THE AVAILABILITY OF EXEMPLARY DAMAGES IN … · THE AVAILABILITY OF EXEMPLARY DAMAGES IN NEGLIGENCE...

4 Mac LR 61

THE AVAILABILITY OF EXEMPLARY

DAMAGES IN NEGLIGENCE

Rachael Mulheron INTRODUCTION One of the most vexed questions surrounding exemplary damages1 is whether, at law, a plaintiff may claim and recover them, additional to compensatory damages, outside the province of intentional torts. Prior to the recent decision of the High Court in Gray v. Motor Accident Commission2, there was some division in Australian judicial opinion as to whether, and in what circumstances, awards of exemplary damages could properly be made in negligence cases. That question now appears to have been resolved by the High Court in favour of their award for negligent conduct. However, because of this particular tortfeasor’s previous criminal punishment, the decision of the trial judge not to award exemplary damages was held to be correct. The case is of considerable importance because, until its handing down, there was no decision in which the High Court had been required to address the particular question: could exemplary damages be awarded for a cause of action framed in negligence?3 The purpose of this article is to discuss and critique the Gray decision, which is particularly interesting in light of the debate about the availability of exemplary damages which has been ventilated by three separate Law Reform Commissions - in 1 They are also variously called “punitive damages”, “vindictive damages”, “exemplary damages”, “retributory damages” and “penal damages.”

2 (1998) 196 CLR 1.

3 Kirby J noted the absence of High Court authority on this point at (1998) 196 CLR 1, 27-28.

62 RACHAEL MULHERON (2000)

Ontario,4 England5 and Ireland6 - within the last 10 years. The studies performed by those bodies have demonstrated that the availability of exemplary damages in cases of negligence is necessarily informed by several controversial and important policy issues. But, first, it is useful to briefly canvass the various views which Australian courts expressed about the issue prior to the High Court consideration in Gray. EXEMPLARY DAMAGES IN NEGLIGENCE: THE POSITION PRIOR TO GRAY In the 1987 decision Lamb v. Cotogno,7 the defendant attempted to serve a summons on the plaintiff. A heated argument followed, during which the plaintiff threatened to kill the defendant. The defendant started to drive away, and the plaintiff threw himself across the bonnet of the car. The plaintiff was seriously injured when the defendant drove his car in such a manner, swerving from side to side and braking suddenly, that the plaintiff was thrown to the ground. The defendant then drove away, and the plaintiff was subsequently discovered on the roadway, injured and bleeding, by a neighbour. The plaintiff sued for trespass to the person. The sum of $5,000 was awarded at first instance by way of exemplary damages, which sum was upheld by the High Court on the basis that “intent or recklessness”8 was sufficient to justify an award of exemplary damages. However, given that the claim was not pleaded as negligent driving, the comments indicating the sufficiency of reckless conduct were obiter only.

4 Ontario Law Reform Commission, Report on Exemplary Damages (1991) (hereafter “1991 Report”).

5 Law Commission for England and Wales, Consultation Paper No 132, Aggravated, Exemplary and Restitutionary Damages (1993) (hereafter “1993 Consultation Paper”); Law Commission for England and Wales, Report No 247, Aggravated, Exemplary and Restitutionary Damages (1997) (hereafter “1997 Report”).

6 Law Reform Commission of Ireland, Consultation Paper on Aggravated, Exemplary and Restitutionary Damages (1998) (hereafter “1998 Consultation Paper”).

7 (1987) 164 CLR 1.

8 n. 7 at 13.

4 Mac LR Exemplary Damages 63

Much earlier, in 1962, the High Court had considered the availability of exemplary damages in a case of assault, an intentional tort. However, the following statement of Owen J appeared to contain wider ramifications for the unintentional tort of negligence:

In an action for assault, as in many other cases of tort, the conduct and motives of the parties may be taken into account either to aggravate or mitigate damages. In a proper case the damages recoverable are not limited to compensation for the loss sustained but may include exemplary or punitive damages as, for example, where the defendant has acted in a high-handed fashion or with malice.9 [emphasis added]

Nothing else was said to restrict the cases in which exemplary damages could be awarded to intentional torts, or to exclude negligence actions from their province.10 Subsequently, in Coloca v. BP Australia Ltd,11 O’Bryan J considered that the law in Victoria permitted an award of exemplary damages in actions for personal injuries caused by negligence in appropriate cases.12 In this particular case, the two plaintiff employees alleged that the employer had negligently exposed them to dangerous substances, benzol fumes and asbestos dust and fibres respectively, during the course of their employment, for which each sought exemplary damages. After reviewing the Australian authorities, His Honour stated:

9 Fontin v. Katapodis (1962) 108 CLR 177 at 187.

10 Cocola v. BP Australia Ltd [1992] 2 VR 441 at 444 per O’Bryan J.

11 [1992] 2 VR 429. The matter of Thompson v. James Hardie & Co Pty Ltd was heard together with this action in the one interlocutory hearing. In the former case, the plaintiff applied to amend his statement of claim to include a claim for the recovery of exemplary damages in negligence. In the latter, the defendant applied to strike out a paragraph of the plaintiff’s statement of claim which sought exemplary damages for alleged negligence.

