4 Mac LR
61
THE AVAILABILITY OF EXEMPLARY
DAMAGES IN NEGLIGENCE
Rachael Mulheron
INTRODUCTION
One of the most vexed questions surrounding exemplary
damages1 is whether, at law, a plaintiff may claim and recover
them, additional to compensatory damages, outside the
province of intentional torts. Prior to the recent decision of the
High Court in Gray v. Motor Accident Commission2, there was
some division in Australian judicial opinion as to whether, and
in what circumstances, awards of exemplary damages could
properly be made in negligence cases. That question now
appears to have been resolved by the High Court in favour of
their award for negligent conduct. However, because of this
particular tortfeasor’s previous criminal punishment, the
decision of the trial judge not to award exemplary damages was
held to be correct.
The case is of considerable importance because, until its handing
down, there was no decision in which the High Court had been
required to address the particular question: could exemplary
damages be awarded for a cause of action framed in
negligence?3
The purpose of this article is to discuss and critique the Gray
decision, which is particularly interesting in light of the debate
about the availability of exemplary damages which has been
ventilated by three separate Law Reform Commissions - in
They are also variously called “punitive damages”, “vindictive damages”, “exemplary
damages”, “retributory damages” and “penal damages.”
1
2
(1998) 196 CLR 1.
Kirby J noted the absence of High Court authority on this point at (1998) 196 CLR 1, 2728.
3
62
RACHAEL MULHERON
(2000)
Ontario,4 England5 and Ireland6 - within the last 10 years. The
studies performed by those bodies have demonstrated that the
availability of exemplary damages in cases of negligence is
necessarily informed by several controversial and important
policy issues. But, first, it is useful to briefly canvass the various
views which Australian courts expressed about the issue prior
to the High Court consideration in Gray.
EXEMPLARY
DAMAGES
POSITION PRIOR TO GRAY
IN
NEGLIGENCE:
THE
In the 1987 decision Lamb v. Cotogno,7 the defendant attempted
to serve a summons on the plaintiff. A heated argument
followed, during which the plaintiff threatened to kill the
defendant. The defendant started to drive away, and the
plaintiff threw himself across the bonnet of the car. The plaintiff
was seriously injured when the defendant drove his car in such
a manner, swerving from side to side and braking suddenly,
that the plaintiff was thrown to the ground. The defendant then
drove away, and the plaintiff was subsequently discovered on
the roadway, injured and bleeding, by a neighbour. The plaintiff
sued for trespass to the person. The sum of $5,000 was awarded
at first instance by way of exemplary damages, which sum was
upheld by the High Court on the basis that “intent or
recklessness”8 was sufficient to justify an award of exemplary
damages. However, given that the claim was not pleaded as
negligent driving, the comments indicating the sufficiency of
reckless conduct were obiter only.
Ontario Law Reform Commission, Report on Exemplary Damages (1991) (hereafter “1991
Report”).
4
Law Commission for England and Wales, Consultation Paper No 132, Aggravated,
Exemplary and Restitutionary Damages (1993) (hereafter “1993 Consultation Paper”); Law
Commission for England and Wales, Report No 247, Aggravated, Exemplary and
Restitutionary Damages (1997) (hereafter “1997 Report”).
5
Law Reform Commission of Ireland, Consultation Paper on Aggravated, Exemplary and
Restitutionary Damages (1998) (hereafter “1998 Consultation Paper”).
6
7
(1987) 164 CLR 1.
8
n. 7 at 13.
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Exemplary Damages
63
Much earlier, in 1962, the High Court had considered the
availability of exemplary damages in a case of assault, an
intentional tort. However, the following statement of Owen J
appeared to contain wider ramifications for the unintentional
tort of negligence:
In an action for assault, as in many other cases of tort, the
conduct and motives of the parties may be taken into
account either to aggravate or mitigate damages. In a
proper case the damages recoverable are not limited to
compensation for the loss sustained but may include
exemplary or punitive damages as, for example, where
the defendant has acted in a high-handed fashion or with
malice.9 [emphasis added]
Nothing else was said to restrict the cases in which exemplary
damages could be awarded to intentional torts, or to exclude
negligence actions from their province.10 Subsequently, in Coloca
v. BP Australia Ltd,11 O’Bryan J considered that the law in
Victoria permitted an award of exemplary damages in actions
for personal injuries caused by negligence in appropriate cases.12
In this particular case, the two plaintiff employees alleged that
the employer had negligently exposed them to dangerous
substances, benzol fumes and asbestos dust and fibres
respectively, during the course of their employment, for which
each sought exemplary damages. After reviewing the Australian
authorities, His Honour stated:
9
Fontin v. Katapodis (1962) 108 CLR 177 at 187.
10
Cocola v. BP Australia Ltd [1992] 2 VR 441 at 444 per O’Bryan J.
[1992] 2 VR 429. The matter of Thompson v. James Hardie & Co Pty Ltd was heard
together with this action in the one interlocutory hearing. In the former case, the
plaintiff applied to amend his statement of claim to include a claim for the recovery of
exemplary damages in negligence. In the latter, the defendant applied to strike out a
paragraph of the plaintiff’s statement of claim which sought exemplary damages for
alleged negligence.
11
12
n. 11 at 442 and 448.
