Menu
Home
Log in / Register
 
Home arrow Law arrow The principles of the law of restitution
Source

(A) THE DOCTRINE OF WAIVER OF TORT

The doctrine of waiver of tort has had a malign influence on the rational development of the law of restitution for wrongs by virtue of its ambiguity and tendency to mislead. In United Australia Ltd v Barclays Bank Ltd[1] Lord Romer described the phrase ‘waiver of tort’ as picturesque but inaccurate. The doctrine can be interpreted in three different ways.

(i) Waiver of a Compensatory Remedy

The usual interpretation of the doctrine is that the claimant can elect not to claim compensation for the tort and can choose instead to recover a restitutionary remedy.[2] It is, however, misleading to say that a claimant who elects a restitutionary remedy is waiving the tort. In fact, it is vital that the claimant does not waive the tort because the tort constitutes the cause of action on which the restitutionary claim is founded.4 All the claimant is doing is waiving the right to obtain remedies assessed by reference to the loss suffered, and instead elects remedies which are assessed by reference to the benefit gained by the defendant as a result of committing the tort.

That this is the proper analysis of this interpretation of the waiver of tort doctrine is supported by its history. The need to waive the tort originated as a device to enable the claimant to obtain a restitutionary remedy from the defendant where the cause of action was the defendant’s wrongdoing. Such a waiver was required because, if the claimant wished to obtain restitution from the defendant, it used to be necessary to identify a promise by the defendant to repay the claimant. But if the defendant had committed a tort against the claimant such a promise to repay would be incongruous, save where the claimant had ratified the wrong first. Such ratification was therefore required if the claimant wished to bring a restitutionary claim. Eventually the ratification of the wrong became a fiction, but at least it provided a route to imply a contract and so obtain restitutionary remedies.

With the rejection of the implied contract theory by the House of Lords in United Australia Ltd v Barclays Bank Ltd,[3] the demise of the doctrine of waiver of tort should have followed automatically. If it was no longer necessary to imply a promise to make restitution, it should have followed that it was no longer necessary to show that the claimant had ratified the wrong before he or she could obtain restitutionary relief for the defendant’s tort. But, unfortunately, the House of Lords in that case did not appreciate the logical consequence of the rejection of the implied contract theory, since the court affirmed the continued existence of the waiver of tort doctrine.

In United Australia the claimant had received a cheque which had been fraudulently endorsed by its secretary, who did not have authority to do so, in favour of M Ltd, a company with which the secretary was associated. M Ltd paid the cheque into its account with the defendant bank. The defendant collected the proceeds of the cheque and placed them to the credit of M Ltd’s account. The claimant then sought to recover the value of the cheque from M Ltd by suing both for money had and received and money lent. Before the claimant had obtained final judgment, the action against M Ltd was automatically stayed after the claimant entered into compulsory liquidation. The claimant then sued the defendant for damages for negligence and for conversion of the cheque. The defendant pleaded that it could not be sued by the claimant because, by initially commencing proceedings against M Ltd, the claimant had elected to waive the tort. This argument was rejected by the House of Lords, so the claimant was able to sue the defendant and obtain compensatory damages for the tort of conversion. On the facts of the case it was particularly easy to conclude that the commencement of proceedings against M Ltd had not involved waiver of the tort by the claimant, since the tort of conversion committed by M Ltd was separate from that committed by the defendant. In other words, the remedies which the claimant sought were cumulative rather than alternative, being founded on different acts of conversion.[4] The claimant would only have been prevented from seeking compensation for its loss against the defendant if the claimant had fully recouped all of its loss in the earlier proceedings against M Ltd.[5] But the court specifically recognized that its decision would have been the same if the claimant had initially sued the defendant for money had and received and then, before final judgment was given, had commenced proceedings against the same defendant for compensation. This is because the commencement of proceedings does not involve an election between restitutionary and compensatory remedies.[6] Compensation would only have been denied to the claimant if it had elected to take the restitutionary remedy, for it would then have been bound by that election. The implication of this decision, therefore, is that the claimant would only have irrevocably waived the tort once it had elected to take a restitutionary remedy. It follows from this that the court implicitly recognized that the waiver of tort doctrine is concerned with waiving the usual compensatory remedy for the tort, rather than waiving the underlying cause of action.

That the doctrine of waiver of tort relates to choosing between alternative remedies has been accepted in subsequent cases, most notably by Edmund Davies J who said in Chesworth v Farrar9 that:

A person upon whom a tort has been committed has at times a choice of alternative

remedies, even though it is a sine qua non regarding each that he must establish a tort has

been committed. He may sue to recover damages for the tort, or he may waive the tort and

sue in quasi-contract to recover the benefit received by the wrongdoer.

Even if the doctrine is interpreted in this way it is misleading to speak of ‘waiver of tort’. It is clear that the claimant does not need to waive anything, since he or she simply needs to elect between restitutionary and compensatory remedies. Crucially, claimants must ensure that they do not waive the tort itself for that is the underlying cause of action regardless of the remedy which the claimant seeks. As Birks said, ‘[waiver of tort] has become a loose and anachronistic description of the decision by the victim of such a tort to seek restitution’.[7] [8] [9]

  • [1] 3 Cf S Hedley, ‘The Myth of “Waiver of Tort”’ (1984) 100 LQR 653.
  • [2] 4 Chesworth v Farrar [1967] 1 QB 407, 417 (Edmund Davies J).
  • [3] [1941] AC 1.
  • [4] See Lord Wright, ‘United Australia Ltd v Barclays Bank Ltd (1941) 57 LQR 184, 190.
  • [5] United Australia Ltd v Barclays Bank Ltd [1941] AC 1, 20 (Viscount Simon LC). See also Tang Man Sit vCapacious Investments Ltd [1996] AC 514, 523.
  • [6] See Tang Man Sit v Capacious Investments Ltd [1996] AC 514, discussed at p 438, above.
  • [7] [1967] 1 QB 407.
  • [8] PBH Birks, An Introduction to the Law of Restitution (rev edn, Oxford: Clarendon Press, 1989), 317.
  • [9] [1996] Ch 217, 227. 4 See p 417, above.
 
Source
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
 
Subjects
Accounting
Business & Finance
Communication
Computer Science
Economics
Education
Engineering
Environment
Geography
Health
History
Language & Literature
Law
Management
Marketing
Mathematics
Political science
Philosophy
Psychology
Religion
Sociology
Travel