(Beever) - (Structure)

The Structure of Aggravated and Exemplary Damages
Author(s): Allan Beever

Source: Oxford Journal of Legal Studies , Spring, 2003, Vol. 23, No. 1 (Spring, 2003), pp.
87-110
Published by: Oxford University Press
Stable URL: https://www.jstor.org/stable/3600646
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Oxford Journal of Legal Studies, Vol. 23, No. 1 (2003), pp. 87-110
The Structure of Aggravated and

Exemplary Damages
ALLAN BEEVER*
Abstract-This article explores aggravated and exemplary damages

their structure. It argues that the awards are distinguishable and o
been appropriately analysed it can be seen that aggravated damages
foundation in the private law and are importantly different from othe
awards. The article then argues that many of the reasons given in favo
damages are not consistent with the structure of that award. The a
by insisting that exemplary damages should be abolished as they
tension with the nature of civil liability.
In Rookes v Barnard,' Lord Devlin severely restricted the awar

damages and expressed the hope that his decision would 'remov
a source of confusion between aggravated and exemplary dam
troubled the learned commentators on the subject'.2 It will n
anyone that this hope has proved unfounded. Many have com
Lord Devlin's view. For example, Peter Cane maintains that '[p]
are sometimes distinguished from "aggravated damages".... However, ag-
gravated damages are effectively indistinguishable from punitive damages, and
in my view, they [but not exemplary damages] should be abolished'3; the exact
converse of Lord Devlin's position. Bruce Feldthusen goes as far as to claim
that Lord Devlin was disingenuous.
Lord Devlin defined aggravated damages as a special category of compensatory damages
used to redress
aggravated special
damages wereinjury to upon
allowed the plaintiff's
proof of thedignity or pride.
same type .... In otherconduct
of objectionable words,
used to justify punitive damages in most other jurisdictions. Lord Devlin did not clarify
why particularly egregious conduct is required to justify aggravated damages. The
better explanation is that Lord Devlin preferred to describe as 'aggravated damage
cases' the many punitive damages precedents that lay outside his restrictive categories.
At that time, the House of Lords refused to overrule its decisions. Lord Devlin then
needed some doctrinal device to distinguish the previous inconsistent authority.4
* Faculty of Law, The University of Auckland, New Zealand.
1 [1964] AC 1129 (HL).
2 Ibid at 1230.
3 P. Cane, The Anatomy of Tort Law (1997) at 114. For the view that aggravated damages are punitive, see also
J.M. Kelly 'The Inner Nature of the Tort Action' (1967) 2 Ir Jur (NS) 279.
4 B. Feldthusen 'Punitive Damages in Canada: Can the Coffee Ever Be Too Hot?', 17 Loyola of Los Angeles
International and Comparative Law Journal 793 at 794-5 (1995) (citations omitted). See also B. Feldthusen 'Punitive
Damages: Hard Choices and High Stakes' [1998] New Zealand Law Review 741 at 749.
Oxford Journal of Legal Studies, Vol. 23, No. 1, ? Oxford University Press 2003; all rights reserved

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88 Oxford Journal of Legal Studies VOL. 23
However, despite these objections, Lord Devlin was both ho
aggravated damages are compensatory and not punitive, and
should be restricted-this article argues that they should be
be shown, when the nature of the awards is correctly unders
that much of the support for exemplary damages is misplac
in favour of exemplary damages are irrelevant to that task; the
the expansion of the award of aggravated or other compensa
This article is divided into two sections. It begins with a discus
damages in order to ascertain their structure. It then turns to e
examining arguments for their retention, expansion, and abo
1. Aggravated Damages
A. The Nature of the Affected Interest
Consider the following scenarios: first, either someone will stri

negligently or will do so intentionally. Second, someone you disl
either touch your face5 negligently or will do so intentional
second alternatives would be worse in some sense. It is tempt
by saying that we would feel worse in the second cases. But this
The question is why would we feel worse. To answer this questio
to identify an interest that is affected in the second cases b
less affected, in the first.6
Following Hegel, it is possible to divide wrongdoing into
ordinary,8 deception, and coercion.9 In the case of an ordi
particular rights of the parties are in dispute. Accordingly, the
the parties centres on whether the claimant has a right to some
piece of property, the performance of a contract, redress
Neither party disputes that the other party is a rights ho
some rights. Moreover, each side accepts that if the other pa
disputed right, then that party is entitled to the subject ma
For example, if A claims a property right to P when P is th
commits an ordinary wrong if A accepts that B can have pr
that if B has a right to P then B is entitled to P.
It may be helpful to think of this in the following manner. In
ordinary wrong, the defendant is able to say, 'I accept tha
5 Other body parts could be substituted to amplify this example. For a similar argum
here, see P. Birks, Harassment and Hubris: The Right to an Equality of Respect (1996) at
is significantly different from Birks'. See text, below n 16.
6 The following discussion owes much to G.W.F. Hegel's Elements of the Philosophy of
7 G.W.F. Hegel, Elements of the Philosophy of Right, A. Wood (ed.) (1991) at 117-9 [5?
categories, not in the manner that follows, but to argue for the appropriateness of pun
is important to note that it does not follow that this punishment should be exacted by
E.J. Weinrib 'Restitutionary Damages as Corrective Justice' (2000) 1 Theoretical Inquirie
8 Hegel's term is 'unintentional', ibid at 117 [584]. However, this seems inappropriate
included. 'Ordinary', of course, is not a great label, but I have been unable to think of
9 Hegel's term was 'coercion and crime', ibid at 119 [590].

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SPRING 2003 The Structure of Aggravated and Exemplary Damages 89
rights holder and is entitled to respect as such, but I do not think that she has
this right'.
In deception, the wronged party receives what he falsely believes to be his due
where that belief is caused by deceit on the part of the wrongdoer. An example
is an insurance company that not only refuses to pay out on a claim that they
have a contractual obligation to meet, but also deceives its client into believing
that she has no right to the payment. In such a case, the claimant is wronged,
not merely because she does not get what she is owed or because she is wrongfully
interfered with, but because the defendant treats her rights with contempt. In
the example, the insurance company undermines the claimant as a holder of
contractual rights. As it were, the company says to its client, 'I know you have
rights but I will ignore them'. Here, then, the defendant accepts that the claimant
has rights but denies that she is worthy of them.'o
The third and most serious type of wrong is coercion. Here, the wrongdoer's
action amounts to a denial that the victim has rights and hence is the most
powerful attack on the dignity of the claimant. If I unintentionally strike someone,
this is not consistent with her right not to be struck. However, my action is
consistent with the victim having the right not to be struck. This is because I
did not mean to breach that right and so I cannot be taken to have denied that
she has it. On the other hand, I cannot intentionally strike someone and make
a similar claim. Hence, such a battery involves an implicit assertion that the
battered has no right to bodily integrity. In the case of coercion, then, the
claimant is wronged not merely by the physical, mental, or pecuniary loss inflicted
on her (if any), but because she has been treated by the defendant as being
without rights; that is, as a mere thing. It is as if the defendant were saying to
the claimant, 'you have no rights'."
It is this wrong for which aggravated damages compensate. The wrong is an
injury to the victim's moral dignity that results from the defendant's denial that
the victim is entitled to respect as a moral person.12 This attack on the victim's
dignity is serious and the common law is right to compensate for it.~3
10 Note that a company that did not pay out on its contractual obligation but did nothing to prevent or subvert
its client's action in a court of law would not be attempting to avoid the obligation in the relevant sense. Instead,
the company would be seeking to have the obligation determined in the appropriate legal manner.
1 Birks, above n 5 at 37.
12 See also Weinrib, above n 7 at 27-9. It may perhaps be objected that one cannot be sure what it is that the
defendant is 'saying' to the claimant-the defendant's subjective intention is not clear. This is true, of course; but
this constitutes a problem only for punishment where the defendant's mens rea is relevant. On the other hand, as
a general rule, private law is not interested in the actual intentions of the parties. In these cases, the relevant
concern is the public meaning of the defendant's action; his intention interpreted on the objective test. This is
particularly appropriate here because, as I elucidate shortly, our concern is to compensate the injury to the claimant
not to punish the wrongdoing of the defendant. Hence, the appropriate interpretation of the defendant's action is
not his own-i.e. his subjective intention--but the interpretation of a reasonable, objective claimant.
13 '[I]t is very well established that in cases where the damages are at large the jury (or the judge if the award
is left to him) can take into account the motives and conduct of the defendant where they aggravate the injury
done to the plaintiff. There may be malevolence or spite or the manner of committing the wrong may be such as
to injure the plaintiff's proper feelings of dignity and pride. These are matters which the jury can take into account
in assessing the appropriate compensation'. Rookes v Barnard [1964] AC 1129 (HL) at 1221, per Lord Devlin.
See also ibid at 1229; Broome v Cassell & Co Ltd [1972] AC 1027 (HL) at 1085, per Lord Reid.

