THE LAW REFORM COMMISSION

AN COIMISIÚN UM ATHCHÓIRIÚ AN DLÍ

CONSULTATION PAPER

ON

AGGRAVATED, EXEMPLARY AND RESTITUTIONARY DAMAGES

APRIL 1998

IRELAND

The Law Reform Commission

Ardilaun Centre, 111 St. Stephen's Green, Dublin 2

© Copyright The Law Reform Commission 1998

First Published April 1998

ISSN 1393-3140

THE LAW REFORM COMMISSION

The Law Reform Commission was established by section 3 of the Law Reform Commission Act, 1975 on 20th October, 1975. It is an independent body consisting of a President and four other members appointed by the Government.

The Commissioners at present are:

The Hon. Anthony J. Hederman, former Judge of the Supreme Court, President;

Ms Hilary A Delany, B.L., Lecturer in Law, Trinity College, Dublin;

The Right Honourable Dr Turlough O'Donnell, Q.C.;

Mr Arthur F Plunkett, Barrister-at-Law;

Ms Patricia T Rickard-Clarke, Solicitor, Partner – Mc Cann Fitzgerald Solicitors.

Mr. John Quirke is the Secretary to the Commission.

The Commission's programme of law reform, prepared in consultation with the Attorney General, was approved by the Government and copies were laid before both Houses of the Oireachtas on 4th January, 1977. The Commission has formulated and submitted to the Taoiseach or the Attorney General fifty five Reports containing proposals for the reform of the law. It has also published eleven Working Papers, eleven Consultation Papers, a number of specialised Papers for limited circulation and eighteen Reports in accordance with Section 6 of the 1975 Act. Details may be found on pp. 132–137.

Gerard Quinn, BA, LLB, LLM (Harv), SJD (Harv), Barrister-at-Law is the Director of Research to the Commission.

Ms. Lia O'Hegarty, B.C.L., LL.M. (Michigan), LL.M. (Harvard), Barrister-at-Law and Ms. Roisin Pillay, LL.B., LL.M (Cantab.), Barrister-at-Law are Researchers.

Ms. Mary Teresa Faherty, Ms. Dympna Forde and Ms Deborah Parkes are the Administrative Staff.

Further information from:

The Secretary,

The Law Reform Commission,

Ardilaun Centre,

111 St. Stephen's Green,

Dublin 2.

Telephone: 475 1310.

Fax No: 475 1265.

Email: lrcsecretary@tinet.ie.

INTRODUCTION

The Reference of the Attorney General

1.

On 13 January 1997, pursuant to the provisions of section 4(2)(c) of the Law Reform Commission Act, 1975, the then Attorney General, Mr Dermot Gleeson, SC, requested the Law Reform Commission to examine and make recommendations in relation to

2.

Without prejudice to this, the Attorney General also requested the Commission to:

Outline of the Consultation Paper

3.

This Consultation Paper has been prepared in response to the Attorney General's reference. Part I of the paper examines the established categories of damages and sets out the arguments, on both principled and practical levels, for and against the award of exemplary damages. Part II of the paper contains an analysis of the Irish, European, Commonwealth and American laws of punitive/exemplary and aggravated damages. Part III of the paper then examines the newly emerging law of restitutionary damages. Finally, Part IV sets out the possible options for reform of the law, drawing on the arguments of principle, the comparative material, and the unique demands of the Irish context.

4.

In Part IV, the Commission's provisional conclusions on the central issue of principle are set out. Provisional recommendations are made in respect of the availability of exemplary damages in Irish law. These recommendations are not unanimous, in that whilst some of the commissioners favour the availability of exemplary damages for all tort actions and for breach of constitutional rights, some are of the view that such damages should be awarded only in cases of certain specified torts, as well as for breach of constitutional rights, and some favour their abolition in so far as the law permits. A number of provisional recommendations are then made by the paper on subsidiary issues in relation to exemplary damages, such as the regulation of quantum and the availability of

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insurance for exemplary awards. These recommendations are made on the understanding that they are to apply only to the causes of action in which the recovery of exemplary damages is recommended.

5.

Provisional recommendations are also made in the Consultation Paper on the availability of aggravated and of restitutionary damages. Further recommendations are made in relation to those sections of the Civil Liability Act, 1961 which deal with exemplary and aggravated damages.

Terminology

6.

The question of terminology in the law of damages is a vexed one. An attempt has been made in this paper to use terms as consistently and clearly as possible. In general in this paper, unless otherwise stipulated, the terms “exemplary damages” and “punitive damages” should be taken to refer to one and the same category, whilst the term “aggravated damages” refers to a distinct, and (at least partially) compensatory, category. In referring to the law of England, Ireland and Commonwealth countries, the term “exemplary damages” has been used in most instances, since that is the term most commonly in use in those jurisdictions. In the US, awards of damages with broadly the same purpose are usually called “punitive damages”, and they are referred to as such in this paper. In a few instances, where there is an attempt to highlight inclusivity, or where there is a question of disputed terminology, the terms “punitive/exemplary” or “non-compensatory” have been used. “Non-compensatory damages” may be taken to include exemplary/punitive damages, restitutionary damages, and aggravated damages as they are presently defined.

Consultation Process

7.

The Commission recognises the complex and controversial nature of this topic. All of the recommendations in this paper are tentative and provisional only. The final recommendations of the Commission will be made only after extensive consultation with all interested parties and the careful consideration of all submissions received. Following this consultation process, the Commission will make recommendations in its Final Report. So that the Commission's final Report may be made available as soon as possible, those who wish to do so are requested to make their submissions in writing to the Commission by 31 July 1998.

PART I

CHAPTER 1: THE CATEGORIES OF DAMAGES

1.01

In civil law, compensatory damages are the primary monetary remedy, awarded on the basis of the loss or injury to the plaintiff, rather than on the basis of the defendant's fault. The common law has, however, long made provision for the award of non-compensatory damages. These have been variously described as punitive, exemplary, aggravated, vindictive, or retributive.¹ The place of these damages, in a civil law that is ostensibly purely compensatory, has always been precarious, and they have often been criticised as anomalous.² Non-compensatory damages exist on the boundary between the civil and the criminal law, and appear to import elements of the criminal law into the civil. The debate as to their validity is therefore grounded in rival conceptions of the role of the civil law, and its relation to and separation from the criminal law.

1.02

Our conception of the boundary between the civil and criminal laws, and of the extent to which this boundary may be regarded as permeable, is crucial to our consideration of non-compensatory damages. The basis and character of awards of exemplary damages on the one hand, and of the wider civil law on the other, and the compatibility of one with the other, is at the core of this paper's consideration of the categories of damages. Questions arise as to whether punishment is a defining characteristic of the criminal law only, or whether it is also inextricably an element of the civil law. The wider social function of the civil law, and the extent to which an award of damages in tort may address more than the relations between the parties to the action, is also to be considered.

1.03

At the outset, it is helpful to consider the accepted categories of damages, and to define each category, as it has been developed by the courts. Clear categorisation of damages according to their purpose is difficult. It may be thought that a rigid categorisation of damages is not warranted, and that any punitive element should be tolerated to co-exist with the compensatory, within an

undifferentiated general award.³ The creation of separate categories within a single award of damages may certainly seem artificial. A compensatory award will punish, even if it is not intended to, as a punitive award will, inevitably, compensate. The award of damages in several categories (exemplary, aggravated, compensatory) in a single case may result in undesirably large awards. There is the danger, identified by Windeyer J in Uren v John Fairfax & Son,⁴ that the court may find itself “fixing a compensation figure swollen by aggravation, and then adding a fine on top”.⁵ However, a classification of particular awards as exemplary or compensatory has the benefit of relative transparency, and reduces the danger of large and unexplained general awards of damages which have no clearly apparent justification. The delineation of clear categories of punitive and compensatory damages may in fact serve to reduce the quantum of compensatory awards, in confining notions of punishment and deterrence to a single category.

1.04

For many years the law of damages was beset with uncertainty as to the meaning of the various terms – exemplary, punitive, aggravated – which were often used interchangeably and apparently at random. Judicial dicta, beginning with the judgement of the House of Lords in Rookes v Barnard, have helped to clarify the law. The accepted categories of damages, in so far as it is possible to define them, are as follows.

Compensatory Damages

1.05

The aim of compensatory damages is to compensate the plaintiff for the loss he has suffered, and to put him in the same position as if the tort had not been committed. This is unproblematic in the case of pecuniary loss, but less satisfactory in relation to non-pecuniary or intangible loss, where the award of damages compensates for mental and emotional distress. In such a case the award of damages is said to compensate the plaintiff “in so far as money can do so”. However, it is arguable that where there is intangible loss resulting from injury to interests of personality (insult, humiliation, degradation, distress etc.) the

award of damages does not serve a wholly compensatory purpose.⁶

Aggravated Damages

1.06

Aggravated damages are classified as a species of compensatory damages, which are awarded as additional compensation where there has been intangible injury to the interests of personality of the plaintiff, and where this injury has been caused or exacerbated by the exceptional conduct of the defendant. It is because aggravated damages are awarded on the basis of the loss to the plaintiff that they are categorised as compensatory. However, the requirement that the defendant's conduct must have been exceptional in order for aggravated damages to be awarded, undermines the compensatory nature of aggravated damages, and suggests that they are, in part at least, awarded with reference to the moral quality of the defendant's actions. Aggravated damages appear to be a hybrid of the compensatory and exemplary models of damages. In practice, and especially in England, they have often been used to perform the function of exemplary damages.

Exemplary / Punitive Damages

1.07

Exemplary or punitive damages – the two terms are now regarded as interchangeable – are additional damages awarded with reference to the conduct of the defendant, to signify disapproval, condemnation or denunciation of the defendant's tortious act, and to punish the defendant. Exemplary damages may be awarded where the defendant has acted with vindictiveness or malice, or where he has acted with a “contumelious disregard” for the rights of the plaintiff. The primary purpose of an award of exemplary damages may be deterrent, or punitive and retributory; and the award may also have an important function in vindicating the rights of the plaintiff. The award signals to the defendant that “tort does not pay”⁷ and at the same time it vindicates the rights of the plaintiff and the strength of the law.

Restitutionary Damages

1.08

Restitutionary damages are not compensatory in nature. Like exemplary damages, they look to the actions of the defendant rather than the damage to the plaintiff; but their aim is not to punish. Their purpose is to prevent the

defendant being unjustly enriched as a result of his wrong, and to remove any profits or other benefits which the defendant has obtained as a result of the wrong to the plaintiff. Their recovery is most appropriate in cases involving damage to property interests. Although restitutionary damages have obtained some recognition by the English courts, their status in Irish law is still uncertain.⁸

CHAPTER 2: ARGUMENTS FOR AND AGAINST EXEMPLARY DAMAGES

Arguments Against the Award of Exemplary Damages

Arguments Based on Principle

2.01

The first argument against the availability of exemplary damages as a civil law remedy is one of principle, and relates to the boundary between the civil and criminal laws. This boundary was clearly set out by Lord Mansfield in 1776:

2.02

Blackstone adopted a similar model:

2.03

It may be argued that punitive or exemplary damages, the purpose of which is to punish the defendant, are more characteristic of the criminal law than the civil: that their inclusion in the civil law usurps the function of the criminal law, and imports an alien public law function into the civil law.³ The criminal law allows for the prosecution and punishment of acts which are regarded as morally reprehensible and as damaging to society as a whole, not merely to the individual victim. The civil law is generally described as contrasting with this, as having the function of regulating relationships between individuals and dispensing justice as between the parties to a case, without regard to the wider interests of society.⁴ The function of punishment is closely associated with the criminal law,

so much so that it has arguably become exclusive to it. Deterrence is also associated with criminal rather than civil sanctions. In imposing exemplary damages, the court is attempting to punish, to vindicate the rights of the plaintiff, and to deter the infringement of the rights of others in the future, a wider social purpose which is traditionally within the sphere of public law.⁵

Arguments Based on Practicality

2.04

In addition, a number of arguments may be made which highlight the impracticability of including exemplary damages awards in the civil system. It may be argued that if the defendant is to be subjected to punitive sanctions, he should have the benefit of the procedural safeguards which are available in the criminal courts but not in the civil; and that his accusers should have to prove the charges against him on the basis of the criminal burden of proof. The criminal law's imposition of harsh penal sanctions is justified by its public function. It is also justified by the fact that only a narrow range of acts are criminal offenses, by the strict procedural safeguards which are imposed in criminal trials, and by the high standard of proof in such trials. Comparable safeguards do not exist where exemplary damages are imposed in civil cases. Thus public law elements are being introduced into an area of law which, arguably, is not equipped to deal with them. This point was made by Lord Reid in his House of Lords judgement in Cassell & Co Ltd v Broome⁶ when he justified the restriction of exemplary damages as follows:

2.05

A further objection to exemplary damages is that, where they are awarded, the defendant may have to answer to both the civil and the criminal courts in respect of the same wrong, and this will expose him to the possibility of being punished twice for the same wrong. In several jurisdictions, legislation makes particular provision for this eventuality, providing structures to limit actions against the defendant in both civil and criminal law.⁷

2.06

Finally, the fourth argument made against exemplary damages is that the plaintiff will benefit from the award of exemplary damages, rather than the State, resulting in an unjust enrichment of the plaintiff. This “windfall” to the plaintiff is clearly problematic, since the award of exemplary damages is assessed with reference only to the defendant and his conduct, and does not aim to compensate the plaintiff. The plaintiff, who will already have been fully compensated for his loss by an award of compensatory damages, may become the fortunate beneficiary of the defendant's morally outrageous or unconstitutional or antisocial behaviour.

Arguments in Favour of the Award of Exemplary Damages

Arguments Based on Principle

The Punitive and Deterrent Function of the Civil Law

2.07

The proposition that exemplary damages necessarily usurp the function of the criminal law to the civil law is disputed by many commentators,⁸ and there are some judicial dicta to the effect that the civil law may legitimately accommodate some punitive purpose.⁹ The boundary between the civil and criminal laws need not be viewed as unbreachable. The civil and the criminal have many elements in common, although these may be emphasised more in one system than the other: both are largely fault-based; both to some extent condemn and stigmatise wrongful conduct; both impose sanctions.¹⁰ The most significant perceived difference between the two systems of law is that the criminal law punishes, while the civil law does not. This, however, is also open to challenge; whilst punishment is certainly a characteristic of the criminal law, it is not at all clear that it is exclusive to it. Similarly, wider public functions of deterrence and social ordering which have traditionally been identified with the criminal law are not necessarily excluded from the civil law. In his seminal 1931 article on punitive damages, Morris pointed out that tort law does contain a deterrent function:

2.08

Lord Wilberforce, giving judgement in the English case of Cassell & Co v Broome, took a cautious approach to any rigid compartmentalisation of the civil and the criminal:

2.09

The argument may be made that a punitive purpose is not unknown to the civil law, even if the long tradition of awarding punitive damages is discounted. When subjected to close inspection, the distinction between the compensatory and punitive purposes of monetary sanctions is difficult to distinguish. J M Kelly¹³ has pointed out that a monetary award for the loss of a limb cannot in any real sense compensate for the loss. He argues that the real purpose of the award of ostensibly compensatory damages is:

2.10

On this view, some punitive purpose is already present in the civil law, quite apart from the categories of punitive/exemplary or aggravated damages.¹⁴ Once the wider social and moral purpose of the civil law is accepted in this way, categories of punitive/exemplary damages cease to appear anomalous.

