Breach of Trust: Elements and Penalties

What Is Breach of Trust?

Breach of trust, as defined in Article 355 of the Korean Criminal Act, reads as follows.

A person who, while administering another's business, obtains a pecuniary advantage or causes a third person to obtain it through an act in breach of their duty, and thereby causes loss to the principal, shall be punished by imprisonment for not more than 5 years or a criminal fine not exceeding KRW 15 million.

Objective Elements

The elements of breach of trust are ‘a person who administers another's business’, ‘an act in breach of duty’, ‘a pecuniary advantage’, ‘causing loss’..

1. A person who administers another's business

In the context of breach of trust, ‘a person who administers another's business’ refers to someone who, in an internal relationship with another and in light of the principle of good faith, comes to stand in a fiduciary relationship to administer that person's business, and who, on the basis of that relationship, holds a position in which protecting·managing the other's pecuniary interests constitutes the typical·essential content of the fiduciary relationship.

However, it is not required that the administration of that business consist solely of protecting·managing another's interests; even where it also has the character of pursuing one's own interests, if its character as business conducted for another goes beyond merely incidental·peripheral significance and forms an important part of its content, the person falls within the ‘person who administers another's business’ referred to here.

(Supreme Court 2012. 5. 10. Judgment 2010Do3532)

2. An act in breach of duty

In breach of trust, 'an act in breach of duty' includes any and all acts that betray the fiduciary relationship with the principal, by failing to do what one would, in light of the specific circumstances such as the content and nature of the business being administered, naturally be expected to do under statute, the terms of the contract, or the principle of good faith, or by doing what one would naturally be expected not to do.

(Supreme Court 2000. 12. 8. Judgment 99Do3338)

3. A pecuniary advantage

In breach of trust, ‘a pecuniary advantage’ means an increase in overall pecuniary value, and it is a de facto concept understood from an economic standpoint.

This encompasses both an active gain and a passive benefit.

4. When pecuniary loss is caused

'When pecuniary loss is caused' includes not only cases where actual loss is caused but also cases where a risk of pecuniary harm arising is created; and once such a risk of loss has been created, the fact that the harm is later remedied does not affect the establishment of breach of trust.

Subjective Elements

The subjective requirements for occupational breach of trust to be established are ‘intent to commit breach of trust’ and ‘awareness of the breach of duty’.

1. Intent to commit breach of trust

The intent to commit breach of trust is recognized even where it amounts only to willful blindness (dolus eventualis).

Where the defendant denies criminal intent for breach of trust by asserting that the act in question was carried out for the principal's benefit, the facts that, by the nature of the matter, constitute the subjective elements of breach of trust can only be proved by establishing indirect facts that bear a substantial connection to intent; and even if the defendant also had an intention to act for the principal's benefit, if those indirect facts make clear that the intention to act for the principal's benefit was merely incidental and that the intent to gain or to harm was the principal one, it must be held that the intent for breach of trust existed.

2. Awareness of the breach of duty

The question is whether there was an intent of unlawful gain to commit, for the purpose of seeking the benefit of oneself or a 3rd party, an act in breach of one's occupational duty.

Penalties for Breach of Trust

The severity of punishment for breach of trust is classified according to the amount involved in the offense.

The sentencing guidelines are as follows.

Embezzlement and Breach of Trust

Embezzlement, like breach of trust, is defined in Article 355 of the Korean Criminal Act.

A person who, while keeping another's property in custody, embezzles that property or refuses to return it shall be punished by imprisonment for not more than 5 years or a criminal fine not exceeding KRW 15 million.

The difference between embezzlement and breach of trust here is that embezzlement is conditioned on the appropriation of property, whereas breach of trust targets a pecuniary advantage.

However, since breach of trust and embezzlement both rest on a fiduciary relationship and there is no difference in the applicable sentence, punishing what is breach of trust as embezzlement does not affect the outcome of the judgment, and absent special circumstances, embezzlement may be applied and punished as breach of trust without an amendment to the indictment.

Fraud and Breach of Trust

Where an act of fraud is committed at the same time as an act of breach of trust, because the elements of breach of trust and fraud differ, under Article 40 of the Korean Criminal Act the two are treated as an ideal concurrence of offenses, and punishment is imposed for the more serious of the two.

Article 40 of the Korean Criminal Act (Ideal Concurrence) Where a single act constitutes several offenses, the offender shall be punished by the penalty prescribed for the most serious offense.

Breach of Trust Lawyer

Breach of trust has a very broad scope of application. For this reason, there are aspects where applying the legal principles is difficult, and as a result the acquittal rate is relatively high, roughly twice that of criminal cases overall.

Accordingly, when filing a criminal complaint for breach of trust, it is advisable to obtain the assistance of an attorney.