Response to On the MIG question

I now have a response from the solicitor to Simon Wiggin's message on MIGS above:

'I still think that the real issue is subrogation - I agree that the CA didn't deal with MIGs - but the court defined the limitation periods for lenders and, assuming the subrogation point is correct, the insurer inherits all the rights of the lender - the same limitation period and cause of action therefore apply to both of them. I don't see that there is a contract between the borrower and the insurer - the contract is between the lender and the insurer - the lender pays the premium and recovers it (in advance) from the borrower. There cannot, therefore, be an action in simple contract as there is no contract!! Without subrogation, I cannot see what right of action the insurer has against the borrower. I will see what authorities I can find on subrogation - although the words of s5 of the Mercantile Law Amendment Act 1865 seem to speak for themselves.. "Every person who, being a surety for the debt or duty of another (this is surely the position of the insurer)...shall be entitled to stand in the place of the creditor and use all the remedies...in order to obtain from the principal debtor...indemnification for the advances made and the loss sustained by the person who shall have so paid such debt (i.e. the insurer that has paid out under the MIG) or performed such duty. Everyone is, of course entitled to their opinion - however, no legal arguments have been put forward as to why the above is not true. Mr Wiggins says that MIGs are wholly different as they are not debts charged on land - they are however, in effect, surety for debts that are secured on land - hence they get the rights of the secured lender under subrogation. I cannot identify anywhere that the court 'hinted' at anything to do with MIGs. It is certainly not the case that all non- land debts are limited to 6 years - what about specialties, among others? No details of the cases he mentions are given I do not understand the reference to Re Pascoe (1944) All ER 593) - this was an insolvency case that held that a criminal fine was a debt (since reversed for bankruptcy by legislation, but still valid as far as Admin Orders and fines are concerned). The only other possible argument that a MIG debt is subject to a six-year limitation period is that it is money recoverable under statute (LA s9,) but I don't think this applies. The debt itself is not recoverable under the Mercantile Law Amendment Act 1865 - the Act does not create the debt - only gives the right to sue while standing in the shoes of the lender.'

The solicitor went on to say that he would be more convinced if Mr Wiggins would comment on subrogation, give details of the cases he mentioned and explain what he meant by the 'hints' given by the CA.

Mr Wiggins replied stating:

"Unfortunately this issue is up for debate and at present it is only peoples personal opinions so this varies from adviser to adviser as you will appreciate." He also said " my forum is not the appropriate site to debate these issues as it is simply a free facility to answer people’s basic debt problems and can not possibly go into the legal arguments you mention. It would takes days of research to look up all the cases needed to answer you query and I simply do not have the time to do so at present I’m afraid." (He runs the site himself for free) My line was based on work a few years ago in several high profile cases so the solicitor you mention may be more up to date.

Since this I've received more information from the solicitor:

A case that I have come across recently may shed some light. It is Romain v Scuba TV [1995] Times Law Reports, November 11 1995, CA. Rent under a lease was guaranteed by a guarantee contract under seal, i.e. a speciality. It was held that because the limitation period that related to any claim by the landlord against the tenant was 6 years under s 19, any claim against the guarantor was subject to the same 6-year limitation period, notwithstanding that the guarantee itself was made under seal. This tells me that the nature of the contract of guarantee (or MIG) is irrelevant (I think the position of a MIG insurer is analogous to that of the guarantor) and that what is relevant is the nature of the contract that is guaranteed (or insured).

Following this he noticed an article in a new law book:

I did notice a small para on subrogation. It says..."but for limitation purposes the vital point is that the indemnifier (e.g. a MIG (my comment)) stands in the shoes of the indemnified (e.g. the shortfall lender). In Orakpo v Mansion Investments [1978] A.C. 95 the Court of Appeal held that the right of the indemnifier to sue is synonymous with the right of the indemnified. It therefore follows that there is no separate category of subrogation rights for limitation purposes".

I think that this says it all.

.......................................

I leave you all to draw your own conclusions, but I must say it looks pretty conclusive. Hope this helps those of you with MIGS.

Mark.

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