The Criminal Law

2.11

The uncertain boundary between the law of tort and criminal law is also evidenced in the difficulties experienced by commentators on the criminal law, in arriving at a definition of a crime which satisfactorily distinguishes it from a civil wrong.¹⁵ Acknowledging that punishment, since it is a feature also of the civil law, cannot be a determining factor, Smith and Hogan fall back on a procedural definition of a crime, emphasising the role of the State in prosecuting a criminal offence.¹⁶ The 19th edition of Kenny's Outlines of Criminal Law advocates caution in attempting to define a criminal offence, stating that:

2.12

The question has been considered in a number of cases in the Irish courts. The courts appear to favour a relatively narrow definition of a criminal offence, which relies on the characteristics of criminal proceedings, as well as on the punitive nature of the sanction.¹⁸ In Melling v O Mathghamhna¹⁹ Kingsmill-Moore J set out a number of indicia of a criminal offence, as follows:

2.13

O Dálaigh J, in the same case, admitted the possibility of some punitive purpose in the civil law, but differentiated the criminal law on the basis of pre-trial detention, bail, search warrants and imprisonment for failure to pay a fine. He held that:

2.14

The character of a criminal offence was further considered in the case of McLoughlin v Tuite,²² which involved penalties under the Income Tax Act, 1967, which were imposed in civil proceedings. The Supreme Court held that the penalties were not criminal in nature. Finlay C J considered that the penalty under the Act constituted a deterrent or sanction, but that, in the context of the income tax code, this did not in itself bring it within the ambit of the criminal law:

Compensatory Aspects of the Criminal Law

2.15

The tort/crime distinction is further called into question by recent developments which import more private and compensatory elements into the criminal law. In many common law jurisdictions, including Ireland, a range of measures have been introduced which are aimed at expanding the role of the victim of crime in the criminal justice process.²⁴ These measures include the preparation of victim impact statements and the payment of compensation to the victim by the offender. The making of a compensation order, in particular, as provided for by section 6 of the Criminal Justice Act, 1993, gives a compensatory

character to criminal proceedings. The section provides that, on conviction, the court may make an order requiring the convicted person to pay compensation in respect of any personal injury or loss which has resulted to any person from the offence. The compensation is to be assessed on the same basis as damages in a tort action: section 6 (1) provides that the compensation:

Arguments Based on Practicality

2.16

The objections to exemplary damages on the basis of the lack of procedural safeguards in civil law may also be contested. In addition, many of the inadequacies they point to may be redressed by legislative intervention.

1. Due Process

2.17

The absence of strict procedural safeguards, as well as the lower burden of proof in civil cases where exemplary damages may be awarded can be justified on the basis of the differing consequences of a finding of responsibility in the civil as opposed to the criminal law. Conviction of a criminal offence may result in the loss of liberty. The possibility of the imposition of this sanction warrants particular procedural safeguards, and a higher standard of proof. Where the liberty of the individual is not threatened, as in an action for exemplary damages, there is not the same necessity for these precautions.²⁵

2. Unjust Enrichment

2.18

The plaintiff in a case in which exemplary damages are awarded against the defendant may benefit from a windfall. In many ways, however, he is the most appropriate person to benefit. It is the plaintiff who has been the victim of the wrong. It is also the plaintiff who has brought the action against the defendant, probably at considerable financial risk to himself. One commentator wrote:

2.19

If it is considered that the enrichment of the plaintiff through the receipt of exemplary damages is unjust, there is an alternative: that the damages, or a

portion of them, go to the State, or to a public fund. Several US states now have “split-recovery” provisions which allow the state to claim a portion of each award of exemplary damages.²⁷

3. Double Jeopardy

2.20

The danger of “double jeopardy” where there is a claim for exemplary damages lies in the fact that in many such cases the civil wrong complained of may also be a criminal offence. The defendant may find himself, for example, ordered to pay exemplary damages and to pay a criminal fine, in reference to the same wrong. White suggests that this problem could be resolved if the civil courts were to take into account in mitigation any criminal penalty which had already been imposed on the defendant in respect of the wrong for which he is being sued in damages.²⁸ Presumably, any exemplary damages already awarded could also be taken into account in mitigation by a criminal court imposing a penalty. This issue is addressed in the Ontario Law Reform Commission's Report on Exemplary Damages, which recommends that:

2.21

In Ireland, co-operation between the civil and criminal justice systems is already provided for in the Criminal Justice Act, 1993, in relation to compensation orders made by a trial judge on conviction. Section 9 of the Act provides that, where an award of damages is made in a civil case, and a compensation order has previously been made in respect of the same injury or loss, adjustments may be made to the amount of compensation awarded in the criminal case, so that it does not exceed the amount of damages. Where the damages awarded exceed the amount of the compensation order, only the sum of the excess is to be paid in damages; and where the damages awarded are less than the sum awarded as compensation, then the court may order that the sum by which the compensation exceeds the damages be repaid to the convicted person. The section then provides that, upon the award of damages being made, the compensation order shall cease to have effect.

4. The Inadequacies of the Criminal Law

2.22

In favour of the retention of exemplary damages, it may be argued that the criminal law is often inadequate to vindicate all the rights of the individual.

Some important interests may not be designated criminal wrongs. Other wrongs may be both criminal offenses and civil wrongs. Where a wrong does constitute a civil offence, the discretion to prosecute belongs, in many cases, entirely to the Director of Public Prosecutions. Under the Criminal Justice (Administration) Act, 1924, private prosecutions may only be brought under limited circumstances.³⁰ In cases where no prosecution is brought, it is desirable, in order that the victim of the wrong may obtain redress, and for the benefit of society at large, that the victim bring an action for damages, and that there be the possibility that some form of exemplary damages be awarded. An award of exemplary damages may vindicate interests which are of central importance to society but which are either not protected by the criminal law, or have not been subject to prosecution in that particular case. It also vindicates the strength of the law which has been violated.

2.23

A further inadequacy of the criminal law relates to wrongs committed by corporations.³¹ Sanctions, such as imprisonment, which are relied on by the criminal law to provide adequate punishment or deterrence in respect of individuals, are obviously ineffective in the case of corporations. A fine, which is likely to be the only available criminal sanction, may not be sufficient to punish or deter. Exemplary damages may achieve this purpose more readily, providing a sanction appropriate to the defendant's economic strength, and to the gravity of the wrong.

5. Intangible Losses

2.24

Exemplary damages play an especially important role in relation to intangible losses. The English Law Commission have placed particular emphasis on this, demonstrating the historically important part which exemplary damages have played in the protection of personality interests and the redress of intangible losses. Indeed, it is argued in the English Law Commission's Consultation Paper that it is difficult to style any award of damages for injury to interests of personality as purely compensatory. Given the indeterminate nature of the interests involved,

Exemplary damages are therefore a more suitable remedy than compensatory damages, in certain cases.

2.25

The English Law Commission Consultation Paper demonstrates that exemplary damages have been consistently awarded by the courts in cases of defamation, false imprisonment, assault and battery: torts which directly protect personality interests. Exemplary damages are seen as having a special and distinct role in the protection of these interests, and of vindicating individual rights as they relate to them. According to the paper, in a country without a written constitution, the awarding of exemplary damages is an especially vital technique for the protection of civil liberties. In the Consultation Paper, the English Law Commission gives as one of its reasons for recommending the retention of exemplary damages in English law, that “there is an intrinsic value in protecting personality rights and in empowering citizens to enforce those rights.”³³ This conclusion is reenforced by the final recommendations of the English Law Commission.³⁴

2.26

It is interesting to compare the English Law Commission's approach with the situation in Ireland, where the Supreme Court has expressly related the awarding of exemplary damages to the vindication of rights enshrined in the Constitution, and has stated the importance of exemplary damages as a weapon with which the courts can defend the constitutional rights of the individual.³⁵ This coincides with the English Law Commission's view of exemplary damages as a necessary means of protecting individual rights.

PART II

CHAPTER 3: EXEMPLARY AND AGGRAVATED DAMAGES IN THE ENGLISH COMMON LAW

Historical Evolution

3.01

The historical precedents for punitive/exemplary damages are ancient and venerable. Punitive damages were awarded in Babylonian law under the code of Hammurabi, the earliest known legal code.¹ The Hittite laws of about 1400 BC also allowed for their recovery, as did the Hindu Code of Manu of about 200 BC.² Multiple damages awards were made under Roman law, and many commentators assert that the Roman law of delict was punitive in nature.³ The delict of injuria (insult) for example, has been seen by commentators as a basis for punishment by way of a monetary award:

3.02

The origins and early development of exemplary damages in the English common law are obscure. The first recorded awards of exemplary damages in the English courts are not to be found until the eighteenth century. It is useful, however, to place exemplary damages in the context of the development of the early common law, and of the remedies and sanctions for which it provided.

3.03

In early Anglo-Saxon law, the necessity to limit recourse to the blood-feud resulted in the development of a complex system of composition, of the

payment of bot (compensation) and wer to the injured party or his family.⁵ In the twelfth century, this system was replaced, in the English courts at least, with “marvellous suddenness”⁶ by a system which made the most serious offenses crimes against the King (and abolished bot and wer for their commission), made lesser offenses punishable by monetary fines (replacing wite) and in other cases replaced the bot with an award of damages.⁷ Gradually, damages became the dominant remedy in civil actions.⁸ In the early stages of their development, awards of double or treble damages were common.⁹

3.04

In the early common law, at the point where awards of damages first began to be made, there was no clear conception of the civil/criminal divide.¹⁰ Although civil actions were distinguished, all causes of civil action, including torts, were considered to be punishable offenses.¹¹ Pollock and Maitland emphasise that, in this period:

3.05

The fourteenth and fifteenth centuries saw the emergence of a distinct civil law.¹³ Increasingly, the concept of intent became central to the criminal law, and criminal liability became associated with moral wrongdoing, rather than with the mere fact of injury. In this it differed from the civil law of the time, which retained its basis in strict liability.¹⁴ By this period, compensation had come to be identified with civil remedies. Holdsworth quotes Hale, explaining the differing effects of incapacities such as madness, in the civil and criminal laws:

3.06

The first express awards of exemplary damages were made in judgements of the English courts of the eighteenth century.¹⁶ They concerned punishable conduct by agents of the State, which interfered with the personal rights of the plaintiffs. Awards of exemplary damages were made in two cases which arose out of the government's suppression of John Wilkes's The North Briton. In Wilkes v Wood, the plaintiff challenged the search of his home on foot of a general warrant, and was awarded large damages for trespass. Pratt L J held that

3.07

In the second case arising out of the incident, Huckle v Money,¹⁸ a journeyman printer who had been taken into custody during the raid on the North Briton, was awarded £300 damages. Lord Camden accepted that the plaintiff had not suffered any serious injury, but, notwithstanding this, refused to set aside the award as excessive. He stated that the jury had been correct in awarding exemplary damages, since:

3.08

Although these cases are the first in which awards of exemplary damages are recorded, it is likely that the doctrine of exemplary damages had already developed to some extent in the English common law. Several theories have been put forward as to the possible evolution of a category of exemplary damages.¹⁹ It has been suggested that it may have emerged in order to circumvent the power of a defendant, under the Writ of Attaint, to take proceedings against the jury where they had awarded an excessive sum of damages against him. The doctrine of exemplary damages provided an additional

justification for substantial awards, and thus strengthened the immunity of the jury, and the strength of the jury as an institution. A second explanation lies in the unavailability, under the early common law, of damages for mental anguish, embarrassment and other intangible loss. Exemplary damages may have been used to fill this lacuna. In the early case of Tullidge v Wade,²⁰ Judge Bathurst stated:

3.09

Another possible reason for the development of a category of exemplary damages is the need to forestall revenge.²² Finally, it is possible that exemplary damages were developed as a civil law response to the criminal law's inadequacy in protecting offenses against the person, in contrast to the protection given to offenses against property.

3.10

Whatever the merits of these various explanations of the origins of exemplary damages, it appears that the development of the doctrine from the eighteenth century onwards was relatively unprincipled. Awards of exemplary, punitive or vindictive damages continued to be made by the English courts, but the judgements contain no explanation of the basis of the awards.²³ In Ireland the law was applied in a similarly haphazard manner.²⁴

The Present English Law

3.11

The present English law in relation to the award of exemplary damages is regarded by many as unsatisfactory and unprincipled.²⁵ The combined effect of the decisions in Rookes v Barnard²⁶ and AB v South West Water Services²⁷ has been to place strict limits on awards of exemplary damages.²⁸ The Court

of Appeal has attempted, in Broome v Cassell & Co,²⁹ to excise Rookes v Barnard, and restore exemplary damages to their former central position, but this attempt has been conclusively rejected by the House of Lords, on appeal in the same case.³⁰ The English Law Commission, in its Report on Exemplary, Aggravated and Restitutionary Damages,³¹ has provisionally recommended extensive changes in the English law of exemplary and aggravated damages.³²

Rookes v Barnard: Exemplary Damages Reluctantly Accepted as Legitimate but Awards Constrained

3.12

The case of Rookes v Barnard.³³ decided in 1964, marked an important watershed in the development of the law of exemplary damages in English law. The case concerned an industrial dispute over membership of the Association of Engineering and Shipbuilding Draughtsmen (AESD), a trade union. The appellant, an employee of BOAC, had resigned his membership of the union, following a disagreement with it. His fellow employees, including the respondents, all of whom were members of the union, threatened industrial action if the appellant was not dismissed from his post, and the appellant was duly dismissed by his employers, despite the absence of any breach of the employment contract on his part. The appellant claimed damages against the respondents for using unlawful means to induce BOAC to terminate his contract of service, and for conspiracy. The jury found in favour of the appellant and awarded exemplary damages, on the basis that there had been a deliberate attempt to bring illegal pressure to bear on BOAC to dismiss the appellant.

