Aggravated, Exemplary and Restitutionary ... - Law Commission

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from any other person who is “liable in respect of the same damage”. 750 A person is “liable in respect of any damage” if the person who suffered the damage is entitled to recover compensation from him or her in respect of it, whatever the legal basis of the liability. 751 1.207 In general, it would be inappropriate for the statutory right to contribution to operate in respect of a liability to punitive damages. We recommend above that, 752 subject to two specific exceptions, the liability to pay punitive damages should be ‘several’ only. 753 Where this is the case, there should be no right to contribution under the 1978 Act. For the avoidance of doubt, 754 we accordingly recommend that: (36) our draft Bill should ensure that the right to recover contribution laid down in section 1 of the Civil Liability (Contribution) Act shall not extend to a liability to pay punitive damages that is ‘several’. (Draft Bill, clause 8(3)) 1.208 Where a liability to punitive damages is other than ‘several’, however, any right to claim contribution conferred by the 1978 Act should continue to exist. This means that where a person is held vicariously liable to pay punitive damages, or is a partner who is held ‘jointly and severally’ liable to pay punitive damages in respect of the wrongs of a co-partner, 755 he or she should not be prevented from claiming contribution from his or her employee, agent or co-partner, when the 1978 Act currently entitles him or her to do so. (6) Vicarious liability 1.209 The questions we address here are whether, and if so, when, a person should be held vicariously liable to pay punitive damages in respect of another’s wrongful 750 Civil Liability (Contribution) Act 1978, s 1(1). 751 Civil Liability (Contribution) Act 1978, s 6(1). 752 See para 5.193 and recommendation (34) above. 753 The proposition that a liability to punitive damages should be ‘several’ means that punitive damages should only be awarded where they are available because of, and are assessed by reference to, the defendant’s conduct. The corollary is that any award so available and assessed should be payable only, and in full, by that defendant. 754 This may be sufficiently clear from the general proposition in our draft Bill (clause 8(1)) that a liability to pay punitive damages is ‘several’ only. Nevertheless, subject to this, the wording of s 1(1) and s 6(1) of 1978 Act is broad enough to entitle a person to claim contribution in respect of a liability to pay punitive damages wherever he or she is liable to pay compensation for the “same damage” as the person from whom contribution is claimed. In some cases so included (ie where liability is vicarious) this is acceptable, because such cases constitute exceptions to our recommendation that the liability of a person to pay punitive damages should be ‘several’ only. But in many other cases so included (eg where two or more persons are liable as participants in a joint enterprise, or have independently acted wrongfully so as to cause the same indivisible damage to the defendant) it is not acceptable that they should have a right to contribution under the 1978 Act in respect of any punitive sums that are awarded. 755 Partnership Act 1890, ss 10 and 12. See para 5.205 above. 158
conduct. 756 Although it has consistently been assumed that vicarious liability extends to exemplary or punitive damages on the same basis as compensatory damages, 757 we cannot find any case in which the application of vicarious liability has been challenged in an English court. Existing authorities therefore offer little assistance in resolving this difficult issue. Several strong objections can in fact be raised to recognising vicarious liability to punitive damages. (a) The problems caused by the recognition of vicarious liability 1.210 The first objection is that vicarious liability imposes a burden on employers that is unfair, because it imposes the cost of an award on an ‘innocent’ employer, whilst leaving the ‘guilty’ employee unpunished by law. Prima facie this is objectionable for precisely the same reasons as require that several liability to punitive damages be introduced in relation to joint and several tortfeasors. As the award will not be made against the primary wrongdoer-employee, 758 it will not be ‘effective’; and as the award will be exacted from an ‘innocent’ employer, it will necessarily infringe the principles of ‘moderation’ and ‘proportionality’ which we consider constitute vital limiting principles on the scope of liability to punitive damages. 1.211 The second objection is that recognising vicarious liability for punitive damages imposes a burden on employers that is not warranted by the policies which serve to justify the law’s recognition of claims to punitive awards. A similar objection has been raised against insurance against such awards. 759 The immediate practical effect of insurance and of vicarious liability is that the burden of liability is transferred from the ‘primary’ wrongdoer to another party - whether the employer or the insurer. As a result, the direct punitive, deterrent or symbolic efficacy of the punitive award is at best substantially diluted. The ‘primary’ wrongdoer does not ‘feel’ the punitive award in his or her pocket. 1.212 We acknowledge the force of these arguments. Together they appear to entail that one should refuse to recognise vicarious liability to punitive damages. But for the reasons which we elaborate below, and in agreement with the majority of consultees, we nevertheless consider it to be correct to recommend that: (37) our draft Bill should clarify that a person may be vicariously liable to pay punitive damages in respect of another’s conduct; (Draft Bill, clause 11(1)) (b) The reasons for recognising vicarious liability to punitive damages 1.213 Our reasons for preferring to recognise vicarious liability, which we elaborate fully below, can be summarised as follows: 756 The question was discussed in Aggravated, Exemplary and Restitutionary Damages (1993) Consultation Paper No 132, paras 6.42-6.44, without any provisional view being reached. 757 See paras 4.102-4.105 above. 758 Whether directly, by initial proceedings against the employer, or less directly, by way of contribution or indemnity claims between employer and employee. 759 See generally paras 5.234-5.268 below. 159
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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)
Page 107 and 108: when applying this principle a cour
Page 109 and 110: indefensible position which the com
Page 111 and 112: ... the availability of exemplary d
Page 113 and 114: But these concepts are inadequate,
Page 115 and 116: for a wrong which arises under an A
Page 117 and 118: view that such an award would be co
Page 119 and 120: the promise. To award exemplary dam
Page 121 and 122: else should, actually constitute in
Page 123 and 124: 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
Page 153 and 154: liability’) which applies to any
Page 155 and 156: (c) Implications of the adoption of
Page 157: ‘moderation’ and of ‘proporti
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 and 176: award to be covered by insurance, t
Page 177 and 178: punitive damages, no enactment shal
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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