COURT
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
FRENCH J

CWDS
  Corporations - proceedings - legal representation - leave to proceed without
legal representation - relevant criteria - whether sufficient reason - motion
dismissed.

  Practice And Procedure - legal proceedings - representation - corporation -
representation other that by solicitor - relevant criteria - sufficient
reason.

  Federal Court Rules

  Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (1991) 1 All ER
591

  Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 11 ACLR 326

  Tritonia Ltd v Equity and Law Life Assurance Society (1943) AC 584

  Re G.J. Mannix Ltd (1984) 1 NZLR 309

  Battle v Irish Art Promotion Centre Ltd (1968) IR 252

  Peters v Australian Institute of Food Science and Technology Ltd (1986) 10
ACLR 547

  Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68

HRNG
PERTH, 28 June 1993
#DATE 29:6:1993

  Counsel for the Applicant:      Mr J.V. Caruso, a Director of
                                  the Applicant appeared by
                                  leave on the motion.

  Counsel for the Respondents:    Mr M.J. McCusker QC and
                                  Mr J. Gilmour

  Solicitor for the Respondents:  Pullinger Sanderson and
                                  Workman

ORDER
The Court Orders that:
1. The applicant be granted leave pursuant to O.4 r.14 to carry of the
proceedings otherwise than by a solicitor for the purpose of resisting the
respondents' motion to strike our the application and for the purpose of
directions as to the future conduct of the proceedings.
2. The applicant's motion be otherwise dismissed.
3. The Applicant pay the respondents' costs of the motion.
Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal
Court Rules.

JUDGE1
REASONS FOR JUDGMENT ON MOTION BY CORPORATION FOR LEAVE TO PROCEED WITHOUT
SOLICITOR
Introduction
FRENCH J  The present proceedings have been on foot since February 1991. The
trial of the action, estimated to take three months, commences on 5 July 1993.
It has been listed since June 1992. The action involves a claim for some $31
million in damages for misleading or deceptive conduct in relation to the
arranging of project finance for a major mineral sands project. It will
involve complex questions of fact and law. Less than two weeks prior to the
commencement of the trial, the corporate applicant has terminated the retainer
of its solicitors and counsel. The company now seeks leave to proceed without
a solicitor and to be represented by one of its directors. The Court is asked
to grant leave under O.4 r.14 of the Federal Court Rules.

Factual Background
2.  By proceedings instituted on 5 February 1991, Simto Resources Ltd
("Simto") claims damages against Normandy Capital Ltd ("Normandy") and one of
its directors, Gino Vitale. The damages, exceeding $31 million, are alleged to
have been suffered as the result of misleading or deceptive conduct on the
part of Normandy Capital. The conduct complained of comprises various
representations said to have been made by Normandy in relation to its proposal
to arrange project finance for a mineral sands mining and processing project
being undertaken by Simto at Wonnerup near Bunbury. Various of the
representations, allegedly made orally, are said only to have been made by
Gino Vitale, the executive director of Normandy, to John Vincent Caruso, a
director of Simto, and Anthony Royston Hyde, that company's secretary.
Normandy Capital cross-claims against Simto, Mr Caruso and Mr Hyde. By the
cross-claim it seeks recovery of unpaid fees of $39 000 said to be owed to it
by Simto. It also claims damages of $100 000 being the difference between an
agreed fee of $50 000 and a figure of $150 000 which Normandy says it would
have negotiated as its fee but for certain assurances given by Simto, Mr
Caruso and Mr Hyde.

3.  In June 1992, trial dates were allocated, being sixty days commencing on 5
July 1993. The action has proceeded through various interlocutory processes. A
preliminary issue relevant to the cross-claim has been heard and determined. A
large number subpoenas have been issued by the respondents and made returnable
in advance of the trial to allow for inspection of documents thereby produced.
It is apparent from the nature of the pleadings and the extent of the
interlocutory processes the trial of the action will raise complex issues of
fact and law. On 23 June 1993, less than two weeks before the commencement of
the trial, the applicant Simto, and Mr Caruso, who is named as second
cross-respondent to the cross-claim, filed a Notice of Removal of their
solicitor of record pursuant to O.45 r.6 Mr Caruso now moves pursuant to O.4
r.14, for an order that Simto be granted leave to carry on the proceedings
otherwise than by a solicitor and that he be given leave to appear on behalf
of the company.

