Supreme Court of WA|2000-07-13|Before: Mr P, Hasluck J

Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2000] WASC 178 (13 July 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : EASTERN METROPOLITAN REGIONAL COUNCIL -v- FOUR SEASONS CONSTRUCTION PTY LTD [2000] WASC 178

BETWEEN : EASTERN METROPOLITAN REGIONAL COUNCIL

Legal Practitioners Act - Supreme Court Rules - Order 12 r 1(2) - Requirement that a body corporate may not defend an action otherwise than by a solicitor - Distinction between defending an action and appearing for a company - Circumstances in which the court in the exercise of its inherent jurisdiction will allow an individual other than a solicitor to appear for a company

Leave to appear for a body corporate granted to an individual other than a solicitor

VN International Video Pty Ltd v West End HK TVB Video & Ors (1996) 14 ACLC 1308

A.L.I. Finance Ltd v Havelet Leasing Ltd & Ors [1992] 1 WLR 455

1 HASLUCK J: This is an application by an individual for leave to represent the respondent company, notwithstanding the terms of O 12 r 1(2) of the Supreme Court Rules 1971.

2 The rule in question states that, except as expressly provided by any Act, a defendant to an action which is a body corporate may not enter an appearance in the action or defend it otherwise than by a solicitor. The application arises out of a protracted dispute between the parties and I must therefore begin by turning to the history of the matter. It will be convenient to refer to the Eastern Metropolitan Regional Council as "EMRC" and to Four Seasons Construction Pty Ltd as "Four Seasons".

3 The present application was made by Peter Mavlian, the sole shareholder and a former director of Four Seasons, who sought an order allowing him to represent the company in accordance with a letter to the Registrar of the Supreme Court dated 10 April 2000. The letter says that Mr Mavlian is the owner, sole shareholder and secretary of Four Seasons. He was formerly a director of the company, but his daughter is now the director. The letter included a passage whereby the daughter, Annie Derkacs, as a director of Four Seasons, purports to authorise Peter Mavlian to represent the company in the Supreme Court. The common seal of the company was affixed next to her signature.

4 A copy search of the records of the Australian Securities & Investments Commission established that Annie Derkacs is a current director of the company, having been appointed on 2 July 1999. The same search suggested that Mr Mavlian was also a current director, the sole shareholder and the current secretary of the company. The letter to the Registrar of the Supreme Court said that Mr Mavlian was applying for leave to represent Four Seasons "to the extent of lodgement of my attached affidavits and being present to respond to any questioning, but otherwise to leave the matters to the discretion of the court." I will return to the implications of an application made in these terms later.

5 EMRC is a body corporate constituted in the Local Government Act. It has responsibility for a waste disposal site at Red Hill to the east of Perth. By written contract dated 2 December 1997 EMRC engaged Four Seasons to carry out certain earthworks and drainage works at the Red Hill site for a sum of $222,222. The date for the completion of the works was 20 April 1998, although this date was subsequently extended. In mid-1998, a dispute arise between the parties. EMRC claimed that there were certain defects in the way Four Seasons had carried out the works and alleged further that work had been suspended without written approval. Against this background, EMRC purported to terminate the contract by written notice. Four Seasons responded by saying that it did not accept that EMRC was entitled to terminate, with the result that EMRC had repudiated the contract. It follows from this that the contract came to an end, albeit leaving various matters in issue between the parties.

6 Four Seasons took steps to refer the matters in issue to arbitration in the manner allowed for by the contract. The first meeting of the parties with the Arbitrator occurred on 19 August 1998. The Arbitrator subsequently wrote to both parties indicating that he had not entered on the reference. Later events showed that the Arbitrator had entered on the reference, but it is not entirely clear on what date he did so. In any event, not long after the dispute between the parties arose, EMRC commenced proceedings in the Supreme Court for a declaration as to whether or not the contractual relationship between the parties had come to an end. Four Seasons was successful in having the action stayed upon the basis that the dispute had been referred to arbitration and that was the proper forum for determination as to whether the contract between the parties had been terminated.

7 I understand from the affidavit of Haydn Ross Robinson sworn 9 June 2000 that Four Seasons has been paid $127,763.82 in respect of the contract price. It claims a further $414,488.85. EMRC counterclaims $168,331.99, being the costs allegedly incurred by EMRC in completing the work that was said not to have been done by Four Seasons under the contract. The prime issue in the arbitration is whether it was EMRC or Four Seasons that lawfully terminated the contract, with the issue of the quantum of damages to be looked at in the light of a ruling upon that point. Mr Robinson suggests in his affidavit, as solicitor for EMRC, that there are complex issues of law and fact to be decided by the Arbitrator. He also mentions that there are various applications to be dealt with by the Supreme Court before the arbitration can be completed. This brings me to the history of the present proceedings.