3.13

In his House of Lords speech in the case, Lord Devlin made the important distinction between aggravated and exemplary damages, confirming the status of aggravated damages as compensatory. He viewed exemplary or punitive damages as an anomaly within the civil law,³⁴ but held that, given the long history of exemplary damages in English law, it was not within the power of the House of Lords to abolish them.³⁵ Lord Devlin was also convinced that, in certain circumstances, the award of exemplary damages would serve a useful purpose in vindicating the strength of the law; to that extent their anomalous nature could be disregarded.³⁶ He therefore restricted awards of exemplary damages to three categories of situations:

3.14

Lord Devlin went on to set out considerations which should be taken into account in the assessment of any award of exemplary damages.³⁷ They are:

3.15

Given the strictures of Lord Devlin's limitations on exemplary damages, compensatory, including aggravated, damages must be relied on to do much of the work which might previously have been done by exemplary damages. Lord Devlin stated that, in making an award of exemplary damages, the jury must be directed to have regard to the sum of compensatory damages awarded. The jury should be directed that exemplary damages should be awarded “if, but only if” the sum of compensatory damages is inadequate to punish the defendant.³⁹

3.16

There has been much criticism of Lord Devlin's three categories of situations in which exemplary damages may be awarded.⁴⁰ In relation to the first category, it has been questioned why oppressive action by a State authority should be distinguished from similar action by a private entity wielding comparable power, such as a privatised industry, a large corporation, or a trade union. Concerning the second category, critics have pointed out that it is illogical to penalise conduct motivated by the desire for profit, while leaving unpunished conduct motivated by spite or malice.

Rookes v Barnard Criteria Loosened in Cassell & Co v Broome

3.17

Dissatisfaction with Rookes v Barnard⁴¹ was demonstrated by the attempt by the Court of Appeal, in Broome v Cassell & Co,⁴² to overthrow it. Lord Denning in that case described Lord Devlin's categorisation as “hopelessly illogical and inconsistent”. This view was not shared by the House of Lords, which, on appeal,⁴³ reinstated the doctrine of Rookes v Barnard. They did attempt to mitigate its strictures, however, by adopting a broad interpretation of Lord Devlin's categories.

3.18

In regard to the first category, Lord Hailsham interpreted it as applying, not just to servants of the government in the strict sense of the word, but also to the police, local officials, and:

Lord Reid also interpreted the scope of this category broadly:

Lord Reid saw the category as including “all those who by common law or statute are exercising functions of a governmental character.” In Lord Diplock's opinion, the first category was not confined to torts committed by servants of central government. It embraced all persons purporting to exercise powers of government, central or local, conferred on them by statute or at common law by virtue of the official status or employment which they held.⁴⁶

3.19

A similar approach was taken by the House of Lords in relation to Lord Devlin's second category. Lord Hailsham thought that, on this point, “a broad rather than a narrow interpretation of Lord Devlin's words was absolutely essential.”⁴⁷ It was not necessary, in order to ground recovery of exemplary damages, to show that the defendant had calculated that the sum of damages which might be awarded to the plaintiff would be less than the defendant's profit. It was only necessary to show, generally, that the defendant had acted with knowledge that he would more than likely profit from the tortious action:

whether this was because the potential plaintiff was unlikely to sue, or because any award of damages he might recover would be negligible, was immaterial.⁴⁸

3.20

Thus, although the categorisation imposed by Rookes v Barnard was affirmed, it was indicated that the House of Lords would tolerate some flexibility in the application of the categories. In the case of at least one of the speeches, that of Lord Wilberforce, this flexibility was grounded in an express ambivalence as to the compensatory or punitive nature of exemplary damages.⁴⁹ Lord Wilberforce, while accepting that the judgement of the House of Lords in Rookes v Barnard must stand, expressed grave reservations as to its alteration of the law, and a certain amount of sympathy with the Court of Appeal's attempt to excise it.⁵⁰ In his speech, he doubted whether a single purpose could be discerned from any particular award of damages, as each plaintiff might have many motives in seeking the award.⁵¹ It was regrettable, therefore, that damages had been rigidly compartmentalised with reference to their purpose; in this Lord Wilberforce was particularly concerned that the awarding of damages under a number of headings would lead to excessive amounts being awarded by juries.

Rookes v Barnard to Apply in Limited Causes of Action: AB v South West Water Services

3.21

The scope of application of exemplary damages was further diminished by the decision by the Court of Appeal in 1993 in the case of AB v South West Water Services.⁵² That case placed additional restrictions on the award of exemplary damages, limiting the number of torts in regard to which they could be awarded, to those torts in respect of which exemplary damages had been awarded prior to the decision in Rookes v Barnard. The case raised the question of whether the plaintiffs could recover exemplary damages for the tort of public nuisance. In holding that they could not, and in restricting recovery of exemplary damages to a settled range of torts, the Court of Appeal relied on dicta of the House of Lords in Cassell & Co v Broome,⁵³ where Lord Diplock had stated that:

3.22

The effect of the decision in AB v South West Water Services is that further development of the English law of exemplary damages is largely forestalled. One commentator has lamented that: “the law is now fossilised in a form dependent on the accidents of pre-1964 litigation.”⁵⁵ It is clear that, however liberally the courts may construe the Rookes v Barnard judgment, the exceptions it allows to the general prohibition on exemplary damages are confined to a determinate range of torts. On an examination of the caselaw, it is not entirely clear what this range of torts may be. There are conflicting authorities, for example, on whether deceit is included within the range of torts for which exemplary damages are recoverable.⁵⁶ The English courts have been steadfast in their refusal to extend recovery of exemplary damages to cases of negligence, and, following AB v South West Water Services, such cases would now clearly be excluded.⁵⁷ It would appear, however, that in some cases of statutory torts, created subsequent to Rookes v Barnard, exemplary damages may be recoverable. In Bradford Metropolitan City Council v Arora,⁵⁸ it was held that exemplary damages could be recovered for racial and sexual discrimination under the Race Relations Act 1976.⁵⁹

Quantum of Exemplary Damages

3.23

In the recent case of Thompson v Commissioner of Police,⁶⁰ the Court of Appeal set limits to the amount of exemplary damages that could be awarded by a jury, and laid down guidelines for the directions to be given to a jury assessing damages. The Court held that an award of £50,000 was the maximum appropriate for exemplary damages in a civil action against the police. This was, the Court held, a figure:

3.24

The Court of Appeal held that, where exemplary damages were appropriate, it should be explained to the jury that such an award was exceptional, and that such damages should only be awarded where the compensatory and aggravated damages awarded would not have the effect of adequately punishing the defendant. It would provide a useful check on exemplary damages, the Court held, if it were accepted that the total sum of damages, including exemplary damages, should not exceed three times the basic (compensatory) damages awarded. In response to a submission that the disciplinary proceedings available against the officers concerned should be taken into account in the calculation of damages, the Court held that this would be permissable only where there was good evidence that the proceedings were likely to take place, and there was a reasonable chance that they would succeed.

Aggravated Damages

3.25

Prior to the House of Lords' decision in Rookes v Barnard, the separate identity of the award of exemplary damages was not clearly established, and the term “aggravated damages” was often used interchangeably with “punitive damages” and “exemplary damages”. In that case, Lord Devlin stressed that aggravated damages were compensatory in nature, and that they could be awarded in cases in which:

3.26

The award of aggravated damages looks to both the injury to the feelings of the plaintiff, and to the conduct of the defendant in injuring him. In English law, before there can be an award of aggravated damages, it must be shown both that there was exceptional conduct on the part of the defendant, such as malice, insolence or arrogance, and that this resulted in mental distress or suffering – not physical suffering⁶²– on the part of the plaintiff. Furthermore, the plaintiff in the case must be aware of the malice or exceptional conduct of the defendant, so that it may be shown that he has been affected by it.⁶³

3.27

An award of aggravated damages may be made in respect of the conduct

of the defendant subsequent to the wrong, for example during trial. In Sutcliffe v Presdram Ltd,⁶⁴ Nourse J in the Court of Appeal listed the factors which, in a libel case, might ground an award of aggravated damages, as including:

3.28

Lord Devlin, in his speech in Rookes v Barnard, saw aggravated damages as making exemplary damages unnecessary in many cases. Despite his view of aggravated damages as being compensatory, he stated that “aggravated damages in this type of case can do most, if not all, of the work that could be done by exemplary damages”. Thus, since the courts refer both to the conduct of the defendant and the effect on the plaintiff, there has been some ambiguity as to whether the function of the award of aggravated damages is compensatory or punitive, or an amalgam of both. This ambiguity may be seen in Lord Hailsham LC's dicta in Cassell & Co v Broome⁶⁶:

3.29

The requirement that, in order for aggravated damages to be awarded, there must be exceptional conduct on the part of the defendant, characterised by malice, insolence or arrogance, leaves the award of aggravated damages in negligence cases open to question. The English courts have held that aggravated damages may not be awarded in negligence cases or in cases of breach of contract. In Kralj v McGrath,⁶⁸ the Court implied that it was the punitive nature of aggravated damages which made them unsuitable to be awarded in negligence cases. Woolf J stated:

3.30

The exclusion of aggravated damages in negligence and breach of contract cases was reaffirmed by the Court of Appeal in AB v South West Water Services.⁷⁰ In that case the Court also placed a further limitation on the recovery of aggravated damages, when it held that the plaintiff's feelings of anger and indignation at his treatment by the defendant were not sufficient to ground aggravated damages, since such feelings did not constitute pain or suffering.⁷¹

CHAPTER 4: EXEMPLARY DAMAGES IN OTHER COMMON LAW COUNTRIES

4.01

Since the decision of the House of Lords in Rookes v Barnard,¹ the courts of other common law countries have been concerned to prevent or limit the impact of that decision in their own law. It now seems clear that Rookes v Barnard is not a potent force outside England, and that awards of exemplary damages are acceptable in the majority of common law countries. Having given a wider sphere of application to exemplary damages, the courts of Canada, Australia and New Zealand have developed jurisprudence on the principles on which awards of exemplary damages are to be based, and in particular, on the standard of culpability which gives rise to liability for exemplary damages.²

Canada: Rookes v Barnard Rejected³

4.02

The Canadian courts award both aggravated and exemplary damages. A clear distinction is made between the two types of awards, and aggravated awards are regarded as compensatory.⁴

4.03

In the case of Vorvis v Insurance Corporation of British Columbia⁵, the Canadian Supreme Court rejected the limitations placed on exemplary damages by Rookes v Barnard. Although the Court confirmed that exemplary damages could be awarded under Canadian law, it stated that such awards should be confined to cases of extreme conduct deserving of condemnation and punishment. The conduct would have to be harsh, vindictive, reprehensible or exhibit a malicious motive, in order for exemplary damages to be awarded.

4.04

Despite this cautious approach, the Canadian courts have allowed for the

recovery of exemplary damages in cases of negligence, albeit only in rare cases. In Robitaille v Vancouver Hockey Club,⁶ the British Columbia Court of Appeal upheld an award of exemplary damages for negligence and explained its decision as follows:

4.05

In Dhalla v Jodrey,⁸ Jones JA, giving judgement in the Supreme Court of Nova Scotia, stated obiter that exemplary damages could be awarded in addition to general damages in a negligence case. He relied on a passage from Waddams, The Law of Damages:

Australia: Rookes v Barnard Rejected

4.06

The Australian courts have also rejected the Rookes v Barnard limitations, in Uren v John Fairfax & Sons, Pty Ltd, and the connected case of Australian Consolidated Press v Uren.⁹ In the first case, the High Court of Australia ruled that exemplary damages could be awarded where there was a “contumelious disregard of the rights of the plaintiff”. Exemplary damages were distinguished from aggravated damages on the basis that the state of mind of the defendant was relevant in exemplary damages cases but not relevant to an award of aggravated damages. Therefore, it would not be necessary to establish malice to ground an award of aggravated damages, and aggravated damages could be awarded in cases of negligence. In the later case of XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd,¹⁰ the High Court emphasised the deterrent and social function of exemplary damages. It detected a social purpose in the English conception of exemplary damages:

4.07

Again, in Lamb v Cotongo,¹¹ the Court saw the aim of an award of exemplary damages as deterrence of both the defendant and of others, stating that: “the deterrence which is intended extends beyond the actual wrongdoer and the exact nature of his wrongdoing.”¹²

4.08

In the past decade, the Australian courts have moved towards an acceptance of awards of exemplary damages in negligence cases. The foundations were laid in Lamb v Cotongo,¹³ in which it was held that:

4.09

In Coloca v BP Australia,¹⁴ the Supreme Court of Victoria held that exemplary damages could be awarded for personal injuries caused by negligence, but that such awards would be “unusual and rare”, and should be awarded only where the conduct of the defendant towards the plaintiff merited punishment.

4.10

In contrast to the liberal approach of the Australian courts towards awards of exemplary damages, there have been a number of legislative restrictions on such awards. In New South Wales, the legislature has abolished exemplary damages in cases of motor accident injuries, industrial injuries, and defamation claims. In Victoria, exemplary damages have been abolished in relation to motor accident cases and industrial injury claims.¹⁵

4.11

The decision in Lamb v Cotongo¹⁶ is also interesting on the issue of insurance cover for an award of exemplary damages. In the case, the Australian High Court approved an exemplary damages award where the plaintiff was indemnified against the award. The Court reasoned that the object of the award was not alone to deter the defendant, but also to deter other persons of like mind and, generally, to deter conduct of the same reprehensible kind.

4.12

Another issue which has been explored by the Australian courts is that of the award of exemplary damages in cases of joint tortfeasers. In XL Petroleum

(NSW) Pty. Ltd. v Caltex Oil (Australia) Pty. Ltd,¹⁷ the High Court of Australia held that there was no objection in principle to the making of an exemplary award against one of multiple defendants, and confining the award to compensation in respect of the others.

New Zealand: The Complicating Variable of No-Fault Liability¹⁸

4.13

The situation in New Zealand differs from that in the other jurisdictions so far discussed in that the New Zealand law of damages has been shaped by the Accident Compensation Act, 1972, which established a comprehensive no-fault compensation scheme for personal injury as a result of accident. Under the Act, compensatory and aggravated damages cannot be awarded for such injuries, but the Act is silent on the question of exemplary damages. In Donselaar v Donselaar,¹⁹ the New Zealand Court of Appeal held that the Act did not preclude the award of exemplary damages. In arriving at this ruling, the Court had to circumvent the objection that exemplary damages are parasitic on compensatory damages: since they arise indirectly out of the injury, it is argued, they cannot be awarded in cases where no award of compensatory damages is made. This position is inferred from Lord Devlin's dictum that, in order for exemplary damages to be awarded, the plaintiff must be the victim of punishable behaviour.²⁰ Where no compensatory damages are awarded, the implication is that the plaintiff has suffered no compensatable injury; therefore her receipt of a exemplary damages “windfall” award, imposed to serve a public law function, is unjustifiable. This approach creates difficulties in cases to which the Accident Compensation Act applies, as the Act's exclusion of compensatory damages would seem to exclude by implication any award of exemplary damages.

