Case: Molnar Engineering Pty Ltd v Burns [1984] FCA 232 ; (1984) 3 FCR 68
Outcome: applied
4 rule 14(2) confers a discretion upon the Court which, although not constrained by the terms of the rule, is nevertheless to be exercised judicially. That discretion will be exercised in favour of the grant of leave where there is a "sufficient reason to do so". In Molnar Engineering Pty Ltd v Burns [1984] FCA 232 ; (1984) 3 FCR 68 , the majority of the Full Court of the Federal Court dismissed an appeal against the refusal by the trial judge to grant leave pursuant to O 4 r 14(2). Smithers J, with whom Sweeney J comprised the majority, considered that the discretion to be exercised was to be exercised judicially "according to the requirements of justice" (at 74). The dissenting judge Keely J agreed with this observation. Smithers J considered that where there was "sufficient reason" it was inevitable that the discretion be exercised in favour of a company. Smithers J then recognised that the problem was to determine what was sufficient reason. His Honour said at 74: "The common reason for a company seeking to proceed without qualified assistance is, no doubt, that the company does not have the funds to engage such assistance. One would suppose that a company might successfully support an application to sue or defend without qualified assistance, not only where the company is bereft of funds, but also where having regard to the necessary or reasonable commitments of the company, the appropriation of funds to engage qualified assistance for the litigation in question would create financial difficulties with which the company could not cope, or with which it ought not be required to cope. The class of company involved, the nature of its undertaking, its financial structure, its ability to retain and pay its staff and no doubt other factors might be relevant in particular cases. Similarly the identity of the shareholders and the spread of the shareholding would be relevant. So also would the capacity of a person by whom the litigation might be commenced and carried on. In this case Mr Molnar is, from the point of view of substance, a one man company. In addition, he is the inventor of the hoist in question and understands the technical factors relating to its safety. It could no doubt be urged that, in the case of a one man company which seeks leave to carry on the proceedings without a solicitor and which proposes that it be carried on by the one man of the company the situation approximates, in substance, that of a litigant in person. If Mr Molnar were carrying on business as personal proprietor thereof he would have the privilege of conducting litigation himself without qualified legal assistance. The accessibility of the courts to any citizen unconditionally, in this respect, is regarded as fundamental to the system of justice under the Crown. That ready accessibility to the courts should be available to a juristic person is no doubt similarly fundamental. However, it has been regarded as appropriate that when a trader decides to use the corporate form in which to carry on his business for the advantages flowing therefrom his accessibility to the courts as plaintiff and his appearance as a defendant should be made conditional as set forth in O 5, r 6 of the rules of the United Kingdom and the practice which it reflects. ..." In Simto Resources Limited v Normandy Capital Limited (1993) 10 ACSR 776 , French J (as he then was) followed Molnar Engineering Pty Ltd v Burns (supra) and said at 782 in relation to the judgment of Smithers J: "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 appropriation of funds to engage legal practitioners for the litigation in question would create financial difficulties with which 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).'"