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1989 (Gyo-Tsu) 68

1990.06.05
1989 (Gyo-Tsu) 68
Minshu Vol. 44, No. 4
Judgment concerning the case regarding the degree of identification of the subject matter in a residents' request for audit
Case seeking compensation of illegal expenditures
Judgment of the Third Petty Bench, dismissed
Osaka High Court, Judgment of February 23, 1989
1. A residents' request for audit must be made by individually and specifically indicating an act or a fact of negligence relating to finance and accounting subject to the request in a way that it can be identified and distinguished from other matters. In addition, where there are two or more acts, etc. as mentioned above, a residents' request for audit must be made by individually and specifically indicating them in a way that each of the acts, etc. can be identified and distinguished from other acts, etc., except when it is considered reasonable to determine the illegality or unjustness of the acts, etc. by treating them as a unit in light of the nature, purpose, etc. of the acts, etc.

2. A residents' request for audit, which was made while attaching the newspaper article (cited in the judgment) as a document proving the illegal expenditures of public money by stating as follows in a written request for audit, is unlawful because it lacks the identification of the subject matter of the request: "The persons who were in the position of Water Supply Company Manager, Water Supply Division Manager or General Affairs Department Chief of the Water Supply Division during the period from fiscal 1980 to fiscal 1982 made unjust expenditures, or approved their subordinates' unjust expenditures, in the amount of over 50,000,000 yen for the three years on the pretext of meeting and entertaining expenses or various construction expenses by falsifying names and pretending to have held meetings and entertained guests."
Article 242, paragraph (1) and Article 242-2, paragraph (1) of the Local Autonomy Act

Local Autonomy Act

Article 242, paragraph (1)
(1) When a resident of an ordinary local public entity finds that a head, committee or committee member or official of the ordinary local public entity illegally or unjustly expends public money, obtains, administers or disposes of property, concludes or performs a contract or incurs a debt or other obligation (including the cases where such act is expected to be committed with considerable certainty) or that there is a fact of illegal or unjust negligence of imposition or collection of public money or administration of property (hereinafter referred to as a "fact of negligence"), the resident may make a request for audit to an audit committee member and demand that the audit committee member implement necessary measures for preventing or rectifying the relevant act or amending the relevant fact of negligence, or for compensating damages incurred by the ordinary local public entity due to the relevant act or the fact of negligence, with a document proving the act or the fact of negligence attached.

Article 242-2, paragraph (1)
(1) In the case where a resident of an ordinary local public entity makes a request pursuant to the provisions of paragraph (1) of the preceding Article, when such resident is dissatisfied with the results of the audit or recommendation conducted by the audit committee member pursuant to the provisions of paragraph (3) of that Article or the measures taken by the assembly, head, other executive agency or official of the ordinary local public entity pursuant to the provisions of paragraph (7) of that Article, when the audit committee member fails to conduct the audit or recommendation pursuant to the provisions of paragraph (3) of that Article within the period prescribed in paragraph (4) of that Article, or when the assembly, head, other executive agency or official fails to take the measures under the provisions of paragraph (7) of that Article, the resident may make any of the following claims by filing an action with the court with respect to the illegal act or the fact of negligence related to the claim under paragraph (1) of that Article; provided, however, that the claim under item (i) may only be made in the case where the relevant act is likely to cause damage to the ordinary local public entity that is difficult to recover from and the claim for return of unjust enrichment against the official among the claims prescribed in item (iv) may only be made to the extent a benefit exists for the official:
(i) a claim against the relevant executive agency or official for an injunction to cease the relevant act in whole or in part;
(ii) a claim for the revocation of, or a declaration of nullity of, the relevant act that was conducted as an administrative disposition;
(iii) a claim against the relevant executive agency or official for a declaration of illegality of the relevant fact of negligence; and
(iv) a claim for compensation for loss or damage or claim for return of unjust enrichment to be made against the official on behalf of the ordinary local public entity, or a claim for a declaratory judgment of absence of legal relationships, claim for compensation for loss or damage, claim for return of unjust enrichment, claim for recovery or claim for elimination of obstruction to be made against the other party related to the relevant act or fact of negligence.
The final appeal is dismissed.

