9. If I am a director of a limited company or a partner of a partnership in Hong Kong, what should I do to instruct a solicitor to represent my company or partnership in civil litigation?
The answer depends on the type of business entity involved. A limited company and a partnership are treated differently because a company has separate legal personality, while a partnership is generally a collection of individual partners.
Limited companies
Because a limited company is a separate legal person distinct from its directors and shareholders, it generally does not have the same right as a natural person to act as a “litigant in person”.
In the High Court, the general rule is that a limited company must begin and carry on proceedings through a solicitor. This applies to substantive steps in litigation, such as commencing proceedings, issuing applications, defending claims, or continuing with a case after the initial procedural stage. A company can be represented by one of its directors only if permission is obtained from the court.
In the District Court, a limited company may be represented either by a solicitor or by its directors. A director may commence or conduct proceedings on the company’s behalf as of right, without first obtaining leave from the court. However, the director must file an affidavit/affirmation confirming that he has been duly authorised to act, and exhibit a certified copy of the relevant board resolution.
If a company wishes to instruct a solicitor in the High Court or the District Court, the directors should ensure that the company has properly authorised the instruction.
In practice, this is usually done by a board resolution. The resolution should:
- Authorise the company to retain a named firm of solicitors.
- Authorise specific directors or officers to give instructions on the company’s behalf.
- Confirm authority for the solicitor to accept service or commence specific legal steps.
Partnerships: Partners usually act through one solicitor
In a partnership, each partner is generally an agent of the firm and of the other partners for matters relating to the partnership business. This means that a partner may, in ordinary business matters, bind the firm.
Disputes or decisions concerning ordinary partnership business may usually be decided by a majority of the partners. Bringing a standard civil claim connected with the partnership business will often fall within this category.
However, if the proposed litigation would change the nature of the partnership business, unanimous consent may be required.
Where several partners are suing together in the same interest, they should normally be represented by one firm of solicitors. They should not separately instruct different solicitors to act for them in the same claim if they are advancing the same case as plaintiffs.
A partner may, in some circumstances, commence proceedings in the name of the firm even if other partners disagree. However, if litigation is commenced against the express wishes of the other partners, the court may stay the action until the partner bringing the claim provides the dissenting partners with a full indemnity, and possibly security, against any costs, charges, or liabilities arising from the proceedings.
If the partnership is sued, a managing partner will generally have implied authority to defend proceedings brought against the firm in relation to its usual business.
A partnership firm is not a separate legal entity and therefore cannot acknowledge service in the name of the firm. Instead, acknowledgment must be made by the individual partners in their own names, accompanied by a description of their relationship to the firm (e.g., “A.B., a partner in the firm of Brown & Co.”).
If an individual partner is joined as a co-defendant, he may file a separate defence for himself and for the firm.
If you are a partner intending to instruct a solicitor, you should:
- confirm that the litigation concerns the partnership business;
- obtain the necessary majority agreement if possible, or unanimous consent if required;
- confirm that the partnership is carrying on business in Hong Kong, if proceedings are to be brought or defended in the firm name; and
- if the partners are suing as plaintiffs, ensure that the partners agree on the single firm of solicitors who will represent their collective interest.
Consequences of commencing or defending proceedings without authority
The court has the inherent and statutory power to strike out or stay an action that has been commenced without proper authority. This applies to actions brought in the name of a non-existent company, a deceased plaintiff, or a corporation acting in contravention of its articles.
A challenge to authority is not a defence to be determined at trial. It must be raised by the defendant before the trial via an application to strike out or stay the proceedings.
When a solicitor purports to act for a client, he impliedly warrants that he has the authority to represent that client. If it is later discovered that the solicitor lacked such authority, he has acted in breach of this implied warranty. In such circumstances, the solicitor may be ordered personally to pay costs wasted or unnecessarily incurred by the opposing party. This liability is strict: it applies even if the solicitor acted in good faith, was innocently unaware that authority had ceased, or was deceived into believing he had the necessary instructions.
However, a lack of authority is not always fatal. The client may later ratify the solicitor’s unauthorised acts at any time even after the limitation period has expired. If the company or partnership subsequently approves and adopts the solicitor’s acts, the proceedings may continue as properly authorised.
Once ratification takes place, the opposing party can no longer object on the basis of the initial lack of authority. Ratification may also remove the basis for a wasted costs order against the solicitor. The opposing party can then seek costs directly from the client. In that situation, any personal costs order made against the solicitor will usually be set aside.
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