“[Additionally,] advancing irrelevant arguments, and delays can prejudice the company’s position.”

Hurley said the Simpson case involved a company director seeking leave to personally represent the company in ongoing proceedings and highlights several factors the courts considered in declining to dispense with the general requirement under the Federal Court rules that corporate parties are legally represented.

Facts presented to the court stated that Taylors Business operated a pawnbroking business in which it took possession of goods while advancing funds to customers. The proceeding arose from allegations that Taylors had engaged in unconscionable conduct and unlicensed lending.

In late 2024, Taylors’ solicitors ceased acting, leaving the company without legal representation. Its sole director and shareholder, Graeme Grainger, had been managing the litigation since the prior director, Noel Borruso, was disqualified.

“Pursuant to earlier court orders, the company’s assets were subject to a freezing order, and concerns had been raised about the security and handling of pawned goods in the context of the company ceasing operations,” Hurley said.

“Against this backdrop, Grainger applied for leave to represent Taylors himself in order to file revised defences as part of resisting an application for default judgment.”

She continued that in considering Grainger’s submissions, Justice Elizabeth Bennett confirmed the starting point is the mandatory language in r 4.01(2) of the Federal Court Rules 2011 (Cth) (Rules) that “[a] corporation must not proceed in the court other than by a lawyer”.

“However, r 1.34 permits the court to dispense with the obligation imposed by r 4.01(2) as an exercise of judicial discretion,” she said.

“While many small or low-value companies may view the cost of engaging lawyers as a significant burden, the court confirmed that financial hardship alone is not enough to justify allowing a corporation to appear without a lawyer.

“A director seeking to represent the company must show that an exemption is both appropriate and consistent with the overarching purposes in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth).”

In the ruling, Justice Bennett noted that establishing “sufficient reason” to depart from r 4.01(2) of the rules is assessed on a case-by-case basis.

“Several factors were considered in the case, with reference to prior case law, including the company’s class, shareholding structure, nature of undertakings, financial structure and related matters,” Hurley said.

“Additionally, the court considered the circumstances of how the matter came before the courts, such as whether the company is the applicant or respondent and whether they are effectively the ‘aggressor’ in litigation.”

Furthermore, it also takes into account the financial difficulties faced by the company, including those that would be created by having to pay legal expenses as well as pre-existing, “reasonable” financial commitments such as those of wages to staff.

“[Justice Bennett also noted in her ruling] the fact that a company is the alter ego of a single person especially, if that person is to also provide witness testimony and, if so, whether they will properly be able to conduct the case of the company whilst also being a witness,” she added.

“Finally, consideration is given as to whether the proposed representative is capable of conducting the proceeding on behalf of the company based on their education and experience and the complexity of the case, and the manner in which the case has progressed to date and the manner in which it may progress without the company having formal legal representation.”

Hurley said that applying these factors, Justice Bennett declined to grant leave for Taylors to be represented by Grainger due to several considerations, including that the litigation, though brought against Taylors, was necessary to protect the applicant’s rights, given ongoing concerns about the security of pawned goods and prior non-compliance with court orders.

“She also ruled that the ‘impecuniosity’ alleged by Grainger was unsupported by evidence, and the freezing order in place already permitted the use of funds for legal fees – a point that Grainger had misunderstood and failed to take steps to clarify,” she said.

“Moreover, the ‘procedural history’ of the matter involved repeated failures to comply with court orders, and a lack of ‘… candour and assistance this court is entitled to look for’. [Justice Bennett] noted there were unexplained ‘financial irregularities’, including ‘large transfers of money out of the company, to related parties, and without any explanation or apparent understanding,’ coupled with the prior involvement of a disqualified person in company affairs.”

Hurley said that in the ruling, it was stated that Grainger had not “demonstrated any real understanding of the court process”, took no steps to inform himself about the matters in dispute, advanced irrelevant legal arguments, and misinterpreted agreements and court orders.

“It was also stated that the company had no employees and was not operating and the matter had suffered numerous delays due to lack of representation, with Grainger’s interest languishing at times, only to be ‘revived’ at others ‘with no explanation … as to why’,” she said.

“The court’s discretion to dispense with the rule in r 4.01(2) is exercised sparingly and only where there is clear evidence that self-representation will serve and not frustrate the overarching purpose of resolving disputes justly, quickly and efficiently.”