Purnell, John --- "The Rarity of Punitive Damages" [2015] PrecedentAULA 64; (2015) 130 Precedent 42

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THE RARITY OF PUNITIVE DAMAGES

By John Purnell SC

Punitive or exemplary damages are rarely awarded. Indeed, they are rarely sought. It is a discretionary remedy that is not compensatory and is unrelated to the plaintiff’s loss. These damages can be awarded for intentional torts, product liability and property damage claims. They are not available for defamation, nor for breach of contract, nor for misleading and deceptive conduct under the Competition and Consumer Act 2010 (Cth), or its predecessor, the Trade Practices Act 1974 (Cth).

Division in judicial decision concerning exemplary damages in Australia was settled by the High Court in Gray v Motor Accident Commission.^[1] Exemplary damages, according to Kirby J, provide a means for the court to express its disapproval, not only to the tortfeasor, but to the world. It is available, according to Gleeson CJ, McHugh, Gummow and Hayne JJ, where an employer persisted in using an unsafe system of work when the employer knew the system posed ‘extreme danger’ and thus it acts as a deterrence to all and sundry and gives the plaintiff a few more dollars as appeasement. However, exemplary damages must be considered to be an exceptional remedy, imposed for conduct which shocks the court representing the community. In Gray, the plurality held that (i) where the criminal law has been brought to bear upon a wrongdoer and substantial punishment inflicted, exemplary damages may not be awarded,^[2] and that (ii) the fact that the tortfeasor was insured under a compulsory scheme of insurance against liability for exemplary damages was no bar to the award of exemplary damages.

In Gray, Gleason CJ and McHugh, Gummow and Hayne JJ, gave two reasons for disallowing exemplary damages:

• First, the deterrence and punishment aims of exemplary damages had been exacted by the criminal law.

• Second, a person should not be punished twice for what is substantially the same act.

More than fault, less than malice

The joint judgment in Gray also stated:

‘Exemplary damages are awarded rarely. They recognise and punish fault, but not every finding of fault warrants their award. Something more must be found.’^[3]

In Lamb v Cotongo,^[4] a 1987 case involving trespass to the person, the High Court held that malice on the part of the defendant was not necessary for exemplary damages to be awarded but damages may be awarded where the defendant’s conduct is malicious, contumelious or insolent. The High Court stated:

‘The absence of actual malice did not disentitle the plaintiff to exemplary damages. Whilst there can be no malice without intent, the intent or recklessness necessary to justify an award for exemplary damages may be found in contumelious behaviour which falls short of being malicious or as not aptly described by the use of that word.’^[5]

The expression adopted by Knox CJ in 1920 in Whitfield v De’Lauret & Co Ltd^[6] was that exemplary damages may be awarded when there is a ‘conscious wrongdoing and contumelious disregard of another’s rights’, and this expression describes at least the greater part of the argument for exemplary damages. This phrase was applied by Judge Skoien of the Queensland District Court in Grosse v Purvis^[7] when he awarded $20,000 exemplary damages for breach of privacy in a stalking case.

The majority judgment in Gray also used the expression ‘contumelious disregard’:

‘Exemplary damages could not properly be awarded in the case of alleged negligence in which there was no conscious wrongdoing by the defendant. Ordinarily then, questions of exemplary damages will not arise in most negligence cases, be they motor accidents or other kinds of cases. But there can be cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiffs or persons in position of the plaintiff. Cases of an employer’s failure to provide a safe system of work for employees in which it is demonstrated that the employer well knowing of an extreme danger thus created, persisted in employing an unsafe system might perhaps be of the latter kind. No doubt other examples can be found.’^[8]

Since the implementation of the Ipp recommendations of 2002, exemplary damages in negligence claims have been all but abolished.

Double punishment and vicarious liability

The High Court findings in NSW v Ibbett^[9] are interesting. NSW was sued vicariously for the actions of two NSW police officers. The Court of Appeal increased the trial judge award for exemplary damages from $10,000 to $25,000. The argument in the High Court was that NSW had in essence been punished twice for the same wrong and that NSW should not have exemplary damages awarded against it when the two police officers were not before the Court (that is, in the pleadings this was not necessary because of the Police Legislation Amendment (Civil Liability) Act 2003 (NSW) which provided that the tort claim not be made against the police officer concerned but instead the claim is to be made against the Crown).

In Uren v John Fairfax & Son,^[10] the High Court held that the same set of circumstances might well justify awards of either or both of aggravated or exemplary damages.

