Aggravated, Exemplary and Restitutionary ... - Law Commission

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1.271 It would be very difficult to argue that any of the existing statutory requirements for insurance were intended, when passed, to extend to a liability to pay exemplary or punitive damages. The primary purpose of compulsory insurance is plaintiffprotection: ensuring that defendants are able (via the insurer) to meet judgments against them. Each existing statutory requirement is such that the dominant aim must have been to ensure that defendants could compensate plaintiffs for their injuries. 822 In some of the statutes, for example, the compulsory insurance provisions are expressed to apply only to a liability which the statute itself establishes, and that statutory liability is a liability to compensate only. In all of the other cases, the compulsory insurance provision applies to an area of activity in which it would be extremely rare (or impossible) on the state of the law, at the time of enactment, for a claim to exemplary damages to succeed. 823 It would in any case require a rather forced interpretation of the aim of plaintiff-protection, for it plausibly to extend to require that insurance against exemplary or punitive damages be compulsory. For, on the face of it, there is injustice to the plaintiff only if he or she cannot obtain compensation - not if he or she is merely unable to obtain the ‘windfall’ of an exemplary or punitive damages award. 1.272 In our view, the fact that the legislature has made insurance compulsory in an area of activity, so as to ensure that claims to compensation can be satisfied, provides no justification for concluding that the relevant statute should in future, in view of the new remedy of punitive damages which we propose, extend to require insurance against liability to that remedy also. Whether this is so must be a matter for the legislature to decide, rather than for resolution on the basis of assumptions about what the enacting legislature might have decided, if the law had then been what we propose it should now be. The decision is pre-eminently a policy decision which is appropriate for the legislature, and not for the courts. 1.273 We therefore consider that no Act or subordinate legislation should be construed to require insurance against a liability to pay punitive damages. Statutory clarification of this point is essential for both insurers and insured; it cannot be left to ad hoc resolution by courts following litigation. We recommend that: (43) our draft Bill should ensure that, unless a future enactment expressly or clearly requires insurance against a liability to pay 822 Thus, in many cases, we find parallel compensation funds established (eg Merchant Shipping Act 1995, Ch IV; Nuclear Installations Act 1965, s 18; rules made pursuant to the Insurance Brokers (Registration) Act 1977 (see SI 1987 No 1496 and SI 1990 No 2461); Solicitors Act 1974, s 36); expressly-created direct rights of action for victims against insurers (Merchant Shipping Act 1995, s 165; see also Road Traffic Act, s 153); and terms in the insurance contract being rendered ineffective as against victims (Road Traffic Act 1988, s 148). 823 For example, exemplary damages have never been awarded for the tort of negligence, yet this would be the main basis for a claim against motorists (covered by the Road Traffic Act 1988) or against employers by their employees (covered by the Employers’ Liability (Compulsory Insurance) Act 1969). The same reasoning applies to professional indemnity insurance. Exemplary damages cannot be awarded for negligence, breach of contract, deceit or pre-contractual misrepresentations actionable under s 2(1) of the Misrepresentation Act 1967. In addition to the unlikelihood of there being a cause of action for which exemplary damages could be claimed, there is the difficulty of fitting claims within one of the three Rookes v Barnard categories. 176
punitive damages, no enactment shall be construed to require it. (Draft Bill, clause 9(2)) This recommendation will preclude any argument that any of the existing compulsory insurance statutes extend to punitive damages: none of those statutes expressly cover a liability to pay punitive damages. But it will not prevent a future Act from requiring insurance against such a liability, should the legislature decide that such a requirement is appropriate, provided that it is made clear (by express words) that that is the intention. (9) Survival of actions (a) For the benefit of the victim’s estate 1.274 At present no claim for exemplary damages survives for the benefit of the estate of a deceased victim of wrongdoing. 824 This rule can be criticised on a number of grounds, 825 and repeal was supported by a majority of consultees. We consider that wrongdoers ought to be punished whether or not their victims are alive: a wrongdoer should not escape punishment as a result of a fortuity. 826 And crucially, the aims of both retribution and deterrence will be furthered by the survival of a punitive damages claim for the benefit of the estate of the victim. 1.275 We accordingly recommend that: (44) section 1(2)(a)(i) of the Law Reform (Miscellaneous Provisions) Act 1934 should be repealed and the Act amended so as to allow claims for punitive damages to survive for the benefit of the estate of a deceased victim. (Draft Bill, clause 14(1)-14(3)) (b) Against the wrongdoer’s estate 1.276 At present an award of exemplary damages can be claimed from the estate of a deceased wrongdoer. 827 We think this is the wrong approach. 828 Unfortunately we have not benefited from the views of any significant number of consultees on this question. Responses dealing with the ‘survival’ issue almost uniformly dealt with 824 Law Reform (Miscellaneous Provisions) Act 1934, s 1(2)(a)(i). This is also the prevailing approach in other major Commonwealth jurisdictions: see para 4.106 above. 825 See Consultation Paper No 132, paras 3.108-3.110, 6.36; and see, for similar criticisms, the Ontario Law Reform Commission, Report on Exemplary Damages (1991) pp 59-60. 826 The Association of Personal Injury Lawyers pertinently pointed out that only a politician or lawyer would tolerate the suggestion that if a person maims or cripples someone then punitive damages may be awarded against him but, if he goes further and kills the victim, then he is free and no question of punitive damages arises. 827 This is also the prevailing approach in other major Commonwealth jurisdictions: see para 4.107 above. 828 This view is supported by the conclusions of the Ontario Law Reform Commission, in its Report on Exemplary Damages (1991) pp 59-60, as well as by practice in the United States. The Commission observes that of United States jurisdictions in which punitive damages may be awarded only for the purposes of punishment and deterrence, every state which has considered the issue has rejected the idea that a claim for punitive damages should be permitted against the estate of a deceased wrongdoer. 177
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THE LAW COMMISSION Item 2 of the Si
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should emphasise at the outset that
