2001(Gyo-Hi)No. 266 and, 267

Date of the judgment	2004.01.15
Case number	2001(Gyo-Hi)No. 266 and, 267
Reporter	Minshu Vol. 58, No. 1
Title	Judgment upon the case in which the payment of salaries to prefectural officials dispatched to a public-private joint venture company was deemed to be illegal
Case name	Case to seek for suspension of payment of salaries to public officials, etc.
Result	Judgment of the First Petty Bench, partially quashed and decided by the Supreme Court, partially rejected, partially dismissed
Court of the Second Instance	Hiroshima High Court, Okayama Branch, Judgment of June 28, 2001
Summary of the judgment	1. Where the prefectural government dispatched its officials to a public-private joint venture company and paid them salaries while exempting them from the obligation to devote themselves to performing their prescribed duties and permitting them to be absent from duty in the prefectural government, given the fact that the government dispatched them partly because the company did not have either business income or sufficient human resources, the company's business was the operation of an amusement park, the dispatched officials were engaged in the company's business in general, and 13 officials were dispatched in total over seven years, the payment of salaries to these officials by the prefectural government is illegal. 2. Even where the prefectural government concluded an agreement with a public-private joint venture company for the government to dispatch prefectural officials to the company and bear costs of their salaries and the prefectural government actually paid them salaries while exempting them from the obligation to devote themselves to performing their prescribed duties and permitting them to be absent from duty, and even if the said agreement was held to be illegal as being in violation of the purport of Article 24, para.1, Article 30, and Article 35 of the Local Pubic Service Law, when considering the circumstances in this case where, at the time when the said agreement was concluded, although the legal systems for the dispatch of local public officials had yet to be established, many local governments in Japan dispatched officials to public-private joint venture companies and, in most cases, paid them salaries while exempting them from the obligation to devote themselves to performing their prescribed duties, and there was no established idea and common views among experts and court decisions with respect to the appropriateness of such dispatch also differed from case to case, the said agreement cannot be deemed to be null and void under private laws. 3. Under the circumstances where, at the time when the prefectural government concluded an agreement with the public-private joint venture company for the government to dispatch prefectural officials to the company and bear the costs of their salaries, although the legal systems concerning the dispatch of local public officials had yet to be established, many local governments dispatched officials to public-private joint venture companies and, in most cases, paid them salaries while exempting them from the obligation to devote themselves to performing their prescribed duties, there was no established idea or common view among experts and court decisions with respect to the appropriateness of such dispatch differed from case to case, and the dispatch of the prefectural officials to the company was implemented through the due process for the exemption from the obligation to devote themselves to performing their prescribed duties under the ordinance of the prefectural government, the prefectural governor cannot be deemed to be negligent for having concluded the said agreement and paid the dispatched officials salaries.
References	(Concerning 1 to 3) Articles 24, para. 1, Article 30, and Article 35 of the Local Public Service Law, Article 2 of the Ordinance Concerning the Exceptions for the Obligation to Devote Oneself to Performing One's Prescribed Duties (Okayama Prefecture Ordinance No. 49 of 1953), Article 14 of the Ordinance Concerning Salaries of Okayama Prefecture Officials (Okayama Prefecture Ordinance No. 18 of 1951), and Article 2 of the Rules Concerning the Exceptions for the Obligation to Devote Oneself to Performing One's Prescribed Duties (Okayama Prefectural Personnel Commission Rules No. 10 of 1953) (Concerning 2) Article 90 of the Civil Code, Article 2, para. And 17 of the Local Autonomy Law (Concerning 3) Article 709 of the Civil Code, Article 242-2, para. 1, sub-para. 4 of the Local Autonomy Law (before amendment by Law No. 4 of 2002) Local Public Service Law Article 24, para. 1 The compensation of personnel must be paid according to their duties and responsibilities. Article 30 Every member of personnel, as a servant of the whole community, must devote their duties in the interest of the public and must exert their utmost in and devote him/herself to the performance of their prescribed duties. Article 35 Personnel must, except for cases specially provided for laws or ordinances, spend their full work hours for, and pay all occupational attention to, their prescribed duties and responsibilities, and engage themselves solely in services which the local public body has the responsibility to perform. Ordinance Concerning the Exceptions for the Obligation to Devote Oneself to Performing One's Prescribed Duties Article 