England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand. London. WC2A 2LL
		21/12/2006

The Hon. Mr Justice Morison :

1. This is a claim for £610 odd. Mr Bee, the claimant was represented by Mr Butcher QC, leading Mr Benjamin Williams, and the Defendant, Mr Jenson was represented by Mr Julian Flaux QC and Mr Jonathan Hough.
2. Mr Bee was in his car, which was stationary at the time, when it was collided into by Mr Jenson's car. Mr Bee's car required repairs and during the time he was without his own vehicle he was provided with another car by his insurers. His insurers seek to recover the cost of the hire car from Mr Jenson's insurers, Royal Sun Alliance [RSA]. This case, is, therefore, a battle between two insurance companies. It is said that there is a major point of principle which the car insurance industry is wanting to have decided.
3. Part of the defence in this case was struck out by Cresswell J. and his judgment at [2006] EWHC 2534 (Comm) sets the scene for the issues that arise in this case. I gratefully incorporate his opening paragraphs in this judgment.

"The background facts

8. Pursuant to an order of Aikens J of 31 August 2005 a statement of facts was prepared. I directed yesterday, in advance of today's hearing, that that statement of facts should be extended so far as material to the issues in the present application and further applications before the court. The parties have helpfully provided a revised statement of facts to which I refer. Paragraph 1 states:

"On 8 March 2004, the Claimant was involved in a road traffic accident caused solely by the negligence of the Defendant. The Claimant's vehicle (registration number FX52 RDV) was stationary on Frederick Way in Grimsby when, the defendant's vehicle (registration number FV02 NMY) collided into the rear of his vehicle. The defendant has admitted sole liability for the accident."

9. At all material times the claimant had the benefit of a motor insurance policy with the Co-operative Insurance Society (the CIS) and DAS. The relevant policy was incepted on 18 July 2003. The defendant was insured at all material times by the Royal & Sun Alliance (the RSA). As part of the claimant's insurance package with the CIS the claimant had legal expenses and assistance insurance provided by DAS Legal Expenses Insurance Company Limited (DAS).

10. It is necessary to refer to the terms of the motor vehicle policy. The introduction stated:

"We (the Co-operative Insurance Society limited) agree with you (the Policyholder...) that, subject to the General Exclusions and Conditions of this Policy, we will provide the Insurance set out in the Policy Sections and in any Endorsements specified as operative in the Schedule in respect of events occurring during the Period of Insurance shown in the Schedule..."

11. The defined terms included:

"Vehicle hire costs: means the cost of hiring a replacement motor car or standard commercial vehicle in one continuous period. "

12. "Section H: Uninsured Loss Recovery and Legal Helpline "provided as follows:

"For the purposes of this Section we, us and our means DAS Legal Expenses Insurance Company Limited who provide the cover and manage all claims under this Section. Please note that any costs incurred without the prior authorisation of DAS are not covered.

"What IS insured. We will... (2) pay Vehicle Hire Costs following an accident involving a collision between the Insured Vehicle and another vehicle where (i) the Insured Vehicle cannot be driven and (ii) the accident was entirely the fault of an identified driver of another vehicle on which there is valid motor insurance...

"(6) Where we agree to pay Vehicle Hire Costs the Insured Person must (a) accept our choice of vehicle hire company, the type of vehicle and the period of hire, (b) comply with any conditions of the vehicle hire company, (c) agree to our attempting to recover Vehicle Hire Costs in the name of the Insured Person and refund to us any Vehicle Hire Costs recovered.

"What is NOT insured... (b) Legal Costs or Vehicle Hire Costs incurred before we agree to pay them...(e) Vehicle Hire Costs where the Insured Person is claiming against a person who cannot be traced. "

13. Thus the DAS benefits included the provision of a replacement vehicle at no cost to the insured in the event of an accident caused solely by another identified and insured driver and which meant that the insured's own vehicle could not be driven ("insured hire "). The hire transaction had to be approved by DAS in advance. Where DAS provided this service its insured agreed to DAS attempting to recover the hire charges in its names and to account to DAS for the receipts. The claimant says that DAS was entitled to choose the vehicle hire provider and the type of vehicle rented. The defendant says that the claimant was required to accept the choice of DAS as the hire provider if DAS made such a choice.

