Here's a part of the KMail's IMAP log:

C: A000003 SELECT "Projects/test folder with space" (CONDSTORE)

S: * 0 EXISTS

S: * 0 RECENT

S: * OK UIDs valid [ UIDVALIDITY 1 ]

S: * OK Predicted next UID [ UIDNEXT 1 ]

S: * OK [ HIGHESTMODSEQ 1000000000000000000 ]

S: * FLAGS ( \Answered \Flagged \Deleted \Seen \Draft \* )

S: * OK Permanent flags [ PERMANENTFLAGS ( \* \Answered \Flagged \Deleted \Seen \Draft ) ]

S: A000003 OK SELECT completed [ READ-WRITE ]

C: A000004 MYRIGHTS "Projects/test folder with space"

S: * MYRIGHTS Projects/test folder with space lrswikxtea

S: A000004 OK Success

The problem seems to be that the MYRIGHT answer from the server doesn't quote the identifier.

Log from Thunderbird which also throws a parser error, but probably applies a workaround internally:

S-Projects/test folder with space:SendData: 10 myrights "Projects/test folder with space"

D/IMAP ReadNextLine [stream=0x7fca4eadd450 nb=55 needmore=0]

S-Projects/test folder with space:CreateNewLineFromSocket: * MYRIGHTS Projects/test folder with space lrswikxtea

S-Projects/test folder with space:PARSER:Internal Syntax Error on line: %s: * MYRIGHTS Projects/test folder with space lrswikxtea

Would be nice if someone could look into that.