McCool Controls and Engineering Ltd v Honeywell Control Systems Ltd

• Jurisdiction: Ireland
• Judge: Mr Justice Garrett Simons
• Judgment Date: 25 October 2019
• Neutral Citation: [2019] IEHC 695
• Docket Number: 2005 No. 2747 P.
• Court: High Court
• Date: 25 October 2019

[2019] IEHC 695

THE HIGH COURT

Garrett Simons

2005 No. 2747 P.

BETWEEN

MCCOOL CONTROLS AND ENGINEERING LIMITED

PLAINTIFF

AND

HONEYWELL CONTROL SYSTEMS LIMITED

DEFENDANT

Substitution application – Res judicata – Issue estoppel – Plaintiff seeking to substitute a new party as plaintiff to the proceedings – Whether the matter was res judicata

Facts: This matter came before the High Court by way of an application to substitute a new party as plaintiff to the proceedings. The application sought to give effect to a purported assignment of the proceedings from the corporate plaintiff, McCool Controls and Engineering Ltd, to its sole shareholder, Mr McCool. The application was made in circumstances where the corporate plaintiff had, seemingly, been unable to retain legal representation because of its inability to pay for same.

Held by Simons J that, having noted that the High Court had previously found that the purported assignment of the benefit of the proceedings from the corporate plaintiff to its sole shareholder was merely a “device” intended to avoid the requirement that a company be legally represented in proceedings, that finding in the judgment of 10 April 2018 was binding on Mr McCool, and was dispositive of the application, given that there had been no material change in circumstances between the first and second substitution applications.

Simons J held that the relief sought in the notice of motion of 2 July 2018 would be refused and that the application would be dismissed.

Application dismissed.

JUDGMENT of Mr Justice Garrett Simons delivered on 25 October 2019

INTRODUCTION

1 This matter comes before the High Court by way of an application to substitute a new party as plaintiff to the proceedings. The application seeks to give effect to a purported assignment of the proceedings from the current corporate plaintiff to its sole shareholder, Mr Eugene McCool ( “Mr McCool”). The application is made in circumstances where the corporate plaintiff has, seemingly, been unable to retain legal representation because of its inability to pay for same.

2 An application in almost precisely the same terms had been made to the High Court (Noonan J.) in March 2018. That application was dismissed by the High Court in a reserved judgment delivered on 10 April 2018, McCool v. Honeywell Control System Ltd [2018] IEHC 167. It will be necessary to examine the basis of that judgment in more detail presently, but for introductory purposes it is to be noted that one of the grounds upon which the application was rejected is that it represented a device intended to avoid the requirement that a company be represented in proceedings by qualified lawyers.

3 The judgment and order of the High Court of April 2018 is under appeal to the Court of Appeal, and it is anticipated that the appeal will be heard next year.

4 Notwithstanding this procedural history and the pending appeal, Mr McCool has purported to make a second application to the High Court to be substituted as plaintiff in the proceedings. This application is grounded upon a second assignment said to have been executed on the part of the corporate plaintiff. The shorthand “the company” or “the corporate plaintiff” is used to refer to McCool Controls and Engineering Ltd.

5 Where convenient to do so, I will use the shorthand “the first substitution application” to refer to the application heard and determined in 2018, and the shorthand “the second substitution application” to refer to the application the subject-matter of the within judgment.

PROCEDURAL HISTORY

6 Given the nature of the principal objection made on behalf of the defendant to the present application, namely that the 2018 judgment gives rise to an issue estoppel, it is necessary to rehearse the procedural history in some detail.

7 These proceedings were instituted by way of plenary summons on 9 August 2005. Notwithstanding that the pleadings have been closed since 2007, no notice of trial has ever been served. Instead, it seems that matters became bogged down in disputes in respect of replies to particulars and the discovery of documents.

8 The corporate plaintiff has been represented by a number of different firms of solicitors. The last of these firms of solicitors, O'Grady Solicitors, had brought a motion to come off record on 22 September 2017, and that application was acceded to by order of the High Court (Noonan J.) on 21 March 2018.

9 In anticipation of the company's solicitors applying to come off record, Mr McCool, who is the sole shareholder of the corporate plaintiff, issued a motion on 10 July 2017 seeking to be joined as a co-plaintiff. This motion was listed before the Master of the High Court.

