Companies must have legal representation in court
The 'Rule in Battle' (the Rule) states that corporate entities may be represented only by lawyers who have a formal right of audience in court proceedings and not by non-lawyer directors or shareholders. In the 2018 case of Allied Irish Banks v Aqua Fresh Fish Limited (Aqua Fresh), the Supreme Court reaffirmed the position that companies require legal representation in court except in exceptional circumstances.
The common law rule whereby a company may only be represented in court, or appear as a party to legal proceedings, through a solicitor or counsel was established by the Supreme Court in the 1960s case of Battle v Irish Art Promotion Centre Limited (Battle). The Supreme Court in that case refused permission for the managing director and majority shareholder to personally represent the company in court.
Although the Rule appears to be relatively simple and straightforward, certain practical consequences may arise:
- Companies who cannot afford legal representation are effectively unable to pursue or defend their rights in court. In these circumstances, the only viable option is for members of the company to personally deposit funds into the company.
- The courts often face dealing with complex litigation involving companies in the absence of officers of the company who are best placed to explain the company's position.
Supreme Court reaffirms the Rule
Despite the consequences of the Rule, which has been described by one judge as "far from ideal", the Supreme Court reaffirmed its principles in Aqua Fresh. The case concerned a managing director and principal shareholder, Mr Flynn, who sought to represent the company in security enforcement proceedings. In the High Court, an application by the director to represent the company was refused on the grounds that Mr Flynn did not hold a professional legal qualification. This was upheld by the Court of Appeal.
In the Supreme Court, Mr Flynn and Aqua Fresh Fish Limited submitted that the Rule conflicts with Article 40.3 of the Constitution, arguing that the State’s obligation to protect the rights of citizens includes “the property rights of the Company and its shareholders and their right of access to the courts”.
The Court rejected this argument on the basis that the Rule, when complemented by the inherent jurisdiction and discretion of the Court to permit a company to be represented by a non-lawyer in "exceptional circumstances", is consistent with the Constitution. The Court also highlighted the fact that the Oireachtas did not deem it necessary to legislate for the right of a company to be represented by lay persons in the Companies Act 2014 (save in circumstances already provided for in relation to proceedings on indictment).
The Supreme Court chose not to define “exceptional circumstances”, although it stated that neither the financial status of a company nor a lack of available funds to engage legal representation could be classed as exceptional.
Exceptions to the Rule
While the Irish courts have confirmed that they enjoy an inherent jurisdiction to hear from lay advocates on behalf of any person in "exceptional circumstances", no such application has yet succeeded in relation to a company. However, there have been some indications by the courts of possible exceptions to the Rule:
- Single member private limited companies: In McDonald v McCaughey Developments Limited, the High Court observed that a person who is the controlling mind of a small corporate entity may know as much about the company’s business and financial affairs as an individual would know of his own.
- Where injustice may arise: In Re Marble and Granite Tiles Ltd, a winding-up petition, Laffoy J allowed the director to have a say, albeit not in a representative capacity.
- Criminal cases prosecuted on indictment: Section 868 of the Companies Act 2014 allows a company charged on indictment to appear "by a representative" who may answer any question and plead on the company's behalf.
Following the Supreme Court decision in Aqua Fresh, the Rule in Battle remains in force in Ireland. Although the courts contemplate exceptions to the Rule in exceptional circumstances, these circumstances have yet to be defined.
It is worth noting that the Rule is not unique to Ireland and is followed throughout the common law world, including in the UK, Australia and Canada. In the UK, however, the discretion of the court has been placed on a statutory footing, with civil procedure rules expressly giving the court discretion to allow a company to be represented by a non-lawyer on a case-by-case basis.
The Company Law Review Group in Ireland has recommended that a statutory restatement of the rule should maintain most of the Rule's original features. It is therefore unlikely, save in the absence of a general overhaul of civil procedure rules, that we will see a relaxation of the Rule in Battle.
For more information in relation to this topic, please contact Julie Murray, Knowledge Lawyer or any member of the A&L Goodbody Knowledge Team.
Date published: 26 February 2020