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RACHAEL MULHERON
(2000)
It is perfectly true that in no reported authority in
Australia is the law relating to exemplary damages
stated in terms admitting exemplary damages in an
action for negligence causing personal injuries. On the
other hand, every statement of the law in the High Court
appears to admit an award of exemplary damages in
torts of negligence.... it would be illogical now to draw a
distinction between tortious liability founded in trespass
or intentional wrongdoing and liability founded in
negligence.13
Moreover, O’Bryan J considered that if the plaintiff in Lamb v.
Cotogno had brought his claim in negligence, the court would
still have been able to award exemplary damages, and that there
was nothing to indicate that the plaintiff chose his cause of
action wisely in that case.14
Then, in 1996, the Supreme Court of Victoria upheld an award
of exemplary damages in Backwell v. AAA,15 a case of medical
negligence in which a woman known as AAA was artificially
inseminated with sperm that had not been intended for her, at a
Melbourne infertility clinic. After the mistake was discovered,
AAA was told by her treating doctor that if she did not have an
abortion, or if she instituted legal proceedings, she could not
continue on the artificial insemination program and would not
be accepted for treatment under any similar donor insemination
program elsewhere in Australia.
Further, the defendant
expressed concern about hostile media scrutiny of the donor
insemination program and claimed that “if the press got hold of
it, the clinic would be closed down”. Subsequently, AAA had
the pregnancy terminated.
n. 11 at 447. O’Bryan J drew support for that view from an unreported judgement by
Coldrey J of the same Court in Rafferty v. James Hardie & Co Pty Ltd which had been
delivered in April 1991: at 443.
13
14
n. 11 at 447.
15
(1996) Australian Torts Reports 81-387.
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65
Some 11 years after these events, a Melbourne jury awarded
AAA $60,000 in compensatory damages for physical and
psychiatric injuries suffered, and $125,000 in exemplary
damages for what it considered to be the defendant’s
“contumelious, arrogant and wanton disregard for the plaintiff
and the plaintiff’s health in advising and treating the plaintiff”.16
The jury’s decision to award exemplary damages was upheld on
appeal by the Court of Appeal of Victoria17 as appropriate,
although the sum of exemplary damages was reduced to
$60,000.
Also in 1996, the New South Wales Court of Appeal agreed that
exemplary damages could be recovered in a claim based on
negligence. In Trend Management Ltd v. Borg,18 the plaintiff was
employed by the defendant company in work which created
cedar wood dust. As a result of exposure to the dust, the
plaintiff developed asthma. He claimed damages against his
employer in negligence. The defendant admitted liability, and in
addition to compensatory damages, the sum of $30,000 was
awarded by way of exemplary damages. On appeal, it was held
that there is nothing in the nature of exemplary damages which
precludes their availability in negligence because it is
conceivable that defendants who do not intend to cause damage
to the plaintiff may act in contumelious disregard of the
plaintiff’s rights in such claims.19 On the other hand, Mahoney
P considered that there were frequent instances in negligence
when exemplary damages will not be appropriate:
Unreported, Supreme Court of Victoria, 12 September 1994, cited by Ormiston JA at
(1996) Australian Torts Reports 81-387 at 63 and 380.
16
All members of the Court, Ormiston, Brooking and Tadgell JJA, agreed that the appeal
should be upheld. However, while the former two members reassessed the jury award
of exemplary damages, Tadgell JA would have ordered a new trial limited to the issue of
damages. It is said that this was the first time in Australia that exemplary damages had
been awarded in a medical negligence case: Weybury, D, “AAA v. Backwell: The Case of
the Mixed-Up Sperm” (1995) 1 Torts Law Journal 15 at 25.
17
18
(1996) 40 NSWLR 500.
19
n. 18 at 504 per Mahoney P.
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RACHAEL MULHERON
(2000)
... where, for example, the negligence consists in a mere
inadvertent failure to take the care for the plaintiff’s
safety which a particular duty of care requires. They will
ordinarily not be appropriate where the negligence
consists in the failure, notwithstanding bona fide
endeavours, to achieve the standard of care towards the
plaintiff which the situation or the defendant’s professed
skills required that he attain.20
In the circumstances of the particular case, no exemplary
damages were warranted, as the employer made bona fide
attempts to rectify the dust problem by the upgrading of a dust
collection system, and then by the installation of another dust
extraction system, during the course of the plaintiff’s
employment.21
In comparison with the abovementioned cases, doubts about the
proper award of exemplary damages in the context of
negligence were expressed by the Full Court of the Supreme
Court of Victoria in Midalco Pty Ltd v. Rabenalt.22 The plaintiff
Mr Rabenalt was employed by Midalco Pty Ltd from July 1960
to January 1961 at a blue asbestos mine and mill at the
Wittenoom mine in Western Australia. In October 1987, the
plaintiff was diagnosed with malignant mesothelioma, a cancer
of the lining of the lung. It was held that, at the time of the
plaintiff’s exposure to asbestos dust and fibres, the defendant’s
directors and managers had access to extensive scientific and
medical knowledge of the risks of mesothelioma associated with
asbestos exposure. At first instance, a jury found that there was
negligence on the part of the defendant which was a cause of Mr
Rabenalt’s illness, and that, in addition to compensatory
damages of $426,000, the defendant was liable to pay exemplary
damages of $250,000.
20
n. 18 at 503.
21
n. 18 at 506 and 509.
22
[1989] VR 461.
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67
The defendant appealed on the basis, inter alia, that the trial
judge had misdirected the jury in defining the circumstances in
which an award of exemplary damages could be made.
However, the appeal was dismissed in light of the fact that
defendant’s counsel had conceded at trial that “recklessness”
was sufficient to found an award of exemplary damages.
