2020Da270121 Confirmation of Non-existence of Obligation

A. A. B. B.C. Co.

Law Firm LLC et al., Counsel for defendant-appellant

[Defendant-Appellee]

Korea

Government Legal Service Corporation (Law Firm LLC)

[Defendant-Appellee] Plaintiff 1 and 3 others

Jeju District Court Decision 2019Na15434 Decided August 26, 2020

June 24, 2021

The judgment below is reversed, and the case is remanded to Jeju District Court.

The grounds of appeal are examined.

1. Special characteristics of private investment and concession agreements in public law;

A. Legislative intent

“Private investment” is a system under which the State, local governments, etc. (hereinafter referred to as “State, etc.”) procure all or part of financial resources from private persons to take account of the survival of the citizens through the construction and operation of public facilities, and guarantees the operation of facilities and the right to benefit within a certain scope. The purpose of using private capital and technology is to cope with the necessity of the expansion of investment in social infrastructure resulting from rapid industrialization and the expansion of economic scale, and to overcome the shortage of financial resources and inefficiency of the public sector (hereinafter referred to as “Private Investment Act”) in order to systematically support this system (see Constitutional Court Order 2007Hun-Ba63, Oct. 29, 2009).

(b) Classification by business operation method;

The method of implementing a private investment project shall be one of the methods prescribed in the Private Investment Act (Article 4 of the Private Investment Act). The method of private investment project is divided into the time when ownership of the infrastructure concerned belongs to the State or a local government at the time of completion of the infrastructure and the time when the management and operation rights are exercised, and the ownership of the infrastructure is vested in the State or a local government at the time of completion of the infrastructure, and the project implementer is granted the rights to manage and operate the infrastructure for a certain period, but the State, etc. leases and uses the infrastructure for the period determined by the Convention (BTL method). In principle, the method of BTL is a project implementer

(c) Characteristics of legal relations formed by the concession agreement;

The implementation of a project under a concession agreement shall comply with the provisions of the Public-Private Partnerships Act and the relevant Acts, and the concessionaire shall not perform any project other than the one recognized at the time of designation of the concessionaire, and there are restrictions or modifications, such as the prior approval of the competent authority at the time of disposal of management and operation rights or an alteration to investors. Therefore, the rights and obligations acquired by a concessionaire, the State, etc. under a concession agreement differs from the rights and obligations acquired by the contracting parties under a contract concluded between the parties on an equal contractual basis (see Supreme Court en banc Decision 2017Da273441, May 6, 2021).

The implementation of a project under a concession agreement shall follow the specific procedures, etc. prescribed by the Public-Private Partnerships Act and relevant Acts. The State, etc. shall designate the concessionaire by concluding a concession agreement with potential concessionaire including the conditions for the implementation of the project, such as total project cost, the period of use, etc. (Article 13 of the Private Investment Act). The same shall apply where a concessionaire prepares an implementation plan of the project before the implementation of the private investment project and obtains approval from the competent authority, and modifies the approved details

Therefore, in interpreting the contents of the concession agreement and the legal act based on the concession agreement under the Private Investment Act, it should not go beyond the interpretation principles under the provisions of the Private Investment Act and the relevant laws.

2. The judgment of the court below

A. The lower court acknowledged the following facts.

1) On September 2015, the Plaintiff concluded an agreement with the Minister of Education and a competent authority (hereinafter referred to as “instant agreement”) with the Plaintiff designating ○ University as a potential concessionaire for a project under “private-use private-use investment project newly established in the middle and the middle school life hall.”

2) On October 2015, with respect to the construction of a new living hall of Seogsan University (hereinafter “instant construction”), among the foregoing projects, the implementation plan was approved by the president of Seogsan University on and around October 2015, and the Plaintiff Surveyer submitted the commencement date, stating the commencement date as “ October 2015” (hereinafter “one starting date”).

3) However, since the procedure for selecting a supervisor of the president of △ University was delayed, on March 9, 2016, and the consent to land use was granted, the Plaintiff Survey Corporation could continue the instant construction work around that time. The Plaintiff Survey Corporation re- submitted the commencement date, stating “the commencement date of the construction work March 2016” (hereinafter referred to as “two starting date”). The Plaintiff Survey Corporation completed the construction work and obtained the confirmation of construction completion on July 19, 2017.

