High Court of Justice in Northern Ireland Queen's Bench Division Decisions

"As a result of these deliberations the Elders of Lurgan Baptist want to make the following points:

1. Mr Gerald Titmus had been invited by Lurgan Baptist church to participate in the Young People's Weekend during which this unfortunate accident happened.

2. The Elders of Lurgan Baptist Church apportion no blame to Mr Gerald Titmus for the freak accident that culminated in the horrific injury to Grace Knox (sic).

3. The Elders of Lurgan Baptist Church do not support any action being taken against Mr Gerald Titmus."

"6. The Third Party avers, in point of law, that at the date of the issue of the third party proceedings herein, the Defendants did not authorise or consent to the issue of same, and that the Third Party is therefore entitled to judgment against the Defendants in respect of same."

"2. The Defendants deny that in point of law they need to authorise or consent to the issue of third party proceedings herein as alleged or at all. They aver that by the terms of their contract of insurance – particularly clauses 2 of the general conditions 3, 5(B) and 6 of the claims conditions – their insurers became entitled to take over and conduct in their name the defence or settlement of any claim or to prosecute any claim in their name for the insurer's benefit and their insurers became entitled to have full discretion in the conduct of any proceedings and in settlement of any claim."

"It is a fundamental principle that a party in whose name proceedings are issued must consent or authorise the issue of same. In the absence of such consent or authority the proceedings issued are in the nature of a nullity. At no time have the Defendants consented to, authorised or ratified the issue of the third party proceedings herein. As such, the Third Party is entitled to judgment in respect of same."

"Trustees Committee and Officers for the Time Being of the Baptist Union of Ireland whose names appear on the certificates issued by the brokers each of whom shall separately be called the Insured."

The General Conditions provide inter alia –

"2. Observance of the terms of this Policy relating to anything to be done or complied with by the Insured is a condition precedent to any liability of the Company except in so far as is necessary to comply with the requirements of any legislation enacted in great Britain Northern Ireland the Channel Islands or the Isle of Man relating to compulsory insurance of legal liability to employees."

The Claims Conditions provide –

"5 (B) No admission offer promise payment or indemnity shall be made or given by respondent on behalf of the insured without the written consent of the company which shall be entitled to take over and conduct in the name of the insured the defence or settlement of any claim or to prosecute any claim in the name of the insured for its own benefit and shall have full discretion in the conduct of any proceedings and in the settlement of any claim.

6. The insured shall at the Company's request and expense do and concur in doing and permit to be done all such acts and things as may be necessary or reasonably required by the Company for the purpose of enforcing any rights and remedies or of obtaining relief or indemnity from other parties to which the Company shall be or would become entitled or subrogated upon the Company paying for or making good any loss under this Policy whether such acts and things shall be or become necessary or required before or after the Company indemnifies the Insured."

" the insurer is entitled to exercise rights of subrogation if:

a) the insurance is an indemnity insurance;

b) he has made payment under it and

c) his rights of subrogation are not excluded by a term of the parties contract".

"But I always understood that the underwriter had no right to subrogation until he had fully indemnified the assured under the policy. When he had fully indemnified the assured he then had the equitable right to diminish his loss by using in his own favour and in the name of the assured any rights the assured could use against a third party in respect of the subject-matter of the loss.

There are a series of cases in which that has been said. I look at Castellain v Preston, 11 Q.B.D. 380, at p. 389, where Lord Esher said:--

Later he summarised the issue in the case at page 138 -

"Another question seems to arise. It is said that at the time the writ was issued the underwriter had paid all that was due in respect of the particular claim for which the writ was issued and that it does not matter that there was some other claim under the same policy and in respect of some expenditure which the underwriter had not paid. That is said to be the position in this case. The insurer says: 'True, I was disputing the amount you claimed in respect of third-party liability, but I had by reinstatement made good to you so that you suffered no loss by the damage to your own car. Consequently, I was entitled to be subrogated to that part of your claim under the policy irrespective of the fact that there was a claim which I had not paid.'

I think that that is an erroneous view of the doctrine of subrogation. I think the right to be subrogated to the rights of the assured does not pass to the underwriter until he has satisfied all the claims under the policy in respect of the particular subject-matter, and that if you get one car, one accident, one policy and one premium, I do not think that the underwriter can claim to be subrogated until he has satisfied all the claims arising out of that policy and paid for by that one premium in respect of that one accident and that one car.

What is the result of that? It appears to me that when the Scottish Insurance Corporation used the name of Forster to bring an action for negligence against Page they had not satisfied, they had not indemnified, they had not paid the assured the claims he was making in respect of that one car and that one accident. It follows that they had no right in my opinion to use his name.

I think that they acquired the right during the course of the action when they paid the owner of the Rolls Royce, or paid to the assured the sum he had to pay the owner of the Rolls Royce. But it is no answer when you have brought an action prematurely to say: "I had a right to bring the action three months later and that will redeem my fault in bringing the action three months too soon." I do not think the fact that the amount due on the third-party liability was paid before the action came on for trial relieved them from the consequences of the original default in bringing the action in the name of Forster at a time when there was no authority to bring it."

