SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, DR & AJU LLC
it is important not to miss the minimum three- year limitation period in preparation for tort claim filing. 1.5 Proprietary Claims Against Property Cancellation of a Contract due to Fraud Generally Misrepresentation of specific facts about impor - tant matters in a transaction, in a way that is reprehensible in light of the principle of good faith, is evaluated as illegal defrauding. Addition - ally, the causal relationship between the illegal deception and the conclusion of the contract is deemed to exist where, if there was no decep - tion, the contract could not be concluded or not be concluded under the same conditions. In that case, the contract can be cancelled by fraudu - lent expression of intention. Pursuant to Article 110(2) of the Civil Act, the declaration of expression transferring interests caused by a fraudulent act or omission by the other party can be cancelled or revoked; how - ever, it can be restricted when there is a bona fide third-party beneficiary who has a legitimate interest in the transferred property. If a contract can be cancelled due to fraud, it becomes void retroactively; therefore, the profits obtained by the parties shall be returned as unjust gains based on the law. Creditor’s Right of Revocation Pursuant to Article 406 of the Civil Act, a claim - ant can seek the recovery of property when the debtor intentionally transferred their interest knowing this transfer may harm their creditors. However, they can also be restricted when there is a bona fide third-party beneficiary or the per - son who purchased the property from the ven - dor had no knowledge of the fraudulent acts. In that case, the claimant cannot recover the mis - appropriated property directly from the current
title owner; however, the claimant can request the return of the sale price from the perpetra - tor, which is a sort of unjust enrichment concept recognised in the common law system. Even if the proceeds of fraud are invested suc - cessfully, the claimant can only request the return of the sale price; however, they cannot request the return of the total proceeds invested. Also, there is a limitation period of one year from the date of recognition of the fraud, or five years from the date of the occurrence of the fraudulent acts. Fraudulent Transactions of Real Estate With a Mortgage If a transaction related to real estate falls under a fraudulent act, in principle, the fraudulent act must be cancelled, and an order to restore the real estate itself, such as cancellation of the registration of transfer of ownership, can be ordered. However, in the case of fraudulent transactions of the real estate on which a mort - gage 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 There is no pre-action conduct rule in relation to fraud claims in Korea. Typically, the victim of fraud initially files a criminal complaint, and when the case is charged by the prosecutor’s officer through various kinds of investigation, the claim - ant can then choose whether it should go to a civil court or seek an alternative dispute resolu - tion procedure such as mediation, etc.
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