FOR EDUCATIONAL USE ONLY (c) Sweet & Maxwell Limited Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd (QBD (Comm Ct)) Commercial Court 14 April 1961 Where Reported Summary Cases Cited Legislation Cited Citations to the Case Where Reported [1962] 2 Q.B. 330 [1961] 2 W.L.R. 1043 [1961] 2 All E.R. 487 [1961] 1 Lloyd's Rep. 479 (1961) 105 S.J. 367 Summary Subject: Insurance Keywords: Insurance claims; Ships; Subrogation Catchphrases: Marine insurance; subrogation Abstract: Where an insurer pays for a total loss of the subject-matter insured and the assured, in exercise of his remedies in respect of the subject- matter, recovers from a third party an amount which exceeds the sum so paid by the insurer, the insurer cannot recover from the assured the amount of such excess. A vessel was an actual total loss as a result of a collision and the insurers paid the owners the sum in which it was insured, which was slightly less than its value. The owners sued the owner of the ship with which it collided and recovered considerably more than the value of the ship as a result of the revaluation of the pound against the dollar. Summary: Held, the owners need not reimburse to the insurers any more than the insurers had actually paid them (Castellain v Preston (1883) 11 Q.B.D. 380 applied; North of England Iron Steamship Insurance Association v Armstrong (1870) L.R. 5 Q.B. 244 explained). Judge: Diplock, J. Cases Cited Castellain v Preston, (1882-83) L.R. 11 Q.B.D. 380 (CA) North of England Steamship Insurance Association v Armstrong, (1869) L.R. 5 Q.B. 244 (QB) Legislation Cited Marine Insurance Act 1906 s. 63 Marine Insurance Act 1906 s. 79 Marine Insurance Act 1906 Sect.79 Citations to the Case Applied by H Cousins & Co v D&C Carriers, [1971] 2 Q.B. 230; [1971] 2 W.L.R. 85; [1971] 1 All E.R. 55; [1970] 2 Lloyd's Rep. 397; (1970) 114 S.J. 882 (CA) Considered by Lucas (L) v Export Credits Guarantee Department, [1973] 1 W.L.R. 914; [1973] 2 All E.R. 984; [1973] 1 Lloyd's Rep. 549; (1973) 117 S.J. 506 (CA) Morris v Ford Motor Co, [1973] Q.B. 792; [1973] 2 W.L.R. 843; [1973] 2 All E.R. 1084; [1973] 2 Lloyd's Rep. 27; (1973) 117 S.J. 393 (CA) END OF DOCUMENT Copr. (c) West 2001 No Claim to Orig. Govt. Works FOR EDUCATIONAL USE ONLY *479 Yorkshire Insurance Company, Ltd. v. Nisbet Shipping Company, Ltd. Queen's Bench Division (Commercial Court) QBD (Comm Ct) Apr. 11, 12, 13, 14, 1961 Before Mr. Justice Diplock Marine insurance -- Subrogation -- Total loss paid by insurer under a valued policy-- Greater sum recovered by assured from third-party--Right of insurer to recover excess from assured-Marine Insurance Act, 1906, Sect. 79 (1). Valued policy effected by defendant assured with plaintiff insurer on assured's steamship Blairnevis--Blairnevis valued in policy at << PoundsSterling>>72,000 -- Total loss of Blairnevis as the result of collision with H.M.C.S. Orkney, in February, 1945-- Value of Blairnevis at time of loss was <<PoundsSterling>>75,514 9s. 11d. (336,039.52 dols.)-- Assured paid << PoundsSterling>>72,000 by insurer -- In September, 1946, assured instituted proceedings in Canada (with consent of insurer) against Canadian Government for damages for loss of Blairnevis--Damages (336,039.52 dols.) paid to assured in Canada in 1958--Consequent on devaluation of sterling in 1949, 336,039.52 dols. realized <<PoundsSterling>>126,971 14s. 11d. when converted into << PoundsSterling>> in London -- Claim by insurer to full amount received by assured--Contention by assured that it was entitled to retain all moneys in excess of <<PoundsSterling>>72,000 -- Construction of Marine Insurance Act, 1906, Sect. 79 (1), which provided: Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subjectmatter as from the time of the casualty causing the loss. Held, (1) that by the doctrine of subrogation terms were implied in a contract of marine insurance to ensure that, although the insurer had made a payment under the policy, the assured should not be entitled to retain, as against the insurer, a greater sum than his actual loss, and it was also an implied term that, when possible, the assured should exercise remedies against third parties to*480 reduce the amount of the loss (upon indemnification by the insurer against costs); that, in an action brought in the name of the assured it was the assured who recovered judgment against the third party and that judgment