Seongnam Citizens' 'Daejangdong Lawsuits' Assigned to Collegiate Panel... Will Trials Accelerate?

Several Judges Participate Considering Importance
Hwacheondaeyu-Cheonhwadongin 1~3 Lawsuits
Hearing in Progress for a Week, Date to Be Set Soon
Seongnam Utddeul Dividend Resolution Nullity Confirmation Suit
Reassigned to Seongnam Branch Court 1st Civil Division

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyung-min] Alongside the prosecution's investigation into preferential treatment and lobbying allegations related to the Daejang-dong development in Seongnam City, court trials are also gaining momentum.

According to the legal community on the 28th, various courts are currently hearing major lawsuits related to the Daejang-dong allegations in collegiate panels rather than single-judge panels. This means multiple judges are participating in reviewing the cases, reflecting the seriousness of the matters.

The Civil Division 5 of the Suwon District Court Seongnam Branch recently took over the dissolution order application lawsuit filed by six Seongnam citizens against Hwacheon Daeyu Asset Management (Hwacheon Daeyu) and Cheonhwa Dongin Nos. 1 to 3 from the Suwon District Court and has been hearing it for a week. It is expected that one or two hearings will be held to ascertain the facts, with the first hearing likely to be scheduled soon. Considering local jurisdiction, the Seongnam citizens have also filed dissolution order applications against Cheonhwa Dongin Nos. 4, 5, and 7 at the Seoul Central District Court, and No. 6 at the Seoul Eastern District Court, with each court reviewing the cases.

The lawsuit filed by nine Seongnam citizens against Seongnam Utdul Co., Ltd. to confirm the invalidity of dividend resolutions was initially assigned to the Civil Division 9 single-judge panel when it was received at the Suwon District Court Seongnam Branch last month, but was reassigned to the First Civil Division a week later.

Among these, the Seongnam citizens are most eager for a dissolution order decision against Hwacheon Daeyu and the Cheonhwa Dongin companies. If the court recognizes the illegality of these companies and accepts the dissolution order, not only will the dividend resolutions be invalidated, but procedures to recalculate the profits from the beginning will also become possible.

The Seongnam citizens and their legal representative, Attorney Lee Ho-seon, argue based on Article 176 of the Commercial Act that Hwacheon Daeyu and Cheonhwa Dongin are "companies not worthy of legal protection" and "must be dissolved." They point to circumstances where eight corporate entities were created simultaneously involving the same major shareholder, Kim Man-bae, and others, suggesting that the companies' establishment purposes and intentions appear illegal and that there is sufficient indication of abuse of the Commercial Act's principle of company establishment rules. Furthermore, they emphasize that "the illegality of the companies' business has been revealed by the prosecution, and in the case of Cheonhwa Dongin Nos. 1 to 3, there are no facilities or personnel for business operations, and since business has not commenced for over a year, the companies should be dissolved according to the relevant Commercial Act provisions."

These lawsuits hinge on whether the court recognizes the standing of the Seongnam citizens as plaintiffs. Since the lawsuits were filed by citizens rather than shareholders or related parties who could suffer direct damage from the companies' businesses, the court may view the cases differently. Attention is also focused on where the 404 billion KRW in dividends collected by Hwacheon Daeyu and others over three years will go depending on the lawsuit outcomes. Currently, there is a high possibility that this money will revert to Seongnam City.

Meanwhile, among the key figures in the Daejang-dong allegations, former Seongnam Urban Development Corporation Planning Director Yoo Dong-gyu will be the first to stand trial. The Criminal Division 22 of the Seoul Central District Court (Presiding Judge Yang Cheol-han) has scheduled Yoo's first trial for the morning of the 10th of next month. Yoo was arrested and indicted on charges including bribery and promise of bribery after fraudulent acts under the Act on the Aggravated Punishment of Specific Crimes. Yoo must appear in court on that day in accordance with the defendant's attendance obligation.