Communicated on 17 September 2015
FOURTH SECTION
Application no. 22061/15
APOLLO ENGINEERING LIMITED against the United Kingdom
lodged on 28 April 2015
STATEMENT OF FACTS
1. The applicant, Apollo Engineering Limited (“Apollo”), is a limited company based in Troon, Scotland. Its majority shareholder, Mr G. Politakis, owns 90% of the shares. He represents the company before the Court. The only other shareholder is Mr Politakis’s wife, who owns the remaining 10% of the shares.
A. The circumstances of the case
1. The litigation between Apollo and Scott
2. The facts of the case, as submitted by the applicant, may be summarised as follows.
3. In February 1990, the applicant entered into a contractual dispute with a sub-contractor, James Scott Limited (“Scott”), over a contract worth some GBP 4-5.5 million. The non-resolution of that dispute forced Apollo into liquidation in September 1991.
4. Litigation began in October 1991 between Scott and the liquidators of Apollo in the Court of Session, which was sisted (adjourned) in June 1993 pending arbitration.
5. It appears that various procedures then took place in the course of the arbitration proceedings, including adjustment of the parties’ pleadings, legal submissions and attempted settlement negotiations. The arbitration had not been concluded before the original arbiter retired in 2004.
6. A second arbitration with a new arbiter commenced in July 2005. Following various interim proceedings, the second arbiter issued his final draft opinion on 18 May 2007, indicating an intention to dismiss most of Apollo’s claims against Scott.
7. Apollo appealed against that opinion to the Court of Session by way of stated case. It also sought judicial review of the second arbiter’s conduct of the proceedings.
8. The judicial review was heard first and dismissed at first instance by the Outer House of the Court of Session on 7 March 2008 and then, on appeal, by the Inner House of the Court of Session on 21 May 2009.
2. The motion to allow Mr Politakis to represent Apollo and the Inner House’s subsequent dismissal of the stated case
9. As part of a 2001 agreement between Apollos’ creditors, funds had been set aside to allow for legal representation for Apollo. By 2011, however, those funds had run out. Moreover, at the material time, Scots law provided that, in all court proceedings, a company had to be represented by a solicitor or advocate (counsel). Companies are also ineligible for legal aid. For these reasons, on 2 March 2011, relying on Article 6 of the Convention, Mr Politakis sought an order to allow him to represent Apollo in any future court proceedings and, in particular, in the forthcoming hearing of the stated case.
10. The matter came before the Inner House, which allowed Mr Politakis to make submissions on the issue. It also appointed an independent advocate to make submissions as amicus curiae.
11. By judgment given on 18 January 2012 the Inner House refused to make the order sought by Mr Politakis.
12. A majority of the court (Lord Reed with whom Lord Bracadale agreed) found that the issues raised in the stated case proceedings were complex and it was unlikely that the appeal could be presented by anyone without legal qualifications: the effective presentation of an appeal of this nature generally required substantial experience and expertise, which Mr Politakis manifestly lacked. In those circumstances, Article 6 § 1 could not require that the application be granted, since to allow Mr Politakis to represent Apollo would not provide Apollo with an effective right of access to court. While considering this was sufficient to determine the application, Lord Reed added:
“[56] ... 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.”
13. Lady Paton, concurring in judgment, took a different approach. She found that the rule requiring companies to be legally represented had its origins in the Act of 1532 which established the College of Justice (the Supreme Courts of Scotland, including the Court of Session). The rule had been confirmed by the House of Lords in Equity and Law Life Assurance Society v. Tritonia Limited [1943] SC (HL) 88. Unless there were wholly exceptional circumstances, the Inner House was bound to follow that precedent, even if the precedent was considered to conflict with the case‑law of the European Court of Human Rights. There were no such exceptional circumstances in the present case so the application had to be refused.
14. Lest she were wrong in this conclusion, Lady Paton went on to consider whether the application could otherwise succeed, notwithstanding the terms of the Act of 1532. She considered that, in light of section 3 of the Human Rights Act 1998 (the obligation to read and give effect to primary and secondary legislation in a way which is compatible with the Convention rights), the court had to construe the Act of 1532 as providing the court with a discretionary power to allow the possible representation of a limited company in court by an employee or director of the company, provided that the court had given authorisation and certain conditions were met. These would have to include, at a minimum, that: the company had a prima facie valid claim; it was unable to pay for legal representation; the company had authorised the employee/director to represent it; and this was done out of necessity rather than choice. The court would also have the power to apply additional conditions as necessary, such as costs orders against the individual if the claim failed and other similar case management orders.
