiff’s claim 150,000,000 as the settlement amount under a business agreement, but it does not recognize it in the trial. Therefore, it is reasonable that the Defendant’s defense as to the existence or scope of the duty to perform as to KRW 150,00,00 as cited in the first instance trial is a dispute over the existence or scope of the duty to perform by the date of the final judgment in the trial.