Remedy to correct court proceedings

“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 as to be given the opportunity to be heard, a right safeguarded constitutionally. It is the duty of every court to establish that any person affected is aware of proceedings. If proceedings are not served and a court issues a judgment or order, it can be annulled with an application made by the affected party or ex officio.

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 Appeal No 112/2018, dated March 29. A company was liquidated by a court order in an application filed by the minority shareholders and the court temporarily appointed the official receiver as liquidator, who was thereafter replaced by a liquidator. The majority shareholders filed an appeal against the judgment of first instance and during the appeal proceedings, an oral application by consent was submitted in order to annul the order of liquidation and of the appointment of the liquidator.

The court of appeals, as mentioned in the supreme court’s judgment, asked 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, it annulled by consent the first instance judgment and issued an order setting aside the orders of liquidation and appointment of the liquidator, in the absence of the liquidator who was not called 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 appeals 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 and so was not given the opportunity to be heard or to submit his position on what the lawyers had said regarding other affected persons, although he undertook various actions and 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 as having sole responsibility of the management of the company’s assets and affairs. In this case, the company was directly involved in the company application which should have been served to it. The liquidator as its representative at the time 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.

George Coucounis is a lawyer in Larnaca and the founder of George Coucounis Llc, info@coucounis.law