The costs of the final appeal shall be borne by the appellants of final appeal.
Concerning reasons for a final appeal stated by the counsel for final appeal, YOSHIKAWA Minoru

Article 242, paragraph (1) of the Local Autonomy Act (hereinafter referred to as the "Act") provides that when a resident of an ordinary local public entity finds that there is an illegal or unjust act or a fact of negligence relating to finance and accounting in relation to an executive agency or official of the ordinary local public entity, the resident may make a request for audit to an audit committee member and demand that the audit committee member implement necessary measures with a document proving the act or the fact of negligence attached. It is reasonable to consider that the aforementioned provisions grant residents the authority to make a request for audit and measures to prevent and rectify illegalities to an audit committee member only in relation to a certain specific act or a fact of negligence relating to finance and accounting (hereinafter an act or a fact of negligence relating to finance and accounting is referred to as the "relevant act(s), etc.") committed by an executive agency or official of the ordinary local public entity, but do not grant residents the authority to make a request for audit to an audit committee member beyond that scope by comprehensively including the relevant acts, etc. over a certain period of time without specifically identifying them. The Act establishes the system of request for audit of affairs as one of the direct requests and provides that persons who hold the right to vote may make a request for audit to an audit committee member in relation to the execution of affairs, etc. of the ordinary local public entity through joint signatures of over one-fifth of such persons (Article 75). In addition, the Act includes no other provisions that distinguish a residents' request for audit from a residents' suit in relation to the relevant act, etc., which is the subject matter thereof, except that a residents' request for audit is positioned as a procedure prior to a residents' suit, which is a system to request the prevention and rectification of a specific illegal act, etc., and is provided as covering the relevant unjust act, etc.. In light of these facts, it must be considered to conform to the purpose of the Act to construe that the Act provides that even one resident may make a residents' request for audit but limits the subject matter of such request to a certain specific range of the relevant act, etc.. Furthermore, Article 242, paragraph (1) of the Act provides that a request for audit should be made by attaching a document proving the existence of the relevant illegal or unjust act, etc., and paragraph (2) of the same Article provides that a request for audit may not be made if one year passes from the date on which the relevant act was committed or the date on which the relevant act was completed unless there are any legitimate grounds. These provisions are considered to have been established on the premise that the relevant act, etc. subject to a residents' request for audit is specifically identified.

Therefore, in a residents' request for audit, it is not sufficient to identify the relevant act, etc. subject to the request to the extent of triggering an audit by an audit committee member, and it is necessary to individually and specifically indicate the relevant act, etc. in a way that it can be identified and distinguished from other matters. In addition, where there are two or more relevant acts, etc., it should be deemed necessary to individually and specifically indicate them in a way that each of the relevant acts, etc. can be identified and distinguished from other acts, etc., except when it is considered reasonable to determine the illegality or unjustness of the relevant acts, etc. by treating them as a unit in light of the nature, purpose, etc. of the relevant acts, etc. When it is found that the subject matter of a request for audit is not specifically indicated to the aforementioned extent as a result of comprehensively taking into account the written request for audit, statements in a document proving the facts attached thereto, and other materials, etc. submitted by the requester of the audit, it must be considered that the request for audit lacks the identification of the request and is thus unlawful and that the audit committee member does not assume the obligation to conduct audit in relation to the aforementioned request.

