Section 24 MUD Act Relief Must Be Anchored to an Enforceable Right/Obligation: No Direct Claims Against OMC Directors; Derivative Claims Require High Court Leave

Introduction

This judgment concerns the boundary between (i) statutory remedies under the Multi-unit Developments Act, 2011 (the “MUD Act”) and (ii) orthodox company-law principles on proper parties, directors’ duties, and derivative litigation. The plaintiff (a unit owner and member of an owners’ management company (“OMC”)) issued Circuit Court proceedings against two natural-person directors of the OMC (the “defendant directors”), alleging that service charges were unlawfully levied to fund separate High Court litigation said to benefit an associated company rather than the OMC or its members.

The Circuit Court struck out the proceedings under the strike-out jurisdiction (as imported into the Circuit Court by Order 67 Rule 16 of the Circuit Court Rules 2001 applying Order 19 Rule 28 of the Rules of the Superior Courts). The plaintiff appealed to the High Court, where the motion was reheard de novo.

The core issues were:

• whether the pleaded claims were, in substance, (a) claims against the OMC (which was not sued) and/or (b) derivative claims for wrongs done to the OMC;
• whether sections 18, 24 and 25 of the MUD Act permit a member to obtain section 24 orders directly against directors;
• whether “piercing/lifting the corporate veil” could cure the choice not to sue the OMC;
• whether the court should “save” the action by joining the OMC as a defendant absent any application to amend.

Summary of the Judgment

Dunne J refused the appeal and affirmed the Circuit Court order striking out the proceedings in their entirety. The court held that:

• The plaintiff’s case comprised only (i) allegations of wrongdoing by the OMC (e.g., unlawful service charge levies), and/or (ii) allegations of wrongdoing to the OMC by its directors (breach of directors’ fiduciary duties).
• Claims in category (i) should have been brought against the OMC. The plaintiff’s deliberate decision not to sue the OMC was fatal.
• Claims in category (ii) were, in substance, a derivative action; derivative actions require High Court leave and are not properly pursued in the Circuit Court.
• The MUD Act provides standing for members to apply under section 24, but does not impose relevant obligations on directors personally nor alter Companies Act 2014 architecture on to whom directors’ duties are owed.
• The plaintiff’s reliance on “lifting the corporate veil” was misconceived on the facts and authorities cited.
• The court was not obliged to reconstitute the proceedings by joining a new defendant (the OMC) and crafting amendments where no amendment was sought or proposed.

As the proceedings were struck out, the court did not consider the alternative application for security for costs.

Analysis

1) The strike-out framework after SI 456/2023: a consolidated test, still applied sparingly

The court set out the amended Order 19 Rule 28 (as amended by SI 456/2023), which now expressly permits strike-out where a claim: “discloses no reasonable cause of action”, “amounts to an abuse”, “is bound to fail”, or “has no reasonable chance of succeeding”, and allows limited regard to affidavit evidence (sub-rule (3)).

Drawing on the post-amendment discussion in O'Malley v National Standards Authority of Ireland [2024] IEHC 500, Dunne J noted that the amendment “erod[es]” the former distinction between the rule-based and inherent jurisdictions (though the precise residual difference remains for another case).

The court then applied the familiar high threshold distilled in Beades v KBC Mortgage Finance Company [2025] IEHC 363, including: trial as default, sparing exercise, moving party bears a heavy onus, the claim taken at its “high-water mark” (see Tracey v Minister for Justice, Equality and Law Reform [2018] IESC 45), but the high-water mark does not dispense with essential legal elements (per Desmond v Moriarty [2018] IESC 34), and the court may assess whether pleaded inferences can sustain a cause of action (per Fay v. Tegral Pipes Ltd [2005] IESC 34).

Importantly, and consistent with Mohan v Revenue Commissioners, Ireland and the Attorney General [2025] IEHC 63, the court accepted that, to a limited extent, the amended rule codifies a capacity to look at underlying merit where there is “no credible basis” for the asserted facts or where the claim is bound to fail on the merits. It also reaffirmed (by reference to Jeffrey v. Minister for Justice, Equality and Defence [2022] 2 IR 635) that straightforward points of law may be resolved on a strike-out motion where there is no real risk of injustice.

In this case the decisive issues were legal and structural: proper parties, statutory anchoring under section 24, and the derivative action rule.

