| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
Lady Paton Lord Reed Lord Bracadale | [2012] CSIH 4 XA156/07 OPINION OF LADY PATON in the cause APOLLO ENGINEERING LIMITED (in liquidation) Appellants; against JAMES SCOTT LIMITED Respondents: _______ |
Proposer of motion: G Politakis, director and shareholder of Apollo Engineering Limited
Appellants: No appearance
Respondents: Ellis, Q.C.; MacRoberts
Amicus curiae: Springham
18 January 2012
Introduction
[1] Mr and Mrs Politakis are the sole directors and shareholders of a limited company (the appellants, hereinafter "Apollo"). In 1990 Apollo entered into a sub-contract with the respondents ("Scott") to carry out pipe construction work at Coulport. Disputes arose about work done, sums due, and whether or not Scott had in effect repudiated the contract. In September 1991 Apollo went into liquidation. Scott sued the liquidator of Apollo, who responded with a counterclaim. On 24 June 1993 the action was sisted pending an arbitration in terms of the sub-contract. The parties duly entered into an arbitration (the Ford Arbitration). Various procedures took place, including adjustment of the pleadings, a legal debate, indications that a proof before answer was imminent, attempted settlement negotiations, and ultimately the sisting of the arbitration. In early 2001, a Creditors' Voluntary Arrangement enabled sufficient funds to be produced such that Apollo could continue to have legal representation. In December 2002, the winding-up of the company was sisted pending the outcome of the arbitration. Further details of the history of the case can be found in James Scott Ltd v Apollo Engineering Ltd, 2000 SC 228; McGruther v James Scott Ltd, 2003 SC 495 (OH); 2004 SC 514 (IH); Apollo Engineering Ltd v James Scott Ltd, 2008 SLT 472 (OH); 2009 SC 525 (IH).
[2] In July 2004 the arbiter reached retirement age, and retired before the arbitration was finalised. Following upon an unsuccessful attempt to continue that arbitration by means of a replacement arbiter, a second arbitration with a new arbiter Mr Spencely commenced in July 2005 (the Spencely arbitration). In the second arbitration, the sums sought by Apollo were larger and were based on a different method of calculation. The pleadings were adjusted and amended, motions for interim decree were presented, and a debate took place. The arbiter issued a final draft opinion dated 18 May 2007, indicating an intention to dismiss most of Apollo's claims. Apollo challenged that opinion by way of a Stated Case to the Court of Session in terms of section 3 of the Administration of Justice (Scotland) Act 1972. Apollo also sought judicial review of Mr Spencely's actings as arbiter. A hearing in the Stated Case process was discharged pending the outcome of the judicial review. Apollo was unsuccessful in the judicial review, both in the Outer and in the Inner House (2009 SC 525).
[3] Apollo's funds ran out. The company could no longer afford legal representation. On 2 March 2011 Mr Politakis enrolled the following motion:
"For the reasons given below [not quoted here] I respectfully seek a court order under Article 6 of the ECHR which would allow me to represent Apollo Engineering Limited in any future court proceedings. In particular I seek such order in relation to the forthcoming Stated Case procedure."
Scott opposed the motion. The court ex proprio motu appointed an amicus curiae for its assistance.
The European Convention on Human Rights (ECHR)
[4] The ECHR provides inter alia:
Article 6
Right to a Fair Trial
In the determination of his civil rights and obligations ..., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly ...
Article 14
Prohibition of Discrimination
The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
Submissions: Mr Politakis
[5] The court ex proprio motu invited Mr Politakis to make submissions, although not a party to the action. Mr Politakis thereupon moved the court to grant his motion. He argued that the conditions specified in Secretary of State for Business Enterprise and Regulatory Reform, petitioner (The UK Bankruptcy case), 2010 SLT 1242 were satisfied. In particular, in terms of paragraphs [45] and [46] of that case:
(i) Apollo had a prima facie valid claim;
(ii) Apollo was unable to pay for legal representation;
(iii) Apollo had authorised Mr Politakis to represent it;
(iv) Apollo's decision to authorise Mr Politakis arose from necessity rather than choice.
[6] In further written submissions to the court, Mr Politakis emphasised that the company's claim could readily be demonstrated and proved. The methodology underlying the sums claimed was simple, consisting of measurement of the sub-contract by reference to contract drawings followed by the application of Composite Bill rates to that measurement, with the claim being split into two parts, one pre-Scott's-repudiation, and the other post-Scott's-repudiation. Although the claim was clear and simple, Scott's approach to the dispute had obfuscated and obstructed any resolution, and now the company had no funds. Despite all the procedures to date, the company had not yet been allowed to lead evidence to prove its claim. A refusal to allow Apollo to be represented by Mr Politakis would amount to a breach of Apollo's rights under Article 6 of the ECHR. The motion should be granted.