8 On 7 April 1999, EMRC applied to the Supreme Court by originating summons for orders that Four Seasons be required to give security for EMRC's costs of the arbitration proceedings and that, in the meantime, all further proceedings in the arbitration be stayed. Master Sanderson of the Supreme Court ruled on 21 May 1999 that Four Seasons provide $10,000 by way of security, this being the first step in a staging process for the provision of security. While reviewing the matters in issue, Master Sanderson noted that the issues between the parties were both complex and technical. It would therefore be difficult for him to reach any conclusion one way or the other as to the strength of Four Seasons' case. Nonetheless, he concluded that the arbitration was properly on foot and that it was the proper forum for resolution of the dispute between the parties. He also noted that Four Seasons had made it plain that it was in no position to meet any order for security, nor was its sole director, Mr Mavlian.

9 Subsequently, by a chamber summons dated 3 September 1999, EMRC sought further orders for security for costs. A few days later, on 13 September 1999, EMRC applied for orders pursuant to s 44 of the Commercial Arbitration Act 1985 for removal of the Arbitrator and, pending the appointment of a replacement Arbitrator, for all further proceedings in the arbitration to be stayed. These applications have not yet been disposed of. In the meantime, in December 1999, the solicitors for Four Seasons ceased to act on behalf of the company and took steps to have themselves removed as solicitors on the record.

10 It was against this background that Peter Mavlian applied for leave to be allowed to represent Four Seasons. He was permitted to file and serve an affidavit sworn 12 May 2000 directed to that issue. In reply, EMRC relied upon the affidavit of Haydn Ross Robinson sworn 12 June 2000. At the hearing of this matter, I received a further affidavit from Mr Mavlian sworn 17 June 2000. The parties did not file and serve written submissions, but in the course of debate it became apparent that Mr Mavlian's objective in seeking to obtain leave to represent Four Seasons was to act as the spokesman or lay advocate for the company at forthcoming hearings concerning the further application for security for costs and the application for removal of the Arbitrator. It is possible that further applications will be brought before the Supreme Court in the exercise of its supervisory jurisdiction as the arbitration proceeds. A question therefore arises as to whether the present application should be regarded as an application for leave to represent the company until further order.

11 I pause to note that the orders sought by Mr Mavlian in his letter dated 10 April 2000 to the Registrar of the Supreme Court reflect a wish to lodge "my attached affidavits". These are two lengthy affidavits, each sworn 7 April 2000, the first of which is directed specifically to the application for security for costs and the second of which is directed specifically to the application for removal of the Arbitrator. These affidavits have been physically received at the Supreme Court Registry, but their status as evidentiary materials has yet to be determined. It was also apparent from the debate before me that I must begin by determining whether the court has power to make the orders applied for, bearing in mind that O 12 r 1(2) seems to forbid any representation of a body corporate otherwise than by a solicitor. If the court does have such a power, a further question then arises as to whether the power should be exercised in the circumstances of the present case in the manner proposed by Mr Mavlian.

12 Mr Mavlian said in his affidavit sworn 12 May 2000 that prior to 1974 he was employed for seven years as a public servant in Victoria in the Department of Air. He came to Western Australia in that year with his family. He describes himself as a project manager and as the "owner" of Four Seasons. In addition to attaching to his affidavit copies of various items of correspondence evidencing the progress of the arbitration, he attached a statement dated 17 March 2000 which is said to be a statement of Four Seasons' impecuniosity. This is in the form of a computer print-out detailing ingoings and outgoings, commencing in January 1998 and running through to November 1998. It covers the work the subject of the disputed contract. The cumulative impecuniosity is said to amount to $282,150.92.

13 This statement does not give a full picture of the present financial situation of the company. Other evidentiary materials before me reveal, however, that the company does not have work on hand and is presently dormant. Mr Mavlian said that he became the first and sole director of Four Seasons when it was incorporated on 23 March 1997. He continued in that role until his resignation and the appointment of his daughter, Annie Derkacs, as sole director on 2 July 1999. He confirms that his authority to represent the company in these proceedings is contained in the letter to the Registrar of the Supreme Court dated 10 April 2000 signed by his daughter as sole director of the company. The rest of his affidavit is devoted to tracing the history of the arbitration and the related proceedings in the Supreme Court.

14 Mr Mavlian alleged that the company's impecuniosity was the direct result of the unlawful actions of EMRC. He referred to various alleged shortcomings on the part of the EMRC superintendent and similar matters. He went on to say that the details concerning impecuniosity relate to the Red Hill project exclusively because this was the first and only project undertaken by Four Seasons since its incorporation. He said further that the company's only source of operating capital was through a $35,000 overdraft provided by the ANZ Bank to Mr Mavlian personally, which remains unpaid. The company has been unable to continue trading due to lack of funds and credit since commencement of the arbitration. He has been unable to find gainful employment in the same period, and is currently in receipt of a mature age allowance. He adds that neither the company nor himself has access to any further funds. He notes that his present financial circumstances do not allow him to engage another solicitor to represent Four Seasons in the Supreme Court proceedings.

