Ying-Chieh Wu＊

Seoul National University

Abstract: This article attempts to extend the list of fiduciary relationship by unlocking some of the hidden fiduciaries in other areas of South Korean private law.The reason for this is as follows.The exact label of “fiduciary relationship”may not be widely used, but the underlying mechanisms can be found in many other legal relationships under South Korean private law.Through the clarification of the types of fiduciary relationship, even though it may not be complete, we can come to understand when the fiduciary duty (or the duty of loyalty) and remedies for its breach should be applied.This article shows us that the following should be considered to be fiduciary relationships in addition to trustees and company directors: agents, mandataries, parents and adult guardians, executors of inheritance, commission agents, and partners.It must be stressed that the list is not yet closed.There is always the possibility for a new candidate being added to the list.Like cases must be treated alike, for certainty, systematic consistency, and legal stability are vital for any legal system.

Keywords: fiduciary, loyalty, no-conflict rule, no-profit rule, mandate

Prologue

The term “fiduciary or fiduciary relationship” is not unknown to South Korean lawyers.However, only trust law and company law expressly adopt this jargon since trustees and company directors are considered to be fiduciaries for their beneficiary and company, respectively.Such an approach has caused practitioners and academics alike to perceive that the fiduciary relationship is only confined to the relationships of trustee/beneficiary and director/company.①cf.Lee, J.K.(2016).Fiduciary law.Seoul: Samoosa.This article attempts to extend the list of fiduciary relationships by unlocking some of the hidden fiduciaries in other areas of South Korean private law.Although the exact “fiduciary relationship”label may not be widely used②The author cautiously supposes that this is also true of China, Japan, and other non-common law Asian countries.However, analysis of the fiduciary duty abounds in the common law world.see Finn, P.(1977).Fiduciary obligations.Sydney: the Law Book Company Ltd; Frankel, T.(2011).Fiduciary law.New York:Oxford University Press; Conaglen, M.(2010).Fiduciary loyalty: Protecting the due performance of non-fiduciary duties.Oxford: Hart Publishing; Birks, P.(1996).Equity in the modern law: An exercise in taxonomy.University of Western Australia Law Review, 26, 1; Shepherd, J.C.(1981).Towards a unified concept of fiduciary relationships.Law Quarterly Review, 97, 51., the underlying mechanisms can be found in many other legal relationships under South Korean private law.Through this clarification, even though it may not be complete, we can come to understand the types of fiduciary relationships and when the fiduciary duty(or the duty of loyalty) and the remedies for its breach should be applied.Like cases must be treated alike as certainty, systematic consistency, and legal stability are vital for any legal system.

Section II will explore the archetypal fiduciary relationships recognized under the current legal system.It clarifies the scope of fiduciaries, delineates the content of fiduciary duties, and explains the remedies arising from the breach of those duties.Section III utilizes the elements ascertained in Section II as criteria for uncovering hidden fiduciary relationships.Section IV concludes.

Archetypal Fiduciaries

Introduction

This section explores the two well-established fiduciary relationships under South Korean private law, namely, trustees and company directors.I will focus on the following three aspects:how are they made fiduciaries (i.e., the creation issue), what are the obligations they owe as a fiduciary (i.e., the content issue) and, most importantly, what liabilities are imposed upon them should they breach their fiduciary duty (i.e., the remedies issue).

The Creation Issue

Trustees.

There are four methods by which a trust relationship can be created.First, a settlor can enter into a contract with a trustee.①Art.3(1)1 of the Trust Act of the Republic of South Korea (KTA).(Official trans.Ministry of Government Legislation, National Law Information Center,Republic of Korea), available at https://www.law.go.kr/engLsSc.do?menuId=1&subMenuId=21&tabMenuId=117&query=Trust%20Act# (last accessed 15 July 2021).Note that the present author will not strictly quote from the official translation where it fails to convey to the English reader the nuances of the texts in the original language.Some minor modifications will thus be made if necessary.A trust relationship is then created by the parties’ mutual consent.Common lawyers are sometimes bewildered by such an approach.That is because trusts are not contracts under the common law tradition.②Trusts are not contracts in common law jurisdictions; cf.Langbein, J.H.(1995).The contractarian basis of the law of trusts.Yale Law Journal, 105(3), 625.For criticisms of Professor Langbein’s view, see: Hansmann, H., & Mattei, U.(1998).The functions of trust law: A comparative legal and economic analysis.New York University Law Review, 73, 434; and Getzler, J.(2002).Legislative incursions into modern trusts doctrine in England: The Trustee Act 2000 and the Contracts (Rights of Third Parties) Act 1999.Global Jurist Topics, 2, 13.However, there is no difficulty in conceptualizing trusts as a type of contract in South Korean private law.This is a jurisdiction, following the traditional civil law approach, where mutual consent suffices to create a contractual relationship.The doctrine of consideration is not recognized.The second way of creating a trust relationship is through the making of a will.③Art.3(1)2 of the KTA.Through this method, a settlor can create a trust via a unilateral manifestation of intent.The third means a settlor can use is to declare himself as the trustee of the trust he intends to create.The creation of a trust by self-declaration of trust was adopted in the 2011 reform of the Trust Act of the Republic of South Korea (KTA).This is a novel means and has rarely been used, for people are not familiar with it.The fourth is irrelevant to the parties’autonomy.A trust may be imposed by a statute.When a trust relationship terminates, the KTA imposes a trust upon the exiting trustee for the remainderman.④Art.101(4) of the KTA.The trust in this case is created by the operation of law and is a statutory trust.⑤Constructive trusts are not recognized in South Korea since courts have no power or jurisdiction to create or impose a trust upon the relevant parties.Judges must find grounds from legislation.This also implies that constructive trusts are virtually not allowed under the civil law tradition.There are, if any, only statutory trusts.Thus, a trust-based fiduciary relationship can be generated by mutual consent, a unilateral manifestation of intent, or by the operation of law.Let us turn to the case of company directors.