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At this point, it is important to emphasize that, on the vi
aggravated damages are not awarded for mental distress.14 I
the invasion of the claimant's dignity and dignity is not a feeli
the claimant may be entitled to aggravated damages though she
just as a claimant who unconcernedly loses an eye has a clai
Moreover, a highly distressed claimant is due no more in th
damages than is a little distressed one; though she may be e
award in the separate area of mental distress. This is because
compensate for violations of dignitary interests and dignity is
varies between persons. Human dignity is absolute, hence
comparison."5
It is also important to distinguish this view from similar suggestions of Peter
Birks.16 He also maintains that aggravated damages are warranted in that they
respond to invasions of the claimant's dignity; in his view, they respond to
interferences with the claimant's right to equality of respect. But Birks insists
that responding to such interference is not compensatory and that the desire to
respond to such invasions justify exemplary damages. I accept neither of these
claims.
I hope to have shown in the above that it is plausible to regard aggravated

damages as genuinely compensatory and hence that I have distinguished my
view from Birks'. However, Birks also provides an argument to suggest that
aggravated damages cannot be compensatory. This argument is now addressed.
To convince us that responses to invasions of dignity cannot be compensatory,
Birks constructs two examples that he labels Fan Club Two (a) and (b)." In
each case, the claimant is permanently unconscious as the result of a motor
accident. The defendants enter the claimant's hospital room uninvited and
photograph the unconscious claimant. The defendants distribute these pho-
tographs."1 Birks argues that the claimant is entitled to a remedy in such a case,
but that this cannot be explained in terms of compensation.
The defendant fans could ... show ... that there was no compensable harm, just as
where a trespasser puts one foot over your boundary line, there is a protected interest
and an infringement of that interest, but no harm done or none that is substantially
compensable. The compensation model cannot cope with Fan Club Two. In a suitable
14 Compare A. Burrows, Remedies for Torts and Breach of Contract (2nd ed, 1994) at 237-8, 241; Law Commission,
Aggravated, Exemplary and Restitutionary Damages, Law Com No 247 (1997), para 2.1.
15 See, e.g. I. Kant, 'Groundwork of the Metaphysics of Morals' in A. Wood (ed.), Practical Philosophy (1996)
37 at 83-4 [4:434]; A. Wood, Kant's Ethical Thought (1999) at 115-6. For a discussion of this in the legal context,
see B. Chapman, 'Punitive Damages as Aggravated Damages: The Case of Contract' (1990) 16 Canadian Business
Law Journal 269 at 279.
16 See also Kelly, above n 3; N.J. McBride, 'On the Conceptual and Philosophical Foundations of Tort Law'
in J. Horder (ed.), Oxford Essays in Jurisprudence (Fourth Series, 2000) 219 at 231.
17 Birks, above n 5 at 6-7. The difference between these cases is not relevant here.
is In the original formulation of the example, the defendants only intend to distribute the photographs and the
question is whether the claimant is entitled to an injunction preventing them from doing so. For the purposes of
this argument, however, it is necessary to assume either that the photographs have been disseminated or that the
violation of the claimant's dignity lies in the defendants entering the claimant's room in the first place.

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situation one might still get an injunction and, after the event, nominal damages, but
there would be no possibility of any effective remedy in money.19
What is the argument here? Much seems to turn on the analogy with trespass.
I take it that the point of the trespass example is that compensation-other than
nominal damages-is not available in the absence of physical damage to the
property, because there is no interest in the property owner injured by the
trespass. The analogy, then, is that the claimant in Fan Club Two has not suffered
any injury.
There are two reasons why the trespass example cannot function in this
manner. First, it is wrong to state that a trespass that causes no physical damage
does not injure the property owner. A trespass is an infringement or violation of
the property owners' rights, hence a trespass makes the property owner worse
off than he would have been had the trespass not occurred. It is true that we
are inclined to think that a trespass as described by Birks makes the property
owner worse off to only a trivial degree, and hence that such trespasses warrant
only nominal damages, but trespasses are nevertheless sufficiently significant
violations of the property owner's rights to issue in liability. These nominal
damages, then, compensate for a trivial loss. Moreover, some cases of trespass
without physical damage warrant substantial damages, sometimes even ag-
gravated damages. For instance, if I explicitly refuse permission for someone to
enter my land, but that person does so in any case-even merely to place one
foot over the boundary line-that person treats my rights with contempt. This
amounts to a serious breach of my moral dignity and justifies an award of
aggravated damages to compensate.
The second reason Birks cannot rely on an analogy with trespass is the
following. The point of the analogy is to show that there is no interest in the
claimant in Fan Club Two that has been injured, hence there can be no com-
pensation for that injury. But Birks insists that there is such an interest both in
this passage and elsewhere.20 Moreover, he needs to do so in order to justify the
need for a remedy. Birks claims:
(1) The claimant has an interest (in privacy, to equal treatment, etc.).
(2) That interest has been interfered with by the defendants.
(3) That interference warrants a remedy; and
(4) the remedy cannot be compensatory.
But (4) seems inconsistent with (1), (2), and (3). In any case, we have seen no
reason to believe that (4) cannot be replaced with the far more natural:
Hence (4*) the remedy is compensatory.
I suggest that Birks' difficulties are to be explained by the belief that the claimant
in Fan Club Two cannot be injured, because he does not and cannot know what
19 Birks, above n 5 at 45-6.

20 Ibid at 37-8.

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the defendants did. The crucial work, then, is done, not b
trespass, but by the fact that that claimant is unconscious. Hen
relies on the view that one cannot be harmed unless one is conscious of that
harm; the 'what you don't know can't hurt you' theory. Almost all find this
position deeply intuitive; however, it suffers from one flaw-it is wrong.
The view upon which Birks relies cannot explain why we feel sorry for an
adult reduced to happy infancy by a motor accident, why we feel that failure to
observe a will is an affront to the deceased, or why it is rational to fear a painless
death. It cannot explain why we take out life insurance on ourselves to protect
the future interests of our families, why we care about the future health of the
globe, or why we do not want to be talked about behind our backs. It is a
powerful and persuasive view that unfortunately happens to be inconsistent with
even more powerful and persuasive views.21 What you don't know can sometimes
hurt you, and this is what happens in Fan Club Two.22 The claimant had been
make worse off by the actions of the defendants. That he does not know this is
not decisive. In fact, Birks is committed to this position, because he insists that
the claimant has an interest with which the fans have interfered. There is no
reason, then, to hold that responses to that interference cannot be compensatory.23
B. The Affected Interest and the Structure of Aggravated Damages
That aggravated damages are responses to invasions of dignity explains their

structure. First, while some express doubt that awards of aggravated damages
made in conjunction with compensation for mental distress can be compensatory,
as the latter leave no room for the former,24 this is unfounded. Aggravated
damages do not compensate for injured feelings. This also explains why the
quantum of aggravated damages does not change according to how injured the
claimant feels.
Second, it is thought anomalous that in determining the availability and

quantum of aggravated damages the defendant's conduct rather than the claim-
ant's injury is examined. Surely, if we are aiming to compensate, we need study
only the injured party.25 Strictly, this is correct, but in this case the injunction
to examine only the claimant renders the relevant damage invisible. The claimant's
injury lies in the violation of her dignity by the defendant. Violation of dignity
is not directly observable. Instead, to discover the injury, we must look at how
the defendant acted. In these cases, then, our sole epistemological access to the
21 T. Nagel 'Death' (1970) 4 Nous 73.

22 Note that Aristotle accepts that the dead can have their interests affected, Ethics (1976) at 85 [11l01a-b].
23 Birks, above n 5 at 37, 45, also argues that an approach opposed to exemplary damages will tend to forget
the relevant interest. Thus, he maintains, the compensatory model should be abandoned in favour of one that
accepts punishment. But this is a weak argument. Assuming arguendo that the compensatory model has a tendency
to ignore the interest, surely this can be avoided by academics and so on reminding us all. In any case, this
argument cannot address the truth of the compensation model. Birks, of course, was not bothered by these
objections, because he thought that exemplary damages were justified on other grounds.
24 Law Commission, above n 14 at paras 2.21-5.
25 Birks, above n 5 at 46. It is this point that lies behind Feldthusen's inclination to regard Lord Devlin as
disingenuous. See text, above n 4.