Therefore, it was not open to the defendant to question the
correctness of the trial judge’s direction. Nevertheless, both
Kaye23 and Fullagar24 JJ expressed reservations about the
proposition that such damages could be awarded in a
negligence action. At the very least, recklessness simpliciter was
not sufficient.25
Similarly, in Cullinan v. Urban Transit Authority of NSW,26
Carruthers J, sitting in the Admiralty jurisdiction of the
Supreme Court of New South Wales, noted that “the specific
question whether exemplary damages are available in an action
for negligence is still open”.27
Fortunately, the doubts which plagued the preliminary question
- whether exemplary damages are available in negligence claims
- must now be considered to have been laid to rest by the High
Court in Gray.
THE FACTS OF GRAY v MOTOR ACCIDENT COMMISSION
In September 1988, the plaintiff/appellant, Donald Gray, while
walking across a street, was hit by a car deliberately driven at
23
n. 22 at 467.
24
n. 22 at 476-7.
Given the concession made by defendant’s counsel, Kaye J was prepared to hold that
according to the weight of uncontradicted evidence, a strong case supporting “a finding
of recklessness - indeed of continuing, conscious and contumelious disregard by the
defendant for the plaintiff’s right to be free from risking of injury or disease - was made
out”: at 473.
25
26
Unreported, Supreme Court of NSW, Carruthers J, 20 December 1991.
27
n. 26 at 18.
68
RACHAEL MULHERON
(2000)
him by the defendant Darren Bransden. The plaintiff was an
Aboriginal Australian and, at the time of the accident, 16 years
old. At first instance, it was found that Mr Bransden drove
directly at a group of Aboriginal youths with the intention of
running down and seriously hurting Mr Gray, one of the group.
Two and a half years later, Mr Bransden was convicted of
causing grievous bodily harm with intent to do such harm, and
was sentenced to seven years’ imprisonment. The sentencing
judge28 described the attack on the plaintiff as “brutal and
cowardly”, and one for which there was “no mitigating factor at
all.”29 Then, in 1993 and two years after the criminal trial, the
plaintiff commenced an action against Mr Bransden (and his
compulsory third party insurer) for damages for negligence
giving rise to personal injury. The plaintiff’s injuries were
extensive: fractures to both legs, multiple contusions to the face
and head, and a residual cognitive impairment.
At trial, damages were assessed by the District Court of South
Australia at $72,206. No award was made for exemplary
damages on the basis that Mr Bransden had already been
punished in the criminal court, thus a civil penalty in the guise
of exemplary damages was inappropriate.30 Mr Gray appealed
against this decision, and on the basis that the compensatory
damages (in particular, the economic loss component) were
manifestly inadequate.31
The majority of the High Court framed two questions for
consideration:
•
28
are exemplary damages available where the plaintiff’s claim
is for damages for negligence rather than some intentional
R v. Bransden, Supreme Court of South Australia, 14 March 1991, Bollen J, unreported.
Noted by the majority Gleeson CJ, McHugh, Gummow and Hayne JJ at (1998) 196 CLR
1 at 3.
29
Had the trial judge, Judge Pirone, been minded to award exemplary damages, His
Honour indicated that he would have assessed those damages at $10,000.
30
The second basis of the appeal was allowed, and a new trial was ordered on the issue
of damages.
31
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69
wrong? And
•
is the award of exemplary damages a matter of right, or does
it depend on the exercise of a discretion informed by some
identifiable criteria?32
THE DECISION
Availability of Exemplary Damages
In Australia, exemplary damages have been recovered in tort for
a variety of causes of action: trespass to chattels;33 trespass to
land;34 trespass to the person;35 deceit;36 and defamation.37
However, in Gray, the High Court confirmed that there may be
rare cases, framed in negligence, in which the defendant can be
shown to have acted consciously in contumelious disregard of
the rights of the plaintiff.38 In such cases, exemplary damages
are possible.
A variety of arguments were used in the judgements to support
this contention:
•
the “roots of tort and crime” are “greatly intermingled”39,
such that it is not necessarily inappropriate to use civil
proceedings to both compensate the plaintiff and punish the
32
(1998) 196 CLR 1 at 9 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
33
Healing (Sales) Pty Ltd v. Inglis Electrix Pty Ltd (1968) 121 CLR 584.
34
XL Petroleum (NSW) Pty Ltd v. Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448.
35
Lamb v. Cotogno (1987) 164 CLR 1.
36
Musca v. Astle Corporation Pty Ltd (1988) 80 ALR 251.
37
Uren v. John Fairfax & Sons Pty Ltd (1966) 117 CLR 118.
(1998) 196 CLR 1 at 9-10 per Gleeson CJ, McHugh, Gummow and Hayne JJ; Kirby J at
27-29; Callinan J at 51.
38
Uren v. John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 149-50 per Windeyer J, cited
by Gleeson CJ, McHugh, Gummow and Hayne JJ at (1998) 196 CLR 1 at 6-7.