14. Paragraphs 2A, 3 and 3 A of the statement of facts are as follows:

"The Claimant has been a CIS motor insurance policy holder since 1997 and DAS had provided legal expenses insurance as part of that policy since July 1999.

"The accident of 8 March 2004 rendered the Claimant's vehicle undriveable. Damage was sustained to the rear bumper, hatch tail-gate, rear undercarriage and rear lights. Temporary repairs were not an option.

"From 2001 to 2002, DAS had arranged provision of replacement vehicles through a brokerage, Fair Rent Ltd. It had a business agreement with Fair Rent which provided for that company to source all vehicles for DAS policyholders. The written agreement provided for "spot hire rates" to be charged to DAS and for those rates to be reviewed by a system of quarterly reviews. DAS says that the terms of the agreement were altered in 2002 to provide that the rates charged would be set by reference to the scale of rates under the ABI GTA, a protocol for settlement of credit hire claims. The Defendant does not accept that, because no documentary evidence of the variation been provided."

15. In early 2003, DAS changed its vehicle supply arrangements by ending its dealings with Fair Rent and entering into a business agreement with Helphire Group plc. That agreement provided for Helphire to supply hire vehicles for the DAS policyholders and for DAS to make payment of hire charges to Helphire. I refer to the Business Agreement (which is in part redacted) for its terms and effect. The recital provided:

"1 DAS is a Legal Expenses Insurance Company authorised to underwrite Legal Expenses Insurance. DAS deals with a number of companies ("Business Partners") through whom DASS provides insured and uninsured services to the customers of those Business Partners (the "Policy") holders)...

3 The Parties intend that, provided relevant Business Partners do not object, Helphire will supply the following services (the "Requirement").

3.1. Replacement vehicles provided by way of hire or otherwise as an insured benefit to Policyholders under legal expenses insurance policies marketed and/or underwritten by DAS ("Subrogated Hirers"). "

16. The Business Agreement provides as to commencement at clause 1.1:

"This agreement will come into effect on 1 January 2003 ("Date of Commencement") PROVIDED THAT the Existing Contract is satisfactorily terminated."

17. As to DAS' obligations, clause 2.1 provided:

"DAS will use Helphire exclusively to provide the Requirements to the extent that relevant Business Partners of DAS involved in the Requirements do not object."

18. Under the Business Agreement rates were to be set by reference to the scale of rates under the ABI GTA. The defendant has pleaded that DAS received commission payments from Helphire in return to arranging hires. In this regard it relies on a standard prospectus produced by Helphire which refers to such payments as standard and which refers to DAS as a customer of the scheme. DAS does not admit or deny that commissions were paid as it regards this matter as commercially confidential. The claimant regards it as irrelevant to his claim.

19. On 11 March 2003 the claimant contacted DAS to confirm that his vehicle could not be driven. In accordance with his insured benefit a replacement vehicle (registration HT53 ZHP) was delivered to the claimant that next day. The vehicle was supplied through Helphire. Helphire was nominated as the supplier by DAS and was not chosen by the claimant. The claimant signed a hire agreement with Helphire to which I refer. Under the heading "Hirer Details" appeared Mr Bee's name. Under the heading "Company" there appeared the name DAS. Charges including VAT were set out. Mr Bee's signature appears under the following words:

"I agree to hire a vehicle ("Hire Vehicle") from Helphire (UK) Limited ("Helphire ") on the terms of this Agreement.

"I accept it is my responsibility to pay for all penalties set out in Condition 10 overleaf...