could only be satisfied by payment to the assured; that, when he received it, the insurer could recover from him, as moneys had and received, such sum as he had overpaid to the assured; (2) that Sect. 79 (1) meant that the insurer was entitled, as against the assured, to the benefit of the assured's rights and remedies against third parties to the extent indicated in (1) above; that, accordingly, the insurer's rights were limited to recovering any sum which he had overpaid; and that, therefore, where an insurer paid for a total loss of the subject-matter insured and the assured, in the exercise of his remedies in respect of the subject-matter, recovered from a third party an amount which exceeded the sum so paid by the insurer, the insurer could not recover from the assured the amount of such excess, and therefore, the insurer was entitled to << PoundsSterling>>72,000, and no more. --North of England Iron Steamship Insurance Association v. Armstrong and Others, (1870) L.R. 5 Q.B. 244, considered and not applied. The following cases were referred to: Attorney-General v. Glen Line, Ltd., and Liverpool & London War Risks Association, Ltd., (1930) 37 Ll.L.Rep. 55; (1930) 36 Com. Cas. 1; Bank of England v. Vagliano Brothers, [1891] A.C. 107; Boag v. Standard Marine Insurance Company, Ltd., [1937] 2 K.B. 113; (1937) 57 Ll.L.Rep. 83; British and Foreign Marine Insurance Company, Ltd. v. Samuel Sanday & Co., [1916] 1 A.C. 650; Burnand v. Rodocanachi, Sons & Co., (1882) 7 App. Cas. 333; Castellain v. Preston and Others, (1883) 11 Q.B.D. 380; Celia (Owners) v. Volturno (Owners), [1921] 2 A.C. 544; (1921) 8 Ll.L.Rep. 449; Goole and Hull Steam Towing Company, Ltd. v. Ocean Marine Insurance Company, Ltd., [1928] 1 K.B. 589; (1927) 29 Ll.L.Rep. 242; King v. Victoria Insurance Company, Ltd., [1896] A.C. 250; Livingstone, (1904) 130 Fed. 746; North of England Iron Steamship Insurance Association v. Armstrong and Others, (1870) L.R. 5 Q.B. 244; St. Johns, (1900) 101 Fed. 469; Simpson & Co. v. Thomson, Burrell, (1877) 3 App. Cas. 279; Thames and Mersey Marine Insurance Company v. British and Chilian Steamship Company, [1915] 2 K.B. 214; (1915) 21 Com. Cas. 150; Volturno, [1921] 2 A.C. 544; (1921) 8 Ll.L.Rep. 449; West of England Fire Insurance Company v. Isaacs, [1897] 1 Q.B. 226. In this action, the plaintiffs, Yorkshire Insurance Company, Ltd., (also representing other insurers) claimed that they were entitled to moneys received by the defendants, Nisbet Shipping Company, Ltd., from the Canadian Government in respect of the loss of the defendants' steamship Blairnevis as the result of a collision with H.M.C.S. Orkney, in 1945. The plaintiffs paid a total loss ( <<PoundsSterling>>72,000) on a valued policy on the Blairnevis whose actual value at the time of loss was <<PoundsSterling>>75,514 (or 336,059 dols., at 4.45 dols. to the <<PoundsSterling>>, which was the rate of exchange operating at that time). The defendants recovered 336,039 dols. --as the value of the lost ship--in 1959 from the Canadian Government, whom they sued as owners of H.M.C.S. Orkney. By "selling" the dollars at the 2.639 dols. to the <<PoundsSterling>> exchange rate, the defendants obtained over <<PoundsSterling>>120,000. The plaintiffs sought a declaration that they were entitled to a proportion of that sum. The defendants denied this and claimed that the underwriters were only entitled to <<PoundsSterling>>72,000--the value of the policy--which they had paid to the defendants after the loss of the ship. The <<PoundsSterling>> 72,000 had been repaid to the underwriters. The defendants denied that they had been acting as the plaintiffs' agents or trustees in recovering damages from the Canadian Government. The value of the policy, in dollars, was 320,400 dols. when exchanged at the 4.45 dols. to the <<PoundsSterling>> rate. It had been agreed that that was the rate at all material times up to the devaluation of sterling in September, 1949. According to the plaintiffs' points of claim, on Feb. 13, 1945, the Blairnevis was in collision with H.M.C.S. Orkney. As a result of the collision the Blairnevis became a total loss. *481 On Sept. 19, 1946, the defendants instituted proceedings against the Crown as owners of H.M.C.S. Orkney in the Exchequer Court of Canada. As a result of those proceedings, the defendants, in May, 1959, received from the Canadian Government damages amounting to 350,000 dols., of which 336,039.52 dols. were attributable to the value of the Blairnevis. 