15 A central feature of Mr Mavlian's affidavit was the contention that the various procedural actions taken by EMRC in the Supreme Court were in spite of a validly constituted arbitration being in place and with the result that the arbitration has been delayed for approximately 15 months. He concludes by saying that these exceptional circumstances, together with the company's impecuniosity and his impecuniosity, warrant the court's use of its inherent power in the interests of justice to permit him to appear as an advocate for Four Seasons in these proceedings.

16 I mentioned earlier that the affidavit of Hadyn Ross Robinson sworn 12 June 2000, filed on behalf of EMRC, has exhibited to it a copy search of the records of the Australian Securities & Investments Commission for Four Seasons. This copy search suggests that Mr Mavlian continues to be a director of Four Seasons and is also secretary of the company. The affidavit has exhibited to it also a bankruptcy extract, showing that Mr Mavlian was bankrupt in the period 21 May 1990 to 23 June 1993. By an extract from the National Personal Insolvency Index, it seems that, as a consequence of steps taken by the ANZ Bank as petitioning creditor on 6 July 1999, a sequestration order was made in respect of Mr Mavlian's affairs. The extract reveals that Mr Mavlian is presently an undischarged bankrupt.

17 Mr Robinson's affidavit evidences that the Arbitrator required the parties to each pay $4,000 security for costs of the Arbitrator. Four Seasons made two payments of $2,000 on 30 March 1999 and the balance of $2,000 on 14 April 1999. The source of those funds has not been disclosed. Further, pursuant to the order made by Master Sanderson, the respondent paid $10,000 into the Supreme Court, but has not disclosed the source of those moneys. Mr Robinson goes on to confirm that Four Seasons has not at any stage produced accounts. He confirms that EMRC opposes the application by Mr Mavlian to represent Four Seasons in any proceedings in the Supreme Court.

18 In his second affidavit sworn 16 June 2000, Mr Mavlian addresses some of the matters raised in the Robinson affidavit. He says that his resignation as director of the company, and his daughter's appointment on 2 July 1999, was in accordance with instructions given to his accountant. He is unable to explain why only part of this instruction is reflected in the ASIC search. He does not deny the matters of substance reflected in the bankruptcy searches. He identifies himself as the source of the $4,000 security for the Arbitrator's costs. As to the security for $10,000, he says that this payment was made into the Supreme Court by the Four Seasons' then solicitors, Summers Partners, by a bank cheque, which was provided by a creditor. The payment was conditional on his prior agreement that its source remained confidential, and that no further funds would be made available. He says that he feels obliged to observe the requirement concerning confidentiality. He says further that Four Seasons has never been under any obligation to produce accounts in either the arbitration or in the proceedings in the Supreme Court. He disputes that there are complex issues of law and fact to be decided by the Arbitrator or that his current application to represent Four Seasons in the present proceedings involves complex issues of fact and law.

19 During the course of the hearing, a letter from the bankruptcy office was handed up by Mr Mavlian in support of his application for leave to represent the company without objection by counsel for EMRC. Although this was done, counsel for EMRC submitted that the letter in question should be viewed in context and given little weight. The letter said, in effect, that the trustee in bankruptcy had no objection to leave being granted to Mr Mavlian to represent Four Seasons in the present legal proceedings.

20 Before turning to the precise effect of the prohibition contained in O 12 r 1(2) of the Supreme Court Rules against a company being represented otherwise than by a solicitor, it will be useful to view this provision in a context established by the previously decided cases and by legislation bearing upon the matter in question.

21 A corporation in the common law sense is a legal device by which legal rights, powers, privileges, immunities, duties, liabilities and disabilities are attributed to a fictional entity equated for many purposes to a natural person. The fictional entity acquires rights and liabilities by the acts of persons behind it. Those persons are its immediate operators, its directors, and its ultimate controllers, its member or members. After amendments made by the First Corporate Law Simplification Act 1995 (Cth) the Corporations Law permitted a company formed as a proprietary company to be incorporated on the application of only one person and to exist throughout its life as a single shareholder company, if that was desired. Nonetheless, the overriding concept is that a company is a distinct entity and its rights and liabilities must be viewed separately from the individuals involved in its operation: Ford's Principles of Corporations Law (8th ed par 1.050 to par 1.080).

22 Section 76 of the Legal Practitioners Act 1893 provides that no person other than a certificated legal practitioner shall appear in any action. Nonetheless, this provision is not to be construed as preventing a party from appearing or defending in person. Further, by s 77A, a person may appear before a court if that appearance is authorised by a written law. The effect of s 5 of the Interpretation Act is that the term "person" is to be construed as including a company. Accordingly, at a first glance, it might be thought that where a company cannot afford legal representation, like a natural person, the company should have, by one of its office bearers, a right of appearance in court.

23 Section 198A of the Corporations Law provides that the business of a company is to be managed by or under the direction of its directors who are entitled to exercise all the powers of the company. By s 198E, where there is a single director he or she may exercise all the powers. When these provisions are viewed in combination, they might suggest that a company was entitled to be represented by a duly authorised director, notwithstanding that the company is a discrete legal entity.

