Issue 52 February 2011 - Current Awareness: Civil Procedure & Insolvency

 

CIVIL PROCEDURE AND INSOLVENCY - Secretary of State for Business, Enterprise and Regulatory Reform, Petitioner [2010] CSIH 80

This was a petition for the winding-up of UK Bankruptcy Ltd (“the company”) under s.124A of the Insolvency Act 1986 on the ground that the winding-up is expedient in the public interest. A provisional liquidator was appointed. M, one of the two directors and shareholders, lodged answers to the petition. They were signed by him for and on behalf of the company. M produced no evidence that the Board of the company had authorised him to lodge these answers, or had even resolved to defend the petition.

According to the petitioner, M was opposing the petition in order to forestall disqualification proceedings against him under the Company Directors Disqualification Act 1986. M did not contradict that assertion. In 2009, at a hearing on further procedure, M sought to represent the company in the process. At a hearing before Lord Hodge on the question of whether he was entitled to do so, M submitted:

(1) that under art.6 a company has the right to be represented in court by one of its directors; and,

(2) that the rule that a company may be represented before the Court of Session only by counsel or by a solicitor having extended rights of audience is no longer good law.

The Lord Ordinary considered that in consequence of the rule in Equity and Law Life Ass Soc v Tritonia Ltd (1943 S.C. (HL) 88), M had no right to represent the company and that, as a general rule, there was no incompatibility between art.6 and the requirement that a company must be represented by a suitably qualified legal representative, who had responsibilities to the court and was subject to professional discipline. He thought that, nonetheless, exceptional circumstances could arise in which the court would have to allow a company to be represented by a person who was not a qualified practitioner in order to ensure that there was a fair hearing under art.6. The rules of court did not provide for that, but the Court could allow it by the exercise of its inherent power. There was a need for careful consideration of the circumstances in which that might be done and so the matter was reported to the Inner House.

Held: (1) The proposal is that the case for the respondent company should be conducted by M, who is not legally qualified. His conduct of the case would include the framing and lodging of answers to the petition, representation of the company in procedural hearings and oral advocacy in opposition to the prayer of the petition.

(2) This was in essence a proposal for rights of audience. This was in conflict with the Court of Session Act 1532 and subsequent authority and, in particular, the related line of authority starting with the House of Lords decision in Equity and Law Life Ass Soc v Tritonia Ltd.

(3) It was not open to this Court to modify the rule, whether by the use of its inherent power or by act of sederunt, no matter what conditions or safeguards it might impose.

(4) Even if it were open to the Court to modify the rule, it should not do so. The proposal raised questions of social policy relating to rights of audience in the civil courts. Such questions are not for the court to decide. Every extension of rights of audience has been brought about by express legislation. If there were to be an extension of rights of audience in relation to artificial legal persons, that should be effected only by legislation after the normal consultative processes of law reform.

(5) The granting of this proposal would inevitably lead to wider questions of rights of audience in relation to unqualified persons, e.g. in the representation of a trust by one of its trustees or the representation of a commercial partnership by one of its partners.

(6) Even if it were open to the Court to allow representation of a company by an unqualified person, these considerations would suggest the problems in taking that step.

(7) In relation to the art.6 point, the question was raised as to whether the enforcement of the present rule could operate to infringe the human rights of a company under art.6. The submission for the amicuscuriaecanvassed the possibility that the present rule could have that effect if a company had a prima facie valid claim or defence but was unable to pay for legal representation. However, that question only arose if there was evidence that the company had authorised M to represent it and that its decision to do so arose from necessity rather than choice. Instead, the evidence was of an uncontradicted assertion from the petitioner that M is opposing this petition in his own personal interest. For these reasons, art.6 did not arise for determination on these facts. Comment: It therefore looks as if the art.6 issue remains open. However, given the general tenor of the decision on the common law position and given that the Strasbourg Court has, in general, left it to national systems to devise their own rules of civil court procedure, it might be open to question as to whether the conclusion of the Inner House would be any different on art.6.