336,039.52 dols. converted at 2.639 dols. to the <<PoundsSterling>> was equivalent to << PoundsSterling>>126,971 14s. 11d. By a policy of marine insurance dated Aug. 4, 1944, the plaintiffs and other insurers insured the defendants against loss or damage to the Blairnevis by perils of the sea in the sum of <<PoundsSterling>>36,888 on the terms and conditions therein contained. The Blairnevis was valued in the policy at << PoundsSterling>>72,000, which converted at 4.45 dols. to the << PoundsSterling>>, was equivalent to 320,400 dols. As a result of the loss of the Blairnevis, the plaintiffs became liable to pay the defendants the full amount of their subscription to the policy, namely <<PoundsSterling>>2523, and the plaintiffs paid that sum to the defendants on Apr. 20, 1945. The plaintiffs said that on paying for the total loss of the Blairnevis they became entitled to take over pro tanto the interest of the assured in the subject-matter insured and were subrogated pro tanto to all the rights and remedies of the assured in and in respect of the subject-matter, under Sect. 79 (1) of the Marine Insurance Act, 1906. The plaintiffs alleged that the defendants, in recovering damages from the Canadian Government for the loss of the Blairnevis, were acting pro tanto as agents of the plaintiffs and/or on the instructions and/or with the agreement or approval of the plaintiffs and were bound to account to the plaintiffs pro tanto for the sums so recovered. The plaintiffs further alleged that the defendants were trustees pro tanto of the sums so recovered for the plaintiffs. The plaintiffs alleged that they were entitled to receive such proportion of that sum of <<PoundsSterling>>126,971 14s. 11d. as the amount of their subscription to the policy bore to the insured value of the Blairnevis; or that they were entitled to receive that proportion of such part of the sum of << PoundsSterling>>126,971 14s. 11d. as was to the whole in the proportion of << PoundsSterling>>72,000: <<PoundsSterling>>75,514 9s. 11d. In the alternative, the plaintiffs alleged that they were entitled to receive that proportion of <<PoundsSterling>>121,409 12s. 5d. (being 320,400 dols. converted at 2.639 dols. to the <<PoundsSterling>>). In the further alternative, the plaintiffs alleged that they were entitled to receive that proportion of << PoundsSterling>>72,000. By their defence, the defendants admitted that they were bound to account to the plaintiffs out of the sums recovered as damages from the Canadian Government for the amount of the plaintiffs' subscription to the policy less their proportion of costs as set out in an average statement made by A. H. May & Son dated Nov. 15, 1958. The balance of that amount, namely, << PoundsSterling>>404 4s. 9d., was tendered and/or paid to the plaintiffs on or about Dec. 5, 1958, but the defendants denied that in recovering their damages, they were acting pro tanto as agents of the plaintiffs. Representation Mr. A. A. Mocatta, Q.C., and Mr. C. T. Bailhache (instructed by Messrs. Ince & Co.) represented the plaintiffs; Mr. Eustace Roskill, Q.C., and Mr. Anthony Lloyd (instructed by Messrs. Holman, Fenwick & Willan) represented the defendants. JUDGMENT Mr. Justice DIPLOCK: The defendant company, whom I shall call the assured, were at all material times the owners of the steamship Blairnevis. The plaintiff company and other insurers insured the defendant company against loss of or damage to the Blairnevis by marine risks for a period of 12 months from June 27, 1944, in a policy of marine insurance, in the common form of hull policy of the Institute of London Underwriters. The policy is for the sum of <<PoundsSterling>>36,888, of which the amount underwritten by the plaintiff company is << PoundsSterling>>2523. The Blairnevis is valued in the policy at << PoundsSterling>>72,000. The balance of the sum of <<PoundsSterling>>72,000 was fully covered by other policies of marine insurance in similar terms to the said policy. I refer to the plaintiffs and the other subscribers to the said policy and the other policies collectively as the insurer. On Feb. 13, 1945, during the currency of the policy, the Blairnevis was damaged in a collision with Her Majesty's Canadian Ship Orkney in the Irish Sea, and later on the same day she was