In Ibbett, the joint judgment of Gleeson CJ, Gummow, Kirby, Heydon and Crennan JJ held that the tort of trespass protects the interests of the plaintiff in maintaining the right to exclusive possession of the plaintiff’s place of residence, and aggravated damages may be awarded if that right was infringed (compensatory) and that exemplary damages (punitive) is different. Thus there was no double punishment.

The High Court then addressed the complaint by NSW concerning the state’s vicarious liability of exemplary damages and held that the criticisms of NSW failed and it was appropriate to award exemplary damages in this case.

In Lamb v Cotogno,^[11] the High Court held that malice on the part of the defendant was not necessary for exemplary damages to be awarded; however, exemplary damages may be awarded where the defendant’s conduct is malicious, contumelious or insolent.

In Zorom Enterprises v Zabon,^[12] Basten JA, with McColl and Campbell JJA agreeing, applied Ibbett’s dictum in relation to vicarious liability of an employee (as compared to an employer) in respect of an intentional tort; that is, where the conduct was done in the intended or ostensible pursuit of the employer’s interest or in the intended performance of the contract of employment or the apparent execution of the authority which the employer held out the employee as having. Accordingly, Basten JA held that the trial judge did not err in awarding exemplary damages.

Equitable wrongs

Exemplary damages do not seem completely settled in the area of equitable wrongs. In Harris v Digital Pulse Pty Ltd,^[13] the NSW Court of Appeal held that exemplary damages are not available for breach of contract or breach of fiduciary duty. Heydon JA held that there is no power to award exemplary damages in equity. Spigelman CJ refrained from making that decision and Mason P dissented and held that there was no reason in principle, if exemplary damages are awarded for common law torts, to not award them for analogous equitable wrongs. However, exemplary damages must be specifically pleaded. Failure to do so may result in no such damages being awarded.

In New Zealand, the case of Susan Couch v The Attorney General^[14] makes for fascinating reading. The bench comprised Elias CJ, Blanchard, Tipping, McGrath and Wilson JJ. Chief Justice Elias referred to and mostly endorsed the Privy Council’s decision in Buttril v A,^[15] which held that under the common law of New Zealand the court’s jurisdiction to award exemplary damages in cases of negligence is not rigidly confined to cases where the defendant intended to cause the harm or was consciously reckless as to the risks involved. Elias CJ further noted that all members of the court were in agreement that exemplary damages are available in negligence and are not confined to intentional torts. However, the Chief Justice declined to impose, as a matter of law, a precondition that the defendant must consciously run the risk of harm to the plaintiff, as this would restrict the jurisdiction to mark society’s condemnation of outrageous behaviour by the defendant and the ‘needs of modern New Zealand society’ (whatever they are). He also disagreed with the suggestion that in not following Buttrill the Court of Appeal (below) brought New Zealand law back into line with Australia and Canada. He said that in Australia the High Court, in Uren, has not decided whether a ‘conscious appreciation of the risk to the plaintiff is a precondition of an award of exemplary damages in negligence’. But the majority of the High Court in the Gray case considered that ‘conscious wrongdoing in contumelious disregard of another’s right describes at least the greater part of the field’.

Wilson J asked what should be the test for the award of exemplary damages and suggested they could be awarded in two circumstances. Firstly, where the conduct of the defendant can be described as ‘outrageous’, or secondly, where the conduct of the defendant is intentional or subjectively (consciously) reckless (which Wilson J preferred).

It will be interesting to see where the ‘needs of modern New Zealand society’ take the law of exemplary damages into the future, as in Australia the law in this area seems settled.

John Purnell SC was admitted to the bar in 1973 and took silk in 1995.

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^[1] (1998) 196 CLR 1.

^[2] Ibid, p 10.

^[3] Ibid, p 3.

^[4] [1987] HCA 47; (1987) 164 CLR 1.

^[5] Ibid, p 13.

^[6] (1920) 29 CLR71 at 77.

^[7] (2003) QDC 151.

^[8] See n1 above, p 491.

^[9] (2006) HCA57.

^[10] [1966] HCA 40; (1966) 117 CLR 118.

^[11] [1987] HCA 47; (1987) 164 CLR 1.

^[12] (2007) NSW CAI 106.

^[13] [2003] NSWCA 10; (2003) 197 ALR 626.

^[14] (2010) NZSC 27.

^[15] (2003) 2 NZLR 21.