B. Based on the above facts, the lower court determined that, according to the instant agreement, the construction period is 510 days from the date of commencement (Article 22(1)), and the date of commencement refers to the date of commencement of construction as stated in the schedule of commencement submitted by the project implementer (Article 3 subparag. 58). The date of commencement, which is the date of commencement of construction under the terms of the agreement, refers to the date on which the supervisor is selected and the project implementer becomes able to carry out the actual construction by completing the procedure for commencement, such as obtaining consent from the competent authority to use the site, and thus, the date of commencement shall be deemed March 10, 2016, rather than the one starting date, and determined that there was no penalty for delay against the Plaintiff’s Defendant, as long as the construction period is completed before 510 days elapse.

3. Judgment of the Supreme Court

However, it is difficult to accept the judgment of the court below for the following reasons.

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

1) Article 28(1) of the State Contracts Act provides that when a project operator completes construction in excess of “the scheduled date for completion by unit school of each unit school of the project facilities (including the date of extension under the instant agreement) as determined by the instant agreement and the implementation plan without good cause, the project operator is obligated to pay liquidated damages from the completion date to the completion date as determined by the Ordinance of the State Contracts Act (Article 28(1)); “the scheduled date for completion” refers to the date specified in the implementation plan, and “the scheduled date for completion” refers to the date specified in the implementation plan at the time of extension of the construction period or extension of the commencement date (Article 3 subparag. 55), “the date of completion” refers to the date specified in the completion date in the confirmation date of construction completion issued by the project operator after recognizing the completion date through the completion completion

2) However, the implementation plan for the instant construction project submitted by the Plaintiff around September 2015 is specified as February 22, 2017 as the completion date of the implementation plan, and otherwise, it is difficult to find out that the Plaintiff filed an application for mediation of the completion plan for the reason attributable to the side of △ University for mediation of the completion plan for the reason that the cause attributable to the Plaintiff was attributable to the △ University (for instance, during the construction of the instant project, the completion date of the completion plan is indicated as February 22, 2017, even in the commencement date attached to the report on the commencement of the construction project submitted by the Plaintiff

3) The instant agreement provides that the term “construction period” means the period from the commencement date to the date preceding the date of final confirmation of completion (Article 3 subparag. 6); the construction period for each unit of school shall be 510 days from the commencement date; however, the term “construction period” shall be 510 days from the commencement date; however, the term “the commencement date” means the commencement date of construction as set forth in the construction date submitted by the project executor (Article 3 subparag. 55) where the competent authority requests the commencement date or extension of construction period and the competent authority recognizes it (Article 22(1) and (3).

Meanwhile, according to the instant agreement, the project implementer shall commence the construction within 14 days after obtaining approval of the implementation plan and notify the competent authority of the commencement report, and submit the report of commencement to the competent authority within seven days from the commencement date of the construction project supervisor (Article 23(2) and (3)).

If a project operator fails to commence construction works within one month from the commencement date without any justifiable reason, the competent authority may terminate the instant agreement and cancel the designation of the project operator pursuant to the Private Investment Act (Article 23(4)). The competent authority shall select a project supervisor who is an eligible project operator in accordance with the relevant statutes, such as the Construction Technology Promotion Act, and the project operator shall enter into a construction project management agreement with the project supervisor selected by the competent authority after consultation with the competent authority on the total amount of supervision expenses and the method of paying supervision expenses (Article 34(1)). Meanwhile, the Defendant asserts that there was no objection against the validity of the consultation on supervision expenses due to the delayed change of the construction works by the Plaintiff.

B. Examining the facts acknowledged by the court below in light of the legal principles as seen earlier and the contents of the instant agreement, the issue of whether the obligation to compensate for delay has occurred under the instant agreement shall be based on the determination whether the “scheduled date of completion” was completed without justifiable grounds pursuant to Article 28(1), which is a provision on the compensation for delay, is the basis for determination. Thus, as long as the project operator has completed the instant construction project by neglecting the scheduled date of completion as specified in the implementation plan, it shall be deemed that the obligation to compensate for delay, in principle, has occurred

Nevertheless, the lower court determined that there was no liability for liquidated damages under the premise different from the interpretation principle of the instant Convention. In so determining, the lower court erred by misapprehending the legal doctrine on the method of interpreting concession agreements under the Private-Private Partnerships Act, and the requirements for compensating for delay under Article 28(1) of the instant Convention, thereby failing to exhaust all necessary deliberations. The allegation contained in the grounds of appeal assigning this error is with merit.

4. Conclusion

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 Park Tae-tae, Counsel for the defendant

Justices Cho Jae-chul

Justices Min You-sook

Justices Lee Dong-won