Aggravated, Exemplary and Restitutionary ... - Law Commission

conduct. 756
Although it has consistently been assumed that vicarious liability
extends to exemplary or punitive damages on the same basis as compensatory
damages, 757
we cannot find any case in which the application of vicarious liability
has been challenged in an English court. Existing authorities therefore offer little
assistance in resolving this difficult issue. Several strong objections can in fact be
raised to recognising vicarious liability to punitive damages.
(a) The problems caused by the recognition of vicarious liability
1.210 The first objection is that vicarious liability imposes a burden on employers that is
unfair, because it imposes the cost of an award on an ‘innocent’ employer, whilst
leaving the ‘guilty’ employee unpunished by law. Prima facie this is objectionable
for precisely the same reasons as require that several liability to punitive damages
be introduced in relation to joint and several tortfeasors. As the award will not be
made against the primary wrongdoer-employee, 758
it will not be ‘effective’; and as
the award will be exacted from an ‘innocent’ employer, it will necessarily infringe
the principles of ‘moderation’ and ‘proportionality’ which we consider constitute
vital limiting principles on the scope of liability to punitive damages.
1.211 The second objection is that recognising vicarious liability for punitive damages
imposes a burden on employers that is not warranted by the policies which serve
to justify the law’s recognition of claims to punitive awards. A similar objection
has been raised against insurance against such awards. 759
The immediate practical
effect of insurance and of vicarious liability is that the burden of liability is
transferred from the ‘primary’ wrongdoer to another party - whether the employer
or the insurer. As a result, the direct punitive, deterrent or symbolic efficacy of the
punitive award is at best substantially diluted. The ‘primary’ wrongdoer does not
‘feel’ the punitive award in his or her pocket.
1.212 We acknowledge the force of these arguments. Together they appear to entail that
one should refuse to recognise vicarious liability to punitive damages. But for the
reasons which we elaborate below, and in agreement with the majority of
consultees, we nevertheless consider it to be correct to recommend that:
(37) our draft Bill should clarify that a person may be vicariously liable
to pay punitive damages in respect of another’s conduct; (Draft Bill,
clause 11(1))
(b) The reasons for recognising vicarious liability to punitive damages
1.213 Our reasons for preferring to recognise vicarious liability, which we elaborate fully
below, can be summarised as follows:
756 The question was discussed in Aggravated, Exemplary and Restitutionary Damages (1993)
Consultation Paper No 132, paras 6.42-6.44, without any provisional view being reached.
757 See paras 4.102-4.105 above.
758 Whether directly, by initial proceedings against the employer, or less directly, by way of
contribution or indemnity claims between employer and employee.
759 See generally paras 5.234-5.268 below.
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