Remedy to correct Court proceedings

Remedy to correct Court proceedings

by George Coucounis

“The remedy to correct Court proceedings is a duty to restore justice

THE principle of natural justice requires that a person affected by an order or decision of the Court must be served with the relevant proceedings so that to be given the opportunity to be heard, a right safeguarded constitutionally. The guarantee of this right is the duty of every Court to establish that a person affected by any decision or order has become aware of the proceedings and has been given the right of defence to submit his own allegations. Violation of this fundamental right, where the proceedings are not served and the Court proceeds with the issuance of a judgment or order, while service should have been made, its annulment can be done after an application of the affected party or ex officio by the Court when the fact becomes known to the Court in the course of the exercise of its inherent power and as a duty to restore justice.

In view of the above as decided in caselaw, Republic v. Poulli, and judging that the case was one of the rare cases in which it was called to decide whether the reopening of the appeal was justified on the basis of the established legal principle imposed by the facts of the present case, the Supreme Court proceeded and issued its decision in the Appeal No 112/2018, dated 29.3.2021. A company was liquidated by a Court order in an application filed by the minority shareholders and the Court appointed temporarily the Official Receiver as liquidator, who was thereafter replaced by a liquidator. The majority shareholders of the company filed an appeal against the judgment of first instance and during the appeal proceedings an oral application by consent was submitted to the Court in order to annul or set aside the order of liquidation and of the appointment of the liquidator.

The Court of Appeal, as mentioned in the judgment of the Supreme Court, asked questions to the lawyers of the two parties, who in the meantime reached a settlement, whether their oral application and the orders they sought affected any other persons besides the parties and their answer was that only the shareholders were affected. On the basis of these explanations, the Court of Appeal annulled by consent the first instance judgment and issued an order setting aside the order of liquidation of the company and the order for the appointment of the liquidator, in the absence of the liquidator who was not called to the Court to take part in the proceedings.

The company, acting through its liquidator, filed an application requesting the annulment of the decision of the Court of Appeal and the issuance of the said orders. The application was based on the inherent power of the Court and the supporting affidavit of the liquidator that as the appointed liquidator of the company and its representative by law, he was not notified to take part in the proceedings before the Court of Appeal. As a result, he was not given the opportunity to be heard or to submit his position on what the shareholders’ lawyers had said regarding other affected persons, although he took various actions and made significant expenses to maintain the company as an active economic entity, with a view to securing its unsecured creditors and to be sold.

The Supreme Court referred to the status of the liquidator and that after his appointment he has sole responsibility of the management of the company’s assets and its affairs. In this case, the company was a directly interested party in the company application which should have been served to it. The liquidator, while the company is under liquidation, is its representative and in this capacity, he is entitled to appear in the appeal representing the company, which was a party in the first instance proceedings and is included in the persons entitled to take part in the appeal. The liquidator was not notified to take part in the proceedings and was not even aware of the existence of the appeal.

The Supreme Court decided that the liquidator’s application was not an appeal and that its inherent power allows it to annul a previous decision, if it deems it necessary, due to violation of a rule of natural justice. It stressed that this principle was established in the case Republic v. Poulli, whereby it was stated the Court is given inherent power to annul an order or a decision which is issued in proceedings that were not served to an interested person and its annulment is a duty to restore justice. Such was the case here and the Supreme Court ordered the annulment of the decision of the Court of Appeal.