2 In any of the following cases, a member of personnel may, with prior approval from the person with the appointing authority or other person delegated by such a person, be exempted from the obligation to devote himself/herself to performing his/her duties: (1) where the member of personnel receives training programs; (2) where the member of personnel participates in the implementation of plans concerning welfare; (3) except in the cases set forth in the preceding two sub-paragraphs, where the exemption is decided by the personnel committee. Ordinance Concerning Salaries of Okayama Prefecture Officials Article 14 A member of personnel who is absent from duty shall be paid salary that is reduced by the amount per hour set forth in Article 18 for the hours of absence, unless absence is specially approved. Rules Concerning the Exceptions for the Obligation to Devote Oneself to Performing One's Prescribed Duties Article 2 Cases where the exemption is decided by the personnel committee in accordance with Article 2, sub-para. 3 of the Ordinance shall be the following cases: (1) where the member of personnel concurrently holds the position of a national or local government official in relation to his/her duty and engages in the relevant work; (2) where the member of personnel concurrently holds the position of a director or employee of an organization, which is specially required for the operation of the prefectural administration, and engages in the relevant work for the organization; (3) where the member of personnel delivers lectures or lessons at the request of agencies of the national government or local public body, schools, or other organizations; (4) where the member of personnel takes an examination or participates in a selection that is related to his/her duties; (5) except in the cases set forth in the preceding sub-paragraphs, where the exemption is decided by the personnel committee. Civil Code Article 90 A juristic act which has for its object such matters as are contrary to public policy or good morals is null and void. Local Autonomy Law Article 2, para. 17 Each local public body shall be considered as a juristic person. (17) Any action of a local public body which has contravened the preceding paragraph shall be null and void. Civil Code Article 709 A person who intentionally or negligently violates the right of another is bound to make compensation for damage arising therefrom. Local Autonomy Law (before amendment by Law No. 4 of 2002) Article 242-2, para. 1, sub-para. 4 1. Any inhabitant of an ordinary local public body who has made petition under Paragraph 1 of the preceding Article may, by initiating litigation, claim the judicial remedies set forth in the following Subparagraphs for the illegal act or omission for which the claim under Paragraph 1 of the same Article was made, if dissatisfied with the results of the audit or the recommendation of the audit commissioner(s) under Paragraph 3 of the same Article, or with the measures taken by the assembly, the chief or other executive organs of the local public body or their officers under Paragraph 7 of the same Article, or if the audit commissioner(s) fail to audit or make recommendation under Paragraph 3 of the same Article within the period specified in Paragraph 4 of the same Article, or the assembly, the chief or other executive organs of the local public body or their officers fail to take measures under Paragraph 7 of the same Article. However, a claim set forth in Subparagraph (1) may not be made unless such act will be likely to bring about irrecoverable damages to the ordinary local public body; and a claim for restitution of unjust enrichment from an officer included in Subparagraph (4) shall be allowed only to the extent such gains are still retained in the officer's hand: (4) a claim, which is made on behalf of the local public body, for the damages or for the restitution of unjust enrichment against officers, or for the declaration of non-existence of legal rights, for damages, for the restitution of unjust enrichment, for the restoration of the status quo ante or for an injunction of nuisance against persons responsible for the act or omission.
Main text of the judgment	1. The judgment of the second instance shall be quashed with respect to the part for which the jokoku appellant of 2001(Gyo-Hi)No. 266 lost the case. 2. The judgment of the first instance shall be revoked with respect to the part for which the jokoku appellant of 2001(Gyo-Hi) No. 266 lost the case. 3. The claim of the jokoku appellees of 2001(Gyo-Hi) No. 266 shall be dismissed on the merits with respect to the part mentioned in the preceding paragraph and the extended part of their claim in the second instance. 4. The jokoku appeal filed by the jokoku appellants of 2001(Gyo-Hi) No. 267 to request the jokoku appellee of 2001(Gyo-Hi) No. 267 to pay 38,758,978 yen, which is equivalent to the amount of salaries paid to the dispatched officials from February 20, 1990, to June 23, 1991, and the interest on this amount at 5% a year for the period from October 1, 1995 until the payment is completed, shall be dismissed on the ground of a deficiency of procedural requisites, and the rest of the jokoku appellants' claims shall be dismissed on the merits. 5. The jokoku appellees of 2001(Gyo-Hi) No. 266/jokoku appellants of 2001(Gyo-Hi)No. 267 shall bear the whole cost of the lawsuit.
