Exemplary Damages and Situations

This essay will define exemplary damages and situations in which they are awarded, followed by arguments for their retention and arguments in favour of abolition; it will suggest reformations and then conclude with a standpoint.

‘Exemplary damages are essentially different from ordinary damages. The object of damages in the usual sense of the term is to compensate. The object of exemplary damages is to punish and deter’. ‘From time to time cases do arise where awards of compensatory damages are perceived as inadequate to achieve a just result between the parties. The nature of the defendant’s conduct calls for a further response from the courts’. ‘Exemplary damages or punitive damages, the terms are synonymous, stand apart from awards of compensatory damages. They are additional to an award which is intended to compensate a plaintiff fully for the loss he has suffered, both pecuniary and non-pecuniary’ and awarded for conduct which outrages the courts.

In the case of Rookes v Barnard (1964) in which the plaintiff, a skilled draughtsman, brought an action for damages after he had been subjected to unlawful means of inducement to terminate his contract of service, and/or a conspiracy to have him dismissed, Lord Devlin held that ‘there are certain categories of cases in which an award of exemplary damages can serve a useful purpose in vindicating the strength of the law and thus affording a practical justification for admitting into the civil law a principle which ought logically to belong to the criminal’. Well aware that if these proposals were accepted, this would ‘impose limits not hitherto expressed on such awards and that there is powerful, though not compelling, authority for allowing them a wider range’, Lord Devlin proposed two categories in which exemplary damages should be awarded. ‘The first category is oppressive, arbitrary or unconstitutional action by the servants of the government’, and ‘cases in the second category are those in which the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff’ ‘ and to these two categories which are established as part of the common law there must of course be added any category in which exemplary damages are expressly authorised by statute’.

Following Lord Devlin’s very prominent judgment a bar of action was imposed on exemplary damage cases, this bar implemented by the case of AB v South West Water Services (1993) which involved an action for public nuisance and negligence. As a result of this bar exemplary damages were not available in those causes of action where such damages had not been awarded prior to the case of Rookes v Barnard (1964), this including public nuisance and negligence.

However, in the case of Kuddus v Chief Constable of Leicester (2001) not only was this bar unanimously removed but Lord Nicholls also heavily criticised Lord Devlin’s formulation because whatever the position forty years ago, he respectfully inclined to doubt the soundness of the distinction between government officials and companies and individuals. ‘National and international companies can exercise enormous power. So do some individuals. I am not sure it would be right to draw a hard-and-fast line which would always exclude such companies and persons from the reach of exemplary damages. Indeed, the validity of the dividing line drawn by Lord Devlin when formulating his first category is somewhat undermined by his second category, where the defendants are not confined to, and normally would not be, government officials or the like. Nor, I may add, am I wholly persuaded by Lord Devlin’s formulation of his second category (wrongful conduct expected to yield a benefit in excess of any compensatory award likely to be made). The law of unjust enrichment has developed apace in recent years. In so far as there may be a need to go further, the key here would seem to be’ ‘outrageous conduct on the part of the defendant. There is no obvious reason why, if exemplary damages are to be available, the profit motive should suffice but a malicious motive should not’. Nonetheless, even though a report by the Law Commission stated that exemplary damages should be available to all torts, upon consideration of an award for exemplary damages, it was held that it is not necessary to consider whether the cause of action was of one which had been awarded prior to 1964 but instead whether the situation in which an award is being claimed is covered by Lord Devlin’s formulation.

Arguments In Favour Of Exemplary Damages

The award of exemplary damages is a very controversial remedy in civil law this providing many arguments for its retention and many for its abolition. One of the main arguments supporting exemplary damages, this argument also supported by the Law Commission, is that such an award can serve as a deterrent. Allowing a plaintiff to pursue a civil action for exemplary damages is thought to deter reoccurrence of the tortfeasors behaviour as the punishment incurred goes beyond compensation and beyond putting right the damage caused. An award of exemplary damages can therefore place a plaintiff in a better position than what he or she was in prior to the wrongdoing, this deterring the defendant by punishing him or her further. Punishment is also an argument in favour of exemplary damages with some arguing that this is the primary objective for their existence. ‘On occasion conscious wrongdoing by a defendant is so outrageous, his disregard of the plaintiff’s rights so contumelious, that something more is needed to show that the law will not tolerate such behaviour’ and thus the law allows for a plaintiff to bring a civil action completely separate to any criminal proceedings to administer further punishment. ‘The principled case for retention [of exemplary damages] begins with the proposition that civil punishment is a different type of punishment from criminal punishment; the conclusion drawn from this is that it is coherent to pursue the aims of punishment (retribution, deterrence, disapproval) through the civil law, in addition to the criminal law and in a civil form which does not necessarily mimic the criminal form’. Because the criminal law and its process are not entirely perfect; ‘civil punishment can go some way towards making up for’ its defects and therefore the administering of punishment in private law supplements the criminal law. ‘General ‘defects’ include the following: that the state does not have sufficient resources to apprehend all criminals; that the state may not wish to prosecute, or to continue prosecutions which it has begun; that the substantive scope of the criminal law may not extend to all wrongs which merit punishment’ and therefore an action for exemplary damages is a more appropriate form of punishment and ‘an efficient way of achieving the full legal response’. The suggestion is then that ‘exemplary damages see private law doing the criminal law’s job and this is desirable because the criminal law alone cannot perform its task effectively’. Two further arguments in favour of exemplary damages are that not only do they protect civil liberties, a right which should be vindicated by retributive justice, but they are also considered to be therapeutic. Because a claimant has more control over the litigation and because the claimant retains any damages awarded it is believed that by witnessing the court demand that the defendant pay damages, the claimant gains a psychological benefit which in turn aids recovery.

