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Caledonia North Sea Ltd v London Bridge Engineering Ltd, posted by Lionel today, nicely illustrates the ambiguities inherent in the word 'subrogation'. For although you might not guess it from the way in which the courts frequently use the word to describe them both, there are in fact two types of subrogation. Let us call them 'simple subrogation' and 'reviving subrogation' (not because I'm proud of this terminology, but because I've got used to it now, and I can't think of anything better).

Simple subrogation is a remedy awarded in certain circumstances to interveners who make payments in respect of other people's obligations, and who don't discharge those obligations by their payments. It entails the courts' agreeing to treat an intervener as though he had stepped into the creditor's shoes and set about enforcing the creditor's still subsisting right of action against the debtor for his own benefit. We know from The Esso Bernicia that simply subrogated actions *must* always be brought in the name of the creditor: if the intervener purports to bring a simply subrogated action in his own name, it will be struck out as wrongly pleaded. Furthermore, if he tries to bring a direct action in UE in his own name against the debtor he won't get anywhere, as the debtor can reply that he hasn't been enriched by the intervener's payment, since he remains liable to the creditor.

Reviving subrogation is a remedy awarded to interveners who have made payments in respect of other peoples' obligations and who have succeeded in discharging those obligations by their payments. It entails the court's agreeing to treat an intervener as though the obligation had not been discharged, and as though the intervener had stepped into the creditor's shoes and set about enforcing the creditor's rights for his own benefit. We know from BFC v Parc that the scope of the court's agreement to treat the intervener in this way can vary, as according to circumstances the court may think it appropriate to treat the intervener in this way vis-a-vis one party, but not vis-a-vis another party.

It was formerly the case that a surety had only an equitable right to be reimbursed by a principal debtor where the principal had not expressly promised to repay him: see eg Ford v Stobridge (1632) Nels 24; Hungerford v Hungerford (1708) Gilb Eq Rep 67, 69 (per Lord Cowper LC). It would therefore have given him an advantage to acquire the creditor's personal rights at law via reviving subrogation. But sureties have been entitled to reimbursement at common law at least since Morrice v Redwyn (1731) 2 Barn KB 26. And in practice, therefore, interveners nowadays usually only ask for reviving subrogation if it will enable them to acquire the creditor's (extinguished but fictionally revived) secured rights against the debtor: they are not interested in acquiring the creditor's personal rights (there is an exception to this which I won't go into, but see eg Thurstan's case). It follows that in practice an intervener usually only asks for reviving subrogation in the context of an action for money paid or a contribution action brought in his own name against the debtor, as an additional remedy on top of an order for account and payment: see eg Atkin's Court Forms Vol 18 (2nd edn, 1992 issue) p 352 Form 82; Vol 20 (2nd edn, 1993 issue) p 179 Form 13.

However, there is no procedural *requirement* that an intervener seeking to acquire rights via reviving subrogation must do so in the context of an action brought in his own name. For the Mercantile Law Amendment Act 1856, s 5, gives interveners who have paid under legal compulsion the optional right 'if need be and upon a proper indemnity, to use the name of the creditor in any action, or other proceeding' to recover from the debtor. For the reason already stated, interveners nowadays practically never use this route to recovery (nor did they by the end of the 19th century if Lord Cockburn CJ is to be believed - see Swire v Redman (1876) 1 QBD 536, at 541). But the optional right to use this route is still there on the statute book.

Which brings us to Caledonia North Sea ...

Following the Piper Alpha oil-rig disaster, the rig operator's liability insurer paid it in respect of its liability to employees and the families of employees injured or killed. The operator also had the right to recover in respect of this liability from various third parties who had been involved in building the rig, who had given the operator contractual undertakings to indemnify them against such liability. The insurer assumed that its payment did not discharge the insured's right of action against the contractors, and so it assumed that any action it might have against the contractors to recover its payments should be framed as a simply subrogated action in the insured's name. 360 trial days and many lawyers' bills later, however, the contractors pointed out that in fact the insurer's payment had discharged their liability. Lord Caplan agreed, and went on to hold that the insurer should therefore have brought a direct action against the contractors for reimbursement in its own name. He therefore struck out the insurer's action as wrongly pleaded, and (I imagine) the insurer was jolly cross with its lawyers.

On appeal, though, whilst Lord Rodger agreed that the contractors' liability had been discharged, he went on to hold - quite correctly - that the insurer had had the optional right to use the insured's name in litigation, acquired via *reviving*, though not by *simple* subrogation (my terminology, not his). The insurer's action had therefore been rightly constituted after all, although not for the reason which it had supposed.

There are three footnotes to this saga:

1) The Mercantile Law Amendment Act 1856, s 5 was enacted to bring English law into line with the Scots law concerning the rights of sureties to acquire securities via reviving subrogation. There is therefore an appealing historical neatness about the fact that a Scots lawyer should now be the one to remind us what the section says.

2) Lord Caplan ordered that the costs of the action he struck out should be divided equally between the pursuers and the defenders, since both sides had behaved equally feebly in failing to take the pleading point on Day 1 rather than on Day 360. I have not seen a full transcript of Lord Rodger's judgment yet, and so I don't know whether he has left this costs order in place, or varied it in any way. Can you shift the costs of winning a pleading point for the wrong reason onto your opponent?

3) The law concerning the question whether an intervener's payment to a creditor discharges the debt is in a hopeless mess. It is inconsistent, unpredictable, and it leaves those representing interveners unsure whether or not to plead their actions against debtors as simply subrogated actions in the creditor's name. Something should be done about this.

_________________________
Dr Charles Mitchell
Lecturer in Law
School of Law
King's College London
Strand
LONDON WC2R 2LS

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