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claimant's injury is through examination of the defendant's actions. This does

not show that we are interested in the defendant's actions per se, however. We
are interested in these actions only in so far as they impinge on the claimant.26
In its report on private law damages, the Law Commission also expresses the
view that, were aggravated damages purely compensatory they should be available
in cases of breach of contract and negligence. As they are not so available, they
cannot be compensatory.27 This position is somewhat overstated. On the view
outlined here, the unavailability of aggravated damages in contract and negligence
is comprehensible, though ultimately unjustified. This is because acts of neg-
ligence or breaches of contract seldom violate the relevant dignitary interests;
they are 'ordinary' wrongs. However, as seen above, this need not be the case.
Breaches of contract can involve deception as can negligence.28 While the
resulting injury to the claimant's dignity falls short of constituting a tort in its
own right, as consequent to a breach of contract or negligence it warrants
compensation. Moreover, negligent acts that involve blatant and extreme dis-
regard for the claimant's rights can be correctly regarded as falling into Hegel's
category of crime and coercion. This is indicated by the fact that they are often
crimes. If I act with such disregard for the claimant that, as it were, I say to her,
'you do not deserve the protection of a duty of care', this is the equivalent of
my saying 'you are not worthy of rights' and hence constitutes a serious breach
of the claimant's dignity and calls for an award of aggravated damages to
compensate. While these cases may be rare, the bar against awards of aggravated
damages for negligence and breach of contract should be removed.
However, in reasoning approved of by the Court of Appeal,29 Woolf J strongly
opposed this position.
It is my view that it would be wholly inappropriate to introduce into claims of this
sort, for breach of contract and negligence, the concept of aggravated damages. If it
were to apply in this situation ... whether under contract or in tort, then I would
consider that it must apply in other situations where a person is under a duty to
exercise care. It would be difficult to see why it could not even extend to cases where
damages are brought for personal injuries in respect of driving. If the principle is right,
a higher award of damages would be appropriate in a case of reckless driving which
caused injury than would be appropriate in cases where careless driving caused identical
26 Naturally, if dignity were directly observable, it would be possible to examine only the claimant, but that is
not the case. Damage awards are often similarly contextual. For example, in assessing loss of amenity due to the
negligent amputation of a leg, a court would need to enquire into the difficulties of living in society with only one
leg. This will vary between societies according to how adequately the disabled are provided for, etc. Hence, the
court will need to examine how well similarly disabled persons cope in the relevant community. Likewise, an
exploration of a wrongdoer's blameworthiness in order to determine the appropriate punishment may need to
involve an examination of the victim's injury. For example, to see whether an accused deserved to be punished
for murder, it is necessary to establish that he killed his victim. Nevertheless, compensation focuses on the wronged
party's injury and punishment on the wrongdoer's action. In the first case, we look to society in order to measure
the claimant's injury and in the second we look to the victim to determine the defendant's guilt.
27 Above n 14 at paras 2.26-6.
28 An example in negligence is the following. I negligently injure a person, then send a team of lawyers who on
my instructions convince him with undue pressure that he has no cause of action when I know that such an action
has good foundation.
29 AB v South West Water Services [1993] QB 507 (CA) at 528, per Stuart-Smith LJ.

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injuries. Such a result seems to me to be wholly inconsistent with t
to damages in this area, which is to compensate the plaintiff for
actually suffered, so far as it is possible to do so, by the award of m
and not to treat those damages as being a matter which reflects the
or breach of duty of the defendant.30
The worry, that allowing aggravated damages in this case

floodgates to their award in all cases, is not warranted once
award is made clear. Aggravated damages should be given on
observe due care amounts to an invasion of the claimant's dig
claimant is merely upset. They would be available only in a
negligence or breach of contract cases. Moreover, it is app
aggravated damages in some cases of reckless driving but no
This is because in being reckless the driver may indicate tha
for the claimant's rights and is prepared to treat her as a me
is treated as such, she deserves to be compensated.31
Aggravated damages, then, are not an incoherent award indist
exemplary damages as Cane asserts. Though the basis for a
has not been clearly articulated by the courts, Lord Devlin w
that there is such a basis and that their award should be con
expanded.32
2. Exemplary Damages
A. Exemplary Damages Confused as Aggravated or other Compensatory

Damages
In this section, I explore some comments made in respect of exemplary damages
that do not appreciate the unique nature of that award. It is important to discuss
these before examining arguments made in favour of exemplary damages. This
is because much of the intuitive appeal of exemplary damages comes from
confusing them with compensatory damages. To put it bluntly, the belief is that
exemplary damages are justified because they are required to ensure that the
30 Kralj v McGrath [1986] 1 All ER 54 at 61.

31 However, a hurdle for claimants in such a position is that the actions of the defendant in reckless driving
cases are not often directed at the claimant in particular. Hence, they may often warrant punishment but not
aggravated damages.
32 Clarifying the award may also provide argument that causes of action should be expanded to afford the
protection of the dignitary interest that underlies aggravated damages. A likely candidate is a cause of action for
sexual harassment which infrequently causes personal injury but often has a serious impact on the claimant's
dignity. See also Birks, above n 5.

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claimant is adequately compensated.33 It is only when this error is brought into

the open that the validity of the award can be assessed adequately.
In Rookes v Barnard, Lord Devlin called attention to this confusion by pointing
out that many past awards of exemplary damages could be explained in terms
of aggravated damages.34 In the same vein, the rules surrounding the survival of
claims mean that claims for exemplary damages are extinguished upon the death
of the claimant but survive the death of the defendant. This makes sense if the
aim of the award is compensation, but if punishment is the goal then this is
absurd.35 While this may appear an inexplicable confusion,36 it indicates that
much of what goes under the label 'exemplary damages' in fact characterizes
aggravated damages as defined here.37
Lord Devlin's analysis can be extended. Many of the remarks made by
advocates of exemplary damages do not make sense in a punitive context. An
example of this occurs in the Law Commission's discussion of the availability of
insurance against exemplary damages. It is common to point out that if the
function of exemplary damages is to punish and deter, then it defeats this purpose
if potential defendants are allowed to insure against the consequences of acting
in a punishable manner. In reply, the Law Commission claims:
There is a clear public interest in punishing and deterring bad conduct of a nature
which merits a punitive damages award, as well as in offering appeasement to the
victims thereof. Nevertheless, it is futile to discuss the pursuit of these aims through
civil litigation if plaintiffs will not claim punitive damages because the defendant cannot
pay them. Plaintiffs are unlikely to claim punitive damages where defendants do not
have the financial capacity to pay any substantial damages and costs which may be
awarded against them. Such capacity may be afforded, however, by liability insurance.38
Recall, however, that the alleged point of such an award is to punish and deter.
This cannot be achieved efficiently if the defendant has insurance. The fact (if
33 For example, R.W. Wright 'Principled Adjudication: Tort Law and Beyond' (1999) 7 Canterbury Law Review
265 at 292 (citation omitted) claims '[t]hese two distinct types of retribution [criminal and civil], one a public
retribution accomplished though criminal law for the nondiscrete wrong to the public as a whole and the other a
private retribution accomplished through tort law for the discrete dignitary injury to the individual claimant, have
been recognized in the law since ancient times. Both types of retribution are rectificatory or compensatory in
nature and fall within the domain of corrective justice'. But if the damages are punitive, they are not compensatory.
In fact, it is not clear whether Wright means to refer to punitive damages, which are retributive but not compensatory,
or what in the Commonwealth is referred to as aggravated damages, which are compensatory but not retributive.
The distinction is not generally made in the United States, which only adds to the confusion.
34 Above n 1 at 1221-5. See also Broome v Cassell & Co Ltd [1972] AC 1027 (HL) at 1085-6, per Lord Reid;
Chapman, above n 15; N.J. McBride, 'Punitive Damages' in P. Birks (ed.), Wrongs and Remedies in the Twenty-
First Century (1996) 175 at 177.
35 A. Burrows, 'Reforming Exemplary Damages: Expansion or Abolition?' in P. Birks (ed) Wrongs and Remedies
in the Twenty-First Century (1996) 153 at 171; Law Commission, above n 24 at para 5.274f; J. Smillie 'Exemplary
Damages for Personal Injury' [1997] New Zealand Law Review 140 at 171-2; J. Swanton & B. McDonald
'Commentary on the Report of the English Law Commission on Aggravated, Restitutionary and Exemplary
Damages' (1999) 7 Torts Law Journal 184 at 198-9.
36 See for example the view of the Law Commission, above n 14 at paras 5.274f.
37 This was Lord Devlin's point in reassessing past judgments which claimed to award exemplary damages but
in fact did not. Rookes v Barnard [1964] AC 1129 (HL) at 1221-5.
38 Above n 14 at para 5.237. See also Lamb v Cotogno (1987) 61 ALR 549 (HC); J. Swanton & B. McDonald,
'Commentary on the Report of the English Law Commission on Aggravated, Restitutionary and Exemplary
Damages' (1999) 7 Torts Law Journal 184 at 197-8.