Submissions: Scott
[7] Senior counsel submitted that, under Scots law, the motion must be refused. Such a refusal would not result in a breach of Apollo's Article 6 rights. Esto the ECHR had the effect that the court had a discretion to grant the motion, the court should exercise that discretion by refusing the motion.
[8] Focusing upon Article 6 of the ECHR, counsel's contention was that the right of access to justice was not absolute. Limitations on access to a court could lawfully be imposed, provided that the limitations pursued a legitimate aim, and there was a reasonable relationship of proportionality between the means employed and the legitimate aim sought to be achieved. Reference was made to The UK Bankruptcy case 2010 SLT 1242 (IH); [2009] CSOH 50 (OH); Teltronic-CATV v Poland [2006] ECHR 21, paragraphs 34, 46-47; Ewing v Times Newspapers Ltd 2010 SLT 1093, paragraphs 10-11; and Monarch Energy Ltd v Powergen Retail Ltd 2006 SLT 743, paragraph 12.
[9] A "legitimate aim" included (i) the efficient conduct of court business; and (ii) the interests of other parties: Ashingdane v UK (1985) 7 EHRR 528, paragraphs 56-58; Luordo v Italy (2005) 41 EHRR 26, paragraphs 85-86; The UK Bankruptcy case cit sup, Lord Hodge in the Outer House at paragraphs 9-10; Lord Advocate v McNamara 2009 SC 598, Lord Reed at paragraph [41] citing Bhamjee v Forsdick.
[10] Counsel then reminded the court of the position in England where, as a result of the Woolf reforms, Rule 39.6 of the Civil Procedure Rules 1998 (SI 1998/3132) and Practice Direction 39A permitted a company employee authorised by the court to represent the company. However those provisions had been brought into existence as part of a package of measures designed to protect the court from irresponsible behaviour. For example, the court's permission was required for such representation; there was a system of case management by judges; another party could apply for a "striking-out" of the claim. In relation to the court's permission, paragraph 5.3 of Practice Direction 39A specifically empowered the court to withhold permission for some "particular and sufficient reason", including the complexity of the issues, and the experience and position of the proposed representative. It was notable that the English courts prior to the Woolf reforms had held that a company's lack of funds to instruct counsel did not amount to "exceptional circumstances" justifying a departure from the normal rule that a limited company should litigate through legal advisers: Radford v Samuel [1993] BCC 870, at pages 873; Floods of Queensferry Ltd v Shand Construction Ltd and others [1997] 81 BLR 49.
[11] Against that background, senior counsel submitted that the following factors were of relevance in the present case:
(i) Apollo's unusual situation: As the liquidation of Apollo had been sisted pending the outcome of the arbitration, the directors were able to litigate without being liable for expenses. In that special situation, it was legitimate and proportionate to require the company to be represented by a professional. That would protect the interests of both the court and Scott. The professional would have a discretion whether or not to pursue certain lines and arguments.
(ii) Apollo was the author of its own difficulties: Counsel accepted that Apollo currently had no funds, but pointed out that the company had in the past had funds with which to litigate, but had exhausted those funds by wasteful procedure. Two arbitrations had taken place. The sums now sought by Apollo had almost doubled, and the methodology by which they were calculated had changed. A hearing in the Stated Case procedure had been discharged to allow the hearing in the Inner House of a reclaiming motion in the judicial review proceedings brought by Apollo, challenging the actings of the arbiter and the auditor of the Court of Session. Apollo had been unsuccessful in the judicial review proceedings, both in the Outer and Inner House. Apollo had not conducted litigation reasonably or responsibly. Apollo had been represented by seven different firms of solicitors. Scott had been unable to recover expenses because the liquidation of Apollo was sisted.
(iii) Mr Politakis was not an appropriate person to represent Apollo: Counsel submitted that Mr Politakis was intimately linked with the circumstances associated with the claims. He was not a lawyer. He was ill-equipped to present the issues in such a complex case. Moreover during the time that the company had been under his control, the company had acted irresponsibly. The company had abused the privilege it enjoyed as a result of the sisted liquidation. A further factor to be taken into account in the present case was a potential conflict of interest between Mr Politakis and Apollo. Mr Politakis had a significant financial interest in the outcome of the dispute. There were concerns that the dispassionate judgment required in connection with what was in the company's best interests would be lacking, as would the skills and efficiency necessary for the presentation of such a large and complicated claim. Major disputes of fact and complex issues required to be resolved. Examples of disputes included (i) whether Scott had contributed to any extent to the liquidation of Apollo; (ii) whether any sums were due to Apollo, and if so, how they should be calculated.
In all the circumstances, the motion should be refused.
Submissions: amicus curiae
[12] Miss Springham presented submissions on issues of principle, for the assistance of the court, but did not seek to persuade the court to adopt any particular outcome.