When this determination is applied to this case, the facts lawfully determined by the court of prior instance are as follows: [1] A private body called "Citizens' Ombudsman," to which the appellants belong, brought an accusation to the Osaka District Public Prosecutors Office in relation to the unlawful expenditures of meeting and entertaining expenses, etc. by the Water Supply Division of Osaka Prefecture, which became a problem at the meeting of the Special Audit Committee of the Osaka Prefectural Assembly in December 1982, and also filed three residents' suits (covering the expenditures, etc. stated in Breakdown Lists of Illegal Expenditures (I) to (III) attached to the judgment in first instance) after going through residents' requests for audit, as part of its activities; [2] Under the heading of "Fictitious entertaining expenses exceeded 50,000,000 yen," etc., the February 3, 1984 issue of Mainichi Shimbun reported that public money unlawfully expended by the Water Supply Division of Osaka Prefecture amounted to over 50,000,000 yen, which is 20 times the amount for which an accusation was made by the Citizens' Ombudsman to the Osaka District Public Prosecutors Office, for three years from 1980 to 1982, and that fictitious entertaining expenses were recorded by three departments out of the four departments of the Water Supply Division of Osaka Prefecture, specifically, the General Affairs Department, the Water Purification Department, and the Engineering Works Department, except for the Accounting Department, on the pretext of various construction expenses, etc. after meeting and entertaining expenses ran over the budget; [3] On March 2, 1984, the appellants made a request for audit (hereinafter referred to as the "Request for Audit") to an audit committee member of Osaka Prefecture in relation to the expenditures of meeting and entertaining expenses, etc. reported by the aforementioned newspaper by attaching the aforementioned newspaper article as a document proving the illegal expenditures; [4] The following content was stated in the written request for audit submitted by the appellants: "Persons who were in the position of Water Supply Company Manager, Water Supply Division Manager or General Affairs Department Chief of the Water Supply Division during the period from fiscal 1980 to fiscal 1982 (specifically, former Water Supply Company Manager of Osaka Prefecture B1, former Water Supply Division Managers of Osaka Prefecture B2 and B3, and former General Affairs Department Chief of the Water Supply Division of Osaka Prefecture B4) made unjust expenditures, or approved their subordinates' unjust expenditures, in the amount of over 50,000,000 yen for the three years on the pretext of meeting and entertaining expenses or various construction expenses by falsifying names and pretending to have held meetings and entertained guests. Osaka Prefectural Governor B5 left the situation where the aforementioned acts were repeated as it is and did not implement measures to prevent damages to the prefectural government and citizens of Osaka Prefecture without taking ordinarily necessary care regarding the administration of property." According to the aforementioned facts, the act subject to the Request for Audit is understood as the multiple expenditures of public money by the General Affairs Department, Water Purification Department, and Engineering Works Department of the Water Supply Division of Osaka Prefecture on the pretext of meeting and entertaining expenses, etc. over three budget years from fiscal 1980 to fiscal 1982. There seems to be no other choice but to determine the illegality or unjustness of the expenditures of public money of the kind as mentioned above with respect to each of the expenditures in terms of the nature of the matter. Therefore, it should be considered necessary to individually and specifically indicate the aforementioned expenditures of public money in a request for audit in a way that each of the expenditures of public money can be identified and distinguished from other expenditures. The period of the aforementioned expenditures of public money extends across three budget years, and according to Breakdown Lists of Illegal Expenditures (I) to (III) attached to the judgment in first instance, which were already alleged in the three residents' suits that the appellants had filed prior to the Request for Audit, the expenditures seem to have been made many times, at a level exceeding hundreds of times. Despite that fact, the pretext of the expenditures is only identified as meeting and entertaining expenses or various construction expenses, and the date and time, amount, destination, purpose, etc. of each of the expenditures are not made clear and the total amount of the expenditures is also not identified but is merely stated as over 50,000,000 yen. Even in combination with the aforementioned article in the February 3, 1984 issue of Mainichi Shimbun, the Request for Audit cannot be found to individually and specifically indicate the expenditures of public money to the extent that each of the expenditures of public money can be identified and distinguished from other expenditures. Therefore, the Request for Audit lacks the identification of the request and should be thus considered unlawful.

The determination of the court of prior instance to the same effect as above is legitimate and can be accepted. The judgment in prior instance contains no illegality as argued by the counsel, and the counsel's argument of unconstitutionality on the premise of the existence of the aforementioned illegality lacks a premise. The counsel's arguments are not acceptable.

Accordingly, in accordance with Article 7 of the Administrative Case Litigation Act and Articles 401, 95, 89, and 93 of the Code of Civil Procedure, the Court unanimously decides as set forth in the main text, except for the dissenting opinion stated by Justice SONOBE Itsuo.

The dissenting opinion stated by Justice SONOBE Itsuo is as follows.