4.  Simto's motion is supported by an affidavit sworn by Mr Caruso. In the
affidavit he says that despite making every attempt and exploring every avenue
to fund the trial of the proceedings, Simto is unable to expend the large
amount of money to pay counsel and solicitors. Because neither Simto nor Mr
Caruso is able to "expend these monies at the present time" the retainers of
senior and junior counsel have been determined. The company has also
determined the authority of its solicitors to act because it cannot provide
them with the funds to run the case. Mr Caruso says that he has approached the
office of the Commonwealth Attorney-General for Legal Aid and has spoken to an
officer of the Trade Practices Commission in that regard. He considers
however, that it is most unlikely that any funds will come from that source.
At para.6 of his affidavit, he says:
    "6. The current recession and the failure of the Wonnerup
    Mineral Sands Project, which is central to this case, have made
    it difficult to continuously fund the case since its inception,
    but a considerable amount of money has been expended on the
    case to date by parties other than the Applicant and myself,
    and being other companies owned and controlled by other members
    of the Caruso family. The financial position of the Applicant
    and myself makes it impossible to come up with the large amount
    of money required to take the case through to completion with
    legal representation, and the parties who have funded the
    action to date cannot and will not provide further funds at
    present, although there would be a good prospect of them being
    willing and able to come up with further funds at a later
    stage."

5.  Mr Caruso says that he has an intimate knowledge of the proceedings, the
issue and the relevant documentations. Much of the evidence involved in the
defence to the cross-claim is also relevant ti Simto's claim. He exhibited to
his affidavit a resolution of the company authorising him to act on its behalf
in the proceedings. That was a resolution of a meeting of directors comprising
himself and his brother, Mark. There is a third director of the company,
another brother, Joseph Anthony Caruso. Since August 1992, the principal
shareholder in Simto has been Zurich Bay Holdings Pty Ltd which is controlled
by Joseph and another relative, Peter Caruso. That company operates as trustee
of a discretionary trust of which Simto is a beneficiary. The trust is known
as the Minesite Construction Services Trust. The other shareholders in Simto
are Mr Caruso, his brothers, Mark and Joseph, Christopher Victor Caruso and
Simto Pty Ltd as trustee for the Simto Australia Unit Trust.

6.  Mr Caruso maintains that if the order he seeks is not granted, Simto will
be forced to abandon its claim. The affidavit evidence upon which he relies is
notably light in detail given the asserted importance of the order sought to
the progress of the application. And as emerged in cross-examination, the
picture it paints is not complete. In particular, it fails to disclose that
some eight weeks ago the costs of continuing the action to and including trial
were estimated by Simto's solicitors to be in the order of $270 000 on the
basis of representation by junior counsel only and allowing about $60 000 for
the cost of expert witnesses. Up to that time, some $200 000 had been expended
in legal costs and the provisions of expert reports. $50 000 was provided by
Simto from the sale of its assets. Some $80 000 was received from Zurich Bay
Holdings in consideration of the assignment to it of an earthmoving contract
arranged by Simto with a company called AMC Mineral Sands Ltd. There was some
evidence to suggest that the consideration for the contract was substantially
less than the value it would have had on an arms length basis. Simto, it
should be noted, was also the beneficiary of a distribution of $330 000 from
the Minesite Construction Services Trust as at 30 June 1992. Other
distributions from other Trusts brought the total income from trust
distributions to $399 941 for the year ended 30 June 1992. This distribution
was evidently to be applied to reduce a debt owing by Simto to Simto Pty Ltd
as trustee of the Simto Australia Unit Trust, being a sum of $1.3 million.