129.94.8.26 on Mon, 01 Apr 2024 08:08:43 +00:00
it is one) that claimants will not pursue exemplary damages
defendants is neither here nor there.39
A further area of uncertainty surrounds vicarious liability. If exemplary damages
serve to punish the wrongdoer, then it seems both senseless and unjust to hold
his innocent employer liable. The Commission replies that furthering the purpose
of exemplary damages requires vicarious liability. It maintains that there are
occasions when vicarious liability is the only feasible method by which the
purposes of exemplary damages can be pursued. These are 'firstly, where
employees are unlikely to be able to satisfy a punitive damages award of any
significant size; and secondly, where a claimant has problems identifying the
culpable member of the employer's workforce'.40
This completely loses sight of the punitive nature of exemplary damages. That
an employee cannot meet an award of exemplary damages or be identified is no
reason to transfer the punishment to his innocent employer. It is impossible to
escape the fact that to do so would be to punish the innocent.4' But the situation
is worse than this-vicarious liability for exemplary damages is an injustice of
the first order as it entails punishing a defendant who has done no wrong by
transferring his property to a claimant who has no right to receive it.
Approached from the perspective of punishment, the above points involve
such serious misunderstandings that one must assume that they are in fact
motivated by concern for the claimant. On this view, insurance against exemplary
damages and vicarious liability should be permitted so as to ensure the access
of claimants to those damages. This makes more sense, but it is not consistent
with the punitive and non-compensatory nature of exemplary damages. Concern
for the claimant cannot provide a justification for exemplary damages. Any such
validation must focus on the defendant. Accordingly, any argument in favour of
exemplary damages that concentrates on the plight of the claimant is necessarily
misguided.
This does not show that all arguments such as the ones explored above are
to be dismissed, however. Rather, it indicates that those arguments are relevant
to debates about compensatory not exemplary damages. Those who find such
arguments compelling should follow up their consequences for compensation,
but they have no relevance for punishment.
39 See also S. Todd 'Exemplary Damages' (1998) 18 New Zealand Universities Law Review 145 at 184-7.
40 Above n 14 at para 5.221. The Commission also discuss the deterrent effect of vicarious liability. This is
explored further in the text below, n 60. See also J. Swanton & B. McDonald, 'Commentary on the Report of the
English Law Commission on Aggravated, Restitutionary and Exemplary Damages'(1999) 7 Torts Law Journal 184
at 196-7.
41 See also Kuddus v Chief Constable of Leicestershire Constabulary [2001] 3 All ER 193 (HL) at 224f, pe
Scott of Foscote; Ontario Law Reform Commission, Report on Exemplary Damages, 1991 at 57-8; P. Ja
Law Commission Report on Aggravated, Exemplary and Restitutionary Damages' (1998) 61 MLR 860
Todd, above n 39 at 182-4.

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B. Arguments in Favour of Exemplary Damages42
I now discuss prominent arguments that support the award of exemplary damages.
I maintain that these fail either because they cannot justify damages that are
punitive or because they cannot justify exemplary damages in the private law
context.
(i) Exemplary damages are therapeutic and vindicatory

A seemingly promising argument for exemplary damages is that
wrongdoing find such awards therapeutic. The idea is that claim
psychological benefit that aids recovery from seeing the court re
fendant to pay exemplary damages.43 However, what is not clear is th
between the therapy and specifically exemplary damages. Both T
Joanna Manning utilize the work of Feldthusen; however, Feldthu
argue for exemplary damages. He maintains that the civil action m
therapeutic than the criminal, because the parties are placed in a
formal equality and the claimant has more control over the litiga
is intended to argue only for the therapeutic nature of tort law i
Proponents of exemplary damages owe us an argument for awardin
damages in particular.
If Thomas J and Manning are not to be read as missing this poi
two ways of taking their argument. First, their reasoning is meant to
in the New Zealand context where it is impossible to sue for comp
personal injury.45 The idea here is that since the personally injur
only opportunity to sue the defendant is to sue for exemplary d
channel should not be closed. Obviously, this argument is of no relevan
New Zealand. Moreover, even within New Zealand the argument is weak.
As Manning notes,"46 Feldthusen argues that compensation through statutory
schemes, such as New Zealand's, are also therapeutic.47 Manning replies that
the removal, in 1992, of lump sum payments for such injury, leaving only
periodic payments, weakened the therapeutic nature of compensation in New
Zealand.48 Perhaps this is so-however, this point argues against the 1992 changes
to the scheme rather than in favour of exemplary damages.
42 In Lamb v Cotogno (1987) 61 ALR 549 (HC) at 192, the High Court of Australia maintained that exemplary
damages may be justified even when they neither punish nor deter, because the damages remove the incentive for
the claimant to seek revenge or to take self-help. Because these arguments are extremely weak, I pass over them
here. For their rejection, see Daniels v Thompson [1988] 3 NZLR 22 (CA) at 29.
43 Daniels v Thompson [1988] 3 NZLR 22 (CA) at 133-5, per Thomas J; Bottrill v A [2001] 3 NZLR 622 (CA)
at 648-9, per Thomas J; J. Manning 'Professor Smillie's "Exemplary Damages for Personal Injury": A Comment'
[1997] New Zealand Law Review 176 at 183-5; 'Exemplary Damages and Criminal Punishments in the Privy
Council' (1999) 7 Torts Law Journal 129; A. Reed 'Exemplary Damages: A Persuasive Argument for their Retention
as a Mechanism of Retributive Justice' (1996) 15 Civil Justice Quarterly 130.
44 B. Feldthusen 'The Civil Action for Civil Battery: Therapeutic Jurisprudence?' (1993) 25 Ottawa Law Review
203. See also the cautious comments in B. Feldthusen 'Punitive Damages: Hard Choices and High Stakes' [1998]
New Zealand Law Review 741 at 763-4.
45 Injury Prevention, Rehabilitation, and Compensation Act 2001 (NZ), s 317.
46 Manning, above n 43 at 184.
47 Feldthusen, above n 44 at 231.
48 Accident Rehabilitation and Compensation Insurance Act 1992 (NZ) (repealed).

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A second, and more charitable, interpretation of Thomas
claims is that they maintain that there is something unique to
that make them especially therapeutic. Unfortunately, such
be found clearly in their writings. However, In Wv W Lord
to supply one.
A prosecution is generally speaking initiated and controlled by the

is initiated and controlled by the victim. Thus the prosecution of an
damages enables the victim publicly to vindicate his or her version
punishment, even revenge, in ways which a criminal prosecutio
Punishment takes the form of damages which go to the victim rath
or a fine which can afford her only a more indirect satisfaction. A
pursue such a claim may have a therapeutic value which mitigate
offence.49
There are four points made in this passage: in tort the victim (i) controls the
action, (ii) vindicates her version of the events, (iii) inflicts punishment and/or
revenge, and (iv) receives damages. Points (i), (ii), and (iv) are not relevant here,
as they apply to actions for all kinds of damages. They cannot, therefore, justify
exemplary damages as opposed to tort law generally.5o Point (iii) is specific to
exemplary damages-however, it is unclear that it has justificatory force.
First, Lord Hoffmann's argument assumes that the defendant has wronged
the claimant and also that the defendant deserves punishment. But this is seldom
clear. Usually, the defendant disputes the claimant's version of the events. Hence,
an appropriate trial is required in order to determine whether the defendant is
deserving of punishment in the first place. In our legal system, criminal trials
are the appropriate vehicle for the fulfilment of this purpose. Hence, point (iii)
seems to argue for more victim participation in the criminal process rather than
for exemplary damages in private law.
Second, while it may be true that a claimant who is allowed by a court to
inflict punishment on her wrongdoer will find such action therapeutic, it is not
clear that this is the most therapeutic or the most appropriately therapeutic
possibility. Proponents of therapeutic damages sometimes claim that an award
of exemplary damages vindicates the claimant's rights, because, in awarding
those damages, the court demonstrates to the claimant that it views the de-
fendant's actions as an unjustifiable breach of the claimant's personhood. While
it may (or may not) be true that many claimants feel vindicated when awarded
exemplary damages, as a matter of principle, exemplary damages are not vin-
dicatory.
Exemplary damages are oriented towards the defendant's wrongdoing. Con-
sequently, they are quite consistent with a complete disregard for the claimant.
One may feel that a person deserves punishment though one cares nothing for
49 [1999] 2 NZLR 1 (PC) at 3. For commentary, see Manning, above n 43 at 3.

s0 This point is obscured in Wv W as this was a personal injury case on appeal from New Zealand where the
only possible tort action for personal injury was for exemplary damages.

