Former Namyang Dairy Chairman Hong Wonsik Loses First Trial in 44 Billion Won Severance Lawsuit, Ordered to Return 1.1 Billion Won (Comprehensive)

Court Partially Upholds Namyang Dairy Products’ Countersuit

Orders Hong Wonsik to Pay 1.17 Billion Won

Hong Wonsik, former chairman of Namyang Dairy Products, lost the first trial in his lawsuit seeking 44 billion won in severance pay from Namyang Dairy Products. In a countersuit filed by Namyang Dairy Products against Hong, the court partially upheld the company’s claims, ordering Hong to pay approximately 1.2 billion won to Namyang Dairy Products.

Won-Sik Hong, former chairman of Namyang Dairy Products. Photo by Yonhap News

On the afternoon of the 27th, the 41st Civil Division of the Seoul Central District Court (Presiding Judge Lee Kyuhun) issued a ruling against Hong in his executive severance pay claim filed against Namyang Dairy Products. Conversely, the court partially upheld Namyang Dairy Products’ countersuit seeking restitution of unjust enrichment, and ordered, “Hong Wonsik must pay 1,172,428,570 won and delay interest to Namyang Dairy Products.”

After losing his management rights dispute to private equity fund Hahn & Company (Hahn & Co.), Hong filed a lawsuit against Namyang Dairy Products in May 2024, seeking 44.35775 billion won in executive severance pay and delay interest. This sum represented approximately 6.54% of Namyang Dairy Products’ equity capital at that time. It is known that the severance pay amount was calculated based on the company’s rules for executive severance pay.

In contrast, Namyang Dairy Products argued that, since the agenda item setting the director remuneration limit at 5 billion won passed at the 2023 and 2024 general shareholders' meetings was later annulled by the court, the corresponding period should be excluded from the severance pay calculation.

The court reasoned that under Namyang Dairy Products’ 2009 executive severance pay regulations, Hong’s severance should be calculated based on his annual salary at the time of retirement. However, since the shareholders’ resolutions setting the director remuneration limit at 5 billion won for 2023 and 2024 were nullified by court ruling, the court concluded there was no valid remuneration standard applicable to Hong at the time of his retirement.

Accordingly, it determined that Hong’s annual salary at the time of retirement was effectively zero, and his right to claim severance pay did not arise. The court also determined that the approximately 1.17 billion won in salary and bonuses paid to Hong between January 2023 and April 2024 constituted unjust enrichment without legal grounds, ordering him to return these funds. However, the court excluded around 120 million won in health insurance premiums withheld by Namyang Dairy Products from the amount to be returned, on the grounds that this was not actually received by Hong.

Separately from this case, Hong was prosecuted on charges of personal use of company-owned villas and vehicles, as well as causing the company financial harm by inserting intermediaries in business transactions. In the first trial, he was sentenced to three years in prison and ordered to forfeit 4.3 billion won. He is currently appealing the verdict.

Meanwhile, Namyang Dairy Products released a statement immediately after the verdict, saying that it "respects the first-instance court’s decision."

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