7.  As from eight weeks ago it appears that Zurich Bay Holdings was prepared
to fund the action on the basis of junior counsel only. Subsequently however,
Simto's solicitors indicated that senior counsel should be retained for the
trial and that overall costs, including that retainer, would be closer to $600
000, a figure which, according to Mr Caruso, neither the company nor those
interested in supporting could meet. He was however unable to say that Zurich
Bay Holdings could not meet the funding of the action on the reduced basis of
representation by junior counsel only. His evidence on these and other matters
on which he was cross-examined was vague and lacking detail and raised a doubt
about the seriousness with which he and the company are approaching the
conduct of these proceedings generally. That doubt is deepened in the light of
Simto's failure to discover until the last minute a number of obviously
relevant documents, its failure to issue any subpoenas at all thus far and its
failure to make any arrangement to have present as a witness in its own case
the third cross-respondent, Anthony Royston Hyde. Mr Hyde, who is said to have
been present when oral representations pleaded were made, is, on any view, a
witness whose evidence would be of great importance to Simto's case. He has,
however, gone overseas and will not be back until the end of August. Specific
orders in relation to the hearing of the cross-claim against him were made to
take this into account without any demur on the part of Simto. Simto has also
apparently taken no steps to inspect the large quantity of documents produced
into this Court under the various subpoenas issued by Normandy. The dates for
the trial of the action have been known to all parties for about a year.

8.  There is affidavit evidence from Normandy that Mr Caruso told an officer
of Normandy on 22 June that he would arrange for subpoenas to be served on a
number of its top executives and would keep them sitting in the back of the
Court for weeks and that much time would be wasted. He allegedly said that
such a waste of time would be avoided if the matter would be settled. Although
he denied, under cross-examination, making a threat in those terms, Mr Caruso
conceded that he had argued that time would be wasted for all concerned if the
action were to proceed to a hearing. The respondent's construction of the
conversation was borne out to some degree by a letter dated 16 June from
Simto's solicitors to Normandy's solicitors in which it was said that Simto
believed there to be further documents in the possession of various person
connected with Normandy to do with the involvement of those persons in the
Wonnerup Mineral Sands project. The letter said:
    "We would propose to issue Subpoenas in respect of the
    following parties:
    (1) Steven Dean
    (2) Robert de Crespigny
    (3) E.J. Malone
    (4) Keith Harvey
    (5) Roy Swan"
The lack of detail of the documents sought and the failure to pursue their
disclosure by Normandy through the discovery process lends support to the
inference that the letter was written in an attempt to put pressure on
Normandy with a view to a settlement of the action.

9.  I am not satisfied that those who stand to benefit from the proceedings
brought by Simto are not in a position to fund legal representation at least
to the level of solicitors and junior counsel. And while not expressing a
concluded view about the matter, there is a distinct possibility, which I am
unable to exclude, that at least in recent times, Simto has been less
concerned with co-operating in the pre-trial process and preparing for trial
than with maintaining pressure on Normandy in order to secure a settlement.
That possibility, I should say, does not impinge on the merits of the action
which can only be assessed after consideration of all the evidence. It is
however, relevant to the question whether the Court is satisfied that this is
an appropriate case in which to make the order sought by Simto.

10.  It is also a relevant factor, although not conclusive, that the
presentation of Simto's case, which involves complex questions of fact and law
and is likely to take the allotted time of sixty days, will be almost
unmanageable if unaided by skilled legal representation. It is with no
disrespect to Mr Caruso, that I say that his submissions in support of the
motion do not inspire confidence to adequately present evidence and deal with
legal and other argument.

The Legal Framework
11.  Order 4 r14 provides:
    "14 (1) Subject to sub-rule (2) and to Order 43 (which relates
    to disability), any person may proceed in the Court by a
    solicitor or in person.
    (2) Except as provided by or under any Act, a corporation may
    not, without the leave of the Court, commence or carry on any
    proceeding otherwise than by a solicitor.
    (3) Sub-rule (2) does not apply to an organisation."
Also to be noted for present purposes is O.9 r.1 which provides in the
relevant parts:
    "1 (1) A respondent may enter an appearance and may defend a
    proceeding by a solicitor or in person.
    . . .
    (3) Notwithstanding sub-rule (1) and subject to any Act, a
    corporation may not without the leave of the Court or a Judge
    enter an appearance of defend any proceeding except by a
    solicitor."

