Should a capital be deducted from compensation in fraud case?

Defrauded victims can ask a return of their expense to defrauders: if victims rescind contracts based on civil code (art.96) , they can seek restitutions as unjust enrchiment (civil code, art.704);  victims also seek repaymnet as damage compensaton by tort (civil code, art.709).

Restitution of unjust profit

In any events, when the scammer expent any money to as means of defrauding a victim, the scammer principally can ask deducting his payment from damage; It is because the money that a victim got shall be regarded as unjust enrichment, even if the money was spent as a means of cheating (civil code, art.703), precedent court ruling had stated (Supreme Court ruling on 24th March 1993, Showa 63nenn (o) 1749). The civil code stipulates that a person who made an expenditure based on unlawfull inducement cannot claim return of it. But the civil code does not make it clear whether a person who already paid back the money can seek restitution of money paid by unlawful inducement or not.

Supreme Court ruling

On 24th June 2008, the Supreme Court altered a precedent in nominal terms of purchasing transactions of U.S treasury bond;  it follows to the Supreme Court ruling on 10th June 2008 related to illegal money lending case. The defendant sold a U.S treasury bond to the claimants, promising to be able to get profitable dividend by the purchasing. Although the defendant did not purchased any bonds, he paid the dividend several times as promised, but soon later he failed to perform his obligation. In litigation procedure,the defendant claimed that the dividend should be deducted from his unjust profit.

The court of appeal approved the claim of the defendant. However, the Supreme Court, on the contrary, rejected the claim of the defendant: the scammer can not ask a return of his expense, if the expense was consumed by immoral purpose like as fraud; the scammer also can not ask deducting his expense from damages compensation; as a result, a victim can claim returning all of his payment including an expenditure of the defrauder.

Objection by one Justice

One of the Justices, Justice Tahara, objects to this ruling: he states that if the payment of dividends for the purpose of concealing illegal activity by defrauder, the ruling might be justified; but in this case, the payment of dividents by defraluder is already established at the contracts formed; the payment of dividends is embodied in fraudulent sheme and it should not be regarded as the activity concealing his cheating. 

The justice states the unfairness among victims. The status quo of recovery of damage in victims would be different; some victims might have already received dividends several times; but another victims might not receive any dividends yet; if the defraluder goes into bankruptcy before all victims receivd dividends in same ratio, and if they can seek damage compensation as same as their expense of purchasing bonds, this treatment shall be not justified.