The Supreme Court has ruled that an assignment of a company’s legal claim is not invalid solely because it enables the assignee to represent himself in court, where the company could not do so. The Court nevertheless left intact the other conclusions against Eugene McCool, meaning he still could not be substituted as plaintiff in the underlying action.
The dispute concerns a claim by McCool Controls and Engineering Limited for damages over an alleged breach of a 1998 distribution agreement with Honeywell Control Systems Limited. The company says the breach occurred in 2001 and began proceedings in 2005.
In 2017, the company purported to assign the claim to McCool, then its sole shareholder and a director. After a Master’s order substituted him as plaintiff, Honeywell successfully appealed. The company made a second purported assignment in 2018. McCool’s later substitution application was rejected, and he lost appeals to the High Court and Court of Appeal before the Supreme Court granted leave to appeal.
The Court of Appeal had upheld findings that the assignments were unenforceable on grounds including champerty and maintenance, and that the second application was barred by res judicata. It also found the first assignment was not absolute as required in certain circumstances by the Supreme Court of Judicature Act (Ireland) 1877. Those conclusions were final between the parties for this appeal, the Supreme Court said; it expressed no view on their correctness.
The live issue was whether an assignment intended to avoid the rule in Battle v Irish Art Promotion Centre was invalid for that reason alone. The Supreme Court agreed with the Court of Appeal that this objection was misplaced. It said that if a legal claim is lawfully assigned, the assignee becomes a party and may represent himself. The purpose of enabling that result does not, on its own, make the assignment abusive.
The Court explained that an assignment of a bare right to litigate is generally unenforceable unless the assignee had a genuine commercial interest in the claim before, and independently of, the assignment. A shareholder or creditor may qualify if that interest is substantial; the Court said a small interest may not suffice. It left open whether the benefit taken by an assignee must also be proportionate to that interest.
The judgment did not decide that McCool’s assignments met those requirements. It concluded only that the Battle-based objection did not invalidate an assignment by itself, while expressly stating that this did not affect the enforceability of the assignments under the earlier decisions. The other Court of Appeal rulings stood.