McCool Controls and Engineering Ltd v Honeywell Controls Systems Ltd (Approved) [2024] IESC 5 (27 February 2024)

McCool Controls and Engineering Ltd v Honeywell Controls Systems Ltd (Approved) [2024] IESC 5 (27 February 2024)

A company cannot assign a bare right to litigate (a chose in action) to a director or shareholder for nominal value while it is a going concern, as this undermines the principle of separate corporate personality, evades statutory requirements such as security for costs, and is contrary to public policy. Such assignments are only permissible in liquidation or receivership, where an independent fiduciary acts for the benefit of creditors.

Citation
[2024] IESC 5
Parties
Plaintiff/appellant: Eugene McCool (substituted as plaintiff for McCool Controls and Engineering Ltd); Defendant/respondent: Honeywell Control Systems Ltd
Jurisdiction
Ireland
Judgment Date
27 February 2024
Procedural Posture
Supreme Court Appeal / Dissenting Judgment on Appeal Regarding Assignment of Chose in Action
Outcome
Dissenting judgment—assignment of chose in action from company to director is invalid as a matter of law and public policy.
Legal Topics
Assignment of Chose in Action, Corporate Personality, Public Policy, Champerty, Security for Costs
Company Law Civil Procedure Assignment of Chose in Action Corporate Personality Public Policy Champerty Security for Costs

Case Brief

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Parties

Eugene McCool (substituted as plaintiff for McCool Controls and Engineering Ltd)

Plaintiff/appellant

Honeywell Control Systems Ltd

Defendant/respondent

Procedural Posture

Supreme Court Appeal / Dissenting Judgment on Appeal Regarding Assignment of Chose in Action

Legal Issues

  1. 1 Whether a company can assign a bare right to litigate (a chose in action) to a director or shareholder outside liquidation or receivership
  2. 2 Whether such assignment is contrary to public policy and corporate law principles

Ratio Decidendi

A company cannot assign a bare right to litigate (a chose in action) to a director or shareholder for nominal value while it is a going concern, as this undermines the principle of separate corporate personality, evades statutory requirements such as security for costs, and is contrary to public policy. Such assignments are only permissible in liquidation or receivership, where an independent fiduciary acts for the benefit of creditors.

Court Disposition

Dissenting judgment—assignment of chose in action from company to director is invalid as a matter of law and public policy.

Orders

  • No specific orders issued in this dissent; recommends case management by a single High Court judge.