2) The pleaded case revealed a “proper party” problem: the reliefs targeted the OMC, but the OMC was not sued

Dunne J analysed both the pleadings and the reliefs sought. The plaintiff sought (among other things) orders declaring certain legal costs “not recoverable” as service charges, orders facilitating inspection of the OMC’s records, and an order amending the OMC’s constitution. The court characterised these as, in substance, orders directed at the OMC (or for the OMC’s benefit), not at the defendant directors personally.

The court treated the plaintiff’s decision not to sue the OMC as deliberate, influenced (on the plaintiff’s own affidavit evidence) by the concern that suing the OMC could expose unit owners to litigation costs through the OMC. That forensic/costs concern did not change the legal analysis: if the alleged wrong is the OMC’s levying/collection of service charges, the OMC is the prima facie defendant.

3) Section 24 MUD Act requires “anchoring”: standing is not the same as a viable cause of action against these defendants

A central contribution of the judgment is its careful separation of:

• Standing (who may apply), and
• Merits/viability (whether the respondent owes the applicant an enforceable obligation/right justifying a section 24 order).

The court accepted that the plaintiff, as a member of the OMC, fell within section 25 of the MUD Act and thus had standing to bring a section 24 application. But it emphasised that section 24(1)(a) permits relief only “to enforce any rights conferred, or obligation imposed, by this Act or any rule of law”. Therefore, a successful application must identify: (i) a right conferred on the applicant, and/or (ii) an obligation imposed on the respondent, by the MUD Act or another rule of law.

The court held that section 18 places the obligation to establish and maintain the service charge scheme on the OMC, not on directors personally. Nothing in sections 18, 24, or 25 (or elsewhere in the MUD Act) was found to:

• impose personal service-charge compliance obligations on directors owed directly to members; or
• authorise members to “bypass” the OMC and obtain section 24 remedial orders directly against directors in respect of the OMC’s service charge decisions.

The court reinforced that reading with section 29 of the MUD Act (non-derogation), treating it as confirming that the Act’s remedies sit alongside, rather than reconfigure, general legal rights and powers (including company-law architecture).

The judgment’s approach to “anchoring” section 24 relief is supported by (and illustrated through) Lee Towers Management Company Ltd v Lance Investments Ltd (in liquidation) [2020] 1 IR 260. While not factually on point, Dunne J relied on Baker J’s insistence that section 24 remedies enforce existing rights/obligations; they do not create new ones or displace other statutory schemes absent clear language. Here, the plaintiff could not point to an MUD Act provision (or other rule of law) creating direct director liability to it in respect of service charge disputes.

4) Directors’ duties claims were, in substance, derivative: Foss v Harbottle applied, and High Court leave was required

On the allegations of directors’ wrongdoing (breach of fiduciary duties; inducing the OMC to act unlawfully), the court held that these are classic wrongs done to the company. Under section 227(1) of the Companies Act 2014, directors’ duties are owed “to the company alone”. Dunne J referenced the orthodox authority Percival v Wright [1902] 2 Ch 421 (directors’ duties owed to the company, not shareholders, absent exceptional circumstances).

The court then situated the dispute within the rule in Foss v Harbottle (1843) 2 Hare 461, citing:

• Prudential Assurance Co Ltd v. Newman Industries Ltd (No. 2) [1982] 1 Ch 204 for the conceptual basis of the derivative action as an exception to the “proper plaintiff” rule;
• O' Neill v Ryan [1993] ILRM 557 and the quotation from Burland v Earle [1902] AC 83 for the principle of non-interference with internal management and that redress for wrongs to a company is prima facie by the company.

Accepting the pleadings at their “high-water mark”, the court noted that the plaintiff even pleaded the classic derivative-action rationale: that the defendant directors’ control could prevent the OMC from suing them. That pleading strengthened (rather than avoided) the derivative character of the claims.

Procedurally, the plaintiff accepted that derivative actions remain within the High Court’s exclusive jurisdiction. Dunne J pointed to Order 15 Rule 39 of the Rules of the Superior Courts: a derivative action may not be commenced without High Court leave. The plaintiff had not sought leave and had instead attempted to run the equivalent claim in the Circuit Court against directors personally. The court held it “cannot do” this.

5) Corporate personality and “piercing the veil”: Salomon applied; Moorview and Powers did not assist

Dunne J reaffirmed the foundational separate-legal-personality principle from Salomon v A Salomon & Co. Ltd [1897] AC 22. Against that background, the plaintiff’s fallback submission—that it could succeed by “lifting the corporate veil” to fix the directors with liability—was rejected.