39
70
RACHAEL MULHERON
(2000)
wrongdoer, just as it is now possible in some jurisdictions,
by virtue of statute, for a judge at a criminal trial to order
compensation to a person for pain, suffering, or other loss or
damage resulting from the commission of an offence;40
•
quite apart from the function of punishment, exemplary
damages provide a means for the court to express its
disapproval (hence, the function of deterrence) “not only to
the tortfeasor but to the world”;41
•
there is precedent in Australia in which exemplary damages
have been permitted in cases where an employer failed to
provide a safe system of work where it was shown that the
employer, well knowing of an extreme danger, persisted in
using the unsafe system of work;42
•
the deterrence intended by an award of exemplary damages
appeases the victim and assuages any urge for revenge felt
by the victim;43
•
whatever may be the true characterisation of the pleading, if
the case is conducted as one of conscious wrongdoing by the
tortfeasor, then exemplary damages may be warranted. In
this particular case, the majority was of the opinion that,
although Mr Gray’s action was pleaded in negligence, not
for trespass to the person, it was conducted at trial as if it
were a claim in trespass, i.e. that Mr Bransden deliberately
drove his vehicle towards the plaintiff without regard for the
40
(1998) 196 CLR 1 at 8 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
41
(1998) 196 CLR 1 at 29 per Kirby J.
(1998) 196 CLR 1 at 9 per Gleeson CJ, McHugh, Gummow and Hayne JJ. The cases to
which their Honours referred were: Midalco Pty Ltd v. Rabenalt [1989] VR 461; Coloca v.
BP Australia Ltd [1992] 2 VR 441; and Trend Management Ltd v. Borg (1996) 40 NSWLR
500. Midalco is perhaps the weakest of those three earlier authorities because, as noted
previously, the availability of exemplary damages had been conceded by the defendant
at trial.
42
(1998) 196 CLR 1 at 12 per Gleeson CJ, McHugh, Gummow and Hayne JJ, wherein
their Honours cited Lamb v. Cotogno (1987) 164 CLR 1 at 9-10 with approval.
43
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71
latter’s safety.44 Liability for negligence was not disputed at
trial, and no contributory negligence on Mr Gray’s part was
shown.
Thus, were it not for one of the criteria discussed in the next
section, the fact scenario in Gray v. Motor Accident Commission
may well have given rise to exemplary damages because of the
character of the defendant’s conduct.
Criteria Informing the Award of Exemplary Damages
The High Court confirmed that, although the quantification of
exemplary damages was a matter for the discretion of the
tribunal assessing damages,45 certain criteria did inform the
exercise of that discretion:
•
the fact that a defendant is insured under a compulsory
scheme of insurance against any liability for exemplary
damages does not bar the award of such damages.46 This
followed the identical conclusion of a differently constituted
but unanimous High Court in Lamb v. Cotogno.47 Moreover,
it was not relevant that the sole defendant in this case was,
by virtue of statute, the insurer, and that the wrongdoer was
not a defendant on the record at all. In that case, the insurer
assumed the driver’s liability, and the deterrent function of
the award continued to apply;48
•
where the criminal law has been brought to bear upon the
wrongdoer, and substantial punishment inflicted (and in the
44
(1998) 196 CLR 1 at 10 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
45
(1998) 196 CLR 1 at 10 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
(1998) 196 CLR 1 at 13 per Gleeson CJ, McHugh, Gummow and Hayne JJ, 25-27 per
Kirby J, and Callinan J at 46-47.
46
(1987) 164 CLR 1 at 9 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ. In Gray
v. Motor Accident Commission, both Kirby and Callinan JJ expressed certain reservations
about that proposition in Lamb v. Cotogno, with Kirby J noting that “[s]ome day it may be
necessary to reconsider the correctness of that decision”: at 27.
47
48
(1998) 196 CLR 1 at 12-13 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
72
RACHAEL MULHERON
(2000)
majority’s opinion, a term of imprisonment would seem
always to be substantial49), exemplary damages may not be
awarded.50 The majority of the High Court clarified that this
decision must be reached if the criminal punishment is
inflicted for what is substantially the same conduct as the
conduct which is the subject of the civil proceeding; it is not
a matter for the court’s discretion.51 Further, the imposition
of substantial criminal punishment is a bar to the award for
two reasons. First, the purposes of awarding exemplary
damages - punishment and deterrence - have been wholly
met; and second, considerations of double punishment
would otherwise arise.52
•
further, the majority of the High Court noted that the
remedy of exemplary damages must be considered to be an
exceptional remedy,53 which sentiment is consistent with
earlier inferior courts’ statements. In Coloca v. BP Australia
Ltd,54 O’Bryan J held that such awards would be “unusual
and rare”;55 and in Trend Management v. Borg,56 Mahoney P
cautioned that “if exemplary damages are to perform the
function which the Australian law has assigned to them, it is
important that the seriousness of the conduct involved be
not diluted.”57
49
(1998) 196 CLR 1 at 16.
50
(1998) 196 CLR 1 at 14.
In contrast, both Kirby J (at 31-33) and Callinan J (at 50-51) held that the award of
exemplary damages is discretionary, but in exercising the discretion, the fact that the
defendant has already been punished by the criminal court was a relevant factor, indeed,
perhaps the major or decisive one.
51
52
(1998) 196 CLR 1 at 14 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
53
(1998) 196 CLR 1 at 9.
54
[1992] 2 VR 441.
55
[1992] 2 VR 441 at 448.
56
[1992] 2 VR 441.
[1992] 2 VR 441 at 509. Similarly, in the recent decision of the New Zealand Court of
Appeal, Ellison v. L [1998] 1 NZLR 416, it was cautioned that “because negligence is an
57
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73
Thus, exemplary damages could not be awarded against Mr
Bransden for his conduct. For that reason, the observations by
the Court about the availability of exemplary damages in cases
pleaded in negligence were strictly obiter only, for the trial
judge’s conclusion about the effect of the prior criminal sentence
were upheld.