The law in Scotland relating to the representation of companies
[13] In 1943, the House of Lords held that a limited company had to be represented by a lawyer in the sheriff court, Court of Session, and House of Lords: The Equity and Law Life Assurance Society v Tritonia Limited 1943 SC (HL) 88. That principle had subsequently been followed, without exception: Gordon v Nakeski-Cumming 1924 SC 939; Rush v Fife Regional Council 1984 SLT 391; Dana Ltd v Stevenson 1989 SLT (Sh Ct) 43 at page 44H-I; Clark Advertising Ltd v Scottish Enterprise Dunbartonshire 2004 SLT (Sh Ct) 85, paragraphs [7], [9], and [10]; Mushtaq v Secretary of State for the Home Department, 2006 SC 524; Kenneil v Kenneil [2006] CSOH 95, paragraph [12] et seq; Anderson petitioner 2008 SCLR 60; Cultural and Educational Development Association of Scotland v Glasgow City Council 2008 SC 439, at pages 442-3; and The UK Bankruptcy case cit sup (although in that case it was ultimately unnecessary to resolve the Article 6 issue). The reasoning underlying this well-settled rule was based on accountability, answerability, and the protection of the interests of others.
The position in England
[14] In England, Rule 39.6 of the Civil Procedure Rules 1998 permitted an employee of the company to represent it at trial if the company authorised him, and if the court gave permission. But Rule 39.6 was part of a comprehensive reform resulting from the Woolf Report. For example, the English courts had been given wide powers to award costs against non-parties: thus considerable control was retained. By contrast, in Scotland it was difficult to obtain expenses from a dominus litis: Macfadyen, Court of Session Practice, Div L, Ch 5, paragraphs 505-522, and 533; O'Connor v Bellimore Underwriting Agency Ltd [2005] CSOH 90; 2005 SCLR (N) 1111; Eastford Limited v Gillespie 2010 CSIH 12, paragraph [13]. The court might wish to contemplate allowing an individual to represent a company, but only on condition that he be made liable (jointly and severally with the company) for any expenses awarded against the company.
The rights under the ECHR
[15] Limited companies had rights under Article 6 of the ECHR: Stran Greek Refineries and Stratis Andreadis v Greece (1994) 19 EHRR 293. But the right of access to a court in terms of Article 6 was not absolute. It was subject to limitations: Ashingdane v UK (1985) 7 EHRR 528. The limitations should not restrict or reduce the access in such a way or to such an extent that the very essence of the right was impaired. The limitation must be in pursuit of a legitimate aim; also there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved. There were three essential questions: (i) did the limitation so restrict access to the courts to the point that there was in fact no right of access at all; (ii) did the limitation pursue a legitimate aim; (iii) was the limitation proportionate: cf Teltronic-CATV v Poland Appeal no 48140/99 ECtHR 10/1/06; Monarch Energy Ltd v Powergen Retail Ltd 2006 SLT 743; Ewing v Times Newspapers Ltd 2010 SLT 1093; Tolstoy Miloslevsky v United Kingdom (1995) 20 EHRR 442. In terms of Article 14 of the ECHR there required to be an objective and reasonable justification for any difference in treatment between individuals and companies: Adami v Malta (2007) 44 EHRR 49.
Ought non-legal representation to be permitted?
[16] There were legitimate aims in placing restrictions on non-legal representation of companies, namely (i) a concern that an individual might be representing his own interests rather than the company's; and (ii) a risk that an individual could seek to avoid consequences such as expenses by shielding behind the corporate body: Clark Advertising Ltd v Scottish Enterprise Dunbartonshire 2004 SLT (Sh Ct) 85; Cultural and Educational Development Association of Scotland [2008] CSIH 23. If conditions could be imposed to address those two issues, non-legal representation should be permitted where the very essence of the right of access to a court would be defeated if such representation were not permitted.
Conditions under which a company ought to be permitted non-legal representation
[17] Counsel submitted that the conditions to be imposed were as follows:
· The company had to be unable to pay for legal representation
· The company must have authorised the individual to act on its behalf
· The individual should be capable of representing the company's interests
· The company should have a prima facie case
· The court would have a discretion to allow the individual to represent the company on condition that the individual would be liable for an award of expenses made against the company.
The powers of the court
[18] The Act of 1532 was passed at a time when the incorporated company in its modern form was not in existence. It was therefore not clear whether the Act was intended to prevent representation of companies by individuals. In any event, the Act of 1532 had to be interpreted in a way compatible with the ECHR: section 3 of the Human Rights Act 1998 and Ghaidan v Godin-Mendoza [2004] UKHL 30. The Act could therefore be read as extending the right of self-representation to companies: cf the court's inherent power to regulate its own jurisdiction: Hepburn v Royal Alexandra Hospital [2010] CSIH 71, paragraphs [20], [28] and [47]. The Court of Session therefore had the inherent power to decide whether or not to allow Mr Politakis to represent the appellants. The court's powers were not hampered by the lack of any relevant rules of court.
