A regularly asked question is whether a director of a company can represent that company in court proceedings in Scotland or whether the company must engage legal representation. That question has been reviewed in the recent petition for the winding-up of UK Bankruptcy Ltd.
In that petition, the Secretary of State sought to wind up the company under the Insolvency Act 1986. One of two directors of the company, who also owned 50% of the company's share capital, sought to represent the company in the proceedings. Under the pre-existing law, the directors of a company were not entitled to represent the company in Scottish court proceedings.
The director, however, argued, amongst other things, that a company had an inalienable right under Article 6 of the European Convention on Human Rights to be represented in court by one of its directors and contended that the law as it stood breached Article 6, on the ground that it deprived the company of a right to a fair hearing if its directors were not in a position to arrange and fund legal representation.
This issue was reported to the Inner House (appeal court), as it raised important questions of legal policy which were not addressed in the Rules of the Court of Session.
The Inner House has now issued its opinion and held that, in this case, an Article 6 argument did not arise. In particular the director in this case had produced no evidence to show that the company had authorised him to represent it and he appeared to be opposing the petition for his own personal interest. Accordingly, the director was not able to represent the company and the case has been returned to the judge at first instance with a direction that he decline to accept the director as a representative of the company.
In its decision, the Inner House concluded that it would be unwise to modify the general rule that directors of a company are not able to represent the company in legal proceedings. The court indicated that extension of rights of audience in the courts has historically been brought about by express legislation. Therefore, if the right of audience were to be further extended to company directors, this should be implemented only by legislation after the normal consultative processes of law reform.
However, as one final point, the court did recognise that the present rule prohibiting directors from representing a company in court proceedings could have the effect, in certain circumstances, of infringing a company's right to a fair hearing under Article 6 if the company had a prima facie valid claim or defence but was genuinely unable to pay for legal representation.
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