[1] The method of determining the legal interest under Article 12 (2) of the Administrative Litigation Act, that is, the interest in a lawsuit seeking dispute over an administrative disposition

[2] While a lawsuit seeking confirmation or revocation of an administrative disposition is pending, where the effect of the administrative disposition is extinguished due to the lapse of the period, the benefit of lawsuit seeking revocation of the administrative disposition can be exceptionally acknowledged even if it is impossible to restore the original state to its original state, and where one of the exceptions is "the same as that of the administrative disposition is likely to repeat the illegal disposition

[1] Article 12 of the Administrative Litigation Act provides, “A lawsuit for revocation may be instituted by a person who has a legal interest in seeking the revocation of a disposition, etc... The same shall apply to a person who has a legal interest in seeking the revocation of a disposition, etc. even after the effect of a disposition, etc. is extinguished due to the lapse of the period, the execution of a disposition, etc., and other causes.” The legal interest in seeking the revocation of a disposition, etc. under Article 12(2) of the Administrative Litigation Act, i.e.

[2] A lawsuit seeking confirmation of invalidity or revocation of an administrative disposition is lawful at the time of filing a lawsuit. Even where the pertinent administrative disposition is deemed impossible to restore its original state even if it has ceased to have been revoked due to the lapse of the period due to the lapse of the litigation period, where there exist other rights or interests that can be restored by invalidation or revocation, or where there is a risk of repeating an illegal disposition due to the same cause as that of such administrative disposition, and thus, there is a need to seek revocation of such administrative disposition exceptionally in terms of ensuring legality of administration, judicial control thereon, and expansion of citizens’ rights. Here, “where there is a risk of repeating an illegal disposition due to the same cause as that of such administrative disposition” is only a representative example of an unclear situation requiring explanation of legal issues, and does not necessarily mean “where there is a risk of repeating the same party to the pertinent lawsuit.”

[1] Article 12 of the Administrative Litigation Act / [2] Article 12 of the Administrative Litigation Act

[2] Supreme Court en banc Decision 2006Du19297 Decided July 19, 2007 (Gong2007Ha, 1291) Supreme Court Decision 2007Du13203 Decided February 14, 2008 (Gong2013Du1638 Decided June 10, 2016) (Gong2016Ha, 938)

An Accounting Corporation (Attorney Lee Jae-jin et al., Counsel for the plaintiff-appellant)

Financial Services Commission (Government Law Firm Corporation, Attorneys Tae Tae-Gyeong et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2018Nu74473 decided November 14, 2019

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Case summary and key issue

A. Review of the reasoning of the lower judgment and the record reveals the following circumstances.

(1) The Plaintiff is a corporation established for the purpose of accounting audit, etc., and is an auditor who has conducted an external audit under the former Act on External Audit of Stock Companies (wholly amended by Act No. 15022, Oct. 31, 2017; hereinafter “former External Audit Act”) with respect to the financial statements during the 11th period (2010 Fiscal Year) through the 16th period (2015 Fiscal Year) of the Treatment Shipbuilding Shipping Co., Ltd. (hereinafter “Treatment Shipping Sea”) (hereinafter “the instant audit team”). The audit team consisting of certified public accountants belonging to the Plaintiff, which conducted each of the instant audits (hereinafter “the instant audit team”).

(2) On December 10, 2015, the Financial Supervisory Service, as a result of the window dressing accounting suspicion of the Daewoo Shipbuilding Sea and the suspicion of false audit by the instant audit team, was selected as the subject of supervision and commenced supervision over each of the instant audits, etc. Based on such supervision results, the Securities and Futures Commission recommended the Defendant to “12-month business suspension disposition” against the Plaintiff on March 24, 2017 on the ground of “violation of the External Audit Act and the standards for accounting audit in each of the instant audit processes” in accordance with Article 16(1) of the former External Audit Act.

(3) On April 5, 2017, the Defendant imposed a penalty surcharge of KRW 1.6 billion on the Plaintiff. At the same time, the Defendant rendered a formal audit of the maritime financial statements from 2014, April 8, 2014, March 9, 2015, and December 13, 2016, on the audit report of 2013, 2014, and 2015, the Plaintiff expressed an adequate opinion on the false maritime financial statements of the vessel treated as negligence in the audit procedure, and provided the Plaintiff with the instant disposition of KRW 1.6 billion under Articles 429(1) and 119 of the Financial Investment Services and Capital Markets Act. At the same time, the Defendant provided the Plaintiff with the instant disposition of KRW 1.6 billion on the ground that “The instant audit team provided the instant disposition of KRW 200,000 for the purpose of identifying and rationalizing the accounting standards of the vessel, or aided the Plaintiff’s request for the instant disposition of violation of Article 15 of the Certified Public Accountant Act.”

(4) On June 30, 2017, the Plaintiff filed the instant lawsuit seeking revocation only with respect to the instant disposition for suspension of business. As such, the suspension of business was commenced from April 5, 2017 and the period of suspension of business expired on April 4, 2018.

