[1] The method of calculating the amount of damages and the initial date in which the general partner and managing partner have established a private equity fund for specific investment purposes and violated the obligation to provide accurate information on the investment targets planned in the process of soliciting investors to participate in the investment, thereby causing losses to investors who participated in the investment as limited partners of the company

[2] In a case where a tort is constituted at the time of declaration of bankruptcy, whether the report prepared and submitted to the court by the trustee in bankruptcy may be the data for the assessment of the amount of damages (affirmative)

[3] The degree of proof required for the interest to be gained in the future out of the amount of damage caused by a tort, and whether such a legal principle is equally applicable to the calculation of the amount that a bankruptcy creditor is entitled to receive in the bankruptcy proceeding (affirmative)

[4] Whether a bankruptcy creditor can calculate the amount that the bankruptcy creditor can receive in the future bankruptcy procedure based on the total dividend estimated rate stated in the report filed by the bankruptcy trustee to the court based on Article 358 of the Debtor Rehabilitation and Bankruptcy Act (affirmative in principle)

[1] Since a person who establishes a private equity fund for specific investment purpose and becomes a general partner and managing partner of the private equity fund (hereinafter “the founder and managing partner of the private equity fund”) violates the obligation to provide accurate information about the subject-matter of investment and the method of investment, and the structure of recovery of investment, planned in the course of soliciting investors to participate in the investment, the amount of damages suffered by investors who participated in the investment as a limited partner of the private equity fund is the amount obtained by subtracting the total amount of money collected or recoverable from the total amount of money paid for acquiring the equity interest of the private equity fund (hereinafter “unclaimed amount”), the damages suffered by investors due to the founder and managing partner of the private equity fund due to the breach of such duty of care occur at the time when the unclaimed amount becomes final and conclusive, and at that point, the date

[2] The amount of damages caused by a tort shall be calculated based on the point at which the tort is established, but all the materials that refer to the point at which the argument is concluded. If a tort is established at the time the bankruptcy is declared, the reports prepared and submitted to the court after the bankruptcy trustee can also be the materials for the calculation of the amount

[3] The benefits that can be gained in the future from the amount of damages caused by a tort are sufficient to prove the benefits with considerable probability within the extent that it does not lose reasonableness, not from the proof of specific and reliable benefits that the victim can actually obtain by reducing the degree of proof rather than the proof of past facts. This legal doctrine applies likewise to the case where a bankruptcy creditor calculates the amount that he/she can receive in the bankruptcy proceeding.

[4] A report submitted by a trustee in bankruptcy to the court on the basis of Article 358 of the Debtor Rehabilitation and Bankruptcy Act is intended to inspect and supervise the progress of bankruptcy proceedings and the performance of duties by the trustee in bankruptcy, and the court may demand the trustee in bankruptcy to present books, deposit passbooks and other necessary materials, if necessary to verify the accuracy of the report. In light of such contents, nature and confirmation procedures, etc. of the report, barring special circumstances, such as where there are unreasonable parts of the report or where it is certain that the main contents of the report will be revised or modified, such as where the report is expected to be delayed due to the circumstances revealed at the time of closing the argument, it is also possible to calculate the amount that the bankruptcy creditor can receive in the future bankruptcy proceedings based on the total dividend rate stated in the report.

[1] Articles 393, 750, and 763 of the Civil Act / [2] Articles 393, 750, and 763 of the Civil Act / [3] Articles 393, 750, and 763 of the Civil Act / [4] Articles 393, 750, and 763 of the Civil Act; Article 358 of the Debtor Rehabilitation and Bankruptcy Act

[3] Supreme Court Decision 91Da29972 Decided April 28, 1992 (Gong1992, 1698), Supreme Court Decision 2012Da39769, 3976 Decided May 24, 2013

Plaintiff (Counterclaim Defendant) (Law Firm Sejong, Attorneys Kim Yong-dam et al., Counsel for the plaintiff-appellant)

KTB Asset Management Corporation

Defendant 2 (Bae, Kim & Lee LLC, Attorneys Kim Man-man et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2013Na81028, 2014Na49014 decided February 6, 2015

1. Of the part against the Plaintiff (Counterclaim Defendant) in the lower judgment, the part regarding the amount calculated by the annual rate of 5% from August 16, 2012 to July 14, 2014 regarding KRW 374,034,786, among the part against which the Plaintiff (Counterclaim Defendant) was lost, is reversed, and the appeal filed by Defendant (Counterclaim Plaintiff) KB Asset Management Company and Defendant 2 against that part is dismissed, respectively.

