Zoya Ltd v Ahmed (t/a Property Mart)

Where a corporate claimant’s authority to commence proceedings is challenged, the issue ordinarily concerns whether the court’s process was properly invoked, rather than whether the underlying debt exists. The defendant should raise the issue at an early stage, but the court retains jurisdiction to determine it at any stage and may dismiss unauthorised proceedings as an abuse of process.

The evidential burden normally rests on the defendant challenging the authority of the claimant’s agents. The issue is determined on the balance of probabilities, including where it is tried as a preliminary issue. A certificate issued by a registered agent for a Liberian company has only the evidential weight justified by the circumstances and does not replace the company’s internal records.

The claimant, Zoya Limited, brought proceedings against the defendant, who traded as Property Mart, seeking an account of rents collected from properties registered in Zoya’s name.

The court directed a preliminary trial of whether John Haastrup was legally entitled to Zoya’s shares and had been validly appointed its director. Those issues determined whether he had authority to instruct solicitors to bring the proceedings and affected the mechanism by which the defendant might obtain a discharge of any accounting obligations.

Zoya relied principally on a certificate issued by the Liberian registered agent and asserted that Mr Haastrup had become sole shareholder and director shortly after incorporation. The central questions were the proper burden and standard of proof, the evidential value of the certificate, and whether the evidence established the alleged share transfer and appointment.

1. Authority to litigate. The issue was whether the proceedings had been properly authorised, not whether the rents were ultimately due to Zoya. Applying Russian Commercial and Industrial Bank v Comptoir d’Escompte de Mulhouse [1925] AC 112, Richmond v Branson & Son [1914] 1 Ch 968, and Sutton v G E Capital Commercial Finance Ltd [2004] EWCA Civ 315, the proper course is ordinarily to determine want of authority at an early stage rather than plead it as a defence to the substantive claim.
2. The court nevertheless retained jurisdiction to decide at any stage that proceedings were unauthorised and should be dismissed as an abuse of process, as explained in John Shaw & Sons (Salford) Ltd v Peter Shaw and John Shaw [1935] 2 KB 113 and Airways Ltd v Bowen [1985] BCLC 355. The issue was to be determined on the balance of probabilities, although tried before the substantive trial.
3. The burden lay on Mr Ahmed. Solicitors issuing proceedings in a company’s name warrant that they are authorised, and the court proceeds on that basis unless the contrary is shown. Daimler Company Ltd v Continental Tyre and Rubber Company (Great Britain) Ltd [1916] 2 AC 307 was distinguishable because that case concerned a company incapable of giving any retainer at all.
4. Under the Liberian Business Corporation Act, the identity of directors and shareholders of a non-resident Liberian corporation was a matter for the company’s internal records; public registration was not required. The certificate issued by LISCR was not conclusive and, at most, carried such evidential weight as the circumstances justified. It did not corroborate Mr Haastrup’s account.
5. A director had to be appointed by election at a shareholders’ meeting. Mr Haastrup had produced no evidence of such an appointment. The contemporaneous evidence instead showed that Captain Haastrup had controlled Zoya, held its shares and acted as its director. Mr Haastrup’s evidence was unreliable, and the alleged 1982 transfer and appointment were rejected.
6. The court therefore determined that Mr Haastrup was not legally entitled to Zoya’s shares and had not been validly appointed director. Further submissions were directed on the consequential orders.