(5) Furthermore, the first instance court held that, on the premise that the instant lawsuit is lawful upon satisfying all the requirements for litigation, the reason for disposition under Article 39(1)5 of the Certified Public Accountant Act (in the event of a serious mistake or omission in the audit of an accounting firm), but it is difficult to recognize that the Plaintiff was involved in the organized act of violation of the standards for accounting audit of the instant audit team, such as silent, aiding and abetting, etc., the Plaintiff’s member (registered director) is 133 persons, and its affiliated certified public accountant is 1,305 persons, the audit team of this case is 1,300 members and 13 affiliated certified public accountants, and the Plaintiff was subject to sanctions such as imposition of penalty surcharge of KRW 1.60 million in addition to the instant disposition of business suspension, and Article 52-2 of the Certified Public Accountant Act provides that the Plaintiff may impose penalty surcharges on the Plaintiff in lieu of the disposition of business suspension.

(6) On the other hand, the lower court determined that the Plaintiff did not have the possibility of repeating the same mistake in the process of performing the audit in the future, and that if the Plaintiff repeats the same mistake by intention or gross negligence in the future, the Defendant cannot repeat the business suspension disposition pursuant to Article 39(1)5 of the Certified Public Accountant Act against the Plaintiff, and thus, it cannot be deemed that the Defendant requires explanation on legal issues with which illegality confirmation or uncertainty of the administrative disposition is verified or unclear because there is a risk that illegal disposition may be repeated for the same reason between the Plaintiff and the Defendant, and therefore, the Plaintiff did not have the interest to seek revocation of the business suspension disposition in the instant case, as the business suspension period under the instant

B. The key issue of the instant case is whether the interest in the Plaintiff’s lawsuit seeking revocation of the instant business suspension disposition should be deemed extinguished due to the expiration of the business suspension period specified in the instant business suspension disposition during the course of litigation.

2. Relevant legal principles

A. Article 12 of the Administrative Litigation Act provides, “A litigation for revocation may be instituted by a person who has a legal interest in seeking the revocation of a disposition, etc... The same shall apply to a person who has a legal interest in seeking the revocation of a disposition, etc. even after the effect of a disposition, etc. is extinguished due to the lapse of the period, the execution of a disposition, etc., and other causes.” The legal interest in seeking the revocation of a disposition, etc. under the proviso of Article 12(2) of the Administrative Litigation Act, i.

B. A lawsuit seeking confirmation or revocation of an administrative disposition is lawful at the time of filing a lawsuit. Even if the pertinent administrative disposition is deemed impossible to restore its original state even after its effect has ceased to exist due to the lapse of the period, the benefit of a lawsuit seeking revocation of the administrative disposition can be exceptionally acknowledged in light of the following: (i) the legality of the administration is secured; (ii) the judicial control is over it; and (iii) the expansion of citizens’ rights to remedy for revocation of the administrative disposition, where there is a risk of repeating the administrative disposition due to the same cause as that of invalidation confirmation or revocation; or (iv) there is a risk of repeating the administrative disposition due to the same cause as that of the administrative disposition; or (iv) there is a risk of repeating it; and (v) the interest of a lawsuit seeking revocation of the administrative disposition is limited to cases where there is a risk of repeating the administrative disposition due to the same cause as that of the relevant administrative disposition; and (v) the risk of repeating it between the parties to the lawsuit (see, e.g., Supreme Court en banc Decision 2007Du308.

3. Determination as to the instant case

We examine the above facts in light of the aforementioned legal principles.

First, even if the audit team’s violation of the standards for accounting audit is recognized and the plaintiff also does not dispute them, ① there seems to be room for dispute as to whether the defendant’s disposition of business suspension is an excessive disposition in violation of the principle of proportionality when considering various circumstances such as the content and degree of the violation committed by the audit team, the degree of the plaintiff’s involvement, and the share of the audit team in the accounting firm even in the case where the grounds for disposition are acknowledged, and ② there is no clear precedent of the court as to whether the disposition of business suspension for the entire accounting firm belonging to the audit team of this case is permissible in the interpretation of Article 39(1)5 of the Certified Public Accountant Act and relevant subordinate regulations, which are the basis of the law. Therefore, if the court did not decide on the merits of this case, it is anticipated that the defendant repeats and applies the opinion or the criteria for disposition regarding the interpretation of statutes

Therefore, even if the period of business suspension under the instant business suspension expires, it is still necessary to clarify or clarify the illegality of the instant business suspension disposition, so it is reasonable to recognize the benefit of lawsuit seeking revocation of the instant business suspension disposition, in accordance with the legal principles as seen earlier.

Ultimately, the lower court erred by misapprehending the legal doctrine prior to the interest of a lawsuit in an appeal litigation, thereby failing to exhaust all necessary deliberations, which led to the conclusion of the judgment, on the grounds that “no possibility of repeating an illegal disposition for the same reason exists between the Plaintiff and the Defendant.” The allegation in the grounds of appeal assigning this error is with merit.

4. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ahn Jae-chul (Presiding Justice)