12 n. 11 at 442 and 448.


It is perfectly true that in no reported authority in Australia is the law relating to exemplary damages stated in terms admitting exemplary damages in an action for negligence causing personal injuries. On the other hand, every statement of the law in the High Court appears to admit an award of exemplary damages in torts of negligence.... it would be illogical now to draw a distinction between tortious liability founded in trespass or intentional wrongdoing and liability founded in negligence.13

Moreover, O’Bryan J considered that if the plaintiff in Lamb v. Cotogno had brought his claim in negligence, the court would still have been able to award exemplary damages, and that there was nothing to indicate that the plaintiff chose his cause of action wisely in that case.14 Then, in 1996, the Supreme Court of Victoria upheld an award of exemplary damages in Backwell v. AAA,15 a case of medical negligence in which a woman known as AAA was artificially inseminated with sperm that had not been intended for her, at a Melbourne infertility clinic. After the mistake was discovered, AAA was told by her treating doctor that if she did not have an abortion, or if she instituted legal proceedings, she could not continue on the artificial insemination program and would not be accepted for treatment under any similar donor insemination program elsewhere in Australia. Further, the defendant expressed concern about hostile media scrutiny of the donor insemination program and claimed that “if the press got hold of it, the clinic would be closed down”. Subsequently, AAA had the pregnancy terminated.

13 n. 11 at 447. O’Bryan J drew support for that view from an unreported judgement by Coldrey J of the same Court in Rafferty v. James Hardie & Co Pty Ltd which had been delivered in April 1991: at 443.

14 n. 11 at 447.

15 (1996) Australian Torts Reports 81-387.


Some 11 years after these events, a Melbourne jury awarded AAA $60,000 in compensatory damages for physical and psychiatric injuries suffered, and $125,000 in exemplary damages for what it considered to be the defendant’s “contumelious, arrogant and wanton disregard for the plaintiff and the plaintiff’s health in advising and treating the plaintiff”.16 The jury’s decision to award exemplary damages was upheld on appeal by the Court of Appeal of Victoria17 as appropriate, although the sum of exemplary damages was reduced to $60,000. Also in 1996, the New South Wales Court of Appeal agreed that exemplary damages could be recovered in a claim based on negligence. In Trend Management Ltd v. Borg,18 the plaintiff was employed by the defendant company in work which created cedar wood dust. As a result of exposure to the dust, the plaintiff developed asthma. He claimed damages against his employer in negligence. The defendant admitted liability, and in addition to compensatory damages, the sum of $30,000 was awarded by way of exemplary damages. On appeal, it was held that there is nothing in the nature of exemplary damages which precludes their availability in negligence because it is conceivable that defendants who do not intend to cause damage to the plaintiff may act in contumelious disregard of the plaintiff’s rights in such claims.19 On the other hand, Mahoney P considered that there were frequent instances in negligence when exemplary damages will not be appropriate:

16 Unreported, Supreme Court of Victoria, 12 September 1994, cited by Ormiston JA at (1996) Australian Torts Reports 81-387 at 63 and 380.

17 All members of the Court, Ormiston, Brooking and Tadgell JJA, agreed that the appeal should be upheld. However, while the former two members reassessed the jury award of exemplary damages, Tadgell JA would have ordered a new trial limited to the issue of damages. It is said that this was the first time in Australia that exemplary damages had been awarded in a medical negligence case: Weybury, D, “AAA v. Backwell: The Case of the Mixed-Up Sperm” (1995) 1 Torts Law Journal 15 at 25.

18 (1996) 40 NSWLR 500.

19 n. 18 at 504 per Mahoney P.


... where, for example, the negligence consists in a mere inadvertent failure to take the care for the plaintiff’s safety which a particular duty of care requires. They will ordinarily not be appropriate where the negligence consists in the failure, notwithstanding bona fide endeavours, to achieve the standard of care towards the plaintiff which the situation or the defendant’s professed skills required that he attain.20

In the circumstances of the particular case, no exemplary damages were warranted, as the employer made bona fide attempts to rectify the dust problem by the upgrading of a dust collection system, and then by the installation of another dust extraction system, during the course of the plaintiff’s employment.21 In comparison with the abovementioned cases, doubts about the proper award of exemplary damages in the context of negligence were expressed by the Full Court of the Supreme Court of Victoria in Midalco Pty Ltd v. Rabenalt.22 The plaintiff Mr Rabenalt was employed by Midalco Pty Ltd from July 1960 to January 1961 at a blue asbestos mine and mill at the Wittenoom mine in Western Australia. In October 1987, the plaintiff was diagnosed with malignant mesothelioma, a cancer of the lining of the lung. It was held that, at the time of the plaintiff’s exposure to asbestos dust and fibres, the defendant’s directors and managers had access to extensive scientific and medical knowledge of the risks of mesothelioma associated with asbestos exposure. At first instance, a jury found that there was negligence on the part of the defendant which was a cause of Mr Rabenalt’s illness, and that, in addition to compensatory damages of $426,000, the defendant was liable to pay exemplary damages of $250,000.

20 n. 18 at 503.

21 n. 18 at 506 and 509.

22 [1989] VR 461.


