What Did the Supreme Court Decide on the Lawyer Who Recovered 19.6 Billion KRW for North Korean Residents but Did Not Receive Fees?

“No Legal Requirement, Hence Invalid”… Refusal to Pay Success Fee
Supreme Court: “Litigation Delegation Itself Should Be Considered Valid”

A law firm that represented North Korean residents in a domestic (South Korean) inheritance property lawsuit and recovered assets worth approximately 19.6 billion KRW did not receive its success fee. The Supreme Court ruled that the success fee agreement was invalid because it did not meet legal requirements, but the delegation contract itself remains effective.

According to Yonhap News and others on the 28th, the Supreme Court's First Division (Presiding Justice Seo Kyunghwan) made this judgment on the 4th when it overturned and remanded the appeal in a lawsuit filed by law firm A against the North Korean resident brothers Mr. An and his sibling regarding the fee agreement.

In 2016, law firm A entered into a delegation agreement concerning a paternity confirmation lawsuit and an inheritance recovery claim lawsuit for the An brothers, agreeing to receive 30% of the inheritance share as a success fee.

Since 2012, the South Korean government has recognized the inheritance rights of North Korean residents through the enactment of the "Special Act on Family Relations and Inheritance between South and North Korean Residents (Nam-Buk Gajok Teukrye Beop)." The An brothers are children of Mr. B, who left property in South Korea in March 2012 and passed away. They signed the delegation and fee agreements with the law firm through a broker.

In May 2018, law firm A succeeded in obtaining a ruling from the Seoul Family Court that the An brothers were the biological children of Mr. B. The firm also participated in the appeal of the "Inheritance Property Division Trial" already underway among the heirs in South Korea, and through a court-mediated settlement in 2019 with the remaining heirs, enabled the An brothers to inherit the property. The assets inherited by the An brothers include land in Namyangju, Gyeonggi Province, and a building located in Jung-gu, Seoul, totaling approximately 19.624 billion KRW.

However, after the lawsuit concluded, the An brothers suddenly refused to pay the success fee. According to Article 15 of the Nam-Buk Gajok Teukrye Beop, when a North Korean resident acquires rights to property in South Korea, a property manager must be appointed, and any legal acts related to inherited property not conducted through the property manager are invalid. The An brothers argued that the fee agreement was invalid because it did not comply with these legal requirements.

Law firm A filed a lawsuit demanding payment of 5.887 billion KRW, corresponding to 30% of the inherited property, but lost in both the first and second trials. The first trial court held that the success fee contract should be regarded as a "legal act related to inherited property," and that if it was not conducted through a property manager, the agreement was invalid regardless of the presence of a manager. Since the success fee agreement was invalid, the court also ruled that the entire litigation delegation contract, as a single contract, was invalid.

In response, law firm A appealed, arguing that "even if the fee agreement is invalid, the 'delegation agreement' appointing the legal team is itself valid," and that "the defendants are obligated to pay a reasonable fee calculated by considering the value of the subject matter of the lawsuit and the benefits obtained as parties to the lawsuit." However, the second trial court also ruled in favor of the An brothers.

The Supreme Court also upheld the rulings of the first and second trials, stating, "The success fee agreement is invalid because it was not conducted through a property manager." However, it ruled that "just because the fee agreement is invalid, it cannot be concluded that the delegation agreement in this case is a gratuitous delegation contract; it only applies when there is no explicit agreement regarding payment and amount," and therefore the delegation contract should be recognized as effective.

According to precedent, when a lawyer is entrusted with handling a case, even if there is no explicit agreement, unless there are special circumstances such as agreeing to work without compensation, it is presumed that there is an implicit agreement to pay reasonable fees. Therefore, it is reasonably presumed that both the An brothers and law firm A agreed to enter into a delegation contract that involves paying some degree of compensation, even if they did not conclude a success fee agreement.

Accordingly, the trial court handling the remanded second trial following the Supreme Court ruling will determine an appropriate fee by comprehensively considering factors such as the circumstances of case acceptance, the difficulty of the case, and the benefits the An brothers obtained from winning the case.