Company directors.

Company directors are appointed at a general meeting of shareholders.⑥Art.382(1) of the Commercial Code of the Republic of South Korea (KComC).(Official trans.Ministry of Government Legislation, National Law Information Center, Republic of Korea), available at https://www.law.go.kr/engLsSc.do?menuId=1&subMenuId=21&tabMenuId=117&query=%EC%83%81%EB%B2%95#(last accessed 15 July 2021).The appointed directors would, if they accept the position, then conclude a contract of mandate (i.e., delegation)with the company.The Commercial Code of the Republic of Korea (KComC) prescribes that the provisions of the Civil Code regarding mandate shall apply mutatis mutandis to the relationship between the company and the directors.⑦Art.382(2) of the KComC.The contract of mandate is provided from articles 680to 692 of the Civil Code of the Republic of Korea (KCivC).①Official trans.Ministry of Government Legislation, National Law Information Center, Republic of Korea, available at https://www.law.go.kr/engLsSc.do?men uId=1&subMenuId=21&tabMenuId=117&query=# (last accessed 15 July 2021).It is one of the special (or typical)contracts enshrined in the KCivC.So, both the KComC and KCviC have relevant provisions regarding company directors.The provisions of the KComC take priority since it is a special act to the KCivC.The conclusion of a mandate contract is the way to create a fiduciary relationship between the appointed company directors and the company.It must be noted that, unlike the trust relationship, the way by which the fiduciary relationship between the appointed director and the company can be created is confined to the parties’ mutual consent.There are no directors created by a unilateral manifestation of intent or by operation of law.

Inductive analysis of the aforementioned two archetypal examples of fiduciary relationships tells us that fiduciary relationships under South Korean private law can be created by mutual consent (i.e., a contract), by a unilateral manifestation of intent, or by operation of law.The next question that needs exploring is what fiduciary duties are imposed upon them once they become a fiduciary, namely, the content issue.

The Content Issue

Trustees.

The KTA imposes various duties upon trustees.②For example, the duty of care (art.32), the duty of loyalty (art.33), the duty against conflicting acts (art.34), the duty of impartiality (art.35), the duty not to profit (art.36), the duty of segregation (37), duty to prepare, preserve, and keep documents (art.39), the duty of delegation (art.42), etc.But not all of them are fiduciary in nature.The one that they owe as a fiduciary is the duty of loyalty.Article 33 of the KTA provides for the duty of loyalty.It requires all trustees to perform trust affairs solely for the interests of the beneficiaries.This provision, however, does not offer us any information as to standards that can guide trustees about what they ought to do.The provision is, therefore, hollow.It is not a free-standing duty.It only holds meaning when combined with articles 34 and 36 of the KTA,respectively dealing with the no-conflict rule and the no-profit rule.The duty of loyalty is a higher concept that encompasses the no-conflict and no-profit rules.③This is also true of Chinese and Japanese trust law, see Zhou, X.M.(2017).Trust law: Theory and practice (pp.276-270).Beijing: China Legal Publishing House;Zhao, L.H.(2015).Trust Law in China (pp.309-312).Beijing: China Legal Publishing House; Makoto, A.(2014).The law of trust in Japan, 4th edn (pp.256-279).Tokyo: Yuhikaku; Hiroto, D.(2017).Trust law (pp.203-235).Tokyo: Yuhikaku.The content of the duty of loyalty is therefore comprised of these two limbs.By prohibiting all trustees from being in conflictcausing situations and from obtaining any profits from the trust, they may be led to act for the sole interest of their beneficiaries.It is, therefore, both proscriptive and prophylactic.Let us now consider the first of the two limbs of the duty of loyalty, namely the no-conflict rule.

The no-conflict rule is enshrined in article 34 of the KTA.Article 34(1) provides that no trustees are allowed to engage in any of the following conduct in anyone’s name:④Unless the trust instrument permits, the beneficiaries have given their fully informed consent, or a court order is given (art.34[2]).(a) transferring trust property or any rights relating to trust property to themselves; (b) transferring their privateproperty and any rights relating to their private property to trust property; (c) transferring trust property from one trust held by the trustee to another trust that the trustee administers; (d)representing a third party in a dealing concerning trust property that the trustee administers;and (e) Any other acts that are against the interest of the beneficiaries.The first and second are concerned with the prohibition on self-dealing.The third bars the trustees from making dealings between trusts under his control.The fourth inhibits trustees from making any dealings as a third-party’s agent regarding trust property they administer.This is in accordance with the proscriptive rule that the same person cannot represent both parties of a dealing.The fifth covers those miscellaneous occasions where the interest of the beneficiaries might be affected.The most commonly recognized cases are:①Wu, Y.C.(2021).Trusts Law (p.225).Seoul: Hongmoonsa; Choi, S.J.(2019).Trust Law (p.321).Seoul: PYbook.first, when trustees exploit an opportunity that they should use for the trust they administer (i.e., purchasing land that should be bought for the trust);second, when trustees run a business competitive with the trust business (i.e., running a business identical to that of the trust); third, when trustees breach the duty of confidence (i.e., misuse of confidential information relating to the trust under their control); fourth, when trustees dispose of trust property to a third party at an unreasonable price.The main purpose of article 34 is to deter trustees from putting themselves in situations where their, or a third party’s interest and the beneficiaries’ interest may conflict.However, those regulated in article 34(1) are in no way exhaustive.It remains to be seen how its future development unfolds.