Discussion
Domestic law
[19] As noted in paragraph [7] of Secretary of State for Business Enterprise and Regulatory Reform, Petitioner (The UK Bankruptcy case) 2010 SLT 1242:
"The rule restricting rights of audience in [the Court of Session] dates from the foundation of the court. In the legislation of 1532 which established the College of Justice, the Act 1532 provided inter alia: 'That na man enter to pley, bot parties conteined in their summoundes and their procuratoures, gif they will ony have."
The procurators mentioned are "the advocates, whose office was instituted, and is still regulated, by chapters 64, 65 and 66 of that year."
[20] Further, in Equity and Law Life Assurance Society v Tritonia Ltd 1943 SC (HL) 88, the House of Lords ruled in a Scottish appeal that, as a corporation was an artificial entity which could not attend the court and argue personally, the right of audience was necessarily limited to counsel instructed on the corporation's behalf. That dictum has been construed as applying not only to the House of Lords, but also to the Court of Session and the sheriff court: paragraph [18] of The UK Bankruptcy case.
[21] Finally, there has been no equivalent to the Woolf reforms in Scotland. Accordingly there is no package of measures and no Rule of Court such as Rule 39.6 of the Civil Procedure Rules 1998 enabling a limited company to be represented by a company director or employee.
[22] In the result, Scots law clearly does not permit Mr Politakis to represent Apollo in court.
The effect of the ECHR
[23] The problem faced by an impecunious limited company is that, if it cannot afford to instruct a lawyer to act in court on its behalf, and if it is not permitted to be represented by an employee or director, it is prima facie denied access to the court. By contrast, a natural person in a similar situation (impecunious and unable to obtain Legal Aid) is entitled to represent himself in court as a party litigant.
[24] During the debate it was not disputed that a limited company has rights under Article 6 of the ECHR: Stran Greek Refineries v Greece (1994) 19 EHRR 293. Further, it was not disputed that Articles 6 and 14 of the ECHR apply to arbitrations and Stated Case procedures governed by the Administration of Justice (Scotland) Act 1972. I therefore consider that Apollo's inability to present its case in court because of lack of funds to pay for legal representation engages Articles 6 and 14. In that context, it should be noted that the approach of the English courts prior to the Woolf reforms was that a company's lack of funds to instruct counsel did not amount to "exceptional circumstances" justifying a departure from the normal rule that a limited company should litigate through legal advisers (Radford v Samuel [1993] BCC 870, at pages 873; Floods of Queensferry Ltd v Shand Construction Ltd and others [1997] 81 BLR 49). However the English courts have changed their procedures, and now permit representation by a company employee on certain conditions and subject to inter alia case management and striking-out provisions. Further, while I agree with the dicta of Lord Hodge at paragraph [9] of his judgment in the Outer House in The UK Bankruptcy Case (quoted in paragraph [39] below), I consider that the decision to seek the benefit of limited liability by trading through the medium of a registered company does not in itself amount to sufficient "objective and reasonable justification" for differentiating between an impecunious limited company and an impecunious natural person by in effect denying the limited company the option of progressing its case in court without a lawyer: cf Adami v Malta (2007) 44 EHRR 49. Finally, the absence of any relevant Rules of Court does not, in my view, present an obstacle to Mr Politakis's motion.
[25] However the Act of 1532, and the decision of the House of Lords in Equity and Law Life Assurance Society v Tritonia Ltd, cit sup, may present obstacles. I deal first with the effect of the decision in the House of Lords.
A. Equity and Law Life Assurance Society v Tritonia Limited
[26] In the House of Lords decision in a Scottish appeal, Equity and Law Life Assurance Society v Tritonia Limited 1943 SC (HL) 88, Viscount Simon, LC, observed:
"When an appeal is argued before the House of Lords, no-one has any right of audience except counsel instructed on behalf of a party or (when the litigant is a natural person) the party himself. In the case of a corporation, inasmuch as the artificial entity cannot attend and argue personally, the right of audience is necessarily limited to counsel instructed on the corporation's behalf."
[27] As Lord Justice Clerk Gill explained in The UK Bankruptcy Case 2010 SLT 1242:
"Although this dictum relates specifically to proceedings before the House of Lords, the principle that it sets out has been applied more widely. It has been applied consistently in the Court of Session (cf the annotations to the Rules of the Court of Session, Parliament House Book, Vol 2, para 4.3.6). It has also been applied in ordinary cause procedure in the sheriff court where the right of audience is confined to advocates, solicitors and natural persons appearing on their own behalf (Dana Ltd v Stevenson)."