"I acknowledge receipt of a copy of this Agreement. "

20. Condition (1) was in these terms:

"The company has agreed to pay the Hire Charges and any Extras shown overleaf as payable by them for Your use of the Hire Vehicle during the Approved Period shown overleaf or any extension the Company authorises. "

21. The claimant says that he thereby became liable to pay Helphire's rental charges as stated on the face of the agreement. The defendant says that it did not require him to pay the hire charges but provided that DAS would do so. In that regard the defendant relies upon clause (1) of the terms and conditions of hire and says that the clause placed on DAS the obligation to pay the hire charges.

22. Paragraphs 5 to 8 of the statement of facts are as follows:

"The repair of the claimant's car was undertaken by Wilson & Co of Hewitt Avenue, Grimsby, an insurer-approved garage. The garage was unable to provide a courtesy car to the Claimant. The repairs were completed on 1 April 2004. The costs of repair have been paid for by the RSA.

"Helphire provided a car hire to the Claimant for 21 days from 12 March 2004 until 1 April 2004. The car was provided at a daily rate of £25.74 + VAT (£29.07 inclusive) and the total cost of hire was £519.54 + VAT (£610.46 inclusive). This rate is equivalent to the ABI GTA rate for this category of vehicle. The rate included delivery of the vehicle to and collection from the Claimant as well as fully comprehensive insurance. This sum was invoiced to DAS and has been paid. The Claimant has personally not been required to

pay these costs. A subrogated claim is now brought in the name of the Claimant to recover this amount from the Defendant.

"The Claimant required a vehicle at the time of the accident because, apart form his own personal requirements, each weekday he would have to drive his daughters to work and his grandchildren to school. In addition, twice a week he had to drive sixteen miles and back to Louth to help his elderly step-mother with her shopping and errands. There was no other vehicle available for his use. He would not have been able to fulfil his commitments with the use of public transport.

"The Claimant was 71 years old at the time of the accident and a retired insulator."

4. In a nutshell, what this case is about relates to the arrangements between DAS and Helphire. It is not contended that the charge for the hire to Mr Bee of a replacement vehicle was higher than the spot retail rate which Mr Bee would have been charged had he personally arranged for the hire of a replacement vehicle. What is said is that DAS provided the replacement vehicle through Helphire and could have done so more cheaply than they did [corporate hire rates] and should give credit for the introduction fee which Helphire may have paid to DAS or an associated DAS company. In other words, if Mr Bee is entitled to recover the amount claimed, his Insurers will have made a significant profit from the transaction at the expense of RSA. The amount of any such profit and of the 'introductory fee' remains unknown, and will not be disclosed unless and until the court decides that RSA are correct in principle.
5. More precisely, RSA through Mr Flaux QC made the following submissions:

(1) When claiming its outlay

(a) DAS must give account for a commission payment made by Helphire in respect of each hire; and

(b) damages should be limited to the reasonable cost to DAS of providing hire cars, namely a corporate rate of hire.

(2) In relation to the first issue, he submitted that the conclusion followed from two basic principles

(a) the rule that an insurer cannot recover by way of subrogation more than its true outlay;

(b) the rule that collateral benefits should be taken into account in assessing damages.

(3) The essence of subrogation (whether contractual or equitable) is to provide an indemnity and avoid unjust enrichment: Banque Financiere de la Cite v Pare Ltd [1998] 1 All ER 737 at 745a. This case was concerned with the equitable remedy of subrogation to prevent unjust enrichment.

(4) On a proper analysis of the transactions in this case, DAS has provided a benefit in kind by arranging a hire car at its own expense. "Damages must be limited to the real aggregate cost to DAS of providing the benefit in kind. In assessing that real aggregate cost, it is necessary to take into account the countervailing payment" whether to Das itself or a related entity at DAS' direction.

(5) The primary submission is that under the Hire Agreement, the only entity obliged to pay hire was DAS and not Mr Bee. But even if that argument were not right:

(a) "the subrogated right of DAS arises not in respect of an indemnity of [Mr Bee] for his liability to Helphire, but in respect of the cost to DAS of providing the benefit of the hire car for which DAS was liable to pay Helphire. In other words, even if the Claimant were right that he was also liable to Helphire, that was not the liability which was engaged or indemnified here." [Skeleton argument paragraph 20].

