Representation in Court – Legal or Not?

The courts may permit a one-person company to be represented at a court hearing by its alter ego. However it must be stressed that this will only be the case if exceptional circumstances exist.

Representation in Court – Legal or Not?

13 February 2006

Article by Sam Oosthuizen & Marc Friedman of Cliffe Dekker Inc

The courts may permit a one-person company to be represented at a court hearing by its alter ego. However it must be stressed that this will only be the case if exceptional circumstances exist.

In the recent decision of Navy Two CC (the CC) v Industrial Zone Limited (Industrial), the rule barring a person who is not a legal practitioner from representing a corporate entity came under judicial scrutiny. The sole-member of a close corporation was refused audience by the High Court,resulting in an appeal to the Supreme Court of Appeal (SCA).

The facts of the matter are briefly as follows: The parties concluded an agreement of in terms of which the CC was required to make certain payments. Subsequent to the conclusion of the agreement, the CC fell in arrears. The cancellation clause in the agreement provided for a 14 day notice period to be given to the defaulting party to rectify the breach, failing which cancellation would be permissible. The notice appeared to have been served on the CC at its place of business and signed for, however the CC denied receiving it.

Industrial launched an application in the High Court for an order declaring that the written agreement had been validly terminated and at the hearing, the sole-member of the CC, who was not a legal practitioner, attempted to appear on its behalf to apply for a postponement. The High Court refused to allow him to represent the CC, and directed that he prepare and file an affidavit in support of his request for a postponement indicating that he himself could bring the affidavit to court.

At the postponed hearing, the matter came before a different judge who was prepared to receive the affidavit, but still refused to allow the member to represent the CC on the basis that a corporate entity could only be represented by a legal representative. The judge then, as a compromise, permitted the member to relay his submissions to the court through Industrial’s legal counsel. Notwithstanding this indulgence, the judge made an order refusing the postponement and granted Industrial the relief it sought.

The issue on appeal was whether the High Court should have exercised its discretion in applying the rule, and thereby allowing the member to represent the CC.

The SCA referred to various authorities (both South African and English) that place emphasis on the court’s inherent power to exercise a discretion, in the interests of justice, to permit a person other than a legal practitioner to appear before it on behalf of a corporate entity. However, the SCA stressed that this will only be the case if exceptional circumstances are present, such as a director who is a party to litigation to which a company is also a party. In this situation the director may be allowed to appear in person for purposes which are also those of the company.

The SCA in the present case stated that very little of the court’s time would have been taken up if the High Court had allowed the member of the CC to address it on the merits of the application for a postponement. The effect of its refusal was that the CC was denied an opportunity to be heard. Furthermore, the defect was not remedied by the High Court judge receiving the CC’s submissions through Industrial’s legal counsel. The SCA held that the refusal by the judge in the High Court in exercising his discretion in granting the member audience, was a misdirection which entitled the SCA to interfere with the decision and to consider the application afresh.

The effect of this decision is that the courts may permit a one-person company to be represented at a court hearing by its alter ego. However it must be stressed that this will only be the case if exceptional circumstances exist.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Specific Questions relating to this article should be addressed directly to the author.

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