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Champerty and Assignment of Causes of Action

McCool Controls and Engineering Ltd v Honeywell Control Systems Limited [2024] IESC 5.

The facts

McCool Controls and Engineering Limited (Company) was the original plaintiff in proceedings against Honeywell Control Systems Ltd (Honeywell) for alleged breaches of an agreement between the parties.  The proceedings were commenced in 2005.  Mr McCool was the managing director and majority shareholder of the Company, and he brought an application to substitute him for the Company as the plaintiff in the proceedings, where the Company could no longer afford legal representation.  The application was based on an assignment entered into between the Company and Mr McCool, whereby the Company assigned the cause of action to him for the nominal consideration of €1 (First Assignment).  The First Assignment contained a clause allowing Mr McCool to reassign any or all the rights transferred (onward transmission clause).

Honeywell successfully applied to have the substitution order discharged. The High Court (Noonan J) found that the assignment was invalid and an abuse of process as it amounted to an impermissible attempt to circumvent the rule in Battle (as discussed in our article here).  The assignment was also found to savour of champerty (meaning it is conducive to carrying out champerty) because it expressly provided for the onward transfer of the cause of action to a disinterested third party.  Mr McCool appealed the decision to the Court of Appeal (COA).

Despite the pending appeal, Mr McCool brought a second application to the High Court to be substituted as plaintiff.  This application was grounded on a second assignment executed by the Company in favour of Mr McCool (Second Assignment).  The Second Assignment was similar to the First Assignment, save that it omitted the onward transmission clause.   Simons J refused this application on the basis that the matter was already decided by the High Court in 2018.  Mr McCool also appealed this refusal to the COA.

The COA in 2022, dismissed both appeals upholding the findings of the High Court.  The COA found that the First Assignment savoured of champerty because Mr McCool did not have a pre-existing legitimate interest in the transaction giving rise to the claim.  Only the Company, which had entered the agreement with Honeywell, held that interest.

Mr McCool sought and obtained leave from the Supreme Court to appeal on the narrow grounds of whether an assignee of its interest in litigation by a corporate body can pursue the action by being substituted as a plaintiff in place of the company, irrespective of the purpose of the assignment.

Assignment of a bare cause of action

An assignment of a chose of action, such as a cause of action in litigation, is not enforceable under Irish law if it “savours of” maintenance or champerty.  “Savours of”, as explained by Murray J, means that the assignment offends the same public policy as maintenance and champerty. Champerty means an agreement to fund or support litigation in which the party providing that support has no legitimate interest, in return for some share in the proceeds of that litigation.  Maintenance occurs when a person supports litigation in which they have no legitimate interest.  Both are torts and offences under Irish law.

Assignments of bare causes of action have traditionally been regarded as commercialising litigation and therefore offensive.  Such assignments formed the subject of the seminal Supreme Court decision of SPV Osus v HSBC International Trust Services (Irl) Ltd [2018] IESC 44, (discussed in our article here)  which is authority for the position under Irish law that the assignment of a bare cause of action is unenforceable unless the assignee had a genuine commercial interest in the assignment.

Although leave to appeal in this case was restricted to a very narrow point around the rule in Battle, Mr Justice Hogan and Mr Justice Murray nonetheless considered the public policy behind the tort of champerty as applied to the assignment of a cause of action. Hogan J found it impossible to avoid considering the question of whether the First Assignment was champertous.

Murray J after reviewing existing authorities on the assignment of a cause of action/ right to litigate, summarised the relevant rules concerning assignments of bare causes of action as follows:

  • Such an assignment is prima facie champertous and therefore unenforceable unless the assignee has a genuine commercial interest in the claim that pre-existed the assignment and was independent of it (e.g. through their shareholding or debt);
  • However, the extent of the shareholding or debt cannot be so small that it renders their interest insubstantial.
  • There should be a reasonable proportion between the percentage share of the proceeds of the claim taken by the assignee and their pre-existing commercial interest in the claim.

Hogan J referring to the comments of O’Donnell J in SPV Osus, and disagreeing with the findings of the COA, concluded that the First Assignment was not champertous because Mr McCool had a clear personal interest in the outcome of the proceedings. As the principal shareholder in the Company, he had a legitimate interest in receiving the assignment of the cause of action.  There was no question of him “investing in litigation”.


Whilst the validity of the assignment and the public policy issues regarding maintenance and champerty did not form part of the appeal to the Supreme Court, the comments of Murray and Hogan JJ are a welcome clarification of the principles that a court may apply in testing the validity of an assignment of a cause of action.

Notably, Hogan J applied a broader interpretation of the findings in SPV Osus than the COA had, in circumstances where Mr McCool and the Company had a shared mutual interest in the proceedings.  This might suggest a growing tolerance by the courts of assignments of a right to litigate/ bare cause of action.  It certainly shows that the law is continuing to develop in this area.

Regarding insolvent companies, and applying Murray J’s findings, such companies may face difficulties in establishing a pre-existing interest of sufficient substance to successfully stand over an assignment of a cause of action to their shareholders or creditors. However, in practice, large, interested creditors of insolvent companies often fund a liquidator to bring proceedings against third parties.  The extent of their debt will most likely be of sufficient substance to take the assignment outside the rules against maintenance and champerty.

We will continue to monitor developments in this area.  Should you wish to discuss this article or maintenance and champerty in general, please contact Ruairi Rynn, Paul Convery or Barbara Galvin.

To read more about maintenance and champerty please see our previous William Fry articles here.


Contributed by Gail Nohilly