A proposed transfer of a company’s right to sue its former business partner to its director would undermine the company’s separate legal identity, Supreme Court judge Peter Charleton has said in a dissenting judgment.
The dispute concerns McCool Controls and Engineering Ltd’s claim against Honeywell Control Systems Ltd. McCool Ltd alleges that the companies made an arrangement in 1998 concerning heating and ventilation control expertise, and that Honeywell later failed to honour obligations when it entered a lucrative building scheme. Charleton J made no finding on those allegations or on the merits of the underlying claim.
The appeal concerned whether the company could assign its right to pursue the case to its director and majority shareholder, Eugene McCool. Two earlier assignments, dated September 2017 and June 2018, had been abandoned as invalid by the assignee following earlier High Court and Court of Appeal judgments. The issue discussed in Charleton J’s judgment was a proposed third assignment.
Charleton J said a company that remains in business cannot transfer a valuable right to litigate to its director for nominal consideration in order to continue proceedings while avoiding rules that can require a company plaintiff to provide security for the defendant’s costs. He distinguished cases where liquidators or trustees sell a claim: those independent office-holders act to realise value for creditors of a company in liquidation or otherwise distressed.
The judgment notes that the earlier assignments were for €1 each, while the company had asserted that the claim might be worth millions, or tens of millions, of euro. Charleton J said a company’s assets, including a claim it may have, belong to the company and cannot simply be given away at an unjustifiable value. He also referred to the company’s obligation to fund its litigation and remain exposed to the consequences of an adverse costs order.
The judgment is expressly a dissent and does not state the Supreme Court’s majority disposition. Charleton J did not rule on any procedural motion or decide whether the company’s allegations of procedural abuse were justified. He said the case should be managed by a single High Court judge, who could focus the parties’ allegations and answers, set time limits and control repetitive or disproportionate steps. He said the judgment did not determine the merits of McCool Ltd’s claim against Honeywell.