However, and despite this recent High Court endorsement,
several of the policy arguments against the availability and
assessment of an award of exemplary damages in negligence
actions are particularly cogent, and have been canvassed and
discussed by the three Law Reform Commissions referred to in
the introduction to this article. Due to the manner in which the
appeal was conducted in Gray, the High Court did not need to
grapple with many of these policy arguments other than briefly.
The majority was careful to note that:
Notwithstanding, then, what are sometimes seen as the
anomalies and difficulties that attend the awarding of
exemplary damages, this appeal concerns when such an
award may be made, not whether any anomalies are
such as to invite some radical change to the law.58
A selection of the most important of the policy conundrums
associated with exemplary damages in negligence are discussed
below.
ARGUMENTS AGAINST EXEMPLARY DAMAGES IN
NEGLIGENCE
•
The distinction between aggravated and exemplary damages
is, as the High Court has admitted,59 difficult. In Gray, Kirby
unintentional tort those cases [of exemplary damages] are likely to be rare indeed”: at
419. For commentary upon the effect of that decision in New Zealand, see: Beck, A,
“Exemplary Damages in New Zealand: Sunset and Evening Star” (1998) 6 Tort Law
Review 194.
58
(1998) 196 CLR 1 at 5.
Uren v. John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 129 per Taylor J, 149 per
Windeyer J; Lamb v. Cotogno (1987) 164 CLR 1 at 8; Gray v. Motor Accident Commission
59
74
RACHAEL MULHERON
(2000)
J described the former category as damages “given for
conduct which shocks the plaintiff and hurts his or her
feelings”.60 Exemplary damages, on the other hand, are not
compensatory, but punitive. They are awarded for conduct
“which shocks the tribunal of fact, representing the
community”.61
However, there is a degree of overlap, in that the affront to
the particular plaintiff will often coincide with the affront to
the community.62 Additionally, in order to obtain an award
of aggravated damages, it appears that there must be more
than a mere injury to the plaintiff’s pride and dignity - some
outrageous conduct on the part of the defendant which
aggravated the circumstances of the injury also appears
necessary. This element of aggravation may occur in the
very manner in which the defendant committed the wrong,
or in the defendant’s conduct subsequent to the wrong.63
However, to trigger an award of aggravated damages seems
to require proof of precisely the same type of conduct on the
part of the defendant as would trigger an award of
exemplary damages.64
In some respects, aggravated damages may be seen to seek
the best of both worlds: seeking to compensate the plaintiff
for intangible losses, while seeking to punish and deter
outrageous tortious conduct on the defendant’s part.65
(1998) 196 CLR 1 at 34 per Kirby J. Also: Backwell v. AAA (1996) Aust Torts Reports 81387 where Ormiston JA noted the “confusion” with aggravated damages: at 63,393.
60
(1998) 196 CLR 1 at 35.
61
(1998) 196 CLR 1 at 35 per Kirby J.
62
(1998) 196 CLR 1 at 35.
63
Law Commission for England and Wales, 1997 Report at 3.
64
Ontario Law Reform Commission, 1991 Report at 28.
Ontario Law Reform Commission, 1991 Report at 29. Also: Law Reform Commission
of Ireland, 1998 Consultation Paper at 107.
65
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Exemplary Damages
75
Indeed, Lord Devlin noted in Rookes v. Barnard66 that
“aggravated damages can do most, if not all, the work that
could be done by exemplary damages”.67 The danger is that,
if exemplary damages are not available, the tendency is for
juries to overstate aggravated damages so as to include a “de
facto” punitive element, which of course is not the function
of such compensatory damages.68
The practical difficulty which the blurred distinction is
causing on the state of present Australian authorities is best
illustrated by the facts of Gray itself. On appeal, counsel for
Mr Gray sought to contend that aggravated damages might
have been awarded in that case. However, the court noted
that no such claim was pleaded, nor was any evidence given
in support of the claim at trial, the Commission’s case could
well have been different had aggravated damages been
sought, so it was too late to raise the claim on appeal.69
•
66
If exemplary damages are awarded, the plaintiff, who will
already have been fully compensated for his loss by an
award of compensatory damages, may become the fortunate
recipient of the defendant’s punishment.70 Indeed, in Broome
v. Cassell & Co Ltd,71 Lord Reid called the award “a pure and
undeserved windfall at the expense of the defendant” and
[1964] AC 1027.
[1964] AC 1027 at 1230. A similar sentiment was expressed by Somers J in Taylor v.
Beere [1982] 1 NZLR 81 at 95.
67
In Gray, Callinan J noted this to a “serious question” which may have arisen in certain
defamation cases in New South Wales, where exemplary damages for defamation were
abolished by the Defamation Act 1974, s 46(3)(a): at 43. See also, Law Reform
Commission of Ireland, 1998 Consultation Paper at 99 for a similar expression of concern.
68
69
(1998) 196 CLR 1 at 7 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
See, for example: Law Reform Commission of Ireland, 1998 Consultation Paper at 9;
Law Commission for England and Wales, 1997 Report at 79. The windfall argument was
also noted, but not with any particular concern, by the majority in Gray v. Motor Accident
Commission (1998) 196 CLR 1 at 7 per Gleeson CJ, McHugh, Gummow and Hayne JJ.
70
71
[1972] AC 1027.