As for the no-profit rule, article 36 prescribes that no trustees are allowed to obtain any profits when administering the trust.The typical profits regulated by this article are:②Wu, Y.C.(2021), Trusts Law (p.232).Seoul: Hongmoonsa; Choi, S.J.(2019).Trust Law (p.328).Seoul: PYbook.first, the trust property itself or any other profits flowing from the administration of trusts; second, bribes or secret commissions provided by a third party dealing with trustees.To elaborate, trustees are inhibited from taking trust property or any proceeds flowing from it unless otherwise provided in the trust instrument.For example, if trust instruments provide that the trustee can receive remuneration from trust property or its proceeds.③Art.47 of the KTA provides that trustees are only allowed to receive remuneration when allowed in the trust instrument.However, trustees are entitled to receive remuneration if they assume trusts as business trustees.Moreover, trustees are not allowed to accept any secret bonus, commission, or any other benefits from a third party with whom they are dealing.This is mainly to remove any temptation to pursue their own interest since it might affect the adequate administration of the trust.

Company directors.

Company directors are also fiduciaries.They owe a fiduciary duty (i.e., the duty of loyalty)to their company.④Art.382-2 of KComC.For the analysis of the company director’s duty of loyalty, see Lee, J.H.(2015).Directors’ fiduciary duty in Corporation Law.Chonnam Law Review, 35(1) 81; Choi, S.J.(2011).Rethinking the duty of loyalty.Journal of Business Administration & Law, 12(4), 1; Kim, B.Y.(2005).Revisiting duty of loyalty and fiduciary duty.Commercial Law Review, 24(3), 61.The KComC embodies the two limbs of the duty of loyalty: the no-conflict and no-profit rules.The former is subdivided into the following three categories.First, companydirectors are not allowed to make self-dealings①This includes the case where the self-dealing is made under another’s name (this is regarded as indirect self-dealing), see art.398 of KComC.unless a fully informed consent is given by the board of directors.②Art.398 of the KComC.Self-dealings are, in principle, barred.Second, company directors are not allowed to release any confidential information relating to the business, namely, the duty of confidence is levied on them.③Art.382-4 of the KComC.Thirdly, the duty not to compete is also imposed upon company directors.No directors shall, without the approval of the board directors, engage in, on his/her own account or on the account of a third party, any transaction in the same type of business of the company or become a general partner or a director of any other company, the business purposes of which are identical to those of the company.④Art.397 of the KComC.Fourth, no directors shall use business opportunities of the company likely to be of present or future benefit to the company for themselves or a third party unless approval is given by the board of directors.⑤Art.397-2 of the KComC.Business opportunities here denote those that became known to the directors in the course of performing their duties and those closely related to the business that the current company is dealing with or will soon be dealing with.⑥Art.397-2, items 1 and 2 of the KComC.Company directors are therefore not permitted to exploit business opportunities of the companies they work for.The no self-dealing rule, the non-competition rule, and the no-exploitation rule fall under the umbrella of the no-conflict rule.

As for the no-profit rule, the KComC does not have an independent and general provision like article 36 of the KTA.Instead, it allows an innocent company to claim profits obtained by its director who has breached the duty not to compete or the duty not to exploit business opportunities.Such claims are premised on the no-profit rule.By awarding remedies to the innocent company, the KComC indirectly prevents company directors from procuring any unallowed profits.I shall return to this in more detail when I examine remedies.

As explained above, the duty of loyalty is the most important fiduciary duty owed by both trustees and company directors.It comprises the no-conflict rule and the no-profit rule.⑦This is also true of the duty of loyalty in the common law world, see Bray v Ford [1896] AC 44; Bristol and West Building Society v Mothew [1998] 1 Ch; Finn, P.(1977).Fiduciary obligations (pp.199-200).Sydney: Law Book Company; Sealy, L.S.(1962).Some principles of fiduciary obligation.The Cambridge Law Journal, 21(1),69; Conaglen, M.Fiduciary loyalty: Protecting the due performance of non-fiduciary duties (p.61).Oxford: Hart Publishing.Both rules are aimed at promoting the interest of the beneficiary and of the company.This is done by not permitting trustees or company directors to favor their own interest or the interest of a third party, or to gain any profits when managing a trust or a company.The fiduciary duty is thus prophylactic.However, a prophylactic rule is effective only if proper remedies can follow its breach.The KTA and KComC, therefore, provide beneficiaries and companies with some powerful remedies, to which I now turn.

The Remedies Issue

Trustees.

If the fiduciary duty is contravened by a trustee, the KTA provides the beneficiary with four remedies.According to article 43(1) of the KTA, the beneficiary may hold the trustee liable for restitution or for damages: article 43(2) of the KTA provides for the trustee’s duty of disgorgement of profits.Furthermore, article 75 of the KTA awards the beneficiary the right of rescission, that is, the beneficiary is entitled to rescind the deal concluded between the trustee and a third party.However, this does not mean the beneficiary can assert all remedies simultaneously.He or she must choose the right remedy or remedies suited to the case.Article 43(1) of the KTA prescribes that, where a trustee breaches his/her duties, incurring any loss to the trust property, the beneficiary may hold the breaching trustee liable for restitution of the trust property dissipated,unless the restitution is impossible, highly difficult, requires an excessively high cost, or other circumstances make restitution inappropriate.In these cases, the beneficiary is entitled to damages.