4.14

Cooke J, giving judgement in the Court of Appeal, considered that the Accident Compensation Act did not intend to preclude awards of exemplary damages in the cases to which it applied. He therefore saw no obstacle to awarding exemplary damages in the case before him. Cooke J admitted that the award of exemplary damages without a compensatory award created difficulties in the assessment of quantum;²¹ but he found that any such difficulties were overridden by considerations of social policy, which made it essential to allow for the award of exemplary damages as effective sanctions against certain wrongs. At a time of change in New Zealand society the law must not withhold:

4.15

In a judgment handed down on the same day as that in Donselaar, the Court of Appeal, in Taylor v Beere,²³ followed Australian Consolidated Press v Uren,²⁴ in holding that the restrictions imposed in Rookes v Barnard²⁵ were not binding on the New Zealand courts. The court envisaged a wide scope for exemplary damages. Richardson J saw exemplary damages as performing a vital social function, since the criminal law cannot be the only “vehicle of social control of an increasingly diverse and multi-value society.” In the light of this, it cannot be assumed that the role of the civil law is purely compensatory: tort law,

4.16

The Court in the Donselaar²⁷ case held that since, under the Accident Compensation Act, compensatory or aggravated damages could no longer be awarded, purely punitive or exemplary damages would have to be made to do some of the work previously done by aggravated damages. Thus, the distinction between aggravated and exemplary damages is no longer very clear in New Zealand law.

South Africa

4.17

The South African law of tort, known more commonly as the law of delict, has its basis in Roman-Dutch law. The status of punitive/exemplary damages in South African law is controversial. It appears that, in general, exemplary damages may not be recovered. Where exemplary-type awards have been made, it is also possible to classify them as aggravated damages, or as a species of “sentimental damages” with a basis in the distress or suffering of the plaintiff.²⁸

4.18

In a recent case dealing with the award of punitive damages for breach of constitutional right, Ntandazeli Fose v Minister of Safety and Security,²⁹ the Constitutional Court refused to award punitive damages for breach of the plaintiff's constitutional rights.³⁰ The plaintiff in the case had suffered serious assault at the hands of members of the security forces. He sought a substantial award of “constitutional damages”, which were to include “an element of punitive damages”.³¹ Discussion of the issues in the Constitutional Court was in the context of section 7 (4) (a) of the Interim Constitution of South Africa, which allowed for a cause of action and “appropriate relief” against the State for infringement of a fundamental constitutional right. Ackermann J held that there was no reason why “appropriate relief” under this section should not include an award of damages, where this would be necessary to protect the rights infringed. He expressed serious reservations, however, about the award of exemplary damages, both in general and in particular against the State for breach of constitutional rights.³² He concluded that:

4.19

Central to the rejection of punitive damages by the Court was the public policy consideration that such awards made against the state would place an unjustifiable burden on public resources.³⁴ It was suggested by Didcott J, obiter, that a punitive damages award against a private corporation might be more easily justified.³⁵

Nigeria

4.20

After some initial uncertainty, the Nigerian courts have now rejected the doctrine of Rookes v Barnard, and have accepted that exemplary damages can

continue to be awarded under Nigerian law.³⁶ In Ezeami v Ejidike³⁷ the Supreme Court held, obiter, that Rookes v Barnard was “of strong persuasive authority” in Nigerian law. Dicta of the Court of Appeal, in Shugaba Abdul Rahman v Minister of Internal Affairs³⁸ suggested that Rookes v Barnard might be binding on the Nigerian courts, but the Supreme Court found otherwise in Eliochin v Mbadiwe,³⁹ finally issuing a decisive rejection of Lord Devlin's restrictions, and awarding exemplary damages.

Conclusions

4.21

The caselaw which has been discussed in this Chapter demonstrates that the courts of commonwealth countries have considered exemplary damages carefully and on a principled basis. The English law has for the most part not been considered persuasive. Whilst the trend in the majority of common law jurisdictions appears to be towards a wide availability of exemplary damages, limited by a high standard of culpability, it would seem that South Africa is an exception to this.

4.22

A striking feature of some of the leading commonwealth cases has been the emphasis placed by the courts on the social function and practical effect of exemplary damages, and on the need to consider them in the wider social context. This may serve either to broaden the scope of their recovery (as in New Zealand) or to limit it (as in South Africa). The law of the commonwealth jurisdictions demonstrates the wide scope which exists for the development of exemplary damages within the common law, and in doing so suggests that there remains much possibility for the development, both judicial and legislative, of the Irish law.

CHAPTER 5: PUNITIVE DAMAGES IN THE UNITED STATES

5.01

In the US, more so than in other common law jurisdictions, the availability of punitive damages in tort actions is well established.¹ Punitive damages are awarded on the basis of wilful or wanton conduct, or of a conscious and deliberate disregard of the interests of others.² Their purpose is to punish outrageous conduct, and to deter both the defendant and others.³ As a result of their central place in the legal system, US jurisprudence regarding punitive damages is highly developed, and the courts have addressed many of the difficult issues inherent in such awards. US punitive damages law is also of particular interest from an Irish perspective, since it has developed against the background of a written Constitution, which has at times been an influence, and at times a constraint, on the development of the law. Awards of punitive damages in the US courts have been subjected to constitutional challenge on a number of grounds, including due process, equal protection, excessive fines and double jeopardy. Although the courts have been dismissive of arguments that punitive damages are in themselves unconstitutional,⁴ particular awards may be struck down in certain circumstances.

5.02

There has been considerable concern in the US that awards of punitive damages may be unreasonably high. Since the 1960s, when punitive damages first began to be awarded for bad-faith breach of insurance contracts and in products liability cases, punitive awards have been high and frequent. There has been criticism of the lack of control over the quantum of punitive damages, and the

breadth of jury discretion in the assessment of quantum.⁵ Although the validity of concerns over excessive awards is questioned by some commentators, it has led to numerous constitutional challenges in the courts, and to repeated intervention by State legislatures.

Constitutional Challenges to Punitive Damages Awards

Due Process

5.03

The most significant constitutional difficulties with punitive damages have arisen in relation to due process, both substantive and procedural.⁶ In the 1927 case of Louis Pizitz Dry Goods Co v Yeldell,⁷ the Supreme Court held that punitive damages were not in violation of substantive due process, as then understood.⁸ That case involved the vicarious liability of an employer for punitive damages. The Supreme Court held that the imposition of punitive damages on the employer did not violate the guarantee of substantive due process. It must be assumed that if the imposition of such an award is justifiable in these circumstances, the compatibility of the majority of punitive damages awards with substantive due process is assured.

5.04

Further difficulties have arisen regarding the procedural protections in punitive damages cases, and the mechanisms of assessment of punitive damages. In particular, where very large punitive damages awards are made, procedural due process may be violated.

5.05

In the cases of Pacific Mutual Life Insurance v Haslip,⁹ and TXO Production Corporation v Alliance Resources,¹⁰ the Supreme Court, while upholding the constitutionality of the punitive awards before them, held that

excessive punitive damages might involve a breach of procedural due process.¹¹ In a third case of a constitutional challenge before the Supreme Court, Oberg v Honda Motor Company,¹² the Court reversed a finding of constitutionality of an award by the Oregon Supreme Court, and remanded the award for reconsideration, holding that the prohibition on judicial review of punitive damages awards in the Oregon Constitution, was contrary to the due process guarantee.¹³ Following this, in the recent case of BMW v Gore¹⁴, the Supreme Court struck down an award of $2 million punitive damages, on the grounds that the award was grossly excessive and that the defendant had not received sufficient notice that such a severe penalty, effectively equivalent to a criminal penalty, would be imposed. The Court held that:

5.06

The Court listed three “guideposts” to be taken into account in deciding whether there had been sufficient notice of the award:

5.07

Following BMW v Gore,¹⁶ the US Supreme Court has struck down punitive awards in a number of cases.¹⁷ In Continental Trend Resources, Inc v

OXY USA Inc.,¹⁸ an award of $30 million, remanded to the tenth circuit by the Supreme Court for reconsideration, was found to be excessive and in violation of the due process guarantee. In addition to the three “guideposts” set out in BMW, the Court also took into account the wealth of the defendant. The defendant's wealth could, it was held, be especially significant where a wealthy defendant had acted oppressively in seeking to force or prolong litigation, or had attempted to “impose its corporate will” on the plaintiff.

5.08

A further aspect of the impact of procedural due process on punitive damages is the possibility of imposing more stringent procedural safeguards and higher standards of proof in punitive damages cases.¹⁹ Many states have made legislative provision for a higher standard of proof, usually an intermediate standard which may require “clear and convincing evidence”. Some commentators have argued that an intermediate standard of proof may be constitutionally required, given the serious consequences of an award of punitive damages. In order for this to be the case, however, it would have to be shown that the consequences of an award of punitive damages were more serious than the merely financial, for example, that the imposition of a punitive award resulted in the stigmatisation of the defendant. The grounds for a finding of this nature are generally regarded as dubious.²⁰

Double Jeopardy

5.09

In the majority of US states, potential criminal liability for a wrong does not preclude the award of punitive damages for the same wrong. Punitive damages and criminal penalties are seen as having clearly distinct functions, and are not regarded as capable of substituting one for the other. Contentions that punitive damages violate the Double Jeopardy Clause have been rejected by the courts in a majority of states,²¹ although a small number of state courts have held that punitive damages cannot be awarded for an act which may also be the subject of a criminal prosecution.²²

Excessive Fines

5.10

A further ground on which the constitutionality of punitive damages awards has been challenged is the eighth amendment's prohibition on excessive fines. However, the courts have repeatedly rejected challenges made on this

basis.²³ It would appear that an award of punitive damages will not be found to be contrary to the Eighth Amendment unless it can be shown to be quasi-criminal in nature.²⁴

Scope of the Availability of Punitive Damages

Torts

5.11

In most states, punitive damages are available in the majority of tort cases.²⁵ The primary exception to the availability of punitive damages for torts is negligence. In general, in the US, negligence is not enough to give rise to an award of exemplary damages, without some degree of “aggravated” negligence, involving “wilful or wanton” or reckless disregard for the rights of others.²⁶ In a number of states, “gross” negligence can ground a punitive award.²⁷ The Restatement (Second) of Torts, §908 does not accept gross negligence as capable of grounding punitive damages; some element of recklessness or outrageousness is required. It states that:

5.12

Although, in most states, the standard of culpability required for the imposition of punitive damages is a high one, in general it is not commensurate with the standard of intent which would ground liability in an intentional tort.²⁸ Wanton or reckless conduct does not amount to intentional conduct: therefore, in most states, there may be cases where intent is not established, yet where punitive damages are recoverable.

5.13

A punitive award may be made in a products liability case on the basis

of negligence, strict liability, or breach of warranty. The “MER 29” cases of 1967, which concerned the sale of a drug which had side-effects which were known to the company but undisclosed by it to the public, clearly established this.²⁹ However, the availability of punitive damages in such cases, particularly where liability has been on the basis of negligence, has been controversial.³⁰ The award of punitive damages in products liability cases causes particular difficulty, since in the nature of such cases, there is likely to be a large number of awards made in relation to one defective product, and the burden on the defendant may thus be very great. An additional difficulty is that, in this type of case, the award of punitive damages is likely to be made against a corporate defendant, and therefore questions arise as to the propriety of penalising innocent shareholders. These difficulties were acknowledged by Judge Friendly in Roginsky v Richardson – Merrell, Inc., when he warned of the dangers of “overkill” in products liability cases.³¹

5.14

Punitive damages may also, however, be particularly appropriate and particularly necessary in cases of products liability. As has been pointed out by commentators on the US law,³² a punitive award may be the only effective deterrent against a manufacturer who knowingly markets a defective and dangerous product, having calculated that the profits will outweigh any possible compensatory damages. This policy justification for punitive damages was recognised by the court in Sturm, Ruger & Co. v Day.³³ The Court held that, in relation to products liability, punitive damages could act as a deterrent in:

5.15

In the light of the concerns referred to above, a number of states have taken steps to restrict the recovery of punitive damages in product liability cases,³⁵ and several states have enacted legislation to prohibit their recovery altogether.³⁶

Contract

5.16

The general rule in US law is that punitive damages cannot be recovered for breach of contract;³⁷ but this exclusion has to some extent been eroded by the courts. In the majority of states, punitive damages may be awarded where there is a breach which also constitutes an independent tort. This exception is also allowed by the Restatement (Second) of Contracts,§355 of which states that:

Given the wide and ever-expanding range of torts, this exception can allow for punitive damages awards in a large proportion of contract cases. Liability in punitive damages in contract cases has arisen most frequently for fraudulent misrepresentation, and for the breach of an implied contract of good faith and fair dealing.³⁸

Liability of State Authorities

5.17

In contrast to the position in English law, where wrongdoing by the “servants of the government” is one of the exceptional cases in which exemplary damages can be recovered, the norm in the US is to except government and State authorities, as well as municipalities, from liability for punitive damages. This is grounded in the principle of sovereign immunity, and is also justified by the policy argument that punitive awards against public authorities would penalise innocent taxpayers. Both the federal government and many US states have enacted legislation which prohibits the award of punitive damages against State authorities. In Wisconsin, for example, statute precludes the recovery of exemplary damages even against agents and officers of the State.³⁹ At federal level, the Federal Tort Claims Act confers immunity from punitive damages awards on the US State.⁴⁰ It appears that at State level, where there is no legislation on this matter, the courts will adopt a similar approach, based on the public policy grounds referred to above, and will refuse to make punitive awards against the State.⁴¹

Vicarious Liability

5.18

In accordance with the punitive and deterrent function of punitive damages, the general rule in US law is that they may not be imposed on a defendant found vicariously liable for the wrong of another. This rule is subject to exceptions, most notably in relation to the liability of employers for the wrongs of employees. The general rule is that, where the employee is acting in the course of his employment, the employer may be liable for punitive damages.⁴² This allows for the imposition of punitive damages against an employer in cases where the employer has not been at fault, but is justified as an incentive to good management and a deterrent against the employment of incompetent employees.⁴³ The Restatement (Second) of the Law of Torts takes a more limited view of the vicarious liability of employers than that of many State courts. It provides that vicarious liability may be imposed where:

5.19

Under the Restatement, prior authorization, as well as ratification or approval may be implied from the action or inaction of the employer.⁴⁵

Limitations on the Quantum of Punitive Damages

5.20

In an attempt to address the difficulties with excessive awards of punitive damages and the consequent windfalls which may accrue to plaintiffs, states have imposed a number of restrictions on the quantum of punitive damages, either by imposing “caps” on quantum, by limiting awards in cases where there are multiple claims, or by apportioning a part of the award to the State.