beached near the mouth of the River Mersey. On Feb. 15, 1945, the assured gave notice of abandonment of its interest in the Blairnevis and claimed payment for a total loss. The notice of abandonment was not accepted. The Blairnevis became an actual total loss with no salvage value and on Apr. 20, 1945, the insurer paid the assured the*482 <<PoundsSterling>>72,000 for the total loss of the vessel. The plaintiff company paid the full amount of its subscription to the policy. On Sept. 19, 1946, the assured, with the approval of the insurer, commenced proceedings in Canada against the Canadian Government for damages for the loss of the Blairnevis. Its claim was quantified in Canadian dollars. The proceedings, which went to the Privy Council, were protracted and on July 25, 1955, the Privy Council ( [1955] 2 Lloyd's Rep. 173) restored the judgment of the Exchequer Court of Canada, of July 20, 1951, which held that H.M.C.S. Orkney was solely to blame, and set aside the judgment of the Supreme Court of Canada, who had varied the judgment of the Exchequer Court on appeal, on an issue of limitation of liability only. Negotiations then took place as to quantum of damages, in the course of which it was agreed that the actual value of the Blairnevis at the time of loss was <<PoundsSterling>>75,514 9s. 11d. Applying the principle laid down in the House of Lords in Celia (Owners) v. Volturno (Owners), [1921] 2 A.C. 544, at p. 554; (1921) 8 Ll.L.Rep. 449, at p. 451, this sum was converted into dollars at the rate of exchange of 4.45 dols. to the <<PoundsSterling>>, current at the date of the collision in 1945, giving a sum in Canadian dollars of 336,039.52 dols. This sum was paid to the assured in Canada in May, 1958. But, in 1949, the <<PoundsSterling>> had been devalued. Consequently, when the 336,039.52 dols. were transmitted to England in June, 1958, they were converted into <<PoundsSterling>> at the new rate of exchange and in fact realized << PoundsSterling>>126,971 14s. 11d.; that is nearly <<PoundsSterling>>55,000 more than the <<PoundsSterling>>72,000 which the insurer had paid for the total loss in April, 1945, and some <<PoundsSterling>>51,000 more than the sterling value of the Blairnevis at the date of the loss. This action raises the neat point as to who is entitled to this windfall. The assured has accounted to the insurer for the sums received upon the basis that it is entitled to retain all moneys in excess of the <<PoundsSterling>>72,000 in fact paid to the assured under the policies by the insurer. The insurer claims to be entitled to the full amount received by the assured. By agreement between the parties I can ignore for the purposes of this judgment the costs incurred in the litigation between the assured and the Canadian Government. They have agreed between themselves as to the way in which these will be dealt with, depending upon the ultimate decision in this action upon the question of principle involved. I therefore will deal with the matter on the basis that the assured, in 1958, received from the Canadian Government, the tortfeaser responsible for the loss of the Blairnevis, the net sum of <<PoundsSterling>> 126,971 14s. 11d., and repaid to the insurer the sum of <<PoundsSterling>> 72,000, which was paid to the assured by the insurer for the total loss of the vessel in 1945. The question of principle involved can, I think, be stated thus: Where an insurer pays for a total loss of the subject-matter insured and the assured, in the exercise of his remedies in respect of that subject-matter, recovers from a third party an amount which exceeds the sum so paid by the insurer, can the insurer recover from the assured the amount of such excess? I turn first, as is my duty, to the Marine Insurance Act, 1906, Sect. 79 of which deals with the rights of the insurer on payment. Sub-s. (1) is in the following terms: Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subjectmatter as from the time of the casualty causing the loss. It is to be noted that the sub-section, which comes into operation only upon payment for the total loss by the insurer, deals with two distinct matters: (1) the interest of the assured in the subjectmatter insured, and (2) the rights and remedies of the assured in and in respect of that subjectmatter. The former, the insurer, is entitled although not bound to take over; if he does, the whole interest