Wednesday, 19 November 2014

Punitive damages in Australia - Justifications

1.0        Circumstances where punitive remedies are available [TORTS]

·       In England, punitive damages may be available in the following three categories of case:

1) oppressive, arbitrary or unconscionable action by servants of the government;
2) where D has cynically calculated that the profit to be made by his wrongdoing might well exceed the compensation payable to the plaintiff; and
3) where statute authorized awards of exemplary damages (Lord Devlin in Rookes v Barnard).

·       In Australia, punitive damage were said to be available where there was conscious wrongdoing in contumelious disregard of another’s rights (Knox CJ in Whitfeld v De Lauret). However, the High Court in Uren (1966) expressly rejected Lord Devlin’s restatement of the law of exemplary damages. But what the High Court refused to endorse was Lord Devlin’s restriction of the availability of exemplary damages. Therefore, in Australia, exemplary damages are said to be available where the P had an action for damages in tort and the defendant’s conduct satisfied the description of ‘conscious wrongdoing in contumelious disregard of another’s rights’.
·       The case law suggests that exemplary damages will only be recoverable in exceptional circumstances (majority in Gray).
·       In Gray v Motor Accident Commission, punitive damages were available for negligence where D intended to cause personal injury.
·       Punitive damages were also awarded in deliberate torts.

2.0        Circumstances where punitive remedies are available [CONTRACTS]

·       In England, punitive damages are not available for breach of contract (Addis; approved in subsequent cases).
·       In Australia, punitive damages are also not available for breach of contract (Butler; approved in Gray)

3.0        Circumstances where punitive remedies are available [EQUITY]

·       It seems that punitive damages are not available in breach of fiduciary duty (NSWCA in Harris v Digital Pulse). However, the case leaves unclear whether punitive damages are available in respect of equitable wrongs more analogous to torts. Mason P in dissent was of the view that punitive damages should be available in this case because account of profits would not be able to achieve sufficient deterrence. But there would be an issue of speculation in quantifying such damages.

4.0        Punitive remedies in private law context

·       The question whether punitive damages should be available raises the question of whether they have coherence within the very structure of private law claims, whether those claims are sourced at common law or in equity.

·       Opening
o   the reason why they cannot be brought together into a single legal structure is that exemplary damages are an alien life form in the realm of private law (Dr A Beever).

·       Criticism – Correlativity
o   Remedies of compensation, disgorgement or restitution are legitimate responses to a breach of a duty that is owed to the particular claimant. Corrective justice theorist Professor E Weinrib stated that plaintiff’s entitlement exists only in and through the defendant’s correlative obligation (notion of correlativity). In simple expression, the duty breached defines the response. However, the response of exemplary damages simply cannot be founded in a duty to pay exemplary damages owed to the plaintiff. This may be, according to Professor C. Rickett, classified as a secondary duty but this must be a duty owed to society at large (therefore may be described as primary duty owed to society at large.
o   The element of correlativity, an essence of corrective justice, exhibits coherence in the system of liability.

·       Support – Deterrence as rationale
o   However, some may argue that the theory of corrective justice should be expanded to incorporate the notion of punitive damages. This may be justified based upon its rationale of deterrence, as opposed to rationale of punishment. The term ‘exemplary’ derives from Latin word exemplaris meaning ‘example for others.’ Majority, if not most, would view that the basis of the award of an account and disgorgement of profits is deterrence. In cases where the plaintiff has made no loss, it must be that such award is deterrence based. The law of tort also serves an extrinsic function of deterrence (but in limited cases as confined by Knox CJ’s statement of authority). Therefore, if a taste of deterrence exists in the awards of such remedies, then why would people argue that there is no place for deterrence in private law?

·       Support – punitive damages in case of breach of contract
o   More specifically, why should it be unavailable in breach of contract situations? Some argue that it is not available because quantification of damages is straight-forward and secondly because the contractual damages are concerned with private interests (whereas tort damages are concerned with public interest as well). Furthermore, if punitive damages were available, this would deter parties from making ‘efficient breach’. Richard Posner suggested that such damages, which are essentially penalties, would discourage ‘efficient’ behaviour which would be undesirable for society as a whole.
o   However, from a moral perspective (not Law and Economics school of thought point), efficient breach is an endorsement of immoral behaviour of breaching a promise. It assumes that contracts are simply vehicles for achieving economic efficiency. This theory commends acts that the law should condemn.
o   Furthermore, it ignores the other functions remedies serve such as signaling.

·       Conclusion
o   But in light of all arguments for and against punitive damages in the area of private law, I believe, standing on the same position with Weinrib, that the essential characteristic of corrective justice is correlativity and that incorporation of the notion of punitive damages would more than distort this understanding of corrective justice theory and will cause great confusions as to rationale of private law and the scope of remedies, where available. Punitive damages confuse the civil and criminal functions of the law.

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