The defendant appealed on the basis, inter alia, that the trial judge had misdirected the jury in defining the circumstances in which an award of exemplary damages could be made. However, the appeal was dismissed in light of the fact that defendant’s counsel had conceded at trial that “recklessness” was sufficient to found an award of exemplary damages. Therefore, it was not open to the defendant to question the correctness of the trial judge’s direction. Nevertheless, both Kaye23 and Fullagar24 JJ expressed reservations about the proposition that such damages could be awarded in a negligence action. At the very least, recklessness simpliciter was not sufficient.25 Similarly, in Cullinan v. Urban Transit Authority of NSW,26 Carruthers J, sitting in the Admiralty jurisdiction of the Supreme Court of New South Wales, noted that “the specific question whether exemplary damages are available in an action for negligence is still open”.27 Fortunately, the doubts which plagued the preliminary question - whether exemplary damages are available in negligence claims - must now be considered to have been laid to rest by the High Court in Gray. THE FACTS OF GRAY v MOTOR ACCIDENT COMMISSION In September 1988, the plaintiff/appellant, Donald Gray, while walking across a street, was hit by a car deliberately driven at 23 n. 22 at 467.

24 n. 22 at 476-7.

25 Given the concession made by defendant’s counsel, Kaye J was prepared to hold that according to the weight of uncontradicted evidence, a strong case supporting “a finding of recklessness - indeed of continuing, conscious and contumelious disregard by the defendant for the plaintiff’s right to be free from risking of injury or disease - was made out”: at 473.

26 Unreported, Supreme Court of NSW, Carruthers J, 20 December 1991.

27 n. 26 at 18.


him by the defendant Darren Bransden. The plaintiff was an Aboriginal Australian and, at the time of the accident, 16 years old. At first instance, it was found that Mr Bransden drove directly at a group of Aboriginal youths with the intention of running down and seriously hurting Mr Gray, one of the group. Two and a half years later, Mr Bransden was convicted of causing grievous bodily harm with intent to do such harm, and was sentenced to seven years’ imprisonment. The sentencing judge28 described the attack on the plaintiff as “brutal and cowardly”, and one for which there was “no mitigating factor at all.”29 Then, in 1993 and two years after the criminal trial, the plaintiff commenced an action against Mr Bransden (and his compulsory third party insurer) for damages for negligence giving rise to personal injury. The plaintiff’s injuries were extensive: fractures to both legs, multiple contusions to the face and head, and a residual cognitive impairment. At trial, damages were assessed by the District Court of South Australia at $72,206. No award was made for exemplary damages on the basis that Mr Bransden had already been punished in the criminal court, thus a civil penalty in the guise of exemplary damages was inappropriate.30 Mr Gray appealed against this decision, and on the basis that the compensatory damages (in particular, the economic loss component) were manifestly inadequate.31 The majority of the High Court framed two questions for consideration: • are exemplary damages available where the plaintiff’s claim

is for damages for negligence rather than some intentional

28 R v. Bransden, Supreme Court of South Australia, 14 March 1991, Bollen J, unreported.

29 Noted by the majority Gleeson CJ, McHugh, Gummow and Hayne JJ at (1998) 196 CLR 1 at 3.

30 Had the trial judge, Judge Pirone, been minded to award exemplary damages, His Honour indicated that he would have assessed those damages at $10,000.

31 The second basis of the appeal was allowed, and a new trial was ordered on the issue of damages.


wrong? And • is the award of exemplary damages a matter of right, or does

it depend on the exercise of a discretion informed by some identifiable criteria?32

THE DECISION Availability of Exemplary Damages In Australia, exemplary damages have been recovered in tort for a variety of causes of action: trespass to chattels;33 trespass to land;34 trespass to the person;35 deceit;36 and defamation.37 However, in Gray, the High Court confirmed that there may be rare cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiff.38 In such cases, exemplary damages are possible. A variety of arguments were used in the judgements to support this contention: • the “roots of tort and crime” are “greatly intermingled”39,

such that it is not necessarily inappropriate to use civil proceedings to both compensate the plaintiff and punish the

32 (1998) 196 CLR 1 at 9 per Gleeson CJ, McHugh, Gummow and Hayne JJ.

33 Healing (Sales) Pty Ltd v. Inglis Electrix Pty Ltd (1968) 121 CLR 584.

34 XL Petroleum (NSW) Pty Ltd v. Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448.

35 Lamb v. Cotogno (1987) 164 CLR 1.

36 Musca v. Astle Corporation Pty Ltd (1988) 80 ALR 251.

37 Uren v. John Fairfax & Sons Pty Ltd (1966) 117 CLR 118.

38 (1998) 196 CLR 1 at 9-10 per Gleeson CJ, McHugh, Gummow and Hayne JJ; Kirby J at 27-29; Callinan J at 51.

