[1] The case affirming the judgment below holding that in a case where listed corporation Gap corporation's miscellaneous securities and other assets were excessively appropriated on the balance sheet of the business report, etc., the above business report, etc. constitutes a case where there exists "false entry" under Articles 186-5 and 14 (1) of the former Securities and Exchange Act

[2] Whether there exists a causal relationship between a false disclosure and a change in stock price after the normal share price was removed from the part supported by a false disclosure (negative in principle), and in a case where the share price was purchased after the normal share price was formed or the share price was sold after the normal share price was formed or the share price was continuously owned by the closing date of argument, the method of calculating the amount of damages (=purchase price- the

[1] In a case where a listed corporation Gap corporation’s annual report, quarterly report, and half-yearly report (hereinafter “business report, etc.”) excessively appropriated securities, sales bonds, advance payment, inventory assets, and deferred corporate tax assets (hereinafter “property, such as sold securities”) on the balance sheet of the business report, the case affirming the judgment below holding that the financial statements of the business report prepared and published by a listed corporation listed on the Korea Securities and Futures Exchange under the former Securities and Exchange Act (amended by Act No. 8985 of Mar. 21, 2008; hereinafter the same shall apply) are the most important investment index for ordinary investors to measure the financial status of the company, and that the financial statements of the business report shall be prepared in accordance with the corporate accounting standards. Considering the fact that the corporate accounting standards provide for the fair display of the company’s financial status, business performance, etc. after evaluating assets in excess of the reasonable and objective scope permitted under the corporate accounting standards, as stated in the business report in the business report, are included in the processed assets, and thus, constitute a false and objective financial statements beyond the scope of Article 15 of the former Securities and Exchange Act.

[2] In general, in a case where the normal share price is formed after the fact of false disclosure is revealed, and the shock therefrom is turned down and all of the parts supported by false information are removed, there is no causation with the false disclosure, barring any special circumstances, since the change in the share price after the normal share price formation date does not exist any causation with the false disclosure. Thus, in a case where the sale of the pertinent shares after the normal share price formation date or the holding of the pertinent shares is confirmed until the closing date of oral argument, there is proof of absence of causation between the normal share price and the actual disposal price (or the market price at the closing date of oral argument) among the damages under Article 15 (1) of the former Securities and Exchange Act (amended by Act No. 8985, Mar. 21, 2008; hereinafter the same shall apply). In this case, the amount of damages shall be the amount calculated by deducting the normal share price on the date of normal share

[1] Articles 14(1) and 186-5 (see current Article 162(1) of the former Securities and Exchange Act (amended by Act No. 8985 of Mar. 21, 2008) / [2] Articles 15(1) (see current Article 162(3) and (4) of the former Securities and Exchange Act) and 15(2) (see current Article 162(4) of the Financial Investment Services and Capital Markets Act) of the former Securities and Exchange Act (amended by Act No. 8985 of Mar. 21, 2008)

[2] Supreme Court Decision 2006Da16758, 16765 decided Oct. 25, 2007 (Gong2007Ha, 1806) Supreme Court Decision 2008Da92336 decided Aug. 19, 2010 (Gong2010Ha, 1776)

Plaintiff

Defendant 1 and two others (Law Firm Sejong, Attorneys Kim Yong-ho et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2009Na115665 decided September 17, 2010

All appeals and supplementary appeals are dismissed. The costs of appeal are assessed against the Defendants, and the costs of appeal are assessed against the Plaintiff.

The grounds of appeal and incidental grounds of appeal are examined.

1. As to the defendants' grounds of appeal Nos. 1, 2, and 3

The court below acknowledged the facts as stated in its reasoning based on the adopted evidence, and found that the financial statements of the business report prepared and published by a listed company that issued stocks listed on the Korea Securities and Futures Exchange pursuant to the former Securities and Exchange Act (amended by Act No. 8985 of Mar. 21, 2008; hereinafter the same shall apply) are the most important investment index for ordinary investors to measure the financial status of the company, and the financial statements of the business report must be prepared in accordance with the corporate accounting standards. The corporate accounting standards provide that the financial statements of the business report must fairly indicate the company's financial status and business performance by reflecting the economic facts and the substance of transactions in preparing accounting and financial statements. Thus, the court below determined that the excessive appraisal of assets beyond the reasonable and objective scope permitted under the corporate accounting standards constitutes a false statement different from the economic facts, on the premise that the inclusion of the processed assets in the financial statements of the business report constitutes an “in the case of Article 15 of the former Securities and Exchange Act” (hereinafter referred to as the “Korea Compact”).

