Cyprus Mail
Property

Lawyer acting without authority

court

THE representation of a client by a lawyer before the court requires the signing of a retainer and in case the client is a legal entity, a relevant resolution of its board of directors is necessary. Problems arise when the company has more than one director and no decision can be taken by the board of directors for the appointment of a lawyer. A director purporting to appoint a lawyer unilaterally without a valid resolution of the board does not bind the company and such an appointment is not legitimate. Hence, the court may cancel the purported appointment, as well as any relevant legal procedure instituted without the authority of the company.

When it comes to the attention of a party that the opponent’s lawyer is acting without proper authorisation, the party has to raise the issue immediately before taking any fresh step in the action. In such a case, the remedy provided by the law is the striking out of the procedural step taken or the pleading in question. The application to strike out is examined by the court in priority, since the issue is essential it comes under the jurisdiction of the court and its operation as a court of justice. Otherwise, every director could appoint a lawyer himself, alleging that the appointment is made on behalf of the company, leading to the paradox of multiple representation of the same legal person without its prior decision.

The above issue was examined by the court in a recent case where a party filed an application seeking an order to strike out an application to set aside a judgment, as well as the memorandum of appearance filed by a law firm on behalf of a company – judgment debtor. The creditor, to the benefit of whom the judgment had been issued, questioned the validity of the memorandum of appearance and the application to set aside the judgment issued against the company, claiming that the pleadings were fi led without the authority of the company. To this end, before filing an objection to the application to set aside the judgment, the applicant filed an application to strike them out and his application was examined by the court in priority.

The court agreed that the correct procedure for questioning the authorisation of such a procedural step is the application to strike out, which must be examined at the outset and the creditor had indeed such a right. In the case in issue, the defendant company had two directors and three shareholders, one having 50 per cent of the shares and the other two having 25 per cent each. During his submissions to court, the lawyer of the defendant company recognised that he received instructions to file a memorandum of appearance and an application to set aside the judgment from only one of the two directors.

The decision was not taken by the board of directors and the company did not act as a body corporate, since there was a dispute between the two directors. Moreover, one of the company’s directors appeared before the court at an earlier stage and stated that he had not authorised the lawyer purporting to represent the company to appear on its behalf nor had the company taken a decision to appoint him. The court stressed that if every director acted on his own volition and appointed a different lawyer to represent the company, then confusion, to say the least, would be created.

Therefore, due to the lack of a decision of the board of directors or a relevant resolution by the members of the company acting in general meeting, there was no decision by the company authorising the lawyer to fi le both, the application to set aside judgment and the memorandum of appearance.

 

George Coucounis is a lawyer specialising in the Immovable Property Law, based in Larnaca, Tel: 24 818288, [email protected], www.coucounislaw.com

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