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Financial Advice 2

Think twice or suffer the consequences.

The NSW Supreme Court of Appeal’s recent decision in Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2016] NSWCA 23 (Tanamerah) is a timely reminder to corporations that in many cases, it must be legally represented in any court proceedings it is involved in.

The requirement for a corporation to be represented by a lawyer in civil proceedings is found in the civil procedure rules of most states and territories. As an example, in Victoria, r 1.17 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) states that:

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.

Some steps in a legal proceeding are time-critical and as such, being unable to secure legal representation before the deadline can expose a company to potentially severe adverse consequences. As an example, if a corporation is served with a creditor’s statutory demand for payment of a debt and disputes that debt, it must, within 21 days of being served with that statutory demand, issue proceedings to have it set aside. If the corporation fails to do so or otherwise does not comply with the statutory demand within the prescribed time limit, the corporation becomes exposed to winding up proceedings by that creditor.

In Tanamerah, Tanamerah Estates Pty Ltd had commenced proceedings in the Supreme Court of New South Wales to set aside a statutory demand that had been served on it. The company was represented by a director of the company however, the Uniform Civil Procedure Rules 2005 (NSW) (Rules) stipulates that a company may only be represented by a director if that director is also a plaintiff in the proceedings (which, in this case, they were not). As the company had not complied with the Rules, and had not provided any explanation for its decision to not retain a lawyer, the Court dismissed the proceeding with costs. A subsequent application by the corporation to appeal the Court’s decision was also dismissed.

The Tanamerah decision highlights that courts take the requirement that corporations be legally represented very seriously and will enforce those requirements.

If your corporation is contemplating legal action against another party or anticipates legal action being taken against it, we recommend that you obtain legal representation as early as possible to avoid any unnecessary costs or delays, or adverse consequences later on down the track.

If you would like to speak to one of our experienced lawyers about a dispute your company is involved in, please contact us by completing the enquiry form below.

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