Thus, the principal remedy is restitution.Damages are secondary.They are mutually exclusive.In the case of self-dealing, the transaction itself is void.①The KTA remains silent regarding the effect of self-dealing.But the Supreme Court of the Republic of Korea (hereafter “the Supreme Court”) regards such a transaction as void (Judgment of the Supreme Court 2011.6.10 2011DA18482).So, the trustee is obliged to make restitution by retransferring the disposed trust property back to the trust account.If restitution is not possible, the beneficiary can claim for damages.However, both legislation and courts remain silent as to the effect of cases where trustees act as agents for the other party and where a trustee conducts a dealing between the trusts under his control.It is submitted that they should be treated the same as self-dealing cases, for they are de facto identical in nature as only one person, i.e., the trustee, is involved in the illicit dealings.Therefore, transactions in these latter two cases should also be considered void.A trustee’s liability for restitution then follows.The beneficiary may ask for damages if restitution is not possible.It must be noted that the remedy of disgorgement of profits is not mutually exclusive with restitution and damages.For example, a trustee has concluded a deal in relation to trust property he is holding in favor of a third party.In this deal, the trustee acted as the third party’s agent, and the trustee received some secret commission in return.The trustee would be liable for disgorgement of profits (that is, the secret commission) to the trust.The fact that the trustee is held liable for restitution or for damages does not affect his liability to disgorge the profits he obtained.This typically happens when the two limbs of the duty of loyalty are both contravened.

In cases where trustees exploit an opportunity that they should have used for the trust they administer, where trustees run a business competitive with trust business, and where trustees breach the duty of confidence but no dealings concerning trust property are involved, only breachof the no-profit rule is relevant.If any profits have accrued from such breaches, article 43(2) shall apply; that is, trustees would be liable to disgorge the profits they procured.

Finally, when a trustee has disposed of the trust property at an unreasonable price to a third party whom he did not represent, the deal itself is not void because the third party is not represented by the trustee.The fact that the trustee has favored the third party may constitute a breach of the duty of the no-conflict rule.But the third party may be a bona fide purchaser.A balance must be struck.Therefore, article 75(1) of the KTA provides that the beneficiary is entitled to rescind the deal concluded between the trustee and a third party if the third party knew or should have known that the trustee entered into the deal in violation of the trust.Therefore,the beneficiary is accorded the right of rescission if the trustee dispose of trust property in breach of the trust under his or her administration.In fact, the beneficiary’s right of rescission is not confined to breaches of the no-conflict rule.The beneficiary’s right of rescission is given whenever the trustee makes any dispositions not allowed by the trust.So, it can also accommodate the case under discussion.It goes without saying that the right of rescission and the disgorgement of profits can overlap.They are not mutually exclusive.If the trustee receives any secret reward for making a deal advantageous to the third party, he or she must disgorge that profit to the trust.Whether the beneficiary rescinds the deal made between the trustee and the third party has nothing to do with the trustee’s liability to disgorge the profits.

Company directors.

According to the Supreme Court, self-dealings between a company and an errant director are void.①Judgment of the Supreme court 1984.12.11.84DAKA1591.The errant directors are therefore liable for restitution.However, the company cannot defeat a bona fide purchaser who obtained dissipated property from the director.In such a case,the company can only claim damages②Art.399 of the KComC.against the errant company director.Restitution of company property is not relevant when company directors breach their duties not to compete with their companies and not to exploit business opportunities that should belong to their companies.This is because no dealings on company assets are involved.Only remedies for breach of the no-profit rule apply.In other words, if any director has engaged in a transaction on his/her own account in breach of the non-competition rule, the company may, by a decision of the board of directors, deem such a transaction to be made on the account of the company and if he or she has made a transaction on the account of a third party, the company may request the pertinent director to transfer any gains accrued therefrom.③Art.397(2) of the KComC.By deeming the transaction to have been done by the company, the company is capable of holding the errant director liable for the disgorgement of profits.

Furthermore, where a company director breaches the no-exploitation rule, the benefits earnedby the director or a third party from the breach shall be presumed to be damage suffered by the company.①Art.397-2(2) of the KComC.Though the law uses the legal technique of presumption, it virtually requires the errant director to disgorge the profits to the company as it would be extremely difficult to rebut the presumption in this case.To conclude, when the no-profit rule is contravened, the ultimate effect is the disgorgement of profits.

Unlocking Hidden Fiduciaries

The Core Elements of Fiduciary Relationships

In the previous section, three questions were explored relating to the two archetypal and fullyfledged fiduciaries under South Korean private law, namely, trustees and company directors.For the creation issue, we have found that both fiduciary relationships can be created by mutual consent (i.e., a contract) while only trusts can be generated by a unilateral manifestation of intent or by operation of law.The point here is that the way a fiduciary relationship can be established varies according to the individual type of relationship involved.

As for the content question, the duty of loyalty is the core obligation that both fiduciaries under discussion owe to their principals respectively, i.e., the beneficiary and the company.The duty of loyalty consists of two sub-rules, namely, the no-conflict rule and the no-profit rule.The former prevents fiduciaries from putting themselves or third parties in a position in which their interest conflicts with the principal’s interest (e.g., self-dealing, breaching the non-competition rule or the no-exploitation rule etc.).The latter deters fiduciaries from wrongfully profiting in the course of conducting their fiduciary tasks.Both rules are aimed at promoting the proper administration of trusts or company businesses.

Finally, various remedies are available to the beneficiary or company if the trustee or company director breaches the duty of loyalty.They are: restitution in response to void self-dealings,damages if restitution is not possible or very difficult, and the disgorgement of profits arising from cases where the no-profit rule is breached (i.e., cases in which fiduciaries have received bribes or secret commissions or where the non-competition rule or the no-exploitation rule is breached).The beneficiary also has the right of rescission.

Now we must consider how a fiduciary can be created, the core duties he or she owes to the principal and what remedies ensue once the fiduciary duty is breached.However, both trust law and commercial law remain silent regarding the definition of a fiduciary or the fiduciary relationship.This is unexpected in a civil law jurisdiction.Civilian codes or acts generally offer definitions of the relevant legal institutions that they provide for.Here we can only infer the core elements of fiduciary relationships from the two primary fiduciaries recognized under the locallegal system.This section will suggest a definition founded on those core elements.However, it must be stressed that the core elements and definitions offered here are not universally absolute.They are merely inferred from the currently recognized fiduciary relationships, i.e., trustees and company directors.

