THIRD PARTY RISKS

Hokitika Guardian, 26 August 1929, Page 2

THIRD PARTY RISKS

ENGLISH COURT OF APPEAL

JUDGMENT.

OF INTEREST TO MOTORISTS,

The following article by Mr P. R. Waddy, B.A!, L.L.M., Barrister at law and author of “Waddy’s Mercantile Law,” on the subject of Motoricar Insurance and Subrogation” .qmbodies an important judgment by,".the English Court of Appeal.

1 The principle of subrogation applies to all contracts of indemnity, including contracts of most, classes of insurance (which is gn aleatory contract and not a contract olf indemnity). According to the principle the insurere who has agreed to indemnify the iiisfired will, on making good the loss, be entitled to succeed by all the ways and means b.y which the latter might have protected himseff against, or reimburse himself for, the loss. 1 This'ls'a brief summary of a portion of an important judgment' delivered by Lord Justice BreetL in the leading case of Castellain v. Preston (1883), L.R, 11 Q.B.D. 041. Attention is drawn to the words on making good the loss, as, Unless and until the loss is made , good by "the inurer, "the principle does pot apply.

“Forster, as owner, insured a motorcar with the Scottish Insurance Coporation Limited. The policy insured against accidental damage to the car and against claims by third parties, and, inter alia, .undertook liability for third party claims arising when the car was being driven by a licensed personal friend - of the insured. During the currency of the policy the car, while being driven by Page, a licensed personal ifriend of the insured came into collision with another car, owing to Page’s- negligence. Both the insured car and the other car were damaged in the collosion. Page was the owner of a garage and motor works, and with the consent of Forster (! and of the insurance company, he repaired the insured car at his own works. He then sent in an account for £ll7 2s 6d., in in respect of the repairs, and Forster on receiving the account, passed it on to the insurance company, but the insurance company refused to pay it on the grounds that, since the date when they had authorised Page to do the ronairs, they had become, aware of the fact that Page’s own negligence had caused the damage. The owner of the other car brought an action for damages and recovered judgment against Korster for £2OO and costs. Forster referred this claim also to the insurance company, and they at first refused to pay on the ground that Forster Ird 1 reken certain condi ions of the policy. The dispute was referred to arbitration, and an award was made against the company, and there-upon they settled the claim. They still refused to pay Page’s account for £ll7 2s 6d on the ground that, as the accident had. been caused by Pagee’s negligence, Forster would have been able to recover the amount of the damage from him, and thev. having Forster’s right'of action by-subrogation, were entitled to set off against the amount claimed by Page for doing the repairs an identical sum which Forester, would have been able to recover from Page as damages for negligence. Page brought an action for work and labour done to enforce his claim against the company, and thereupon the company, suing in the name of Forster, brought an action against Page fof £ll7 2s Gd as damages for negligence and claimed the right to set off that sum against the claim of Page for repairing the car

The two actions were consolidated and were tried before Mr Justice Salter, in the King’s Bench Division, who decided in favour of the company. Page mien appealed. “Page’s counsel submitted that un-der-writers do not acquire a right ot subrogation until they have paid the assured for the- whole of the loss which lie had sustained, and, as the company at the time when they issued their writ in the name of Forester had not paid the sum for which Forster was liable in connection with the. damaged car belonging to the third party, they had no right to sue in Forster’s name Counsel cited S.mpson v. Thomson (1677), 3 App. Cas. 279, Darrellv Tib oitts (1880), L.R. 5 Q.B.D. 560, Castellain v.' Preston (supra) and an Irish case In re Driscol (1918) Ir. Ch. 152. “Lord Justice Scrutton, England’s most eminent commercial Judge, in reversing Mr Justice Salter’s decision and entering judgment ngaingt the insurance corporation said ((after stating the facts): “The action’ by the company against Page was brought in the name 01 Forster. The Statement of is curious; it began as a claim by Forster himself for damages for negligence and finished as a claim by the company for a set-off. At the time when the company issued their writ against Page in the name of Forster tney had not paid either the cost of re pairing Forster’s car or the sum for which Forster was liable to the owner of the third party’s damaged car; hut while the action was pending they went to arbitration with regard to the latter sum, and the arbitrator awarded in favour of Forster, and the company then. paid Forster the amount which was due. They then continued their action in Forster’s name, contending that they hnd a right to do so by subrogation. Now the rights which arise by subrogation differ from those which arise by abandonment. In the latter case an underwriter may obtain for more than he has paid; but in subrogation the underwriter is using the right of his assured and lie cAnnot make use of it until he has fully indem nified the assured under his policy And he can only make use-of the right of the assured; if the assured himself liqs done the damage there is no right to which the underwriter can be subrogated. This case shows that there are still some points with regard to the law as to subrogation which are not clear. . . . .The appeal must be allowed and judgment: must he- entered for Page against the company for £ll7 2s 6d in the first action, and judgment must lie entered for Page against Forster i'll the second action with costs.”

“Lord Justice Greer and Lord Justice Sankcy (more recently appointed Lord High Chancellor of England in the MacDonald Administration) delivered judgments to the same effect.— Pagev. Scottish Insurance Corporation Limited, Forster v. Page. (Consolidated Appeals 1929.) 34 Com. Cas 236.”