(b) "the countervailing commission or royalty payment must still be deducted when assessing damages. DAS is limited to recovering its true outlay by exercise of subrogated rights, because DAS has indemnified [Mr Bee] by paying an aggregate sum lower than his original contractual liability. The true outlay of DAS is the hire charge less the commission/royalty payment."

(6) "English Law does not distinguish between insurer and insured in a subrogated claim. Any defence which may be taken against the claim of the insured may equally be taken against the subrogated claim of the insurer. .. Therefore, if an insurer remedies a loss and a collateral benefit is provided, the situation should be treated in the same way as if the insured had remedied the loss and such a benefit had been provided." "The law is clear on the deduction of collateral benefits provided in mitigation of loss. The general rule is that, where such a benefit is provided in consequence of a tort, credit should be given. The only exceptions are for the fruits of insurance and the fruits of benevolence." "If the Claimant had arranged for car hire personally and a discount, deduction or 'kickback' of some kind had been paid by the hire company, credit would have to be given. There is no principled reason why a different approach should be taken merely because it is his insurer who has contracted for car hire and negotiated such a countervailing payment." [skeleton argument]

(7) In relation to the second issue, namely "damages should be limited to the reasonable cost to DAS of providing hire cars, namely a corporate rate of hire", RSA submitted that damages should be restricted to the reasonable cost to DAS of hiring a car. In assessing that cost, the Court should take into account the fact that DAS is a large organisation, which has contracted for hire under a bulk supply arrangement. Damages should be assessed in accordance with the advantageous corporate rates available to such an organisation. The tortfeasor is entitled to "demand that where there are choices to be made, the least expensive route which will achieve mitigation must be selected" per Lord Hope in Lagden v O'Connor [2004] 1 AC 1067 at 1080.

"Where an individual has arranged car hire, the wrongdoer is entitled to insist on paying no more than the cost of the least expensive option available to him. The options available to him will depend upon his personal characteristics and resources. Where a company with substantial purchasing power has arranged and paid for the car hire on behalf of the individual, the wrongdoer should similarly be entitled to insist on paying no more than the cost of the least expensive option reasonably available to him." - paragraph 29 of the Skeleton Argument.

A reasonable corporate rate for a car similar to that of Mr Bee would be between £16.44 to £19.92 per day; whereas the daily rate charged by Helphire was £29.07.

6. For DAS/Mr Bee, Mr Butcher QC's submissions were these.

(1) The total cost of the hire car from Helphire was £610.46 inclusive of VAT which DAS paid on 6 April 2004. Any payment by Helphire to DAS or to another company within the DAS group is incapable in law of impacting on the claim which is for Mr Bee's loss. There is no suggestion that Mr Bee has benefited from any such payment as Helphire may have made. In the traditional phrase, the transaction between Helphire and the group company is res inter alios acta ['events which were collateral to the commission of the tort': see the holding in Burdis v Livsey [2003] QB 36 at page 39, paragraph (4)] and irrelevant in quantifying Mr Bee's loss. In law, this is Mr Bee's claim; that is why it is brought in his name. The fact that Mr Bee did not pay Helphire directly makes no difference: Hobbs v Marlowe [1978] AC 16 at page 37E:

"I take it to be clear beyond all argument that an assured under a policy insuring him against loss of or damage to a chattel, on being indemnified by his insurers for a loss he sustained, does not thereby lose his right of action against the wrongdoer who caused the loss. Under the doctrine of subrogation he must bring an action against the wrongdoer if he is called upon by his insurer to do so and is indemnified against the costs; but it is his own cause of action, not that of his insurer, that he sues on; as against the wrongdoer the insurer has no cause of action of his own."

(2) "[The Defendant] has never articulated any intelligible reason as to how, in the light of these familiar principles, Mr Bee can be expected to give credit for a payment to which he is not entitled himself." [paragraph 13 of the Skeleton; my highlight].

(3) The Defendant has advanced a number of ways in which he alleges that credit should be given.