The central question here is: what are the features or characteristics that make the legal relationships of trustees and company directors fiduciary in nature? They must be those that are distinctively embedded in those fiduciary relationships and that can demarcate them from other legal relationships.The core elements will be revealed once they are clarified.In any case, the analysis of creation does not offer any clue in determining the nature of fiduciary relationships since they can be established by both intention and operation of law—mechanisms through which other legal relationships can also be created.Therefore, the modes of creation do not indicate anything distinctively existing only in a fiduciary relationship.Furthermore, remedies in respect of the breach of fiduciary duties are unhelpful as well.Restitution, damages, and rescission are not uniquely designed for fiduciary relationships as we can also find them adopted in other areas of law.On the other hand, the remedy of disgorgement of profits is novel under the civilian legal tradition, where the principle of no-loss-no-compensation dominates.But this remedy is given when the fiduciaries have breached the duty not to profit.Therefore, this analysis shall focus on the content of fiduciary duties.

Trustees and company directors owe various duties to their principals.But only the duty of loyalty involving the no-conflict rule and the no-profit rule is considered fiduciary in nature.①English law also recognizes these two duties as fundamental components of the loyalty obligation, see Bray v Ford [1896] AC 44.50.This reflects the law’s particular concern for protecting the principals’ interests.In other words,beneficiaries and companies are in a relatively vulnerable position since they cannot constantly monitor trustees and company directors.This raises the chances that trustees, and company directors may carry out actions that favor themselves (or a third party) ahead of their principals’ or seek to procure secret profits.Such possibilities inevitably tempt trustees and company directors more inclined to pursue their own interests.This in turn hampers them from adequately executing their business and is fundamentally contrary to the nature of the position of trustees and company directors on whom the beneficiary and company are dependent.Therefore, vulnerability and dependency are embedded in a fiduciary relationship.②It is submitted that vulnerability is one of the characteristics commonly cited by common lawyers, see Miller, P.B.(2014).The fiduciary relationship.In A.S.Gold & P.B.Miller (Eds.).Philosophical foundations of fiduciary law (p.67).Oxford: Oxford University Press; For various opinions on the characteristics of fiduciary relationships in the common law world, see Hoyano, L.(1997).The flight to the fiduciary haven.In P.Birks (Ed.).Privacy and loyalty (p.269).Oxford:Oxford University Press.

Fiduciaries are destined to work for another person and the law is determined to secure this relationship through the duty of loyalty comprised of the no-conflict rule and the no-profit rule.However, it must be noted that the phrase “working for another” used here holds a rather special connotation.It does not involve all situations in which a person works for another.It is confinedto circumstances in which there are opportunities (or temptations) for the entrusted person to make self-advantageous decisions when his interest conflicts with that of the principal.This can be inferred from the content of the two limbs of the duty of loyalty.They are designed to protect the economic interest of the principal.Only when the economic interest conflicts can we say a conflict exists between a fiduciary and his principal.Moreover, what the no-profit rule aims at is guiding fiduciaries to concentrate on the business of promoting or securing the interest of their principal.Therefore, that last requirement can be phrased as working for another where there are possibilities for the entrusted person to make an economically self- or third-party-advantageous decision or to profit from his position.The core of the fiduciary duty of loyalty, i.e., the noconflict rule and the no-profit rule, reflect this proposition.

Taken together, these distinctive characteristics, inferred from the two fully-fledged fiduciaries under South Korean private law, indicate that the South Korean fiduciary relationship may be defined as a relationship that involves the principal’s vulnerability, dependency, and the possibility that the entrusted person may make an economically self-or third party-advantageous decision or to profit from his position.The term “principal” here denotes those whom the entrusted person works for.The entrusted person becomes the fiduciary.If so, questions arise as to whether other fiduciaries exist under South Korean private law since others may also satisfy the abovementioned characteristics and come within the ambit of the definition of fiduciary relationships.It is submitted that there are at least six legal relationships that potentially fall into the fiduciary category as they possess the required characteristics.These relationships are mandate, agency,parents or adult guardians, executors of inheritance, commission agency, and partnership.Failing to include these within the ambit of the fiduciary relationship would seriously damage the systematic coherence of private law.

Taking Systematic Coherence Seriously

Mandates.

The first instance where a fiduciary relationship can be established is that of the contract of mandate.A mandate is a contract that becomes effective when one person (i.e., the mandator)entrusts the other party (i.e., the mandatary) with the management of affairs with the other party’s consent.①Art.680 of the KCivC.Is the mandatary a fiduciary, and thus a fiduciary relationship exists between the mandator and the mandatary? No authority confirms this, but I argue it is because the contract of mandate satisfies the three requirements.The nature of the contract itself already signifies that between the mandator and mandatary exists vulnerability, dependency, and possibilities for the entrusted person to make an economically self- or third-party-advantageous decision or to profit from his position.Once a mandatary deals with affairs for the mandator, the mandatary is situated right at the center of the execution of the relevant affairs.No matter how carefully the mandatormonitors the mandatary, it remains true that: (a) the mandator, having entrusted his affairs to the mandatary, becomes vulnerable and dependent on the mandatary, and, moreover (b) there will always be room for the entrusted person to make a self- or third-party-advantageous decision when a conflict-of-interest situation arises or to profit from their position.