15. In any case, Lady Paton would not have exercised any discretionary power that existed in favour of Mr Politakis and Apollo. She also concluded that such a refusal would not breach Article 6. She observed:
“[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]: [see relevant domestic law and practice at paragraphs 25–27 below]:
‘... 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.”
16. On 27 November 2012 the Inner House refused Mr Politakis leave to appeal to the Supreme Court and refused motions for Mr Politakis either to substitute himself for Apollo in the proceedings or join the proceedings as a separate party. It also ordered Apollo to pay Scott’s costs from the sum of GBP 35,000 which Apollo had to lodge at the start of the appeal. The court then granted Scott’s motion for dismissal of the stated case and in so doing observed:
“... Mr Politakis has been unsuccessful in his endeavours to represent Apollo in legal proceedings. Apollo currently has no funds or assets whereby legal representation could be obtained, and appears highly unlikely ever to acquire such funds or assets. In all the circumstances, including Mr Politakis’ candid acceptance before us that Apollo’s financial circumstances had not changed, we consider that at any future hearing Apollo will be unrepresented and will be unable to move or oppose motions, make submissions, answer questions from the court, or take any other effective steps in the proceedings. That being so, it seems to us fruitless to permit the Stated Case proceedings to continue.”
3. Proceedings before the Supreme Court
17. The case then came before the Supreme Court for its judgment as to whether it was open to Apollo to appeal against the dismissal of the stated case to the Supreme Court.
18. After hearing submissions from Mr Politakis and counsel for Scott, on 13 June 2013 the Supreme Court gave judgment finding that it was open to Apollo to appeal.
19. In respect of the rule requiring legal representation, Lord Hope (with whom Lord Clarke of Stone-cum-Ebony and Lord Carnwarth agreed), considered that the rule requiring legal representation was a “troublesome” aspect of the case. He added:
“[T]here may be grounds for thinking that the rule which disables a company from being represented other than by counsel or a solicitor with a right of audience needs to be re-examined. The rule about representation does not apply to proceedings before an arbiter, as has now been made clear by rule 33 in Schedule 1 to the Arbitration (Scotland) Act 2010 which provides that a party may be represented by a lawyer or any other person: see also rule 41 which enables a party to apply for issues of Scots law arising in an arbitration to be determined in the Outer House. Rules 33 and 41 are, it must be emphasised, default rules. They apply only in so far as the parties have not agreed to modify or disapply them: see section 9 of the 2010 Act. But the fact that they are there suggests that the rule about representation ought not to be applied in cases where they do apply in a way that disables a company which is unable to pay for a lawyer from obtaining the view of the court on such issues.”
20. A notice of appeal was filed by Apollo on 18 September 2013 (it appears by legal representatives, including two Scottish counsel, whom Apollo had by now instructed). Scott then applied for the appeal to be struck out on the basis that the appeal had not been certified as reasonable by two counsel (a requirement for appeals from Scotland to the Supreme Court) and it did not raise any arguable point of law of general public importance.
21. Having considered the matter, the Supreme Court gave further directions to the parties. The Registrar’s letter of 17 February 2014 stated:
“I have been asked to inform Counsel that there is no dispute that Article 6 may require the Court to allow lay representation of a company in certain circumstances. This appeal raises a much narrower question. Accordingly, Counsel for the Appellant [Apollo] should be asked to consider whether it would be appropriate for them to certify that the questions:
(i) whether the majority of the Inner House erred in holding that Article 6 of ECHR in this case did not require the court to allow a director of the company (Mr Politakis) to represent it in the stated case proceedings; and
(ii) whether the Inner House erred in law in dismissing Apollo’s application for a stated case;
raise points of law which are of general public importance.”
22. It further appears that Apollo then changed from Scottish to English legal representatives but that, in June 2014, the new, English legal representatives informed the court that they no longer acted for Apollo. Further correspondence took place between the court and the parties with Mr Politakis acting on behalf of Apollo. In that correspondence Mr Politakis took the position that either the necessary certification had been implicitly provided in its notice of appeal of 18 September 2013 or the necessary certification could be provided by English rather than Scottish counsel.