Reasons	I. Outline of the case 1. This is a case brought by the jokoku appellees of 2001(Gyo-Hi)No. 266/jokoku appellants of 2001(Gyo-Hi)No. 267 (hereinafter referred to as the "Plaintiffs") who were inhabitants of Okayama Prefecture, to seek damages from the jokoku appellee of 2001(Gyo-Hi)No. 267 (hereinafter referred to as "Defendant A"), who held the post of the Prefectural Governor, and the restitution of unjustified gains from the jokoku appellant of 2001(Gyo-Hi)No. 266 (hereinafter referred to as the "Defendant Company") in accordance with Article 242-2, para. 1, sub-para. 4 of the Local Autonomy Law (before amendment by Law No. 4 of 2002; hereinafter referred to as the "Law"), on the ground that the payment of salaries to the prefectural officials dispatched to the Defendant Company was illegal. 2. The outline of the facts legally determined by the judgment of the second instance is as follows. (1) The Okayama Prefectural Government (hereinafter referred to as the "Prefectural Government") decided to promote the development of a park in Kurashiki that would be designed following the example of Tivoli Gardens in Denmark as a part of the Prefecture's Comprehensive Welfare Program, based on the understanding that the development of such park would be a project of an extremely public nature because it would bring benefits to all inhabitants of the Prefecture under the Prefecture's urban policy as well as measures concerning leisure, the aging of the population, and culture, that it could bring spreading effects through investment and would contribute to job creation, development of tourism resources for long-stay tourists, enrichment of quality of lifestyle, promotion of international exchanges, revitalization of the prefecture, improvement of the image of the prefecture and creation of attractive communities. (2)The Defendant Company was established on February 20, 1990, as a public-private joint venture company to be engaged in developing and operating the Kurashiki Tivoli Park under the said program. The Defendant Company's start-up capital was 4.8 billion yen, of which 500 million yen was invested by the Prefectural Government. Subsequently, the Prefectural Government's share of investment stayed within the range from about 12% to 24%. The Prefectural Governor and the mayor of Kurashiki City assumed the post of directors of the Defendant Company. (3) The Kurashiki Tivoli Park, in which the Prefectural Government developed the foundation and cultural facilities and the Defendant Company developed restaurants, shops, and leisure equipment, was opened on July 18, 1997. (4) On February 20, 1990, the Prefectural Government concluded an agreement with the Defendant Company for the government to dispatch prefectural officials to the Defendant Company to engage in the company's business and bear the costs of salaries to be paid to the dispatched officials. Thereafter, the Prefectural Government concluded an agreement with the same purpose as the initial agreement with the Defendant Company every year (hereinafter referred to as the "Agreements"), and as indicated in the table attached to the judgment of the second instance, dispatched two to six officials every year, 13 officials in total, to the Defendant Company and continued to pay them salaries from the said date to March 31, 1997 (hereinafter the dispatch of these prefectural officials referred to as the "Dispatch of Officials" and the officials dispatched referred to as the "Dispatched Officials"). (5) Article 2 of the Ordinance Concerning the Exceptions for the Obligation to Devote Oneself to Performing One's Prescribed Duties (Okayama Prefecture Ordinance No. 49 of 1953; hereinafter referred to as the "Ordinance on Exemption") stipulates as follows: "In any of the following cases, a member of personnel may, with prior approval from the person with the appointing authority or other person delegated by such a person, be exempted from the obligation to devote oneself to performing one's duties: (i) where the member of personnel receives training programs; (ii) where the member of personnel participates in the implementation of plans concerning welfare; (iii) except in the cases set forth in the preceding two sub-paragraphs, where the exemption is decided by the personnel committee." Article 2, sub-para. 2 of the Rules Concerning the Exceptions for the Obligation to Devote Oneself to Performing One's Prescribed Duties (Okayama Prefectural Personnel Commission Rule No. 10 of 1953; hereinafter referred to as the "Rules on Exemption") stipulates that the case "where the member of personnel concurrently holds the position of a director or employee of an organization, which is specially required for the operation of the prefectural administration, and engages in the relevant work for the organization" is included in the cases where the exemption is decided by the personnel commission set forth in Article 2, sub-para. 3 of the Ordinance on Exemption. Article 14 of the Ordinance Concerning Salaries of Okayama Prefecture Officials (Okayama Prefecture Ordinance No. 18 of 1951; hereinafter referred to as the "Ordinance on Salaries") stipulates as follows: "A member of personnel