The plaintiff relied on Moorview Developments Ltd & Ors v First Active Plc & Ors [2018] IESC 33 and Powers v Greymountain Management Ltd (In Liquidation) [2022] IEHC 599. The court distinguished both:

• Moorview Developments was a non-party costs/funding case; McKechnie J’s analysis did not turn on piercing the corporate veil.
• Powers v Greymountain Management involved a company described as existing to perpetrate fraud, and the veil issue arose in that context. The present case involved an OMC performing its statutory role; no fraud was pleaded, and the plaintiff had not even sued the OMC.

The court also observed that, if the plaintiff had sued the OMC and succeeded, ordinary enforcement mechanisms would be available against the OMC—undermining any claim of necessity to disregard separate personality.

6) “Saving” amendments and joinder: no duty on the court to reconstitute proceedings by adding a new defendant

The plaintiff’s final position was unusual: it did not seek to amend, did not seek to join the OMC, and insisted it was “content” to proceed as framed— but argued the court should, if necessary, save the action by joining the OMC of its own motion.

Dunne J accepted the general principle that pleadings should not be struck out where a viable amendment is identified that could save the action, as illustrated by Mohan v Revenue Commissioners, Ireland and the Attorney General [2025] IEHC 63. However, the court drew a critical distinction between:

• amending pleadings to cure deficiencies between existing parties, and
• reconstituting proceedings by adding an “entirely new defendant” so the plaintiff can pursue a different cause of action.

On whether a court must itself devise amendments absent an application, the judgment surveyed: V.K. v M.W. [2018] IECA 290 (obiter discussion), Malone and Another v Laois County Council and Others [2025] IEHC 345, McAndrew v Launceston Property Finance DAC, [2023] IECA 43, and Fulham v. Chadwicks Limited & Ors [2021] IECA 72. Dunne J aligned with the prevailing approach: it is generally for the plaintiff to intimate an intention to amend and indicate (at least in broad outline) the proposed amendment. Represented plaintiffs are not entitled to have the court do this work for them.

7) Practical impact

• MUD Act litigation discipline: Section 24 is not a free-standing supervisory jurisdiction over “unfairness”; remedies must be tethered to an identifiable right/obligation owed by the respondent.
• Service charge disputes: Where the complaint is about the lawfulness or recoverability of service charge items, the OMC will ordinarily be the necessary defendant. Suing directors personally, without a distinct legal duty owed by them to the member, is vulnerable to strike-out.
• Director-misconduct allegations: If the complaint is that directors breached duties and harmed the company (including by causing the company to spend money improperly), the correct procedural route is typically a derivative action, requiring High Court leave under Order 15 Rule 39.
• Costs and strategy: The judgment signals that avoiding an OMC as a defendant for cost-allocation reasons cannot justify misjoinder or bypassing corporate personality.
• Amendments: Plaintiffs resisting strike-out should come to court with an actual amendment application or, at minimum, a coherent outline of amendments; courts will not ordinarily re-engineer the case by adding parties unasked.

Complex Concepts Simplified

Derivative action

A derivative action is a lawsuit brought by a shareholder/member on behalf of the company to remedy a wrong done to the company, typically where those controlling the company will not allow the company to sue. Because it is exceptional (it displaces the company as the normal claimant), Irish procedure requires High Court leave (Order 15 Rule 39).

Proper plaintiff/proper defendant (Foss v Harbottle principle)

If the company is the party harmed, the company is the proper plaintiff. If the alleged wrong is an act of the company (e.g., levying charges), the company is the proper defendant. Shareholders usually cannot sue directors personally just because they dislike how the company is run.

Section 24 MUD Act “anchoring”

Section 24 empowers the Circuit Court to make strong remedial orders, but only to enforce a right or obligation found in the MUD Act or another rule of law. Having standing under section 25 does not automatically mean the chosen respondent owes you the enforceable obligation you need.

Piercing/lifting the corporate veil

“Piercing the veil” is an exceptional step where courts disregard a company’s separate personality (e.g., certain fraud/abuse scenarios). It is not a general device to sue directors instead of suing the company.

Conclusion

Consortio Ltd v Lynch & Anor [2026] IEHC 336 is a firm reaffirmation that MUD Act remedies do not rewrite company law. Members may apply under section 24, but they must sue the correct party and must tether relief to an enforceable right/obligation owed by the respondent. Complaints about an OMC’s service charge scheme belong (in the ordinary way) against the OMC; complaints that directors breached duties owed to the OMC belong to the OMC or (exceptionally) to a High Court-authorised derivative action—not a Circuit Court claim against directors personally.