Aggravated, Exemplary and Restitutionary ... - Law Commission

liable to pay a sum of money which is not required to rectify any wrongful loss which he
or she has caused or any wrongful gain which he or she has made, nor to punish him or
her for any wrongful conduct of his or her own.
1.217 In relation to vicarious liability in respect of compensatory damages, many would
consider that the law rightly tolerates any perceived unfairness at least partly
because, by allowing plaintiffs to proceed against solvent employers, their chances
of having any claim to compensation satisfied are significantly improved. As a
result, the primary compensatory aim of such damages is furthered, rather than
frustrated, by the recognition of vicarious liability.
1.218 On careful consideration we believe that, although contrary to what one might at
first think, the same reasoning applies to awards of punitive damages. In other
words, the primary punitive aim of such damages can be furthered, rather than
frustrated, by the recognition of vicarious liability. If so, then this provides at least
some reason why any perceived ‘unfairness’ in vicarious liability ought to be
tolerated. We explain this point below.
(ii) Furthering the purposes of punitive damages by means of vicarious liability
1.219 The immediate impact of vicarious liability is clearly that the primary wrongdoer
escapes punishment by the law. 763
Nevertheless, vicarious liability may offer a
wider, if indirect, method for pursuing the aims of punitive damages. 764
1.220 Employers who are so liable, or who are potentially so liable, will have an incentive
to control and educate their workforces. The development by employers of some
form of ‘wrong-preventing’ educative process might be particularly beneficial, for
example, in cases of sex or race discrimination. Employers also possess a range of
disciplinary powers which will enable them to penalise and deter individual guilty
employees, or to discourage potential wrongdoers. Indeed, the loss of
employment, coupled with impaired employment prospects, 765
may be a more
severe form of sanction for wrongdoing by employees than a punitive damages
award could directly provide.
1.221 In two categories of case, moreover, vicarious liability may provide the only
method for pursuing the aims of punitive damages. These are, firstly, where
employees are unlikely to be able to satisfy a punitive damages award of any
significant size; and secondly, where a plaintiff has problems identifying the
culpable member of the employer’s workforce. 766
763 Cf the potential impact of rights of contribution or indemnity.
764 For economic theory supporting this conclusion, see A Ogus, “Exemplary Damages and
Economic Analysis” in K Hawkins (ed), The Human Face of Law: Essays in Honour of Donald
Harris (1997) p 99.
765 An employee dismissed for such a reason would be most unlikely, for example, to be able to
obtain favourable references from his or her former employer.
766 In this respect it is interesting to observe that the statement of claim in Racz v Home Office
[1994] 2 AC 45 (see para 4.103 above) only identified one of the officers concerned by
name, and that in Flavius v MPC (1982) 132 NLJ 532 (see para 2.10, n 53 above), an
“unknown” police officer broke the leg of the plaintiff. We appreciate that some practical
difficulties will arise in proving that the unidentified individual employee’s conduct showed
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