(1) As the business list, which is a company issuing securities available for sale (hereinafter referred to as “business list”) has de facto deteriorated the financial status of the issuer of securities due to the complete capital erosion, the company should have recognized the total amount of KRW 791,00,000 as the acquisition value by estimating the recoverable value as of December 31, 2006, which is the balance sheet, as long as there is no clear reflect that the reduction is unnecessary pursuant to subparagraph 8 (securities) proviso 33 and 34 of the corporate accounting standards, the company’s acquisition value of shares on the balance sheet without recognizing the loss without recognizing the loss without any clear reflect that it is unnecessary to reduce the acquisition value of the business list in excess of the reasonable and objective scope permitted by the corporate accounting standards.

② An advance payment of KRW 2,523,00,000 among the sales claims for franchis in de facto complete capital erosion; KRW 273,000,000 for franchis in advance; KRW 365,000,000 for franchis in closure; and KRW 235,000,000 for 26 companies in closure of closure of business for more than five years; and it constitutes a case where the possibility of recovery at the time of December 31, 2006, which is the balance sheet, is weak, and thus, it should have established the bad debt allowances equivalent to the above amount with the bad debt allowances pursuant to Article 57 of the corporate accounting standards, which is the aggregate of KRW 135,00,00 (sales claims + KRW 115,000,000 + advance payment 20,000,000).

③ On December 31, 2006, the balance sheet date of inventory assets, which was not sold within one year or normal business cycle as of December 31, 2006, or which was unusable for production, and the market price falls below KRW 882,00,000 as of the long-term material as of December 31, 2006, the market price shall be entered in the inventory value of the balance sheet in accordance with subparagraph 5 and 23 of the corporate accounting standards, but the acquisition price shall be entered in excess of the reasonable and objective scope permitted by the corporate accounting standards.

④ Since the Kenyacom recorded and recorded accounting losses from 2005, it should have recognized the assets subject to deferred corporate tax within the scope of its scope only when there is a temporary difference in the amount to be additionally added pursuant to subparagraph 16 (Corporate Tax Accounting) sentence 28 and 31, or where there is a clear evidence that taxable income will accrue in the future. However, it is reasonable to estimate sales and sales profit ratio to be excessively high without objective and reliable evidence and estimate the excess taxable income in the balance sheet to calculate the deferred corporate tax assets in excess of the estimated taxable income without reasonable and objective materials, thereby exceeding the reasonable and reasonable scope of the respective corporate tax accounting standards.

In light of the relevant legal principles and records, the judgment of the court below is just, and there is no error of misapprehending the legal principles as to corporate accounting standards, etc. or exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

2. As to the Plaintiff’s ground of incidental appeal No. 1

In general, in a case where the normal share price is formed after the fact of false disclosure was revealed, and the shock from such false information took place, and all of the parts supported by such false information were removed, there is no causation with the false disclosure, barring any special circumstances. Thus, in a case where the sale of the pertinent shares after the normal share price formation date or holding them continuously until the closing date of oral argument is confirmed, there is proof of the absence of causation under Article 15 (2) of the former Securities and Exchange Act as to the difference between the above normal share price and the actual disposal price (or the market price at the closing date of oral argument) among the damages under Article 15 (1) of the former Securities and Exchange Act. In this case, the amount of damages shall be the amount calculated by deducting the share price on the date of the formation of the above normal share price from the purchase price (see Supreme Court Decisions 2006Da16758,1675, Oct. 25, 2007; 2008Da39636, Aug. 29, 20108).

In light of the above legal principles and records, the court below held that with respect to the shares disposed of after February 26, 2008 by the plaintiff, the purchase price per share less 240 won per share, which was formed on February 26, 2008, shall be calculated as damages for one share, on the grounds that the share price of the Kenya, which was brought down after the fact of the false publication of this case was revealed, led to the low point of view on February 26, 2008, should be deemed to have been removed from all the share price supported by the false publication. In light of the above legal principles and records, the court below's above determination is just, and there is no error of law by misapprehending the legal principles as to normal share price as asserted by the plaintiff in the grounds of incidental appeal.

3. As to the Defendants’ ground of appeal Nos. 4 and Plaintiff’s ground of incidental appeal No. 2

The fact-finding or the ratio of limitation of liability for offsetting negligence or fair burden of damage in a damage compensation case is an exclusive right of a fact-finding court, unless it is deemed that it is remarkably unreasonable in light of the principle of equity.

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the lower court’s fact-finding or its determination on the grounds for limitation of liability is within the acceptable scope, and it does not considerably unreasonable in light of the principle of equity. Therefore, the Defendants’ grounds of appeal and the Plaintiff’s grounds of incidental appeal

4. Conclusion

Therefore, all appeals and appeals are dismissed. The costs of appeal by the Defendants are assessed against the Plaintiff. The costs of appeal by the Defendants are assessed against the Plaintiff. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min Il-young (Presiding Justice)