Halifax Building Society v. Thomas

“Waiver of tort” is a slippery and misleading term, and we would be better off without it. As Professor Birks has explained,1 its use has served only to conceal the fact that the victim of an acquisitive wrong may obtain restitution against the wrongdoer in three quite separate ways, only the second of which actually requires the victim to “waive” the tort in the sense that he ratifies and thus extinguishes it: (i) the victim may ignore the wrong and recover via an autonomous claim for unjust enrichment; (ii) he may affirm the acts of the wrongdoer and so turn him ex post facto into his lawful agent; (iii) he may claim a restitutionary remedy founded upon the wrong. The third route to recovery is perhaps the most interesting from a theoretical point of view, since it remains an open question exactly which torts will found a restitutionary claim, and to which restitutionary remedies the victims of these torts will be entitled.2 The Court of Appeal has now held in Halifax Building Society v. Thomas 3 that a victim of deceit cannot be entitled to an account of profits. But it will be argued here that this finding was unnecessary to the result reached in the case, and that in principle a victim of deceit should be entitled to this remedy in appropriate circumstances.

In 1986 Mr Thomas obtained a 100% mortgage advance from the Halifax Building Society to finance the purchase of a flat in Nottingham. To obtain this advance, he fraudulently misrepresented his identity and creditworthiness. He defaulted on his mortgage payments, and in 1987 the Halifax won a possession order against him in his assumed name. In 1988 the Halifax learnt his true identity for the first time, from the police, but proceeded with the sale of the mortgaged property nonetheless. In 1989, the Halifax sold the property, and realized a surplus after it had recouped the amount due on the mortgage, which it placed in a suspense account. In 1990, the Halifax began proceedings against Mr Thomas, seeking a declaration that it was entitled to retain this surplus for its own use. In 1991 he was found guilty of conspiracy to obtain mortgage advances by deception from a lending institution, and sentenced to 21 months’ imprisonment by the Nottingham Crown Court. At the same time a confiscation order was made in respect of the money in the suspense account and accrued interest. On 15 October 1993 the Crown Prosecution Service then won a charging order over Mr Thomas’ interest in these moneys from Auld, J. The Halifax therefore joined the C.P.S. as second defendant to its action against Mr Thomas in respect of the same moneys. On 28 October 1993 Judge Maddocks, sitting as a judge of the Chancery Division, dismissed the Halifax’s claim and