39 Uren v. John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 149-50 per Windeyer J, cited by Gleeson CJ, McHugh, Gummow and Hayne JJ at (1998) 196 CLR 1 at 6-7.


wrongdoer, just as it is now possible in some jurisdictions, by virtue of statute, for a judge at a criminal trial to order compensation to a person for pain, suffering, or other loss or damage resulting from the commission of an offence;40

• quite apart from the function of punishment, exemplary

damages provide a means for the court to express its disapproval (hence, the function of deterrence) “not only to the tortfeasor but to the world”;41

• there is precedent in Australia in which exemplary damages

have been permitted in cases where an employer failed to provide a safe system of work where it was shown that the employer, well knowing of an extreme danger, persisted in using the unsafe system of work;42

• the deterrence intended by an award of exemplary damages

appeases the victim and assuages any urge for revenge felt by the victim;43

• whatever may be the true characterisation of the pleading, if

the case is conducted as one of conscious wrongdoing by the tortfeasor, then exemplary damages may be warranted. In this particular case, the majority was of the opinion that, although Mr Gray’s action was pleaded in negligence, not for trespass to the person, it was conducted at trial as if it were a claim in trespass, i.e. that Mr Bransden deliberately drove his vehicle towards the plaintiff without regard for the


41 (1998) 196 CLR 1 at 29 per Kirby J.

42 (1998) 196 CLR 1 at 9 per Gleeson CJ, McHugh, Gummow and Hayne JJ. The cases to which their Honours referred were: Midalco Pty Ltd v. Rabenalt [1989] VR 461; Coloca v. BP Australia Ltd [1992] 2 VR 441; and Trend Management Ltd v. Borg (1996) 40 NSWLR 500. Midalco is perhaps the weakest of those three earlier authorities because, as noted previously, the availability of exemplary damages had been conceded by the defendant at trial.

43 (1998) 196 CLR 1 at 12 per Gleeson CJ, McHugh, Gummow and Hayne JJ, wherein their Honours cited Lamb v. Cotogno (1987) 164 CLR 1 at 9-10 with approval.


latter’s safety.44 Liability for negligence was not disputed at trial, and no contributory negligence on Mr Gray’s part was shown.

Thus, were it not for one of the criteria discussed in the next section, the fact scenario in Gray v. Motor Accident Commission may well have given rise to exemplary damages because of the character of the defendant’s conduct. Criteria Informing the Award of Exemplary Damages The High Court confirmed that, although the quantification of exemplary damages was a matter for the discretion of the tribunal assessing damages,45 certain criteria did inform the exercise of that discretion: • the fact that a defendant is insured under a compulsory

scheme of insurance against any liability for exemplary damages does not bar the award of such damages.46 This followed the identical conclusion of a differently constituted but unanimous High Court in Lamb v. Cotogno.47 Moreover, it was not relevant that the sole defendant in this case was, by virtue of statute, the insurer, and that the wrongdoer was not a defendant on the record at all. In that case, the insurer assumed the driver’s liability, and the deterrent function of the award continued to apply;48

• where the criminal law has been brought to bear upon the

wrongdoer, and substantial punishment inflicted (and in the 44 (1998) 196 CLR 1 at 10 per Gleeson CJ, McHugh, Gummow and Hayne JJ.


46 (1998) 196 CLR 1 at 13 per Gleeson CJ, McHugh, Gummow and Hayne JJ, 25-27 per Kirby J, and Callinan J at 46-47.

47 (1987) 164 CLR 1 at 9 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ. In Gray v. Motor Accident Commission, both Kirby and Callinan JJ expressed certain reservations about that proposition in Lamb v. Cotogno, with Kirby J noting that “[s]ome day it may be necessary to reconsider the correctness of that decision”: at 27.

48 (1998) 196 CLR 1 at 12-13 per Gleeson CJ, McHugh, Gummow and Hayne JJ.


majority’s opinion, a term of imprisonment would seem always to be substantial49), exemplary damages may not be awarded.50 The majority of the High Court clarified that this decision must be reached if the criminal punishment is inflicted for what is substantially the same conduct as the conduct which is the subject of the civil proceeding; it is not a matter for the court’s discretion.51 Further, the imposition of substantial criminal punishment is a bar to the award for two reasons. First, the purposes of awarding exemplary damages - punishment and deterrence - have been wholly met; and second, considerations of double punishment would otherwise arise.52

• further, the majority of the High Court noted that the

remedy of exemplary damages must be considered to be an exceptional remedy,53 which sentiment is consistent with earlier inferior courts’ statements. In Coloca v. BP Australia Ltd,54 O’Bryan J held that such awards would be “unusual and rare”;55 and in Trend Management v. Borg,56 Mahoney P cautioned that “if exemplary damages are to perform the function which the Australian law has assigned to them, it is important that the seriousness of the conduct involved be not diluted.”57

49 (1998) 196 CLR 1 at 16.

50 (1998) 196 CLR 1 at 14.

51 In contrast, both Kirby J (at 31-33) and Callinan J (at 50-51) held that the award of exemplary damages is discretionary, but in exercising the discretion, the fact that the defendant has already been punished by the criminal court was a relevant factor, indeed, perhaps the major or decisive one.


53 (1998) 196 CLR 1 at 9.

54 [1992] 2 VR 441.

55 [1992] 2 VR 441 at 448.

56 [1992] 2 VR 441.

