Aggravated, Exemplary and Restitutionary ... - Law Commission

the promise. To award exemplary damages would tend to discourage efficient
breach.
1.73 A counter-argument to our approach is that the potential for concurrent liability 638
means that it would be anomalous and odd to allow punitive damages for a tort (or
equitable wrong) which arises on the same facts as a breach of contract, while
denying the availability of such damages in an action for the breach of contract.
But the acceptance of concurrent liability does not seek to deny that the bases of
the causes of action in contract and tort are different. And the recognition of
concurrent liability can be presented as supporting, rather than undermining, our
recommendation, in that there is now no impediment to a plaintiff claiming
damages for both breach of contract and a tort (and an equitable wrong) and then
electing to take judgment on the cause of action most favourable to him or her.
The prospects of plaintiffs being denied punitive damages merely because they
have incorrectly pleaded their case as one for breach of contract rather than tort
(or, for example, breach of fiduciary duty) are therefore significantly reduced.
(vi) Why exclude damages under an undertaking in damages?
1.74 The device of an undertaking in damages is presently used in different contexts,
where it is required to perform rather different purposes. 639
This makes it far from
easy to resolve the question, should it be possible for a court to make an award of
exemplary damages pursuant to an undertaking? Two views can be identified.
1.75 One view is that it is very surprising that exemplary damages have ever been
thought to be awardable under an undertaking. 640
The purpose of an undertaking,
on this view, is to ensure that if a court wrongly grants interlocutory relief, the
financial or other detriment that is suffered by the defendant as a result of the
issuing of the relief can be adequately compensated. If such compensation were
unavailable, the awarding of interim relief would be severely impeded by concerns
that unrepaired and unjustified harm might be caused to the defendant. 641
On this
view, the undertaking enforced is typically one to indemnify the defendant, in the
event of an interlocutory injunction subsequently being discharged, for the loss he
638 In Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 the House of Lords authoritatively
accepted that there can be concurrent liability for breach of a contractual duty of care and
the tort of negligence causing pure economic loss. Cf Tai Hing Cotton Mill Ltd v Kamsing
Knitting Factory [1979] AC 91.
639 The multiple purposes of undertakings in damages have been recognised in the helpful
article by A Zuckerman, “The Undertaking in Damages - Substantive and Procedural
Dimensions” [1994] CLJ 546. The distinction which we draw between the two conceptions
of an undertaking in damages is close to, but not exactly the same as, the distinction which
Zuckerman draws between the undertaking as (i) a protection for ‘substantive rights’ of
defendants (pp 548-555) and (ii) a protection for ‘procedural rights’ of defendants (pp 555-
566).
640 For recent judicial doubts, see Berkeley Administration Inc v McClelland 18 February 1994
(unreported, CA), per Hobhouse LJ, cited in S Gee, Mareva Injunctions and Anton Piller
Relief (3rd ed, 1995) p 132.
641 See, for example, Hoffman-La Roche v Trade Secretary [1975] AC 295, 361A-C, per Lord
Diplock. See also the general accounts of undertakings in damages in, in particular, Spry,
Equitable Remedies (4th ed, 1990) pp 472-478 and Appendix A, and S Gee, Mareva
Injunctions and Anton Piller Relief (3rd ed, 1995) ch 9.
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