24 Nonetheless, the words of O 12 r 1(2) are quite explicit: "Except as expressly provided by any Act, a defendant to such an action which is a body corporate may not enter an appearance in the action or defend it otherwise than by a solicitor." The corollary to this is to be found in O 4 r 3(2). This rule provides that "except as expressly provided by or under any Act a body corporate may not begin or carry on any such proceedings otherwise than by a solicitor." The Rules of the Supreme Court in England are to similar effect. The rule embodies the previous law and practice in the High Court: see the Supreme Court Practice 1991 at 32 and 108.

25 The situation in England has been reviewed in a number of previously decided cases. In Frinton & Walton Urban District Council v Walton & District Sand & Mineral Co Ltd & Anor [1938] 1 All ER 649, the court held that a limited company could not be represented in court by its managing director. An editorial note to the decision in that case observes that it has always been assumed that a corporate body cannot appear in person in the High Court, but the point seems never to have been decided before.

26 Many years later, in Arbuthnot Leasing International Ltd v Havelet Leasing Ltd & Ors [1991] 1 All ER Ch D 591, Scott J in the Chancery Division undertook a comprehensive survey of the relevant authorities. In that case, a Mr Maughan was the managing director of three defendant companies involved in the proceedings and was also a defendant himself. A large number of interlocutory orders were made and injunctions granted, including some of a Mareva character. Mr Maughan applied in person to appear not only on his own behalf, but also on behalf of one of the defendant companies. Scott J said that the issue before him was whether a director of a company has locus standi to appear in person and make an application on behalf of the company. Scott J held that if the issue before him had been simply one of audience, he would have concluded that Mr Maughan had no right of audience, having regard to the provisions of the Supreme Court Rules, but that he had a discretion pursuant to the inherent power of the court to regulate its own proceedings. However, in circumstances where a director was a party to litigation to which his company was a party, the court was prepared to allow the director to appear in person for purposes which were also those of the company so that justice could be done to all parties.

"In a case in which a company has had all its assets frozen so that it cannot use those assets to instruct solicitors, I do not for my part see why, in a suitable case, a director of a company whose duty it is to see that the company properly discharges its obligations to third parties, such as trade creditors, should not be joined as a party in order to make an application for a suitable variation or discharge of the injunction that binds the company. In the present case, joinder for that purpose is not necessary. Mr Maughan is already a party to the action. I do not see why, as a party to the action, he has not, by reason of his office as director of Finance and his interest in the shareholding of Finance, sufficient locus standi to make an application for the variation of the order that binds Finance. He does so, not on behalf of Finance, in the sense that Finance will be the party making the application, but on his own account albeit for the purposes of Finance and authorised by Finance to do so."

28 I observe in passing that it is apparent from the decision in this case that the role of Mr Maughan as a party to the proceedings in his own right was an important feature of the circumstances underlying the court's decision to exercise its inherent powers. Further, Mr Maughan was a director of the defendant companies at the time the application was made. These features are not present in the circumstances of the present case.

29 When one turns to the situation in Australia, a useful starting-point is the decision of the Full Court in Hubbard Association of Scientologists International v Anderson & Just [1972] VicRp 37; [1972] VR 340. In that case, on the hearing of an appeal to the Full Court against an order of the court granting a motion against it, the appellant, a foreign company registered as such in Victoria, sought to be heard by its agent who was not admitted as a barrister and solicitor in Victoria. The Full Court held that although the general rule is that any court can, in the exercise of control over its own proceedings, and in the absence of statutory prohibition, allow itself to be addressed in a proper case by any person it considers a proper person to be allowed audience, nevertheless, in the circumstances of the case and in conformity with the well-established practice that a company should be allowed to speak to the court only through a legally qualified person, audience to speak as agent for the appellant company should be refused. In reaching this conclusion, the Full Court gave weight to provisions of the Legal Profession and Practice Act 1958 which restricted the right of audience to barristers and solicitors. The Full Court concluded, however, that the relevant statutory provision in terms did not expressly prohibit the granting of audience to an unqualified person, irrespective of the circumstances in which he seeks to be heard.

30 It appears to have been a factor in the Full Court's decision in that case that it had not been demonstrated to the satisfaction of the Full Court that professional representation had been denied or could not be procured. The Full Court observed, at 343:

"These contentions raise matters of policy as to the appropriate procedure for the administration of justice. If the contentions were accepted, they could produce far-reaching consequences. They would open the way to a vast field of litigation, associated with companies, being conducted through untrained and unqualified advocates. They would not merely encroach on the established practice, but they would destroy that practice, and perhaps, if extended further to include agents for litigants who are natural persons, destroy the whole system of the administration of justice in these courts.

