Hotel Shilla Loses Appeal in Lawsuit Over Sale of Donghwa Duty-Free Shop Shares

Donghwa Duty Free Shop

[Asia Economy Reporter Yuri Kim] Hotel Shilla lost the civil lawsuit appeal against Kim Ki-byeong, chairman of Lotte Tour Development, regarding the sale of shares in Donghwa Duty Free. This is contrary to the first trial. Hotel Shilla plans to decide whether to appeal after reviewing the judgment.

According to the legal community on the 3rd, the Seoul High Court Civil Division 16 (Presiding Judges Cha Moon-ho, Jang Jun-ah, Kim Kyung-ae) ruled on the 1st that, unlike the first trial which partially ruled in favor of the plaintiff in the stock purchase price claim lawsuit filed by Hotel Shilla against Chairman Kim, the plaintiff lost in the appeal trial.

In 2013, Hotel Shilla purchased 19.9% of Donghwa Duty Free shares held by Chairman Kim for 60 billion KRW and signed a stock purchase contract that allowed exercising a put option to sell the shares after three years from the contract date. As the duty-free business deteriorated, Hotel Shilla notified Chairman Kim in 2016 to repurchase the shares. Chairman Kim declared default and countered by offering to provide 30.2% of Donghwa Duty Free shares, which had been pledged as collateral at the time of the contract.

If the collateral shares were additionally acquired, Hotel Shilla would own 50.1% of Donghwa Duty Free shares, becoming the largest shareholder. However, since Hotel Shilla already held a large corporation duty-free business license and had no intention to operate the small and medium-sized Donghwa Duty Free, it demanded cash repayment from Chairman Kim, and the conflict escalated into litigation.

The first trial ruled in favor of Hotel Shilla, ordering "Chairman Kim to pay approximately 78.8 billion KRW." The court pointed out, "The plaintiff not receiving the purchase price and instead holding the target shares and remaining shares, whose value has significantly dropped, does not effectively guarantee the right to demand the sale of the target shares."

However, the appellate court overturned the first trial ruling, stating, "Even if the defendant refuses the plaintiff's demand to sell and does not repurchase the target shares, the plaintiff can only demand the attribution of the remaining shares as a sanction." It added, "Since the defendant agreed not to make further claims such as enforcing the purchase obligation once the remaining shares are attributed to the plaintiff, the first trial ruling is overturned." The court judged that the penalty clause stipulating the attribution of the remaining shares free of charge, so that the total shares including the existing target shares (19.9%) and remaining shares (30.2%) would amount to 50.1%, was created by Hotel Shilla, indicating an intention to acquire management rights.

Regarding this ruling, Hotel Shilla stated, "We will decide whether to appeal after reviewing the judgment."

This content was produced with the assistance of AI translation services.