76
RACHAEL MULHERON
(2000)
considered that this justified the severe restriction, if not
abolition, of exemplary damages.72 The windfall argument
was acknowledged, but not supported, by the majority in
Gray.73
•
By permitting an award of exemplary damages where
criminal punishment has already occurred, and in order to
avoid double punishment of the wrongdoer, difficult
questions may arise for the civil court which hears
subsequent proceedings against the defendant. Is the
criminal punishment substantial enough? What if the
criminal punishment is unknown or delayed? How close
must be the conduct that is the subject of the civil and
criminal proceedings? What should be the effect of any
victims’ compensation legislation? What if, in the prior
criminal proceedings, the accused pleaded to a lesser
charge? Does the prospect of a civil court revisiting a
sentence imposed in a criminal court undermine the
criminal process?74
None of these particular problems arose in the Gray decision.
However, such perplexities are inherent in the interaction of
criminal punishment and civil damages which are described
in part as being punitive. Recently, in Daniels v. Thompson,75
the Court of Appeal of New Zealand, by a majority, took the
view that there should be an absolute bar on exemplary
damages when criminal proceedings have been instituted
and whether a conviction or an acquittal has resulted.76
•
The lack of definition of those circumstances when an award
[1972] AC 1027 at 1086. Also Lord Hailsham LC at 1082, Lord Morris at 1099, and
Lord Diplock at 1126.
72
73
(1998) 196 CLR 1 at 7.
(1998) 196 CLR 1 at 14-15 per Gleeson CJ, McHugh, Gummow and Hayne JJ; Kirby J at
32-33.
74
75
[1998] 3 NZLR 22.
76
An appeal to the Privy Council was dismissed: W v. W [1999] 2 NZLR 1.
4 Mac LR
Exemplary Damages
77
of exemplary damages is warranted has been the cause of
judicial resentment towards, and restriction upon, such
damages. As Lord Reid despaired in Broome v. Cassell & Co
Ltd:77
There is no definition of the offence except that the
conduct punished must be oppressive, high-handed,
malicious, wanton or its like - terms far too vague to
be admitted to any criminal code worthy of the
name.78
Moreover, the assessment of exemplary damages is inherently
uncertain.The amounts are not capable of objective assessment,
and are seen as capricious, whether determined by a judge or
jury. Where the assessment of damages is tied, not to a loss
which can be objectively measured, but to subjective factors,
such as the gravity of the defendant’s conduct, or the character
and degree of the wrong,79 the process is inevitably a
discretionary one.80
Associated with this sense of uncertainty are the
perceived excessive awards of exemplary damages. In
the recent exemplary damages award in medical
negligence in Backwell v. AAA, Ormiston JA stated:
The warning [to juries about restraint and
moderation] is perhaps even more important in an
era when reports, either factual or fictional, of
excessive awards of exemplary damages in the
United States are reported in the papers and on
television.81
77
[1972] AC 1027.
78
[1972] AC 1027 at 1087.
Gray v. Motor Accident Commission (1998) 196 CLR 1 at 11 per Gleeson CJ, McHugh,
Gummow and Hayne JJ.
79
80
Law Reform Commission for England and Wales, 1993 Consultation Paper at 83.
81
Backwell v. AAA (1996) Australian Torts Reports 81-387 at 63,392.
78
RACHAEL MULHERON
(2000)
The Ontario Law Reform Commission considered that,
of all the arguments against exemplary damages in tort,
“concerns about the absence of clear principles to govern
the size of the award are among the most basic.”82
Moreover, the Law Commission for England and Wales
gloomily predicted that “reasoned, consistent and
proportionate awards” are “almost impossible” to
achieve if juries have the task of determining the
quantum of exemplary damages.83
•
Once exemplary damages are allowed in negligence
cases causing personal injury, it is impossible to shy
away from degrees of negligence.84 Whatever test of
culpability is applied - something more than careless,
probably wanton recklessness, disregard, or similar these degrees are very difficult to apply to a fact
situation.85
Indeed, the scenario in the New Zealand case McLaren
Transport Ltd v. Somerville86 provides a case on point. Mr
Somerville took the wheel rim from his hay conditioning
machine to the defendant’s garage to have a new tyre
fitted. The defendant’s foreman, Mr Stumbles, overinflated a 15 inch tyre in an effort to fit the tyre to a rim
which, at 15.3 inches, was too large. The tyre was
inflated to more than double the recommended safe
pressure, and no “tyre cage” was used, although one
was available. After two unsuccessful attempts, the tyre
exploded, severely injuring the plaintiff, who was
82
1991 Report at 46.
Law Commission for England and Wales, 1997 Report at 2. In Thompson v. MPC [1997]
3 WLR 403, Lord Woolf MR noted that the jury awards referred to the court disclosed a
range of figures both “striking” and which “disclosed no logical pattern”: at 415.
83
84
McLaren Transport Ltd v. Somerville [1996] 3 NZLR 424 at 433 per Tipping J.
A similar complaint has been made in respect of the award of aggravated damages in
negligence cases: Kralj v. McGrath [1986] 1 All ER 54 at 61 per Woolf J.
85
86
[1996] 3 NZLR 424.
4 Mac LR
Exemplary Damages
79
assisting. Negligence was conceded by the employer on
appeal; however, it was argued that this was not a
situation which warranted an award of exemplary
damages.
Tipping J held that the level of negligence displayed by
the employee was “so high that it did amount to an
outrageous and flagrant disregard for [the plaintiff’s]
safety,”87 that the conduct of the employee was
“foolhardy in the extreme”88 and that the negligence was
“so bad as to require an award of exemplary damages”.89
The sum of $15,000 was awarded by way of exemplary
damages.