of the assured in the subject-matter insured is transferred to him. To the rights and remedies of the assured in respect of the subject- matter insured, with which alone I am concerned in this case, the insurer is "subrogated as from the time of the casualty causing the loss." In my view, this case turns upon what is meant by the word "subrogated" in this context. The doctrine of subrogation is not restricted to the law of insurance. Although often referred to as an "equity" it is not an exclusively equitable doctrine. It was applied by the Common Law Courts in insurance cases long before the fusion of Law and Equity, although the powers of the*483 Common Law Courts might in some cases require to be supplemented by those of a Court of Equity in order to give full effect to the doctrine; for example, by compelling an assured to allow his name to be used by the insurer for the purpose of enforcing the assured's remedies against third parties in respect of the subject-matter of the loss. In his classic judgment in Castellain v. Preston and Others, (1883) 11 Q.B.D. 380, at p. 386, Lord Justice Brett was dealing with an unvalued policy but for the purpose of analysing the principle I can at the present stage ignore the complication which arises when the policy is a valued one. Lord Justice Brett based the application of the doctrine of subrogation to policies of insurance upon the fundamental principle . . . that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. . . . The expression "subrogation" in relation to a contract of marine insurance is thus no more than a convenient way of referring to those terms which are to be implied in the contract between the assured and the insurer to give business efficacy to an agreement whereby the assured in the case of a loss against which the policy has been made shall be fully indemnified, and never more than fully indemnified. Two consequences flow from this: First, "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 (see Simpson & Co. v. Thomson, Burrell, (1877) 3 App. Cas. 279); he is bound by any release given by the assured to a third party (see West of England Fire Insurance Company v. Isaacs, [1897] 1 Q.B. 226). The insurer's rights against the assured cannot be affected by any subsequent contract, or dealings between the assured and a third party. ( Boag v. Standard Marine Insurance Company, Ltd., [1937] 2 K.B. 113, (1937) 57 Ll.L.Rep. 83, and West of England Fire Insurance Company v. Isaacs, sup.) It seems to me to follow that the only terms to be implied to give business efficacy to the contract between the parties are those necessary to secure that the assured shall not recover from the insurer an amount greater than the loss which he has actually sustained. The insurer has contracted to pay to the assured the amount of his actual loss. If, before the insurer has paid under the policy, the assured recovers from some third party a sum in excess of the actual amount of the loss he can recover nothing from the insurer because he has sustained no loss, but it has never been suggested that the insurer can recover from the assured the amount of the excess. It is difficult to see why a term should be implied in a contract of insurance which would involve a fundamentally different result merely because the insurer had already paid for the loss under the policy before the assured had recovered any sum from the third party. In my view, the doctrine of subrogation in insurance law requires one to imply in contracts of marine insurance only such terms as are necessary to ensure that notwithstanding that the insurer has made a payment under the policy the assured shall not be entitled to retain, as against the insurer, a greater sum than what is ultimately shown to be his actual loss. As Lord Justice Cotton said in Castellain v. Preston and Others, sup., at p. 395: . . . if there is a money or any other benefit received which ought to be taken into account in diminishing the loss or in ascertaining what the real loss is against which the contract of indemnity is given, the indemnifier ought to be allowed to take advantage of it in order to calculate what the real loss is. . . . Thus, if after payment by the insurer of a loss that loss, as a result of an act of a third party, is reduced, the insurer can recover from the assured the amount of the reduction because that is the amount