[1] Whether causation is acknowledged between the negligence of an external auditor who failed to disclose the large-scale window dressing accounting fact of the company and the damage of the financial institution which provided the credit by purchasing corporate bills issued by the company (affirmative)

[2] In a case where a financial institution which has offered loans to an enterprise by means of re-purchaseing commercial papers with large-scale window dressing accounts, continues to purchase such commercial papers under policy consideration when it is practically impossible to collect loans from the enterprise's funds, whether the causal link between the negligence of an external auditor in the audit of the financial statements with respect to which large-scale window dressing accounts were conducted and the damage caused by the financial institution's purchase of commercial papers is severed (negative)

[3] The case holding that the starting point of the short-term extinctive prescription under Article 766 (1) of the Civil Code in a claim for damages caused by a tort filed against an external auditor who failed to disclose the window dressing accounting of the company shall be when the Securities and Futures Commission made a recommendation for disciplinary action against the external auditor, etc. or subsequent disciplinary action against the general director

[1] Corporate financial statements and audit reports indicating the audit results by an external auditor are the most objective data revealing the company's accurate financial status through the Korea Stock Exchange, etc., and serve as the basis for evaluating the credit rating of corporate bonds and commercial papers issued by the company and determining whether to provide loans to the financial institution. Therefore, if an external auditor was negligent in conducting or neglecting an important audit procedure with respect to the audit of financial statements through large-scale window dressing accounting, if the auditor was negligent in performing or neglecting his/her duty of care, it shall be deemed that the commercial papers issued by the company were obtained a reasonable credit rating from the credit rating institution and the financial institution was to provide loans by purchasing the above commercial papers. If the above financial status is revealed properly, other factors than the "company's financial status indicated in the financial statements", i.e., feasibility of redemption resources and business plans, preservation methods of bonds, business prospects, business profitability, business profitability analysis, and market research results, it shall be deemed that all of the factors other than the "company's financial statements are different."

[2] Where a financial institution entered into a credit contract with a company by purchasing commercial papers at the maturity of each commercial paper for a certain period, and the contract was due to large-scale subdivision, and it is deemed that the financial institution would not provide credit as it would have been, if it had known of such circumstances, if there were circumstances to deem that it would have been sufficient to refuse to purchase commercial papers at the time of the initial credit contract, it is practically impossible to collect credit from the company's funds and thus, it is merely an extension of the maturity of the previous commercial paper, and thus, it cannot be deemed that the previous losses were extinguished and new losses were incurred. This is because the suspension of the re-purchase and the collection of credit at that time means only the restoration of losses incurred by the purchase of commercial papers that the previous commercial papers had to have been purchased after the purchase of the commercial papers, and it is not because the final re-purchase decision was made based on a policy-based causal relationship between the financial institution's financial statements and the financial statements for the business year during which the re-purchase was conducted.

[3] In a tort claim case filed against an external auditor who failed to disclose the window dressing accounting of Daewoo Electronic Co., Ltd., the case holding that since it is difficult to view that the plaintiff actually and specifically recognized the difference between the implementation standards and the corporate accounting standards of the company at the time of the announcement or the result of the corporate restructuring plan for all affiliates of the Treatment Group including Daewoo Electronic Co., Ltd. as the result of the examination of the accounting corporation or the result of the corporate accounting of the company's restructuring plan, it is difficult to view that the difference between the result of the above inspection is due to window dressing accounting or that the window dressing accounting was not clarified, it constitutes a violation of the duty of care of the external auditor, the starting point of the short-term extinctive prescription period under Article 766 (1) of the Civil Code

[1] Article 750 of the Civil Code, Articles 2, 7-2, and 17(2) of the Act on External Audit of Stock Companies / [2] Article 750 of the Civil Code, Article 17(2) of the Act on External Audit of Stock Companies / [3] Article 766(1) of the Civil Code

[1] [2] Supreme Court Decision 2004Da63354 decided Dec. 22, 2006 (Gong2007Sang, 199)

Korean Bank (Law Firm Pung et al., Counsel for the defendant-appellant)

Defendant Accounting Corporation and six others (Attorneys Lee Im-soo et al., Counsel for the defendant-appellee)

Seoul High Court Decision 2004Na64489 Delivered on April 29, 2005

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

We examine the grounds of appeal.

1. Regarding ground of appeal No. 1

The financial statements of an enterprise and audit report stating the audit results by an external auditor are the most objective data revealing the accurate financial status of the enterprise in question through the Korea Stock Exchange, etc., and the enterprise's credit rating evaluation of corporate bonds and commercial papers issued by the enterprise and the decision on whether to grant a loan to the financial institution is important. As a result, the same case cannot be seen as an extremely exceptional case where, even though it is aware that the scale of the window dressing accounting in violation of the accounting standards is serious in comparison with the size of the equity capital of the relevant enterprise, it provides large-scale credit in accordance with the evaluation of the external window dressing accounting contents and the credit rating of corporate bonds and commercial papers based thereon.

