Subway Line 9 Contract Extension Additional Payment Lawsuit: Construction Company Loses

When the Judgment Is Final, Litigation Costs Are Borne

[Image source=Yonhap News]

[Asia Economy Reporter Seongpil Cho] Construction companies involved in the construction of Seoul Subway Line 9 filed a lawsuit claiming additional construction payments worth 5.5 billion KRW due to contract period extensions but lost in the appellate court.

According to the legal community on the 24th, the Seoul High Court Civil Division 21 (Presiding Judge Seungmyeon Hong) ruled against Daelim Industrial (now DL), Doosan Construction, Samsung Heavy Industries, and others in their lawsuit against the Seoul Metropolitan Government for construction payment claims. The previous first trial partially ruled in favor of the plaintiffs. The appellate court stated, "It is difficult to view that there was a legitimate request for price adjustment due to the extension of the construction period, and there is no evidence to recognize this," and "the part of the first trial ruling where the defendant lost is canceled." If this ruling is finalized, Daelim Industrial and others will not receive any additional construction payments and will instead have to bear Seoul City's litigation costs.

Previously, Daelim Industrial and others formed a consortium and won the bid for Section 923 of Phase 3 of Seoul Subway Line 9 in September 2010. The Section 923 construction project connects 29 Dunchon-dong, Gangdong-gu, Seoul, and the Seoul Veterans Hospital in Dunchon-dong. The project was scheduled for completion in March 2016, but the total construction period was extended by about 2 years and 9 months due to delays in Greenbelt approval and budget shortages. Accordingly, Daelim Industrial and others filed a lawsuit against Seoul City demanding payment of indirect costs due to the extension of the construction period.

The first trial court partially accepted only one of the five principal and alternative claims filed by Daelim Industrial and others and ruled that Seoul City pay about 430 million KRW. The court judged that Seoul City had an obligation to adjust the contract amount for additional indirect costs during the extended construction period from March 22, 2016, to May 22, 2016, under the 6th contract extension.

The appellate court's judgment differed. It found procedural defects in Daelim Industrial's contract amount adjustment application process. To increase construction payments due to the extension of the construction period, adjustment applications per contract phase are required, but Daelim Industrial failed to meet this requirement. The court stated, "It is difficult to consider a price adjustment application based on the extension of the total construction period stipulated in the master contract rather than the construction period specified in each contract phase as legitimate."