Aggravated, Exemplary and Restitutionary ... - Law Commission

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means of one or more of several different remedies: an action for ‘money had and received’; an ‘account of profits’; and (restitutionary) ‘damages’. 1.11 Our conclusion is that development of the law on restitution for wrongs is, in general, most appropriately left to the courts. 20 No attempt should be made to state comprehensively in legislation which civil wrongs can trigger restitution, or when they should do so. 21 This position had the support of a large majority of consultees. 1.12 Nevertheless, it would be desirable if the law were to develop towards having a single, restitutionary remedy for wrongs, rather than the range of remedies which currently fulfil that role. 22 More importantly, we recommend that a limited measure of legislative reform is required as a result of our recommendations relating to exemplary damages. Restitutionary damages are a less extreme remedy than exemplary damages. We recommend that they should be available (at least) where exemplary damages could be awarded. 23 (3) Exemplary damages 1.13 It is in relation to the remedy of exemplary damages that reform of the law is most needed. It is also in relation to this remedy that we make our most far-reaching recommendations. We shall see in Part IV that the availability of exemplary damages under English law is, at present, artificially restricted. 24 In broad terms, an award can only be made for a limited set of civil wrongs (‘the cause of action test’) 25 and in only a limited set of circumstances in which those wrongs are committed (‘the categories test’). 26 (a) What direction should reform of exemplary damages take? 1.14 Almost without exception, consultees considered that the current legal position could not be justified; the status quo should not be maintained. We agree. But in what direction should the law develop? A number of consultees (including senior judges, practitioners and academics) considered that rationalisation entailed abolition. 27 But a significantly higher number (also including senior judges, 20 See Part III: section 3(1), paras 3.38-3.47 below. 21 See Part III: section 3(1), paras 3.38-3.47, and recommendations (4)-(6), below. 22 See paras 3.82-3.84 and recommendation (14) below. 23 See paras 3.48-3.53, recommendations (7)-(8), and draft Bill, clauses 12(1)-12(3) (and 12(5)), below. 24 See generally Part IV, but in particular, paras 4.2-4.4 below. 25 See AB v South West Water Services Ltd [1993] QB 507, and see, in particular, paras 4.4 and 4.24-4.28 below. 26 See Rookes v Barnard [1964] AC 1129, per Lord Devlin, and see, in particular, paras 4.3 and 4.6-4.23 below. 27 Just over one quarter (28%) of those responding to the Supplementary Consultation Paper (1995) favoured total abolition, in preference to the two other alternatives of expansion and partial retention. See paras 5.13-5.15 below. 4
practitioners and academics) considered that rationalisation entailed a principled, statutory expansion of the availability of exemplary damages. 28 1.15 In favouring retention and expansion, rather than abolition, we have been most influenced by two considerations. First, there is a practical need for exemplary damages. Our attention was drawn by large numbers of consultees to what are, or would be, ‘gaps’ in the law - areas in which other remedies or sanctions are inadequate, in practice, to punish and to deter seriously wrongful behaviour. These ranged from providing sanctions against abuses of power by the police, to deterring unlawfully discriminatory conduct by employers or persons generally, to discouraging deliberate violations of health and safety legislation. In general terms, one can regard the gaps as flowing from the fact that the criminal law and criminal process do not work perfectly (and inevitably so). Substantial numbers of consultees considered that exemplary damages do or could have a useful role to play in filling these gaps. They fulfil a practical need. We agree. 1.16 Secondly, we believe that, provided exemplary damages are a ‘last resort’ remedy which are subject to significant limitations, and provided that the availability and assessment of exemplary damages are determined by judges and not juries, exemplary damages are a legitimate way of meeting that practical need. 1.17 In formulating our recommendations, our guiding aims have been five-fold. First, exemplary damages should be an exceptional remedy, rarely-awarded and reserved for the most reprehensible examples of civil wrongdoing which would otherwise go unpunished by the law. Secondly, their availability (and assessment) must be placed on a clear, principled basis. Thirdly, although flexibility is necessary, unnecessary uncertainty as to the availability and assessment of the remedy must be avoided. Fourthly, defendants must not be unfairly prejudiced. Fifthly, the impact on the administration and funding of civil justice should not be adverse. 1.18 We believe that, if legislative reform is guided by those aims, the remedy of exemplary damages can emerge as a useful and legitimate, rather than anomalous, civil remedy, which may be expected to command support from all but the strongest proponents of abolition. (b) Our recommendations for reform of exemplary damages 1.19 Our central recommendations are that the ‘cause of action’ and ‘categories’ tests should be replaced with a general principled test of availability, but that that expansion of liability should be subject to major limitations. 