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that person's victims; one may even feel that the victims deserved to be harmed.
Moreover, it is widely held that punishment can be merited though no one has
been harmed-possession of drugs being an obvious example. Hence, in awarding
exemplary damages, a court cannot be taken to be concerned with the rights of
the claimant. The court is expressing condemnation of the defendant, but
condemnation of the defendant does not imply vindication of the claimant.
The above should not be taken as a description of the intentions of judges or
jurors. I accept that awards of exemplary damages may often be motivated by
sympathy for the claimant. The point, however, is that exemplary damages are
not the appropriate vehicle for expressing that intention. More appropriate would
be an award of damages that focus instead on the claimant and directly recognize
the infringement of her rights and her dignity. In other words, the need for
therapy argues in favour of aggravated damages as defined here. These are
awarded for breaches of the claimant's dignity and hence necessarily involve a
vindication of the claimant's rights. Therapy, then, argues for compensation via
aggravated damages rather than for punishment.
The argument explored above is not to be dismissed, however. Though it
cannot function on its own as a justification for exemplary damages, it could
operate in conjunction with other arguments to do so. If punishment of the
defendant through an award of exemplary damages can be justified on other
grounds, then this argument could be used to bolster those grounds. It is certainly
possible to argue that punishment by the criminal law is justified, in part, because
of the therapeutic effect it has on the victim. But it is crucial to see that the
argument cannot stand alone.
(ii) Exemplary damages are a kind of punishment appropriate to private law

The Law Commission maintains:
The principled case for retention [of exemplary damages] begins with the proposit
that civil punishment is a different type of punishment from criminal punishment;
conclusion drawn from this is that it is coherent to pursue the aims of punishm
(retribution, deterrence, disapproval) through the civil law, in addition to the crimin
law, and in a civil "form" which does not necessarily have to mimic the crimin
"form".51
In the view of the Law Commission, there are two essential differences. First,
while in criminal litigation the defendant is prosecuted by the state, two individuals
are involved in a civil action. Second, the stigma that attaches to a criminal
conviction does not result from an award of exemplary damages in private law.52
It is undeniable that these differences exist, but it is quite opaque how they
are meant to constitute an argument for awarding exemplary damages. Rather,
51 Above n 14 at para 5.22. See also Daniels v Thompson [1988] 3 NZLR 22 (CA) at 71-3, per Thomas J.
52 Above n 14 at para 5.23. See also G.S. Pipe 'Exemplary Damages after Camelford' (1994) 57 MLR 91 at
96-7; Todd, above n 39 at 149. Compare Burrows, above n 35 at 159.

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this is an argument against an objection to exemplary dama
assessed as such.53
(iii) Exemplary damages, restitution, and disgorgement

One argument offered by the Law Commission is that:
While aggravated and restitutionary damages may go a long way towards properly
protecting plaintiffs, lacunae will be left if one abolishes exemplary damages. The most
blatant examples will occur where one cannot link profits to a particular wrong, so
that restitutionary damages will not be available: viz, where a defendant deliberately
committed a wrong in order to make money, yet one cannot identify the particular
profit that has been made from the wrong.54
The desire for restitution or disgorgement55 cannot support damages that serve
to punish the claimant. If I steal your car and use it as a taxi, I may be required
to yield to you my profits. The reason for this is that you own the car and
ownership entails a right to the exclusive benefit of the asset.56 Hence, the money
derived from the use of the car as a taxi is rightfully yours. To require me to
transfer it to you is not punishment. As a matter of legal analysis, this case is
little different from the one in which I steal your car and am forced to pay for
it or to return it. Few would describe this as punitive; nor is there need to so
portray the former case.
Similar considerations may generate an argument for disgorgement in cases
where the defendant has profited from intentional wrongdoing. If it can be
apposite to represent the defendant as having profited from the wrongful ap-
propriation of the claimant's rights, then disgorgement of the profit may be
justified on the ground that the benefit of the use of the right belongs to the
claimant.57 Imagine the following case: A owes a contractual obligation to B to
pay 100 but deceives B into believing that the obligation is not owed in order
to use the ?100 to make a ?200 profit. In deceiving B, A acknowledges that B
had a right to the ?100, hence the need for deception. Consequently, it may be
appropriate to view A as having effectively asserted 'ownership' over, or as having
'converted', B's contractual rights. B, not A, is entitled to the enjoyment of those
rights, so B is entitled to the profit A made by wrongfully 'appropriating' B's
rights. However, it is most important to note that whatever the truth of this
53 This is the argument that punishment belongs to the criminal and not private law. I examine this in the text
below at n 93. Note that the Law Commission later recognizes the nature of its argument: 'It follows from the
view that civil punishment is distinctive in these ways that the objections outlined in para 5.21 above fall away as
necessary objections', above n 14 at para 5.24 (emphasis added).
54 Ibid at para 5.27. See also Nantel v Parisien (1981) 18 CCLT 79 (Ont HC) at 87; Vorvis v Insurance Corp of
British Columbia [1989] 1 SCR 1085 (SCC) at 70-3.
55 For the distinction between restitution and disgorgement, see R. Grantham & C. Rickett, Enrichment and
Restitution in New Zealand (2000) at 472-3.
56 '[F]or he who is owner of a thing is naturally owner of the fruits of the thing', H. Grotius, On the Rights of
War and Peace (1853) at 144 [II.X.IV]; R. Grantham & C. Rickett, 'On the Subsidiarity of Unjust Enrichment'
(2001) 117 LQR 273 at 291.
57 See also Weinrib, above n 7 at 8, 32-6. 'Since the plaintiff's right was treated as a commodity whose value
was available to the defendant, the plaintiff is allowed to recapture the gain that was realized through it'. loc.cit
at 34.

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issue, requiring disgorgement is not punitive.58 In such cases, A is required

merely to surrender something that A has no right to keep and that rightly
belongs to B. Here again we see that an argument ostensibly for exemplary
damages in fact favours some other kind of award.
Second, while it may be true that on occasions when the profit cannot be
followed or traced and the profit cannot be disgorged, this cannot justify
exemplary damages.59 This argument could support the claim that when it is
impossible to determine the profit the court should estimate it, but this can be
done-if it should be done-via restitutionary or disgorgement damages. It
cannot provide an argument for punishment.
(iv) Deterrence
A different kind of argument is that exemplary damages deter serious wrongdoing.
Despite appearances, this is a problematic assertion. While it is sometimes said
that the function of exemplary damages is to punish and deter wrongdoing, in
fact punishment and deterrence can be competing goals."6
There are two ways in which deterrence could be related to exemplary damages.
The first is as a corollary of the punitive function of that award. On this
understanding, the primary purpose of exemplary damages is to punish. So,
assessment of the appropriateness and size of awards should focus on the
behaviour of the defendant and should be large in proportion to the seriousness
of the defendant's wrongdoing. This will have an incidental deterrent effect as
punishment is undesired. The second role that deterrence could play is that of
a primary function. In this case, determination of the appropriateness and size
of exemplary damages should focus on the effects of the award. This may involve
requiring defendants who are innocent to pay exemplary damages or to pay
them out of proportion to the seriousness of their wrongdoing.61 Despite frequent
58 See also Kuddus v Chief Constable of Leicestershire Constabulary [2001] 3 All ER 193 (HL) at 222, per Lord
Scott of Foscote; J. Berryman 'The Case for Restitutionary Damages over Punitive Damages: Teaching the
Wrongdoer that Tort does not Pay' (1994) 73 Canadian Bar Review 320; Burrows, above n 35 at 155; P. Cane
'The Scope and Justification for Exemplary Damages: the Camelford Case' (1993) 5 Journal of Environmental Law
149 at 164-5; J. Edelman 'Restitutionary Damages and Disgorgement Damages for Breach of Contract' (2000)
2 Restitution Law Journal 129; J. Glover, 'Restitutionary Principles in Tort: Wrongful User of Property and the
Exemplary Measure of Damages' (1992) 18 Monash University Law Review 169 at 188-90; M. Tilbury & H. Luntz
'Punitive Damages in Australian Law', 17 Loyola of Los Angeles International and Comparative Law Journal 769 at
788 (1995).
59 For the concept of following and its distinction from tracing, see L. Smith, The Law of Tracing (1997);
Grantham and Rickett, above n 55 at 438-9.
60 The following discussion owes much to Feldthusen, above n 4 at 797f.
61 'The basic requirement that the defendant's misconduct be exceptional is only consistent with the punishment
rationale, not the deterrence rationale. There is no reason to require the defendant to act outrageously, maliciously,
or with reckless and wanton disregard, if deterrence is the goal. Strictly speaking, there is no reason to require the
defendant to do anything wrong if deterrence is the goal'. Ibid 799. The reason for this is obvious. If deterrence
is the goal, then one ought to prefer whichever course of action maximizes the deterrence. This may involve such
things as punishing the innocent to provide an example of what will happen to wrongdoers and punishing
wrongdoers out of proportion to their wrongdoing so that potential wrongdoers are maximally deterred. I predict
that a good way of deterring drivers from speeding would be to replace speeding fines with the death penalty, for
example.

