[1] Whether Article 80(1) [Attachment 6] subparag. 1(b)(1) of the Enforcement Decree of the Framework Act on the Construction Industry provides for the limitation on the exercise of discretionary power that allows administrative agencies to choose one of the suspension of business or penalty surcharges (affirmative), and the purport of which is that a constructor subject to administrative disposition does not want to impose penalty surcharges in cases where a constructor does not want to do so is subject to administrative disposition

[2] In a case where an administrative agency does not reduce the period of business suspension by misunderstanding that a constructor is not subject to reduction of the period of business suspension even though there are extenuating circumstances such as reduction of the period of business suspension, or misunderstanding that the period of business suspension is not subject to reduction, whether the disposition of business suspension is illegal as it deviates from and abused discretion (affirmative)

[1] Article 82(2) of the Framework Act on the Construction Industry, Article 80(1) [Attachment 6] subparag. 1(b)1 of the former Enforcement Decree of the Framework Act on the Construction Industry (Amended by Presidential Decree No. 27440, Aug. 4, 2016) / [2] Article 82(2) of the Framework Act on the Construction Industry, Article 80(1) [Attachment 6] of the former Enforcement Decree of the Framework Act on the Construction Industry (Amended by Presidential Decree No. 2740, Aug. 4, 2016); Article 27 of the Administrative Litigation Act

[2] Supreme Court Decision 2014Du45956 Decided August 29, 2016 (Gong2016Ha, 1520)

E.S. Construction (Attorney Kim Tae-young, Counsel for the plaintiff-appellant)

The Governor of Gyeonggi-do

Seoul High Court Decision 2016Nu68078 decided April 20, 2017

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

A. Article 25(2) of the Framework Act on the Construction Industry (hereinafter referred to as the “Act”) provides that “A contractor shall subcontract a type of business corresponding to the details of construction to a constructor who has registered such business.” The competent administrative agency may order the constructor to suspend his/her business for a specified period not exceeding one year, or impose a penalty surcharge not exceeding the amount equivalent to 30/100 of the contract amount of the construction works in lieu of the suspension of business (Article 82(2)3), the standards for the suspension of business depending on the type and degree of the offense, the period of the suspension of business, the amount of penalty surcharges, and other necessary matters, shall be prescribed by Presidential Decree (Article 84 (H)).

Article 80(1) of the former Enforcement Decree of the Framework Act on the Construction Industry (amended by Presidential Decree No. 27440, Aug. 4, 2016; hereinafter “Enforcement Decree”) provides that “The period of suspension of business or the amount of penalty surcharge according to the type and degree of offenses under Article 84 of the Act shall be as specified in attached Table 6.” The main text of Article 80(2) provides that “The Minister of Land, Infrastructure and Transport may increase or decrease the period of suspension of business or the amount of penalty surcharge within the scope of 1/2 of the amount of the penalty surcharge pursuant to paragraph (1) in consideration of the motive, content and frequency of offenses, characteristics of construction related to offenses, bidding methods, etc.” Meanwhile, the Enforcement Decree [Attachment Table 6] and the criteria for imposition of business suspension and penalty surcharge (hereinafter “instant disposition standards”) are “1. A. Administrative disposition is imposed only by the relevant type of offense, and the criteria for the frequency of offenses” shall apply to cases where it has been subject to the same disposition for the last one year.”

B. The lower court acknowledged that the Plaintiff subcontracted major construction works on May 19, 2014, where the Plaintiff had not registered the type of business corresponding to the content of the pertinent construction works, to the corporation that executed major construction works such as soil works and reinforced concrete construction works among the instant construction works; and ② on October 16, 2014, where construction works corresponding to the packing construction works among the instant construction works are executed as the main construction works.

Based on the foregoing factual basis, the lower court determined that the Plaintiff’s above acts constituted a separate provision on restriction on subcontracting. In addition, on the premise that “number of violations” stipulated in the Act and the Enforcement Decree is limited to the number of violations committed by construction business operators, etc., who are the counterpart to the disposition, during the last one year, and that it cannot be deemed that the said act ought to be collectively “one disposition” on the basis of several violations, the lower court determined that both the disposition of suspension of business for five months and six months for each violation imposed on the Plaintiff according to the instant disposition standards within the scope of one year under Article 82(2) of the Act and the disposition of suspension of business for six months is lawful.