Although the residents' suit system is a system for citizen action which was established to promote the proper operation of the finance and accounting systems of local public entities, I have been intensely interested in that the current residents' suit system has a legislative defect and is in the situation of being unable to sufficiently fulfill its original function. However, I consider it necessary to make clear the outline and problems of the current residents' suit system as a whole by giving interpretations that are faithful to the text of the current law until legislation is developed in the future. From such standpoint, I will express my basic views on the relationship between the system of residents' request for audit and the residents' suit system, which is disputed in this case.

As mentioned later, looking over the provisions on a residents' request for audit in the Local Autonomy Act (hereinafter referred to as the "Act"), it is reasonable to consider that the procedure for making a residents' request for audit is designed to make it possible for a resident to make a request for audit to an audit committee member by a simple and summary method, differently from the procedure, etc. for filing a complaint as prescribed in the Administrative Complaint Review Act (hereinafter referred to as a "request for administrative review"). Therefore, when a residents' request for audit is made, an audit committee member should not immediately dismiss the request on the grounds of a failure to fulfill the requirements for making the request, but should rather, whenever possible, accept the request, audit the matter in the request, and determine whether the request is well-grounded, and then implement the response measure provided in Article 242, paragraph (3) of the Act; the audit committee member may return the request only where the purpose and grounds of the request are completely unclear and the request is hard to accept as a written request for audit. If one understands a residents' request for audit in this manner, such view would be consistent with the purpose of the system of residents' request for audit. I then believe that if a measure to dismiss a residents' request for audit without prejudice is implemented, the court should, under Article 242-2, paragraph (1) of the Act, consider a residents' suit filed against the aforementioned dismissal without prejudice as a residents' suit filed "when the audit committee member fails to conduct the audit … pursuant to the provisions of paragraph (3) of that Article within the period prescribed in paragraph (4) of that Article" "in the case where a resident of an ordinary local public entity makes a request pursuant to the provisions of paragraph (1) of the preceding Article," as long as the residents' request for audit was made by the prescribed method. The details of the reasons thereof are as follows.

The majority opinion states that the subject matter of a residents' request for audit is limited to a "certain specific act or a fact of negligence relating to finance and accounting." The subject matter of a residents' suit is naturally limited to a certain specific act or a fact of negligence relating to finance and accounting (hereinafter an act or a fact of negligence relating to finance and accounting is referred to as the "relevant act(s), etc.) as long as the claims made in a residents' suit are disputed as various claims prescribed in Article 242-2, paragraph (1) of the Act by applying considerably strict litigation theories. On the other hand, the system of residents' request for audit is a system to make a request for audit to an audit committee member in relation to whether there is the relevant fact in the case where a resident senses that an executive agency or official of an ordinary local public entity commits an unlawful act, etc. relating to finance and accounting based on a newspaper article or any other information and considers the act, etc. to be suspected of being illegal or unjust from a legal perspective. That is, the system of residents' request for audit only allows residents to encourage audit committee members to exercise their authority, and does not grant residents the standing to make some sort of specific claim against a specific other party, such as an administrative organ, official or private person. The Act merely provides as follows: When an audit committee member who received a residents' request for audit finds that the request is groundless, he/she must notify the requester of that fact with reasons and make it public; when such audit committee member finds that the request is well-grounded, he/she must give a recommendation to the related organ or official as prescribed and notify the requester of the content of the recommendation and also make it public (Article 242, paragraph (3) of the Act). That is, the system of dismissal with prejudice on the merits or upholding of a claim, which exists in the system of request for administrative review and the residents' suit system, does not originally exist in the current system of residents' request for audit, and therefore, the concept of specific identification of the subject matter of a dispute, which should become the premise of the dismissal with prejudice on the merits or upholding of a claim, does not originally exist therein. In the same manner, the system of dismissal without prejudice on the grounds of a failure to fulfill the requirements for filing a request is not established in the system of residents' request for audit. In the case of a request for administrative review, an administrative determination or decision is provided as a method of expressing the intention by the reviewing agency or administrative agency reaching the disposition to uphold, dismiss with prejudice on the merits or dismiss without prejudice the request. However, such method is not provided in relation to the system of residents' request for audit. In addition, the principle that is generally called "principle of residents' request for audit first" originally differs from the "principle of request for administrative review first" in terms of its stated reason. That is, an administrative case litigation and a request for administrative review are completely the same in that a specific act or inaction of an administrative authority is disputed, with the exception that they differ in the decision-making agency; therefore, a suit and the procedure prior to it are consistent with each other. For example, in the case of adopting the principle of request for administrative review first, the Act contains the following expressions: "until an administrative determination or decision on a request for administrative review or objection is received" (Article 229, paragraph (6) and Article 231-3, paragraph (9)) or "until a decision on an appeal is made" (Article 256). However, there is absolutely no such consistency between a residents' suit and a residents' request for audit in terms of form, and Article 242-2, paragraph (1) only provides that "In the case where a resident of an ordinary local public entity makes a request pursuant to the provisions of paragraph (1) of the preceding Article, when such resident is dissatisfied with the results of the audit … conducted by the audit committee member pursuant to the provisions of paragraph (3) of that Article," the resident may file a residents' suit.