5.21

In most states the limits affect only certain causes of action; however, in

Virginia, the statutory cap applies without exception.⁴⁶ Other states have limited the amount of punitive damages proportionate to compensatory damages awarded in the case.⁴⁷

Constitutionality of Legislative Restrictions

5.22

There has been some controversy as to the constitutionality of legislative restrictions on punitive damages. In a series of cases, the constitutionality of such limitations has been challenged before the courts, on the grounds that they violate principles of due process, equal protection, and access to the courts.⁴⁸ The courts have demonstrated a reluctance to hold limitations on punitive damages to be contrary to due process and equal protection guarantees. Both the US Supreme Court and the majority of state courts have applied a “rational basis” test, which presumes the validity of a statute where it is shown not to be arbitrary or irrational. The application of this test has ensured that the majority of the challenged provisions are upheld, since limitations on the quantum of punitive damages may be seen as serving a valid public purpose.⁴⁹ A minority of states have departed from this approach and applied a more stringent test of “intermediate level scrutiny” against which statutory limitations have been more readily struck down.⁵⁰

5.23

Challenges have also been brought to restrictions on punitive damages on the basis of state constitutional provisions which confer rights of access to the courts. Two arguments have been successful: that the restriction constitutes an unauthorised interference of the legislature with the plaintiff's common law rights, and that the restriction interferes with the plaintiff's right of redress, in the shape of the award made in his favour.⁵¹

Split Recovery Statutes

5.24

Split recovery statutes, which allow a portion of a punitive damages award to be recovered by the State, have been enacted in a number of US states in an attempt to deal with the “windfall” dilemma in cases where punitive

damages are awarded.⁵² The Florida Tort Reform and Insurance Act, 1986, for example, provides that 60% of punitive damages in personal injury or wrongful death cases are to be paid to the State.⁵³ Split recovery statutes have been subject to a number of constitutional challenges. These have been on two grounds: one, that they infringe the right to due process of the plaintiff, since they constitute an unfair “taking” by the State of the damages awarded to the plaintiff; and second, that any measure of damages which goes directly to the State contravenes the prohibition on excessive fines which is part of the due process protection contained in the Constitution.

5.25

Interestingly, findings by the courts that apportionments of punitive damages to the State are unconstitutional have been predicated on an interpretation of the awards as in part compensatory. In McBride v General Motors Corporation,⁵⁴ a provision in a Georgia statute which stipulated that seventy-five percent of all punitive damages awarded in products liability cases should be diverted to the State was struck down as unconstitutional on a number of grounds, the primary ground being that the plaintiff had a property right in the award of punitive damages. The Court reasoned that, since there was some compensatory purpose to an award of punitive damages, the plaintiff had a property right in the award which was protected by the due process guarantees in the Constitution. The Court also held that the statute was discriminatory, in that it allowed the State to claim a portion of damages from successful plaintiffs in product liability cases, but not from plaintiffs who had been successful in other causes of action.

5.26

In Kirk v Denver Publishing Co.⁵⁵ a Colorado State Court struck down a split recovery statute on the basis that it represented a taking of the plaintiff's property without just compensation, in violation of the fifth and fourteenth amendments. The Court held that the compensatory function served by punitive damages awards⁵⁶ meant that the award vested in the plaintiff on the making of the judgement, and could not afterwards be reclaimed by the State.⁵⁷

5.27

In Kirk v Denver Publishing, it was crucial that the terms of the statute which was struck down expressed the award as going first, in full, to the plaintiff, with a portion of it then being transferred to the State. Awards which are

expressed by statute to accrue directly to the State, without first going to the plaintiff, will not fall on the unfair “takings” challenge, since the damages are never in the possession of the plaintiff, and are therefore not “taken” from her. This was the reasoning adopted by the Supreme Court of Florida in Gordon v State⁵⁸, in which Florida's split recovery statute was upheld as constitutional. The Supreme Court held that there had been no “taking” of the damages in that case because the plaintiff had no right to receive the punitive damages: there was “no cognisable, protectable right to the recovery of punitive damages at all”. A distinction was drawn by the Court between compensatory damages, which the plaintiff did have a right to, and punitive damages. This accords with the nature of punitive damages as addressing not the injury to the plaintiff, but the wrongdoing of the defendant, and with the view that any recovery of punitive damages by the plaintiff is a “windfall”, which cannot accrue to her as of right.

5.28

Some commentators have identified Gordon v State, and other subsequent decisions, as indicative of a trend towards greater acceptance of split recovery statutes.⁵⁹ However, the characterisation of split recovery statutes as transferring a portion of damages directly to the State raises the possibility that, under the US Constitution, large awards of exemplary damages may be struck down as contravening the “excessive fines” prohibition in the Eighth Amendment.

Mass Tort Actions

5.29

One area in which the US jurisprudence is more developed than in other common law jurisdictions is that of the award of punitive damages in mass tort litigation. Difficulties have arisen in the US where a large number of actions have been taken in respect of the same wrong, with the possibility that punitive damages may be awarded in all or many of them; this situation has arisen, for example, in products liability cases.⁶⁰ In such a situation there is a danger of “overkill”: that a series of punitive awards against the same (usually corporate) defendant may result in what one commentator has described as “a form of corporate capital punishment.”⁶¹ The bankruptcy of the defendant following a series of punitive damages awards may be socially undesirable, resulting in the loss of jobs and services, and may also be disproportionate to the degree of wrongdoing by the corporate defendant. In addition, it may deprive other victims, who have been less speedy in bringing their claims, of any damages at all, either compensatory or punitive, for the wrong done to them. In Roginsky v

Richardson-Merrell⁶² Judge Friendly gave voice to some of these concerns, raising the possibility that:

5.30

Several proposals have been made to mitigate the “overkill” effect of punitive damages awards in mass actions. Owen⁶⁴ has proposed that plaintiffs in such actions be permitted to recover punitive damages only up to an aggregate sum, which could be either $5 million or 5% of the defendant's net worth. The disadvantage of this approach would be that plaintiffs whose case came to trial early would claim a disproportionate amount of the available damages, to the detriment of other potential plaintiffs.

5.31

A further proposal, recommended by the Restatement (Second) of Torts,⁶⁵ is that in each case arising out of the same wrong, the jury be informed of any other awards which have been given against the same defendant, or which may be imposed against the defendant in future.⁶⁶ Morris⁶⁷ has proposed that, where there are multiple claims, any assessment of punitive damages should be withheld until all compensatory claims are resolved.

5.32

Another possibility, in the US, is that where there is a series of claims against the same defendant in respect of the same wrong, there should be joinder of the claims, or the institution of a class action.⁶⁸ Under the US Federal Rules of Civil Procedure, a class action is possible provided a number of criteria are satisfied, regarding the number of plaintiffs, the similarity of their claims, the similarity of the legal and factual issues in dispute in the cases, and the adequacy of representation of the parties.⁶⁹ It is the view of many commentators, however, that joinder of claims may only be appropriate where there are a small

number of plaintiffs,⁷⁰ and that a class action may not be at all suited to the determination of “mass tort” claims. The Federal Rules Advisory Committee gave its opinion as follows:

5.33

The American Bar Association's Special Committee on Punitive Damages made a series of proposals for the regulation of punitive damages awards in cases where there are multiple plaintiffs.⁷² Amongst these was the suggestion that there be one mass trial in regard to punitive damages, which would be binding on all plaintiffs and future plaintiffs. The award would then be distributed amongst plaintiffs on a per capita basis and a portion placed in an interest-bearing fund, managed by trustees, for the benefit of future plaintiffs.

Insurance

5.34

Much concern has been expressed in the US at the availability of insurance for punitive damages awards. The majority of state courts have ruled insurance for punitive damages to be permissable, and have construed insurance contracts which make no mention of punitive damages, as providing cover for them.⁷³ It has been held that insurance contracts must be construed to give effect to the expectation of the insured,⁷⁴ and in most cases this has been seen as including an expectation that punitive damages be insured under the contract.

5.35

In a minority of states, insurance for punitive damages is prohibited as being contrary to public policy.⁷⁵ The leading case which advocates this position is Northwestern National Casualty Co. v McNulty,⁷⁶ in which the Court of Appeals for the Fifth Circuit refused to consider the terms of an insurance contract in a punitive damages case, since insurance cover for punitive damages would violate public policy. Judge Wisdom, giving judgement for the Court, reasoned that:

Conclusions

5.36

The US law of punitive damages is obviously more highly developed than that of other common law jurisdictions. Although the central role of punitive damages sets the US law apart from the Irish law, the difficulties which have arisen in relation to punitive damages in the US, and the measures which have been taken in response to these difficulties, are of great interest in regard to the emerging Irish law. In particular, the various mechanisms which US states have used to limit quantum, to divert portions of awards to the State, and to deal with cases involving multiple plaintiffs, suggest possible ways forward for the Irish law on these difficult issues. The role of the US Constitution in placing limits on punitive damages awards is also intriguing from an Irish point of view. Whilst “due process” challenges of the type brought to punitive awards in the US courts appear unlikely under the present Irish law, the possibility of a developing Irish due process law, with implications, as in the US, for punitive damages, should be borne in mind.

CHAPTER 6: DAMAGES IN CIVIL LAW JURISDICTIONS

Germany

6.01

In general, German law does not allow for the recovery of punitive damages. In the German civil law, non-monetary remedies are employed in preference to damages awards. Where damages are awarded, they are based primarily on the principle of compensation. Section 249 of the BGB provides for the basic principle of compensation in cases of delict, importing principles of restitution in kind, and the restoration of the plaintiff to the position which he was in prior to the commission of the wrong.¹ Section 847 of the BGB, which extends the application of section 823, provides that an injured party may be awarded “equitable compensation in money” for personal injury.²

6.02

Within the context of a compensatory system of damages, German law also recognises a second justification for an award of damages: the principle of satisfaction. This second principle, which originated in Swiss Law,³ has been especially to the forefront in cases concerning damages for non-economic loss. The principle of satisfaction is generally explained without any reference to the punishment of the defendant. It is explained simply as reparation for non-pecuniary harm, and is distinguished from punishment in that it is concerned with the victim of the wrong rather than the wrongdoer.⁴

6.03

In a case decided in 1955,⁵ the German Supreme Court was asked to rule on whether Section 847 BGB required a court, in assessing an award of damages, to take into account the culpability of the defendant. The Court stated

that there could be no direct penal function to a civil damages award. It did recognise, however, that where, as in the case of non-economic losses, the award and the measure of punitive damages could not be wholly explained by the principle of compensation, the “satisfaction” of the plaintiff for the wrong committed against him must be recognised as a further reason for the damages award.⁶ The Court held:

6.04

The Court stressed that the compensatory principle was the first and paramount principle by which damages were to be assessed; but the culpability of the defendant could also be a factor. In assessing damages in cases of non-economic loss, several factors should be taken into account. The first of these, and the most important, was the severity of the plaintiffs suffering. The second factor was the degree of blameworthiness of the tortfeaser:

Further factors to be considered were the economic circumstances of the injured party and the economic circumstances of the tortfeaser.

6.05

In arriving at the conclusions discussed above, the Court examined the historical evolution of the law of damages. It recognised that the ostensibly compensatory award of damages in civil law still bore the mark of its more punitive ancestors:

6.06

Caselaw both before¹⁰ and subsequent to the 1955 decision supports a partial justification of a damages award with reference to the quality of the defendant's conduct, where the case involves interference with basic personality rights, or intangible loss. In the Herrenreiter case of 1958,¹¹ it was recognised that the purpose of an award of damages in satisfaction was to re-assert the dignity of the victim of the wrong. The award of damages was seen as symbolic of the importance of human dignity and freedom. The Court held that awards of damages based on the principles of compensation and satisfaction could be made in cases of injury to personality rights, since the provisions of the BGB allowing for the award of damages must be interpreted in the light of the constitutional guarantees of human dignity and personal development.

6.07

Again, in the Ginseng case of 1961,¹² the Court recognised the importance of satisfaction where basic personality rights had been interfered with. In awarding a substantial sum of damages, the Court stressed that the defendant's motive had been profit, and that a significant award of damages was necessary to deter such conduct. The consequence of the Ginseng case, and the later Fernsehansagerin case, is that, for damages to be awarded in a case of intangible loss, there must be:

France

6.08

Exemplary damages are unknown to French law. The French Civil Code allows for recovery of damages, for either physical or intangible loss (dommages moraux), on the basis of fault. In cases where dommages moraux are awarded, the defendant's fault may be taken into account in the assessment of damages, and there have been suggestions from academic commentators that dommages moraux can be justified on the basis of the punishment of the defendant.¹⁴

Italy

6.09

Under Italian law, exemplary damages are not awarded. Compensatory damages may be awarded for either contract or tort, by either a civil court, or,

where the wrong also gives rise to a criminal case, by a criminal court. Article 2043 of the Civil Code provides that compensation is payable for the commission of any fraudulent, malicious or negligent act that causes unjustified damage. “Moral damages” may also be recovered, but only where the loss or damage suffered results from a crime. Where moral damages are not clearly quantifiable, they may be awarded on an “equitable basis”.

Belgium

6.10

Belgian law allows for the recovery of damages in cases of tort and breach of contract, on a compensatory basis only.¹⁵ Compensation is available for mental distress as well as economic loss. Damages may also be awarded for loss of reputation, but the quantum of such damages is usually so small as to be merely symbolic.

Denmark

6.11

Damages in the Danish legal system are made on a compensatory basis.¹⁶ By Act No. 599 of 9 August 1986, damages may also be awarded for a negligent violation of an individual's freedom, peace, honour or person.

The Netherlands

6.12

Under the law of the Netherlands, damages for tort and breach of contract, assessed exclusively on a compensatory basis, may be awarded only where there is specific statutory provision for them.¹⁷ There is some (restrictive) provision for civil remedies in criminal proceedings. Provision is made to co-ordinate awards made in the civil and criminal courts, to guard against two awards of damages being made in respect of the same wrong.

Greece

6.13

Compensatory damages for torts or breach of contract may be awarded by both the civil and the criminal courts, under Greek law.¹⁸ The basis for the award of damages is reparation for injury or loss, and the amount to be awarded is determined by the actual loss sustained.

6.14

Under Articles 919, 920 and 921 of the Civil Code, damages may be

awarded in several circumstances, amongst them where the injury was inflicted intentionally, in such a way as to contravene the morals of society.

Luxembourg

6.15

Compensatory damages may be awarded by both the civil and the criminal courts in Luxembourg; exemplary damages are not awarded.¹⁹ Damages are available for both mental distress and loss of reputation. Provision is made to co-ordinate the civil and criminal systems; where a plaintiff has brought a claim before a civil court, a similar claim may not be instituted on the criminal side.²⁰

Spain

6.16

Damages, which are assessed on a compensatory basis only, may be awarded in the Spanish civil courts, and, in appropriate circumstances, in the criminal courts.²¹ Compensation may be awarded for both material damage and mental distress. Damages for mental distress are awarded with reference to a number of factors, which include the character of the harm suffered, the financial position of the defendant, and whether there was an intention on the part of the defendant to cause harm to the plaintiff.