[28] Thus there is a clear and authoritative ruling of the House of Lords expressly prohibiting the procedural route which Mr Politakis wishes to adopt. He of course prays in aid Articles 6 and 14 of the ECHR. However in R (RJM) v Secretary of State for Work and Pensions [2009] AC 311 at paragraph 64, the House of Lords held that lower courts should continue to follow any binding decision of the House of Lords, even if the precedent was considered to be in conflict with the case-law of the European Court of Human Rights, unless there were "wholly exceptional circumstances".
[29] Thus, standing the authoritative decision of the House of Lords in Equity and Law Life Assurance Society v Tritonia Limited 1943 SC (HL) 88, Mr Politakis would have to demonstrate "wholly exceptional circumstances" such that the Court of Session should not follow that binding decision. In my view he has not done so. Accordingly his motion falls to be refused.
B. The Act of 1532
[30] Lest I am wrong in relation to the effect of Equity and Law Life Assurance Society v Tritonia Ltd, cit sup, I now consider whether Mr Politakis's motion might otherwise succeed, standing the terms of the Act of 1532.
[31] As Lord Rodger of Earlsferry explained in Ghaidan v Godin-Mendoza [2004] 2 AC 557 at paragraph 121:
" ... it is possible for the courts to supply by implication words that are appropriate to ensure that legislation is read in a way which is compatible with Convention rights. When the court spells out the words that are to be implied, it may look as if it is 'amending' the legislation, but that is not the case. If the court implies words that are consistent with the scheme of the legislation but necessary to make it compatible with Convention rights, it is simply performing the duty which Parliament has imposed on it and on others. It is reading the legislation in a way that draws out the full implications of its terms and of the Convention rights. And, by its very nature, an implication will go with the grain of the legislation ..."
[32] In view of section 3 of the Human Rights Act, the provisions of Articles 6 and 14 of the ECHR, and the guidance given by Lord Rodger as noted above, I consider that this court must construe the Act of 1532 as extending to the possible representation of a limited company in court by an employee or director of the company provided that the court has given authorisation and provided that certain conditions are met.
[33] The minimum conditions would be those specified in The UK Bankruptcy Case (see paragraph [5] above). But the court would have the power to add such further conditions as it thought necessary, for the European Court has emphasised that Article 6 does not give an absolute right of access to the court, a fortiori in a civil appeal: Ashingdane v UK (1985) 7 EHRR 528; Tolstoy Miloslavsky v United Kingdom (1995) EHRR 442 and Sialkowska v Poland (2010) EHRR 18. Member states are permitted a margin of appreciation, and may impose regulations or restrictions on access to court, provided that (i) any restriction does not restrict or reduce the access left to such an extent that the very essence of the right is impaired; (ii) any restriction must pursue a legitimate aim; and (iii) there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved: cf Teltronic-CATV v Poland Appeal no 48140/99 ECtHR 10/1/06; Monarch Energy Ltd v Powergen Retail Ltd 2006 SLT 743; Ewing v Times Newspapers Ltd 2010 SLT 1093; Tolstoy Miloslevsky v United Kingdom (1995) 20 EHRR 442 (security for costs order in relation to an appeal held to be legitimate and proportionate: "Article 6(1) does not guarantee a right of appeal"). Thus before authorising a company director or employee to act on behalf of the company, the court might impose additional conditions such as an order for caution for expenses; or a ruling that the individual would be liable, jointly and severally, with the company in respect of any award of expenses against the company; or a rigorous programme of case management; or a prohibition against the assignation of the claim to any other person (natural or artificial); or the fixing of a preliminary diet specifically for the purpose of debating the relevancy of case (or certain aspects of it); or an order that an expert witness be instructed to carry out certain investigations and report to the court; and so on.
[34] In the result, therefore, it is my opinion that this court has a discretionary power in certain circumstances to grant a motion such as that enrolled by Mr Politakis, but on certain terms and conditions. To that extent, I agree with the observations of Lord Clarke in paragraph [51] of The UK Bankruptcy Case. As this court has an inherent power to organise its own procedure, I consider that the court is not limited in the exercise of that power by the lack of any relevant Rules of Court: cf Hepburn v Royal Alexandra Hospital [2010] CSIH 71, paragraphs [20], [28] and [47].
[35] The question then arises whether this court should exercise that discretionary power in favour of Mr Politakis. In assessing that matter, the following factors are relevant:
(1) Senior counsel, while explaining that Scott's position was that Apollo's claims were irrelevant, fundamentally flawed, complex, ill-founded, and without merit, nevertheless provided a helpful undertaking dated 7 July 2011 solely for the purposes of Mr Politakis's motion. The undertaking was in the following terms:
"Scott do not argue, for the purposes of today's hearing only, that Apollo does not have a prima facie valid case. Scott contend that Apollo's case is fundamentally flawed, but accept that the court would not be able to reach that conclusion summarily and without detailed debate of the relevancy of Apollo's case."
