Article 12(1)4 and (2) of the former Enforcement Decree of the Restitution of Development Gains Act; Article 6(1)4 of the Enforcement Rule of the Act on Contracts to Which the State is a Party does not provide a method to add individual items to actual expenses in the calculation of the general management expenses; and the purpose of allowing a uniform method to comply with the calculation method; and whether the calculation of the general management expenses may be based on the calculation method by adding additional expenses, other than material expenses, labor expenses, and expenses (negative in principle)

Article 11(2) of the former Enforcement Decree of the Restitution of Development Gains Act (amended by Presidential Decree No. 22395, Sept. 20, 2010); Article 12(1)4 and (2) of the former Enforcement Decree of the Restitution of Development Gains Act (amended by Presidential Decree No. 22395, Sept. 20, 2010); Article 6(1)4 of the Enforcement Decree of the Act on Contracts to Which the State is a Party under Article 9(4) of the Enforcement Decree of the Act on Contracts to Which the State is a Party does not include individual items as actual expenses in the calculation of the general management expenses. The purport that Article 6(1)4 of the Enforcement Rule of the Act on Contracts to Which the State is a Party under Article 9(4) of the Enforcement Decree of the Act on Contracts to Which the State is a Party does not include all items to be included in the general management expenses and it is difficult to determine the limit because it is very diverse and comprehensive to determine the general management expenses. Therefore, it is difficult to estimate the total construction expenses as additional items and expenses.

Article 11(2) of the former Restitution of Development Gains Act (Amended by Act No. 10662, May 19, 201); Article 12(1)4 and (2) of the former Enforcement Decree of the Restitution of Development Gains Act (Amended by Presidential Decree No. 22395, Sep. 20, 2010); Article 9(4) of the Enforcement Decree of the Act on Contracts to Which the State is a Party; Article 6(1)4 of the former Enforcement Rule of the Act on Contracts to which the State is a Party (Amended by Ordinance of the Ministry of Finance and Economy No. 58, Mar. 5, 2009)

Korea Land and Housing Corporation (Law Firm Shin & Yang, Attorneys Yang Ho-soo et al., Counsel for the plaintiff-appellant)

Masung Market (Attorney Park Jong-soo, Counsel for the plaintiff-appellant)

Seoul High Court Decision 2010Nu33537 decided July 15, 2011

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

The grounds of appeal are examined.

1. As to whether construction indirect costs and other costs are recognized as development costs

Article 2 subparag. 1 of the former Restitution of Development Gains Act (amended by Act No. 10662, May 19, 201; hereinafter “Development Gains Refund Act”) provides that “development gains” refers to increases in the value of land attributed to a person who implements a development project (hereinafter “project operator”) or a landowner in excess of increases in normal land prices due to the implementation of a development project, change of a land-use plan, or other social and economic factors. The development gains here refer to the gains accrued from improving the value of land that would be acquired through a development project. Accordingly, Article 9(1)2 and (4) of the Enforcement Decree of the Act on Contracts to Which the State is a Party (hereinafter “Enforcement Decree of the State Contracts Act”), and Article 6(1)1 of the Enforcement Rule of the same Act, which provides for the standards for preparing a budget for cost calculation in accordance with Article 2 subparag. 2 and 9 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 10662, Mar. 19, 2012>

According to the reasoning of the judgment below, the court below rejected the plaintiff's assertion that the construction cost calculated based on the "Accounting Standards for Public Corporations and Quasi-Governmental Institutions (Public Notice No. 2007-63 of the Ministry of Finance and Economy Notice No. 2007-63)" and "Accounting Standards for Government-Invested Institutions (National Housing Corporation No. 20th Amendment, December 26, 2006)", which the plaintiff is based on the inclusion of net construction costs, are not necessarily consistent with the items of development costs and calculation purposes, since matters necessary for the accounting principles of public corporations and quasi-government institutions are prescribed. Construction indirect costs (the plaintiff's head office, local headquarters, personnel expenses at each site), and other cost (construction supervision expenses, transportation expenses, and communication expenses) alleged by the plaintiff were invested in the land subject to the project of this case for the implementation of the housing site development project of this case.

Examining the reasoning of the judgment below in light of the above legal principles, the above judgment of the court below is just and acceptable, and there is no error in the misapprehension of legal principles as to the recognition of development costs spent as above items, as alleged in the ground of appeal.

2. As to whether construction funds’ development costs are recognized

According to Article 12(1)1 of the Enforcement Decree of the Development Gains Refund Act, the net construction cost, which is the basis for the calculation of development costs, refers to “total amount of material cost, labor cost, expenses, and taxes and public charges incurred for the relevant development project.” Article 12(3)1 of the Enforcement Decree of the Act, Article 9(1)2 of the Enforcement Decree of the State Contracts Act, and Article 6(1)3 of the Enforcement Rule of the State Contracts Act (amended by Ordinance of the Ministry of Finance and Economy of March 5, 2009; hereinafter “Enforcement Rule of the State Contracts Act”) include only the “total amount of expenses for manufacture, construction, or services, etc. of the subject matter of a contract” among net construction cost. However, since construction fund is required for purchasing land and constructing housing while implementing a development project, it shall not be deemed that the cost for construction project is not only material cost, labor cost, but also cost for other development project, but also increase in the value of the land subject to a project (see Supreme Court Decision 2018Du168138,208.