In some fields the principle of allowing audience to non-professional advocates has been sanctioned, as is the case in proceedings under the Commonwealth Conciliation and Arbitration Act, but the classes of questions that arise in the Supreme Court - and this is particularly so in proceedings coming before the Full Court - demand that full technical assistance be provided for the court in its task of administering justice according to law. There are other considerations which were adverted to by the House of Lords when reaffirming its rule of practice in Tritonia Ltd v Equity & Law Life Assurance Society [1943] AC 5 at 84 at p 587. Lord Simon LC said: 'Such a rule, limiting a right of audience on behalf of others to members of the English or Scottish or Northern Irish Bars, secures that the House will be served by barristers or advocates who observe the rules of their profession, who are subject to a disciplinary code, and who are familiar with the methods and scope of advocacy which are followed in presenting argument to this House'."

31 In Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 the Full Court in New South Wales was concerned with the application of a subrule providing: "Except as provided by or under any Act, a corporation may not commence or carry on any proceedings otherwise than by a solicitor." It is important to note, however, that the New South Wales rules contained a dispensing power in Pt I r 12 in these terms: "The court may dispense with compliance with any of the requirements of the rules either before or after the occasion for compliance arises." The Full Court eventually held that the court had an inherent power to permit a corporation to carry on proceedings otherwise than by a solicitor. Circumstances must be exceptional to justify the exercise of such a power. The majority view was, with Kirby J dissenting, that the circumstances of the case were not sufficiently exceptional to justify the exercise of the power.

"Although from time to time, in matters of procedure or practice or not of great complexity, the court has permitted a corporation to appear by an unqualified agent, the rule has in other respects been consistently and strictly applied. The reasons for the rule are many, amongst them that otherwise it might be open to an unqualified person to appear for a corporation without any authority, and as my brother Mahoney pointed out during the argument, to render it liable to large impositions for costs, again without authority."

"Various reasons are suggested for the rule and the practice of the courts. They include the control which courts exercise over those having audience before them and the privilege afforded to legal representatives because of the training which they undergo and the discipline to which they submit. But they also include, in the case of a corporation, the importance of ensuring that those who speak for it (the corporation not being a natural person able to speak for itself), have authority to do so and may thereby be subjected to orders of the court, including as to the costs of litigation."

34 A number of cases have arisen in other Australian jurisdictions, but it is important to keep steadily in mind that in most of these cases the relevant rules either allowed for appearance with leave or contained a dispensing power. In Molnar Engineering Pty Ltd v Burns [1984] FCA 232; (1984) 3 FCR 68, the Full Court of the Federal Court held that O 4 r 14(2) which relevantly provides that a corporation may not without the leave of the court commence or carry on any proceeding otherwise than by a solicitor, confers a discretion upon the court to grant leave, which discretion will be exercised in favour of a company where there is sufficient reason. In the circumstances of that case, the Full Court was not persuaded that there was sufficient reason to allow the major shareholder to appear, principally, it seems, because there was a degree of ambiguity as to the company's financial position and its capacity to engage legal representation. The court approved the notion that it is proper to refuse to exercise the discretion in favour of allowing the appearance of non-qualified persons (other than on merely formal matters such as adjournments) when the assistance of qualified persons might be available to give the courts help in the administration of justice.

"It could no doubt be urged that, in the case of a one man company which seeks leave to carry on the proceedings without a solicitor and which proposes that it be carried on by the one man of the company the situation approximates, in substance, that of a litigant in person. If Mr Molnar were carrying on business as personal proprietor thereof he would have the privilege of conducting litigation himself without qualified legal assistance.

The accessibility of the courts to any citizen unconditionally, in this respect, is regarded as fundamental to the system of justice under the Crown. That ready accessibility to the courts should be available to a juristic person is no doubt similarly fundamental. However, it has been regarded as appropriate that when a trader decides to use the corporate form in which to carry on his business for the advantages flowing therefrom his accessibility to the courts as plaintiff and his appearance as a defendant should be made conditional as set forth in O 5 r 6 of the Rules of the United Kingdom and the practice which it reflects. But where a discretion is conferred on the court, and where a case is presented that there is sufficient reason to permit a company to sue or defend without qualified assistance, the circumstances that the company is a one man company and that that man is proposed as the agent by whom the company seeks to be represented, and that he has advantageous educational and technical qualifications, may be significant."

"I agree with Smithers J that the discretion is to be exercised judicially according to the requirements of justice and that it must be exercised in favour of a company where there is sufficient reason; further that one reason likely to be advanced is that the company neither has, nor has access to, the funds required to engage legal practitioners. I also agree with him that leave should be granted where, having regard to the necessary or reasonable commitments of the company, the appropriation of funds to engage legal practitioners for the litigation in question would create financial difficulties with which the company could not - or with which it ought not be required to - cope and that in this connection the ability of the company to retain and pay its staff may well be relevant."

37 In ACT General Cleaning Co Pty Ltd v Naoum [1996] FCA 1560; (1996) 67 FCR 361, the Supreme Court Rules 1937 (ACT) provided that a corporation could not, without leave, carry on proceedings otherwise than by a solicitor. A principal in a family company was granted leave to appear at interlocutory proceedings, but was denied leave by the trial Judge at the trial of the action. The Full Court held that in denying the individual leave to appear for the corporation, the trial Judge's discretion had miscarried, for the grant of leave on previous occasions carried considerable weight as a reason why the status quo should not be altered. The court also was of the view that the trial Judge had not sufficiently taken into account the close nature of the holding of the equity capital of the company.

