SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, D&A LLC
be cancelled, and an order to restore the real estate itself, such as cancellation of the registration of trans - fer of ownership, can be ordered. However, in the case of fraudulent transactions of the real estate on which a mortgage has been set, the Korean Supreme Court has held that fraudulent acts are established only within the range of the remaining amount after deducting the amount of the secured claims of the mortgage from the value of the real estate (Supreme Court 97da6711 Decision). According to this decision, the creditor cannot request the whole cancellation of title registration but can only request the return of the remaining amount. 1.6 Rules of Pre-Action Conduct In Korea, there is no formal pre-action conduct requirement in relation to fraud claims. In practice, victims of fraud commonly first file a criminal com - plaint. Once the case has been investigated and, where appropriate, indicted by the prosecutor follow - ing various investigative measures, the claimant may then decide whether to pursue a civil action in court or to seek resolution through alternative dispute resolu - tion mechanisms, such as mediation. 1.7 Prevention of Defendants Dissipating or Secreting Assets Application for Preliminary Measures Typically, the victim of fraud can prevent a debtor defendant from transferring or dissipating assets by filing an application for preliminary measures. Basi - cally, there are two types of preliminary measures. If the creditor has a monetary claim against the defend - ant, the creditor can file an application for a prelimi - nary attachment order on a specific asset owned by the defendant debtor. The target should be specific assets, so this may be a bank account, receivables, leasehold deposit or real estate in the name of the debtor defendant. If the creditor does not have a monetary claim but has a specific right arising from a fraudulent act (which, for example, may be the right to transfer title to real estate), the creditor can file an application for a pre - liminary injunction order preventing the debtor from transferring the assets. In addition to an injunction prohibiting disposition as described above, it is also possible to seek a provisional injunction establishing
a temporary status pending the outcome of the main proceedings. The Relevant Court Fees The relevant court fees consist of a stamp duty and a service fee, both of which are relatively modest com - pared with the costs of initiating full proceedings and are not calculated by reference to the value of the claim. However, the creditor is required to provide a security deposit in accordance with the court’s order, and this amount is generally linked to the value of the claim. The level of the deposit varies depending on both the claim amount and the nature of the assets to be attached or subject to injunctive relief. Typically, the deposit amount ranges from a tenth to two fifths of the claim amount, and the court can ask the creditor to deposit cash or to submit an insur - ance policy that guarantees repayment of the deposit amount. Where an application is made to attach a debtor’s bank account, the court commonly sets the deposit at around 40% of the claim amount, with approximately half payable in cash and the remain - ing half provided in the form of a payment guarantee. There is no fixed statutory rule or uniform standard governing the precise amount of security required; rather, it is determined on a case-by-case basis at the discretion of the presiding judge. Sanctions for Non-compliance by the Defendant If the defendant does not follow the court’s freezing order, the creditor can disregard the former disposi - tion by the defendant. For example, if the creditor has received a preliminary injunction order from the court prohibiting the sale of specific property in the name of the defendant, and the defendant has tried to sell the property to a third party, the creditor can argue that there is no title transfer between the defendant and the third party; and if the creditor finally wins the main lawsuit against the defendant, they can enforce against that asset even though the title has already been transferred to the third party. If the debtor disposes of the property to a third party after the registration of the provisional prohibition of disposition is made, the act of disposition in viola - tion of the provisional measure is effective between the debtor and the third party; however, they cannot
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