2017.07.24

2016 (Ju) 1463

Minshu Vol. 71, No. 6

Judgment on the validity of an out-of-court settlement agreement executed by a certified judicial scrivener in violation of Article 72 of the Attorney Act

Case seeking a refund of overcharged interest

Judgment of the First Petty bench, quashed and decided by the Supreme Court

Nagoya High Court Kanazawa Branch, Judgment of May 18, 2016

Even in a case where a certified judicial scrivener’s execution of an out-of-court settlement agreement on behalf of his client constitutes a violation of Article 72 of the Attorney Act, such settlement agreement is not invalid unless exceptional circumstances exist which make the settlement agreement a violation of public policy in its nature considering such factors as its terms and conditions and the circumstances leading up to its execution.

Article 72 of the Attorney Act, Article 3, paragraph (1), item (vii) of the Judicial Scriveners Act, and Article 90 of the Civil Code



Attorney Act

Article 72 No person other than an attorney or a Legal Professional Corporation may, for the purpose of obtaining compensation, engage in the business of providing legal advice or representation, handling arbitration matters, aiding in conciliation, or providing other legal services in connection with any lawsuits or non-contentious cases, or any requests for examination, requests for re-examination, requests for review or other appeals against administrative agencies or other general legal matters, or acting as an intermediary in such matters; provided, however, that the foregoing shall not apply if otherwise specified in this Act or other laws.



Judicial Scriveners Act

Article 3 (1) A judicial scrivener shall engage in the business of conducting the following affairs at the request of other persons in accordance with the provisions of this Act:

(vii) providing consultation, or providing representation in arbitration proceedings or out-of-court settlement, with regard to civil disputes (limited to those that are eligible to be subject to litigation proceedings under the Code of Civil Procedure at a summary court), the value of whose subject matter is no higher than the amount specified in Article 33, paragraph (1), item (i) of the Court Act.



Civil Code

Article 90 A juristic act with any purpose which is against public policy is void.

The judgment of prior instance shall be quashed.

The appellee’s appeal shall be dismissed.

The costs of the appeal and the costs of the final appeal shall be borne by the appellee.

Reasons for the petition for acceptance of final appeal filed by the appellant

1. In this case, the appellee, who is person A’s bankruptcy trustee, seeks from the appellant, who is a money lender, a refund of overcharged interest, among other things, based on the appellee’s claim for return of unjust enrichment, asserting that overcharged interest had been paid if such portion of each of the installments paid in continuous loan transactions between A and the appellant as paid in excess of the amounts calculated at the upper limit interest rates specified by the Interest Rate Restriction Act is allocated to the principal.

The point at issue in this case is the validity of an out-of-court settlement agreement on the aforementioned overcharged interest and other matters executed by the supporting intervener for the appellant (hereinafter simply referred to as the “supporting intervener”), who is a judicial scrivener satisfying all of the requirements listed in the items of paragraph (2) of Article 3 of the Judicial Scriveners Act (hereinafter referred to as a “certified judicial scrivener”), on behalf of A with the appellant.

2. The outline of facts related to the case which duly became final and binding in the judgment of prior instance is as described below:

(1) During the period from May 25, 1993 to November 30, 2008, A conducted continuous loan transactions with the appellant by agreeing to interest rates in excess of the limits specified by the Interest Rate Restriction Act (hereinafter referred to as the “Transactions”). As a result of the Transactions, A had paid, as of the said date, overcharged interest in the amount of approximately 3,300,000 yen, on which legal interest had accrued.

(2) On December 17, 2008, A executed a mandate agreement with the supporting intervener for the purpose of debt-workout. When executing the mandate agreement, the supporting intervener explained to A, among other things, that if the amount of overcharged interest exceeded 1,400,000 yen, the supporting intervener, who was a judicial scrivener, would not be eligible to act as an agent.