Argument Against Exemplary Damages

Contrary to the above are many arguments in favour for the abolition of exemplary damages, the most basic of these being that the function of private law is to compensate and the role of criminal law to punish, consequently, it is argued by many that exemplary damages belong to criminal law as a form of punishment whereby punishment originates from the state, however, those opposing this believe that these two laws ought not to have exclusive functions. Moreover, ‘criminal justice properly requires that the defendant is on notice as to what constitutes wrongdoing. This is reflected by increasing statutory intervention and a consequent emasculation of common law crimes’, yet, this basic principle is offended because of the ambiguity as to what conduct justifies an award of punitive damages. In addition to this further offence is given to the notion that the prescribed punishment should fit the crime; criminal law often specifies penalties, whereas the amounts of punitive damages which can be awarded are usually at large and because of the lack of specification relating to how much need be awarded, this in turn leads to uncertainty as awards vary vastly. One solution offered to curtail this problem is that the law should impose a cap on amounts awarded, this however, does defeat the principle of deterrence because ‘if deterrence is the main objective, there must be an attempt to tailor the amount of punitive damages to the level of deterrence required, an aim which is lost if the levels of damages are fixed’. A further factor adding to the problem of uncertainty with regards to the amount awarded is the use of a jury in assessing and determining cases involving defamation. However, this could be resolved by allowing the ‘judge to rule on quantum after a jury finding on liability and, possibly, whether a punitive award should be made’. In addition to this, contributory negligence is also an issue surrounding an award of exemplary damages, which since 1945, has been used to reduce the amount of damages recoverable where the plaintiff has contributed to his own injuries. ‘To allow the defendant to plead that there should be a reduction in the amount of punitive damages on the grounds that the plaintiff was also at fault dilutes the punishment thereby imposed on him notwithstanding that disapproval of the defendant’s conduct remains the same’. Moreover the possibility of double jeopardy is also a concern although this can however be resolved by denying the right to recover exemplary damages where there is a real possibility of criminal proceedings. On the contrary, where conduct is not punishable by criminal law or is but rarely prosecuted then this begs the question why, ‘if the conduct in question is thought insufficiently serious to demand criminal regulations, punishment is thought appropriate when applied indirectly through the law of torts’. ‘Rather than approach the problem by asking how punitive damages can be a useful and convenient way of redressing these problems it should first be explained why the criminal law does not or cannot be made to fulfil adequately society’s desire to punish and to punish properly’. One final issue regarding exemplary damages is that upon the death of the claimant claims for an award of exemplary damages are extinguished but survive the death of the defendant, this provided the Law Reform (Miscellaneous Provisions) Act 1934 s1(2)(a). This somewhat contradicts the purpose of exemplary damages because death as a result of a tort seems to afford the strongest case for punishment and to allow a deceased victim’s estate pursue a claim for damages further promotes the principle of deterrence.

Suggested Reform

Recommendations by the Law Commission suggest that there is a need for insurance against claims for exemplary damages and that there be the possibility of vicarious liability whereby an innocent employer will be held liable in circumstances where employees are unlikely to be able to satisfy an award or where identifying the blameworthy member of the employers staff is proven problematic. However, these suggestions are totally unfounded because the aim of exemplary damages is to punish and these proposals completely lose sight of this aim altogether.

Conclusion

An award of exemplary damages serves it purpose well by not only punishing and deterring but also by protecting individual civil liberties. All of the above arguments are substantive and although there appears to be more arguments opposing such an award the view here is that the arguments in favour outweigh those to the contrary and therefore the opinion here is definitely favourable.

Bibliography

Books

John Cooke, (2005), Law of Tort, 7th Edition, Pearson Education Limited, Essex

S. I. Strong & Liz Williams, (2008), Complete Tort Law, Text, Cases and Materials, Oxford University Press, New York

Journals

Alan Reed, (1996), Exemplary damages: a persuasive argument for their retention as a mechanism of retributive justice, Civil Justice Quarterly, Westlaw

Allan Beever, (2003), The structure of aggravated and exemplary damages, Oxford Journal of Legal Studies, Westlaw

Lesley J. Anderson, (1992), An exemplary case for reform, Civil Justice Quarterly, Westlaw

Michael Jefferson, (2009), Aggravated and exemplary damages and post-1964 torts, Professional Negligence, Westlaw

Cases

AB v South West Water Services (1993)

Kuddus v Chief Constable of Leicester (2001) UKHL 29

Rookes v Barnard (1964) AC 1129