Portugal

6.17

Damages in Portuguese law are based on compensatory principles.²² The award must put the plaintiff in the same position as he would have been in had the injury or loss not occurred. Civil damages may be awarded in criminal proceedings as well as civil, where the loss relates to a criminal offence.²³

Austria

6.18

Although damages awarded by the Austrian courts are characterised as compensatory, the degree of culpability of the defendant is one factor which determines the level of damages to be awarded.²⁴ Lost profits may be recovered by the defendant where there is a high degree of culpability amounting to gross negligence or intent; whereas in a case of ordinary negligence, only

compensation for immediate damage may be recovered. Damages are generally awarded in the civil courts, but a criminal court may also make an award of damages following a verdict of guilty in a criminal case.

Finland

6.19

Under the Finish Act on Damages,²⁵ compensatory damages may be awarded in cases of intentional or negligent tortious conduct.²⁶ In tort cases, damages are usually not awarded for economic loss, but may be so awarded where the loss has been caused by a criminal act, or by an abuse of public power.

Norway

6.20

The Norwegian law of damages is contained in the Code on Damages.²⁷ Under the Code, damages are purely compensatory; no provision is made for the award of exemplary damages.

Sweden

6.21

The Swedish Act on Damages makes provision for liability for and calculation of damages.²⁸ Under the Act, damages are compensatory in nature. They are available for personal injury, mental distress and loss of reputation, but are awarded for pure economic loss only when they relate to an act which is also a criminal offence. Damages are normally awarded in the civil courts, but can be awarded in a criminal case, provided that this does not unduly complicate the proceedings.

Quebec

6.22

The law of the province of Quebec in relation to damages is interesting in that it provides an example of the importation of the predominantly common law concept of exemplary damages into a civil law jurisdiction. Under the original Civil Code of Lower Canada of 1866, exemplary damages were not recoverable. Damages recovered in tortious actions were envisaged, under Article 1053 of the Civil Code, as being purely compensatory.

6.23

Exemplary damages were introduced into Quebecois law, however, by

way of a number of legislative changes.²⁹ Express provision is made for exemplary damages in the Charter of Rights and Freedoms of Quebec, of 1976, where there is an unlawful and intentional attack on a right or freedom protected by the Charter.³⁰ Exemplary damages are recoverable not only in cases where a right in the Charter is violated through a tortious wrong, but also where the violation is through breach of contract.³¹ The Canadian Supreme Court has adopted a cautious interpretation of the meaning of “unlawful and intentional interference” in section 49 of the Charter. In Quebec (Public Curator) v Syndicat national des employés de l'hopital St-Ferdinand, the Supreme Court expressly rejected an approximation of unlawful and intentional interference with concepts of gross or exceptional fault. The Court held that, for unlawful interference to be characterised as intentional, the result of the wrongful conduct must have been desired:

6.24

The Court emphasised that this standard fell short of specific intent, but went beyond simple negligence, so that:

6.25

In the case of Augustus v Gosset,³² which was simultaneously heard by the Supreme Court, a similarly restrictive interpretation of the standard of fault necessary to ground exemplary damages was adopted. The Court held that the action of a police officer, in mistakenly shooting a suspect whilst pointing a loaded gun at him in an effort to prevent his escape, did not amount to “intentional interference” with his right to life.

6.26

The transportation of exemplary damages into the civil law system of Quebec has presented an anomaly which the courts have negotiated only with difficulty. The Canadian Supreme Court, adjudicating on exemplary damages claims under Quebecois law, has recognised the anomalous nature of exemplary

damages within the Quebecois legal system, but has nevertheless viewed exemplary damages as having become an integral part of the system of civil liability under the Charter of Rights and Freedoms. In Béliveau St-Jacques v Fédération des employées et employés de services publics inc.,³³ the Supreme Court held that an action for exemplary damages must be considered to be a part of the system of civil liability, and could not be dissociated from the principles of civil liability normally applicable.³⁴ The case concerned sexual harassment of an employee, contrary to the provisions of the Charter of Rights and Freedoms. The court held that, even if an award of exemplary damages were to be considered not to be dependent on an existing award of compensatory damages, such an exemplary award must at least be grounded on a finding of an unlawful interference with a right guaranteed by the Charter. As a result, it was impossible not to associate the award of exemplary damages with the general principles of civil liability.³⁵

6.27

Amendments made to the law of obligations in 1987 incorporated provision for exemplary damages into the Civil Code, in an attempt to harmonise its provisions with those of the Charter of Rights and Freedoms. Article 1677 provides that exemplary damages may be recovered where there is

6.28

There is express provision, in Article 1678, that exemplary damages shall not be awarded if the defendant has already been fined or paid exemplary damages in respect of the same wrong. Article 1679 provides that the amount of exemplary damages must not exceed that necessary to assure their deterrent function. All relevant circumstances must be taken into account in their calculation, including the wealth of the defendant. Article 1680 provides that an exemplary damages award may be directed to a body, designated by the Court, which is directly concerned with the prevention of the type of harm perpetrated by the defendant.

Conclusions

6.29

The law of damages in the civil law jurisdictions presents a very different prospect to the law of the common law jurisdictions which have already been considered, and to the Irish law. In the civil law systems, there is no acknowledged punitive purpose to awards of damages, although traces of an unacknowledged punitive purpose may be discerned in some jurisdictions by commentators. Although the exclusively compensatory character of damages awards in these jurisdictions establishes a solid civil/criminal boundary, it is interesting to note that several of the civil law jurisdictions surveyed above do not insist on a strict civil/criminal division as regards procedural matters, in that they allow civil damages to be claimed in the course of criminal proceedings.

CHAPTER 7: THE IRISH LAW

The Place of Exemplary Damages in Irish Law

7.01

The Irish courts inherited the English common law approach to damages, which allowed for the recovery of damages characterised as exemplary, punitive, substantial or vindictive, in certain cases of especial wrongdoing. There was for many years a dearth of modern authority on the position of aggravated, exemplary and punitive damages in Irish law, and it was uncertain whether the Irish law would follow the English in imposing restrictions on exemplary damages. Recent decisions have gone some way towards clarifying the law, and have set its development on a somewhat different course to that of the English law. It has now been made clear by the Supreme Court, in Conway v Irish National Teachers Organisation,¹ that recovery of exemplary damages in Irish law is not limited to the categories set out in Rookes v Barnard, and that exemplary damages may be recovered in Irish law, for breach of a constitutional right. The Constitution has thus been made fundamental to the Irish law of exemplary damages, and its demands are likely to give the development of the Irish law in this area a distinct character.

7.02

Once it is accepted that exemplary damages can be awarded for infringements of constitutional rights, the categorisation of Rookes v Barnard is rendered at least in part redundant. In regard to the first category, any oppressive conduct by a servant of the State would be likely to constitute a breach of a constitutional right; so this category is subsumed within the constitutional right ground of recovery. In addition to this, however, it is also established that exemplary damages may be recovered for breach of constitutional rights by a private individual. This possibility allows for very wide recovery, and may indeed encompass recovery of exemplary damages in many common law torts, since there is a high level of identity between the protection afforded by the personal rights provisions in the Constitution, and that afforded by the law of torts.

The Constitutional Dimension

7.03

Constitutional considerations arise in the law of exemplary damages in two distinct ways. Firstly, in setting out a duty to vindicate the rights of the individual, the Constitution creates an imperative for exemplary awards to be available in appropriate cases where an individual's constitutional rights have

been interfered with. Secondly, there is the prospect that the Constitution may operate, as constitutional provisions have operated in other jurisdictions, to impose restrictions on the award of exemplary damages, in order to safeguard the rights of the defendant.

Exemplary Damages for Breach of Constitutional Rights

7.04

The right to recover damages as a remedy for breach of a constitutional right was first established in Meskell v CIE.² In that case Walsh J stated that a right guaranteed by the Constitution:

7.05

In Kennedy v Ireland,³ the right to recover damages for breach of constitutional rights was reiterated.⁴ The damages in that case were expressed as “substantial” from the judgement of Hamilton P, they can best be characterised as an amalgam of exemplary and aggravated damages.⁵ Hamilton P endorsed Meskell v CIE and emphasised that in the case before him, the only remedy available to the plaintiffs for breach of their constitutional rights lay in an award of damages. He acknowledged the possibility that exemplary damages could be recovered for the breach of a constitutional right, stating:

7.06

In Educational Company of Ireland v Fitzpatrick (No. 2)⁶ it was established that the right to obtain damages for breach of constitutional rights applied not only in actions against the State, but also in actions between two individuals. Budd J in the High Court held that:

7.07

The first case in which an award of exemplary damages for breach of a constitutional right was expressly granted was Conway v Irish National Teachers' Organisation.⁸ In that case, it was held that exemplary damages must be available in cases of infringement of constitutional rights, in order for those rights to be fully vindicated.⁹

7.08

There has been much discussion and little certainty as to the impact which constitutional rights and so-called “constitutional torts” will have on the law of tort in general. There is a large overlap between the two: many actions which are tortious wrongs are also likely to be infringements of constitutional rights. In the immediate aftermath of Meskell v CIE,¹⁰ concern was expressed by some commentators that actions based on infringements of constitutional rights would subsume much of the common law of torts.¹¹ These fears have so far proved unfounded. Dicta of the Supreme Court in Hanrahan v Merck Sharpe and Dohme¹² suggest a more cautious approach to constitutional torts by the courts, and evince a reluctance to allow constitutional rights to modify the law of torts. In Hanrahan, it was submitted by the plaintiffs that the onus of proof which it was necessary for them to reach in order to establish nuisance was too high to adequately vindicate their constitutional rights, which had also been breached by the defendant in the case. In rejecting this argument, Henchy J in his Supreme Court judgement affirmed the distinctive nature and role of the law of tort. Stating that the personal rights provisions of the Constitution had never been relied on to shape the form of existing tort law, he held that, although a plaintiff could claim for damages on the basis of violation of his constitutional rights, this would have to be done directly, independent of the claim in tort, and “where he founds his action in tort he is normally confined to the limitations of that tort.” Therefore, the law of tort is not to be modified by constitutional rights.¹³

7.09

Since exemplary damages incorporate a more public purpose than is usually associated with the law of tort, their recovery in cases of breach of constitutional right may often be particularly appropriate. It was emphasised by the court in Conway, however, that exemplary damages would not be recoverable in every case of breach of a constitutional right; and it must be assumed, and would be desirable, that recovery of exemplary damages should be dependant on the gravity of the infringement of the right. It was pointed out by Binchy that infringements of a constitutional right, for example the right to bodily integrity, may range from the minor to the very serious.¹⁴

7.10

The reach of exemplary damages in Irish law is at least commensurate with the ambit of constitutional rights. It is as yet unclear whether exemplary damages can be recovered in the generality of common law tort actions, but it is probable that they can. It must be borne in mind that any amendment of the present law which would expressly confine exemplary damages to actions for breach of a constitutional right could result in a greater “constitutionalization” of the law of tort, as more emphasis would be placed on constitutional claims in order to avail of exemplary damages.

The Constitutional Rights of the Defendant

7.11

Where an exemplary award is made against a defendant in the course of a civil trial, the possibility of infringement of the defendant's constitutional rights must be considered, having regard to the lesser procedural safeguards and the lower burden of proof which apply in the determination of a claim for exemplary damages. Such an infringement would appear to be most unlikely, since the constitutional guarantee of fair trial in due course of law is specifically stated to apply only to criminal trials, and not to actions in tort or contract, however large the sum of damages awarded.¹⁵

7.12

The nature of a criminal trial to which Article 38 would apply was considered by the Supreme Court in Goodman International v Hamilton (No. 1)¹⁶ where the legitimacy of the Tribunal of Inquiry established to investigate practices in the beef industry was challenged by the plaintiffs, against the due process guarantee of Article 38. Finlay C J held that:

7.13

The principle of “fair procedures” which as been developed by the courts and expressed as arising from the personal rights guarantees in Article 40.3, does have a wider application than that of Article 38. It was first set out in In Re Haughey,¹⁸ which dealt with the procedures before the Dáil Public Accounts

Committee. The requirements of fair procedures as set out in that and in subsequent cases have a limited scope, and would not seem to demand any additional procedural safeguards in cases involving exemplary damages.¹⁹

7.14

Also of potential relevance in this context is the principle of constitutional justice. The phrase “constitutional justice” was coined by Walsh J in the 1965 case of McDonald v Bord na gCon²⁰ as a more appropriate term for the principle previously known as natural justice.²¹ Constitutional justice is potentially a much wider principle than natural justice, and has been described by commentators as constituting a “reservoir of due process.”²² To date, there has been very little development of the concept by the courts, however. It has been suggested, in O'Donoghue v Vetinary Council²³ that, where the result of proceedings could be that the defendant would be prevented from practising his profession, constitutional justice would require that a criminal standard of proof be applied; but the Court in that case made no ruling on the issue. It has been held by the Supreme Court, in the case of Banco Ambrosiano v Ansbacher & Co.,²⁴ that a higher standard of proof is not required in civil cases which involve serious allegations of fraud. In the light of this it would seem unlikely that additional procedural safeguards or an alteration in the standard of proof would be required in exemplary damages cases.

The Impact of the European Convention on Human Rights

7.15

Further questions arise as to the compatibility of exemplary damages with due process guarantees contained in the European Convention on Human Rights. Article 6 of the Convention deals with fair process in both civil and criminal trials. Certain of the guarantees apply only to those “charged with a criminal offence” others apply “in the determination of civil rights and obligations or of any criminal charge.” Under Article 6.1, in any case which involves a determination, either of civil rights and obligations, or of a criminal charge, the defendant is entitled to a fair and public hearing, and to a judgement which is delivered in public, except where special considerations apply. Article 6.2 allows for the presumption of innocence in criminal cases, and Article 6.3 affords

additional guarantees to those subject to a criminal charge, including adequate time to prepare a defence, a right to legal representation, and a right to cross-examine witnesses.

7.16

The scope of application of the guarantees which apply where an individual is “charged with a criminal offence” is not clear. There is considerable jurisprudence from the Court of Human Rights on the issue of what may constitute a criminal offence for the purposes of the article, mostly in relation to disciplinary and regulatory offenses. The Court has not to date, however, considered cases on the boundary between the civil and criminal laws. There have been no rulings regarding exemplary damages or any analogous remedies.