(3) Around January 2009, the supporting intervener received from the appellant a disclosure of the relevant transaction history and made a recalculation by applying the upper limit interest rates specified by the Interest Rate Restriction Act. The recalculation revealed, among other things, that A had paid overcharged interest as described in (1) above. On February 3 the same year, the supporting intervener thus explained to A, among other things, that A had paid overcharged interest in the amount of approximately 3,300,000 yen in the Transactions, and that the supporting intervener was not eligible to act as an agent. However, A wished to engage the supporting intervener to work for A with regard to, among other things, seeking a refund of the interest overcharged in the Transactions and, on the same day, executed a mandate agreement with the supporting intervener, which included an authorization to the supporting intervener to reach a settlement with regard to, among other things, A’s claim for a refund of the aforementioned overcharged interest (hereinafter referred to as the “Mandate Agreement”).

(4) On March 25, 2009, the supporting intervener sent the appellant a written request seeking a refund of the interest overcharged in the Transactions. On March 31, 2009, the appellant offered the supporting intervener a settlement proposal whereby the appellant would pay 1,910,000 yen three months later. Subsequently, the appellant was notified of A’s intention that he would accept a settlement whereby 2,000,000 yen would be refunded by the end of April the same year. On April 1, 2009, the appellant notified the supporting intervener that appellant would settle the matter in line with the above intention of A. While A understood, among other things, that he was entitled to seek from the appellant a refund of the overcharged interest in the amount of approximately 3,300,000 yen, he decided to accept a settlement whereby he would receive a payment of 2,000,000 yen from the appellant, by taking into account, among other things, his burden in the event that the matter developed into litigation. On April 2, 2009, the supporting intervener, on behalf of A, executed an out-of-court settlement agreement with the appellant, whereby the appellant would pay 2,000,000 yen to A no later than April 30, 2009 and whereby A and the appellant acknowledged to each other that there were no other claims or obligations between them (hereinafter referred to as the “Settlement Agreement”), under which the appellant paid 2,000,000 yen. The supporting intervener’s execution of the Settlement Agreement on behalf of A was in violation of Article 72 of the Attorney Act, since the amount of interest overcharged in the Transactions exceeded the limit of 1,400,000 yen as referred to in Article 3, paragraph (1), item (vii) of the Judicial Scriveners Act.

(5) On February 2, 2016, A received an order of commencement of bankruptcy proceedings, whereupon the appellee was appointed as bankruptcy trustee.

3. Based on the facts related to the case described above, the court of prior instance accepted the appellee’s claims by ruling as follows:

The supporting intervener’s execution of the Settlement Agreement as an agent should be considered in violation of Article 72 of the Attorney Act, which is a public interest provision. In this regard, the Mandate Agreement between the supporting intervener and A is invalid, and the Settlement Agreement should be considered invalid as well in that it was executed based on such mandate agreement. Therefore, the claim for a refund of the interest overcharged in the Transactions has not been extinguished, and the appellant should pay the aforementioned overcharged interest and other obligations to the appellee who is A’s bankruptcy trustee.

4. However, the above ruling of the court of prior instance, that the Settlement Agreement is invalid, is unacceptable for the following reasons.

Article 72 of the Attorney Act provides that no person other than an attorney or a Legal Professional Corporation may, for the purpose of obtaining compensation, engage in the business of providing representation, aiding in conciliation, or providing other legal services in connection with legal matters. It is a violation of Article 72 of the Attorney Act to execute a mandate agreement with regard to a certified judicial scrivener’s engagement, for the purpose of obtaining compensation, in the business of arranging an out-of-court settlement on a claim for a refund of overcharged interest in excess of 1,400,000 yen, which is the amount referred to in Article 3, paragraph (1), item (vii) of the Judicial Scriveners Act, and such mandate agreement is understood as invalid in light of Article 90 of the Civil Code (see Supreme Court, 1962 (O) 1460, Judgment of the First Petty bench of June 13, 1963, Minshu Vol. 17, No. 5, p. 744). In the above case, while it is also a violation of Article 72 of the Attorney Act for the certified judicial scrivener, who has executed the mandate agreement, to execute the out-of-court settlement agreement on behalf of his client who is the other party to the mandate agreement, the validity of such settlement agreement should be determined separately from the validity of the mandate agreement, by taking into account such factors as whether or not it is necessary to invalidate the mandate agreement in order to achieve the purpose of the said article.