which he, the insurer, has overpaid under the contract of insurance. This sum he can recover at Common Law, without recourse to Equity, as money had and received. (See Bullen & Leake, 3rd ed., at p. 187.) It is immaterial in what way the loss has been reduced, or whether it has been reduced after the casualty but before the actual date of payment; if the insurer has paid more than the actual loss he can recover from the assured as money had and received the amount of the overpayment. *484 It is also an implied term of the contract that if it is within the power of the assured to reduce the amount of the loss for which he had received payment from the insurer, by exercising remedies against third parties, he must do so upon being indemnified by the insurer against the costs involved. Since such remedies are personal to the assured they must be exercised in his own name. As the Common Law provides no method by which a person can be compelled to bring legal proceedings against another, recourse was needed by the insurer before the Judicature Acts to Chancery to compel the assured to allow his name to be used for legal proceedings against third parties in order to reduce the loss. But the duty of the assured to take proceedings to reduce his loss and the correlative right of the insurer to require him to do so was a contractual duty. The remedy for its breach, by compelling the assured to allow an action to be brought in his name, was an equitable remedy in aid of rights at Common Law, and was alternative to the Common Law remedy of recovering damages for breach of the duty. (See West of England Fire Insurance Company v. Isaacs, sup.) But in the action brought in the name of the assured pursuant to the equitable remedy it is the assured who recovers judgment against the third party, and the judgment can be satisfied only by payment to him. When he receives it, the insurer can recover from him at Common Law, as money had and received, such sum as he has overpaid to the assured under the contract of insurance. In my opinion, the words "he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss" mean that he is entitled, as against the assured, to the benefit of the assured's rights and remedies against third parties to the extent which I have indicated above as constituting the rights of the insurer under those implied terms of the contract of insurance which are connoted by the expression "subrogation" in the law applicable to policies of insurance. This seems to me to be the natural meaning of the words. If it be right, the insurer's rights under the second part of the sub-section, with which I am alone concerned, are limited to recovering any sum which he has overpaid; he cannot recover more than he has in fact paid. It has, however, been argued that if this meaning is to be given to the expression "subrogated" the words at the end of sub-s. (2) (which relates to partial loss)-- "in so far as the assured has been indemnified, according to this Act, by such payment for the loss"--would be unnecessary since on the view which I have expressed this is implicit in the use of the word "subrogated " itself. It may well be that the effect of sub-s. (2) would be the same if those words were omitted; but it is in relation to partial loss that questions normally arise as to the quantum of the insurer's right of subrogation. It can be very rarely--the present is indeed the first recorded case--that it can arise in cases of total loss. It may well be that Parliament inserted those words in sub-s. (2) per majorem cautelam, dealing with a situation in which the problem was likely to arise. Their absence in a sub-section dealing with a situation in which the problem had never arisen before 1906 and has not in fact arisen until 1961 does not seem to me to justify my construing the expression "subrogated" in a sense which, in my view, involves a fundamental departure from the principles of "subrogation" as applied in insurance law at the time of the passing of the Act. Mr. Mocatta, for the insurer, however, relies strongly upon the case of North of England Iron Steamship Insurance Association v. Armstrong and Others, (1870) L.R. 5 Q.B. 244. This case, he contends, shows that under the law as it was in 1906, an insurer was entitled to recover from the assured an amount greater than the sum that he had paid to the assured upon a total loss; and since