Recognized examples of mandatary suggest evidence of a fiduciary relationship.We have already seen that the company director, as the mandatary of the company he works for, is a fiduciary.The scope of mandatary covers a variety of persons such as lawyers, estate brokers,fund managers, accountants, doctors etc.Principals in these cases (i.e., clients, investors, patients)are all in a relatively vulnerable situation in that they are dependent on their mandatary in relation to the work entrusted.Moreover, it is possible that a conflict might arise between those mandataries and their principals.①Doctors are also fiduciaries in some common law jurisdictions: S.E.C.v Willis (1992) 787 Fed.Supp.58 (New York); McInerney v Macdonald (1992) 93 DLR (4th)415 (The Supreme Court of Canada).These mandatories are fiduciaries.Such a view can further be supported by the recognition of the no-conflict and no-profit rules.For the no-profit rule, the law imposes on the mandatary a duty that requires him to transfer to the mandator all the money and any other things that he has improperly received in the course of management of the entrusted affairs.②Art.684 of the KCivC.The Supreme Court further adds that money and other things mentioned here include all the benefits that, if vested in the mandatary, would harm the entrustment relationship between the mandator and the mandatory.③Judgment of the Supreme Court 2010.5.27.2010DA4561.For the no-conflict rule, no express provision is enshrined in the KCviC.But the majority view recognizes that a no-conflict rule also applies in a mandatory relationship.④Jee-Won Lim, Lectures on Civil Law (18th edn, 2021, HMS) p.1610.(The original Korean title is contained in the bibliography of this article).It must be noted that the majority view remains silent on the strong connection between the no-conflict rule with the fiduciary relationship, despite submitting that agents owe to their principal the duty not to prefer their own interest when conflicted with their principal’s.This is mainly due to the fact that the concept of fiduciary duty is comparatively novel within the civil law tradition.

As explored above, the mandate contract satisfies the three requirements needed for establishing a fiduciary relationship: vulnerability, dependency, and the possibility for the entrusted person to make an economically self- or third-party-advantageous decision or to profit from his position.Furthermore, both the no-conflict rule and the no-profit rule, i.e., the two defining duties owed by the fiduciary are also imposed upon the mandator and the mandatary.To conclude, the contract of mandate creates a fiduciary relationship and mandataries are fiduciaries.

Agency.

The relationship of the agency is created when a principal grants another person the power to perform a juristic act for the principal.It is not a contractual relationship.The agency relationship is established when power is granted to another.The appointed person is free to reject the grant, but if he does not, the agency relationship survives.The typical example of a juristic act entrusted to an agent to do on behalf of the principal is the making of a contract.That is, an agentis empowered to make an offer (i.e., a manifestation of intent) or accept (i.e., a manifestation of intent) an offer for the principal.The contract would then be concluded between the principal and the other party.In other words, though the deal is concluded between the agent and the counterparty, the legal effect is vested in the principal.①Art.114 of the KCivC provides that, (a) a manifestation of intent made by an agent, within the scope of his authority while disclosing the fact that he is acting for a principal, shall directly bind the principal and, (b) this applies to a manifestation of intent made by a third person to an agent (sec.2).The agent owes no obligations stemming from the contract.This is one of the reasons that even a minor can become an agent.②Art.117 of the KCivC provides that legal capacity is not required in order to be an agent.It must be noted that the agency and mandate relationships may overlap.When the mandatary is a doctor,no overlap happens since a doctor generally has no power to perform any juristic act on behalf of the patient.The doctor is only a mandatary.On the other hand, a lawyer may be a mandatary as well as an agent.Lawyers empowered only to suggest legal advice may not be agents.If he is empowered to conclude a deal with another on behalf of the client, he is then both an agent and a mandatary.So is a company director.Finally, an agent can be a minor but not a mandatary since the latter is a contractual relationship.Minors are incapable of entering into contracts without their guardians’ approval.③Art.5(1) of the KCivC provides that a minor shall obtain the consent of his/her representative to perform any juristic act.

Agents are people acting on behalf of their principals.The relevant act is a juristic act,concluding or rescinding a contract.The legal status of the principal is therefore affected.Whether the act is carried out adequately as required by the principal depends on the agent’s proper performance.Principals generally rely on their agent and are placed in a relatively vulnerable position as regards the execution of the task entrusted to the agent, resulting in agents being apt to pursue their own benefit should their interest and the principal’s interest conflict.They may even profit from their position.In consequence, it seems the three core requirements for the establishment of a fiduciary relationship are all met in the agent relationship: vulnerability,dependency, and the possibility for the entrusted person to make an economically self- or thirdparty-advantageous decision or to profit from his position.

That the agent relationship is a fiduciary in nature is reinforced by the fact that the no-conflict rule is expressly enshrined in law.Article 124 of the KCivC prescribes that, without the consent of the principal, an agent shall not perform a juristic act for the principal to which the agent himself is the other party or shall not become an agent of both parties to one juristic act.The former concerns the duty not to self-deal and the latter involves the duty not to represent both parties in a deal.If these rules are contravened, the Supreme Court considers the deal a void transaction.④Judgment of Supreme Court 2018.4.12.2017DA271070.The law, however, does not expressly provide for the no-profit rule.No problem would arise if the agent were also a mandatary since the no-profit rule, as mentioned above, applies to the mandate relationship.However, if the two legal capacities do not overlap, the question arises whether the no-profit rule applies to a pure agent.Both courts and academics remain silent.It is submittedthat the rule should also apply to the agency by analogy.This is because the agency relationship satisfies the three requirements.In other words, the fundamental and underlying structure of agency can be seen as similar to that of mandate or trust in that they all involve administering affairs for another while there exists a danger that administrators (i.e., the trustee, mandatary,or agent) could profit in the course of managing the affairs entrusted.Following the axiom that like cases should be treated alike, it would be hard to justify not applying the no-profit rule to the case of agency, as with mandate or trust.But without an express provision on the no-profit rule,article 684 of the KCivC or article 36 of the KTA that deal with the no-profit rule for mandate and trust respectively should apply to the agency by analogy.①Unlike the common law, in which legislation cannot be applied by analogy, it is generally allowed in civil law, provided adequate grounds are given.That said, it would be best to expressly provide for this scenario in the near future.