10 It is said on affidavit that the Master, at a hearing before him on 28 July 2017, ventilated the possibility of the cause of action being assigned by the corporate plaintiff to Mr McCool personally. Prior to the next listing before the Master, the corporate plaintiff executed a document on 28 September 2017 entitled “Assignment of Claim Agreement” which purported to assign its interest in the proceedings to Mr McCool. In reliance on this purported assignment, Mr McCool then reoriented his application as one seeking to have him substituted as plaintiff in lieu of the company. This application was successful, at first instance, before the Master on 8 November 2017.

11 The defendant then brought an appeal against the order of the Master. This appeal came on for hearing before the High Court (Noonan J.) sitting in Cork on 21 March 2018. A reserved judgment was delivered shortly thereafter on 10 April 2018, McCool v. Honeywell Control System Ltd [2018] IEHC 167 ( “the 2018 judgment”). The High Court discharged the order of the Master and made an order in lieu dismissing Mr McCool's application.

12 For present purposes, the principal findings of the 2018 judgment can be summarised as follows. First, the High Court held that the assignment of the interest in the proceedings had been entered into for the sole purpose of circumventing the rule in Battle v. Irish Art Promotion Centre Ltd [1968] I.R. 252. This rule is to the effect that a corporate entity cannot be represented in court proceedings by its managing director or other officer or servant. Rather, a corporate entity can only be represented by a qualified lawyer with a right of audience. The High Court was satisfied that the assignment was an artifice which, if upheld, would set the rule in Battle at nought. The assignment was an abuse of process and invalid.

13 Secondly, the High Court found that the assignment was contrary to public interest in that it savoured of champerty. (The term “champerty” refers to an agreement to support litigation, in which the party providing the support has no legitimate interest, in return for some division of the spoils). This finding was informed, in part at least, by the existence of a clause in the assignment which expressly allowed for the onward assignment of the interest in the proceedings. As explained presently, Mr McCool has since sought to address this aspect of the 2018 judgment by relying on a modified form of assignment which omits the offending provision.

14 Mr McCool has brought an appeal against the 2018 judgment to the Court of Appeal. Relevantly, the appeal asserts that the first assignment is valid. This presents an obvious difficulty for the second substitution application in that the logic of the stance adopted in the appeal is the company had divested itself of any interest in the proceedings by virtue of the first assignment. On this logic, as and from 22 September 2017, the company no longer had any interest in the proceedings capable of being assigned. Yet for the purposes of the second substitution application, Mr McCool seeks to rely on a subsequent assignment dated 29 June 2018.

EVENTS LEADING TO PRESENT APPLICATION

15 Mr McCool has averred in his affidavit grounding the present application that, following the delivery of the judgment on 10 April 2018, the board of the corporate plaintiff made a further assignment of the proceedings to Mr McCool. Minutes of a board meeting dated 29 June 2018 have been exhibited by Mr McCool. No formal board resolution ratifying the assignment has been exhibited.

16 The operative part of the minutes of the board meeting reads as follows.

“The board further stated that they should make a fresh assignment to Mr. McCool as this was of particular importance at this time, following the withdrawal of its solicitor. Mr McCool's involvement with Honeywell dates back to 1998, when he signed the trade agreement to act as Honeywell's exclusive representative in the Irish Market. He personally secured the Wyeth contract and has led the legal case for 17 years from 2001, when the breaches of contract occurred. In addition, Mr. McCool, has successfully protected the company against the aggressive tactics of the defendant during the traumatic years of this litigation, which commenced 13 years ago in August 2005.

Mr McCool also reaffirmed his commitment to the success and survival of the company and with his long experience and involvement in this Honeywell matter, he is in the unique position of being the only person who could effectively see the proceedings finally brought to conclusion.

This proposal to have the proceedings assigned to Mr McCool was again put to the board and passed unanimously.”

17 As appears from the minutes, the perceived need for a further assignment is linked, in part at least, to the loss of legal representation. It will be recalled that the last firm of solicitors acting on behalf of the corporate plaintiff had been allowed to come off record by order of the High Court on 21 March 2018.

18 A further document headed up “Assignment of Claim Agreement” has been exhibited. This document is dated 29 June 2018 and is signed on behalf of the corporate plaintiff by one...