(2) Senior counsel for Scott also stated that, for the purposes of debating and resolving Mr Politakis's motion, it was accepted Apollo did not have the funds to instruct counsel in the Stated Case procedure.
(3) Mr Politakis has authority from Apollo to represent the company. He produced a document dated 22 September 2010 in the following terms:
"RESOLUTIONS OF THE DIRECTORS AND SHAREHOLDERS OF APOLLO ENGINEERING LIMITED
It is hereby agreed by the only two directors and shareholders of the Company that Mr Gabriel Politakis is authorised to represent Apollo Engineering Limited in the legal proceedings against James Scott Limited."
The document is signed by Mr and Mrs Politakis.
(4) We are satisfied that Apollo's decision to authorise Mr Politakis to represent the company arose from necessity rather than choice.
[36] Thus the four conditions laid down in The UK Bankruptcy case are fulfilled. Nevertheless in the light of the guidance given in the European jurisprudence, and in particular the cases of Tolstoy Miloslavsky v United Kingdom (1995) EHRR 442 and Sialkowska v Poland (2010) EHRR 18, I have reached the view that (a) Mr Politakis's motion should be refused, and (b) such a refusal does not constitute a breach of Article 6. I have reached that view for the following reasons.
There has been access to an impartial tribunal
[37] Apollo has had access to independent and impartial tribunals, namely two arbitrations. Despite his dissatisfaction with those proceedings, it cannot in my view be said that the requirement that Apollo be legally represented in any appeal in the Court of Session would impair the very essence of Apollo's right of access to an independent and impartial tribunal.
Legitimate aim
[38] The need for legal representation for the company in the Stated Case proceedings in the Court of Session is, in my view, a "legitimate aim" for several reasons.
[39] First, as Lord Hodge pointed out in The UK Bankruptcy Case at paragraph [9]:
" ... A company as a legal person is not the same as a natural person. Where a person chooses to obtain the benefits of limited liability by trading through the medium of a registered company, he has also to accept the disadvantages to which separate legal personality gives rise ...".
The dispute between the parties is complex and lengthy, involving considerable quantities of documentation. In my view, the dispute requires efficiency and expertise for the presentation of the case in the appeal court. I therefore consider that experienced professional representation is needed for the protection of the court and other parties involved in the proceedings, such as Scott.
[40] Secondly, the sisting of the liquidation has had the effect that Apollo is in effect litigating without paying awards of expenses made against it. Scott has been unable to recover substantial awards of expenses in its favour, including a sum of £195,497 in respect of Apollo's amendment procedure in the second arbitration. As Lord Drummond Young observed in Monarch Energy Ltd v Powergen Retail Ltd 2006 SLT 743 at paragraph [12]:
" ... a legitimate aim [is] ensuring that the device of limited liability is not used as a means of litigating without paying the other side's expenses if the company is unsuccessful ...".
Professional representation should provide some safeguard against wasted expenditure, caused inter alia by a lack of the experience and expertise required in the presentation of such a claim. We should add that we are not confident that an order making Mr Politakis jointly and severally liable with the company for any award of expenses against the company would provide a sufficient safeguard for the court and for Scott in this claim.
[41] Thirdly, Mr Politakis has had close involvement with Apollo and its affairs in the past, and has a major interest in the outcome of any litigation involving Apollo. As he explains in paragraph 8 of his written reasons supporting the present motion:
" ... my wife and I have an interest in that our pension and our home is tied up in Apollo's claim."
There is therefore a risk, which cannot be ignored, that Mr Politakis's personal interests might affect decisions which should properly be taken on behalf of the company - a risk which professional representation would resolve.
Proportionality
[42] Finally, there is in my view a reasonable relationship of proportionality between the means employed (the requirement that there must be legal representation in the Stated Case proceedings) and the legitimate aim referred to in paragraphs [38]-[41] above.
[43] In all the circumstances, even if the House of Lords decision in Equity and Law Life Assurance Society v Tritonia Limited, cit sup, presented no difficulty for Mr Politakis, I am not persuaded that his motion should be granted.
Decision
[44] For the reasons given above, I would refuse the motion.
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
Lady Paton Lord Reed Lord Bracadale | [2012] CSIH 4 XA156/07 OPINION OF LORD REED in the cause APOLLO ENGINEERING LIMITED (in liquidation) Appellants; against JAMES SCOTT LIMITED Respondents: _______ |
Proposer of motion: G Politakis, director and shareholder of Apollo Engineering Limited
Appellants: No appearance
Respondents: Ellis, Q.C.; MacRoberts
Amicus curiae: Springham
18 January 2012
[45] I gratefully adopt your Ladyship's account of the background to this application. I agree that it should be refused. My reasons for reaching that conclusion are however different from your Ladyship's.
