'Debts linked to prostitution are null and void'

Busan District Court [Yonhap]
Busan District Court [Yonhap]

A court has ruled that a loan contract in which a moneylender repaid a nightclub worker's debt — expecting her to pay it back through prostitution — is null and void.

Judge Jeong Sun-yeol of Busan District Court's Civil Division 6 ruled Monday in favor of the plaintiff in a lawsuit filed by nightclub worker A against moneylender B to block enforcement of the debt.

The court found that the financial transaction between the two parties was premised on prostitution and barred compulsory enforcement based on the notarized deed they had signed.

According to the ruling, A had been working at a below-ground nightclub in a hotel in Gangnam, Seoul. In February 2017, a manager who oversaw female workers at the establishment introduced her to moneylender B.

A had an existing advance debt of 52 million won ($38,700) with another lender. B agreed to repay that debt on her behalf, with A agreeing to pay B annual interest of 27.9 percent.

A continued working at the nightclub and made payments on the principal and interest. In April 2018, she entered into a new contract setting the interest rate at 24 percent annually on the remaining balance of 47 million won.

The Act on the Punishment of Arrangement of Prostitution stipulates that any debt held by a person in connection with prostitution is void regardless of the form or name of the contract.

The Civil Act also provides that any legal act contrary to good morals or public order is void, and that money provided for an illegal purpose cannot in principle be reclaimed.

"The defendant was aware that the nightclub in question was a venue where prostitution took place, and appears to have entered into this contract expecting the plaintiff to repay the principal and interest from the substantial income she would earn through prostitution," Judge Jeong said.

He added that despite the advance debt amounting to 52 million won, the defendant had made the subrogated payment without conducting a credit check on the plaintiff or requiring collateral.

"Given that the principal was a large sum and the interest rate was extremely high, the plaintiff appears to have been in a position where she had no realistic choice but to engage in prostitution to repay the debt," Judge Jeong said. "The defendant appears to have gone beyond merely being aware of this — he made the subrogated payment in anticipation of repayment through such means."


jshan@heraldcorp.com