57 [1992] 2 VR 441 at 509. Similarly, in the recent decision of the New Zealand Court of Appeal, Ellison v. L [1998] 1 NZLR 416, it was cautioned that “because negligence is an


Thus, exemplary damages could not be awarded against Mr Bransden for his conduct. For that reason, the observations by the Court about the availability of exemplary damages in cases pleaded in negligence were strictly obiter only, for the trial judge’s conclusion about the effect of the prior criminal sentence were upheld. However, and despite this recent High Court endorsement, several of the policy arguments against the availability and assessment of an award of exemplary damages in negligence actions are particularly cogent, and have been canvassed and discussed by the three Law Reform Commissions referred to in the introduction to this article. Due to the manner in which the appeal was conducted in Gray, the High Court did not need to grapple with many of these policy arguments other than briefly. The majority was careful to note that:

Notwithstanding, then, what are sometimes seen as the anomalies and difficulties that attend the awarding of exemplary damages, this appeal concerns when such an award may be made, not whether any anomalies are such as to invite some radical change to the law.58

A selection of the most important of the policy conundrums associated with exemplary damages in negligence are discussed below. ARGUMENTS AGAINST EXEMPLARY DAMAGES IN NEGLIGENCE • The distinction between aggravated and exemplary damages

is, as the High Court has admitted,59 difficult. In Gray, Kirby unintentional tort those cases [of exemplary damages] are likely to be rare indeed”: at 419. For commentary upon the effect of that decision in New Zealand, see: Beck, A, “Exemplary Damages in New Zealand: Sunset and Evening Star” (1998) 6 Tort Law Review 194.

58 (1998) 196 CLR 1 at 5.

59 Uren v. John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 129 per Taylor J, 149 per Windeyer J; Lamb v. Cotogno (1987) 164 CLR 1 at 8; Gray v. Motor Accident Commission


J described the former category as damages “given for conduct which shocks the plaintiff and hurts his or her feelings”.60 Exemplary damages, on the other hand, are not compensatory, but punitive. They are awarded for conduct “which shocks the tribunal of fact, representing the community”.61

However, there is a degree of overlap, in that the affront to the particular plaintiff will often coincide with the affront to the community.62 Additionally, in order to obtain an award of aggravated damages, it appears that there must be more than a mere injury to the plaintiff’s pride and dignity - some outrageous conduct on the part of the defendant which aggravated the circumstances of the injury also appears necessary. This element of aggravation may occur in the very manner in which the defendant committed the wrong, or in the defendant’s conduct subsequent to the wrong.63 However, to trigger an award of aggravated damages seems to require proof of precisely the same type of conduct on the part of the defendant as would trigger an award of exemplary damages.64

In some respects, aggravated damages may be seen to seek the best of both worlds: seeking to compensate the plaintiff for intangible losses, while seeking to punish and deter outrageous tortious conduct on the defendant’s part.65

(1998) 196 CLR 1 at 34 per Kirby J. Also: Backwell v. AAA (1996) Aust Torts Reports 81-387 where Ormiston JA noted the “confusion” with aggravated damages: at 63,393.

60 (1998) 196 CLR 1 at 35.

61 (1998) 196 CLR 1 at 35 per Kirby J.

62 (1998) 196 CLR 1 at 35.

63 Law Commission for England and Wales, 1997 Report at 3.

64 Ontario Law Reform Commission, 1991 Report at 28.

65 Ontario Law Reform Commission, 1991 Report at 29. Also: Law Reform Commission of Ireland, 1998 Consultation Paper at 107.


Indeed, Lord Devlin noted in Rookes v. Barnard66 that “aggravated damages can do most, if not all, the work that could be done by exemplary damages”.67 The danger is that, if exemplary damages are not available, the tendency is for juries to overstate aggravated damages so as to include a “de facto” punitive element, which of course is not the function of such compensatory damages.68

The practical difficulty which the blurred distinction is causing on the state of present Australian authorities is best illustrated by the facts of Gray itself. On appeal, counsel for Mr Gray sought to contend that aggravated damages might have been awarded in that case. However, the court noted that no such claim was pleaded, nor was any evidence given in support of the claim at trial, the Commission’s case could well have been different had aggravated damages been sought, so it was too late to raise the claim on appeal.69

• If exemplary damages are awarded, the plaintiff, who will

already have been fully compensated for his loss by an award of compensatory damages, may become the fortunate recipient of the defendant’s punishment.70 Indeed, in Broome v. Cassell & Co Ltd,71 Lord Reid called the award “a pure and undeserved windfall at the expense of the defendant” and

66 [1964] AC 1027.

67 [1964] AC 1027 at 1230. A similar sentiment was expressed by Somers J in Taylor v. Beere [1982] 1 NZLR 81 at 95.

68 In Gray, Callinan J noted this to a “serious question” which may have arisen in certain defamation cases in New South Wales, where exemplary damages for defamation were abolished by the Defamation Act 1974, s 46(3)(a): at 43. See also, Law Reform Commission of Ireland, 1998 Consultation Paper at 99 for a similar expression of concern.


70 See, for example: Law Reform Commission of Ireland, 1998 Consultation Paper at 9; Law Commission for England and Wales, 1997 Report at 79. The windfall argument was also noted, but not with any particular concern, by the majority in Gray v. Motor Accident Commission (1998) 196 CLR 1 at 7 per Gleeson CJ, McHugh, Gummow and Hayne JJ.