the Marine Insurance Act, 1906, was a consolidation Act it should be construed, at least in case of ambiguity, as declaratory of the existing law. (See Bank of England v. Vagliano Brothers, [1891] A.C. 107, per Lord Herschell, at p. 145, and British and Foreign Marine Insurance Company, Ltd. v. Samuel Sanday & Co., [1916] 1 A.C. 650; per Lord Wrenbury, at p. 672.) It is necessary, therefore, to see what Armstrong's case, sup., did decide. In that case, there was a valued policy in which the policy value of the hull was <<PoundsSterling>>6000; its actual value was <<PoundsSterling>> 9000. The assured subsequently recovered <<PoundsSterling>>5000 in respect of the loss from a third-party tortfeasor partly to blame. The assured contended that the sum of <<PoundsSterling>>5000 should be apportioned between him and the insurer in the same proportions as <<PoundsSterling>>3000 to << PoundsSterling>>6000; that is to say, he sought to be treated as his own*485 insurer in respect of the difference between the real value and the policy value. This contention was rejected by the Court of Queen's Bench upon the ground that the parties were estopped from alleging that the value was other than that agreed in the policy. No questions arose in that case as to whether the insurer was entitled to recover from the assured more than the << PoundsSterling>>6000 which he had himself paid to the assured, but there are certainly passages in the judgment of Chief Justice Cockburn and Mr. Justice Lush which lead to the conclusion that they would have held that the insurer was so entitled. The case was decided in 1870. Valued policies were clearly regarded by the Court as newfangled devices whose use was to be deprecated; no distinction was drawn by the members of the Court between the insurer's rights in the subject-matter of the insurance and his rights of subrogation to the remedies of the assured. It was not, indeed, until Lord Blackburn's judgment seven years later in Simpson & Co. v. Thomson, Burrell, sup., that this distinction was clearly appreciated by the Courts. The word "subrogation" is not even used in any of the judgments in Armstrong's case, sup. Armstrong's case was decided before Castallain v. Preston and Others, sup., the locus classicus of subrogation in insurance, and, in so far as its reasoning leads to the conclusion that an insurer can recover from an assured by subrogation a sum greater than he has paid, it is in my view inconsistent with the reasoning of the Court of Appeal in Castellain v. Preston and Others, sup. For what it actually decided, namely, that an insurer who pays a total loss under a valued policy can recover from the assured up to the amount of his payment notwithstanding that the real value is greater, it is an authority which has frequently been followed, but it has consistently been treated as an authority for no more than that. Thus, in Thames and Mersey Marine Insurance Company v. British and Chilian Steamship Company, [1915] 2 K.B. 214, Mr. Justice Scrutton (ibid., at p. 220) refers critically to that part of the reasoning of the Court in Armstrong's case upon which Mr. Mocatta relies, and points out that it was unnecessary to the decision. He treats Armstrong's case as an authority only for the limited proposition which I have stated. In the same case, on appeal from Mr. Justice Scrutton (as reported in (1915) 21 Com. Cas. 150), Lord Justice Swinfen Eady, professing to apply Armstrong's case, says (ibid., at p. 153): . . . the plaintiffs are entitled to recover from the shipowners all the sums which the shipowners received in respect of the ship up to the <<PoundsSterling>>45,000, the amount of the insurance. In Goole and Hull Steam Towing Company, Ltd. v. Ocean Marine Insurance Company, Ltd., [1928] 1 K.B. 589, at p. 598; (1927) 29 Ll.L.Rep. 242, at p. 246, Mr. Justice MacKinnon--as he then was-- suggests that Chief Justice Cockburn's reasoning in Armstrong's case can only be right if it rests upon the "cession of property to the underwriter upon payment for a total loss." Finally, in Boag v. Standard Marine Insurance Company, Ltd., [1937] 2 K.B. 113; (1937) 57 Ll.L.Rep. 83, Lord Wright, M.R., citing the above-mentioned judgment of Lord Justice Swinfen Eady, says (ibid., at pp. 123 and 86 of the respective reports): . . . Applying that here, the plaintiffs, the underwriters, are entitled to recover all the