2020Du30450 Demanding revocation of business suspension

Jinjin Accounting Corporation

Attorney Lee Jae-de et al., Counsel for the plaintiff-appellant

Financial Services Commission

Government Legal Service Corporation (Law Firm LLC)

[Defendant-Appellee] Defendant 1 and 2 others

Seoul High Court Decision 2018Nu74473 Decided November 14, 2019

December 24, 2020

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 referred to as the “former Act on External Audit”) 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 referred to as the “Treatment Shipping Sea”). The Plaintiff is a corporation established for the purpose of accounting audit, etc. (hereinafter referred to as the “each of the above external audits”), and the audit team consisting of certified public accountants belonging to the Plaintiff, which conducted each of the instant audits.

(2) On December 10, 2015, the Financial Supervisory Service, as a result of the window dressing accounting suspicion in the Daewoo Shipbuilding Sea and the suspicion of false audit by the audit team of this case, was selected as the subject of supervision, and started supervision over each of the instant audits, etc. Based on such supervision results, the Securities and Futures Commission recommended the Defendant to suspend business for 12 months 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 audits” under Article 16(1), etc.

(3) On April 5, 2017, the Defendant imposed a penalty surcharge of KRW 1.6 billion under Articles 429(1) and 119 of the Financial Investment Services and Capital Markets Act on the ground that: (a) on April 8, 2014, April 8, 2014, March 9, 2015, which was attached to the registration statement of December 13, 2016, the Plaintiff expressed an adequate opinion on the maritime financial statements of the vessel treated as negligence in the audit procedure; (b) on the ground that the audit team conducted a formal audit of the vessels’s financial statements from 2010 to 2015, and (c) upon the Plaintiff’s request for the provision of the logic to verify and rationalize the maritime accounting standards, which was attached to the audit report of December 13, 2016, and (c) the Plaintiff’s request for the implementation of the instant disposition for the suspension of business operation under Article 15(3) of the Certified Public Accountant Act for the reason that the audit team violated the quality control standards.

(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 determined that the instant lawsuit was lawful on the premise that the instant lawsuit satisfies all the requirements for litigation, and that 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 an audit by an accounting firm), but it is difficult to recognize the Plaintiff as the case where the Plaintiff participated in the instant audit team’s audit team’s violation of the standards for accounting audit; the Plaintiff’s members (registration directors) are 133 persons and the affiliated certified public accountants are 1,305 persons; the audit team of this case is 1,305 persons; the audit team of this case was 2 members and the affiliated certified public accountants; the Plaintiff was subject to sanctions such as imposition of penalties of KRW 1.6 billion in addition to the instant business suspension disposition; and Article 52-2 of the Certified Public Accountant Act provides that the Plaintiff may impose penalty surcharges in lieu of the disposition of business suspension on the Plaintiff.

(6) On the other hand, the lower court determined that there is no possibility that the Plaintiff could repeat 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 there is no possibility that the Defendant may repeat the business suspension disposition against the Plaintiff for the same reason. Therefore, it cannot be deemed that there is a need for explanation of legal issues that are verified or unclear in the illegality of the administrative disposition due to the risk of repeating the illegal disposition for the same reason between the Plaintiff and the Defendant, and therefore

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 also 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

B. A lawsuit seeking confirmation or revocation of an administrative disposition was lawful at the time of filing a lawsuit, and even if such disposition is deemed impossible to reinstate even if the effect of the administrative disposition is extinguished due to the lapse of the period, etc. during the proceeding of the lawsuit, the benefit of a lawsuit seeking revocation of the administrative disposition can be exceptionally acknowledged in light of the following: (a) where there exist other rights or interests recoverable by nullification or revocation, or where there is a risk of repeating an illegal disposition due to the same cause as that of the administrative disposition; or (b) where there is a need for explanation on legal issues involving confirmation or uncertainty of illegality of the administrative disposition due to the same cause as that of the administrative disposition, such as ensuring the legality of the administration; (c) judicial control thereof; and (d) expansion of citizens’ rights to remedy (see, e.g., Supreme Court en banc Decision 2006Du19297, Jul. 19, 2007; Supreme Court Decision 2013Du1638, Jun. 10, 2016).

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 of the instant audit team is recognized and the Plaintiff also does not dispute them, ① there is no clear precedent in the court as to whether the instant audit team’s business suspension disposition is permitted in the interpretation of Article 39(1)5 and subordinate regulations of the Certified Public Accountant Act, which is the basis of the instant audit team’s act for this reason, and ② even if the grounds for disposition are acknowledged, considering various circumstances such as the content and degree of the instant audit team’s violation, the degree of the Plaintiff’s involvement, and the proportion of the audit team’s role in the accounting firm, there is room for dispute as to whether the instant business suspension disposition is an excessive disposition in violation of the principle of proportionality. Accordingly, if the court did not make a decision on the merits of the instant case, it is anticipated that the Defendant’s opinion on the interpretation of the laws and regulations adopted and applied while the instant business suspension disposition will be applied again in the future. Accordingly, even if the period of business suspension expires, it is still necessary to clarify or clarify the illegality of the instant business suspension disposition.

Ultimately, the main reason is that “no possibility of repeating the illegal disposition for the same reason exists between the plaintiff and the defendant,” and that the court below erred by misapprehending the legal principles on the interest of the lawsuit in an appeal litigation, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The ground of appeal assigning this error is with merit.

4. Conclusion

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Supreme Court Decision 200

Justices Park Sang-ok

Justices Noh Jeong-hee

Justices Kim Jae-hwan in charge