71 [1972] AC 1027.


considered that this justified the severe restriction, if not abolition, of exemplary damages.72 The windfall argument was acknowledged, but not supported, by the majority in Gray.73

• By permitting an award of exemplary damages where

criminal punishment has already occurred, and in order to avoid double punishment of the wrongdoer, difficult questions may arise for the civil court which hears subsequent proceedings against the defendant. Is the criminal punishment substantial enough? What if the criminal punishment is unknown or delayed? How close must be the conduct that is the subject of the civil and criminal proceedings? What should be the effect of any victims’ compensation legislation? What if, in the prior criminal proceedings, the accused pleaded to a lesser charge? Does the prospect of a civil court revisiting a sentence imposed in a criminal court undermine the criminal process?74

None of these particular problems arose in the Gray decision. However, such perplexities are inherent in the interaction of criminal punishment and civil damages which are described in part as being punitive. Recently, in Daniels v. Thompson,75 the Court of Appeal of New Zealand, by a majority, took the view that there should be an absolute bar on exemplary damages when criminal proceedings have been instituted and whether a conviction or an acquittal has resulted.76

• The lack of definition of those circumstances when an award

72 [1972] AC 1027 at 1086. Also Lord Hailsham LC at 1082, Lord Morris at 1099, and Lord Diplock at 1126.

73 (1998) 196 CLR 1 at 7.

74 (1998) 196 CLR 1 at 14-15 per Gleeson CJ, McHugh, Gummow and Hayne JJ; Kirby J at 32-33.

75 [1998] 3 NZLR 22.

76 An appeal to the Privy Council was dismissed: W v. W [1999] 2 NZLR 1.


of exemplary damages is warranted has been the cause of judicial resentment towards, and restriction upon, such damages. As Lord Reid despaired in Broome v. Cassell & Co Ltd:77

There is no definition of the offence except that the conduct punished must be oppressive, high-handed, malicious, wanton or its like - terms far too vague to be admitted to any criminal code worthy of the name.78

Moreover, the assessment of exemplary damages is inherently uncertain.The amounts are not capable of objective assessment, and are seen as capricious, whether determined by a judge or jury. Where the assessment of damages is tied, not to a loss which can be objectively measured, but to subjective factors, such as the gravity of the defendant’s conduct, or the character and degree of the wrong,79 the process is inevitably a discretionary one.80

Associated with this sense of uncertainty are the perceived excessive awards of exemplary damages. In the recent exemplary damages award in medical negligence in Backwell v. AAA, Ormiston JA stated:

The warning [to juries about restraint and moderation] is perhaps even more important in an era when reports, either factual or fictional, of excessive awards of exemplary damages in the United States are reported in the papers and on television.81

77 [1972] AC 1027.

78 [1972] AC 1027 at 1087.

79 Gray v. Motor Accident Commission (1998) 196 CLR 1 at 11 per Gleeson CJ, McHugh, Gummow and Hayne JJ.

80 Law Reform Commission for England and Wales, 1993 Consultation Paper at 83.

81 Backwell v. AAA (1996) Australian Torts Reports 81-387 at 63,392.


The Ontario Law Reform Commission considered that, of all the arguments against exemplary damages in tort, “concerns about the absence of clear principles to govern the size of the award are among the most basic.”82 Moreover, the Law Commission for England and Wales gloomily predicted that “reasoned, consistent and proportionate awards” are “almost impossible” to achieve if juries have the task of determining the quantum of exemplary damages.83

• Once exemplary damages are allowed in negligence

cases causing personal injury, it is impossible to shy away from degrees of negligence.84 Whatever test of culpability is applied - something more than careless, probably wanton recklessness, disregard, or similar - these degrees are very difficult to apply to a fact situation.85

Indeed, the scenario in the New Zealand case McLaren Transport Ltd v. Somerville86 provides a case on point. Mr Somerville took the wheel rim from his hay conditioning machine to the defendant’s garage to have a new tyre fitted. The defendant’s foreman, Mr Stumbles, over-inflated a 15 inch tyre in an effort to fit the tyre to a rim which, at 15.3 inches, was too large. The tyre was inflated to more than double the recommended safe pressure, and no “tyre cage” was used, although one was available. After two unsuccessful attempts, the tyre exploded, severely injuring the plaintiff, who was

82 1991 Report at 46.

83 Law Commission for England and Wales, 1997 Report at 2. In Thompson v. MPC [1997] 3 WLR 403, Lord Woolf MR noted that the jury awards referred to the court disclosed a range of figures both “striking” and which “disclosed no logical pattern”: at 415.

84 McLaren Transport Ltd v. Somerville [1996] 3 NZLR 424 at 433 per Tipping J.

85 A similar complaint has been made in respect of the award of aggravated damages in negligence cases: Kralj v. McGrath [1986] 1 All ER 54 at 61 per Woolf J.

86 [1996] 3 NZLR 424.


assisting. Negligence was conceded by the employer on appeal; however, it was argued that this was not a situation which warranted an award of exemplary damages.