It is true that Article 242, paragraphs (1) and (2) of the Act include terms which appear to presuppose the physical and temporal identification of an act, etc. in question, such as "the relevant act" and "the relevant fact of negligence," as instructed in the majority opinion. However, such provisions are established only because an illegal or unjust situation relating to finance and accounting is ordinarily identified in many cases. There is no provision stipulating that a residents' request for audit must be treated as one that fails to fulfill the requirements for making a residents' request for audit on the grounds that such illegal or unjust situation is not identified. In addition, it must be considered difficult to immediately derive the need for the identification of a matter subject to a residents' request for audit through comparison between a request for audit of affairs, which is a type of direct request, and a residents' request for audit, which should be considered as a residents' dispute relating to finance. Comparing the method of making a residents' request for audit as being an objective dispute and the procedural position of the requester with those in the case of a request for administrative review as being a subjective dispute, it becomes clear that strict identification of a matter subject to a resident's request for audit is not necessary. That is, regarding the method of making a residents' request for audit, it is sufficient to state the gist of the request within 1,000 words (Article 172 of the Regulation for Enforcement of the Act) in the form separately prescribed in Article 13 of the Regulation for Enforcement of the Act, and detailed statements to identify the relevant act, etc. are not required. On the other hand, in the case of a request for administrative review, the requester is required to state the purpose and grounds for making the request in a written request for administrative review (Article 15, paragraph (1) of the Administrative Complaint Review Act). Then, the Administrative Complaint Review Act provides the procedures that enable the requester to identify and prove the subject matter of the request through the following proceedings: The requester for administrative review may submit necessary documentary evidence and articles of evidence (Article 26 of the same Act), file a petition for a witness's statement or expert opinion (Article 27 of the same Act), a petition for demand for submission of documents or other articles by the owner thereof (Article 28 of the same Act), and a petition for observation (Article 29 of the same Act) with the reviewing agency, and demand inspection of documents or other articles submitted by the administrative agency reaching the disposition (Article 33 of the same Act). On the other hand, in the procedure for making a residents' request for audit, the Act merely provides that a resident may make a request for audit to an audit committee member and demand that an audit committee member implement necessary measures with a document proving the relevant act, etc. attached (Article 242, paragraph (1) of the Act) and that an audit committee member must give a requester an opportunity to submit evidence and make a statement (paragraph (5) of that paragraph). That is, under the current system of residents' request for audit, a requester is not legally granted the authority of investigation which is necessary to identify the relevant act, etc., and in addition, in actuality it must be considered difficult for a requester to conduct investigations on an administrative organ or official engaging in the relevant act, etc. unless there are special circumstances. Therefore, a "document proving …" (Article 242, paragraph (1) of the Act) which should be attached to a written request for audit is not evidence in a strict sense like documentary evidence in litigation or documentary evidence in a request for administrative review (Article 26 of the Administrative Complaint Review Act), and it is considered sufficient if a "document proving …" is one that produced a lead for a requester to know the illegality or unjustness of the relevant act, etc. From the aforementioned standpoint, it is possible to adopt the interpretation that it is possible to require the plaintiff to specifically identify the "illegal act or the fact of negligence related to the request under paragraph (1)" as prescribed in Article 242-2, paragraph (1) of the Act from the perspective of litigation law, but it must be considered impossible to require the plaintiff to specifically identify the relevant act, etc. as prescribed in Article 242, paragraph (1) of the Act in a strict manner in the same way on the grounds that the texts of those provisions are the same by chance.