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references to deterrence, few support deterrence as a primary goa
damages.62
Deterrence, then, cannot be the sole or main justification of exemplary
damages. Deterrence does argue in favour of damages that are non-compensatory,
but not for damages that resemble what we have come to call 'exemplary' or
'punitive damages'. However, deterrence can support the punitive function of
exemplary damages, as it supports punishment in the criminal law. But this in
turn implies that the deterrence rationale can be justificatory only if punishment
is appropriate in the civil context.
Moreover, while one must accept that exemplary damages deter wrongdoing,
this in itself provides no reason to award exemplary damages in private law.
Compensatory damages themselves deter, and while it may be true that some
types of wrongdoing require additional disincentive, it is unclear why that should
be provided by private law.
(v) Supplementing the criminal law

The Law Commission claims:
The criminal law and criminal process do not work perfectly; civil punishment
some way towards making up for their defects. This is so even though, in an
world, such defects would be removed by reform of the criminal law and cr
process themselves. General "defects" include the following: that the state do
have sufficient resources to apprehend all criminals; that the state may not
prosecute, or to continue prosecutions which it has begun; that the substantiv
of the criminal law may not extend to all wrongs which merit punishment.63
In similar vein, Peter Jaffey writes:
there may be breaches of duty where it is appropriate ... to have punishment

of punitive damages in civil proceedings. This might be the case where the vic
likely to have resources to take proceedings, and where the duty is not so im
as to require the more severe forms of punishment available in criminal proce
This might be an efficient way of achieving the full legal response, since it save
resources and avoids two sets of proceedings.64
The suggestion, then, is that punishment in private law supplements the crim
law. Exemplary damages see private law doing the criminal law's job and
desirable because the criminal law alone cannot perform its task effecti
Moreover, claimants are allowed to retain exemplary damages because th
62 'One would search in vain, in judicial opinions or in the general legal literature and economics journ
any discussion of a deterrence "gross up," or the like. Most judges and lawyers would find the economic d
arguments bizarre, if not incomprehensible. Any references in such literature to deterrence would be co
with the incidental deterrent effect of any punishment'. Ibid. See also Feldthusen, above n 43 at 750-3 (s
qualification given at 751); Ontario Law Reform Commission, above n 41 at 32, 38.
63 Above n 14 at para 5.27.
64 Above n 41 at 863.
65 See also Taylor v Beere [1982] 1 NZLR 81 (CA) at 90; Manning, above n 43 at 133f; McBride, ab
Pipe, above n 52 at 96-7. Manning argues that exemplary damages should apply most particularly when the
defendant has been acquitted in a criminal action. In her view, then, exemplary damages do not merely supplement
the criminal law, they to an extent replace it.

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awards provide claimants with an incentive to pursue the public, criminal law
objective: the punishment of wrongdoers.
To those familiar with modem private law theory, this approach will not be
new. Some commentators believe that tort law is best viewed as a scheme that
operates by providing bribes to potential claimants to pursue the public go
deterring inefficient behaviour.66 The suggestion here is somewhat more modes
only that one part of private law, the award of exemplary damages, should
understood in this manner.
I raise no objection to this as a matter of policy, but if this is the considered
position of supporters of exemplary damages, then this radically alters the nature
of the debate. If exemplary damages are a supplement to the criminal law, then
there is no reason a priori why they should be exacted by private law or why
their award should be restricted by private law principles. For example, it is
often taken for granted that only persons who were injured as a result of the
defendant's wrongdoing can receive exemplary damages. But on the rationale
given here, it is not at all clear why that should be the case. If exemplary damages
are a bribe to encourage claimants to pursue the public goal of deterring and
punishing wrongdoers, then there is no reason to insist that the claimant should
be the one who was injured by the defendant. If public policy is what we are
after, we should let the public pursue it. Furthermore, it would be irrational to
leave this public goal in the hands of those few who are injured by wrongdoing.
We do not allow the victims of criminal wrongdoing to determine whether a
prosecution should be brought and, given this rationale, we should not leave
exemplary damages in the hands of the victim either.67 Jaffey suggests that
exemplary damages are appropriate when the victim is wealthy. Surely, those
who injure the poor are not less deserving of punishment. Perhaps this was
unintended, but the point remains that if a wrongdoer merits punishment he
should receive it even if his victim cannot afford to fund civil litigation or has
other reasons for letting the matter lie that do not relate to the defendant's lack
of culpability, e.g. fear of the defendant or lack of faith in the legal system.
Efficiency and justice part company here.
One may be inclined to respond along the following lines. The reason only
injured claimants can claim exemplary damages is to restrain litigation; to allow
anyone to sue for exemplary damages would open the floodgates to every Tom,
Dick, and Harry with a grudge. Moreover, some less than fully moral agents
may take up as their career the suing of others. This could become a minor
industry. However, while this may occur, it is hard to see why it would be
undesirable given the rationale under investigation. If the punishment of wrong-
doers is our goal, then what would be objectionable in having an exemplary
damages industry? We have a criminal prosecutions industry and we even fund
it through compulsory taxation. In fact, it may be much more efficient to have
66 See especially W. Landes & R. Posner, The Economic Structure of Tort Law (1987).
67 This is not to say that we never allow victims to decide whether a prosecution should go ahead. Rather, the
point is that the final decision is not the victim's.

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such an exemplary damages industry rather than the status
reduce much of the burden on our struggling law enforcemen
criminal justice system. If the concern is that innocent parties w
themselves facing civil litigation, then relevant disincentives cou
For example, costs reflecting the defendant's pecuniary and
could be awarded against unsuccessful claimants, actions tha
without reasonable basis could result in fines, etc.68
Moreover, Andrew Burrows has suggested that if we are t
damages as doing the criminal law's job, then it is questionable w
damages should be restricted to monetary awards.69 If exem
to supplement criminal law, then it should do so efficiently by a
of penalties that most effectively achieve its aims.
While none of these suggestions sit very comfortably with
know it, they are quite at home with this rationale behind ex
If it is true that supplementing the criminal law is what we
should design the most efficient scheme we can to achieve it.
is not a good instrument for that goal, then we should aband
one. Accordingly, this rationale leads away from private law a
At this point, it is important to acknowledge the possibility of
arguments on policy grounds. It may be the case that the m
system for achieving the appropriate punishment of wrongd
in which criminal law is supplemented by a scheme in which
sue for exemplary damages, the punishment would be moneta
important features of private law would be preserved. This c
a priori. However, those who support exemplary damages o
the damages supplement criminal law must acknowledge that,
are committed to the most efficient scheme and this may or
awards of exemplary damages in private law. They must ad
attachment to the private law structure depends entirely on the
But these facts do not obviously support their view. Jaffey, for
only that exemplary damages in private law 'might be an efficien
the full legal response'.70 But the argument is of no force until
transformed into an 'is likely to be'. I would have thought
combining criminal law with awarding exemplary damages
context as the maximally efficient means for achieving the effe
of wrongdoing, is quite implausible. At the very least, the suppo
damages should suspend judgment on this issue until some r
not armchair-has been done on this matter.7 As it stands, t
seriously incomplete.
68 Cf. McBride, above n 34 at 196-7.

69 Burrows, above n 35 at 166.
70 Above n 41 at 863 (emphasis added).
7" Kuddus v Chief Constable of Leicestershire Constabulary [2001] 3 All ER 193 (HL) 20
Clashfern.

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Alternatively, Birks accepts that the efficiency argument must be met, but
holds that there is sufficient evidence that it can be. He argues:
[s]uch issues are weighed in our system either by the experience of the common law
or by Parliament. Over centuries the common law made its choice, until in 1964 and
1972 the House of Lords was persuaded that its experience required reinterpretation.72
This argument will not impress someone, such as myself or Lord Devlin, who
maintains that the availability of exemplary damages is to be explained in terms
of a confusion with aggravated and other compensatory damages. In any case,
the argument is surely insufficient. We have good reason to doubt the traditional
wisdom of the common law in this area and we should not refrain from doing
so. At the very least, an academic committed to the truth of her claims cannot
rest content until she has some positive empirical evidence that the award of
exemplary damages in private law is the most efficient method of supplementing
criminal law.
As I have indicated, my view is that it is likely that the most efficient scheme
for supplementing the criminal law would look very different from the award of
exemplary damages in private law. It may involve allowing persons other than
the victim to sue for exemplary damages, for example. I make no objection to
instituting such a scheme. My point is only that if we adopt such a scheme, we
should be clear that it is not a scheme of private law, though it may operate in
or be attached to civil courts. Rather, such a scheme would be part of criminal
law in which prosecutions are brought by bribed private individuals.73
We have seen, then, that the arguments in favour of exemplary damages are
inadequate: either they do not argue for damages that serve to punish the
defendant or they lead away from the private law. I turn now to the argument
against exemplary damages.
C. The Argument for Abolishing Exemplary Damages
There is one basic argument against exemplary damages from which many others
follow.74 It is that punishment is foreign to the structure of private law. The
previous section suggested that one justification offered for exemplary damages
leads away from private law. In this section, I argue that this is not merely a
contingent feature of the argument presented-exemplary damages are necessarily
out of place in private law.
72 Birks, above n 5 at 50.

