Aggravated, Exemplary and Restitutionary ... - Law Commission

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(iii) Joint and several liability is distinguishable, and more clearly ‘unfair’ 1.222 So far we have assumed that vicarious liability is prima facie ‘unfair’ to employers; we have then suggested that this unfairness could be tolerated to the extent that, by recognising vicarious liability to punitive damages, the aims of punitive damages are furthered, rather than frustrated. We now seek to deny that there is, on closer examination, anything intolerably unfair about vicarious liability in respect of punitive damages. Our argument is that ‘joint and several liability’ and ‘vicarious liability’ are distinguishable in two important ways which indicate that the ‘unfairness’ that we have identified in the former does not so clearly exist in the latter case. 1.223 The first difference is that an employee forms part of the employer’s enterprise and that that enterprise generally ‘profits’ from his or her employment. In most cases there will be no similar relationship between joint and several tortfeasors. This element of ‘benefit’ to the employer is one justification which has been offered for vicarious liability to compensatory damages. This justification is founded on a moral imperative that one who derives a benefit - in particular a financial profit - from certain acts, should also bear the risk of loss therefrom. Jane Stapleton has recently offered a more sophisticated formulation of this argument, which she terms “moral enterprise liability”. 767 Such an argument does not appear to be any less applicable to vicarious liability in respect of punitive damages than to vicarious liability in respect of compensatory damages. Moreover, as Jane Stapleton observes, this argument does successfully explain key features of the doctrine of vicarious liability within the civil law. In particular, it explains the restriction of the liability of employers to liability for the acts of their ‘employees’ within ‘the course of their employment’. Current tests used to determine whether a person is an ‘employee’ or an ‘independent contractor’ have at their core the question “who has the chance of gain and bears the risk of loss?” - or in a slightly different form, “is he or she in business on his or her own account?” 768 The ‘course of employment’ criterion also generally restricts the scope of liability of employers to those cases in which the employee is acting for the employer. a ‘deliberate and outrageous disregard of the plaintiff’s rights’. To hold an employer vicariously liable assumes that facts can be proved to exist which would sustain the primary liability of the employee which is to be attributed to the employer by means of the doctrine of vicarious liability. The plaintiff will usually be able to prove that his or her rights have been invaded in some way, by an employee of the employer; however, it may be more difficult to prove that this disregard was ‘deliberate and outrageous’, given that this will depend, to a significant extent, on what was the state of mind of the defendant. This can clearly only be a matter of inference. On particular facts it might be difficult to infer that the really culpable sort of state of mind, which is needed before an award of punitive damages is justified, did exist. But a person’s state of mind is always a matter of (more or less problematic) inference from ‘external’ facts. 767 J Stapleton, Product Liability (1994) pp 190-191, and more generally Ch 8. This rationalisation is distinct from well-established theories of enterprise liability which rest on economic arguments. General discussion of economic theories of this sort in relation to vicarious liability can be found in, inter alia, P S Atiyah, Vicarious Liability in the Law of Torts (1967) pp 22-27. 768 See, in particular: Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497; Market Investigations Ltd v Minister of Social Security [1968] 2 QB 173; Lee Tin Sang v Chung Chi-Keung [1990] 2 AC 374 (PC). 162
1.224 The second difference is that, in very many cases, joint and several tortfeasors have neither the moral nor legal responsibility (or power) to control or influence the past and future behaviour of fellow joint and several tortfeasors. Nor, in most cases, will they have any practical ability to do so. Making a joint and several tortfeasor liable to sums awarded in respect of the conduct of others will therefore do little to advance the aims of punitive damages. The position of employers is precisely the reverse - as we indicate in argument (ii) above. Moreover, the ‘control test’ was traditionally regarded as the criterion by which the legal status of ‘employee’ was to be distinguished, thereby defining the category of persons for whose acts employers can be vicariously liable. And even today, when the ‘control test’ has been replaced by a ‘multiple factor’ approach, ‘control’ remains one such important and relevant factor. 769 (c) When should a person be vicariously liable for wrongs of another? 1.225 When the doctrine of vicarious liability is discussed in cases and texts on the law of tort, those discussions are first and foremost about a person’s vicarious liability to pay compensatory damages. Nevertheless, we, consider that if, as we have argued above, vicarious liability to punitive damages can be justified, it should apply subject to the same conditions as apply generally 770 to the wrong in question. Several considerations support this view. First, to apply two different concepts to different parts of the same claim 771 may promote excessive complexity in argument and adjudication. In particular, it could produce extensive debate as to the precise distinctions between the ordinary and the new (and narrower) concept. Secondly, this complexity would be unwarranted because, we believe, the concept of vicarious liability, as generally formulated, adequately defines the category of case within which it is fair (or at least not unfair) to make employers liable for the wrongs of their employees. 772 Thirdly, it would be unfortunate if our Act made a person vicariously liable to pay punitive damages for a wrong committed by another if the concept of vicarious liability has never been recognised in relation to (or deliberately excluded from) the wrong in question. 1.226 At common law, employers are vicariously liable to pay compensatory damages for the torts of their employees, committed within the course of their employment. 773 In our view, the same concept should generally define when an employer is liable to pay punitive damages for its employees’ torts. However, statutes occasionally expressly formulate the doctrine of vicarious liability for the purposes of a particular wrong (such as unlawful discrimination on grounds of sex, race or disability), 774 or extend the doctrine to apply to persons who are not, strictly, the 769 See, in particular: Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497; Lee Tin Sang v Chung Chi-Keung [1990] 2 AC 374 (PC). See Clerk & Lindsell on Torts (17th ed, 1995) para 5-09. 770 That is, to the liability to pay compensatory damages for the wrong. 771 One concept would apply to the claim to compensation for the wrong; another concept would apply to the claim for punitive damages. 772 See paras 5.219-5.224 above. 773 See para 4.102 above. 774 Sex Discrimination Act 1975, s 41; Race Relations Act 1976, s 32; Disability Discrimination Act 1995, s 58. The phrase “in the course of employment” is to be 163
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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)
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when applying this principle a cour
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indefensible position which the com
Page 111 and 112: ... the availability of exemplary d
Page 113 and 114: But these concepts are inadequate,
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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 and 158: ‘moderation’ and of ‘proporti
Page 159 and 160: conduct. 756 Although it has consis
Page 161: liable to pay a sum of money which
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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