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Dear All,

Out on New Law Online is the headnote of a recent subrogation case called Khan v Permayer, decided by the Court of Appeal (Civil Division) (Morritt LJ, Sir Christopher Staughton) on 22.06.00.

Neither NLO nor Casetrack have the full transcript yet.

According to the digest, the facts were as follows.

In 1989 K and another ("the partners") were granted a 25-year lease of restaurant premises for the purposes of which they obtained a mortgage. The mortgage left a shortfall of £50,000 outstanding to the grantor of the lease. As a result a second mortgage was granted to secure the £50,000 that had not been paid to him by the partners. In 1992 the reversion on the lease and the benefit of the mortgage were assigned to the defendant, P.

From then onwards the £50,000 became the debt of the partners to P. The partners encountered financial difficulties. Under the terms of an individual voluntary arrangement the partners duly repaid all sums owing to P. However, the partners continued to labour under the mistaken belief that a sum was still owing to P. In 1994 E purchased the lease and the restaurant business from the partners. The partners were retained as employees. E believed that the partners still owed P about £40,000. E paid P the sum owed by instalments. The partners indemnified E through deductions made from their wages. K brought a claim for restitution of the deductions made from his wages from P. HHJ Cowell ruled that K was entitled to recover the deductions that E had made from his wages from P because they had been paid under a mistake, they were not paid voluntarily, and P had been unjustly enriched at the expense of K and it was unjust to allow him to retain the benefit. P appealed.

The Court (Morritt LJ, Sir Christopher Staughton) dismissed the appeal. The issue being whether subrogation was available where, as a matter of fact rather than contract or intention, the third party conferring the benefit had been indemnified by the claimant, it was held that the claimant was entitled to recover the sums that had been deducted from his wages from P. P had been unjustly enriched at the expense of K who was entitled to recover under the restitutionary device of subrogation. It was not possible to trace the money from K to P but the payment by E could still be recovered by K as it was precisely commensurate with his loss.

Arianna

***************
Arianna Pretto
Brasenose College
Oxford OX1 4AJ