Contractor goes bankrupt: KRW 2.3 billion defect claim confirmed

Background

Our client, a corporation, had a construction company build a large new building and fit out its interior. Defects appeared soon after completion, and after repeated repair requests our client sued for damages. During the suit the contractor was declared bankrupt; the bankruptcy trustee rejected our client's filed claim in full and took over the lawsuit.

The issue

Whether the damages claim for the defects qualified as a bankruptcy claim, and in particular whether the loss could be established by a defect-inspection report our client had obtained outside the court process.

Our approach

Our client argued that poor, missing and unauthorized changes in workmanship caused serious defects, that the contractor owed about KRW 2,315 million in lieu of repairs, and that, since the trustee disputed it, the amount should be confirmed as a bankruptcy claim.

The court's reasoning

The trustee questioned the report author's credentials and the basis for the figures. The court found the report reasonable: the inspection firm was a registered statutory safety-inspection body, and the report identified each defect's nature, cause and repair method and priced repairs using standard unit costs. The trustee could not point to any specific defect item it disputed.

Outcome

The court confirmed our client's bankruptcy claim in full at about KRW 2,315 million and ordered the trustee's side to bear the litigation costs.

What this case means

Even when the other company goes bankrupt, a claim must be properly confirmed to receive distributions in the bankruptcy. Expert reports obtained outside court can be accepted as evidence if they are sound. Confirmation of a claim does not necessarily mean full recovery.

This is the outcome of an individual case and does not guarantee the same result in similar matters. Some facts have been generalized to protect the parties involved.