knowledge 31 March 2017 |

Sometimes you just need a Lawyer

In Allied Irish Banks plc v Aqua Fresh Fish Ltd,¹ the plaintiff bank sued to enforce its security on a default by the defendant company. Mr Flynn, the Managing Director, Chairman and Secretary of the company, and its principal shareholder, sought the court’s approval to act as advocate on the company’s behalf. The High Court refused to allow him to do so. He appealed to the Court of Appeal. Mr Flynn submitted that the company had insufficient assets to retain lawyers; that it had a good defence to the claim; and that his application raised issues of far-reaching importance.

Company can only be represented by a lawyer

Delivering the judgment of the Court of Appeal, McKechnie J noted that, in essence, Mr Flynn sought to challenge the rule in Battle v Irish Art Promotion Centre Ltd,² which states that a company can only be represented in court by a solicitor or duly instructed barrister and that no officer of the company can do so. Mr Flynn argued that the rule in Battle had not survived – or required revision by reason of – subsequent developments, including Ireland’s EU membership; the European Convention on Human Rights Act 2003; and the Charter of Fundamental Rights of the European Union. He also argued that even if Battle still applied, subsequent case law had carved out an exception to it in “rare and exceptional circumstances”.

The court noted that the rationale of Battle is that “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 own very nature. The creation of the company is the act of its subscribers; the subscribers, in discarding their own personae for the persona of the company, doubtless did so for the advantages which incorporation offers….In seeking incorporation they thereby lose the right of audience which they would have as individuals; but the choice has been their own.. [one] cannot as major shareholder and managing director now substitute his persona for that of the company. The only practical course open to him would be….for him personally to put the company in funds for the purpose of presenting its defence”.³

Personal litigants

In respect of a personal litigant, the rule has been that this person may represent himself or herself in court (though this creates difficulties for the effective conduct of litigation and for judges);⁴ but aside from any other help the person may have,⁵ he or she cannot appoint as advocate a person who is not a professional lawyer. However, the court accepted that there had been some softening of the rule. The possibility that a natural person could appoint a non-lawyer, such as a family member, to act as advocate in litigation, was considered and allowed in Coffey v Tara Mines.⁶ Coffey was a case which was “so exceptional or rare as to probably be unique”. There the court found that none of 22 law firms asked to become involved would do so; Mr Coffey’s request for legal aid went unanswered; his health had deteriorated in such a way that he could not speak and his mobility was seriously impaired, and the court found as a fact that he was wholly incapable of representing himself. It accordingly allowed his wife to act as his advocate.

The court in Coffey relied on the notion that, as regards representation, courts have a “residual discretion….arising from the inherent power to regulate their own proceedings. Cases will arise where the due administration of justice may require some relaxation of the general rule.”⁷

However, the Court of Appeal distinguished the position of corporate litigants and noted that the Battle rule is grounded on the company’s separate legal personality, the law on which has not changed since the decision in Battle.

Some softening of general rule

However, the Supreme Court had endorsed “a slight modification of the strict rule” that a company can only appear in litigation through a professional lawyer.⁸ The Court of Appeal noted that “the basis for the Court establishing such an exception is found within its inherent jurisdiction to manage, control and regulate its own affairs. Such is the case whenever it is sought to apply the exception at either a personal or non-personal level”.

There are also statutory exceptions,⁹ which permit a duly appointed representative of a company who is not a lawyer to take prescribed actions on behalf of the company in criminal proceedings on indictment, but the particular statute makes clear that the appointment of such a person does not qualify him or her to “act on behalf of the company before any court for any other purpose”.¹⁰

Courts recognise the need to be pragmatic and will occasionally hear submissions from a company director without recognising a right of audience where it is in the interests of justice to do so, and the Supreme Court case law suggests that such a person might exceptionally be permitted a right of audience when the strict application of the rule might defeat the interests of justice.

No exceptional circumstances here

However the Court of Appeal was satisfied that it remains the law that lack of funds is not of itself a sufficient reason to make an exception. It also observed that though the rule in Battle has been relaxed by procedural reforms in England¹¹ and Northern Ireland, the rule remains the default position in much of the common law world, being applied with greater or lesser stringency, in the United States,¹² New Zealand,¹³ Scotland,¹⁴ South Africa,¹⁵ and Hong Kong.¹⁶

In Mr Flynn’s case, the court held that the circumstances of the case were not exceptional and did not justify departing from the rule. The court also rejected the suggestion that “one-man companies” should be treated as exceptional. The court reasoned that “although the Battle principle can undoubtedly raise difficulties….including for the type of company in question,….this is not the intention of the rule, nor does it seek to discriminate against or work an unfairness on a small, medium or indeed any type of company.

Any adverse consequences which flow from the rule are merely the logical corollary of the Salomon principle which….allows persons to greatly benefit and profit from conducting their business through this form of legal entity without the risk of being liable for any losses”.

Comment

As the Battle rule survives and there were no exceptional circumstances in this case, the appeal was dismissed. This judgment underlines that one of the trade-offs of limited liability is that a director or shareholder cannot step into the company’s shoes in court when it believes it cannot afford a lawyer.