(iii) Subrogation
The House of Lords in Banque Financiere de la Cite v Parc (Battersea) Ltd162 recognized that subrogation may operate as a personal remedy. 3 Consequently, on the facts of that case, the claimant was able to rely on a third party’s security rights against the defendant, but only as against the defendant and not as against any of the defendant’s other creditors. More simply, the personal remedy of subrogation may operate to assign a third party’s personal rights against the defendant to the claimant.[1] This will be a particularly useful remedy where the claimant’s direct restitutionary claim against the defendant is barred and the claimant’s money has been used by the defendant to discharge a debt owed to a third-party creditor. This is illustrated by Re Wrexham, Mold and Connah’s Quay Railway Co[2] where the claimant could not sue the defendant directly because the borrowing transaction was ultra vires, but it was held that the claimant could rely on the rights of a third party to sue the defendant.
The role of subrogation as a personal restitutionary remedy is much less important today, however. When the law of restitution was founded on the notion of an implied contract, the remedy of subrogation provided a useful mechanism for enabling the claimant to secure restitution even though a contract could not be implied between the claimant and the defendant because, for example, the defendant lacked the capacity to enter into the transaction. But, with the rejection of the implied contract theory and the recognition that the obligation to make restitution is imposed by operation of law, the role of subrogation as a personal remedy is much less important. For today the claimant will be able to obtain restitution directly from the defendant by means of an action founded on unjust enrichment regardless of the fact that either party to the transaction lacked the capacity to enter into the transaction.[3]
