Can a Company represent itself in Court?

Companies Office

Company Law

We all know that persons can represent themselves in Court; although it may not be wise to do so! They are known as “Lay Litigants”. But, can a Company represent itself in Court? No, ruled the Court of Appeal in the recent case of Allied Irish Banks Plc v Aqua Fresh Fish Limited 8/2/2017 No. 2015 239 [2017] IECA 77, confirming the principles already laid down in Battle v Irish Art Promotion Centre Ltd [1968] IR 252.

 
The Facts

 
Allied Irish Banks Plc advanced certain monies to Aqua Fresh Fish Ltd (“the company”), which created a first legal mortgage over its lands in favour of the Bank. It was alleged that the company defaulted in its contractual obligation to repay the loan in the manner agreed, thereby giving rise to an entitlement on the Bank’s part to enforce the security. The Bank instituted Proceedings in which it sought, inter alia, an Order for Possession and, if necessary, an Order for the Sale of such lands. After the service of these Proceedings, Mr Flynn, who was the Managing Director, Chairman and Secretary of the defendant company, and also its principal shareholder, made an application to the Court seeking permission for him to both enter an Appearance to the Originating Summons and to represent and defend the company in the Proceedings. (Incidentally, “entering an Appearance” merely means filing an Appearance document in the Court Office; not “appearing” in Court!)

 
What was at issue?

 
From High Court to Supreme Court and ultimately back to the Court of Appeal, Mr Flynn submitted that he should be entitled to represent the company. In particular, he relied on his inability to afford legal representation. He sought to challenge the rule expressed in Battle v Irish Art Promotion Centre Ltd [1968] IR 252 (“Battle”), which was that a company can only be represented in Court Proceedings by a solicitor or duly instructed counsel; no officer of the company can do so.

 

Round Hall

The Round Hall, The Four Courts

Mr Flynn argued that this rule has not survived – or at least requires substantive revision by reason of various developments since 1968, including, inter alia, Ireland’s becoming a member of the EEC, the enactment of the European Convention on Human Rights Act 2003, the passing of the Lisbon Treaty and the coming into force of the Charter of Fundamental Rights of the European Union. A further strand to this argument was that the rule interferes with his constitutional and Convention rights to fair procedures and access to the courts. In addition, he claimed that even if Battle continues to apply, subsequent case law has modified its strict rigidity and has carved out an exception which can be invoked in rare and exceptional circumstances, an example of which, he said, were the circumstances of the instant case.

 
The Decision

 
Held by McKechnie J that, first, the rule in Battle still survives and that it applied to the presenting circumstances in the case, and second, there were no exceptional circumstances which would justify any departure from the rule.

 
Court Reasoning

 

Applying the Law

Law is not an open book

McKechnie J stated that, in order to fully explain and therefore fully understand both the genesis and essence of the rule precluding companies from being represented by anyone other than solicitor or counsel, it was necessary to have some basic understanding of their separate legal personality. Such principle, that a company is an artificial legal entity, separate and distinct from the members of which it is composed, was first unequivocally stated by the House of Lords in Salomon v. Salomon & Co Ltd [1897] A.C. 22 (“Salomon v. Salomon”). The basic principle has applied thus ever since, meaning that a company is not the agent of its subscribers, irrespective of the degree of control or shareholding which they may have, nor does it act as their trustee. Likewise, such shareholders, no matter how much influence they exercise or equity they hold, will not be regarded as one with the company.

 
Exceptional Circumstances?

 
In concluding his Judgment McKechnie J stated that the Court has a discretion to permit an individual person to act on behalf of the company where justice so demands. The manner in which this might be done will reflect the presenting circumstances of each particular case, with the courts generally adopting a pragmatic approach to such relaxation on both the personal and corporate side. However, lack of funds of the company was not enough in itself to justify a Director representing the company.

 
Unfair Rule?

 
One cannot help escaping the conclusion that the Court will not entertain vexatious Court Proceedings by Companies being able to contest Claims without the penalty of legal costs where the company would be able to walk away from unsuccessful Proceedings with the protection of limited liability. Where an individual represents himself he still carries the risk of personal liability for the other party`s legal costs in the event that his Claim is dismissed. McKechnie J did actually make reference to this in his Judgment. While the Rule in Battle may seem unfair, it is very clear from the reasoning detailed by McKechnie J that the Rule is here to stay and it will only be in very exceptional circumstances that a Company will be entitled to represent itself.

Brian Morgan

Morgan McManus Solicitors

Web:               www.morganmcmanus.com

Phone No.:      00 353 47 51011

E-mail:                        bmorgan@morganmcmanus.ie