7.17

The Court has held, in Engel v Netherlands²⁵ that the mere definition of an offence in the national law as non-criminal will not be determinative. The Court will apply its own “autonomous definition” of the term “criminal offence” as it is used in Article 6. In Engel it was held that, in determining whether an offence is to be regarded as criminal, the Court will normally take into account three factors:

7.18

To date, these three factors have been applied by the Court mainly in cases relating to regulatory or disciplinary offenses. It has been held that, in this context, the nature of the offence may be determined by whether the offence is aimed only at internal regulation (e.g. of a profession or a workplace) or has wider applicability to society at large. With regard to the third consideration, a severe penalty is required in order to render the offence criminal, at least where the criminal nature of the offence is not otherwise clear. In Engel, the Court held that imprisonment would render an offence criminal unless it could not, by its nature, duration or manner of execution, be considered “appreciably detrimental” to the offender. Penalties of two to three weeks' imprisonment were considered insufficient to bring an offence into the criminal sphere. In contrast to this, however, the Court in Öztürk v FRG²⁶ held that an offence under the Road Traffic Regulations, which was defined as regulatory in German law, and which was punishable only by a fine, was criminal in nature. The offence satisfied the second requirement of the Engel test, since it applied to society as a whole, rather than to a small defined group. The Court found that once the general nature of the offence was clearly criminal rather than civil, a monetary fine, the purpose of which was punitive and deterrent, was sufficient to bring the offence into the criminal category. It was also significant that the offence in

question was one that would be classified as a criminal offence in most other Council of Europe states. In Campbell and Fell v UK,²⁷ it was held that the loss of remission of a prison sentence could also be regarded as a criminal sanction.

7.19

In Société Stenuit v France²⁸, it was held that sanctions under EU competition law should be classified as administrative rather than criminal. On the other hand, offenses under price-fixing regulations (Dewer v Belgium²⁹), and under customs regulations (Salabiaku v France³⁰) have been held to be criminal by the Court, although forfeiture of goods under customs regulations has been held not to be a criminal penalty (AGOSI v UK³¹).

7.20

The Court has not considered anything approximating to exemplary damages in relation to Article 6. It is difficult to judge whether a civil case in which exemplary damages were imposed would be regarded as a “criminal offence” under the article, but the further requirement under subsections two and three of Article 6, that the defendant must be the subject of a criminal charge, would be likely to exclude exemplary damages cases from the category of criminal offenses to which Article 6 applies.

7.21

In order for the guarantees in Article 6 (2) and (3) to apply, the applicant must have been “charged” with a criminal offence. The meaning of “charge” in Article 6 has also been considered by the Court in a series of cases. These relate mainly to offenses which are acknowledged as criminal but where the moment at which the accused became subject to a charge is in dispute. The Court has held that “criminal charge” should be given a substantive rather than a formal meaning. It has been held to be: “the official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence” or some other act which carries such an implication or “substantially affects” the suspect. The suspect has been regarded by the Court as charged with a criminal offence where he has been arrested for a criminal offence;³² or when he has been officially informed of the prosecution against him.³³ The concept of a charge is difficult to apply to a case of exemplary damages, which are set squarely within civil law procedure, and may arise as one of a range of possible civil remedies in a tort case. In a case where exemplary damages are claimed, the defendant is not at any stage “charged with an offence” he is only sued for liability in tort, or for breach of constitutional rights.

7.22

Even if it is accepted that exemplary damages cases would not be classified as involving a “criminal offence” under Article 6, the fair trial

guarantees in Article 6 (1) would still apply to such cases, to the extent that they are determinative of “civil rights and obligations”. The requirements of Article 6 (1) should create no particular difficulties in exemplary damages cases. With regard to the burden of proof, it has been held by the Commission in G v France³⁴ that the burden of proof to be imposed in civil cases is a matter for the individual State.

Article 14

7.23

In cases where there has been no violation of Article 6, it must still be considered whether the rights contained in the Article have been applied in a way that is discriminatory. Under Article 14, it must be shown that there has been differential treatment of individuals in analogous situations, on one of a number of grounds listed in Article 14, or on further, unidentified, grounds of “other status”. The caselaw of the Court on Article 14 makes clear that not all differences of treatment will be regarded as discrimination. Where there is an “objective and reasonable” justification for the difference in treatment of persons in analogous positions, Article 14 will not apply.³⁵ Whether the application of higher due process standards in criminal cases than in civil cases involving exemplary damages could be regarded as discriminatory against defendants in exemplary damages cases must remain a matter for debate. A finding of discrimination would not seem to follow automatically from the imposition of exemplary damages in some cases. The differing quality and severity of the sanctions imposed in civil and in criminal cases could be seen as justifying the difference; it might well be considered that on these grounds the two situations would not be analogous.

7.24

It must also be considered that discrimination must be on the basis of a particular aspect of the applicant's status. If, for example, it could be demonstrated that civil exemplary damages cases were being used systematically against a certain class of wrongdoers, in order to penalise them without having to satisfy a higher burden of proof in a criminal prosecution, then an issue might arise under Article 14. Short of this scenario, it would seem that Article 14 would not be an issue in exemplary damages cases.

The Irish Caselaw: Early Irish Acceptance of Exemplary Damages

7.25

Several older authorities establish the availability of punitive/exemplary damages in Irish law. In Reeves v Penrose,³⁶ exemplary damages were awarded in a case of trespass. In Worthington v Tipperary (SR) County Council,³⁷ the

doctrine of punitive damages was accepted. Moloney C.J. held that:

7.26

Thus the original status of exemplary damages was well established.³⁸ Subsequent to the decision in Rookes v Barnard, however, there was uncertainty as to the impact of that case on Irish law. Caselaw gave varying indications. In Dillon v Dunnes Stores Ltd,³⁹ an award of exemplary damages was made against a policeman. Such an award could have been made under Lord Devlin's categorisation on the basis that the policemen were public servants, but the Court at least appeared to accept a wider availability of exemplary damages. In McDonald v Galvin,⁴⁰ the High Court again appeared to accept a broad availability of exemplary damages.

Confusion over Terminology: Exemplary Damages and Punitive Damages

7.27

There was for a time some confusion, arising from decisions of the Irish courts, as to the distinctions to be drawn between the various species of damages, and in particular between punitive and exemplary damages. In most jurisdictions, these two categories have long been regarded as identical; but in Kennedy v Ireland,⁴¹ Hamilton P appeared to draw a distinction between them, without, however, indicating its conceptual basis. The distinction was based on the wording of the Civil Liability Act, 1961. Section 7 (2) of the Act refers to “punitive” damages in the context of survival actions, whereas Section 14 (4) refers to “exemplary” damages in the context of concurrent wrongdoers. In Conway v Ireland,⁴² Barron J in the High Court expressly followed Hamilton P's decision, but made no reference to a distinction between the two categories of damages. Binchy and Byrne offered a “mundane explanation” of the differing wording in the Civil Liability Act, 1961: that the provisions had each been borrowed from separate sources, and that the difference in terminology had simply been overlooked.⁴³ This explanation was subsequently accepted by the Supreme Court in McIntyre v Lewis,⁴⁴ McCarthy J saying that he saw “no real difference of meaning between the two terms”.⁴⁵

7.28

Hamilton P, in Kennedy v Ireland,⁴⁶ also appeared to suggest that the categories of aggravated and exemplary damages might be regarded as interchangeable. He held that the plaintiffs in that case were entitled to “substantial damages” and that, in the circumstances of the case, it was “irrelevant whether they should be described as aggravated or exemplary.” In assessing the amount of “substantial damages” to be awarded, he held that the court should have regard to:

7.29

The first of these considerations, with its focus on compensating the loss suffered by the plaintiff, suggests that the damages are in the nature of aggravated damages; whilst the second consideration suggests a concentration on the conduct of the defendant which is more in accordance with an award of exemplary damages. The third consideration also suggests an award which is exemplary in purpose, since it imports a public law (and perhaps a deterrent) aim into the award of damages: that of the protection and vindication of constitutional rights.

The Current Status of Rookes v Barnard in Ireland

7.30

The question of the status of Rookes v Barnard was first dealt with by the Supreme Court in the case of McIntyre v Lewis,⁴⁷ although that case did not conclusively resolve the question, as the Supreme Court were divided on it. The case concerned the assault and malicious prosecution of the plaintiffs by the defendants, who were members of the gardaí. Hederman J held that “in cases like this, where there is an abuse of power by employees of the State, the jury are entitled to award exemplary damages.”⁴⁸ This statement would suggest some limitation on the scope of exemplary damages, but Byrne and Binchy⁴⁹ caution against interpreting it as a wholesale endorsement of Lord Devlin's categorisation. O'Flaherty J reserved his position on the question of whether exemplary damages were confined to the Rookes v Barnard categories, while McCarthy J was less circumspect, expressly rejecting Lord Devlin's doctrine, as contrary to the dynamism of the common law.⁵⁰

7.31

The law on exemplary damages was clarified to a considerable extent by the decision of the Supreme Court in Conway v Irish National Teachers' Organisation.⁵¹ That case involved an action for damages for conspiracy to interfere with the constitutional right to primary school education, taken by a group of children whose education had been disrupted by an industrial dispute. Finlay C J in the Supreme Court analyzed the headings of damages potentially available in Irish law, for both tort and infringement of constitutional rights. He listed these headings as:

Finlay CJ thus appeared to endorse the availability of exemplary damages in all tort cases, as well as in cases involving a breach of a constitutional right. The exemplary damages award made in the case, however, referred only to the breach of a constitutional right, and not to any liability in tort.

7.32

It is possible that, following this case, the availability of exemplary damages in Ireland may be limited to Lord Devlin's three categories, as well as to cases where there is a breach of constitutional right. This is the interpretation given to the judgement in the Law Reform Commission Report on the Civil Law of Defamation.⁵³ It may, however, be unduly narrow. Dicta of the judges in the case suggest a more thoroughgoing rejection of Lord Devlin's categories. Griffin J, concurring with Finlay CJ, stated very clearly that there is “no valid reason, in logic or common sense” for the limitation imposed by Lord Devlin's first category.⁵⁴ He considered it unnecessary to deal with the other categories. McCarthy J stated:

Griffin J appeared not to confine the award of exemplary damages to cases of breach of constitutional rights. He stated that exemplary damages may be awarded where there is “wilful and conscious wrongdoing in contumelious disregard of another's rights.”⁵⁶

7.33

Finlay C J emphasised that in the case before the Court, the intended and direct consequence of the defendant's acts was the plaintiff's deprivation of her constitutional right to free primary education. This, coupled with the special responsibility of the defendant union towards the educational rights of children, was the basis for the award of exemplary damages. Finlay C J identified four reasons for the award:

7.34

Thus Finlay CJ based the award of exemplary damages on intended breach of a constitutional right of fundamental importance. He characterised the award of exemplary damages as a necessary means to defend constitutional rights. He stated:

7.35

McCarthy J echoed this, saying:

7.36

Finlay CJ emphasised, however, that it should not be inferred that exemplary damages should be awarded in every case of a wrong which involved the breach of a constitutional right.

7.37

Finlay CJ's discussion of exemplary damages seems to suggest a deterrent purpose behind such damages, as well as a denunciatory one. He sees the award of exemplary damages as a weapon with which the courts can defend the Constitution. In his judgement, he stated that exemplary damages should not be awarded in every case where there was a breach of a constitutional right, but in the case before the Court, it was appropriate to mark the court's disapproval of the defendant's conduct.

7.38

Griffin J saw the object of exemplary damages as being:

7.39

In the recent case of Cooper v O'Connell,⁶⁰ the Supreme Court left open the question of the availability of exemplary damages in tort cases. Keane J, giving judgement for the Supreme Court, quoted extensively from Finlay C J's judgement in Conway v INTO. He interpreted that case as having rejected the Rookes v Barnard restrictions on exemplary damages and as allowing exemplary damages in “some, but not all, cases where there is an invasion of the Plaintiff's constitutional rights”. Keane J held that, on the facts of the case, the conduct of the defendant was not such as to warrant the imposition of exemplary damages. It was therefore unnecessary for the Court to decide the question of the precise extent of the availability of exemplary damages in Irish law. The question of whether exemplary damages could be awarded in a case of negligence was left open.

7.40

Keane J referred to exemplary damages as a “drastic but necessary measure” and emphasised that they should be confined to cases of exceptional misconduct. He saw exemplary damages as having primarily a social function. Emphasising their deterrent role in making an example of the defendant, he stated that:

7.41

It appears from the judgments in the case that the award of exemplary damages may also depend on the relationship between the parties. There may have to be a special relationship of trust or responsibility, or of inequality, between the plaintiff and defendant, before exemplary damages can be recovered – but whether this is a necessary condition is not clear from the judgements.

Principles Governing the Assessment of Quantum

7.42

The factors outlined by Lord Devlin, which are to be taken into consideration in awards of exemplary damages, have been set out above. They have been viewed with favour by the Irish courts. In McIntyre v Lewis,⁶² O'Flaherty J adopted Lord Devlin's three considerations: that the plaintiff must be the victim of punishable behaviour; that there must be restraint in the award of exemplary damages; and that the means of the plaintiff and defendant must be taken into account. Hederman J, in the same case, endorsed the principle in Rookes v Barnard, that the amount of exemplary damages awarded should be in proportion to the amount of compensatory damages awarded. O'Flaherty J held that exemplary damages should be “kept on a tight rein”.⁶³ Both O'Flaherty J and Hederman J also held that the damages awarded for the two separate wrongs in the case, assault and malicious prosecution, should “bear some relation to each other”.⁶⁴ Both held that the sum of exemplary damages awarded in the case should be reduced. McCarthy J dissented on this, however, holding that in the circumstances of the case, £30,000 exemplary damages was an appropriate sum.⁶⁵

Aggravated Damages

7.43

The judgement of Finlay CJ in Conway v INTO⁶⁶ also contains important dicta as to the nature and function of aggravated damages. Aggravated damages were seen as having both compensatory and punitive purposes: they were defined by Finlay CJ as compensatory damages which are increased by certain factors. These include:

7.44

Finlay CJ made it clear that this enumeration was not to be regarded as comprehensive; other factors could also ground an award of aggravated damages. Aggravated damages were seen as grounded in both the outrageous conduct of the defendant and the injury of the defendant. This confirms aggravated damages as a hybrid of compensatory and exemplary damages. Finlay CJ stated in his judgement that:

7.45

In Cooper v O'Connell,⁶⁹ the Supreme Court refused to make an award of aggravated damages. The absence of malice or deliberation on the part of the defendant was crucial to this refusal. On the facts of the case, the Court found that, although the defendant had been “seriously negligent”, there had been no element of oppressiveness, arrogance or outrage in his conduct: nothing to distinguish it from an ordinary case of professional negligence. The fact that the defendant had put liability in issue was also held to be insufficient to justify an award of aggravated damages.

7.46

It would seem that the Irish courts tend towards a greater acceptance of the punitive element in awards of aggravated damages than their English counterparts. The dual function of aggravated damages, at once compensatory and punitive, has been acknowledged and accepted by the Irish courts. Nevertheless, the continued classification by the courts of aggravated damages as a category of compensatory damages leaves room for confusion as to their true character.

