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Limits to company representation in litigation
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
A recent High Court decision(1) reconsidered the circumstances in which a shareholder or director may represent a company in legal proceedings. The court confirmed that it will exercise discretion to permit such representation only in exceptional circumstances, and in exercising such discretion it will look to establish whether the company has a real or bona fide case.
The case related to an application brought by Mr Flynn, the managing director and principal shareholder in the defendant company, for an order permitting him to legally represent the company in the proceedings. The proceedings involved the plaintiff bank seeking an order for possession and, if necessary, for sale of certain lands mortgaged to it by the company. When the bank's proceedings were still pending in the Masters Court, an application was made ex parte by Flynn to the High Court for an order permitting him, as a duly authorised agent of the company, to enter an appearance on behalf of it and represent and defend it in the proceedings. This was on the stated basis that the company had insufficient funds to appoint a solicitor or barrister to act on its behalf. The ex parte application was refused by Judge Peart (relying on an established line of authority), but was appealed to the Supreme Court, which directed that although an appearance might be entered on behalf of the company, any question of Flynn further representing the company was to be determined by the High Court on notice to the bank. Subsequently, an application was brought seeking permission to represent the company as an unqualified advocate for the purpose of the proceedings. Other reliefs were also sought.
The court acknowledged that it first had to consider on what basis, if any, a company director who is not legally qualified should be permitted to represent it in litigation and whether the application should be granted on the facts of this case. Further, Judge Keane was of the view that he should not proceed to consider the application for the other reliefs unless he was satisfied that Flynn should be permitted to represent the company. Keane observed that the affidavit grounding the application repeated prior averments as to the company's impecuniosity and its strong and valid defence to the bank's claim (notwithstanding that the company did not deny that it had borrowed the money in dispute, mortgaged the land at issue as security for the borrowings and failed to repay the money involved).
Keane identified that the modern jurisprudence is the Supreme Court's decision in Battle v Irish Art Promotion Centre Ltd, where Chief Justice O Dalaigh stated:
"in the absence of statutory exception, a limited company cannot be represented in court proceedings by its managing director or other officer or servant. This is an infirmity of the company which derives from its very own nature… In seeking incorporation [the subscribers] thereby lose the right of audience which they would have as individuals; but the choice has been their own… [the appellant] cannot as major shareholder and managing director substitute his persona for that of the company."(2)
Keane also referred to the Supreme Court decision Abbey Films v Attorney General, in which it held that "the nature of the company, and its difference of capacity from that of an individual are such as would justify the... requirement... that it should retain a solicitor to act for it".(3)
However, Flynn had placed particular reliance on Coffey v Tara Mines Ltd,(4) where the plaintiff, who had suffered a breakdown in the relationship with his solicitor and who otherwise suffered from specific communication difficulties due to illness, sought permission to be represented at the trial by his wife. Judge O'Neill in that case cited a New Zealand case to the effect that:
"cases will arise where the due administration of justice may require some relaxation of the general rule. The recurrence is likely to be where, circumstances exceptional or at least unusual and content modest."(5)
In that context, O'Neill went on to conclude that the decision in Battle should not:
"be seen as an authority which excludes an inherent jurisdiction in this court to manage and control its own proceedings and in rare and exceptional cases to permit an unqualified advocate to represent another litigant."
In considering Flynn's application, Keane also referred to the Supreme Court decision in Coffey, NO2GM Ltd,(6) which involved an application on the part of various personal litigants and a company for permission to have another lay person represent them in the role of advocate without restriction. Judge Fennelly explained and set out the rationale underpinning the fundamental rule that the only persons who enjoy a right of audience before the courts are individual persons who represent themselves, solicitors duly and properly instructed by a party and barristers duly instructed by solicitors to appear.
The final authority referenced by Keane was the decision in McDonald v McCaughey,(7) where Judge Gilligan observed that:
"It may be that the situation can be resolved whereby in certain exceptional circumstances a company director and significant shareholder on a valid bona fide arguable point at the discretion of the court could be allowed to represent the company's interests, provided that the court was satisfied that the point is at least arguable on the known facts and the applicable law."
However, ultimately and notwithstanding that observation, Gilligan applied the convention rule set out in Battle and reaffirmed Coffey, NO2GM, albeit with due regard to the residual discretion identified in Coffey v Tara Mines.
Keane concluded that, irrespective of how the test might be formulated in precise terms, the company had not satisfied him that it had:
- made out a fair or reasonable probability of having a real or bona fide defence;
- a valid bona fide arguable point on the known facts and the applicable law; or
- raised any defence with a reasonable chance of success.
Accordingly, he ruled that the application did not come within the category of rare and exceptional circumstances that would warrant a departure from the rule in Battle and the application was refused.
In reaching that conclusion, Keane specifically noted that:
"Since Mr Flynn is not himself a defendant to the action, he would have no potential exposure in costs, regardless of the manner in which the defence may be conducted. Similarly, Mr Flynn would not be subject to professional oversight or discipline in relation to his conduct of the defence. The bank, on the other hand, faces every prospect of incurring irrecoverable costs of meeting any such defence, should it be successful in doing so."
The decision confirms that, as a general principle, a company is obliged to instruct qualified lawyers to represent it in legal proceedings. Although the court has an inherent jurisdiction to permit representation of a company by unqualified person where the administration of justice so requires, the decision confirms that such cases are exceptional and rare. Moreover, it is clear that the discretion to permit unqualified persons to represent a company is one that will be exercised sparingly.
(1) Allied Irish Banks plc v Aqua Fresh Fish Limited  IEHC 184.
(2)  1 IR 252, at p 254.
(3)  IR 158, at p 172.
(4)  1 IR 437.
(5) GJ Mannix Limited  1 NZLR 309, at p 316.
(6)  IESC 11.
(7)  IEHC 455.
This article first appeared in the International Law Office Litigation newsletter, 12 May 2015