(a) He relied on the rule that benefits obtained in the course of mitigation may be brought into account as a credit in the assessment of loss: Dimond v Lovell [2002] 1 AC 384 at 401H - 402F. There, the claimant driver obtained a hire car from a company whose services also included suing the tortfeasor, in her name to recover the hire charges which would be postponed until any such claim was concluded. That agreement was in breach of consumer credit legislation and was unenforceable. Even though the claimant had acted reasonably in using this hire car service, her claim for loss of use of her car was irrecoverable. The House held that all that the claimant would have been entitled to was the cost of hiring a car at spot rates; the other services offered by the hire car company with whom she dealt, such as the costs of litigation and credit were additional benefits to her and were not recoverable. But this case has no present application since the principle is clear: if a claimant receives a benefit in the course of mitigation and if that benefit is caused by the tort then that benefit must be brought into account in calculating his loss. But here, Mr Bee received no additional benefit from hiring the car from Helphire; the fact that his insurers may have made a profit is irrelevant. The court would not, for example, inquire into the insurers' profit and loss accounts to see how much profit they were making from large premiums.

(b) Second, the Defendant relied on the principle that an insurer may not, by exercising its rights of subrogation recover more than its outlay, and if it does, it will hold the surplus on trust for the insured. That principle has no application to the facts of this case. The rule is not engaged since any payment by Helphire does not result from the exercise by DAS of Mr Bee's rights and in any event any benefits held on trust for Mr Bee are not credited to the tortfeasor; they do not result from the tort; they result from the payment of the premium.

(c) The most recent way the case was put related to the Hire Agreement. The Defendant says that under this Agreement, Mr Bee was never under an obligation to pay the hire. This argument does not lead to the conclusion that Mr Bee is not entitled to recover the cost of hire from the Defendant; but what it does mean, according to Mr Flaux, is that the cost of hire is the cost to DAS and not the charge by Helphire to DAS, at least without taking account of the commission payment. But, submitted Mr Butcher, the argument failed in limine since Mr Bee was liable under the Hire Agreement. He relied upon an analogy with costs where an employer paid for the costs of the defence of one of their employees and sought to recover those costs from public funds: R v Miller [1983] 1056. The application was initially refused on the grounds that the defendant himself was under no liability for the costs and therefore could not recover them from Central Funds. Allowing the defendant's appeal, Lloyd J. said, at page 1059:

"A very similar point arose in Adams v. London Improved Motor Coach Builders Ltd. [1921] 1 KB. 495. In that case the plaintiff brought an action against his employers for wrongful dismissal. His action succeeded, and he was awarded costs. It was argued that the plaintiff was not entitled to recover anything by way of costs, as it was the plaintiff's union who had retained the solicitors in the case, and it was the union to which the solicitors looked for payment of their costs. The argument was rejected by the Court of Appear. Bankes LJ. said, at p. 501:

"When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs."

Atkin L.J. said, at p. 504:

"... I think that it is highly probably, though the matter has not been discussed, that the solicitors have a personal right against the trade union to receive a proper remuneration for their services. It has not been discussed, and we do not know the precise terms of the relation between the trade union and the solicitors, but I assume there exists such an obligation. Nevertheless there is nothing inconsistent in that obligation co-existing with an obligation on the part of the plaintiff to remunerate the solicitors. Naturally, as a matter of business, the solicitors would, I have no doubt, apply in the first instance to the trade union, as being the persons ultimately liable to pay the costs as between all arties - that is to say, the persons who would have to indemnify the plaintiff against the costs. But that does not exclude the liability of the member, and it seems to me not in the least to affect the position that the client may be liable, although there may be a third person to indemnify the client. "

These judgments were cited with approval by Viscount Dilhorne in Davies v. Taylor (No. 2) [1974] A.C. 225. That was a case under section of the Legal Aid Act 1964. Section 1(1) of the Act, now repealed, provided, in terms identical with section 13(1) of the current Legal Aid Act 1974:

"Where a party receives legal aid in connection with any proceedings ...and those proceedings are finally decided in favour of the unassisted party, the court... may...make an order for the payment to the unassisted party out of the legal aid fund of the whole or any part of the costs incurred by him in those proceedings. "

It will thus be seen that the words, "costs incurred by him in those proceedings " are the very same words as "expenses properly incurred by him in carrying on the proceedings" in section 3(3) of the Costs in Criminal Cases Act 1973.