"The question the Court has to determine is whether on the facts stated by my Lord the Scottish Insurance Corporation were entitled on Jan. 3, 1927 (when they issued their writ), to claim in the name of the assured (Mr. Forster) against Mr. Page damages for loss sustained by the assured owing to the negligence of the defendant. If they were not entitled to begin the proceedings they cannot cure the defect because they became entitled during the course of the proceedings. The cause of action must exist at the date of the writ. If it is ascertained that no cause of action exists at the date of the writ the only course for the plaintiff to adopt is to abandon that action and bring another when the cause of action has arisen."

Sankey LJ set out the relevant legal principle at page 140 -

" adopt as my guide the sentence which has been read by my Lord from Castellain v. Preston, 11 Q.B.D. at p. 389: "He cannot be subrogated into a right of action until he has paid the sum insured and made good the loss." The question, therefore, would appear to me to be whether at the time the writ was issued the insurer could rightly say that he had paid the sum insured and had made good the loss."

Later he commented at the same page -

"Further than that, as pointed out by Lord Justice Greer, they put on the record a defence denying liability--although it is true that when they came into experienced hands at the trial the greater number of these defences were abandoned. Therefore, I do not think it possible to find in respect of the £117 2s. 6d. that they had discharged their liabilities under the contract of insurance.

But even if that were so they certainly had not discharged the third-party liability by indemnifying Mr. Forster against the damages which the owner of the Rolls Royce car obtained against him. They disputed liability for that. It went to arbitration. The arbitrator gave his award on Aug. 15, 1928, saying the insurance company were liable, and they (as one would have expected) immediately paid. But that was in August, 1928, long after the writ in the action they had brought claiming the right to be subrogated into the rights of Mr. Forster. Therefore on this point I think the appeal should be allowed.
On the other point, that the objection should have been taken at an earlier stage, I do not think the Russian Commercial & Industrial Bank v. Le Comptoir d'Escompte de Mulhouse, &c., [1925] A.C. 112; 19 Ll.L.Rep. 312, is an authority here. In that case it was held:--

It was not open to the defendants to raise by way of defence to the action *141 the objection that the London branch manager had no authority to bring the action in the name of the plaintiff bank, but that they ought to have moved to strike out the name of the bank as plaintiff."

" My Lords, the subject of subrogation is bedevilled by problems of terminology and classification which are calculated to cause confusion. For example, it is often said that subrogation may arise either from the express or implied agreement of the parties or by operation of law in a number of different situations: see, for example, Lord Keith of Kinkel in Orakpo v. Manson Investments Ltd. [1978] A.C. 95, 119. As a matter of current terminology, this is true. Lord Diplock, for example, was of the view that the doctrine of subrogation in contracts of insurance operated entirely by virtue of an implied term of the contract of insurance (Hobbs v. Marlowe [1978] A.C. 16, 39) and although in Lord Napier and Ettrick v Hunter [1993] A.C. 713 your Lordships rejected the exclusivity of this claim for the common law and assigned a larger role to equitable principles, there was no dispute that the doctrine of subrogation in insurance rests upon the common intention of the parties and gives effect to the principle of indemnity embodied in the contract. Furthermore, your Lordships drew attention to the fact that it is customary for the assured, on payment of the loss, to provide the insurer with a letter of subrogation, being no more nor less than an express assignment of his rights of recovery against any third party. Subrogation in this sense is a contractual arrangement for the transfer of rights against third parties and is founded upon the common intention of the parties. But the term is also used to describe an equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived. The fact that contractual subrogation and subrogation to prevent unjust enrichment both involve transfers of rights or something resembling transfers of rights should not be allowed to obscure the fact that one is dealing with radically different institutions. One is part of the law of contract and the other part of the law of restitution. Unless this distinction is borne clearly in mind, there is a danger that the contractual requirement of mutual consent will be imported into the conditions for the grant of the restitutionary remedy or that the absence of such a requirement will be disguised by references to a presumed intention which is wholly fictitious. There is an obvious parallel with the confusion caused by classifying certain restitutionary remedies as quasi-contractual and importing into them features of the law of contract."

"Held, dismissing the appeal, that a writ issued within the limitation period applicable to the cause of action but without the authority of the nominal plaintiff was not a nullity; that the nominal plaintiff could subsequently ratify and adopt the writ notwithstanding the expiration of the limitation period, provided that the ratification did not extend the time fixed for doing an act, whether by statute or agreement or (per Roch L.J.) did not adversely affect any rights of property which had arisen since the issue of the writ; that (per Roch L.J.), since the expiry of the limitation period would merely bar the plaintiff's remedies, ratification would not adversely affect any rights of property which had arisen since the issue of the writ; that, in the circumstances, the liquidators' ratification of the unauthorised acts of the solicitors of the plaintiff company was effective; and that, accordingly, the liquidators could adopt the proceedings as their own"

At page 280 Dillon LJ said –

"Where a writ is issued without authority, the cases show that the writ is not a nullity. For the nominal plaintiff to adopt the writ, or ratify its issue, does not require any application to the court. Accordingly, on the same general principle that justifies Pontin v Wood [1962] 1 Q.B. 594, the plaintiff, in the simple example of an action raising a single cause of action which has been begun by solicitors without authority, must be entitled to adopt the action notwithstanding the expiration of the limitation period applicable to that cause of action."