McCool v Honeywell Control Systems Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Noonan
• Judgment Date: 10 April 2018
• Neutral Citation: [2018] IEHC 167
• Docket Number: [2005 No. 2747 P.]
• Court: High Court
• Date: 10 April 2018

BETWEEN

EUGENE MCCOOL (SUBSTITUTED AS PLAINTIFF FOR MCCOOL CONTROLS AND ENGINEERING LIMITED BY ORDER OF THE MASTER OF 8TH NOVEMBER, 2017)

PLAINTIFF

AND

HONEYWELL CONTROL SYSTEMS LIMITED

DEFENDANT

[2018] IEHC 167

[2005 No. 2747 P.]

THE HIGH COURT

Plaintiff substitution – Abuse of process – Champerty – Defendant seeking to have the order substituting the plaintiff as plaintiff in the proceedings discharged – Whether the assignment was an abuse of process

Facts: The plaintiff, Mr McCool, was a director and majority shareholder in McCool Controls and Engineering Ltd (MCC). An agreement was made between MCC and the defendant, Honeywell Control Systems Ltd, in 1998. MCC alleged that the 1998 agreement gave MCC exclusive distribution and installation rights to Honeywell products in Ireland, subject to certain exceptions. In or about the year 2000, the Wyeth pharmaceutical company was engaged in a project involving the construction of a plant in Clondalkin, Co. Dublin. MCC alleged that the project engineers invited MCC to become involved. MCC alleged that it introduced Honeywell to the opportunity in a cooperative venture. The essential claim was that Honeywell itself successfully tendered for the project by cutting MCC out in breach of the 1998 agreement and that this resulted in very substantial losses to MCC. Honeywell delivered a defence in which it denied the claim in full and pleaded that any work done by it on the Wyeth project was either not covered by the 1998 agreement or came within the express exceptions therein provided for. Honeywell further pleaded that, in any event, MCC was estopped from maintaining the claim because a compromise agreement was entered into between it and Honeywell in November 2002, whereby Honeywell agreed to waive a sum of Stg£143,626 then due by MCC to Honeywell in consideration of MCC waiving any claim it might have. Honeywell has also included a counterclaim in respect of goods sold and delivered against MCC in the amount of Stg£134,052.97. Mr McCool issued a motion in person on 18th July, 2017, seeking an order allowing him to be joined as a co-plaintiff on the case. On 8th November, 2017, the Master made an order substituting Mr McCool as plaintiff in the proceedings for MCC. Honeywell brought an application before the High Court by which they sought to have that order discharged. Honeywell argued that the assignment was invalid because first, it was a device deployed to avoid the effect of the rule in Battle v Irish Art Promotion Centre Limited [1968] IR 252 which precludes a director or shareholder from representing a company in legal proceedings and was thus an abuse of process, and secondly, that it was champertous and/or savours of champerty and was thus contrary to public policy and invalid.

Held by Noonan J that the assignment was entered into for the sole purpose of circumventing the rule in Battle; as such, it could not be regarded as other than an artifice which, if upheld, would set the rule at nought. Noonan J was therefore satisfied that it was an abuse of process and invalid. Noonan J held that even if the assignment were not invalid on the ground that it was an abuse of process, it savours of champerty and was thus contrary to public policy and invalid.

Noonan J held that he would discharge the order of the Master and substitute in its place an order dismissing Mr McCool's application.

Application granted.

JUDGMENT of Mr. Justice Noonan delivered on the 10th day of April, 2018

Introduction

1 The plaintiff herein (Mr. McCool) is a director and majority shareholder in McCool Controls and Engineering Limited ('MCC') which was, until the order under challenge herein was made, the sole plaintiff in these proceedings. The case has its genesis in an agreement made between MCC and the defendant ('Honeywell') in 1998. MCC is involved in the provision of building management systems, including electronic control systems for building services such as heating and air conditioning. Honeywell is an English registered company which is part of a multinational conglomerate which manufactures and distributes such systems, amongst others.

2 In its original statement of claim, MCC alleged that the 1998 agreement gave MCC exclusive distribution and installation rights to Honeywell products in Ireland, subject to certain exceptions. In or about the year 2000, the Wyeth pharmaceutical company was engaged in a project involving the construction of a very large state of the art plant in Clondalkin, Co. Dublin.

