CONTENTS
- 1. Claim for Return of Unjust Enrichment, What Were the Detailed Circumstances?
- - Claim for Return of Unjust Enrichment, What Are the Relevant Statutes and Precedents?
- 2. Claim for Return of Unjust Enrichment, What Was the Court's Determination?
- 3. Claim for Return of Unjust Enrichment, Daeryun's Strategy
1. Claim for Return of Unjust Enrichment, What Were the Detailed Circumstances?
🔗the claim for return of unjust enrichment arose from the following case.
The defendants in this lawsuit were freelancers and investors in Company A, a stock corporation that engaged in unauthorized fund-raising*.
The chairman and the managing director of Company A were convicted of, among other charges, violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission (hereinafter the "Unauthorized Fund-Raising Act") along with fraud, and some of the company's officers and employees were likewise convicted of the same charges.
The defendants had agreed to receive from Company A an amount calculated by multiplying their investments by a certain commission rate, and they received more than 100 million won as sales commissions.
After rehabilitation proceedings for Company A commenced, the plaintiff, who had been appointed as the new custodian, claimed that the sales commissions the defendants had received constituted unjust enrichment or an unlawful act, and sought their return and damages.
The defendants, however, argued that the sales commissions had been lawfully paid under an oral agreement and that, under the provision on performance for an illegal cause, the plaintiff could not claim the return of unjust enrichment.
* Unauthorized fund-raising: the business of raising funds from an unspecified number of persons without obtaining authorization or permission under other statutes or completing registration, reporting, or similar procedures.
Claim for Return of Unjust Enrichment, What Are the Relevant Statutes and Precedents?
As a matter of principle, where the other party has received property without a legal cause, that party must return it; however, where it constitutes performance for an illegal cause, no claim for its return may be made.
▣ Civil Act
Article 741 (Contents of Unjust Enrichment)
A person who, without a legal cause, gains a benefit from the property or labor of another and thereby causes loss to that person shall return such benefit.
Article 746 (Performance for an Illegal Cause)
Where property has been given or labor has been provided for an illegal cause, the return of such benefit may not be claimed. This shall not apply, however, where the illegal cause exists only on the part of the beneficiary.
- See Supreme Court, Decision of May 29, 2001, 2001 Da 1782, and others |
- See Supreme Court, Decision of December 10, 1993, 93 Da 12947, and others |
2. Claim for Return of Unjust Enrichment, What Was the Court's Determination?
The District Court that heard the claim for return of unjust enrichment ruled as follows.
The plaintiff argued that the sales commissions Company A had paid to the defendants violated good morals or other social order and that, having been paid without any legal basis, they should be returned.
The court, however, held that the sales commissions paid by Company A constituted performance for an illegal cause and dismissed the plaintiff's claim for the return of unjust enrichment.
The court also found that, because the defendants were victims of Company A's unauthorized fund-raising, the defendants' illegality was not significant.
3. Claim for Return of Unjust Enrichment, Daeryun's Strategy
We analyzed the District Court's judgment, which held that where a performance constitutes performance for an illegal cause, the return of unjust enrichment may not be claimed.
Contracts that constitute performance for an illegal cause, such as gambling or human trafficking, do not receive the protection of the law. In other words, a juristic act that violates good morals or other social order is void. On this basis, the Civil Act does not recognize a claim for the return of unjust enrichment with respect to performance for an illegal cause.
A claim for return may be made, however, where the illegal cause exists only on the part of the beneficiary.
As shown, a claim for return of unjust enrichment under the Civil Act can be rather complex. If you become involved in such litigation, you may wish to retain a 🔗civil litigation attorney of Daeryun Law Firm LLP to obtain assistance.