To conclude, the agency relationship satisfies the three requirements of a fiduciary relationship, that is, vulnerability, dependency, and the possibility for the entrusted person to make an economically self- or third-party-advantageous decision or to profit from his position.Moreover, the KCivC expressly prescribes the no-conflict rule, and the no-profit rule, though not enshrined in law, should be recognized in the agency as well by analogy with mandate or trust.Hence, the two crucial duties that form the duty of loyalty owed by the fiduciary are also imposed upon an agent.The agency relationship is a fiduciary relationship and agents are fiduciaries.

Parents and adult guardians.

Are parents and adult guardians fiduciaries? It is interesting to find that no court decisions or academics have ever raised this question in South Korea.This is partly because the notion of a fiduciary relationship has never extended outside the boundaries of trust law and company law.To argue that both parents and adult guardians are fiduciaries may sound strange to a civil lawyer.However, it is submitted that they are since they are considered to be both agents and mandataries in South Korean private law.Articles 911 and 920 of the KCivC respectively prescribe that the parent who exercises parental authority shall become the agent of his or her minor child and that the person of parental authority who is the agent of the child shall represent the child in juristic acts concerning the property of the child.In other words, those who have parental authority are agents arising by the operation of law.The KCivC in its article 916 further provides that any property acquired under the name of a child shall be the personal property of the child, and such property shall be managed by the person of parental authority who is the agent of the child.This provision, by awarding the right to manage the affairs of their child, treats parents as their children’s mandataries.This is also true of adult guardians.Article 938 of the KCivC regards adult guardians as the agent of their ward and article 949 of the KCivC further says that a guardian shall manage the ward’s property and represent the ward in juristic acts concerning the latter’s property.The upshot is that both parents and adult guardians are agents as well as mandataries in nature.Since both agent and mandatary, as explored above, are fiduciaries, parents and guardiansought to be considered fiduciaries as well.This is understandable in that children and wards are generally in a bad position to monitor parents and adult guardians, resulting in parents and adult guardians being able to put their interests ahead of their principals’ or to obtain unallowed profits.

Tsarevitch Ivan crept nearer, and as it was about to pluck a golden apple in its beak9 he sprang toward it and seized its tail. The bird, however, beating with its golden wings, tore itself loose and flew away, leaving in his hand a single long feather. He wrapped this in a handkerchief, lay down on the ground and went to sleep.

Since parents and guardians are both fiduciaries, the no-conflict rule and the no-profit rule that govern agency and mandate relationships are also applicable to parents and guardians.But,as far as the no-conflict rule is concerned, it is repeated in the KCivC.That is, article 921(1)prescribes that if a person of parental authority, who is the agent of a child, is to perform acts of conflicting interest between himself or herself and his or her child, he or she shall apply to the court for appointment of a special agent on behalf of the child; and (2) where a person of parental authority who is the agent of children, is to perform acts in which the interest of one child conflict with those of the other child, the person of parental authority shall, on behalf of one party, apply to a court for appointment of a special agent.This provision is also applied mutatis mutandis to adult guardians.①Art.949-3 of the KCivC.Parents and adult guardians, though so far rarely thought of in this way, are both fiduciaries.

Executor of inheritance.

When a person dies leaving a will, the will must be executed.The person that executes a will is called the executor of a will.②The corresponding concept under common law is the executor or administrator of the estate.However, unlike common law systems (where the term executor is used when he is appointed by a will, whereas the term administrator is used when he is appointed by the court), South Korean law does not make such terminological distinctions.They are both called the executor of inheritance.The executor of a will can be appointed either by a will③Art.1093 of the KCivC.or by a court order.④Art.1096 of the KCivC.Can executors of wills be regarded as fiduciaries? It is submitted that they can.They are the manager of the deceased person’s assets, that is, paying debts, taxes, and most importantly distributing the inheritance to the deceased’s heirs according to their shares.⑤Art.1101 provides that an executor has the right and duty to manage inheritance assets and to perform acts necessary for carrying out the will.They manage the affairs of another.But who do they work for? It depends on who owns the assets left by the deceased.The answer is that they work for the deceased’s heirs because the rights to assets left by the deceased automatically vest in the deceased’s heirs at the moment the person leaving the will dies.⑥Art.1005 of the KCivC provides that an heir succeeds all the rights and duties held by the deceased predecessor from the time of the commencement of succession; art.997 provides that the succession procedure commences by death.Executors of wills are mandataries managing assets on behalf of the deceased’s heirs.For this reason, the law also recognizes that executors are mandataries by applying some of the provisions on a mandate to executors.⑦See art.1103(2).Furthermore, executors may sometimes need to perform juristic acts on behalf of heirs while managing the inheritance.Hence, article 1103(1) of the KCivC expressly regards an executor of a will, either appointed by a will or by court order, to be deemed an agent for the heirs.Thus, an executor of a will is the heir’s agent as well as mandatary.Executors of wills are fiduciaries.It is not surprising that the law has taken such a path since itcan be easily imagined that all three requirements for the creation of a fiduciary relationship are met even in the case of executors of wills.The no-conflict rule and the no-profit rule are thus automatically applicable to executors of wills as well, in order to deter executors from making transactions favoring their interest or from profiting from the administration of inheritance.Executors of wills are fiduciaries and should be added to the list of fiduciary relationships.

Commission agency.