3 MCC alleges that the project engineers invited MCC to become involved in what is suggested to have been a very lucrative project. MCC alleges that it introduced Honeywell to the opportunity in a cooperative venture. The essential claim is that Honeywell itself successfully tendered for the project by cutting MCC out in breach of the 1998 agreement and this has resulted in very substantial losses to MCC. Mr. McCool estimates those losses at some €11m.

4 Honeywell delivered a defence in which it denies the claim in full and pleads that any work done by it on the Wyeth project was either not covered by the 1998 agreement or came within the express exceptions therein provided for. Honeywell further pleads that, in any event, MCC is estopped from maintaining the claim because a compromise agreement was entered into between it and Honeywell in November 2002, whereby Honeywell agreed to waive a sum of Stg£143,626 then due by MCC to Honeywell in consideration of MCC waiving any claim it might have. Honeywell has also included a counterclaim in respect of goods sold and delivered against MCC in the amount of Stg£134,052.97.

5 These proceedings commenced by plenary summons issued on 9th August, 2005, and have, to say the least, had a very protracted course. For the purposes of this application, it is not necessary to refer to that course which is dealt with at great length in the affidavits of Mr. McCool, in particular. The pleadings were closed as long ago as 2007, and there has been great controversy between the parties on issues including replies to particulars and discovery. Two particular issues were canvassed in the course of this application, one being an application to refer the matter to mediation in 2012, and in 2013, an unsuccessful application by MCC to have the matter admitted to the Commercial List. MCC has, to date, been represented by four different firms of solicitors. The last firm of solicitors to represent MCC were given liberty by me to come off record immediately prior to the hearing of the within application.

This Application

6 This application commenced life as a motion issued by Mr. McCool in person on 18th July, 2017, seeking the following relief:-

'(I) An order by way of allowing me, Eugene McCool, founder, managing director and one hundred percent owner of McCool Controls and Engineering Limited, to be joined as a co-plaintiff on the case, McCool Controls and Engineering Limited v. Honeywell Control Systems Limited, Case Ref 2005/2747P.'

7 The motion came on for hearing before the Master on 28th July, 2017, when it was adjourned to 13th October, 2017. It appears from an affidavit sworn by Colin Monaghan, a solicitor in the firm of Arthur Cox, which represents Honeywell, sworn on 14th November, 2017, that during the course of debate between the Master and Mr. McCool, the Master indicated on the basis of submissions made on behalf of Honeywell that Mr. McCool had no personal claim against Honeywell which he could litigate in his own right. However, the Master ventilated the possibility with Mr. McCool that MCC could assign its cause of action to Mr. McCool.

8 When the matter came before the Master again on 13th October, 2017, the circumstances had changed significantly. Mr. McCool now claimed that MCC had executed an assignment of its claim to Mr. McCool on 28th September, 2017, and Mr. McCool on this basis renewed his application to be joined as a co-plaintiff with MCC. However, it would appear that the Master concluded that since MCC had assigned its interest in the proceedings to Mr. McCool, it could no longer be a plaintiff. When the matter came back before the Master on 13th October, it was adjourned to 27th October, to facilitate further affidavits and ultimately to 8th November, when the Master made an order substituting Mr. McCool as plaintiff in the proceedings for MCC.

9 It is in respect of that order that Honeywell bring this application by which they seek to have it discharged.

10 The essential argument of Honeywell in this application is that the assignment is invalid because first, it is a device deployed to avoid the effect of the rule in Battle v. Irish Art Promotion Centre Limited [1968] I.R. 252 which precludes a director or shareholder from representing a company in legal proceedings and is thus an abuse of process, and secondly, that it is champertous and/or savours of champerty and is thus contrary to public policy and invalid.

The Assignment

11 On the 28th September 2017, the board of MCC passed a resolution which provided at para. 5:

'5. "The company" recorded the total failure of the legal system to protect McCool Controls against the aggressive activities of the defendant, Honeywell Control Systems, over the twelve years of litigation, which has resulted in McCool Controls being denied its constitutional right of access to justice within a reasonable timeframe and under such circumstances it was thereby agreed that the only possible solution at this time, was that "the company" would assign the legal proceedings against Honeywell Control Systems, case no. 2005/2747P, to Eugene McCool in a suitable proportion, whereby Eugene McCool could pursue the claim for damages against the defendant, in these legal proceedings and Eugene McCool confirmed his commitment to the protection and well being of McCool Controls, its staff, customers and suppliers and to bring these...