In light of the records, if the company's 27th business year (197) financial status of the Treatment Electronic Co., Ltd. (hereinafter "Treatment Electronic Co., Ltd.") was actual, the company's 197 business year was 3.2,28.66 billion won in its assets, the company's 4.125.46 billion won in its liabilities, and its net loss was 1.670.5 billion won in its assets, etc., but its net loss was 1.771.628 billion won in its assets, etc., and the company's 4.63.6 billion won in its assets, net income, 41.67 billion won in its net income, and 6.5 million won in its assets and 4.4.6 billion won in its assets and 4.6 billion won in its assets and 4.6.6 billion won in its assets and 4.64.6 billion won in its assets and 4.64.64 billion won in its financial statements, which were found to have been negligent in its financial statements and other than the company's.

In addition, in cases where a financial institution entered into a credit agreement with an enterprise to provide loans each time when the maturity of commercial papers arrives at a certain period, and the contract was due to such large-scale subdivision, and it is deemed that the financial institution would not provide loans as it would have known of such circumstances, even if under the above credit agreement, it is interpreted that the financial institution reserves the authority to suspend re-purchase based on the latest financial information, etc. of the enterprise at the time of each re-purchase and to decide whether to recover the loans, if there are circumstances deemed sufficient to refuse re-purchase at the time of the initial credit agreement, it cannot be deemed that continuing re-purchase under policy consideration as it is practically impossible to recover loans from the company's funds and actually impossible to do so, and thus, it cannot be deemed that the previous losses were extinguished and new losses were incurred. This is because, under the above credit agreement, the financial institution cannot be deemed to have continued to purchase the previous commercial papers within the scope of 97 years from the date of the initial purchase of the commercial papers, and thus, it cannot be deemed that the Defendants continued to purchase damages arising from the previous 97 years.

Nevertheless, the court below, along with the fact that it is difficult to view that the financial status of an enterprise indicated in the financial statements exclusively depends on the determination of whether to provide credit, and the financial institution providing credit to the enterprise shall examine whether to provide credit based on the latest financial information for the enterprise as at the time of providing credit. It constitutes the purchase of newly issued corporate bills at the maturity of every time when the credit limit transaction agreement is concluded, and it shall review whether to purchase such corporate bills as at the time of the maturity of the new purchase. In particular, if the credit status of an enterprise that is the issuer has changed, it shall adjust the purchase and limit of corporate bills as at the time of the latest purchase. Since the last new corporate bills were purchased on July 6, 199 and August 5, 199, the court below erred in the misapprehension of legal principles as to the Plaintiff’s claim for damages arising from the 28th business year financial statements and financial information previously announced to the Plaintiff, and thus, it is difficult to recognize the Plaintiff’s error in the misapprehension of legal principles as to the Plaintiff’s claim for damages arising from the previous corporate bills.

2. Regarding ground of appeal No. 2

Article 766(1) of the Civil Act, which is the starting date of the short-term extinctive prescription of a claim for damages due to a tort, "date on which the injured party becomes aware of the damage and the perpetrator" means the time when the injured party has reasonably and specifically recognized the facts requiring the tort, such as the occurrence of the damage, the existence of the illegal harmful act, and 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 in consideration of various objective circumstances in individual cases and situations in which the claim for damages is practically possible (see Supreme Court Decision 98Da30735 delivered on September 3, 199).

In light of the above legal principles and the records, it is difficult for the plaintiff to understand whether the difference in the result of the above verification is attributable to the accounting for window dressing, considering the fact that the accounting firm's restructuring plan based on the result of the verification of the company's whole affiliate of the treatment group was announced or that the evaluation method differs from each other when the result of the verification was officially announced for the whole affiliate of the treatment group. Even though it was known that most of the results of window dressing accounting were the result of the window dressing accounting, it is difficult to recognize that the plaintiff did not know about such window dressing accounting constitutes the violation of the accounting duty of an external auditor. Therefore, it is reasonable to view that the plaintiff did not know about the window dressing accounting of the treatment group as an auditor's failure to fulfill his duty of care, i.e., that the defendants could not claim damages against the defendants, at least at the time of the above separate accounting audit, the disciplinary action against the public accountant belonging to the defendant and the Securities Futures Commission after 201 to 2018.

Nevertheless, the lower court determined that the Plaintiff’s claim for damages against the Defendants had already been completed and terminated three-year short-term statute of limitations prior to the institution of the instant lawsuit, on the grounds that, on November 2, 1999 or before November 4, 1999, the Plaintiff’s financial statements for the 27th business year, which were published as a result of the actual inspection, were window dressinged and audited by the Plaintiff before the public announcement of the result of the actual inspection, and that the Defendants were aware of the fact that the Defendants performed the audit and inspection, and that the Plaintiff’s claim for damages against the Defendants was incurred by the Plaintiff’s claim for damages. In so determining, the lower court erred by misapprehending the legal doctrine on the starting point of the short-term statute of limitations period in tort liability, thereby adversely affecting the conclusion of the judgment. Accordingly,

3. Conclusion

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Young-ran (Presiding Justice)