12.  The Rules of the Supreme Court 1965 (Eng) reflect long standing practice
in England in Order 5 r6(2) which provides:
    "Except as expressly provided by or under any enactment, a body
    corporate may not begin or carry on any such proceedings
    otherwise than by a solicitor."
The General Rules ion Civil Procedure Proceedings 1986 (Vic), provide a
similar formulation in O.1 r.1.17:
    "Except where otherwise provided by or under any Act or these
    Rules, a corporation, whether or not a party, shall not take
    any step in a proceeding save by a solicitor."
Part 4 r.4(2) of the Supreme Court Rules 1970(NSW) provides:
    "Except as provided by or under any Act, a corporation may not
    commence or carry on any proceedings otherwise than by a
    solicitor."
See also O.4 r3(2) of the Rules of the Supreme Court 1971 (WA) which follows
the words of the English rule.

13.  The authorities in relation to the English Rules were recently reviewed
by Scott J in Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (1991)
1 All ER 591. That case involved a corporate defendant which sought to appear
by one of its directors to vary a Mareva injunction against the company. Scott
J observed that the relevant rule (there RSC O.12 r.1(2)) prohibited a body
corporate from taking a step in a proceeding otherwise than by a solicitor.
The court, however, had an inherent power to permit any advocate to appear for
a litigant "if the exceptional circumstances of the case so warrant". No limit
could be placed on what might constitute sufficient exceptional circumstances.
Subject to any exceptional circumstances that might require a particular
individual in the interest of justice to be allowed to appear as an advocate,
the general practice of the court, as explained by his Honour, was that bodies
corporate could not appear by their directors but only by solicitors or
counsel (pp 597-598). A similar approach had been taken to the equivalent
rules of the Supreme Court of Appeal in Bay Marine Pty Ltd v Clayton Country
Properties Pty Ltd (1986) 11 ACLR 326. Kirby P, although not expressly
formulating a test for the exercise of the court's inherent power, referred to
the circumstances of that case as "sufficiently extraordinary" and the needs
of justice as "sufficiently plain" that the court should exercise its
discretion. (at 331). Kirby P was dissenting on the result of the motion them
before the court. Samuels JA at 333 saw the court's discretion to dispense
with its own rules about representation as one to be exercised "only with the
most meticulous care" and in exceptional circumstances. Mahoney JA determined
against representation by the director on the basis that it was not shown that
he had authority form the company to act.

14.  The high threshold of exceptional or special circumstances which applies
to the exercise of the discretion under the English Rules and similarly
formulated rules in Australia, no doubt derives form the characterisation of
the discretion as a dispensing power. This will be coupled with the rationale
for the restriction which in large part is related to the proposition that
persons should not be represented in superior courts other than by legally
qualified agents who only possess the relevant skills to conduct litigation
but also are bound to observe certain duties to the court itself. Of course,
any natural person may represent himself. But a company being a fictitious
legal person must always be represented by another. And that attracts the
application of the principle that representation by an agent should be limited
to legally qualified persons subject to the inherent and residual discretion
of the court to waive the requirement in appropriate circumstances. The
rationale to which I have referred emerges from such authorities as Tritonia
Ltd v Equity and Law Life Assurance Society (1943) AC 584; Re G.J. Mannix Ltd
(1984) 1 NZLR 309 and Bay Marine Pty Ltd v. Clayton Country Properties Pty Ltd
(supra). It has been said that the restriction is "an infirmity of the company
which derives from its very nature" - Battle v. Irish Art Promotion Centre Ltd
(1968) IR 252 at 254. That rationale may have been overtaken by the statutory
abolition of the doctrine of ultra vires in relation to companies and the
conferring on them of the legal capacity of natural persons (Corporations Law
s.161) - Peters v Australian Institute of Food Science and technology Ltd
(1986) 10 ACLR 547. The correctness of the latter decision however, was
doubted in Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (supra) and
certainly that argument was advanced and rejected by the Court of Appeal in
New Zealand in Re G.J. Mannix Ltd (supra) at 312 (Cooke J). The position under
the Federal Court Rules is not as restrictive as that which applies under the
English and various of the State Supreme Court Rules. While the rationale of
the restriction is basically the same, the power of the Court to give leave to
a corporation to carry on a proceeding otherwise than by a solicitor is
expressly conferred as an integral part of the Rule. The English cases and
those in other jurisdictions with similar rules, invoke a general dispensing
power whose application is ambulatory and to be construed in particular cases
by reference to the content and significance of the rule under consideration.
The terms of O.4 r.14 itself contemplate that leave may be granted and raise
no express threshold requirement of special or exceptional circumstances.