38 In Alice Springs Abattoirs Pty Ltd v Northern Territory of Australia [1996] NTSC 69; (1996) 134 FLR 440 the appellant's managing director, who was not a legal practitioner, entered an appearance, filed a defence and counterclaim and by summons made application for a change of venue. The respondent sought to set aside the defence and counterclaim and summons on the grounds that neither were filed by a solicitor as required by r 1.13 of the Supreme Court Rules 1937 (ACT) which provided that a corporation should not take a step in a proceeding except by a solicitor. The rules also contained a provision in r 2.04 that the court was at liberty to dispense with compliance with a requirement of the rules. Kearney ACJ held that the court had discretionary power pursuant to r 2.04 to grant leave to appear, exercisable in favour of a company when "sufficient reason" is shown and this provision should not be narrowly construed. Kearney ACJ indicated that any court, in exercising its inherent power to control its own proceedings, may allow itself to be addressed by anyone it considers a proper person to be permitted audience in the circumstances. This includes hearing a lay person on behalf of a corporation, though such person generally should be a director, officer or regular employee of the corporation and the matter in issue should be of such a nature that the court does not consider it requires the assistance of a legal practitioner in order to resolve it.

39 In the course of reviewing the previously decided cases in the United Kingdom and in Australia, Kearney ACJ paid careful attention to the apparently small but, in fact, significant differences between the rules of court in the various jurisdictions. In examining the effect of Bay Marine Pty Ltd (supra) and the New South Wales rule under consideration in that case whereby a corporation could not commence or carry on any proceedings otherwise than by a solicitor, he concluded that the rule in question extended to prohibit a non-legal practitioner from appearing in court for a corporation as well as from taking steps in the proceedings such as the filing process or pleadings or applications in court. This was to be contrasted with the provision before him, namely, r 1.13 of the Northern Territory rules which provided that a corporation shall not take a step in a proceeding except by a solicitor. In his view, r 1.13 was silent on the issue of a non-solicitor attending court to address argument, a matter which fell to be dealt with solely under the inherent power.

40 He explored this distinction while reviewing Arbuthnot Leasing (supra). He went on to say at 451:

"It can be seen that his Lordship drew a distinction between making an application, that is, preparing and filing the necessary documents, and seeking to be heard in court; the former was regulated by O 12 r 1(2), the latter by 'the practice of the High Court'. The language of O 12 r 1(2) is similar to r 1.13 in referring to taking 'steps in the action', as distinct, for example, from the language of Pt 4 r 4 in New South Wales of 'carry on any proceedings'. I adopt, in relation to r 1.13, Scott J's approach to O 12 r 1(2); I consider that the question of Mr Hayward appearing in court is a 'separate' question to Mr Whitaker's taking steps in the proceeding. The latter is regulated by r 1.13, the former is not."

41 Kearney ACJ went on to cite with approval a passage in Arbuthnot Leasing (supra) in which Scott J examined the case law and summarised the principles applicable in this way (at 597 - 598). First, O 12 r 1 is of statutory effect and prohibits a body corporate from taking a step in an action otherwise than through a solicitor. Second, the courts have an inherent power to regulate their own procedure and a Judge in an individual case has, as part of that inherent power, the power to permit any advocate to appear for a litigant if the exceptional circumstances of the case so warrant. No limit can be placed on what might constitute sufficient exceptional circumstances. But third, subject to any exceptional circumstances that might require a particular individual in the interests of justice to be allowed to appear as advocate, the general practice of the court is that bodies corporate cannot appear by their directors, but only by solicitors or counsel.

42 Kearney ACJ then went on to note that in the English rules there is no general power to dispense with the rules. In the absence of such a power, a court has no power to dispense with the requirements of the rules: Doyle v Commonwealth [1985] HCA 46; (1985) 156 CLR 510 at 518. Scott J concluded that the company director in Arbuthnot Leasing (supra) could be heard, but could not apply to vary the injunctions against the corporation in question because that would constitute a "step in the action" and would therefore be in breach of the prohibition contained in the rules. On the other hand, where rules contained a dispensing power, as in r 2.04 of the Northern Territory rules, the court did have a general discretion, to be exercised in the interests of justice on "sufficient reason" being shown (rather than only when "exceptional circumstances" were established) to allow a step to be taken on behalf of the company by an individual. In the circumstances of the case, however, in applying the criterion of "sufficient reason" rather than "exceptional circumstances", Kearney ACJ held that the appellant had not shown sufficient reasons to obtain the orders sought. In his view, the affidavits of the director did not establish that the appellant company lacked both cash assets and income and an ability to raise funds.