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practitioners and academics) consid
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punitive damages should survive for
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and sued, he will, at worst, be mad
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‘exceptional’ 62 conduct or mot
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defendant or his legal advisers per
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an undertaking in damages which was
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likely adversely to affect him or h
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noting the concession by the respon
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Kralj, which was an “excruciating
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two of their lordships who gave jud
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such a restriction, unless one take
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(1) legislation should provide that
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1.3 Historically, a number of diffe
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nuisance 195 has also been recognis
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day market). At first instance, Pet
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equired to trigger an account of pr
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disgorgement to principals of bribe
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disgorge what he has saved by commi
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there is no consensus among comment
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(a) Restitutionary damages should b
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the purposes of the claim to restit
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account of profits and damages but
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area. The problem of ‘election of
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there is no such in-built limitatio
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PART IV EXEMPLARY DAMAGES: PRESENT
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that exemplary damages were not awa
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1.96 These questions were recently
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to be irrelevant to, and even incon
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1.107 Consistently with the apparen
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manner. As shall be seen below, it
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1.117 Major Commonwealth jurisdicti
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In the present case there is the fu
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an aspect of the case which made ex
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1.137 The ‘non-discrimination’
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We have ... been referred to a numb
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Thus it has been suggested that the
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underlying such damages, that of pu
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easons of fairness to defendants: i
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(6) Multiple plaintiffs 1.165 Very
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Legal Services Act 1990 and Rules o
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MR himself suggested figures to ass
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Thompson v MPC achieves its aims, t
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proceeded on the basis that the doc
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would be that to allow insurance wo
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PART V EXEMPLARY DAMAGES: REFORM 1.
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1.8 As regards the divide between t
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3. THE CASE FOR AND AGAINST EXEMPLA
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(5) The criminal approach to vicari
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particularly unsatisfactory to rely
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1.34 On the first interpretation an
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4. OUR CENTRAL REFORM PROPOSALS (1)
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when applying this principle a cour
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indefensible position which the com
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... the availability of exemplary d
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But these concepts are inadequate,
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for a wrong which arises under an A
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view that such an award would be co
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the promise. To award exemplary dam
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else should, actually constitute in
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awarded as damages (including exemp
Page 125 and 126: 1.88 The first argument is that it
Page 127 and 128: (2) the relationship between (on th
Page 129 and 130: was determined, the court could mak
Page 131 and 132: (iii) A ‘last resort’ remedy (2
Page 133 and 134: A discretionary or an absolute bar
Page 135 and 136: 1.117 We have therefore recommended
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Page 139 and 140: (24) our draft Bill should lay down
Page 141 and 142: 1.141 In our view, this is necessar
Page 143 and 144: the punitive damages award on the A
Page 145 and 146: to that remedy. 720 Yet this means
Page 147 and 148: (31) once punitive damages have bee
Page 149 and 150: e so where the defendant consents t
Page 151 and 152: 1.183 We also think that any ‘adv
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Page 155 and 156: (c) Implications of the adoption of
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Page 159 and 160: conduct. 756 Although it has consis
Page 161 and 162: liable to pay a sum of money which
Page 163 and 164: 1.224 The second difference is that
Page 165 and 166: award if they succeed in persuading
Page 167 and 168: approaches. 786 132, 787 Although i
Page 169 and 170: ... [c]ontracts should only be held
Page 171 and 172: (ii) The problems of defining with
Page 173 and 174: the insured wrongdoer’s inability
Page 175: award to be covered by insurance, t
Page 179 and 180: one case, 831 and arguably done so
Page 181 and 182: common law to hold, if necessary, t
Page 183 and 184: PART VI SUMMARY OF RECOMMENDATIONS
Page 185 and 186: (19) the ‘cause of action’ test
Page 187 and 188: damages shall be permitted for that
Page 189 and 190: MICHAEL SAYERS, Secretary 11 Septem
Page 191 and 192: Nigel Ley Harvey McGregor QC Tim Ow
Page 193 and 194: APPENDIX C Persons and organisation
Page 195 and 196: Steve Hedley John Hodgson L Hoyano
Page 197: 197
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