Subrogation, suretyship, and the law of restitution
University of British Columbia
Master of Laws - LLM
Subrogation is well known to the common law legal system. It has existed in one form or other for at least three centuries, and quite possibly even longer. It was developed in the English courts of equity, and adapted for use in a variety of situations. Today, "rights" of subrogation lie at the heart of a number of commonplace legal relationships, including those of suretyship and insurance. Yet, despite its antiquity, subrogation has never been well explained. Fundamental questions about its nature have never been fully resolved. Is it a "right"? Or a "remedy"? Or a "remedial technique"? Is it perhaps all of these? Or none? How exactly does it operate? And why? The answers forthcoming have varied almost from one case or piece of legal literature to the next. As a result, subrogation has remained something of a legal will-o-the-wisp - known to exist, experienced by many, but lacking theoretical substance. Recently, however, the prospect of finally giving this theoretical substance to subrogation has improved. The catalyst for this has been the development and increasing acceptance in the common law world of a law of restitution premised upon a fundamental principle of unjust enrichment. For restitution writers have been quick to argue that subrogation, in its many guises, is fundamentally restitutionary in nature - that it is essentially a means of ensuring that one person in a tripartite relationship is not unjustly enriched at the expense of another in that relationship. This explanation, it is argued, more than any other in the past, offers the means of unifying subrogation in its various guises. This paper is about this view of subrogation. Its general thesis is that subrogation is essentially restitutionary in nature. Subrogation can and should, it is submitted, be viewed as a remedial device or technique used to effect restitution in tripartite relationships when one party to that relationship would otherwise be unjustly enriched at the expense of another. As a necessary corollary, it is submitted that the existing "rights" of subrogation in our legal system can be satisfactorily explained and understood in these terms. To test this general thesis and its corollary, this paper examines one in particular of the existing "rights" of subrogation, that of the surety. The surety's right of subrogation is one of the most established of the "rights" of subrogation. It many respects, it is the paradigm, or quintessential, tripartite case in which subrogation has been used. It should, therefore, fully reflect the restitutionary principles upon which subrogation is said to be premised. The question whether, and the extent to which, this is so is the central question that is explored in this paper. Preliminary to that question, this paper explores and outlines the nature and content of the surety's "right" of subrogation itself, for this is an issue that is almost equally surrounded by uncertainty. The general conclusion of this paper is that the surety's "right" of subrogation does fully reflect restitutionary principles, and can be satisfactorily explained in restitutionary terms, thus lending considerable support to this paper's general thesis. Further support for this conclusion is obtained by also considering the extent to which it holds true in relation to the closely related subrogation rights of parties to bills of exchange.
Law, Peter A. Allard School of