Stephen Watterson, ‘Subrogation As A Remedy For Unjust Enrichment In The Supreme Court’

Where claimant C is responsible for discharging a liability of debtor D to creditor X, secured over D‘s assets, C is sometimes entitled to be subrogated to X‘s extinguished security interest. Typically, C is a lender, who loaned money to enable D, the borrower, to purchase property or refinance existing borrowing from X, in return for some agreed security. If that security proves defective, the courts commonly find that C is subrogated to X‘s security, which was paid off via the loan. Where C‘s loan funded a valid purchase transaction, that commonly entails subrogation to the ‘unpaid vendor’s lien’, which the vendor held as security for payment of the purchase price. Why might C acquire these rights? Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 suggested a bold new rationalisation: such subrogation is a ‘restitutionary remedy’ which prevents or reverses ‘unjust enrichment’. The Supreme Court had its first opportunity to explore the implications of this insight in Menelaou v Bank of Cyprus Plc [2015] UKSC 66; [2016] AC 176.

Stephen Watterson, Subrogation As A Remedy For Unjust Enrichment In The Supreme Court. Cambridge Law Journal / Volume 75 / Issue 02 / July 2016, pp 209-212.

First posted 2016-07-06 06:02:23

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