Namyang Dairy Products Chairman Loses 31 Billion Won Breach of Contract Lawsuit Against Hahn&Co

[Asia Economy Reporter Kim Daehyun] The Hong Won-sik family, chairman of Namyang Dairy Products, filed a lawsuit against the Han & Company (Han & Co) side, holding them responsible for the failed M&A by claiming "the transaction conditions were not fulfilled," but lost in the first trial.

On the morning of the 22nd, the Seoul Central District Court Civil Division 16 (Presiding Judge Moon Seong-gwan) ruled against the plaintiffs in the first trial of a claim lawsuit worth approximately 31.072 billion KRW for penalty damages filed by Chairman Hong, his wife Advisor Lee Un-gyeong, and grandson against four people including Han Sang-won, president of Han & Co.

The court initially recommended reconciliation to both parties, but since Han & Co did not agree, the judgment was delivered that day. Han & Co refused to accept Chairman Hong's side's intention to "withdraw the lawsuit."

Immediately after the ruling, Chairman Hong's side stated, "During the process of selling the family business company, the seller's rights were not properly protected due to Han & Co's dual agency actions. The agreed terms were not fulfilled in advance," adding, "Although the substantial responsibility for contract termination lies with Han & Co, we regret that the court did not fully accept these facts and plan to appeal immediately."

Earlier, on May 27 last year, Chairman Hong's family signed a stock purchase agreement to sell 53.08% of Namyang Dairy Products shares to Han & Co for about 310.7 billion KRW. After the related information became public, expectations such as "resolving owner risk issues" acted as positive factors, causing Namyang Dairy Products' stock price to soar.

Subsequently, Chairman Hong claimed that Han & Company did not fulfill the preconditions for the transaction and notified contract termination on September 1 of the same year. In the same month, they also filed a penalty damages lawsuit against Han & Co. Penalty damages refer to a fine paid by a debtor who fails to fulfill an obligation to the creditor, serving as a punitive measure regardless of actual damages.

Chairman Hong's side has argued that preconditions such as the 'spin-off of Baekmidang' and 'family privileges' were not met. The background for the sale suspension was that prioritized conditions, including the spin-off of Baekmidang and the dining business division led by Advisor Lee, and guarantees of privileges for family members including two sons who are executives of Namyang Dairy Products, were not fulfilled.

Meanwhile, the stock transfer lawsuit filed by Han & Co against Chairman Hong's family is currently undergoing second trial proceedings at the Seoul High Court Civil Division 16 (Presiding Judges Cha Mun-ho, Lee Yang-hee, Kim Kyung-ae) after Chairman Hong's side lost in the first trial and appealed.

Chairman Hong also highlighted "dual agency" as a key issue in the first trial of the stock transfer lawsuit. Following the M&A advisor's suggestion, he appointed a lawyer from Kim & Chang as the M&A legal representative, but Han & Co also appointed another lawyer from Kim & Chang, arguing that the contract was flawed. He also claimed that Han & Co did not comply with the transaction conditions.

On the other hand, Han & Co argued that it is common for one law firm to represent both parties in an M&A, so there was no problem. Regarding the preconditions, they countered that Chairman Hong focused only on raising the per-share purchase price and never emphasized conditions such as Baekmidang initially.

The first trial rejected Chairman Hong's claims and ruled in favor of Han & Co. If the second trial also rejects Chairman Hong's appeal and the judgment is finalized, the major shareholder of Namyang Dairy Products will change from Chairman Hong Won-sik to Han & Co.

Han & Co has separately filed a damage compensation lawsuit worth about 50 billion KRW against Chairman Hong's family regarding the delayed stock transfer.

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