When K Sports Center entered into a trust agreement, transferring most of its facilities, with a trust company, the general creditors of K Sports Center filed a lawsuit against the trust company seeking cancellation of a fraudulent transfer to a trust. The trust company lost both at the court of first instance and appellate levels, and Lee and Ko’s Trust Practice Group represented the trust company before the Korean Supreme Court. In November 2013, Lee and Ko’s Trust Practice Group finally obtained a judgment for the trust company that the trust agreement was not a fraudulent transfer to a trust. The Supreme Court reversed and remanded the case to the lower court, and the relevant high court and the Supreme Court affirmed the decision.
The legal issue of this case was whether refund of membership deposit fees should be reflected in the value of the facilities that are the debtor’s assets. Lee and Ko’s Trust Practice Group argued that under Article 27 of the Installation and Utilization of Sports Facilities Act, one who acquires sports facilities through an auction or others should succeed the obligation to refund membership deposit fees. It further argued that the sum of the refund amount of the membership deposit fees and the secured debt is greater than the value of the sports facilities transferred to the trust, so said sports facilities cannot be the debtor’s assets that can be provided as joint security to general creditors; hence, it is not a fraudulent transfer. The Korean Supreme Court fully agreed with Lee and Ko’s above argument. This case is meaningful because there has been an increase in the number of sports centers transferring its facilities to a trust.