2. Of the part of the lower judgment against the Plaintiff (Counterclaim Defendant), the portion of the provisional payment order issued by the Defendant (Counterclaim Defendant) to the Plaintiff in excess of the amount calculated at the rate of 430,437,524 won and the annual rate of 5% from November 23, 2013 to September 30, 2016, and the annual rate of 20% from the next day to the day of full payment, shall be reversed, and the application for the provisional payment return by the Defendant (Counterclaim Plaintiff) KF Asset Management Company corresponding to that part shall be dismissed.

3. The remaining appeals by the Plaintiff (Counterclaim Defendant) are dismissed.

4. Of the total cost of litigation, 80% of the cost incurred by the principal lawsuit between the Plaintiff (Counterclaim Defendant) and the Defendant (Counterclaim Plaintiff) KF Asset Management Co., Ltd. (including the cost of filing an application for return of provisional payment) is borne by the Plaintiff (Counterclaim Defendant), the remainder is borne by the Defendant (Counterclaim Plaintiff) KF Asset Management Co., Ltd., and the part incurred by the counterclaim is borne by the Defendant (Counterclaim Plaintiff) KF Asset Management Co., Ltd., and the portion incurred between the Plaintiff (Counterclaim Defendant) and Defendant 2 is borne by the Plaintiff (Counterclaim Defendant) and the remainder.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the ground of appeal on the starting point of counting damages for damages

A. In principle, tort liability liability is established at the time of an illegal act, but if there is an interval of time between the time of the illegal act and the time of the occurrence of the damage, damage shall be established at the time of occurrence of the damage and the time of commencement of the damage (see, e.g., Supreme Court Decisions 2012Da29649, Jan. 24, 2013). Here, damage refers to the difference between the property disadvantage caused by an illegal harmful act, i.e., the property disadvantage that would have existed without the illegal act, and the current property condition that became the illegal act (see, e.g., Supreme Court en banc Decision 91Da33070, Jun. 23, 1992). The time of the damage refers to the time of actual occurrence of the damage. Whether the damage actually occurred or not shall be determined in light of objective and reasonable standards (see, e.g., Supreme Court Decisions 97Da4760, Aug. 25, 1998; 201Da76368, Jul.

Since a person who establishes a private equity fund for specific investment purpose and becomes the general partner and managing partner of the private equity fund (hereinafter referred to as "establishment and managing partner of the private equity fund") violates the obligation to provide accurate information on the subject-matter of investment and the method of investment and the structure of recovery of investment in the course of soliciting investors to participate in the investment, the amount of damages suffered by investors who participated in the investment of the private equity fund as a limited partner of the private equity fund is the amount obtained by subtracting the total amount of money collected or recoverable from the equity paid for acquiring the equity interest of the private equity fund (hereinafter referred to as "unclaimed amount"), the damages suffered by the founder and managing partner of the private equity fund due to their breach of such duty of care shall occur at the time when the occurrence of the unclaimed amount becomes final and conclusive, and at that point, the date of commencement

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) On January 2006, the Defendant (Counterclaim Plaintiff Company) decided to acquire the Central Busan Savings Bank (hereinafter “Central Busan Savings Bank”) around January 2006. According to the Defendant Company’s plan, the acquisition structure was established by the Defendant Company, which formed a private equity fund with Busan Savings Bank (hereinafter “Incuba Savings Bank”). The investment recovery structure was to normalize the management of the Central Savings Bank and sell it to a third party or list it on the securities market or the KOSDAQ market. However, according to an agreement with the Busan Savings Bank, the right to demand purchase of the shares of the Central Savings Bank owned by the private equity fund against the Busan Savings Bank in an amount calculated by adding profit of 12.5% per annum to the investment principal (hereinafter “instant put option”).

2) On February 2, 2006, Defendant Company established a private equity fund which is a limited partnership company (hereinafter “the private equity fund of this case”) with the term of existence of five years for the above acceptance, and became a general partner and managing partner, and Plaintiff (Counterclaim Defendant hereinafter “Plaintiff”) (hereinafter “Plaintiff”) upon Defendant 2’s solicitation for investment participation, upon investing KRW 2 billion in the private equity fund of this case in April 18, 2006, became a limited partner holding 16% of the shares of the private equity fund of this case (hereinafter “instant shares”). The Defendants, including the Plaintiff, were able to recover the investment money by using the put options of this case from one year after acquiring the National Busan Savings Bank from the date of solicitation for investment participation, but in fact, Busan Savings Bank was punished by the violation of finance-related laws and regulations, and even if the put options of this case were to be exercised by October 209, 209, the Central Savings Bank held shares of this case.