43 When the reasoning in these cases is applied to the Supreme Court Rules in this State, one is reminded that the prohibition is expressed in a different form. By O 12 r 1(2), a defendant which is a body corporate may not enter an appearance in the action or defend it otherwise than by a solicitor. There is no explicit reference in the provision to carrying on any proceedings (being the rule under consideration in Bay Marine Pty Ltd (supra)), or to taking a step in the action, being the rule under consideration in Arbuthnott Leasing (supra).

44 It is equally important to note, however, that if O 4 r 3(2) be regarded as a corollary to O 12 r 1(2), one should take account of the fact that O 4 r 3(2) provides expressly that a body corporate may not begin or carry on any proceedings otherwise than by a solicitor. It is equally important to note that the Rules of the Supreme Court do not contain a dispensing provision of the kind that was under consideration in some of the cases mentioned above, especially Bay Marine Pty Ltd (supra). It is true that O 2, in dealing with the effect of non-compliance with the rules, establishes that where at any stage there has been a failure to comply the failure shall be treated as an irregularity and shall not nullify the proceedings or any step taken in the proceedings, but this cannot be regarded as being of the same effect as a dispensing power. The High Court was quite explicit in Doyle (supra) at 518 that "a Judge cannot dispense with the requirements of the rules of court unless the rules give him power to do so."

45 There are comparatively few authorities in this State bearing upon these matters. Seaman: Civil Procedure Western Australia states, at par 34.5.2, that if the exceptional circumstances so warrant, the court has inherent power in the interests of justice to permit an individual who is not a legal practitioner to appear as an advocate for a company. In Schagen v The Queen (1993) 8 WAR 410, Malcolm CJ noted that a person other than a duly qualified legal practitioner would only be permitted to address the court or actively participate in the proceedings in rare and exceptional cases. However, it is within the inherent jurisdiction of the court to determine the extent to which a so-called "McKenzie friend" may participate in the proceedings. In that case, due to the severe language and hearing difficulties of the appellant, persons other than qualified legal practitioners were permitted to present written submissions.

46 In N R & N J Gardiner & Sons Pty Ltd v Osborne Cold Stores (WA) Pty Ltd trading as Kooltrans (1988) 7 SR(WA) 62, the general manager of a company was given leave to appear in the absence of any objection. Healy J held the District Court, exercising the same jurisdiction as the Supreme Court in this respect, had an inherent jurisdiction to dispense with the requirements of O 4 r 3 of the Supreme Court Rules whereby a body corporate may not begin or carry on any such proceedings otherwise than by a solicitor. It is apparent from the report of the latter case, however, that considerable reliance was placed upon Bay Marine Pty Ltd (supra), but without any discussion of the dispensing power contained in the New South Wales rules, and without any explicit consideration of the distinction drawn by Scott J in Arbuthnot Leasing (supra), and affirmed by Kearney ACJ in Alice Springs Abattoirs (supra) between permission to appear as an advocate and the taking of a step in the action.

47 In my opinion, for the Rules of the Supreme Court in this State to be read consistently, O 4 r 3(2), which provides that a body corporate may not begin or carry on any proceedings otherwise than by a solicitor, should be read in close conjunction with O 12 r 1(2) which provides that a body corporate may not enter an appearance in an action or defend it otherwise than by a solicitor. The need for consistency suggests to me that the notion of defending an action refers essentially to taking a step in the proceedings or carrying on the action. Having regard to the distinction drawn by Scott LJ in Arbuthnot Leasing (supra), as closely analysed by Kearney ACJ in Alice Springs Abattoirs (supra), I am of the view that a Judge of the Supreme Court in this State does not have power to dispense with the explicit requirements of the rules with the result that, even in exceptional circumstances, an individual is not at liberty to take a step in the action on behalf of a company. This is so, notwithstanding the inherent jurisdiction of the Supreme Court to regulate its proceedings. Where the Supreme Court Rules deal with a certain matter specifically, and impose a prohibition, one is obliged to conclude that the Judges collectively, as a collegiate body, have established the practice to be observed. In the absence of a dispensing power, it is difficult to see upon what basis the explicit rule can be disregarded. Section 21(1) of the Supreme Court Act specifically provides that the jurisdiction of the court is to be exercised in the manner provided for by the Act and the rules of court.

48 I have not been referred to and cannot find any decided case which seems to expressly allow for the Supreme Court in the exercise of its inherent jurisdiction to approve the taking of a procedural step in the action in circumstances where the company is represented otherwise than by a solicitor, contrary to the requirements of the rule.

49 It follows from earlier discussion, however, that this issue can be distinguished from the discrete issue as to whether the court in the exercise of its inherent jurisdiction can allow an individual in special or exceptional circumstances to appear before the court and act as an advocate for the company. The decided cases suggest that such a power exists in regard to formal matters such as applications for adjournments if, for some sufficient reason, a certificated practitioner is not available. The decided cases also suggest that in other circumstances, including representation of the company at a hearing, an individual will be allowed to appear if the circumstances can be regarded as exceptional. I pause here to say that, again, bearing in mind the absence of a dispensing power in the Supreme Court Rules in this State, it seems to me, adopting the approach enunciated in Schagen v The Queen (supra), that a person other than a duly qualified legal practitioner will only be permitted to address the court or actively participate at a hearing in rare and exceptional cases.