Exemplary Damages for Breach of European Union Law

7.47

In addition to liability for breach of a constitutional right, there is a possibility that exemplary damages may be recoverable for breaches of European

Union law, at least where the breach is by the State.⁷⁰ In the joined cases of Brasserie du Pêcheur and Factortane III,⁷¹ the European Court of Justice held that the State could be held liable in damages to individuals for legislation which was contrary to EU law, if it could be shown that the legislation affected the rights of individuals, that the breaches of individual rights involved were serious, and that there was a causal link to the damage to the plaintiff in the case.⁷² It was held by the Court that such damages could include exemplary damages, where exemplary damages could have been awarded in a similar action founded on domestic law. Thus recovery of exemplary damages for breach of EU law is made dependant on the availability of exemplary damages in domestic law. There has been a suggestion, in the Irish High Court, that exemplary damages could be awarded against the State for breaches of EU law: Tate v Minister for Social Welfare and the Attorney General.⁷³ In that case the Court refused to award punitive damages against the State for its failure to pay equal social welfare to women, “in view of the very large sums involved” in the case; but it is implicit in the judgement of the Court that punitive damages could be awarded for a breach of EU law in an appropriate case.

The Civil Liability Act, 1961

7.48

The Civil Liability Act, 1961 recognises exemplary damages as a separate head of damages. The Act places two important limitations on the award of such damages.⁷⁴ The first relates to survivor actions, and the second to actions for wrongful death.

Survivor Actions

7.49

Section 7 (2) of the Act expressly excludes an award of exemplary damages where a cause of action survives for the benefit of the estate of a deceased person. The section excludes recovery for “exemplary damages, or damages for any pain or suffering or for personal injury or for loss or diminution of expectation of life or happiness.” White is of the view that damages for “pain and suffering” would probably include aggravated damages, which would therefore not be recoverable in a survivor action.⁷⁵ Restitutionary damages do not appear to be excluded by the section.

7.50

The exclusion of exemplary damages awards to the estate of deceased person appears to be at odds with the nature of these damages, with their punitive rather than compensatory purpose. The exclusion of compensatory or aggravated damages in such an action would be more understandable, since the recipients of the damages will be the beneficiaries of the plaintiff's estate, not the plaintiff himself who has suffered the loss and injury. In the case of exemplary damages, which are awarded according to the behaviour of the defendant, rather than the loss or injury to the plaintiff, there is no reason why the defendant's estate should be considered a more undeserving recipient of the exemplary damages “windfall” than the plaintiff himself.

Concurrent Tortfeasers

7.51

Section 14 (4) of the Act states that where there are concurrent tortfeasers, and punitive damages are to be awarded against one of them, such damages shall not be awarded against another tortfeaser merely because he is a concurrent tortfeaser. This means that where the misconduct of one of the defendants leaves him open to an award of punitive damages, another defendant in the same case who is not equally culpable will not have to suffer the burden of the punitive award.

7.52

Section 14 (4) represents an exception to the general rule regarding concurrent wrongdoers. In general, and subject to section 14 and a number of other exceptions, each concurrent wrongdoer is liable for all of the damage and loss suffered by the plaintiff.⁷⁶

7.53

It is unclear from the Act whether “concurrent tortfeasers” includes a vicariously liable tortfeaser. The Act, in section 11, defines “concurrent wrongdoer” to include those liable through vicarious liability, but it is unclear whether this also applies to the term “concurrent tortfeaser”, which is not defined. If vicariously liable individuals were included within the meaning of “concurrent tortfeaser”, then punitive damages awards could not be made against, for example, vicariously liable employers would not necessarily be liable in punitive damages, in their own right. While there has been no decision of the courts on the interpretation of sections 11 and 14, dicta of McCarthy J in McIntyre v Lewis support the view that section 14 does not apply to cases of vicarious liability.⁷⁷

7.54

The reference to “punitive” damages in section 14 (4) as opposed to the “exemplary” damages referred to in section 7 (2), has given rise to some uncertainty as to the scope of the provisions. While Byrne and Binchy maintain

that the two terms are identical, and see the differing terminology as the result of an error of drafting,⁷⁸ White considers that the scope of “punitive” damages in section 14 (4) is wider than that of exemplary damages in the earlier section, and includes both exemplary and aggravated damages. This, he argues, accords with the purpose of section 14 (2), which is to prevent a concurrent tortfeaser having to pay damages which are exclusively the result of the wrongful conduct of another.⁷⁹ Such an interpretation is based on a view that punitive and exemplary damages have distinct meanings in Irish law (White admits that the terms are synonymous in English law). This view must now be regarded as mistaken, following the decision of the Supreme Court in Conway v INTO.⁸⁰ In that case Finlay CJ expressly stated that “in our law punitive and exemplary damages must be recognised as constituting the same element”. Given these dicta, it must now be taken that “punitive” damages in section 14 (4) refer to exemplary damages only, and that therefore the section does not preclude the recovery of aggravated damages against a concurrent tortfeaser. This situation is unsatisfactory, since in effect it allows one defendant to be penalised for the wrongful conduct (or the injury arising out of wrongful conduct) of a second defendant.

7.55

This anomaly only occurs, however, if aggravated damages are considered to have some punitive or exemplary element. If aggravated damages are to be re-conceptualised as purely compensatory, and without reference to the outrageous conduct of the defendant, then there is no substantive difficulty with allowing for their recovery against a concurrent tortfeaser.⁸¹

Wrongful Death

7.56

Part IV of the Civil Liability Act, 1961 allows for recovery of damages in wrongful death cases by the dependants of the deceased. The effect of section 49 (1) (a) of the Act, however, is to exclude the recovery of exemplary damages in such a case. Section 49 (1) (a) provides:

7.57

The damages recoverable under subsection (i) have been judicially interpreted to be “in the nature of a compensation for the pecuniary loss sustained by the dependants”.⁸² The damages for mental distress allowed for in subsection (ii) are also expressed as compensatory. Mental distress damages must be reasonable, and must not exceed a fixed sum, presently set at £7,500. This would not allow for the recovery of damages approximating to aggravated damages for mental distress. White sees the function of damages for mental distress as vindicatory. They have a “vindicatory effect as a token and acknowledgement of grief needlessly inflicted by the wrongdoer upon the relatives of one wrongfully killed.”⁸³

Comparative Law of Damages for Wrongful Death

7.58

The exclusion of exemplary damages in cases of wrongful death is mirrored in other jurisdictions. The English position on the measure of damages which may be recovered is restrictive. Under the Fatal Accidents Act, 1976, only damages for pecuniary loss may be recovered in an action for wrongful death, with one exception: the spouse or parent of a deceased person may claim for damages for bereavement. It has been established by the courts that mental suffering of the relatives of a deceased person cannot be considered in computing damages: Blake v Midland Ry.⁸⁴

7.59

In Australia, it has been held by the Supreme Court of Victoria, in Reindel v James Hardie & Co Pty Ltd,⁸⁵ that, under the relevant statute making provision for recovery of damages in cases of wrongful death, there could be no award of exemplary damages. In Canada, there are conflicting authorities on the question. In Blacquiere's Estate v Canadian Motor Sales,⁸⁶ it was held by the Prince Edward Island Supreme Court that, although exemplary damages for wrongful death were not appropriate in the case before the court, such damages could be awarded for wrongful death in an appropriate case. In Nichols v Guiel,⁸⁷ however, the Supreme Court of British Columbia held that exemplary damages could not be awarded in cases of wrongful death, since the tortious conduct had not been directed against the plaintiff, and in any case the relevant statute allowed only for the recovery of damages on the basis of the survivor's pecuniary loss. In the US, recovery of punitive damages in actions for wrongful

death is permissible in some states, where there is a wrongful death statute which authorises punitive damages either expressly or by implication.⁸⁸

PART III

CHAPTER 8: RESTITUTIONARY DAMAGES

The Principle Against Unjust Enrichment

8.01

The principle against unjust enrichment is a fundamental one, that a wrongdoer should not profit from his own wrong.¹ It was clearly set out in a number of Eighteenth Century judgements of Lord Mansfield, exemplified by his statement in Moses v MacFerlan² that:

8.02

The US Restatement on the Law of Restitution expresses the same principle succinctly as follows:

8.03

Unjust enrichment has been slow to achieve recognition as a distinct and unified category of the civil law. Actions which reverse unjust enrichment were historically dismissed as cases of quasi-contract, or as remnants of the old forms of actions. In the case of Fibrosa Spolka Akcyjna v Fairboairn Lawson Combe Barbour Ltd³, however, Lord Wright affirmed the centrality of the unjust enrichment principle:

8.04

At first sight, the principle against unjust enrichment may appear abstract and aspirational to the point of unworkability, and this has resulted in allegations that it merely represents a species of “palm tree justice”. In fact, the “unjust” aspect of unjust enrichment refers not to some vague criterion of morality, but to a definable range of situations where the courts will hold, on the basis of the established caselaw, that an enrichment ought to be reversed.⁴ Unjust enrichment is best seen as a unifying principle which encompasses a range of legal measures.⁵ This view of the principle was put forward by Deane J in the High Court of Australia in the case of Pavey and Matthews v Paul⁶ where he characterised unjust enrichment as:

8.05

In order for a wrongdoer to be unjustly enriched, three elements must subsist: first, there must have been a benefit to the defendant; second, this benefit must have been at the expense of the plaintiff; and third, the enrichment of the defendant must have been unjust. The benefit to the defendant may have been either positive or negative; that is, the defendant may have received a benefit merely through saving himself expense. The benefit may include money, a service, or goods. Where the defendant has received a service, the courts may require that the defendant has requested the service, or at least has freely accepted it.

8.06

The remedies which reverse an unjust enrichment are scattered throughout a number of areas of the law, and include both equitable and common law remedies. Where the wrong is one against property, remedies which reverse unjust enrichment may include the recovery of land or an equitable lien on the land. Where the wrong is personal, the remedies may include an action for money had and received, an account of profits, recision or restitutionary damages (which may be for tort, contract, or equitable wrongs).

Restitution for Wrongdoing

8.07

The majority of remedies which reverse unjust enrichment are not based on the commission of a tort or breach of contract by the defendant. They are based solely on the fact of his unjust enrichment. Such remedies have been labelled as instances of recovery for unjust enrichment by subtraction. On the other hand, cases where restitutionary remedies arise out of the commission of a tort, breach of contract or equitable wrong are said to involve unjust enrichment by wrongdoing.⁸ Remedies available for unjust enrichment by wrongdoing include restitutionary damages for tort or for breach of contract.

8.08

This paper is concerned solely with the award of restitutionary damages, in either tort or contract, or in cases of breach of fiduciary duty, and not with any of the other remedies which may be said to reverse unjust enrichment. One of the questions which must be considered is the respective ambit of the various restitutionary remedies, and the circumstances in which restitutionary damages will be awarded as opposed to an independent restitutionary award.⁹

8.09

In cases where restitutionary damages are awarded, restitution is based on the wrong done to the plaintiff, such as a tortious wrong or breach of contract. Restitutionary principles can be said to be operating at a secondary level, or to be dependent on the claim in tort or contract.¹⁰

8.10

The crucial distinction between unjust enrichment by subtraction and unjust enrichment by wrongdoing in that, in cases of the latter, it is not necessary to show that the benefit to the defendant arose directly out of a commensurate loss to the plaintiff. In other words, the second element which is necessary to establish unjust enrichment, the requirement that the benefit was “at the expense of the plaintiff” operates differently in cases of unjust enrichment by wrongdoing. In such cases, it is sufficient to show that the defendant's benefit arose directly

out of the wrong to the plaintiff.¹¹ The fact that the plaintiff may not have sustained a monetary loss equivalent to the defendant's gain is immaterial.¹² This is well illustrated by the US case of Federal Sugar Refining Co v United States Equalisation Board.¹³ In that case, the defendants had induced the Norwegian government to repudiate its contract for the sale of sugar which it had made with the plaintiff, and to enter into a second contract with themselves, the defendants. As a result of the fluctuating price of sugar and the defendants' monopoly of export licences, the plaintiff would in any event have made no profit from the repudiated contract; but the defendant did make a profit. The court rejected the argument that damages could not be awarded since nothing had been taken away from the plaintiff and added to the wealth of the defendant, holding that:

8.11

This position is also reflected in the decision of Denning J in Strand Electric and Engineering Co v Brisford Entertainments.¹⁵ In that case, the defendants had hired equipment from the plaintiffs and had refused to return it within the required time. It was established that, even if the equipment had been returned as required, the plaintiffs might not have been able to re-hire it within the relevant time, and so might not have made any profit from it. Nevertheless, it was held that damages could be recovered, since the sum of damages was not confined to the loss of the plaintiffs.¹⁶

8.12

The irrelevance of the plaintiff's loss has consequences for the quantum of restitutionary damages which may be awarded. In the case of an award of

restitutionary damages, there need not be any exact correlation between the loss to the plaintiff and the gain to the defendant, as would be strictly required in a case of unjust enrichment by subtraction. In cases of restitutionary damages, where the unjust enrichment is based on a wrong, the plaintiff may be awarded a sum which exceeds the loss which he has suffered.

Development of the Law: Waiver of Tort

8.13

Traditionally, the situations in which the compensatory remedy for tort could be replaced with a restitutionary remedy were governed by the rule of 'waiver of tort', a mechanism which originated in the complexities of sixteenth to nineteenth century forms of action, and survived as an anomaly and a legal fiction. Where a plaintiff wished to recover damages for a tort in restitution rather than in compensation, he would be said to have “waived the tort”, abandoning his claim to compensation and thus leaving the way free for a restitutionary remedy to be awarded.¹⁷ In fact, the tort had not been “waived” since the restitutionary remedy was itself based on the finding of tortious liability. Traditionally, only certain torts could be waived, and therefore the ambit of recovery in the restitution measure was limited according to cause of action. Most of those torts which could be waived were proprietary in nature, such as conversion, or wrongful interference with land or goods.¹⁸

8.14

In the case of United Australia Ltd v Barclay's Bank Ltd,¹⁹ the House of Lords cast doubt on the validity of the waiver of tort doctrine. The question which arose in that case was whether, once the plaintiff “waives the tort” and begins an action in assumpsit, he was debarred from bringing any further proceedings in tort. The House of Lords held that he was not, and recognised that the action in assumpsit was itself based on the tort. Therefore the tort itself was not really waived at all: merely, a new remedy was substituted. If it were otherwise, if the effect of waiver of tort were to declare that no tort had been committed, then, since there would have been no wrong, no action in assumpsit could lie. Viscount Simon LC approved the position of the US Restatement of the Law of Restitution that:

8.15

In the light of the United Australia case, the language of waiver of tort may now be considered to be largely redundant.²⁰ Once the language of waiver of tort has been abandoned, there can be a clearer view of a single, tortious