Essential Beauty Franchising WA Pty Ltd v Pilton Holdings Pty Ltd - [2011] SASC 126

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ESSENTIAL BEAUTY FRANCHISING WA PTY LTD & ANOR v PILTON HOLDINGS PTY LTD & ORS
[2011] SASC 126
Reasons of Judge Burley a Master of the Supreme Court
4 August 2011
PROCEDURE
Application by company director to represent corporate defendants - factors to be taken into account - authority of applicant - ability to pay for representation by a practitioner - ability of applicant to conduct defence and prosecute Counterclaim - application refused.
Supreme Court Civil Rules 2006 r 27, referred to.
Worldwide Enterprises Pty Ltd v Silberman and Another [2010] VSCA 17; Pacific Air Freighters (Qld) Pty Ltd v Toller [2000] FCA 343; Super Choice Now Pty Ltd v Brisconnections Management Company Ltd (2009) 259 ALR 451; Julie Ann Barrow Charitable Trust v Brisconnections Management Company Ltd (2009) 71 ACSR 289; Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241, considered.

ESSENTIAL BEAUTY FRANCHISING WA PTY LTD & ANOR v PILTON HOLDINGS PTY LTD & ORS
[2011] SASC 126
JUDGE BURLEY:

These proceedings relate to a dispute between the parties concerning franchise agreements. There are four defendants, namely Mr A A Forrest and three corporate defendants. Mr Forrest is the sole director of the third and fourth defendants and one of two directors of the first defendant. His wife, Sangita Forrest, is the other director of the first defendant.
Mr Forrest has applied for permission to represent the corporate defendants. The following affidavits were admitted on the application:
·two affidavits of Mr Forrest (FDN7 and FDN10)
·the affidavit of Sangita Forrest (FDN9)
·the affidavit of Mr C P Munt, the plaintiffs’ solicitor (FDN11).
Mr Forrest relies upon Rule 27 of the Supreme Court Civil Rules 2006 which is as follows:
27—Representation of company
(1)The Court may, on application by a director of the company, authorise representation of a company by the applicant or some other director of the company.
(2)The Court must be satisfied that a director who is to represent the company has power to bind the company in relation to the conduct of the proceeding.
(3)[immaterial]
I am satisfied that Mr Forrest has power to bind the companies who are respectively the third and fourth defendants, because he is the sole director of those two companies. It seems as if he has the same power in relation to the first defendant, although the affidavit upon which he relies, namely Mrs Forrest’s affidavit, is not as clear on the point as it might be. For reasons which will appear, that lack of clarity does not matter.
If the necessary authority were the only requirement of the Rule, it might have been possible to proceed at this stage to grant the application. However, Mr Munt, counsel for the plaintiffs, submitted that I should take into account a number of other factors. These are:
·whether or not there is evidence of the financial position of the companies and the applicant;
·the reasons for the application;
·the undesirability of the person to be appointed being both an advocate and a witness in his own cause;
·the complexity of the proceedings, which in turn raises the question of whether or not the applicant would be able to defend the proceedings and pursue the counterclaim in an orderly and reasonable manner and
·whether or not Mr Forrest’s health would permit him to attend to the management of the proceedings.
Mr Munt relied upon two authorities: Worldwide Enterprises Pty Ltd v Silberman and Another[1] and Pacific Air Freighters (Qld) Pty Ltd v Toller.[2]
[1] [2010] VSCA 17.
[2] [2000] FCA 343.
In Worldwide Enterprises Pty Ltd the relevant rule is as follows:
1.17(1) 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.
The Court of Appeal held that the Rule was not absolute in its terms. It could be qualified by invoking Rule 2.04 which enabled the Court to dispense with compliance with any of the requirements of the Rules. It was by this means that an applicant could apply for permission to represent a corporate party. At [41] Weinberg JA set out the various factors to be taken into account. They are:
(i)the manner in which the case has progressed at the time that the application is made;
(ii)the manner in which the case can proceed in the future without a solicitor;
(iii)the complexity of the issues involved in the case;
(iv)whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;
(v)whether the case can be conducted in an orderly and responsible fashion without a solicitor;
(vi)whether there are financial considerations which would inhibit a company from obtaining legal representation;
(vii)the stage which the case has reached;
(viii)whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company; and
(ix)what effect, if any, permitting a company to appear without a solicitor will have on Court resources and, particularly, the effect upon other litigants in the Court List.[3]
[3] Worldwide Enterprises Pty Ltd v Silberman [2009] VSC 165 at [20].
Mr Munt submitted that the matters referred to in paragraphs (ii), (iii), (v), (vi) and (viii) were material to this application.
As to (vi), he submitted that there was no evidence of any financial considerations which would inhibit the defendants from obtaining legal representation.[4] As against this, Mr Forrest stated from the bar table, and I accept, that although he has available to him funds which might be sufficient to cover legal costs, the amount that may have to be expended is an unknown quantity and it could well be that he will run out of money before the case has been completed.
