Spain Co., Ltd. (Law Firm Re-ownership, Attorney Choi Young-young, Counsel for the plaintiff-appellant)

Republic of Korea (Law Firm Han, Attorney Noh Jeong-hee, Counsel for defendant-appellant)

March 25, 2010

Seoul Central District Court Decision 2008Gahap86282 Decided July 10, 2009

1. Of the judgment of the court of first instance, the part against the defendant ordering payment of KRW 250,803,017 to the plaintiff as well as KRW 5% per annum from September 16, 2008 to April 15, 2010 to the day of complete payment, and KRW 20% per annum from the next day to the day of complete payment, shall be revoked, and the plaintiff's claim corresponding to the revoked part shall be dismissed.

2. The defendant's remaining appeal is dismissed.

3. Of the total litigation costs, 65% is borne by the Plaintiff, and 35% is borne by the Defendant, respectively.

1. Purport of claim

The defendant shall pay to the plaintiff 709,673,431 won with 20% interest per annum from the day following the delivery of a copy of the complaint of this case to the day of complete payment.

2. Purport of appeal

The part against the defendant in the judgment of the first instance shall be revoked, and the plaintiff's claim corresponding to the revocation shall be dismissed.

1. Basic facts

This part of the court's explanation is the same as the reasoning of the judgment of the court of first instance, and therefore, this part is cited in accordance with the main sentence of Article 420 of the Civil Procedure Act.

2. Related statutes;

It is as shown in the attached Table related statutes.

3. Occurrence of liability for damages;

A. Illegality of revocation of designation of defense materials

1) Whether the requirements for revocation of designation of defense materials are satisfied

A) Article 48(3)1 of the Defense Acquisition Program Act

Where it is not necessary to specify the disposition agency specifically, the Defendant (hereinafter referred to as the Defendant simply without specifying the disposition agency) based on Article 48(3)1 of the Defense Acquisition Program Act, the revocation of the designation of defense materials against the Plaintiff (hereinafter referred to as the “instant revocation of the designation of defense materials”), and thus, whether the revocation of the designation of defense materials in this case satisfies the requirements of the above provision is examined.

Article 48(3)1 of the Defense Acquisition Program Act provides, “When it is recognized that it can be procured from more than two enterprises and that it can be ensured quality.” Thus, if the Defendant intends to revoke the designation of defense materials against the Plaintiff, the above defense materials must satisfy the requirements of ① facilitating procurement from more than two enterprises, ② ensuring the quality of defense materials must be ensured. The designation of defense materials is for securing the stable procurement cost, strict quality assurance, etc. (Article 34 of the Defense Acquisition Program Act). Since the designation of defense materials is for the sake of stable procurement, strict quality assurance, etc. of defense materials (Article 34 of the Defense Acquisition Program Act), “the easiness of procurement” and “quality assurance” as a requirement for revocation of the designation of defense materials must be strictly interpreted so that the stable procurement cost and strict quality assurance can be ensured even if the designation is revoked in light of the unique characteristics of defense materials directly related to the national security and the purport of the system for the designation of defense materials. Accordingly, the easiness and quality assurance of the procurement should be objectively construed from the general average point of view, so that two or more enterprises are procured, smooth, and objectively guaranteed.

However, according to the above basic facts, the promotion of the two industries developed by the defendant was determined as fit for military use on June 29, 2007 at the time of the revocation of the designation of defense materials of this case, and the ability of the two industries was not verified. According to Article 17 (1) 2 of the Enforcement Rule of the Defense Acquisition Program Act, the operation test and evaluation of the research weapons systems to be developed shall be deemed as fit for combat purposes or inappropriate. However, in the case of a project requiring long time from the development and design of naval vessels to the final production, it is prescribed that the suitability for combat purposes can be determined provisionally for the continued implementation of the project or subsequent completion of the project during the research and development. Thus, the evaluation of the suitability for the use of the provisional military is clearly a temporary determination for the continuing implementation of the project under research and development or for the progress of the project at the subsequent stage, so this determination does not reach the level of guaranteeing the objective quality. Moreover, according to the entry of evidence Gap, it is recognized that the two industries to be implemented after the alteration of the two industries at the time of the two industries can be cancelled.