Tipping J held that the level of negligence displayed by the employee was “so high that it did amount to an outrageous and flagrant disregard for [the plaintiff’s] safety,”87 that the conduct of the employee was “foolhardy in the extreme”88 and that the negligence was “so bad as to require an award of exemplary damages”.89 The sum of $15,000 was awarded by way of exemplary damages.

The decision has since been criticised on the basis that foolishness of the type displayed by Mr Stumbles in the instant case did not merit an award of exemplary damages.90 As one author asks, “Should we really be looking at mechanics trying to help a customer out?”91

A similar conundrum appears from the finding of contumelious conduct against the defendant doctor in Backwell v. AAA.92 The degree of intent that was necessary to found this conclusion is not at all clear from the following passage of Ormiston JA:

87 [1996] 3 NZLR 424 at 435.

88 [1996] 3 NZLR 424 at 435.

89 [1996] 3 NZLR 424 at 434.

90 See, for example: A Beck, “Exemplary Damages for Negligent Conduct” (1997) 5 Tort Law Review 90 at 91; J Manning, “Torts and Accident Compensation” [1996] New Zealand Law Review 442 at 457-9; J Smillie, “Exemplary Damages for Personal Injury” [1997] New Zealand Law Review 140 at 155-6; S Todd, “Exemplary Damages” (1998) 18 New Zealand Universities Law Review 145 at 162.

91 G McLay, “Negligence, ACC and Exemplary Damages - What’s Too Bad?” [1996] New Zealand Law Journal 425 at 427.



[The defendant] deliberately designed to persuade [the patient] to have an abortion and was motivated by a desire to protect the programme and the institution for which the [defendant] worked and probably also her employment at the centre ... The false threats made were of a kind to cause distress and place the [patient] in a false dilemma as to what course she should take and, in particular, were designed to persuade her to act in a manner contrary to her moral and religious [Roman Catholic] beliefs.93

As one author has noted, whether the behaviour of Dr Backwell should properly have been described as negligent, intentional or reckless, is very difficult to classify from this passage.94

• In the case of negligence, especially professional negligence,

examples of wanton or contumelious disregard for the rights of the plaintiff may be met with significant compensatory damages; criminal prosecution; disciplinary proceedings; expulsion from an association; or complaints to media or ombudsman ( if one exists in the jurisdiction).

• In these circumstances, exemplary damages are probably not

required as a vehicle by which to satisfy the purposes of punishment or deterrence or condemnation or appeasement.95 Exemplary damages are out of proportion to compensatory damages where liability in negligence is established. A lesser injured plaintiff’s one-off sense of grievance at the defendant’s negligent conduct can be grossly overvalued in comparison with a lifelong deprivation due to physical injuries caused by negligence in circumstances where there was no flagrant conduct by the

93 (1996) Australian Torts Reports 81-387 at 63 and 389.

94 Freckelton I, “Exemplary Damages in Medico-legal Litigation” (1996) 4 Journal of Law and Medicine 103 at 106.

95 n. 94.


defendant.96 • It has also been suggested that the proliferation of safety

legislation in the workplace - which the High Court noted in Gray to have been a particular context in which the tort of negligence has attracted exemplary damages thus far - supersedes any need for civil courts to punish outrageous examples of negligence by means of a punitive remedy.97

• The costs of litigating negligence actions are likely to be

higher when exemplary damages are claimed, such that the expense of a defendant successfully proving that the negligence was not so bad as to merit punishment may be greater than any exemplary damages that would be awarded in respect of the conduct.98 For this reason, spurious claims for exemplary damages may coerce defendants to settle claims, or settle claims for higher amounts than they would otherwise.99

Moreover, if exemplary damages are available in negligence actions, they may encourage claims that have little basis in liability, or may encourage claims that have a good basis in liability but little chance of settling because of the plaintiff’s expectation of exemplary damages, thus imposing greater burdens on court resources.100 • If a defendant’s negligent conduct produces grievous injury, a large award of compensatory damages is likely to

96 Broome v. Cassell & Co Ltd [1972] AC 1027 at 1130 per Lord Diplock.

97 See, for example: Butler, M, “Objective Fault and Exemplary Damages” (1992) 14(9) Law Society Bulletin 27 at 28.

98 McLay G, “Negligence, ACC and Exemplary Damages - What’s Too Bad?” [1996] New Zealand Law Journal 425 at 427.

99 Ontario Law Reform Commission, 1991 Report at 1. However, the Commission noted that responses to its enquiries during the course of the investigations necessary to compile the report indicated that insurers were able to distinguish meritorious claims and discount others: at 25.

100 Law Commission for England and Wales, 1993 Consultation Paper at 112.


have the effect of punishing the defendant, rendering exemplary damages unnecessary. This possibility was noted by Ormiston JA in Backwell v. AAA101:

One could have a plaintiff who was rendered quadriplegic as a result of an assault or a blatantly drunken escapade in a car, where the terrible consequences arose in part from a particular physical weakness or some chance consequence of the original accident, where compensatory damages might be fairly assessed in excess of $1M. In such a case, even though the damages awarded are entirely directed to compensating the plaintiff, the amount might also be viewed as more than sufficient punishment or deterrence.102

• It has further been said that exemplary damages confuse the criminal and civil standards of proof. They are designed to punish the defendant, yet in a suit against that defendant in negligence, he or she is not provided with the usual protections or safeguards of the criminal law (e.g. higher standard of proof; the right against self-incrimination; the right to silence).103 Thus, it is arguable that penal sanctions, in the form of exemplary damages, are being introduced into an area of law which is not equipped to cope with them.

