Aggravated, Exemplary and Restitutionary ... - Law Commission

equires a wrong to exist. Many of these statutes are enacted in order to
implement Community law. 634
Others may pre-date the relevant Community
provisions, but in fact be the means by which Community law is implemented (if
at all). The effect of our proposals is that punitive damages will be available for
such wrongs, provided that such an award is consistent with the policy of the
Act. 635
Where such an Act pre-dates the relevant Community law, it will be more
difficult to conclude that it would be inconsistent with the policy of that statute to
award punitive damages even though to do so would infringe the relevant
Community law. Nevertheless, even in this situation the courts will still be likely
(and perhaps obliged) to construe and apply the particular Act in question, as well
as the consistency test under our Act, so as to conform, so far as possible, with the
requirements of Community law. We suggest that it would generally be open to
them to find that the consistency test is not satisfied, and thus that punitive
damages are unavailable under our Act, if to award them would breach
Community law. 636
(v) Why exclude breach of contract?
1.71 In the consultation paper, we provisionally recommended that there ought to be
no reform of the present law whereby exemplary damages are not available for
breach of contract. 637
A majority of consultees supported that provisional view,
which we now confirm as a final recommendation.
1.72 A range of reasons cumulatively lead to that recommendation. First, exemplary
damages have never been awarded for breach of contract. Second, contract
primarily involves pecuniary, rather than non-pecuniary, losses; in contrast, the
torts for which exemplary damages are most commonly awarded, and are likely to
continue to be most commonly awarded, usually give rise to claims for nonpecuniary
losses. Thirdly, the need for certainty is perceived to be greater in
relation to contract than tort and, arguably, there is therefore less scope for the
sort of discretion which the courts must have in determining the availability and
quantum of exemplary damages. Fourthly, a contract is a private arrangement in
which parties negotiate rights and duties, whereas the duties which obtain under
the law of tort are imposed by law; it can accordingly be argued that the notion of
state punishment is more readily applicable to the latter than to the former.
Fifthly, the doctrine of efficient breach dictates that contracting parties should
have available the option of breaking the contract and paying compensatory
damages, if they are able to find a more remunerative use for the subject matter of
634 See, for example, the Consumer Protection Act 1987, which implements the Product
Liability Directive, and, indeed, expressly states that it is so doing.
635 See paras 5.57-5.65 and recommendation (19)(b) above.
636 Cf if the statute in question expressly provides for a punitive remedy. If courts considered
that it would be contrary to Community law to award punitive damages, but they were
unable to use ‘failure to satisfy the consistency test’ as the reason for refusing to award
them, the courts would need to refuse punitive damages under the ‘safety-valve discretion’
which is preserved by clause 3 of our draft Bill, and discussed in paras 5.118-5.119 below.
See also n 84, above.
637 Aggravated, Exemplary and Restitutionary Damages (1993) Consultation Paper No 132,
paras 6.21 and 8.11.
118