73 Having said that, however, I imagine that there would be strong opposition to the implementation of such a
scheme. One reason for finding unpalatable this vision of uninjured claimants suing wrongdoers is that there is
something unpleasant in the idea of punishment being exacted by individuals. Instead, it is thought, punishment
is a public concern and should be pursued by the public and not by uninjured parties. I am in entire agreement
with this view. It is a powerful argument for restricting punishment to the criminal law. If it would be distasteful
for exemplary damages to be sought by uninjured claimants, it would be no less so when they are pursued by
injured, though properly compensated ones.
74 Burrows also argues that there is one basic objection to exemplary damages; above n 35 at 158. His is similar
to mine, though I believe that mine runs closer to the heart of the private law.

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The idea that exemplary damages do not belong in the civil context is
sometimes inadequately expressed along the following lines. Private law has a
function-compensation. On the other hand, the role of criminal law is to punish.
Hence, exemplary damages properly belong to criminal rather than private law.
Presented thus, this is an extremely weak argument. An adequate reply would
simply be to insist that private law has whatever function we choose to give it
and that there is no reason, prima facie, why the criminal and private law ought
to have exclusive functions." But the real argument is much stronger than this.
Its claim is that private law has a structure that affords no room for punishment.
Accordingly, the existence of exemplary damages is necessarily unprincipled, ad
hoc, and does violence to the coherence of the private law. I pursue this argument
now.
In negligence, a claimant can recover compensatory damages fro

only if she shows that she was injured as a result of the defen
duty of care owed to her. Negligence liability, then, forges a
parties. As Cardozo CJ expressed the point:
Negligence is not a tort unless it results in the commission of a
commission of a wrong imports the violation of a right.... The vi
derivatively, or by right of subrogation, to vindicate an interest inv
of another. Thus to view his cause of action is to ignore the fund
between tort and crime. He sues for breach of a duty owing to hims
As he indicated, Cardozo CJ did not hold this to be unique to the law of

negligence. It is a feature of the law of tort generally. To attract civil liability,
the defendant's action must have breached a duty owed to the claimant7 or, to
put this another way, the claimant must have been wronged by the defendant.
In other words, tort law operates in personam. The same, of course, is true of
the law of contract.
At first sight, exemplary damages appear to fit this model. The defendant is
punished because he breached the duty he owed to the claimant in a serious
fashion. However, this is misleading. Consider the following argument.
(P1) The defendant breached a duty he owed to the claimant in a con-

tumelious fashion.
(C) Hence, the defendant should be punished.
This is an enthymeme. To fill the gap, we need to demonstrate a connection

between the fact that the defendant committed a serious breach of the claimant's
5 Broome v Cassell & Co Ltd [1972] AC 1027 (HL) at 1114, per Lord Wilberforce; Taylor v Beere [1982] 1
NZLR 81 (CA) at 90, per Richardson J; Whiten v Pilot Insurance Co, 2002 SCC 18 at paras 37-8 (unreported),
per Binnie J; McBride, above n 34 at 195; Law Commission, above n 14 at paras 5.20-1; R.G. Lee 'Exemplary
Awards and Environmental Law' [1993] Journal of Business Law 287 at 293-4; Pipe, above n 52 at 95-6, 98-9;
J. Swanton & B. McDonald 'The High Court on Exemplary Damages' (1999) 73 Australian Law Journal 402 at
404.
76 Palsgrafv Long Island Railroad Co, 162 NE 99 (1928) at 101 (citations omitted).
77 Note that this is not to say that the defendant must have breached a duty of care; this, of course, is not the
case. Rather, the point is that the defendant must have infringed a right of the claimant's and therefore-as rights
are correlative to duties--be in breach of a duty.

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rights and the appropriateness of punishment. One possibility is the following.
(P2) The claimant is owed the defendant's punishment.
In order to evaluate the plausibility of this claim, an assumption needs to be

made. We must assume that the claimant has been fully compensated. By this,
I mean that the claimant has received a sufficiently large sum of money that,
were she offered a choice between (i) living her life again being wronged and
compensated and (ii) living again without being wronged, she, as a rational
agent, would be indifferent as to this choice.78 We must now ask whether (P2)
could hold of a fully compensated claimant. I submit that it could not. A claimant
cannot justly demand to be put in a better position than she would have been
in had she not been wronged. She cannot be owed a windfall.79 This is even
clearer in contract. A claimant cannot be owed to be placed in a better position
than she would have been had the contract been performed.
Of course, a claimant in tort is rarely, if ever, fully compensated in the manner
defined above. Some may be inclined to infer from this that exemplary damages
are owed by the defendant to the claimant to make up the shortfall between full
compensation and the amount that a court will award. However, such an
argument is necessarily invalid. Any amount sought from the defendant for this
reason is and must be compensatory.
I conclude that (P2) is not plausible. Instead, the missing premise from the
argument above must be something similar to:
(P3) Society does not tolerate serious breaches of duties owed to individuals.
This shows that while exemplary damages respond to breaches of duty owed by
a defendant to a claimant, it is not correct to regard the duty to pay exemplary
damages as a duty owed to that claimant. Instead, the duty is owed to society
at large."8 Perhaps it is owed when defendants seriously breach duties owed to
claimants, but it is not owed for those duties. Liability for exemplary damages,
then, is not a 'term of relation'81 between the parties, it results from 'a wrong
to the public at large'.82 Exemplary damages do not operate in personam.
78 This is what is meant by the claim that the aim of compensatory damages is to place the claimant in the
position she would have been in had she not been wronged. Obviously, this claim cannot be meant literally, as it
would involve backwards causation.
79 This also shows that, despite appearances, the victim is not the 'natural' person to sue for exemplary damages,
as many claim.
80 'The basis of such an award is actionable injury to the plaintiff done in such a manner that it offends the
ordinary standards of morality or decent conduct in the community in such marked degree that censure by way
of damages is, in the opinion of the Court, warranted'. Paragon Properties Ltd v Magna Envestments Ltd (1972) 24
DLR (3d) 156 at 167, per Clement JA 'Exemplary or punitive damages may be awarded where the defendant's
conduct is such as to merit punishment. This may be exemplified by malice, fraud or cruelty as well as other
abusive and insolent acts towards the victim. The purpose of the award is to vindicate the strength of the law an
to demonstrate to the offender that the law will not tolerate conduct which wilfully disregards the rights of others
Warner v Arsenault (1982) 53 NSR (2d) 146 at 152, per Pace JA; both decisions quoted in Vorvis v Insurance Corp
of British Columbia [1989] 1 SCR 1085 (SCC) at 41-2. Cf. Burrows, above n 35 at 166.
81 Palsgrafv Long Island Railroad Co, 162 NE 99 (1928) at 101, per Cardozo CJ.
82 Ibid at 102, per Andrews J.

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Hence, the basis for awarding compensatory damages is n

for awarding exemplary damages. The duty that, when b
compensatory damages, is owed to a specific claimant; th
breached issues in exemplary damages, is owed to society as
that the liability that gives rise to compensatory damages is n
that produces exemplary damages."83 For this reason priv
exemplary damages. They are inconsistent with the structure
This point can be elucidated with the aid of some examp
that the defendant's employee in Palsgraf had not merely
but had seized the passenger's package and had deliberatel
ground in order to cause damage.84 Such action might be
exemplary damages due to the contumelious disregard fo
property rights.85 Imagine also that Mrs Palsgraf-not the own
sued for both compensatory and exemplary damages. Palsg
cannot receive compensatory damages, because the defend
not breach a duty owed to her. But it could not be right to
damages for that reason. With respect to those damages, th
owed to society as a whole and the defendant's employee b
This is not a surprising conclusion. Because punishment focuses on the
wrongdoing of the defendant, it can be warranted though the person inflicting
the punishment was not personally wronged. This is the standard situation in
criminal law. There can be no rational justification, therefore, for restricting the
availability of damages that are punitive only to those to whom an in personam
duty has been breached. The logical structures of punishment and private law
pull apart here.
Furthermore, as exemplary damages respond to breaches of a duty owed to
society at large and because they aim to punish, causation should be no more
relevant for exemplary damages than it is in the criminal law. For example,
because tort law deals with the relationship between two individuals, a defendant
can be liable to a claimant only if the claimant was injured by the defendant.
Consequently, mere attempts do not constitute torts as they infringe no one's
rights.86 On the other hand, the criminal law sometimes punishes failed attempts
to commit offences. If this is appropriate, then exemplary damages should do
likewise. Therefore, to be true to their own nature, exemplary damages should
be available even when the defendant caused no injury and hence cannot be
sued for compensation. It is commonplace that compensation may be appropriate
83 Hence, Todd is wrong to claim that when exemplary damages are awarded, 'the defendant is not being found
guilty of a crime ... but is simply being held liable for a civil wrong'. Above n 39 at 149 (emphasis added). See also
Burrows, above n 35 at 159.
84 Cf. Palsgraf v Long Island Railroad Co, 162 NE 99 (1928) at 101.
85 Additional facts could be imagined if this seems insufficient and the situation could be changed so that it
does not involve vicarious liability.
86 Attempted batteries may be actionable in assault; however, this is not because they are attempted batteries
but because they may create the apprehension of a battery. An assault, then, is not an incomplete battery but a
separate tort.