23. On 3 November 2014 the Registrar of the Supreme Court informed the parties that the appeal had been dismissed. The letter stated that the court did not think that the general question of lay representation of a company was in issue but that the question raised in the appeal was whether allowing Mr Politakis to represent his company would provide Apollo with an effective right of access to the Court. The court had concluded that this issue did not raise a point of law of general importance and accordingly refused permission for Mr Politakis to present the appeal on Apollo’s behalf.
B. Relevant domestic law and practice
24. In Equity and Law Life Assurance Society v. Tritonia Limited [1943] SC (HL) 88 (“Equity and Law Life”), an appeal in a Scottish case, the House of Lords confirmed the rule that 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.
25. The rule was confirmed by Court of Session HM Secretary for Business, Enterprise and Regulatory Reform Re: an order to wind up UK Bankruptcy Limited (“the UK Bankruptcy Case”): [2009] CSOH 50 and [2010] CSIH 80. This concerned liquidation proceedings in which one of the two directors of a company sought leave to represent the company.
26. At first instance, the trial judge, Lord Hodge, considered that Equity and Law Life remained good law and applied to the Scottish courts. As regards the compatibility of the rule with Article 6, he found (at paragraphs 9 and 10 of his opinion):
“Companies and other non-natural persons can be victims in terms of the Convention. But that does not necessarily mean that in relation to representation in court a company should be treated in precisely the same way as a party litigant. 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. Thus as a general rule I see no incompatibility between Article 6 and the requirement that a company be represented in court not by a director but by a suitably qualified legal representative who has responsibilities to the court and who is subject to professional discipline.
I consider, nonetheless, that exceptional circumstances may arise in which the court has to take steps to allow a company or corporation to be represented in court in order to ensure a fair hearing under Article 6. The Rules of Court do not provide for such a circumstance but the court has an inherent power to regulate its own procedures which it can use in this context. It appears to me that there needs to be careful consideration of the circumstances in which the court may authorise a person who is not a lawyer with rights of audience to represent a company or corporation. Parties have not addressed me on this issue.”
27. Lord Hodge referred the matter to the Inner House. It heard submissions from various interested parties, including the Lord Advocate and Advocate General for Scotland, who had accepted that the rule should be relaxed and that, in certain defined circumstances, and subject to suitable safeguards, companies should be able to be represented by a lay representative. The Inner House found, however, that it was not open to it to modify the rule. In any event, it considered that it should not do so: such a change should be made by legislation after the normal consultative process of law reform. There would also be practical difficulties. In liquidation proceedings, there might be good reasons why a company should not be represented by a director whose own actings may have caused the litigation. There would also be the danger of party litigants making themselves available to other party litigants, including accepting appointments as directors of companies for the purposes of conduction litigation for those companies. The Inner House found that Article 6 did not arise in the particular case before it as there was no evidence that the company had authorised its director to represent it and that it had done so through necessity rather than choice.
28. Lord Matthew Clarke, concurring in judgment, agreed that Article 6 did not arise on the facts of the case, but expressed some sympathy for counsel’s submissions that there would be circumstances in which the absolute bar which the rule represents was incompatible with Article 6. An example was where a company was genuinely unable to pay for representation and had a prima facie valid claim or defence which could not be vindicated, at all, because of the rule.
C. Relevant case-law on Article 47 of the Charter of Fundamental Rights of the European Union
29. Article 47 of the Charter provides:
“Right to an effective remedy and to a fair trial
Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article.
Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law. Everyone shall have the possibility of being advised, defended and represented.
Legal aid shall be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice.”
30. Case C-279/09 DEB Deutsche Energiehandels-und Beratungsgesellschaft mbH v Germany, 22 December 2010, concerned the refusal of legal aid to a company unable to pay for a lawyer, when legal representation was compulsory in the proceedings in wished to take, and the need for the company to make an advance payment of costs before taking those proceedings, which it was similarly unable to pay. After considering, among other authorities, the relevant case-law of this Court on Article 6, the Court of Justice of the European Union ruled that:
“The principle of effective judicial protection, as enshrined in Article 47 of the Charter of Fundamental Rights of the European Union, must be interpreted as meaning that it is not impossible for legal persons to rely on that principle and that aid granted pursuant to that principle may cover, inter alia, dispensation from advance payment of the costs of proceedings and/or the assistance of a lawyer.”
31. It went on to rule that as concerns the granting of legal aid:
“...it is for the national court to ascertain whether the conditions for granting legal aid constitute a limitation on the right of access to the courts which undermines the very core of that right; whether they pursue a legitimate aim; and whether there is a reasonable relationship of proportionality between the means employed and the legitimate aim which it is sought to achieve.