[46] This court decided in Secretary of State for Business, Enterprise and Regulatory Reform v UK Bankruptcy Ltd 2011 SC 115 that a company could not be represented in proceedings before the court by anyone other than an advocate or solicitor possessing a right of audience. The court did not however consider in that case the possible significance of the European Convention on Human Rights and Fundamental Freedoms, the Human Rights Act 1998 or EU law. In the present case, on the other hand, the court has to address the effect, if any, which the Convention and the Human Rights Act may have upon this aspect of our law.
[47] The question arises as a result of the operation, in combination, of two rules of our law: first, the rule that a legal person cannot be represented in proceedings in this court by anyone other than an advocate or solicitor possessing a right of audience; and secondly, the rule that a company is ineligible for legal aid, a body corporate not being a "person" which can be provided with legal aid under the Legal Aid (Scotland) Act 1986 (see section 41). The result of these two rules, in combination, is that an impecunious company may in practice be unable to take part in proceedings before this court. A natural person without funds, on the other hand, is eligible for legal aid and, if unable to obtain legal aid, is entitled to present his own case in person.
[48] In the present case, it is accepted for the purposes of the application that the appellants have an arguable case and do not have the funds necessary to instruct counsel. It is also not in dispute that the appellants have authorised one of their directors, Mr Politakis, to present their case. He is however unable to do so, since he has no legal qualifications, unless there is a modification of the law as determined in the UK Bankruptcy case. The first question which arises, therefore, is whether the inability of the appellant to take part in the present proceedings is compatible with the Convention or with the Convention rights created by the Human Rights Act. If it is not, a consequential question then arises as to the implications of the incompatibility.
[49] The relevant provision of the Convention in the present context is article 6(1). So far as material, it provides:
"In the determination of his civil rights and obligations ....everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".
[50] The European Court of Human Rights has interpreted article 6(1) as guaranteeing practical and effective access to a court or tribunal. The effect of the relevant case law was conveniently summarised in Staroszczyk v Poland (2007) 50 EHRR 114, paras 123-124, in terms which have been repeated more or less verbatim in other judgments (eg Sialkowska v Poland (2007) 51 EHRR 473, paras 101-102; Kulikowski v Poland, Application No 18353/03, 19 May 2009, para 58):
"123. The Court further reiterates that it would be inconceivable that art.6(1) should describe in detail the procedural guarantees afforded to parties in a pending lawsuit without also protecting the right of access to a court which makes it in fact possible to benefit from such guarantees. The fair, public and expeditious characteristics of judicial proceedings are of no value at all if there are no judicial proceedings. The Convention is intended to guarantee not rights that are theoretical or illusory but rights that are practical and effective. This is particularly so of the right of access to the courts in view of the prominent place held in a democratic society by the right to a fair trial. A restrictive interpretation of the right of access to a court guaranteed by art.6(1) would not be consonant with the object and purpose of the provision.
124. However, this right is not absolute, but may be subject to limitations; these are permitted by implication since the right of access by its very nature calls for regulation by the state. In this respect, the contracting states enjoy a certain margin of appreciation, although the final decision as to the observance of the Convention's requirements rests with the Court. It must be satisfied that the limitations applied do not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will not be compatible with art.6(1) if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved".
[51] These general principles have been applied by the Strasbourg court not only in relation to courts and tribunals at first instance, but also in relation to courts of appeal or of cassation, the latter term being used in some countries to describe appellate courts whose jurisdiction is confined to the correction of errors of law. The relevant principles were summarised in Kulikowski at para 59:
"The Convention does not compel the Contracting States to set up courts of appeal or of cassation. However, where such courts do exist, the guarantees of Article 6 must be complied with. The manner in which this provision applies to courts of appeal or of cassation depends on the special features of the proceedings concerned and account must be taken of the entirety of the proceedings conducted in the domestic legal order and the court of cassation's role in them. Given the special nature of the court of cassation's role, which is limited to reviewing whether the law has been correctly applied, the Court is able to accept that the procedure followed in such courts may be more formal".
[52] The Strasbourg court has, in particular, consistently accepted that it is compatible with article 6 for domestic law to require that an appellant should be legally represented before a court of cassation. In Staroszczyk, for example, the court stated (para 128):
"The Court further reiterates that the requirement that an appellant be represented by a qualified lawyer before the court of cassation, such as applicable in the present case, cannot, in itself, be seen as contrary to art.6. This requirement is clearly compatible with the characteristics of the Supreme Court as a highest court examining appeals on points of law and it is a common feature of the legal systems in several member States of the Council of Europe. It is for the contracting states to decide how they should comply with the fair hearing obligations arising under the Convention".