who is absent from duty shall be paid a salary that is reduced by the amount per hour set forth in Article 18 for the hours of absence, unless absence is specially approved." Defendant A (and Defendant A's successors on November 12, 1996, and thereafter), upon the Dispatch of Officials, exempted the Dispatched Officials from the obligation to devote themselves to performing their prescribed duties (hereinafter referred to as the "Exemption from the Obligation of Devotion to Duty") and also gave implicit approval (hereinafter referred to as the "Approval") in accordance with Article 14 of the Ordinance on Salaries. (6) The Prefectural Government concluded the Agreement and implemented the Dispatch of Officials for the reason that the Government needed to maintain close liaison and coordination with the Defendant Company and that the Defendant Company had no income from business or sufficient human resources as it had just been established. At the Defendant Company, the Dispatched Officials were engaged in conducting liaison and coordination with the Prefectural Government and the Kurashiki City Government, coordinating with peripheral infrastructure, laying down the master plan and basic designs of the facilities, filing applications for building confirmation, establishing the organizational system and providing educational programs at the Defendant Company, working on a business revenue and expenditure plan, developing rules and regulations, and fund-raising. (7) The practice of establishing and operating joint venture companies between a local public body and the private sector became rapidly popular in the high-growth era, and many local governments begun to dispatch their officials to such public-private joint venture companies. However, at that time, the legal systems for the dispatch of local public officials had yet to be established and therefore the dispatch was implemented in various forms such as under official instruction from the local government, with the exemption from the obligation of devotion to duty, as unpaid leave, and through the retirement from office. In the case of dispatch official instruction or with the exemption from the obligation of devotion to duty, local governments often paid salaries to dispatched officials. It was pointed out that these forms of dispatch had respective advantages and disadvantages, and in particular, the first two forms were questioned with respect to legality, but there was no established idea or common view among experts, and lower court decisions differed in this respect until the judgmental standard was given in 1994 (Gyo-Tsu) No. 234, judgment of the Second Petty Bench of the Supreme Court of April 24, 1998, Saibanshu-Minji, No. 188, at 275. II. Concerning grounds for the petition for accepting the jokoku appeal argued by jokoku appeal attorneys of 2001(Gyo-Hi)No. 266 KATAYAM Kunihiro, ISHIKAWA Tadashi, TSUKAMOTO Hiroaki, UEDA Hiroyasu, IKEDA Hirohiko, UOZUMI Yasuhiro, NOGAMI Masaki, and TAKAYASU Hideaki 1. Given the facts mentioned in I above, the court of the second instance partially accepted the claims against the Defendant Company by holding as follows. (1) The Kurashiki Tivoli Park is of a public nature to some degree as it was established as a part of the Prefecture's urban policy as well as measures concerning leisure, the aging of the population, and culture, and therefore the Defendant Company that is engaged in developing and operating the Kurashiki Tivoli Park can be deemed to play a function in accomplishing part of the Prefecture's administrative objective. However, the Kurashiki Tivoli Park has a number of items of leisure equipment mainly for entertainment, and the Defendant Company should be basically regarded as a profit-making company. In light of the Prefectural Government's share of investment in the Defendant Company, it could not be expected that the business policy of the Defendant Company would be always consistent with the Prefecture's administrative objective, and there were not sufficient arrangements to guarantee that inconsistency would not occur in this respect. It seems appropriate to consider that the Dispatched Officials were engaged in performing services that were inherently required for operation of the Defendant Company and it is difficult to say that the Dispatch of Officials was necessary for the public interest of accomplishing the Prefecture's administrative objective. In light of the contents of the Defendant Company's business and the contents of the Dispatched Officials' services, the Approval cannot be judged to have been given based on the necessity for a specific public interest. Consequently, the Approval should be deemed to be in violation of the purport of Article 24, para 1, Article 30, and Article 35 of the Local Public Service Law and therefore be illegal. It follows that the payment of salaries to the Dispatched Officials should be deemed to be illegal. (2) The Agreements should be regarded as being illegal because the Agreements, based on the illegal Approval, provided that the Prefectural Government should pay salaries to the Dispatched Officials who was absent from the prefectural duties. In addition, the