3) After the Busan Savings Bank’s investment of KRW 6.6 billion, it acquired 30% of the shares of the Central Busan Savings Bank. The instant private equity fund, etc. invested 12.5 billion won and acquired 55% of the shares of the Central Savings Bank. However, on February 19, 2011, the Central Savings Bank was ordered to suspend its business by the Financial Services Commission due to liquidity shortage, and was declared bankrupt on February 23, 2012 by the Seoul Central District Court 2012Hahap4, and the Busan Savings Bank was also declared bankrupt on August 16, 2012.

4) Meanwhile, on February 15, 201, the instant private equity fund exercised put options to the Busan Savings Bank. According to a bankruptcy claim confirmation lawsuit, the instant private equity fund was recognized as a bankruptcy claim against the Busan Savings Bank as the amount of KRW 25.3 billion (the sum of the principal KRW 12.5 billion plus the profits calculated at the rate of 12.5% per annum). By the time the Busan Savings Bank was declared bankrupt, there was no money recovered by the Plaintiff’s share at all at the time of the declaration of bankruptcy. The Busan Savings Bank, a trustee in bankruptcy of the Busan Savings Bank, prepared and submitted to the court on July 15, 2014, was 26.24% of the total dividend ratio of the Busan Savings Bank to the bankruptcy creditors of the Busan Savings Bank (hereinafter “instant regular report”).

C. We examine the above facts in light of the legal principles as seen earlier.

1) The damages incurred by the Plaintiff by failing to provide accurate information on put options of this case are property disadvantages equivalent to the amount calculated by subtracting the total amount of money recovered or recoverable from the share of this case from the total amount of money paid to acquire the share of this case.

2) The amount of money recoverable by the Plaintiff’s share of this case, namely, the value of the share of this case is equivalent to the share of this case among the value of the private equity fund of this case. Since the private equity fund of this case had 5% of the shares of the central installment savings bank and put options in place without other properties, the value of the share of this case ultimately depends on 55% of the shares of this case and put options.

3) However, on February 23, 2012, the value of 55% of the shares of the Central Installment Savings Bank was reduced to below the investment principal at that time upon the declaration of bankruptcy by the Central Installment Savings Bank. On August 16, 2012, the Busan Installment Savings Bank was declared bankrupt and thus, it was impossible for the instant private equity fund to recover all investment principal even through put options, which can be deemed as a kind of personal security, even if it is impossible for the instant private equity fund to recover all investment principal.

4) Thus, since the Busan Savings Bank's occurrence of the unrecovered amount due to the acquisition of the shares in this case on August 16, 2012, which was declared bankrupt, the occurrence of the unrecovered amount due to the acquisition of the shares in this case, it shall be deemed that the plaintiff's loss was actually caused due to the acquisition of the shares in this case, and therefore, the above point is the initial date

D. Nevertheless, the lower court determined that July 15, 2014, the instant regular report of this case, was the initial date for claiming damages for the Plaintiff’s damages. In so doing, the lower court erred by misapprehending the legal doctrine on the initial date of claiming damages for damages due to a tort related to investment recommendation, thereby adversely affecting the conclusion of the judgment.

2. As to the ground of appeal on the adequacy of calculating damages

A. The amount of damages caused by a tort shall be calculated by referring to all the materials at the time of the establishment of the tort, but may be calculated by referring to the time of the conclusion of the argument. As in the case of this case, if a tort was established at the time of the declaration of bankruptcy, the reports prepared and submitted to the court thereafter may also serve as

B. Meanwhile, the benefits that may be gained in the future out of the amount of damages caused by a tort are sufficient to prove the benefits that are highly probable to the extent that it does not lose reasonableness, rather than the proof of specific and reliable benefits that the victim could actually obtain by reducing the degree of proof rather than the proof of past facts (see, e.g., Supreme Court Decisions 91Da29972, Apr. 28, 1992; 2012Da39769, May 24, 2013). Such legal doctrine ought to be equally applied to cases where a bankruptcy creditor calculates the amount that he/she can receive in the bankruptcy proceeding.