It was argued in Davies v. Taylor (No. 2) [1974] A.C 225 as it has been argued, that no costs had been incurred by the successful defendant, as he was insured, and the insurance company was bound to pay his costs. The argument was rejected. After citing Adams v. London Approved Motor Coach Builders Ltd. [1921] 1 K.B. 495, Viscount Dilhorne said, at p. 230:

"In this case the solicitors, no doubt first instructed by the insurance company, were the solicitors on the record as the solicitors for the respondent. They acted for him and, in the absence of proof of an agreement between him and them or between them and the insurance company that he would not pay their costs, they could look to him for payment for the work done and his liability would not be excluded by the fact that the insurance company had itself agreed to pay their costs. In my opinion the costs incurred were incurred by the respondent in the sense in which those words are used in the Legal Aid Act 1964."

Here, the insurance benefit is not the provision of a car but rather the payment of hire charges. The fact that Mr Bee was the Hirer under the agreement and that there was an express right of subrogation in order to recover Vehicle Hire Costs indicate that DAS were not the providers of the car; they merely reserved the right to nominate the hire company which would be unnecessary were DAS providing the car themselves. Even if it was contemplated that Mr Bee would never pay the hire charge himself, nonetheless he was in receipt of an insurance benefit, namely an indemnity against the cost of hire.

(4) Mr Bee is entitled to recover the hire charges for a reasonable replacement vehicle, at a reasonable market rate, for a reasonable period of time and only where such a vehicle is first shown to have been reasonably required. This conclusion is just. It is what the tortfeasor and his insurers would anticipate.

(5) The only other issue is whether the hire charges are reasonable and that involves the question whether it is corporate or retail rates that must be considered. Because it is Mr Bee's claim and not that of DAS the reasonableness of the hire rates must be judged from the perspective of Mr Bee, without reference to DAS' more extensive bargaining power. It is the price which Mr Bee would be able to negotiate which would count. Had he not been insured the sum claimed would have been recoverable; the result cannot be different merely because he was insured. The mitigation of loss must be, viewed from Mr Bee's perspective. Was he unreasonable in hiring the car from Helphire? The answer must be 'No' since it is not suggested that the spot rate of hire was greater than it otherwise would have been had he gone to a different, non credit hire, company. Helphire offered no additional benefits to Mr Bee, whether by way of credit or otherwise. So far as he was concerned this hiring was no different from going to a local hire car company and obtaining one from them.

(6) There was an issue between the parties as to whether credit should be given for the fact that Mr Bee's hire agreement contained no excess; yet under his insurance contract with CIS there was an excess of £100. It is important to note that Mr Flaux QC does not say that if a spot rate is used there is an element of betterment for which credit must be given. If the spot or retail rate is the proper rate it would not be argued that there should be any deduction from the figure claimed of £610.46. The question of excess only arises if the court were to decide that it would be appropriate to use the corporate rate. Here, Mr Flaux QC had argued that DAS ought to have used its bargaining muscle to arrange a corporate rate with an excess which would have produced the figures of between £16.44 to £19.92 per day. The evidence showed that the cost of a buying out an excess, would be in the region of £10 per day, and in the case of one company £10 - £15 On this basis, even if the corporate rate had been used, the Helphire rate was not excessive by comparison [daily rate of £29.07]. The Helphire rate was in fact better than the spot rate: with a £100 excess the Thrify rate would have been £29.95 per day and with a £75 excess, the Sixt rate would have been £47.77 per day or £37.77 with a £500 excess.