Agreements should also be regarded as null and void under private laws, because by providing that the Prefectural Government shall pay salaries to the Dispatched Officials, the Agreements are in violation of the Local Public Service Law, which stipulates basic obligations on duties and compensation of local public officials and therefore the ground for the illegality of the Agreements should be deemed as being so serious that it can be justified to deny the validity of the Agreements under private laws. The Defendant Company has received unilateral benefits through having its services performed by the Dispatched Officials free of charge under the Agreements. Therefore, even if the Agreement is invalidated and the Defendant Company is required to return money equivalent to the amount of salaries paid to the Dispatched Officials as the restitution of unjust enrichment, the Defendant Company would only be required to pay the salaries that the company should have paid to the Dispatched Officials, which would not cause unexpected damage to the company. For this reason, the Defendant Company shall be liable to return money equivalent to the amount of salaries paid to the Dispatched Officials as the restitution of unjust enrichment. 2. Although this Court can accept the judgment of the second instance with respect to (1), we cannot accept it with respect to (2), for the following reasons. (1) Even if no specific requirement is provided for exempting public officials from the obligation of devotion or for approving them to be absent from duty, this does not mean that the person with the relevant authority has full liberty to give such exemption or approval, but rather such exemption or approval should be construed to be illegal if the exemption from the obligation of devotion to duty is in violation of purport of Article 30 of the Local Public Service Law regarding the basic standards of performance of duty or Article 35 of the said law regarding the obligation of devotion to duty, or if the approval for being absent from duty is in violation of the purport of Article 24, para. 1 of the said law regarding the basic standards of compensation (see the above mentioned judgment of the Second Petty Bench of the Supreme Court). According to the facts mentioned in I above, in 2001 (Gyo-Tsu) No. 266 and 267, (i) the Dispatch of Officials was implemented not only due to the necessity of liaison and coordination with the Defendant Company but also based on consideration that the Defendant Company had no income from business or sufficient human resources as it had just been established, (ii) the Defendant Company was a profit-making company and its business was the operation of an amusement park, (iii) the Dispatched Officials were engaged in the Defendant Company's business in general such as establishing the organizational system, providing education of employees programs, and fund-raising and (iv) two to six officials every year, 13 officials in total, were dispatched to the Defendant Company over about seven years. In light of these facts, even if it is taken into account that the Defendant Company was established partly with funds invested by the Prefectural Government for the purpose of developing and operating the Kurashiki Tivoli Park under the program promoted by the Prefectural Government, the Exemption from the Obligation of Devotion to Duty cannot be deemed to satisfy the requirements set forth in Article 2, sub-para. 2 of the Rules on Exemption, and therefore the Approval should be deemed to be in violation of the purport of Article 24, para. 1 of the Local Public Service Law and therefore be illegal. For this reason, the payment of salaries to the Dispatched Officials implemented based on the Approval without correcting its illegality should be deemed to be illegal, and the judgment of the second instance that goes along with this consideration can be accepted. The argument of the jokoku appellant in this respect cannot be accepted. (2) Since the Exemption from the Obligation of Devotion to Duty and the Approval are illegal as mentioned above, the Agreements that required the Prefectural Government to bear costs of salaries to be paid to the Dispatched Officials should be deemed to be illegal as being in violation to Article 24, para. 1, Article 30, and Article 35 of the Local Public Service Law. However, as the Prefectural Government concluded the Agreements with the Defendant Company and bore the costs of salaries to be paid to the Dispatched Officials under the Agreements, the Defendant Company shall not be required to return money equivalent to the amount of salaries paid to the Dispatched Officials as the restitution of unjust enrichment unless the Agreement is null and void under private laws. Article 24, para. 1, Article 30, and Article 35 of the Local Public Service Law only stipulate the public officials' obligation of performance of duty and the basic standards of their compensation, and they cannot be construed as mandatory provisions that have an immediate influence on the effect of a contract concluded between a local public body and a private person. Further, according to the facts mentioned in I above, (i) at