1.20 A judge (and never a jury) 29 should award exemplary damages (or as we prefer to call them, ‘punitive damages’) 30 for any tort or equitable wrong, as well as for 28 Just under one half (49%) of those responding to the Supplementary Consultation Paper (1995) favoured a principled expansion, broadly along the lines which we recommend in Part V, in preference to the two other alternatives of total abolition and partial retention. Just under a quarter (23%) supported partial retention; 72% were therefore in favour of retaining exemplary damages in some form. See paras 5.13-5.15 below. 29 See paras 5.81-5.98, recommendation (17), and draft Bill, clause 2, below. 30 See para 5.39 and recommendation (15) below. 5
Page 1 and 2: THE LAW COMMISSION Item 2 of the Si
Page 3: should emphasise at the outset that
Page 7 and 8: punitive damages should survive for
Page 9 and 10: and sued, he will, at worst, be mad
Page 11 and 12: ‘exceptional’ 62 conduct or mot
Page 13 and 14: defendant or his legal advisers per
Page 15 and 16: an undertaking in damages which was
Page 17 and 18: likely adversely to affect him or h
Page 19 and 20: noting the concession by the respon
Page 21 and 22: Kralj, which was an “excruciating
Page 23 and 24: two of their lordships who gave jud
Page 25 and 26: such a restriction, unless one take
Page 27 and 28: (1) legislation should provide that
Page 29 and 30: 1.3 Historically, a number of diffe
Page 31 and 32: nuisance 195 has also been recognis
Page 33 and 34: day market). At first instance, Pet
Page 35 and 36: equired to trigger an account of pr
Page 37 and 38: disgorgement to principals of bribe
Page 39 and 40: disgorge what he has saved by commi
Page 41 and 42: there is no consensus among comment
Page 43 and 44: (a) Restitutionary damages should b
Page 45 and 46: the purposes of the claim to restit
Page 47 and 48: account of profits and damages but
Page 49 and 50: area. The problem of ‘election of
Page 51 and 52: there is no such in-built limitatio
Page 53 and 54: 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
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1.88 The first argument is that it
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(2) the relationship between (on th
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was determined, the court could mak
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(iii) A ‘last resort’ remedy (2
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A discretionary or an absolute bar
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1.117 We have therefore recommended
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discrimination between, for example
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(24) our draft Bill should lay down
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1.141 In our view, this is necessar
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the punitive damages award on the A
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to that remedy. 720 Yet this means
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(31) once punitive damages have bee
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e so where the defendant consents t
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1.183 We also think that any ‘adv
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liability’) which applies to any
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(c) Implications of the adoption of
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‘moderation’ and of ‘proporti
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conduct. 756 Although it has consis
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liable to pay a sum of money which
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1.224 The second difference is that
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award if they succeed in persuading
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approaches. 786 132, 787 Although i
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... [c]ontracts should only be held
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(ii) The problems of defining with
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the insured wrongdoer’s inability
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award to be covered by insurance, t
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punitive damages, no enactment shal
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one case, 831 and arguably done so
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common law to hold, if necessary, t
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PART VI SUMMARY OF RECOMMENDATIONS
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(19) the ‘cause of action’ test
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damages shall be permitted for that
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MICHAEL SAYERS, Secretary 11 Septem
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Nigel Ley Harvey McGregor QC Tim Ow
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APPENDIX C Persons and organisation
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Steve Hedley John Hodgson L Hoyano
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197
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