On a preliminary issue, the High Court has ruled that an individual did not have authority to instruct solicitors to bring proceedings in a company’s name, as he was not entitled to shares in that company or to act as director. The evidence in support of the claimant’s case on this issue was vague, insubstantial and wholly inconsistent with a large number of other matters, events and documents.

Given the evidence, the court was able to answer the preliminary issue without having recourse to how the persuasive burden of proof lay, but it made some interesting observations about this.

It confirmed that:

  • A company can only act through its agents.
  • The court always retains jurisdiction to decide, at any stage, that an action was unauthorised and should be dismissed as an abuse, but it is best to do so at an early stage.
  • The issue is whether or not the court’s process has been properly invoked or the proceedings are otherwise an abuse. It is not normally open to a defendant to raise want of authority as a defence to an action.
  • The court must determine the abuse issue on the balance of probabilities, even though the question is being determined before the trial.
  • If the defendant raises abuse, the burden of proving it falls on the defendant. The solicitors who issue process in the name of a company warrant that they are authorised to do so, and the court proceeds on that basis, unless the contrary is shown to be the case.

The court held that the decision in Daimler Company Ltd v Continental Tyre and Rubber Company (Great Britain) Ltd [1916] 2 AC 307, in which the claimant was held to bear the burden of proving that its purported agent had authority to issue proceedings on its behalf, could be distinguished. In that case, the issue was whether the company was capable of giving any instructions to sue in England at all. By contrast, in this case, the issue was whether the individual purporting to act on behalf of the company, had authority to do so.

Case: Zoya Ltd v Ahmed (t/a Property Mart) [2016] EWHC 1981 (Ch) (28 July 2016)