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Aggravated, Exemplary and Restitutionary ... - Law Commission

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1.34 On the first interpretation an award of exemplary damages is ‘moderate’ if it does<br />

not exceed the minimum necessary to achieve the purposes of such an award.<br />

The objection made above has little force if this interpretation is adopted: it does<br />

not entail that awards will not be effective deterrents, or that the effective pursuit<br />

of the aims of exemplary damages will be prejudiced in any other respect. Rather,<br />

the concept is intended simply to avoid awards which are ‘excessive’ in the sense of<br />

being larger than is absolutely necessary in order effectively to achieve their aims.<br />

1.35 On the second interpretation awards of exemplary damages are ‘moderate’ if they<br />

are ‘lower’ rather than ‘higher’; accordingly, judges should prefer lower awards,<br />

rather than higher awards (even if this may mean some loss in efficacy). The<br />

objection made above may have more force if this is the chosen interpretation.<br />

Nevertheless, we do not regard the objection to be a decisive one. We do not<br />

accept that the fact that an aim cannot be performed in an ‘ideal’ or a ‘perfect’<br />

manner is a good reason without more for declining to pursue that aim at all.<br />

Even if awards do not reach a level such that they achieve the maximum degree of<br />

retribution, deterrence <strong>and</strong> disapproval, ‘moderate’ awards may still substantially<br />

achieve those aims, <strong>and</strong> so be of a valuable sanction available to civil courts.<br />

Indeed, the ‘secondary’ aim of disapproval - or of signifying society’s refusal to<br />

tolerate outrageously wrongful behaviour - is an aim that could still be pursued,<br />

successfully, even if awards were ‘low’. And because many factors influence the<br />

punitive efficacy of awards, even comparably low awards can have a significantly<br />

punitive effect. In this respect the wealth of the defendant, which includes the<br />

presence or absence of insurance, will be especially important. 566<br />

“Predictable awards will not be effective deterrents”<br />

1.36 We do not accept that if exemplary damages awards are predictable, this will serve<br />

unjustifiably to impair their efficacy. The underlying assumption seems to be that<br />

predictability enables defendants to engage in cost-benefit calculations, such that<br />

in at least certain circumstances they will be able to conclude that, because the<br />

benefits which are likely to accrue to them from specific wrongful conduct are<br />

likely to exceed the sums payable as damages for that conduct, it is ‘worth’ them<br />

acting in a wrongful way. We challenge this. On the one h<strong>and</strong>, consistent <strong>and</strong><br />

predictable awards are required for reasons of fairness to defendants <strong>and</strong> potential<br />

defendants. This is also recognised within the criminal law. On the other h<strong>and</strong>,<br />

we envisage that a restitutionary award should be considered by a judge ahead of<br />

an exemplary award <strong>and</strong> that the gain which the defendant derived or expected to<br />

derive from his or her wrongdoing should be a relevant factor in the assessment of<br />

exemplary damages. If it is clear that a defendant acted wrongfully after<br />

calculating that an award of exemplary damages would be less than the profit<br />

which he or she expected to flow from the wrong, he or she could be punished<br />

accordingly by an (unexpectedly) larger award.<br />

1.37 For all of these reasons we consider that the main policy objections to exemplary<br />

damages are unfounded or surmountable, <strong>and</strong> that it is therefore hard to see any<br />

practical advantage in their abolition. The case against exemplary awards appears<br />

566 For example, if the defendant is not financially very well off, <strong>and</strong> is not insured against<br />

exemplary damages, the sum that is required to punish <strong>and</strong> deter may be low.<br />

103

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