B) Article 48(3)4 of the Defense Acquisition Program Act

The defendant added the grounds for revocation of the designation of defense materials of this case during the litigation of this case to "when the revocation of the designation of defense materials is necessary due to the research and development or the alteration or revocation of the plan for the purchase of defense materials or when it is not necessary to continue the designation of defense materials" under Article 48 (3) 4

An appeal seeking the revocation of an ordinary administrative disposition is filed against a disposition agency, and the disposition agency may add or change other grounds to the extent that the underlying facts are identical to those of the initial disposition in an appeal litigation. However, since the Defendant is not the disposition agency, the Defendant cannot add or change the grounds for the disposition by itself, and there is no other evidence to acknowledge that the disposition agency added or changed the grounds for the disposition. In addition, even if the disposition agency added the grounds for the disposition as the Defendant asserted, it does not constitute “where revocation of the designation of defense materials is required due to research and development, alteration or revocation of the purchase, or where the designation of defense materials is not necessary to continue to maintain the designation of defense materials,” which is the grounds for the initial disposition, this does not constitute a case where the basic facts significantly differ from that of “where it is recognized that the procurement is easy and quality is guaranteed by more than two enterprises”

In addition, even if the change of the ground for the above disposition is the same case as the basic fact, it is difficult to deem that the disposition of revocation of the designation of defense materials of this case meets the requirements for the following reasons. In other words, Article 48(3)4 of the Defense Acquisition Program Act provides that "Research and Development or the alteration or cancellation of the plan for purchasing defense materials" in cases where the necessity of revocation of the designation of defense materials is recognized, and considering that the disposition is infinite disposal that infringes on the rights of the general public, it cannot be interpreted that "the change or cancellation of the plan" is different from the simple change of the intention of purchasing. However, Article 33(1) of the same Act provides that "the basic plan for fostering the defense industry (hereinafter referred to as the "basic plan") shall be established to provide reasonable support and fostering of the defense industry in Article 33(2) of the same Act, and therefore, Article 48(3)4 of the Defense Acquisition Program Administration provides that "the basic plan shall include the following matters concerning research and development and purchase of defense materials," and its modification or cancellation of the above basic plan.

2) Whether the scope and limits of discretion are complied with

Article 48(3) of the Defense Acquisition Program Act provides that "Where defense materials fall under any of the following subparagraphs, the Administrator of the Defense Acquisition Program Administration may revoke the designation of the defense materials in consultation with the Minister of Knowledge Economy." Therefore, the Administrator of the Defense Acquisition Program Administration may revoke the designation of defense materials in the event that a cause falling under any of the subparagraphs of the said Article exists, but even in that case, the Administrator of the Defense Acquisition Program Administration shall comply with the scope and

In full view of the facts acknowledged earlier, the Defendant delayed the development of the two industries following the two industries for both civilian and military purposes, and designated as defense materials by first raising the promoters through the introduction of technology into Korea through foreign countries, and by limiting the promotion engine to four parts of the technology development products for both civilian and military purposes in reality. The Board of Audit and Inspection conducted an opinion that it would add the performance test to the two industries for both civilian and military purposes where the two industries are in progress without any particular reason, thereby making it impossible to de facto impossible to designate the promotion engine for both civilian and military purposes, and making it possible to designate the defense materials for the manufacturer of the technology promotion engine for both civilian and military purposes, on the ground that “The designation of defense materials in this case was revoked after the determination of the military suitability of the promotion engine for both civilian and military purposes, and the revocation of the designation of defense materials in this case is recognized as having not been made within the scope of the Plaintiff’s discretionary authority’s revocation of the designation of defense materials within the scope of its discretionary authority, which is unreasonable for the following reasons.”

(b) Intentional or negligence of public officials;

On the ground that any administrative disposition is unlawful, it cannot be deemed as a tort as the intentional or negligent act of a public official. However, in a case where the public official in charge of the administrative disposition was deemed to have lost objective legitimacy due to the failure to perform an objective duty of care when considering the public official’s standard, it is reasonable to deem that the public official in charge of the administrative disposition satisfied the requirements for State liability under Article 2 of the State Compensation Act. In this case, whether the administrative disposition has lost objective legitimacy should be determined by the determination on whether there exists a substantial reason to assume the responsibility for compensating for damages to the State or local government, by taking into account all the circumstances such as the type and nature of the gains of infringement, the form and cause of the administrative disposition being infringed, the victim’s involvement in the exercise of the administrative disposition, and the degree of damages (see Supreme Court Decision 9Da7060, May 12, 200).

On the other hand, the revocation of the designation of defense materials of this case is an indivable administrative act that infringes the other party's rights, but there is no provision for compensation, so relevant public officials should be carefully and carefully determined in examining the requirements. In full view of the facts acknowledged earlier, the Administrator of the Defense Acquisition Program Administration designated the plaintiff as defense materials for the reason that the propellor under development in the two industries could not actually be loaded up until 1 to 4, and the request for re-deliberation was made on the ground that the revocation requirements were not met even though the Board of Audit and Inspection's request for re-deliberation was made on the ground that the possibility of procurement and quality assurance cannot be objectively guaranteed. The designation of defense materials of this case was revoked only by the determination of suitability for provisional use, which is difficult to view that the plaintiff's request for re-determination is objectively guaranteed. Since the designation of defense materials of this case was conducted with considerable expenses such as entering into a contract for the introduction of technology with the French LIPS company in accordance with the designation of defense materials of this case, it is recognized that the designation of defense materials of this case was unlawful in light of such circumstances.