[4] See Super Choice Now Pty Ltd v Brisconnections Management Company Ltd (2009) 259 ALR 451 at [12] and [13]; and Julie Ann Barrow Charitable Trust v Brisconnections Management Company Ltd (2009) 71 ACSR 289 at [12].
Factors (ii), (iii) and (v) are inter-related.[5] It is common ground that these proceedings are relatively complex, involving the examination of the provisions of the Master Franchise Agreement, the validity of assertions of breach and termination notices, whether or not there has been unconscionable conduct, whether or not implied terms have arisen and the calculation of damages. I have no doubt that it would be difficult for a lay person to attend to the defence of the proceedings and the prosecution of the defendants’ counterclaim. That may lead to delays and the incurring of extra costs by the plaintiffs.
[5] See Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 at [13].
Mr Munt also referred to some inadequacies in the Defence and Counterclaim. These largely consist of a lack of particularity, which is a common feature of many professionally drawn pleadings. In my opinion, if there are deficiencies in the Defence and Counterclaim, that by itself does not indicate that Mr Forrest will be unable properly to address all matters raised on the pleadings.
Mr Munt also referred to the health of Mr Forrest. Exhibited to his affidavit is a partly redacted copy of a letter in which solicitors acting on his behalf inform the addressee that Mr Forrest had been diagnosed with depression, that he had been prescribed anti-depressant medication and that he undertook regular therapy sessions with a clinical psychologist.
That type of illness, if it persists, may interfere in a material way with Mr Forrest’s ability to act for the corporate defendants. However, it seems to me that if he becomes unable properly to attend to the requirements of such representation, an application could be made either by him or by the plaintiffs to rescind any permission given as a result of this application.
I have summarised briefly the arguments put by Mr Munt, which were directed to matters other than the authority of Mr Forrest to bind the companies in relation to the conduct of the proceedings. It is not clear that under Rule 27 these factors are material. It is to be noted that sub-rule (2) only refers to the question of authority. There is no mention of any other requirements which must be satisfied. However, sub-rule (1) creates a discretion to be exercised by the Court and it would be surprising if that discretion were governed solely by the requirements of sub-rule (2). I am of the view that the various matters referred to in Worldwide Enterprises Pty Ltd v Silberman are relevant. I should also mention another factor, namely, the fact that Mr Forrest would be in a position of being both advocate and witness. This was referred to by Drummond J in Pacific Air Freighters (Qld) Pty Ltd. Like him, I do not “set a great deal of store on [that] fact”.
Of the various factors referred to by Mr Munt, I consider that those capable of requiring an exercise of the discretion adverse to the applicant are to be found in the financial considerations relating to the ability to meet costs and the ability of Mr Forrest to deal adequately with the requirements relating to representation of the defendants, both in resisting the plaintiffs’ claim and pursuing the counterclaim. There is no evidence relating to financial considerations but, as I have previously stated, I accept Mr Forrest’s explanation that he may have sufficient financial resources to meet the legal fees that would be incurred, but he is reluctant to expend those monies when, to some degree, the amount actually required is open-ended.
As to his ability to deal with the requirements of representing the corporate defendants, he is confident that he can do so, but that can only be taken as his assertion. Whilst I accept that he is an intelligent layperson and that he puts such an assertion to me in good faith, I must assess the likelihood of his ability to do so by more objective means. In other words, I must have resort to my experience of litigation over many years and make an assessment of whether or not it would be beyond the ability of an intelligent lay person to deal adequately with the requirements of such representation.
In my opinion, the question of the financial resources of both Mr Forrest and the corporate defendants in relation to prospective legal costs has not been covered adequately (if at all) by the evidence adduced by the applicant. I am not persuaded that the corporate defendants and/or Mr Forrest are unable to retain the services of a legal practitioner because they are respectively financially unable to do so.
As to the ability of Mr Forrest to cope with the management of the litigation, I do not think that the illness referred to in the correspondence by Mr Munt leads to the conclusion that he would be unable to fulfil those requirements. However, I doubt that any intelligent layperson would be able adequately to deal with litigation as complex as this.
Viewing all these factors in combination, I think the proper exercise of my discretion is to refuse the application.