C. Such determination by the court below is acceptable as it is based on the above law and related legal principles. Contrary to the allegations in the grounds of appeal, it did not err by misapprehending the legal principles on the number of offenses or the interpretation of the instant disposition standards

2. Regarding ground of appeal No. 2

A. Article 82(2) of the Act provides that a constructor may order the suspension of business or impose a penalty surcharge in lieu of the suspension of business where the constructor violates the restriction on subcontracting. Meanwhile, the instant disposition standards provide that “(i) where a corrective order is issued on the grounds under Article 81 subparag. 5, 7 or 10 of the Act but fails to comply with it without justifiable grounds; (ii) where an administrative disposition is taken on the grounds under Article 82(1)6 or 7 of the Act or Article 82(2)5 of the Act; (iii) where a constructor violates the provisions on which a penalty surcharge has been imposed; and (iv) where a constructor does not want the imposition of a penalty surcharge in violation of any other provision under the conditions that the penalty surcharge has already been imposed; and (iii) where a constructor does not want the imposition of a penalty surcharge in violation of the provisions on the imposition of a penalty surcharge.”

Therefore, in light of the structure and contents of the relevant regulations as sanctions against constructors’ violations, it is reasonable to view that the provisions of the disposition criteria in the instant case provide administrative agencies with discretion to choose one of the suspension of business or the penalty surcharges in lieu of such suspension of business, but, as seen earlier, the administrative agencies are prohibited from imposing the penalty surcharges in lieu of the suspension of business if it falls under certain grounds. In particular, the purport of the above provision that the disposition of the disposition of the suspension of business, other than the penalty surcharges, may be regarded as minor than the suspension of business under generally accepted social norms, if the other party expresses his/her intention not to actively impose the disposition of the penalty surcharges, it is merely that the disposition of the suspension of business may not be imposed by respecting the other party’s intention, and it cannot be interpreted that the disposition of the suspension of business should be imposed if the other

B. Of the instant disposition standards, the lower court determined that: (a) it is difficult to view the aforementioned provisions to the effect that the administrative agency imposed the “duty to verify what kind of disposition is desired to be imposed on a constructor subject to sanctions under the relevant Acts and subordinate statutes in violation of the relevant Acts and subordinate statutes; and (b) it was not erroneous for the Defendant to not confirm what kind of disposition was intended to the Plaintiff while rendering each of the instant dispositions; and (c) it was lawful for the Plaintiff, who did not express any particular intent regarding the desired disposition, to impose a disposition, which is not a penalty surcharge, in accordance with the principle under Article 8

In light of the above legal principles, the judgment of the court below is just, and it did not err by misapprehending the legal principles on the interpretation and application of the criteria for disposition of the Framework Act on the Construction Industry, thereby affecting the conclusion of the

3. As to the third ground for appeal

Where there exist grounds for the reduction of the period of business suspension to a constructor in accordance with the provisions of the Act and the Enforcement Decree, in cases where an administrative agency takes into account the grounds for the suspension of business against a constructor as well as for the reduction of the period of business suspension, and where an administrative agency takes the disposition of business suspension according to the period of business suspension prescribed in Article 80(1) [Attachment 6] of the Enforcement Decree without reducing the period of business suspension, it cannot be readily concluded that it is unlawful. However, in cases where the administrative agency did not take into account the grounds for the suspension of business at all despite the absence of such grounds or reduces the remaining period of business suspension, it is unlawful that the disposition of business suspension was an abuse of discretion (see Supreme Court Decision 2014Du4

The lower court determined that each of the dispositions of the instant case was not a deviation or abuse of discretionary authority, on the ground that, inasmuch as the period of business suspension was reduced from 6 months to 5 months only for the first violation among the two offenses upon the application of the instant disposition standards, the Defendant considered the criteria for mitigation under Article 80(2) of the Enforcement Decree, and that it cannot be deemed that the Defendant did not consider the grounds for mitigation at all or that it did not constitute “the case where the Defendant misleads that it did not fall

Examining the reasoning of the lower judgment in light of the relevant legal principles, the lower court did not err by misapprehending the legal doctrine on deviation and abuse of discretion.

4. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)