Aggravated, Exemplary and Restitutionary ... - Law Commission

punitive damages award would be frustrated in any case where the wrongdoer
calculated that the profit which he or she would derive from the wrongdoing would
exceed the statutory maximum sum. The aim of the award would be to punish the
wrongdoer for such a calculation, yet statutory maxima facilitate just these sorts of
calculation; they also prevent any possibility of punishment being made more severe, in
a particular case, in order to ‘frustrate’ the calculations. Another is that maxima would
‘look’ bad in any case in which an award was made against the state: the state
would appear to be seeking to limit its liability, which would tend to compromise the
rationale for the availability of punitive awards in these cases. We therefore do not
recommend that statutory maxima be imposed on punitive awards.
1.96 The arguments against the use of either fixed awards or multiples of compensatory
damages are even stronger. At the level of principle, these are objectionable for
two connected reasons. The first is that they lack flexibility - minimising or even
eliminating the scope for judicial discretion. Yet such flexibility is a precondition
of effective and fair awards. It is a precondition of ‘effective’ awards because
flexibility enables an award to be tailored to the precise nature of the defendant’s
conduct, and so more closely to the extent of punishment, deterrence and
disapproval which that conduct makes necessary. In contrast, fixed awards will
almost inevitably either over- or under-punish. It is a precondition of a ‘fair’ award
because fixed awards might, in some or even many cases, infringe the principle of
‘moderation’. This is because a court would have to make an award of a certain
sum, even if it exceeded the ‘minimum necessary’ to punish, deter and disapprove.
The second objection is that ‘multiples’ penalise disproportionately harshly the
wrongdoer who causes substantial loss; they also wrongly assume that there is a
direct relationship of proportionality between the heinousness of the wrongdoing
and the seriousness of the harm caused thereby, and that the loss caused is the
only factor relevant to judgments of the heinousness of the wrongdoing. Finally,
the choice and the use of fixed awards or multiples is essentially arbitrary. The
choice is arbitrary because it is very difficult to decide, in any rational way, what
should be the level of the fixed award, or what multiple or even multiples should
be used. The use of fixed awards will become increasingly arbitrary, unless the
fixed sums are constantly updated in order to take account of changing social
factors and of inflation. We therefore do not recommend the adoption of fixed
awards or multiples in the assessment of punitive damages.
1.97 For the avoidance of doubt, we would emphasise that our rejection of statutory
‘fixed awards’, ‘maxima’ and ‘multiples’ should not be taken to imply criticism of
the very valuable formulation of ‘guidance’ by the Court of Appeal in the recent
case of Thompson v MPC. 678
This is for two main reasons. First, Thompson v MPC
involves judicially-formulated ‘guideline’ ‘ceilings’, rather than absolute statutory
limits to awards; secondly, to the extent that ‘multiples’ are used, they are merely
to suggest a ‘ceiling’ for exemplary damages - that is, a maximum, rather than the
always-appropriate sum.
1.98 As the Thompson ceilings are only ‘guidelines’, if a case was so exceptional as
clearly to require a punitive damages award in excess of the ‘ceiling’, on the basis
that such appalling conduct had not been anticipated at the time when that ceiling
678 [1997] 3 WLR 403. See paras 4.94-4.95 above.
128