Modelling subrogation as an “equitable remedy”

Following the landmark decision of the House of Lords in Banque Financière de la Cité v Parc (Battersea) Ltd, the English courts have come to say that subrogation to extinguished rights is an “equitable remedy” designed to reverse “unjust enrichment”. This creative re-rationalisation requires a fresh look at the nature and operation of this phenomenon, and in particular, at the key components of the “new” orthodoxy — that such subrogation is a “remedy”, which is “equitable” in origin, and is “restitutionary” in aim and effect. A clear understanding of these components is not of merely academic interest. It is vital for a proper understanding of the nature and timing of the entitlements that are afforded to subrogation claimants, and of a court’s role in their recognition and effectuation. On closer examination, the cases reveal an unacknowledged and unresolved tension between two different conceptions of the remedy’s operation: (i) a “strong institutional model”; and (ii) a weaker institutional model, which is labelled the “liability model”. Adopting either model, subrogation is not a drastically “remedial” phenomenon which yields entitlements for claimants only by virtue of some judicial order. Subrogation-justifying facts will immediately trigger some form of entitlement for a subrogation claimant, which arises prior to, and independently of, any subsequent court order. Nevertheless, the nature and quality of this pre-court entitlement, and the court’s role in its recognition and effectuation, will differ depending on the model preferred. On balance, the liability model is the more defensible in principle. It should ultimately prevail.