The defendant asserts that the disposition of revocation of the designation of defense materials of this case was made in accordance with the request of the Board of Audit and Inspection issued under Article 33(1) of the Board of Audit and Inspection Act, and the state agencies under the Board of Audit and Inspection Act have the obligation to comply with such request, and that the Board of Audit and Inspection requested the review of the Board as the business interest would be infringed upon if the revocation was immediately cancelled. In light of these circumstances, the public official's intention and negligence cannot be recognized. However, since the request of the Board of Audit and Inspection for correction by the Board of Audit and Inspection cannot be the ground for infringement of the private person's legitimate rights

4. Scope of damages.

A. Principles

The damage suffered by the Plaintiff due to the revocation of the designation of defense materials of this case refers to the damage caused by the failure to deliver the Defendant more than two to four parcels of propellers, the designation of which was revoked as defense materials. However, if there are other circumstances that the Plaintiff could not supply without the disposition of this case, or there are circumstances that the Plaintiff could not supply due to reasons different from the disposition of this case, it would be difficult to recognize causation between the two parties. Therefore, even if the Plaintiff was designated as defense contractor, it should be seen from which extent the Plaintiff could have supplied the Defendant more than two to four parcels of propellers.

Article 4 of the Defense Acquisition Program Act provides, “Except as otherwise provided for in other Acts, this Act shall apply to defense projects.” Article 37(1) of the same Act provides, “Defense Acquisition Program Act shall be in the position of a special law.” However, Article 37(1) of the same Act provides, “Defense Industry shall be guaranteed by the Government for the manufacture and procurement of defense materials.” Article 50(1) of the Enforcement Decree of the said Act provides, “The Government shall preferentially purchase defense materials manufactured by defense contractors.” Meanwhile, the State has a duty to preferentially purchase defense materials manufactured by defense contractors. Meanwhile, Article 14(1) of the said Act provides, “The Government may preferentially purchase goods developed through technology projects for both civilian and military purposes. In such cases, purchasing contracts may only be concluded under a free contract, as prescribed by the Act on Contracts to Which the State is a Party, and the Plaintiff has the exclusive right to request for damages from the Plaintiff to the Defendant for the manufacture and procurement of defense materials incurred by the State.” Thus, the Plaintiff’s exclusive right to request for damages from the designated manufacturer to the extent of this case.

(b) the scope and amount of specific damages;

1) The Plaintiff asserts the non-refluent cost, inhaled design cost, license tax, etc. that the Plaintiff paid from France while introducing technology. This cost corresponds to ordinary trust interest at the cost incurred before the Defendant’s implementation period supply contract, but it is impossible to recover as the Plaintiff failed to supply the propeller, and thus, it constitutes damages incurred by the instant disposition unless the Plaintiff makes duplicate damages corresponding to the implementation interest. However, considering the overall purport of arguments in Gap evidence 19, 21, Gap evidence 20-1, 20-1, 24-1, 24-1, 24-3, while introducing technology on the propeller of this case, the Plaintiff’s implementation rate of 15,890, 200, 6, 111 x 64, 235, 207, 207, 305, 207, 305, 207, 305, 107, 207, 305, 107.

In regard to this, the Plaintiff asserted that, at the time of cancelling the designation of the defense materials of this case, the damage claim of this case was specified as emulation, not domestic currency, and that, as long as the Plaintiff claims for the conversion into Korean currency by exercising the right to substitute payment, it should be based on the foreign exchange price at the time of the conclusion of arguments at fact-finding proceedings in accordance with Article 378 of the Civil Act. However, it is insufficient to recognize that the Plaintiff and the Defendant have decided to emulation for damages only because the Defendant was aware that the currency to be paid in consideration for the introduction of technology was emulation. Meanwhile, the term “money” under Articles 763 and 394 of the Civil Act, which stipulate the method of compensation for damages due to tort, refers to Korean currency, and thus, the amount of money is not a foreign currency designated foreign currency claim, unless there are special circumstances such as the parties agreed to pay in foreign currency. Therefore, the Plaintiff’s claim on the premise that the damage claim based on the tort of this case

5. Conclusion

Therefore, the defendant is obligated to pay to the plaintiff 250,803,017 won and the amount calculated by applying the rate of 5% per annum from September 16, 2008 following the day of service of a copy of the complaint of this case to April 15, 2010, which is deemed reasonable for the defendant to dispute about the scope of the claim of this case, and 20% per annum from the next day to the day of complete payment. Therefore, the part against the defendant who ordered payment exceeding the above amount of recognition in the judgment of the court of first instance is unfair, and the plaintiff's claim corresponding to the revoked portion is dismissed, and the defendant's remaining appeal is dismissed, and it is so decided as per Disposition.

Judges Jung-gu (Presiding Judge)

1) If the designation of a defense contractor is revoked, it would lead to the revocation of the designation of a defense contractor, so it is not judged separately regarding the revocation of the designation.