sums which the shipowners received in respect of cargo up to the <<PoundsSterling>>685, which is the amount of the insurance. . . . Mr. Mocatta has been unable to point to any passage in any judgment other than that in the Armstrong case itself which supports the proposition that an insurer under the doctrine of subrogation can recover from the assured any sum in excess of the payment which he has actually made, and there are many passages in the cases which are inconsistent with it. Since this case will no doubt go further I need not burden this judgment with more than a few examples. In Arthur Charles Burnand v. Rodocanachi, Sons & Co., (1882) 7 App. Cas. 333, at p. 339, Lord Blackburn, in a speech in which he commented critically upon Armstrong's case, said: The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not whether it is a marine policy, or a policy against fire on land, or any other contract of indemnity) and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already paid it, then, if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it*486 becomes an equity that the person who has already paid the full indemnity is entitled to be recouped by having that amount back. In King v. Victoria Insurance Company, Ltd., [1896] A.C. 250, at p. 256, Lord Hobhouse made it quite clear that, in their Lordships' view, under the doctrine of subrogation an insurer was entitled to recover from the assured only "to the extent of the payment" made to the assured by the insurer under the policy. Finally, in Attorney-General v. Glen Line, Ltd., and Liverpool & London War Risks Association, Ltd., (1930) 37 Ll.L.Rep. 55, at p. 61; (1930) 36 Com. Cas. 1, at p. 13, Lord Atkin, drawing the distinction between the rights of abandonment and the rights of subrogation, said: . . . it is to be noted that in respect of abandonment the rights exist on a valid abandonment, whereas in respect of subrogation they only arise on payment; and that subrogation will only give the insurer rights up to 20s. in the <<PoundsSterling>> on what he has paid. . . . In the light of these authorities, I am not satisfied that, at the date of the passing of the Marine Insurance Act, 1906, the law as to subrogation was as Mr. Mocatta-- relying upon the reasoning of Armstrong's case, sup.-- contends. Indeed, I am satisfied that it was not, but was as I have stated. I am fortified in this view by the fact that the law apparently is, and has for many years been, the same in the United States. See The St. Johns, (1900) 101 Fed. 469, at p. 474, where District Judge Brown says: If the amount recoverable from the wrongdoer, after payment of the damage claims of third parties, were in excess of the amount paid by the underwriters to the assured, no doubt that excess would belong to the latter; since the insurer's right of subrogation in equity could not extend beyond recoupment or indemnity for the actual payments to the assured. . . . See also The Livingstone, (1904) 130 Fed. 746. It follows that, in my view, the insurer's rights in this case were limited to recovering from the assured the amount overpaid, that is to say, << PoundsSterling>>72,000. He is entitled to no more. The principle, I think, is a simple one. It renders irrelevant any consideration of the particular concatenation of circumstances which enable the assured to recover from the Canadian Government a sum in sterling in excess of the value of the ship at the time of the casualty. The fact that the policy was a valued policy, with, as it transpired, a policy value somewhat less than the real value is also irrelevant. The simple principle which I apply is that the insurer cannot recover under the doctrine of subrogation now embodied in Sect. 79 of the Marine Insurance Act, 1906, anything more than he has paid. As I said at the outset, I have, by agreement of the parties, left out of consideration all questions relating to the costs of the Canadian proceedings. It is conceded for the purposes of my decision that the defendant company have already accounted to the plaintiff company on the basis that the plaintiff company was entitled to be repaid <<PoundsSterling>>72,000. It is entitled, in my view, to no more, and the defendant company is accordingly entitled to judgment, with costs. (c) Lloyds of London Press Limited [1961] 1 Lloyd's Rep. 479 END OF DOCUMENT Copr. (c) West 2001 No Claim to Orig. Govt. Works