the time when the Agreement was concluded, many local governments in Japan dispatched officials to public-private joint venture companies, (ii) the legal systems concerning the dispatch of local public officials had yet to be established and therefore these dispatches were implemented in various forms such as under official instruction from the local government or with the exemption from the obligation of devotion to duty, (iii) in the case of dispatch under official instruction or with the exemption from the obligation of devotion to duty, local governments often paid salaries to dispatched officials, and (iv) with respect to the appropriateness of the dispatch implemented in such forms, there was no established idea or common view among experts and lower court decisions differed from case to case until the judgmental standard was established by the above-mentioned judgment of the Second Petty Bench of the Supreme Court. Under such circumstances, it cannot be said that the Agreements were contrary to public order or morality at the time of their conclusion, nor can it be said that, considering the fact that the Agreements are in violation of Article 24, para. 1, Article 30, and Article 35 of the Local Public Service Law is not so obvious as to be known to the Defendant Company, there are any special circumstances that would result in the impairment of the purpose of these provisions unless and as long as the Agreement is invalidated. Consequently, the Agreements cannot be deemed to be null and void under private laws, and the judgment of the second instance that acknowledged the Defendant Company's obligation of restitution of unjust enrichment contains an apparent violation of laws that has affected the judgment. The argument of the jokoku appellant in this respect can be deemed to be well-grounded. III. Concerning the grounds for the petition for accepting the jokoku appeal argued by jokoku appeal attorneys of 2001 (Gyo-Hi) No. 267 YAMAZAKI Hiroyuki Where there is a conflict in views with respect to the legal interpretation of a certain subject matter and the practices differ accordingly and where such views and practices can be seen as being reasonably well-grounded, if a public official has considered one of such views to be appropriate and performed duties based on it, it is inappropriate to immediately hold such act by the public official as being negligent even when the said performance of duty is later judged to be illegal (see 1967 (O) No. 692, judgment of the First Petty Bench of the Supreme Court of June 24, 1971, Minshu Vol. 25, No. 4, at 574).In 2001(Gyo-Tsu)No. 266 and 267, it is stipulated under Article 2, sub-para. 3 of the Ordinance on Exemption and Article 2, sub-para. 2 of the Rules on Exemption that the prefectural government may exempt a member of personnel from the obligation to devote oneself to performing one's duties if the member concurrently holds the position of director or employee of an organization, which is specially required for the operation of the prefectural administration, and engages in the relevant work of the organization, and according to the points mentioned in II-2(2) and the facts mentioned in I above, the Dispatch of Officials was implemented through the due process of exempting the Dispatched Officials from the obligation of devotion to duty under these provisions and of approving them to be absent from duty under Article 14 of the Ordinance of Salaries. Therefore, Defendant A cannot be deemed to have intentionally or negligently violated the law when Defendant A entered into the Agreements and paid salaries to the Dispatched Officials. The judgment of the second instance that goes along with this consideration can be justified and accepted. The argument of the jokoku appellant cannot be accepted. IV. Conclusion From all of the above, the judgment of the second instance shall inevitably be quashed with respect to the part for which the Defendant Company lost the case. And from all of the items pointed out above, the judgment of the first instance should be revoked with respect to the part for which the Defendant Company lost the case, and the claim of the Plaintiffs with respect to this part and the extended part of their claim in the second instance should be dismissed. The jokoku appeal filed by the Plaintiffs to request Defendant A to pay 38,758,978 yen, which is equivalent to the amount of salary paid to the dispatched officials from February 20, 1990, to June 23, 1991, and the interest on this amount at 5% a year for the period from October 1, 1995, until the payment is completed, shall be dismissed on the ground that the ground for submitting the petition for accepting the jokoku appeal is not stated in the petition for accepting the jokoku appeal or the written ground for the petition for accepting the jokoku appeal, and the rest of the Plaintiffs' claim should be dismissed. Therefore, the judgment was rendered in the form of the main text by the unanimous consent of the Justices.
Presiding Judge	Justice IZUMI Tokuji Justice FUKAZAWA Takehisa Justice YOKOO Kazuko Justice KAINAKA Tatsuo Justice SHIMADA Niro

(This translation is provisional and subject to revision.)