The decision has since been criticised on the basis that
foolishness of the type displayed by Mr Stumbles in the
instant case did not merit an award of exemplary
damages.90 As one author asks, “Should we really be
looking at mechanics trying to help a customer out?”91
A similar conundrum appears from the finding of
contumelious conduct against the defendant doctor in
Backwell v. AAA.92
The degree of intent that was
necessary to found this conclusion is not at all clear from
the following passage of Ormiston JA:
87
[1996] 3 NZLR 424 at 435.
88
[1996] 3 NZLR 424 at 435.
89
[1996] 3 NZLR 424 at 434.
See, for example: A Beck, “Exemplary Damages for Negligent Conduct” (1997) 5 Tort
Law Review 90 at 91; J Manning, “Torts and Accident Compensation” [1996] New Zealand
Law Review 442 at 457-9; J Smillie, “Exemplary Damages for Personal Injury” [1997] New
Zealand Law Review 140 at 155-6; S Todd, “Exemplary Damages” (1998) 18 New Zealand
Universities Law Review 145 at 162.
90
G McLay, “Negligence, ACC and Exemplary Damages - What’s Too Bad?” [1996] New
Zealand Law Journal 425 at 427.
91
92
(1996) Australian Torts Reports 81-387.
80
RACHAEL MULHERON
(2000)
[The defendant] deliberately designed to persuade
[the patient] to have an abortion and was motivated
by a desire to protect the programme and the
institution for which the [defendant] worked and
probably also her employment at the centre ... The
false threats made were of a kind to cause distress
and place the [patient] in a false dilemma as to what
course she should take and, in particular, were
designed to persuade her to act in a manner contrary
to her moral and religious [Roman Catholic] beliefs.93
As one author has noted, whether the behaviour of Dr
Backwell should properly have been described as negligent,
intentional or reckless, is very difficult to classify from this
passage.94
•
In the case of negligence, especially professional negligence,
examples of wanton or contumelious disregard for the rights
of the plaintiff may be met with significant compensatory
damages; criminal prosecution; disciplinary proceedings;
expulsion from an association; or complaints to media or
ombudsman ( if one exists in the jurisdiction).
•
In these circumstances, exemplary damages are probably not
required as a vehicle by which to satisfy the purposes of
punishment
or
deterrence
or
condemnation
or
appeasement.95 Exemplary damages are out of proportion to
compensatory damages where liability in negligence is
established. A lesser injured plaintiff’s one-off sense of
grievance at the defendant’s negligent conduct can be
grossly overvalued in comparison with a lifelong
deprivation due to physical injuries caused by negligence in
circumstances where there was no flagrant conduct by the
93
(1996) Australian Torts Reports 81-387 at 63 and 389.
Freckelton I, “Exemplary Damages in Medico-legal Litigation” (1996) 4 Journal of Law
and Medicine 103 at 106.
94
95
n. 94.
4 Mac LR
Exemplary Damages
81
defendant.96
•
It has also been suggested that the proliferation of safety
legislation in the workplace - which the High Court noted in
Gray to have been a particular context in which the tort of
negligence has attracted exemplary damages thus far supersedes any need for civil courts to punish outrageous
examples of negligence by means of a punitive remedy.97
•
The costs of litigating negligence actions are likely to be
higher when exemplary damages are claimed, such that the
expense of a defendant successfully proving that the
negligence was not so bad as to merit punishment may be
greater than any exemplary damages that would be
awarded in respect of the conduct.98 For this reason,
spurious claims for exemplary damages may coerce
defendants to settle claims, or settle claims for higher
amounts than they would otherwise.99
Moreover, if exemplary damages are available in negligence
actions, they may encourage claims that have little basis in
liability, or may encourage claims that have a good basis in
liability but little chance of settling because of the plaintiff’s
expectation of exemplary damages, thus imposing greater
burdens on court resources.100
• If a defendant’s negligent conduct produces grievous
injury, a large award of compensatory damages is likely to
96
Broome v. Cassell & Co Ltd [1972] AC 1027 at 1130 per Lord Diplock.
See, for example: Butler, M, “Objective Fault and Exemplary Damages” (1992) 14(9)
Law Society Bulletin 27 at 28.
97
McLay G, “Negligence, ACC and Exemplary Damages - What’s Too Bad?” [1996] New
Zealand Law Journal 425 at 427.
98
Ontario Law Reform Commission, 1991 Report at 1. However, the Commission noted
that responses to its enquiries during the course of the investigations necessary to
compile the report indicated that insurers were able to distinguish meritorious claims
and discount others: at 25.
99
100
Law Commission for England and Wales, 1993 Consultation Paper at 112.
82
RACHAEL MULHERON
(2000)
have the effect of punishing the defendant, rendering
exemplary damages unnecessary. This possibility was noted
by Ormiston JA in Backwell v. AAA101:
One could have a plaintiff who was rendered
quadriplegic as a result of an assault or a blatantly
drunken escapade in a car, where the terrible
consequences arose in part from a particular physical
weakness or some chance consequence of the original
accident, where compensatory damages might be
fairly assessed in excess of $1M. In such a case, even
though the damages awarded are entirely directed to
compensating the plaintiff, the amount might also be
viewed as more than sufficient punishment or
deterrence.102
•
It has further been said that exemplary damages confuse the
criminal and civil standards of proof. They are designed to
punish the defendant, yet in a suit against that defendant in
negligence, he or she is not provided with the usual
protections or safeguards of the criminal law (e.g. higher
standard of proof; the right against self-incrimination; the
right to silence).103 Thus, it is arguable that penal sanctions,
in the form of exemplary damages, are being introduced into
an area of law which is not equipped to cope with them.