50 What is the result when I apply this analysis to the circumstances of the present case? I am of the view that to allow Mr Mavlian to submit to the court and rely upon his two affidavits sworn 7 April 2000 directed to the EMRC application for security for costs and the application to remove the Arbitrator would be to allow him to "defend" the present proceedings, in the sense of taking a step in the proceedings, contrary to the prohibition contained in O 12 r 1(2). It follows from earlier discussion that his application to file and rely upon the affidavits - and to take similar steps in the future - should be refused. This is because I am not at liberty to disregard the explicit language of the rule, notwithstanding that the court has an inherent power to regulate its procedures. I pause to say that if I be wrong in that regard, with the result that this aspect of the matter should be dealt with upon the same basis as Mr Mavlian's application for leave to address the court, then the reasoning which follows concerning the exercise of the court's discretion in its inherent jurisdiction will apply to the affidavits in the same manner as it is applied to the entitlement to address the court.

51 It also follows from earlier discussion that, in my view, the court can, pursuant to its inherent power to regulate its own proceedings, permit Mr Mavlian, as an individual closely associated with Four Seasons, to appear as an advocate on behalf of the company, provided the court is satisfied that this is one of the rare and exceptional circumstances where he should be permitted to do so.

52 When I turn to a consideration of the various facts and matters bearing upon the exercise of the court's discretion, one notices that he is the sole shareholder in the company and has a detailed knowledge of the matters in dispute in the arbitration proceedings. One must also take account of the fact that there is evidence before me that his daughter is now the sole director of the company and she has provided a written authority to the effect that he is at liberty to represent the company. There are indications that the company is not currently engaged in ongoing business and its future largely depends upon the outcome of the arbitration. The court has not been provided with a full set of financial accounts, but the evidence before me tends to corroborate the assertions made by Mr Mavlian that the company is presently impecunious. He has said on oath that "neither the company nor myself has access to any further funds." I am satisfied on the evidence before me that the company and its supporters cannot afford legal representation, with the result that any argument on behalf of the company will not be heard unless Mr Mavlian is allowed to speak for the company.

53 I note further that the official trustee in bankruptcy has been prepared to state in writing that he has no objection to Mr Mavlian representing the company in court. I am satisfied that this approval extends to the forthcoming procedural applications. The decided cases suggest that I should also take account of the precept underlying the rules of natural justice that a party to litigation should not be denied an opportunity to be heard.

54 Balanced against these considerations, however, is the fact that Mr Mavlian is presently in a state of bankruptcy, is not at liberty to act as a director of the company. He confirms that he is in fact no longer a director of the company. The court is therefore faced with the prospect that the person appearing for the company does not have direct control over the affairs of the company and is possibly at risk of being subject to various influences arising out of his precarious financial position. It is apparent from his affidavits that in seeking to raise funds sufficient to meet the previous court order concerning security for costs, he has been obliged to deal with a third party whose identity is not disclosed. I note also that there is a degree of ambiguity about the exact financial status of the company and it is apparent from the decided cases that the courts have often been reluctant to exercise the inherent jurisdiction in such circumstances. I must also take account of the fact that Mr Mavlian, lacking legal skills, may not be able to assist the court to any large extent in resolving the legal issues which have been described as complex and technical.

55 On balance, however, I have come to the conclusion that, in the exercise of the court's inherent jurisdiction to control its proceedings, leave should be allowed to Mr Mavlian to appear on behalf of the company at the hearing of the forthcoming applications concerning security for costs and removal of the Arbitrator. The weight of the evidence establishes on the balance of probabilities that the company is impecunious and cannot afford or arrange legal representation. Mr Mavlian is closely involved with the affairs of the company and has a legitimate interest in making known to those called upon to adjudicate upon the current procedural issues his view of the matters in controversy and his detailed knowledge of the history of the dispute. As mentioned earlier, I am also influenced by the precept that a party to litigation should generally not be denied an opportunity to be heard. In the exceptional circumstances of this case, where there is a very close affinity between the party to the litigation and the person who is to speak on the company's behalf, bearing in mind that the company has undertaken one project only, and that Mr Mavlian was directly involved in the implementation of the project in question, the precept I have just mentioned weighs in favour of leave being granted. Accordingly, I will order that Mr Mavlian be allowed leave to address the court on behalf of the company at the forthcoming hearings, namely, hearings concerning security for costs and hearings concerning the application to remove the Arbitrator.

Arbitration Act 1985

Corporate Law Simplification Act 1995

Practitioners Act 1893

Profession and Practice Act 1958

Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2000] WASC 178

At a glance

Court

Decision date

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Judgment (71 paragraphs)

Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2000] WASC 178 (13 July 2000)

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Legislation Cited (6)

Cases Cited (6)