In making that assessment, the national court must take into consideration the subject‑matter of the litigation; whether the applicant has a reasonable prospect of success; the importance of what is at stake for the applicant in the proceedings; the complexity of the relevant law and procedure; and the applicant’s capacity to represent himself effectively. In order to assess the proportionality, the national court may also take account of the amount of the costs of the proceedings in respect of which advance payment must be made and whether or not those costs might represent an insurmountable obstacle to access to the courts.
With regard more specifically to legal persons, the national court may take account of their situation. The court may therefore take into consideration, inter alia, the form of the legal person in question and whether it is profit-making or non-profit-making; the financial capacity of the partners or shareholders; and the ability of those partners or shareholders to obtain the sums necessary to institute legal proceedings”.
32. DEB was confirmed by the CJEU the order given by it in Case C‑156/12, GREP GmbH v Freitstaat Bayern, 13 June 2012.
D. Recent legislative developments
33. Sections 95–98 of the Courts Reform (Scotland) Act 2014 now make provision for lay representation of “non-natural persons”. The main provisions are not yet in force but provide as follows.
34. Section 95(2) defines “non-natural person” as a company, a partnership or an unincorporated association (section 95(2)).
35. Section 96 allows, subject to certain conditions, lay representation without the permission of the court in simple procedure cases.
36. Section 97 allows lay representation with the permission of the court in all other cases. Section 97(3) provides that the court may grant permission if satisfied that:
“(a) the non-natural person is unable to pay for the services of a legal representative to conduct the proceedings,
(b) the lay representative is a suitable person to conduct the proceedings, and
(c) it is in the interests of justice to grant permission”.
37. Section 97(4) provides that, for the purposes of subsection (3)(b), a lay representative is a suitable person to conduct the proceedings if:
“(a) the lay representative holds a relevant position with the non-natural person,
(b) the responsibilities of the lay representative in that position do not consist wholly or mainly of conducting legal proceedings on behalf of the non-natural person or another person,
(c) the lay representative is authorised by the non-natural person to conduct the proceedings,
(d) the lay representative does not have a personal interest in the subject matter of the proceedings, and
(e) the lay representative is not the subject of an order such as is mentioned in section 98(2)(f) [a court order preventing that person from conducting proceedings].”
38. Section 97(5) provides that, in subsection (4)(d), “personal interest” means an interest other than one that anyone holding the position that the lay representative holds with the non-natural person would have.
39. Section 97(6) provides that, for the purposes of section 97(3)(c), in deciding whether it is in the interests of justice to grant permission, the court must have regard, in particular, to: (a) the non-natural person’s prospects of success in the proceedings; and (b) the likely complexity of the proceedings.
40. Section 98, which is in force, allows the Court of Session to make further provision about the granting of permission under section 97. Thus, the Court of Session may make rules regulating the conduct of lay representatives, impose conditions on the exercise of the right to conduct proceedings, withdraw that right if the lay representative contravenes a rule made by the court, and, in awarding expenses against a non-natural person, find a lay representative jointly and severally liable for the expenses.
COMPLAINTS
41. Apollo complains under Article 6 of the Convention that the refusal of the Inner House to allow Mr Politakis to represent it amounts to a disproportionate interference with its right of access to court. It also complains that the proceedings in the case were incompatible with the “reasonable time” requirement of that article.
QUESTIONS TO THE PARTIES
1. Has there been a disproportionate interference with the applicant company’s right of access to court under Article 6 of the Convention? In particular, the parties are requested address the following three issues:
(i) Is a rule that a company be legally represented in court proceedings compatible with Article 6 in circumstances where the company in question is in liquidation and unable to afford legal representation?
(ii) What, if any, separate violation arose from the Inner House’s decision to award costs against Apollo out of the GBP 35,000 it had lodged at the start of the stated case proceedings? Does the failure to grant a company in liquidation dispensation from advance payment of the costs of proceedings infringe the company’s right of access to court guaranteed by Article 6 (see, mutatis mutandis, paragraph 1 of the CJEU’s ruling in Case C-279/09 DEB Deutsche Energiehandels-und Beratungsgesellschaft mbH v Germany, 22 December 2010)?
(iii) What, if any, separate violation arose from the Inner House’s decision to dismiss the stated case after it refused Mr Politakis leave to represent Apollo?
2. Was the length of the proceedings in the present case in breach of the “reasonable time” requirement of Article 6 § 1 of the Convention?
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