• Another policy argument against the award of exemplary

damages in negligence concerns the financial means of the defendant. The concern expressed by all three Law Reform Commissions was that the financial circumstances of the defendant are relevant to ascertain the capacity of that party to satisfy a judgement of exemplary damages, and to determine what sum is necessary to act as a deterrent and


102 (1996) Australian Torts Reports 81-387 at 63,395.

103 Broome v. Cassell & Co Ltd [1972] AC 1027 at 1087 per Lord Reid; 1100 per Lord Morris, 1127-8 per Lord Diplock, and 1135 per Lord Kilbrandon. Also: Ontario Law Reform Commission, 1991 Report at 19.


punishment.104 If, however, the means of the defendant are relevant to the assessment of exemplary damages, this may cause an unwarranted intrusion into the affairs of that party, and increase the expense of pre-trial discovery and trial expenses.105 Additionally, if the means of the defendant are relevant to the assessment of exemplary damages, a disproportionate amount of alleged negligence litigation against asset-rich defendants is a distinct possibility.106

• Finally, in Gray, the High Court had cause to consider the

effect upon an award of exemplary damages of a shift in liability from the wrongdoer to an insurer. A similar problem arises where it is sought to impose exemplary damages on a defendant who is only vicariously liable. In the case of compensatory damages, the shift of the burden of payment to an innocent party is reasonable, where the purpose of the award is to ensure that the plaintiff is paid something, but not in the case of punitive damages where the defendant is not liable for any wrongdoing.107 The punitive and deterrent effect on the wrongdoer will be lost if that person is allowed to avoid personal responsibility because of strict vicarious liability on the part of another, such as the employer.

In McLaren Transport Ltd v. Somerville,108 Tipping J stated that “Mr Stumbles’ [the foreman’s] conduct merits condemnation and punishment” - and then upheld the exemplary damages award as against the employer.The employer was punished

104 XL Petrolem (NSW) Pty Ltd v. Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448 at 471-2. Also, see: Law Reform Commission of Ireland, 1998 Consultation Paper at 106.

105 Law Commission for England and Wales, 1993 Consultation Paper at 86 (the Commission did not support inquiry into the financial position of the defendant as a precondition of such an award: at 141); Law Reform Commission of Ireland, 1998 Consultation Paper at 111-12; Ontario Law Reform Commission, 1991 Report at 51.

106 Law Commission for England and Wales, 1997 Report at 141.

107 Beck A, “Exemplary Damages for Negligent Conduct” (1997) 5 Tort Law Review 90 at 92.

108 [1996] 3 NZLR 424.


for no wrongdoing on its part.109 It appears that the case proceeded on the assumption that if Mr Stumbles’ tortious act fell within the scope of his employment, the doctrine of vicarious liability applied automatically to hold the employer strictly liable for all the consequences, including an award of exemplary damages.110

CONCLUSION The debate as to whether exemplary damages ought ever to be available for negligent conduct in Australia appears to have been resolved in light of the decision in Gray v. Motor Accident Commission, although the High Court was careful to note the deliberate nature of the defendant’s actions in that case, as if the case was conducted as a claim in trespass, which is, of course, an intentional tort. The admission of exemplary damages into the tort of negligence requires an analysis of the degrees of a defendant’s negligence, which is a difficult exercise. Whilst the “brutal and cowardly” conduct of the defendant may have warranted the judicial imposition of exemplary damages in Gray (had there been no prior criminal punishment), it is generally considered that the conduct of the defendant mechanic in McLaren Transport Ltd v. Somerville111 was not appropriate for the standard of culpability required for such an award. In the latest edition of the work, The Law of Torts,112 Fleming notes that awards of exemplary damages in actions for negligence are comparatively rare.113 Thus, if exemplary

109 Apparently, at trial, the District Court did take into account the lack of training provided to the foreman, as well as the practice of allowing customers into the workshop. However, these issues were not relied upon by Tipping J on appeal.

110 Similarly, the Law Commission for England and Wales, 1997 Report, notes that all reported decisions in thatjurisdiction have proceeded on the basis that the doctrine of vicarious liability applies to liability for exemplary damages, without going beyond that mere assumption to question whether, and how, the doctrine should apply: at 89.

111 [1996] 3 NZLR 424.

112 JG Fleming, The Law of Torts (ninth edn, 1998).

113 Id at 273.


damages were abolished in Australia in such cases, the number of disaffected litigants would appear to be slight. Moreover, and consistently with society’s expectation of criminal law, is it not better to permit some tort defendants to escape punishment than to punish other defendants excessively or with a penalty, the assessment of which is arbitrary? Given the extensive criticism which has accompanied exemplary damages in claims of alleged negligence giving rise to personal injury, it is the author’s view that there is a strong case for the complete abolition of exemplary damages in such cases, and all the inherent uncertainties which such a remedy entails. However, in light of the decision in Gray, it would appear that such a step will now require legislative intervention.

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