Similar statements have been made in other cases (e.g. Gillow v United Kingdom (1986) 11 EHRR 335, para 69; Sialkowska, para 106; Kulikowski, para 60).
[53] Even where legal representation is not obligatory under domestic law, it may be necessary in order for the proceedings to comply with article 6(1). This issue first arose in the case of Airey v Ireland (1979) 2 EHRR 305, where the applicant was a natural person seeking to commence proceedings to obtain a judicial separation from her husband. Although she was entitled to conduct her own case, the Strasbourg court did not regard that possibility as meeting the requirements of article 6(1), since it was not satisfied that the applicant would be able to present her case properly and satisfactorily. It noted that she would be at a disadvantage if her husband were represented by a lawyer, that the procedure was complex, and that the issues involved were such that it was improbable that she could present her case effectively. The possibility of appearing in person did not therefore provide the applicant with an effective right of access to the court (para 24). The court made it clear that that conclusion reflected the particular circumstances: in certain eventualities, the possibility of appearing before a court in person, even without a lawyer's assistance, would meet the requirements of article 6(1). In the circumstances of the applicant's case, however, effective access to the court required the assistance of a lawyer (para 26). That approach has been followed in later cases such as McVicar v United Kingdom (2002) 35 EHRR 566 and Steel and Morris v United Kingdom (2005) 41 EHRR 403.
[54] In the present case, the appellants' case has been determined at first instance in proceedings in which they had legal representation. By agreement of the parties, those proceedings took the form of arbitration rather than litigation before a court. The appellants then challenged the decision of the arbiter by means of an application for judicial review, which was unsuccessful both at first instance and on appeal to this court. They have also challenged the decision of the arbiter, in the present proceedings, by means of an appeal under section 3 of the Administration of Justice (Scotland) Act 1972. Such an appeal is restricted to points of law. The issues raised in the appeal (which was prepared at a time when the appellants had lawyers acting for them) are complex. A very large quantity of documentation has been produced. Estimates of the length of the hearing required have been in terms of weeks rather than days. It is unlikely that such an appeal could be presented effectively by anyone without legal qualifications: the effective presentation of an appeal of this nature generally requires substantial experience and expertise. I intend no disrespect to Mr Politakis in saying, in the light of his presentation of the application with which the court is now concerned, that he manifestly lacks the necessary experience and expertise.
[55] In these circumstances, applying the approach adopted by the Strasbourg court in such cases as Airey v Ireland, article 6(1) cannot require that the present application should be granted, since to allow Mr Politakis to represent the appellants in their appeal would not provide the appellants with an effective right of access to the court.
[56] That is sufficient to determine the application. There are however two further points which might be added. First, it is clear from the cases which I have cited that a rule requiring that a party to an appeal on a point of law should be legally represented is not in itself incompatible with the Convention. Such a rule tends to ensure that appeals are presented responsibly and efficiently, and is thus in the general public interest as well as in the interest of other litigants.
[57] Secondly, the real issue which arises in circumstances where legal representation is either compulsory in law or necessary in practice, and where it is unavailable because the litigant is unable to afford it, is as to the compatibility with article 6(1) of the domestic arrangements for legal aid. In the Airey case, the court observed (para 26):
"Article 6(1) may sometimes compel the State to provide for the assistance of a lawyer when such assistance proves indispensable for an effective access to court either because legal representation is rendered compulsory, as is done by the domestic law of certain Contracting States for various types of litigation, or by reason of the complexity of the procedure or of the case".
The application of that principle to legal persons was considered by the court in VP Diffusion Sarl v France, Application No. 14565/04, 26 August 2008, unreported, and in CMVMC O'Limo v Spain, Application No. 33732/05, 24 November 2009, unreported. The issue was also considered by the Court of Justice of the European Union in Case C-279/09 DEB Deutsche Energiehandels-und Beratungsgesellschaft mbH v Germany, 22 December 2010. It is however unnecessary to consider those authorities in order to determine the present application.
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
Lady Paton Lord Reed Lord Bracadale | [2012] CSIH 4 XA156/07 OPINION OF LORD BRACADALE in causa by APOLLO ENGINEERING LTD (in liquidation) Appellants; against JAMES SCOTT LTD Respondents: _______ |
Proposer of Motion: G. Politakis, Director and Shareholder of Apollo Engineering Ltd
Appellants: No appearance
Respondents: Ellis, QC; MacRoberts
Amicus Curiae: Springham
18 January 2012
[58] I also gratefully adopt your Ladyship's account of the background to this application. In the particular circumstances of this case I agree that it should be refused for the narrower reasons set out by Lord Reed.