It is understood that the purpose of Article 72 of the Attorney Act is to prohibit persons who are not qualified attorneys from engaging, for the sake of their own profit, in the business of recklessly intervening in other people’s legal matters, since leaving these activities uncontrolled will harm the interests of the parties to the matters and of other persons involved, will disturb the fair and smooth operations of social life related to legal services, and will, in turn, disturb legal order (see Supreme Court, 1969 (A) 1124, Judgment of the Grand bench of July 14, 1971, Keishu Vol. 25, No. 5, p. 690). The effectiveness of the prohibition by Article 72 of the same act is secured by punishing violations of the said article (Article 77, item (iii) of the same act). If a certified judicial scrivener’s execution of an out-of-court settlement agreement violates the said article, he will be considered to have damaged the integrity of judicial scriveners and will be subject to disciplinary action on the grounds of a violation of Article 2 of the Judicial Scriveners Act (Article 47 of the same act). In addition, the mandate agreement executed in violation of Article 72 of the Attorney Act is understood as invalid as described above, which means that the certified judicial scrivener cannot receive remuneration from his client. In light of these rules for securing the effectiveness of the said article, the Court considers that it is not necessary, in order to prohibit certified judicial scriveners from engaging in activities violating the said article, to go so far as to deny the validity of an out-of-court settlement agreement executed by a certified judicial scrivener on behalf of his client. In addition, from the viewpoint of protecting the interests of the parties to such settlement agreement, it is not necessary to deny the validity of such settlement agreement unless there are particularly problematic issues in the terms and conditions of such settlement agreement, the circumstances leading up to its execution, etc. In fact, if the validity of such settlement agreement is immediately denied due to a violation of the said article, the interests of the parties who understand that the dispute has been settled may be damaged, which should be considered inappropriate. For these reasons, it is reasonable to understand that even in a case where a certified judicial scrivener’s execution of an out-of-court settlement agreement on behalf of his client constitutes a violation of the said article, such settlement agreement is not invalid unless exceptional circumstances exist which make the settlement agreement a violation of public policy in its nature considering such factors as its terms and conditions and the circumstances leading up to its execution.

Let us apply the above discussion to this case. According to the facts related to the case described above, the terms and conditions of the Settlement Agreement are designed to resolve the dispute by the appellant’s payment of 2,000,000 yen with regard to the overcharged interest in the amount of approximately 3,300,000 yen and to other obligations in relation to the Transactions. If we turn our eyes to the circumstances leading up to its execution, we find that the supporting intervener had explained to A the amount of interest overcharged in the Transactions and had obtained A’s understanding before executing the Settlement Agreement whose terms and conditions were in line with A’s intentions. No exceptional circumstances as referred to above are suggested, and the Settlement Agreement cannot be declared invalid.

5. For the above reasons, the ruling of the court of prior instance, which accepted the appellee’s claims, contains a violation of law that obviously affects its judgment. The appellant’s reasons for the petition for acceptance of final appeal are well-grounded, and the judgment of prior instance should inevitably be quashed. Based on the above discussion, the appellee’s claims are groundless and the conclusion of the judgment of first instance is legitimate. The appellee’s appeal should thus be dismissed.

Accordingly, the Court unanimously decides as set forth in the main text.

Justice IKEGAMI Masayuki

Justice OTANI Naoto

Justice KOIKE Hiroshi

Justice KIZAWA Katsuyuki

Justice YAMAGUCHI Atsushi