A commercial agent is a person who makes it his business to effect sales or purchases of goods or securities under his or her own name on the account of another party.①Art.101 of the KComC.Therefore, unlike its label, a commercial agent is not an agent since agency requires the agent to implement a juristic act in the name of a principal.Therefore, if a commercial agent concludes a contract, a contractual relationship arises between the commercial agent and the other party, not between the principal and the other party.This is declared in article 102 of the KComC, which says that the commission agent acquires rights and owes obligations with regard to the other party to the transaction.If the commission agent is not an agent in nature, what is it in essence? Article 112 gives us the answer:it is a mandatary.This article argues that the provisions relating to the mandate shall apply mutatis mutandis to the relations between a principal and a commission agent.Such an approach is reasonable in that, even though the contractual parties are the commission agent and the other party, the commission agent is virtually managing the principal’s affair.Furthermore, the principle relies on the commission agent in relation to the sale entrusted and thus is in a comparatively vulnerable position in monitoring the deal.As a result, the possibility emerges of a commission agent favoring his own interests and profiting in the course of a relevant sale.Therefore, article 684 of the KCivC dealing with the no-profit rule should apply to the commission agent.

As for the no-conflict rule, the KComC offers a special provision.That is, article 107(1)provides that, to the extent that a commission agent has received a commission to sell or purchase goods or securities having an objective exchange quotation, he or she may directly become the buyer or seller.In other words, the core element of the no-conflict rule, namely, the no self-dealing rule, is in principle not allowed; however, an exception can apply if the relevant products have an objective exchange quotation in the relevant market.The exception is made to facilitate the sale when a fair price is guaranteed.②Ok-Rial Song, Lectures on Commercial Law (11th edn, Hongmoonsa, Seoul) p.170.The focus here is that the no-conflict rule is expressly applicable to the case of the commission agency.The commission agency creates a fiduciary relationship and thus commission agents are fiduciaries.

Partnership.

The final legal relationship I would like to add to the list of fiduciary relationships is the contract of partnership.That is, partners can be said to owe each other fiduciary duties.A partnership becomes effective when two or more persons have agreed to run a joint businessby making mutual contributions thereto.①Art.703 of the KCviC.The contribution (money, land, or chattels) made by each party belongs to the partners jointly.②Art.704 of the KCviC.But the manager of the partnership is in charge of the execution of the partnership’s business.③The manager of a partnership is elected by an affirmative vote of not less than two-thirds of all the partners (art.706(1) of the KCivC).However, the ordinary affairs (such as purchasing pens,papers, etc.) of the partnership may be managed solely by any partner or any manager acting alone.④Art.706(3) of the KCivC.The manager of a partnership resembles the director of a company.Any partner acting alone for other partners relating to ordinary affairs of the partnership is akin to a mandatary since he or she manages the partnership’s ordinary affairs for other partners.Other members of the partnership depend on the manager(s) they have chosen in relation to the execution of the partnership’s business or ordinary affairs.The structure is similar to that of mandate and has been adopted by law.Article 707 of the KCivC provides that the provisions of articles 681 to 688 shall apply mutatis mutandis to partners who manage the affairs of the partnership.These are provisions dealing with the mandate.The most important and relevant one here is article 684 that states the no-profit rule.Furthermore, as mentioned above, the mandate is also governed by the no-conflict rule, which is also applied to the partnership.These measures prevent a managing partner from favoring his or her own interests or profiting from the management of the partnership business.Partners of a partnership must be placed on the list of fiduciary relationships.

Conclusion

I intended this article to: (a) extract the core elements of fiduciary relationships from the archetypal and most fully-fledged fiduciaries recognized under South Korean private law (i.e,trustees and company directors); and (b) to use them as criteria for the search of undisclosed fiduciaries.As to the former, I found that the fiduciary relationship under the South Korean legal system contains the following three irreducible core elements: vulnerability, dependency, and most importantly, the possibility for the entrusted person to make an economically self- or third-partyadvantageous decision or to profit from his position.I then searched for other legal relationships that might possibly satisfy these three requirements.The analysis indicates that in addition to trustees and company directors, the following should also be considered fiduciary relationships:agents, mandataries, parents and adult guardians, executors of inheritance, commission agents,and partners.It must be stressed that the list is not yet closed.There is always the possibility for new candidates to be added to the list.The concept of fiduciary might not have been widely used in South Korea, but the core elements of the fiduciary relationship are, as explored above,present in several other legal relationships, which constitute a class of hidden fiduciaries.Thetime has come for us to uncover them.It is interesting to find symmetry in common law and civilian systems because in the common law world, trustees,①Re Hallett’s Estate, (1879) 13 ChD 696, 709 (CA).company directors,②Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, HL.agents,③Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch.D 389, CA.lawyers,④Hilton v Barker Booth Eastwood [2005] UKHL 8.partners,⑤Clegg v Fishwick (1849) 1 Mac.& G.294.and estate executors/administrators have traditionally been regarded as fiduciaries.Like cases must be treated alike for the sake of clarity, consistency, and legal stability.Ironically, this axiom seems to have been better implemented in the common law tradition insofar as fiduciary law is concerned.But is it not the Civil Law tradition that lays more emphasis on systematic coherence?⑥The study on the fiduciary duty of loyalty has recently been burgeoning in China since the Trust Law of the People’s Republic of China and the Civil Code of the People’s Republic of China were enacted in 2001 and 2021 respectively.For more details, see Hui, J.(2020).The duty of loyalty in Chinese trust laws.Journal of Equity, 13, 347 and Jian, X.L.(2016).The duty of loyalty for the trustee.Peking University Law Journal, 28(1), 194.However, most of the articles on this subject mainly concentrate on the meaning and scope of, or the remedies for breach of, the fiduciary duty under trust law or company law.Rarely have we seen any attempts that are aimed to clarify the fundamental requirements for fiduciaries and prove that they may exist in other areas of private law.Thus,the conclusion made in this article would therefore hold particular meaning and importance in China considering that China has also planted trusts law on its Roman-Germanic soil.The present author argues that it is crucial to unlock those hidden fiduciaries in other areas (ex., contract law, family law, the law of succession, company law etc.) of private law in China as well so as to treat like cases alike and secure legal consistency and stability.It is hoped that the argument and reasoning made here would provide local lawyers with a new perspective that could help them have a better understanding of fiduciary law.