Aggravated, Exemplary and Restitutionary ... - Law Commission

The object, or at least the effect, of exemplary damages is not wholly
punishment and the deterrence which is intended extends beyond the
actual wrongdoer and the exact nature of his wrongdoing. 789
1.240 In the more recent case of Lancashire County Council v Municipal Mutual Insurance
Ltd, 790
Simon Brown LJ in the Court of Appeal considered that, owing to the
responses of the insurance industry, an exemplary damages award was “still likely
to have a punitive effect”:
First, there may well be limits of liability and deductibles under the
policy. Second, the insured is likely to have to pay higher premiums in
future and may well, indeed, have difficulty in obtaining renewal
insurance. 791
1.241 Moreover, regardless of the impact of permitting insurance against the possibility
of awards of punitive damages on the aims of punishment and deterrence, the aim
of satisfaction of the plaintiff can still coherently be pursued even where a
defendant is insured. As a significant number of cases in this area could involve
the violation of important rights of plaintiffs, yet no or very little compensatable
loss, the importance of this aim ought not to be underestimated.
(iii) Sanctity of contract
1.242 There is a general policy underlying the law of contract that commercial contracts
ought not to be lightly interfered with by courts or even legislation. In Printing &
Numerical Registering Co v Sampson, 792
for example, Sir George Jessel MR offered a
powerful entreaty to courts considering the application of any doctrine of public
policy:
... if there is one thing which more than another public policy requires
it is that men of full age and competent understanding shall have the
utmost liberty of contracting, and that their contracts when entered
into freely and voluntarily shall be held sacred and shall be enforced by
Courts of justice. Therefore, you have this paramount public policy to
consider - that you are not lightly to interfere with this freedom of
contract. 793
1.243 Courts have required that the reasons for imposing a public policy be forceful, and
not open to doubt, before they will apply or extend a public policy ‘bar’. As
Simon Brown LJ stated in Lancashire County Council v Municipal Mutual Insurance
Ltd 794
in indicating his opposition to a public policy bar on insurance against
awards of exemplary damages:
789 (1987) 164 CLR 1, 9.
790 [1996] 3 WLR 493.
791 [1996] 3 WLR 493, 503H-504A.
792 (1875) LR 19 Eq 462.
793 (1875) LR 19 Eq 462, 465.
794 [1996] 3 WLR 493.
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