In this regard, the court below is just in rejecting the Plaintiff’s assertion that the construction fund interest constitutes “expenses” among net construction cost items, and there is no error of law by misapprehending the legal principles as to the recognition of the development costs of the construction fund interest, as alleged in the grounds of appeal.

3. Matters concerning methods of calculating general management expenses;

According to the delegation of Article 11(2) of the Development Gains Refund Act, Article 12(1)4 of the Enforcement Decree of the Act defines general management expenses from among development costs as “total amount of all expenses incurred in the management activity sector in connection with the relevant development project.” Article 12(2) proviso of the Enforcement Decree of the Act provides that “the calculation shall be made by applying the criteria and rates for determination of estimated price pursuant to Article 9 of the Enforcement Decree of the State Contracts Act.” Article 9(4) of the Enforcement Decree of the State Contracts Act provides that matters necessary for determination of estimated price shall be determined by the Minister of Strategy and Finance. Accordingly, Article 6(1)4 of the Enforcement Rule of the State Contracts Act, which is the Ordinance of the Ministry of Strategy and Finance, provides

As such, the purport that the calculation of general management expenses does not include individual items as actual expenses, and that the method of uniform calculation should be followed is very diverse and comprehensive items to be included in the general management expenses, and it is difficult to determine the limit thereof. As such, by allowing the project implementer and the administrative agency to calculate the general management expenses based on the construction cost cost which is relatively easy to be proven, thereby ensuring the convenience in work by lowering the daily details of the use of the general management expenses, and by preventing the excessive appropriation of expenses, etc. irrelevant to the project, into the development cost as the general management expenses. Accordingly, the general management expenses shall be calculated based on the total amount of material expenses, labor expenses, and expenses other than the items, and, in principle, it cannot be based on the calculation of the total sum of additional expenses

Meanwhile, Article 11-2(2) of the Regulations on the Imposition and Collection of Development Charges, which are directives of the Ministry of Land, Infrastructure and Transport, provides that general management expenses shall not exceed the amount calculated by multiplying the total amount of net construction expenses, research expenses, design expenses, and improvement expenses by a certain ratio. However, this is not only limited to the standard for administrative affairs inside an administrative agency having no legal effect, but also to the purport thereof, it is nothing more than that of setting the upper limit of the general management expenses. Therefore, in calculating the general management expenses, it shall not be deemed that it should be based on the amount calculated by adding additional amounts

According to the reasoning of the judgment below, the court below rejected the plaintiff's assertion that the general management expenses of this case should be calculated in accordance with the above provision of the State Contracts Act, based on the premise that they should be calculated in accordance with the above provision of the State Contracts Act, and that the amount of additional research expenses and design expenses should be calculated by multiplying the general management expenses by the rate of

Examining the reasoning of the judgment below in light of the aforementioned legal principles, the above determination by the court below is just, and there is no error of law by misapprehending the legal principles as to the method of calculating general management expenses, as alleged

4. Regarding the scope of recognition of road construction charges outside a district

Article 12 (1) 5 through 6 of the Enforcement Decree of the Development Gains Restitution Act for two land, and Article 12 (1) 5 through 6 of the Enforcement Decree of the same Act for the same project approval. However, in a case where only Party A’s land is subject to development charges and Party B’s land is not subject to development charges, it is reasonable to calculate the portion concerning Party A’s land in proportion to the ratio of the size of Party A’s land (see Supreme Court Decision 2011Du2897, Jun. 28, 2013).

According to the reasoning of the judgment below, after compiling the adopted evidence, the court below acknowledged the facts as stated in the judgment, and determined that the scope of the development costs should be determined in consideration of the legislative purpose of the redemption of development gains from the enhancement of the value of the land to be derived from the development project, and the legislative purpose of the redemption of the development gains from the development project is necessary and reasonable in consideration of the fact that the scope of the development gains from the improvement of the value of the land to be derived from the development project, and the road construction charges of this case outside the district of this case should be divided in proportion to the area of each of the above districts, in light of the fact that construction charges of this case are excluded from the imposition of development charges (rental housing district) although the land to be imposed the development charges and the rental housing district are gaining benefits at the same time due to the construction of roads.

Examining the reasoning of the judgment below in light of the aforementioned legal principles, the above determination by the court below is just, and there is no error of law by misapprehending the legal principles as to the scope of recognition of development costs of road construction charges outside the district, as

5. Conclusion

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)