•
Another policy argument against the award of exemplary
damages in negligence concerns the financial means of the
defendant. The concern expressed by all three Law Reform
Commissions was that the financial circumstances of the
defendant are relevant to ascertain the capacity of that party
to satisfy a judgement of exemplary damages, and to
determine what sum is necessary to act as a deterrent and
101
(1996) Australian Torts Reports 81-387.
102
(1996) Australian Torts Reports 81-387 at 63,395.
Broome v. Cassell & Co Ltd [1972] AC 1027 at 1087 per Lord Reid; 1100 per Lord Morris,
1127-8 per Lord Diplock, and 1135 per Lord Kilbrandon. Also: Ontario Law Reform
Commission, 1991 Report at 19.
103
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Exemplary Damages
83
punishment.104 If, however, the means of the defendant are
relevant to the assessment of exemplary damages, this may
cause an unwarranted intrusion into the affairs of that party,
and increase the expense of pre-trial discovery and trial
expenses.105 Additionally, if the means of the defendant are
relevant to the assessment of exemplary damages, a
disproportionate amount of alleged negligence litigation
against asset-rich defendants is a distinct possibility.106
•
Finally, in Gray, the High Court had cause to consider the
effect upon an award of exemplary damages of a shift in
liability from the wrongdoer to an insurer. A similar
problem arises where it is sought to impose exemplary
damages on a defendant who is only vicariously liable. In
the case of compensatory damages, the shift of the burden of
payment to an innocent party is reasonable, where the
purpose of the award is to ensure that the plaintiff is paid
something, but not in the case of punitive damages where
the defendant is not liable for any wrongdoing.107 The
punitive and deterrent effect on the wrongdoer will be lost if
that person is allowed to avoid personal responsibility
because of strict vicarious liability on the part of another,
such as the employer.
In McLaren Transport Ltd v. Somerville,108 Tipping J stated that
“Mr Stumbles’ [the foreman’s] conduct merits condemnation
and punishment” - and then upheld the exemplary damages
award as against the employer.The employer was punished
XL Petrolem (NSW) Pty Ltd v. Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448 at 471-2.
Also, see: Law Reform Commission of Ireland, 1998 Consultation Paper at 106.
104
Law Commission for England and Wales, 1993 Consultation Paper at 86 (the
Commission did not support inquiry into the financial position of the defendant as a
precondition of such an award: at 141); Law Reform Commission of Ireland, 1998
Consultation Paper at 111-12; Ontario Law Reform Commission, 1991 Report at 51.
105
106
Law Commission for England and Wales, 1997 Report at 141.
Beck A, “Exemplary Damages for Negligent Conduct” (1997) 5 Tort Law Review 90 at
92.
107
108
[1996] 3 NZLR 424.
84
RACHAEL MULHERON
(2000)
for no wrongdoing on its part.109 It appears that the case
proceeded on the assumption that if Mr Stumbles’ tortious
act fell within the scope of his employment, the doctrine of
vicarious liability applied automatically to hold the
employer strictly liable for all the consequences, including
an award of exemplary damages.110
CONCLUSION
The debate as to whether exemplary damages ought ever to be
available for negligent conduct in Australia appears to have
been resolved in light of the decision in Gray v. Motor Accident
Commission, although the High Court was careful to note the
deliberate nature of the defendant’s actions in that case, as if the
case was conducted as a claim in trespass, which is, of course, an
intentional tort. The admission of exemplary damages into the
tort of negligence requires an analysis of the degrees of a
defendant’s negligence, which is a difficult exercise. Whilst the
“brutal and cowardly” conduct of the defendant may have
warranted the judicial imposition of exemplary damages in Gray
(had there been no prior criminal punishment), it is generally
considered that the conduct of the defendant mechanic in
McLaren Transport Ltd v. Somerville111 was not appropriate for the
standard of culpability required for such an award.
In the latest edition of the work, The Law of Torts,112 Fleming
notes that awards of exemplary damages in actions for
negligence are comparatively rare.113
Thus, if exemplary
Apparently, at trial, the District Court did take into account the lack of training
provided to the foreman, as well as the practice of allowing customers into the
workshop. However, these issues were not relied upon by Tipping J on appeal.
109
Similarly, the Law Commission for England and Wales, 1997 Report, notes that all
reported decisions in thatjurisdiction have proceeded on the basis that the doctrine of
vicarious liability applies to liability for exemplary damages, without going beyond that
mere assumption to question whether, and how, the doctrine should apply: at 89.
110
111
[1996] 3 NZLR 424.
112
JG Fleming, The Law of Torts (ninth edn, 1998).
113
Id at 273.
4 Mac LR
Exemplary Damages
85
damages were abolished in Australia in such cases, the number
of disaffected litigants would appear to be slight. Moreover,
and consistently with society’s expectation of criminal law, is it
not better to permit some tort defendants to escape punishment
than to punish other defendants excessively or with a penalty,
the assessment of which is arbitrary?
Given the extensive criticism which has accompanied exemplary
damages in claims of alleged negligence giving rise to personal
injury, it is the author’s view that there is a strong case for the
complete abolition of exemplary damages in such cases, and all
the inherent uncertainties which such a remedy entails.
However, in light of the decision in Gray, it would appear that
such a step will now require legislative intervention.