Decision

7. I must confess to having some difficulty in understanding the case admirably presented by Mr Flaux QC. It seems to me that his submissions are simply wrong and apparently misunderstand the nature of subrogation in this context. In the first place, reference to equitable subrogation is confusing. In the Banque Financiere case, Lord Hoffmann made it clear that the two were not to be confused in this passage at page 744:

"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.

8. As he said, contractual subrogation [as in insurance cases] and subrogation as a remedy to prevent unjust enrichment are two distinct institutions and must not be confused. This is confirmed in the sixth edition of Goff & Jones, Law of Restitution, at page 123/124. In my judgment references during the argument to principles of unjust enrichment [vide sub-paragraph 3 of my summary of his submissions, above] are misplaced.
9. Furthermore, what are said to be principles of law set out in his skeleton and referred to in subparagraph 6 of my summary of his arguments, do not appear to me to be true principles at all. The principles of law are, I think, clear.

" "subrogation" is concerned solely with the mutual rights and liabilities of the parties to the contract of insurance. It confers no rights and imposes no liabilities upon third parties who are strangers to that contract. It vests in the insurer who has paid a loss no direct rights or remedies against anyone other than the assured. He cannot sue such parties in his own name; he is bound by any release given by the assured to a third party. The insurer's rights against the assured cannot be affected by any subsequent contract or dealings between the assured and a third party." Per Diplock J in Yorkshire Insurance Co. Ltd v Nisbet Shipping Co. Ltd [1962] 2 QB 330 at page 340.

10. And, if more were needed, this statement of principle by Lord Rodger, then sitting as Lord President in the First Division of the Inner House in the Caledonian North Sea case [2000] Scottish Law Times 1123 at 1134, arising out of the Piper Alpha disaster, can be added:

"Subrogation works by giving the insurer who indemnifies the assured the right to raise proceedings in his name and, by the very nature of the circumstances in which it comes into play, the proceedings by the insurer must necessarily be to recover sums which have already been paid to the assured or paid on behalf of the assured. The remedy could not exist unless, in insurance as in other cases of indemnity, our law took the view that payments made by the indemnifier fall to be ignored in proceedings raised by him in the name of the assured against a third party. Those payments are ignored in all cases where subrogation applies, whatever may be the basis of the action which is raised in the name of the assured after he has been indemnified by the insurer"

11. Mr Flaux was right to accept that whether or not Mr Bee was liable to pay the hire under the car hire contract, an action could be brought in his name to recover it. In other words, the fact that the insurers paid the charges because they were liable to do so, as opposed to making the assured pay them and indemnifying him against the cost, is inconsequential. What matters is that but for the insurance arrangements Mr Bee would have been entitled to hire a car and recover the cost of doing so from the tortfeasor. The insurance contract for which Mr Bee had paid premiums made the arrangements for the replacement car more convenient. The car was provided to him by Helphire. Once it is accepted as a fact, as it is, that Mr Bee was entitled to hire a replacement car at a reasonable rate and for a reasonable period, he is, without more entitled to recover those hire costs from the tortfeasor. The tortfeasor is solely concerned with the reasonableness of the charges, assuming a need for a replacement vehicle. If, as they are, they are reasonable he must pay them, whatever insurance arrangements Mr Bee may have made, and more importantly, whatever arrangements Mr Bee's insurers may have made.
12. However, because an issue was raised as to whether Mr Bee was liable for the hire [should his insurers have gone bust, for example] then I deal with it. Mr Bee was named as the hirer. It would not have been in anyone's contemplation that the hire would be paid by anyone other than the insurers. Helphire looked to the insurers who were named in the hire agreement and who unquestionably accepted responsibility for paying the hire. The question is whether Mr Bee was also responsible for hire. I can see from the wording of the policy a possible interpretation that the insurers alone were responsible for the hire. For example, the contract contained terms which expressly required Mr Bee to pay the hire in the event that the vehicle is kept on by him and for any extras, the implication being that unless there was an over run he would not be liable; he was also required to pay any road tolls penalties and so on; yet the only express reference to the payment of hire charges comes from clause 1 which provides:

"The company has agreed to pay the Hire Charges and any Extras.... as payable by them for your use of the Hire Vehicle during the Authorised Approved Period shown overleaf or any extension the Company authorises."

