In a case where a person, who establishes a private equity fund under the former Indirect Investment Asset Management Business Act, who acts as a general partner and managing partner, and solicits investors to participate in the investment as a limited partner (the founder and managing partner of a private equity fund), causes losses to investors by affecting investors’ investment decisions in violation of the duty of care borne by the investors, and whether the liability for tort is held (affirmative)

A person who establishes a private equity fund under the former Indirect Investment Asset Management Business Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635, Feb. 4, 2009) and becomes a general partner and an executive partner, and solicits investors to participate in investments as a limited partner (hereinafter referred to as “establish/operator of a private equity fund”) to make an investment after determining investment targets, investment methods, investment recovery structure, etc., has a duty to produce accurate information about important matters such as investment objects, investment methods, investment recovery structure, etc. of the private equity fund and provide investors to participate in investments as limited partners of the private equity fund. In addition, a person who establishes/operator of the private equity fund is liable for tort liability due to breach of the private equity fund if the founder/operator of the private equity fund has violated such duty and affected investors’ judgment on investment and caused damages to investors due to the existing subject matter of investment judgment.

Article 750 of the Civil Act and Article 144-2 of the former Indirect Investment Asset Management Business Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635, Aug. 3, 2007) (see current Article 249-10 of the Financial Investment Services and Capital Markets Act)

Plaintiff (Law Firm LLC, Attorneys Lee Do-tae et al., Counsel for the plaintiff-appellant)

KTB Asset Management Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Kim In-man et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2014Na2011626 decided April 16, 2015

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

A. A person who establishes a private equity fund under Article 2 of the former Indirect Investment Asset Management Business Act [Abolition of Article 2 of the Addenda of the Financial Investment Services and Capital Markets Act (Act No. 8635, Feb. 4, 2009; hereinafter “Indirect Investment Act”) to make an investment subject, investment method, investment recovery structure, etc. (hereinafter “the founder and operator of a private equity fund”) and becomes a general partner and an executive partner, and solicits investors to participate in the investment as a limited partner (hereinafter “the founder and operator of a private equity fund”) to make an investment. Not only has a direct interest in investors’ participation in the investment of the private equity fund but also is in the position of producing and providing information first in relation to investment through the private equity fund. The founder and operator of the private equity fund is obligated to produce accurate information about the investment subject, investment method, investment recovery structure, etc. of the private equity fund and to provide investors with such information as a limited partner of the private equity fund, and even if the founder and operator of the private equity fund has participated in the investment judgment and suffered loss from the company’s’s tort liability.

In addition, the court determines whether the assertion of facts is true in accordance with logical and empirical rules on the basis of the ideology of social justice and equity with free evaluation of evidence taking into account the overall purport of pleadings and the result of examination of evidence. The facts duly confirmed by the court of final appeal that the judgment below did not go beyond the bounds of the principle of free evaluation of evidence (Articles 202 and 432 of the Civil Procedure Act).

In addition, the reasoning of the written judgment is sufficient to indicate the judgment on the party’s allegations and other means of offence and defense to the extent that it can be recognized that the text is justifiable, and there is no need to determine all allegations by the parties or methods of offence and defense (Article 208 of the Civil Procedure Act). Therefore, even if the specific and direct judgment on the allegations by the parties is not indicated in the written judgment, if it is possible to find out that the allegations have been cited or rejected in light of the overall purport of the reasoning of the judgment, it cannot be said that the judgment was omitted (see, e.g., Supreme Court Decisions 2006Da218, Jul. 10, 2008; 201Da87174, Apr. 26, 2012).

B. On the grounds indicated in its reasoning, the lower court determined to the effect that the Plaintiff is liable for damages caused by breach of its duty, on the ground that the Defendant, who was the founder and operator of the instant private equity fund, did not explain to the Plaintiff the fact that it is limited to the exercise of put options, while explaining that the Defendant’s investment principal and profits are guaranteed by put options against Busan Savings Bank, which constituted a consortium with the instant private equity fund, and did not explain to the Plaintiff that there was a restriction on the exercise of put options, thereby affecting the Plaintiff’s investment judgment by providing inaccurate information on important matters of the investment recovery structure.

The allegation in the grounds of appeal disputing such determination of fact-finding is nothing more than an error of the selection of evidence and the determination of the value of evidence belonging to the free evaluation of the fact-finding court. In addition, considering the reasoning of the judgment below in light of the aforementioned legal principles and the evidence duly admitted, the conclusion of the court below to the same purport is acceptable, and contrary to the allegations in the grounds of appeal, the court below did not err by omitting the judgment of the defendant as to the defendant's assertion, failing to meet the reasons, or exceeding the bounds of the free evaluation of evidence in violation of logical and empirical rules

On the other hand, the Supreme Court precedents cited in the grounds of appeal are different from this case, and thus are inappropriate to be invoked in this case.

2. As to the third ground for appeal

For the reasons indicated in its holding, the lower court determined that the Defendant, who is the executive partner of the instant private equity fund, violated the duty of due care and good faith by neglecting the management and supervision of the financial and management of the central savings bank, which is the company subject to investment, and exercising put options against the Busan Savings Bank after an appropriate period of time, despite the Plaintiff and the limited partner of the instant private equity fund, who are the limited partner of the instant private equity fund, were obligated to protect the interests of investors participating in investment.

The allegation in the grounds of appeal is the purport of disputing the fact-finding based on which the lower judgment was based, and is merely an error in the selection of evidence and the determination of the value of evidence belonging to the free trial of the fact-finding court. In addition, even when examining the reasoning of the lower judgment in light of the relevant legal principles and the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine on the duty of care and loyalty of the managing partner of the private equity fund, or by failing

3. As to the fourth ground for appeal

In a claim for damages, recognition of facts concerning the limitation of liability to ensure the fair apportionment of negligence or burden of damages or determination of the ratio is an exclusive right of a fact-finding court unless it is deemed significantly unreasonable in light of the principle of equity (see Supreme Court Decision 2010Da86709, Oct. 11, 2012, etc.).

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the lower court did not err by misapprehending the principle of equity or failing to exhaust all necessary deliberations, contrary to what is alleged in the grounds of appeal.

4. Conclusion

Therefore, the appeal is 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 Kim So-young (Presiding Justice)