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Aggravated, Exemplary and Restitutionary ... - Law Commission

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punitive damages award would be frustrated in any case where the wrongdoer<br />

calculated that the profit which he or she would derive from the wrongdoing would<br />

exceed the statutory maximum sum. The aim of the award would be to punish the<br />

wrongdoer for such a calculation, yet statutory maxima facilitate just these sorts of<br />

calculation; they also prevent any possibility of punishment being made more severe, in<br />

a particular case, in order to ‘frustrate’ the calculations. Another is that maxima would<br />

‘look’ bad in any case in which an award was made against the state: the state<br />

would appear to be seeking to limit its liability, which would tend to compromise the<br />

rationale for the availability of punitive awards in these cases. We therefore do not<br />

recommend that statutory maxima be imposed on punitive awards.<br />

1.96 The arguments against the use of either fixed awards or multiples of compensatory<br />

damages are even stronger. At the level of principle, these are objectionable for<br />

two connected reasons. The first is that they lack flexibility - minimising or even<br />

eliminating the scope for judicial discretion. Yet such flexibility is a precondition<br />

of effective <strong>and</strong> fair awards. It is a precondition of ‘effective’ awards because<br />

flexibility enables an award to be tailored to the precise nature of the defendant’s<br />

conduct, <strong>and</strong> so more closely to the extent of punishment, deterrence <strong>and</strong><br />

disapproval which that conduct makes necessary. In contrast, fixed awards will<br />

almost inevitably either over- or under-punish. It is a precondition of a ‘fair’ award<br />

because fixed awards might, in some or even many cases, infringe the principle of<br />

‘moderation’. This is because a court would have to make an award of a certain<br />

sum, even if it exceeded the ‘minimum necessary’ to punish, deter <strong>and</strong> disapprove.<br />

The second objection is that ‘multiples’ penalise disproportionately harshly the<br />

wrongdoer who causes substantial loss; they also wrongly assume that there is a<br />

direct relationship of proportionality between the heinousness of the wrongdoing<br />

<strong>and</strong> the seriousness of the harm caused thereby, <strong>and</strong> that the loss caused is the<br />

only factor relevant to judgments of the heinousness of the wrongdoing. Finally,<br />

the choice <strong>and</strong> the use of fixed awards or multiples is essentially arbitrary. The<br />

choice is arbitrary because it is very difficult to decide, in any rational way, what<br />

should be the level of the fixed award, or what multiple or even multiples should<br />

be used. The use of fixed awards will become increasingly arbitrary, unless the<br />

fixed sums are constantly updated in order to take account of changing social<br />

factors <strong>and</strong> of inflation. We therefore do not recommend the adoption of fixed<br />

awards or multiples in the assessment of punitive damages.<br />

1.97 For the avoidance of doubt, we would emphasise that our rejection of statutory<br />

‘fixed awards’, ‘maxima’ <strong>and</strong> ‘multiples’ should not be taken to imply criticism of<br />

the very valuable formulation of ‘guidance’ by the Court of Appeal in the recent<br />

case of Thompson v MPC. 678<br />

This is for two main reasons. First, Thompson v MPC<br />

involves judicially-formulated ‘guideline’ ‘ceilings’, rather than absolute statutory<br />

limits to awards; secondly, to the extent that ‘multiples’ are used, they are merely<br />

to suggest a ‘ceiling’ for exemplary damages - that is, a maximum, rather than the<br />

always-appropriate sum.<br />

1.98 As the Thompson ceilings are only ‘guidelines’, if a case was so exceptional as<br />

clearly to require a punitive damages award in excess of the ‘ceiling’, on the basis<br />

that such appalling conduct had not been anticipated at the time when that ceiling<br />

678 [1997] 3 WLR 403. See paras 4.94-4.95 above.<br />

128

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