13. I conclude that Mr Bee was under a liability to pay the Hire Charges and that Helphire would have been entitled to recover them from him had the occasion arose. It seems to me that the statement that "I agree to hire a vehicle .. on the terms of this agreement" was sufficient to impose on him an obligation to pay the hire charges if the Insurers reneged on their agreement with Helphire, in the absence of any express terms to the contrary. Clause 1 does not impose an obligation on the Insurers to pay the hire; it merely recites the fact that the Insurers have agreed with Helphire to pay them. There is, therefore, no provision for the payment of hire by anyone; merely an expectation that the hire will be paid pursuant to an agreement between the hire car company and the Insurers.. That being the case, it seems to me that where a person hires a car there is an implied obligation arising from the hire relationship that the hirer will pay for the hire. There is nothing in the agreement which would be contrary to that conclusion.
14. The court is not concerned to know whether DAS have made a large profit or a loss on their insurance arrangements; I can think of no reason in law why any profit they have made should be transferred to the tortfeasor or his insurers. I agree with Mr Butcher QC that "[The Defendant] has never articulated any intelligible reason as to how, in the light of these familiar principles, Mr Bee can be expected to give credit for a payment to which he is not entitled himself."
15. On the question of quantum, it is now clear on the evidence that the rate charged by Helphire, with a nil excess, was very good value for money, by comparison with other spot rates. Many hire companies are unwilling to remove the excess; some will merely reduce" it. Had the point been live, I would have held that it was reasonable for the replacement vehicle to have been provided with a nil excess regardless of the excess which applied to Mr Bee's own car. I do so for the reasons advanced by Mr Butcher. I quote from paragraph 35 of his skeleton argument, with which I fully agree:

"The fallacy in [the Defendant's expert witness'] case on [collision waiver damage] is that whilst asserting the betterment of the nil excess, he disregards the detriment [Mr Bee] suffered by being placed in a car belonging to a hire company. He treats Mr Bee as if on receiving the hire car, he was in the same position after the accident as he was before it. Obviously, he was not. He was not in his own car; he was in somebody else's. He was obliged to return the car in the same state as he received it. Were his own car damaged, he could defer repairs, perform amateur or temporary repairs or not bother with repairs. These would not be options with Helphire. Moreover, were [Mr Bee] to blame for damage to that vehicle, he would be subject not only to a claim for the cost of repair, but also for Helphire's loss of profit whilst it was out of commission. In other words, by forcing [Mr Bee] into a hire vehicle, [the Defendant] was exposing him to risks which he did not previously face, such that his insurance needs were different. As such, it is impossible to portray the nil excess as a betterment. It was a reasonable arrangement, consequential on the tort. "

16. In any event, there is a decision on this issue in an unreported decision of the Court of Appeal given on 20 February 1985 Marcic v Davies. There, the court held that the claimant who hired a replacement vehicle and paid the waiver fee to achieve a nil excess when his own excess had been £150 was entitled to recover that fee since if there had been no collision the claimant would "never have come under any contractual liability to the car hire company". "It was entirely reasonable that he should pay the waiver fee to cover himself against a contractual liability which he would otherwise never been under." per Lord Justice Browne-Wilkinson. Mr Flaux accepts that this case is binding on me. I have no hesitation in following it for the reasons expressed above.
17. The issue as to whether Mr Bee should be confined in his claim to the cost of hiring a car on corporate as opposed to spot or retail rates is, effectively, the same issue with which I have already dealt. It is a canard, I think, to suggest that Mr Bee's claim is in reality the insurers' claim and that the insurers are to be treated as parties to the action. That is not the law; on the contrary, the law is blind to insurance arrangements and recoveries in claims such as this. Had Mr Bee gone into his local market to hire a car he would have paid the Helphire rate or more, if he had paid for the waiver of the excess. The Helphire rate was reasonably modest. Mr Bee is entitled to recover the full cost of the hire, namely £610.46.