15.  The more flexible approach possible under O.4 r.14 was recognised by the
Full Court of the Federal Court on Molnar Engineering Pty Ltd v. Burns (1984)
3 FCR 68. Smithers J at 73 observed of O.4 r.14(2) and O.9 r.3 (presumably a
reference to rule 1(3)) that:
    "Those rules proceed on the basis that there is a discretion in
    the court to permit a company to commence and carry on any
    proceedings other than by a solicitor and to enter an
    appearance or defend any proceeding without a solicitor and, it
    would seem, it is a discretion to be exercise by reference to
    all relevant considerations."
His Honour expressly eschewed the application to the Federal Court Rules of
the "inflexibility of the practice in England" and said:
    "The discretion being reposed in the court, it is inevitable
    that it be exercised in favour of a company where there is
    sufficient reason. According to the strength of the case made
    as to the existence of such reason, so the weight to be given
    to the consideration that the court might lack qualified legal
    assistance, will decline." (at 74)
It was clear from the judgment that his Honour was prepared to consider under
the rubric of "sufficient reason" such factors as actual financial incapacity,
and the financial difficulties created by diversion to paying legal expenses
of funds which might be necessary to meet wider commitments of a company.
Factors relevant to the exercise of the discretion to give leave would include
the class of company involved, the nature of its undertaking, its financial
structure, its ability to retain and pay its staff, the identity of its
shareholders and the spread of the shareholding. The fact that a company is
the alter ego of a single person who has advantageous educational and
technical qualifications might also be important (at 75). Sweeney J did not
elaborate upon the principles regulating the discretion but dealt with the
case on the basis that the Full Court should not interfere with the discretion
of the trial judge. Keely J, who dissented in the result, nevertheless agreed
with Smithers J that the discretion was 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". He agreed that "leave should be
granted where, having regard to the necessary or reasonable commitments of the
company, the appropriate of funds to engage legal practitioners for the
litigation in question would create financial difficulties with the company
could not - or with which it ought not to be required to - cope and that in
this connection the ability of the company to retain and pay its staff may
well be relevant" (at 80).

The Present Case
16.  In the present case I am not persuaded that leave should be given to
Simto to proceed other than by a solicitor. In so concluding, I take into
account the following matters. Simto is one of a group of companies related by
the family connections of their various directors and interlocking trusts. Its
principal shareholder is apparently deriving income from earthmoving work and
has supported the proceedings for some time. The principal beneficiaries of
the action are Simto Pty Ltd as Trustee of the Simto Australia Unit Trust,
which is owned in excess of $1 million by Simto, and Zurich Bay Holdings Pty
Ltd. It has not been demonstrated that the latter company is unable to afford
to fund legal representations for Simto albeit on a reduced basis of junior
counsel and instructing solicitor.

17.  Simto's evidence in support of the motion is surprisingly spare of detail
having regard to the importance of the action it seeks to continue. This
rather casual approach must be considered along with evidence of a remarkable
lack of preparation for the action. There is evidence to suggest that the
action may be being kept alive in order to pressure Normandy into a
settlement. It is also a relevant factor that the proceedings involved complex
and difficult questions of fact and law and will be hard fought by Normandy.
Mr Caruso, who seeks to represent the company, has no apparent relevant
experience or expertise which would assist in the presentation of his
company's case. He will himself be the company's principal witness. In my
opinion, the presentation and management of the litigation will be virtually
unworkable and certainly protracted if the company does not proceed using
solicitors and counsel.

18.  In conclusion, I am not satisfied that it has been shown that there is
sufficient reason to grant the leave sought. I am satisfied moreover that
there is good reason why it should not be granted. I am prepared however to
grant leave for the limited purpose of allowing the company to resist a motion
for judgment on the basis of its non-compliance with the Court's orders. If
the company fails to arrange representation, however, that leave may become
academic.