129.94.8.26 on Mon, 01 Apr 2024 08:08:43 +00:00
when punishment is not, but it is important to see that the reverse is also true:
sometimes punishment is appropriate when compensation is not.
Moreover, consider the following question. If A aims to strike B but misses
and instead strikes C, has A committed a battery? Tort and criminal law answer
this question differently. In tort, the answer is 'no'. This is because tort focuses
on the relationship between the claimant and the defendant: A did not breach
the relevant duty to B or C, as A did not strike B or intend to strike C.87 Conversely,
criminal law answers 'yes', as criminal law focuses on the blameworthiness of
the defendant: A struck someone and intended to strike someone. Because
exemplary damages aim to punish and because they respond to breach
society's standards, their logic suggests that they follow the criminal
too. In the example above, then, though not liable for compensatory
in battery, if exemplary damages are available, A should be liable for th
Of course, this analysis can be extended. Like the above, many of the diff
between criminal and private law reflect the focus of the former on the defe
wrongdoing and the latter on the connection between that wrongdoing
claimant's injury. Prima facie, exemplary damages should follow the for
the latter-'the availability of exemplary damages should be co-extensi
its rationale'88-unless, that is, the award is simply an unprincipled, a
addition to private law.
The objection to exemplary damages, then, is not a "'compensation-o
dogma'89 or a '"simplistic" adoption of "broad generalisations" '90; it is moti
by a concern for the coherence of the private law. In the light of th
arguments, Cardozo CJ's fear that the 'fundamental difference between tor
crime' would be forgotten seems well justified. Though many suspect
proponents of exemplary damages have not noticed that the nature of that
is incompatible with civil liability. Punishment belongs to the criminal
to the private law, not primarily as a matter of procedure, historical accide
convenience, but because of the logic of their structures. It is not po
bring private law and exemplary damages together into a single legal s
and pretend that that structure makes sense. Exemplary damages in pri
are on 'foreign soil'.92
The Law Commission rejects this type of reasoning as question beggin
One possible answer to this objection is to dismiss it as wholly misconceived.
law is not concerned only with compensation, as shown by restitutionary award
plaintiffs have established that their rights have been infringed, they have est
87 Though A may be liable to B and C in other ways of course.

88 Kuddus v Chief Constable of Leicestershire Constabulary [2001] 3 All ER 193 (HL) at 210, per Lord
Birkenhead.
89 Law Commission, above n 14 at para 5.143.
90 Daniels v Thompson [1988] 3 NZLR 22 (CA) at 141, per Thomas J. See also P. Cane, 'Retribution,
Proportionality, and Moral Luck in Tort Law' in P. Cane and J. Stapleton (eds), The Law of Obligations: Essays in
Celebration of John Fleming (1998) 141.
91 It is this that lies behind the almost universal sense that exemplary damages are anomalous.
92 L. Klar 'Punitive Damages in Canada: Smith v. Megafood', 17 Loyola of Los Angeles International and Comparat
Law Journal 809 at 816 (1995).

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an entitlement to a range of remedies, which include, in certain c
compensatory punitive damages. Once one accepts that civil punish
(as we do) there is no necessary objection to the victim of a wro
punishment exacted.93
But it is this argument, rather than the objection, that is g

begging. The point of the objection is that an award of exem
inconsistent with the structure of the private law. The case of ex
then, is palpably not like that of restitution.
This objection in turn gives rise to many other problems. F
inappropriate when deciding on punishment to adopt the priv
evidence or the civil standard of proof,"94 or to refuse access
criminal record. Moreover, defendants may be subject to do
double punishment if they face punitive actions in both civil and
awards of exemplary damages may exceed in magnitude the st
fine for an offence of the same or similar kind, and the awa
damages amounts to common law criminalization.96 One must
that important though these objections may be, they are mer
the inconsistency of exemplary damages with the structure of th
Exemplary damages, therefore, are logically an anomaly th
punged from the law.
93 Above n 14 at para 5.142.

94 The Law Commission replies at para 5.232 that 'the civil standard of proof is ...
flexible standard'. The suggestion is that it is the usual practice for civil courts to impose
than the simple balance of probabilities when the consequences for the defendant are serio
they are the higher the burden should be. Hornal v Neuberger Products Ltd [1957] 1 QB 2
39 at 179. This is surely wrong. If A negligently causes B ?1000 loss and C negligently
stands to lose much more than C, but the standard of proof is identical. The reason for th
two individuals are involved, one of whom must bear the relevant loss. The task of priva
these persons in a position of equality and do justice as between them. This means adoptin
that favours neither party (though it breaks ties by demanding that the asserter prove 50
law, on the other hand, the standard of proof needs to be higher in order to reflect the in
individual and the state when only the former stands to lose. Moreover, the position of t
unworkable in any case. It is most unlikely that a court would find that for the asse
damages a defendant had committed a tort in a way that showed serious disregard of the
issuing in aggravated damages-and also insist that for assessing exemplary damag
established her case, because she established proof on the balance of probabilities for com
not beyond reasonable doubt for exemplary damages. Here again we see the problems
actions with quite different structures. On the other hand, Pipe, above n 52 at 97-8 recog
of proof does not change, but insists that this is not important. He maintains that when t
standard of proof does not need to be raised. To be consistent on this, Pipe would have to
of proof in criminal cases involving fines could also be the balance of probabilities.
95 Daniels v Thompson [1988] 3 NZLR 22 (CA); Gray v Motor Accident Commission (
at 508-11; Todd, above n 39 at 169-79. Compare Manning, above n 43 at 133f.
96 Law Commission, above n 14 at para 5.21. See also Rookes v Barnard [1964] A
Broome v Cassell & Co Ltd [1972] AC 1027 (HL) at 1087; Burrows, above n 35 at
McBride, above n 34 at 198-9.

129.94.8.26 on Mon, 01 Apr 2024 08:08:43 +00:00

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The Structure of Aggravated and Exemplary Damages

Author(s): Allan Beever

Stable URL: https://www.jstor.org/stable/3600646

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The Structure of Aggravated and

Abstract-This article explores aggravated and exemplary damages

In Rookes v Barnard,' Lord Devlin severely restricted the awar

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A. The Nature of the Affected Interest

Consider the following scenarios: first, either someone will stri

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I hope to have shown in the above that it is plausible to regard aggravated

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Hence (4*) the remedy is compensatory.

19 Birks, above n 5 at 45-6.

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B. The Affected Interest and the Structure of Aggravated Damages

That aggravated damages are responses to invasions of dignity explains their

Second, it is thought anomalous that in determining the availability and

21 T. Nagel 'Death' (1970) 4 Nous 73.

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claimant's injury is through examination of the defendant's actions. This does

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The worry, that allowing aggravated damages in this case

A. Exemplary Damages Confused as Aggravated or other Compensatory

30 Kralj v McGrath [1986] 1 All ER 54 at 61.

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claimant is adequately compensated.33 It is only when this error is brought into

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B. Arguments in Favour of Exemplary Damages42

(i) Exemplary damages are therapeutic and vindicatory

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A prosecution is generally speaking initiated and controlled by the

49 [1999] 2 NZLR 1 (PC) at 3. For commentary, see Manning, above n 43 at 3.

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(ii) Exemplary damages are a kind of punishment appropriate to private law

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(iii) Exemplary damages, restitution, and disgorgement

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issue, requiring disgorgement is not punitive.58 In such cases, A is required

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(v) Supplementing the criminal law

In similar vein, Peter Jaffey writes:

there may be breaches of duty where it is appropriate ... to have punishment

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68 Cf. McBride, above n 34 at 196-7.

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C. The Argument for Abolishing Exemplary Damages

72 Birks, above n 5 at 50.

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In negligence, a claimant can recover compensatory damages fro

As he indicated, Cardozo CJ did not hold this to be unique to the law of

(P1) The defendant breached a duty he owed to the claimant in a con-

(C) Hence, the defendant should be punished.

This is an enthymeme. To fill the gap, we need to demonstrate a connection

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rights and the appropriateness of punishment. One possibility is the following.

(P2) The claimant is owed the defendant's punishment.

In order to evaluate the plausibility of this claim, an assumption needs to be

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