In this manner, the system of residents' request for audit has no standard for the identification of the relevant act, etc. subject to a request. Therefore, even where the subject matter has not been identified, if an audit committee member conducts some sort of audit on the unidentified subject matter and determines that audit cannot be conducted because the subject matter is not identified or where an audit committee member determines that the request is groundless as a result of making efforts for audit according to the purpose of the request, the audit committee member should notify the requester of either determination in writing and make it public with reasons thereof. Then, the aforementioned understanding should be considered to conform to the purpose of the system that allows residents, who generally lack expert knowledge about the acts relating to finance and accounting of local public entities and also lack means for access to information, to make a request for audit with the aim of encouraging an audit committee member to exercise his/her authority.

As mentioned above, absence of identification of the relevant act, etc. in a residents' request for audit should not be considered to be a ground for closing the door to the request, but a request for audit can be effectively dismissed without prejudice due to a legislative defect relating to the system of residents' request for audit or an immature interpretation of law. However, it is reasonable to consider that the court is not permitted to dismiss without prejudice a residents' suit against the aforementioned dismissal of a request for audit without prejudice, deeming that a request for audit has not been gone through or that a request for audit has not been made. That is, according to Article 242-2, paragraph (1) of the Act, in the case where a resident makes a request for audit, when the resident is dissatisfied with the results of the audit conducted by the audit committee member, he/she may file a residents' suit. However, the audit result as prescribed in Article 242, paragraph (3) of the Act is merely either of the following: the request was found well-grounded or groundless. Therefore, where an audit committee member implements a measure to dismiss a residents' request for audit without prejudice, which is not expected in the Act, it will cause the unreasonable result that even a person who made a request for audit is put in the state of being unable to file a residents' suit against the measure in terms of legal form because the request does not conclude in an audit result. However, this state must be considered as a situation that is completely not expected in the Act. Therefore, when a resident who was subjected to the aforementioned measure by an audit committee member files a residents' suit against the measure, the court should determine whether or not the filing of the residents' suit is appropriate as a legally possible relief measure, by considering that the aforementioned status falls under the case "when the audit committee member fails to conduct the audit … pursuant to the provisions of paragraph (3) of that Article within the period prescribed in paragraph (4) of that Article," and then holding the residents' suit to be lawful as long as it fulfills the original requirements for filing a residents' suit.

When this determination is applied to this case, according to the facts lawfully determined by the court of prior instance, the appellants argued that they came to know the illegal expenditures of public money by the Water Supply Division of Osaka Prefecture from the article in the February 3, 1984 issue of Mainichi Shimbun and submitted a written request for audit including statements as cited in the majority opinion with the aforementioned newspaper article attached as a document proving the illegal expenditures of public money. As instructed above, under the current system of residents' request for audit, where a written request for audit accompanied by this level of arguments is submitted, an audit committee member is expected to accept the request and conduct audit. Where a written request for audit at least contains statements as stated above, an audit committee member must consider that a lawful residents' request for audit was made.

Differently from the above, the judgment in prior instance supported the judgment in first instance that determined that the Request for Audit is unlawful and dismissed the action in question without prejudice on the grounds that it has not gone through a lawful residents' request for audit. This judgment in prior instance contains illegality of the erroneous interpretation and application of Articles 242 and 242-2 of the Act, and the aforementioned illegality obviously affects the judgment. Therefore, the counsel's arguments are well-grounded, and the judgment in prior instance should inevitably be quashed. The judgment in first instance should be revoked, and this case should be remanded to the Osaka District Court.
Justice YASUOKA Mitsuhiko

Justice SAKAUE Toshio

Justice TEIKA Katsumi

Justice SONOBE Itsuo
(This translation is provisional and subject to revision.)