2014Da66352 Compensation for damages

A Stock Company

Korea Exchange Bank, Inc.

Seoul High Court Decision 2014Na989 Decided September 5, 2014

March 20, 2015

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

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2, the lower court, on the grounds as indicated in its reasoning, presumed that (1) the contract amount of the call option was USD 600,000 per month, and the contract period was one year, which could not cause substantial losses to the Plaintiff. (2) The Defendant, upon entering into the instant contract, seems to have sufficiently known or could have known the Plaintiff that there was a risk of incurring losses due to the Plaintiff’s failure to secure goods on the settlement date, and (2) the Plaintiff was aware of the risk of having violated the Plaintiff’s duty to explain the suitability of the instant contract in light of the circumstances where the amount equivalent to 80% of the Plaintiff’s sales was spent for raw materials imported from a foreign country at the cost of raw materials imported from the country, and did not have any reason to subscribe to the currency option contract with the country of India. In so doing, the lower court determined that the Plaintiff violated the principle and the obligation to explain the amount of the instant contract to the Plaintiff.

The allegation in the grounds of appeal disputing the fact-finding in the judgment of the court below is nothing more than an error of the selection of evidence and the determination of the value of evidence, which belong to the free evaluation evidence of the court of fact-finding. In addition, while examining the reasoning of the judgment below in light of the legal principles and the evidence duly admitted, the judgment of the court below did not err by misapprehending the legal principles as to the suitability principle and the duty to explain in the currency option contract,

2. As to the third ground for appeal

A. “The date when the injured party becomes aware of the damage and the perpetrator” under Article 766(1) of the Civil Act, which is the starting point of the short-term extinctive prescription of a claim for damages due to a tort, means the time when the injured party has actually and specifically recognized the facts requiring the tort, such as the occurrence of the damage, the existence of the illegal harmful act, and the proximate causal relation between the harmful act and the occurrence of the damage. Whether the injured party, etc. is deemed to have actually and specifically recognized the facts requiring the tort should be reasonably recognized by taking into account the various objective circumstances in each individual case and taking into account the situation in which the claim for damages is practically possible (see, e.g., Supreme Court Decisions 97Meu18, Jul. 24, 1998; 2006Da3040, Apr. 24, 2008); and “the day when the injured party becomes aware of the fact” does not constitute a matter of legal evaluation as to the facts (see, e.g., Supreme Court Decisions 23837Da319192, Aug.

B. (1) On October 5, 2012, the Defendant’s defense that the instant currency option contract was filed on December 15, 2008 and the extinctive prescription has expired on October 5, 2012, the lower court rejected the Defendant’s defense, on the ground that it is reasonable to deem that the Plaintiff was aware of the occurrence of damages on the maturity or settlement date of each of the instant currency option contract, but it is difficult to recognize that the Plaintiff was aware of the occurrence of damages on the maturity or settlement date of each of the instant currency option contract. However, on the first half of 2008, the Plaintiff’s defense was rejected. (2) On the first half of 2008, the Plaintiff’s assertion was widely known among three, and more than 10 companies filed a lawsuit against a bank in relation to the currency option contract, and thus, the Plaintiff could have sufficiently known that the damage was caused by the Defendant’s tort at the end of 2008 and that the extinctive prescription has expired on the following grounds.

(1) From February 2008, when the exchange rate of Won/US began to increase rapidly, the Plaintiff was obliged to pay to the Defendant on each settlement day the difference between the market price due for each observation period maturity and the exchange rate at each event until the maturity date, and the total amount of damages incurred until December 17, 2008, the contract period of which expires, was fully known as KRW 1 billion and the occurrence of such damage.

(2) In addition, in this case, the Defendant’s illegal act was not a need for exchange hedging transactions in light of the Plaintiff’s export price and import price, and the risk that the Plaintiff could incur excessive and practical loss that the Plaintiff could face because it was unable to secure USD 1 on the settlement date, and was not appropriate for the Plaintiff, but actively recommended the instant currency option contract, and did not provide a specific and detailed explanation so that the Plaintiff could recognize the risk.

However, as seen above, since February 2008 through the expiration date of the contract term, the risk of the instant currency option contract was realized as the Plaintiff suffered a big loss exceeding the Plaintiff’s expected, and thus, it can be seen that the Plaintiff, as well as the Plaintiff, could be gradually aware that the instant currency option contract with the risk was inappropriate for the Plaintiff, and that the Defendant did not explain the risk specifically and in detail.

Furthermore, as the Plaintiff continued to increase the market exchange rate above the green exchange rate, and the obligation to sell USD 600,000 continuously from February 2, 2008 to August 2008, the Plaintiff suffered losses during that period by paying a fee of KRW 135,00,000 for the part at which each maturity comes from June 2008 to August 2008, and revising the green exchange rate. In light of the above, it can be said that the Plaintiff had sufficiently known the specific risk of the instant currency option contract at that time.

(3) In addition, due to the rapid rise in the currency exchange rate since March 2008, many small and medium enterprises, as shown in the Plaintiff, who concluded a currency option contract by predicting the stable lower rate of the original/US exchange rate, suffered enormous exchange loss due to the bank’s call option exercise as determined in the currency option contract, and became a major social issue. As a result, from April 2008, the Financial Supervisory Commission investigated the bank’s illegal act related to the currency option, and the Fair Trade Commission also conducted an investigation into the civil petition related to the currency option. Some companies filed a lawsuit against the bank or filed a provisional disposition against the bank, and the court accepted such provisional disposition.

D. Examining these facts in light of the legal principles as seen earlier, it is reasonable to view that the Plaintiff, around December 17, 2008, recognized the Defendant’s tort regarding the instant currency option contract that the Plaintiff had a risk of incurring excessive and practical loss that the Plaintiff could face, and thus, the statute of limitations for the claim for damages ought to run from that time.

Nevertheless, the above determination by the court below which rejected the defendant's defense of extinctive prescription without properly examining these circumstances is erroneous in the misapprehension of legal principles as to the starting point of the extinctive prescription period, or by failing to exhaust all necessary deliberations, which affected the conclusion of the judgment. The ground of appeal

3. Conclusion

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

Justices Kim Jae-young

Justices Lee In-bok

Justices Kim In-bok, Counsel for the defendant

Justices Go Young-young