A report submitted by a trustee in bankruptcy to a court based on Article 358 of the Debtor Rehabilitation and Bankruptcy Act is intended for the inspection and supervision of the progress of bankruptcy proceedings and the performance of duties by a trustee in bankruptcy, and where it is necessary to verify the accuracy of the report, the court may request the trustee in bankruptcy to present books, deposit passbooks and other necessary data. In light of such contents and nature of the report and the confirmation procedures, etc., barring special circumstances, such as where there are unreasonable parts of the report or where it is certain that the main contents of the report will be revised or changed, such as where the report is expected to be delayed due to the circumstances revealed at the time of closing the argument, it is also possible to calculate the amount that a bankruptcy creditor can receive in the future bankruptcy proceedings based on the total dividend rate stated in the report

C. The court below calculated the amount recoverable by the private equity fund of this case in the bankruptcy proceeding of the Busan Savings Bank, and furthermore, the amount recoverable by the Plaintiff’s share at the time of closing argument. In light of the aforementioned legal principles, the court below’s decision is just, and contrary to what is alleged in the grounds of appeal, the court below did not err by misapprehending the legal principles as to the calculation of damages of tort, or by exceeding the bounds of the principle of free evaluation of evidence against logical

3. Parts for reversal

A. As seen earlier, the initial date of the Plaintiff’s damages for delay is not on July 15, 2014, which was recognized by the lower court, but on August 16, 2012. Accordingly, the Defendants are jointly obligated to pay jointly to the Plaintiff an amount calculated at the rate of 5% per annum from August 16, 2012 to February 6, 2015, which is the date of the lower judgment’s pronouncement, and 20% per annum from the following day to the date of full payment. Accordingly, the part of the lower judgment dismissing the Plaintiff’s damages for delay at the rate of 5% per annum from August 16, 2012 to July 14, 2014, which is the day immediately preceding the initial date recognized by the lower court.

B. Meanwhile, with respect to the application for the return of provisional payment by the Defendant Company, the lower court determined that the Plaintiff was liable to pay damages for delay, 454,211,789 won (the starting point of counting damages for delay recognized by the lower court was July 15, 2014, since the starting point of calculating damages for delay was July 15, 2014, after the date of the provisional payment, excluded from the scope of deduction) and damages for delay, which were recognized by the lower court, based on the provisional execution order rendered by the Defendant Company, of KRW 828,246,575, which was paid from November 22, 2013.

However, as seen earlier, the base date of the Plaintiff’s damages for delay is August 16, 2012, and the total amount of damages for delay from August 16, 2012 to November 22, 2013 and damages for delay from August 16, 2012, is 397,809,051 won [=374,034,786 won + (1 + 99/365) + (374,034,786 won x 0.05)].

Ultimately, the amount of provisional payment that the Plaintiff is obligated to return to the Defendant Company is calculated at an annual rate of 430,437,524 won (=828,246,575 won - 397,809,051 won) and the amount of provisional payment from November 23, 2013 to September 30, 2016, which is the date of this decision, deemed reasonable for the Plaintiff to dispute as to the existence and scope of the obligation to return provisional payment, and the annual rate of 5% prescribed by the Civil Act until September 30, 2016, and the annual rate of 20% prescribed by the Act on Special Cases concerning the Promotion, etc. of Legal Proceedings, etc. from the following day to the date of full payment. Accordingly, the portion of the lower judgment ordering the Plaintiff to pay exceeding the above amount shall also be reversed.

4. Conclusion

Therefore, each part of the above reversal is reversed, and this part is sufficient to be directly tried by this court, and therefore, it is decided to self-market in accordance with Article 437 of the Civil Procedure Act.

In addition to the amount recognized by the lower court, the Defendants are obligated to pay the Plaintiff an additional amount calculated at the rate of 5% per annum from August 16, 2012 to July 14, 2014, as to KRW 374,034,786, the Defendants are obligated to pay the Plaintiff an amount calculated at the rate of 5% per annum from August 16, 2012 to July 14, 2014. The Plaintiff’s appeal as to this part is justified, and the Defendants’ appeal as to this part is dismissed as without merit. In relation to the Defendant Company’s provisional payment application, the Plaintiff is obligated to pay an amount of 430,437,524 won per annum to the Defendant Company from November 23, 2013 to September 30, 2016, and the amount calculated at the rate of 20% per annum from the next day to the day of complete payment. The remainder of the Plaintiff’s appeal is dismissed. The remainder of the Plaintiff’s appeal arising between the Plaintiff and the Plaintiff’s remainder of the Defendant Company is dismissed.

Justices Kwon Soon-il (Presiding Justice)