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CHAPTER 2: REGULATING EXEMPLARY DAMAGES

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If it is clear that the purpose of exemplary damages should be confined to punishing a defendant effectively and deterring the defendant and others from engaging in similar conduct in the future, then the quantum of damages must not exceed the amount necessary to do this in all the circumstances of the case. Rookes v Barnard [] 1 All ER at p. Unreported, Supreme Court, 5 June The purposes of deterrence and punishment are not always convergent: An award that has a deterrent purpose will address the possible future conduct of the defendant and of others.

It will be measured not purely against the defendant's conduct, but according to the sum necessary to prevent or discourage the defendant and other similar parties from engaging in such conduct again.

However, as we recommend below, 7 each award should be made with reference to the wealth of the defendant in the particular case. The quantum of the award will therefore be the amount necessary to deter that particular defendant. It is also important to consider the role of exemplary damages in deterring highly reprehensible conduct, including violations of constitutional rights. In a case where there has been a serious breach of constitutional rights, which the court considers warrants exemplary damages, there is a public interest in calculating an award that will effectively deter such a breach in the future.

The debate on exemplary damages raises a question of principle: On this theory, the civil law is seen as being limited to regulating relations between individuals, and exemplary damages are considered to be an anomaly. The branding of exemplary damages as anomalous avoids the question of whether punishment and deterrence are exclusively the business of the criminal law.

Historically, the idea of a strict divide between the civil and criminal laws is a relatively recent one 8 and there is a long tradition of including some punitive remedies within the civil law. There is arguably some public purpose to the law of tort, which renders it appropriate that it should aim to deter extremely harmful and outrageous conduct and to vindicate personal rights by means of exemplary damages.

It has been argued that even within ostensibly compensatory awards, non-compensatory elements exist and should not be abolished. It should also be noted, as an analogy, that just as punishment is not exclusive to the criminal law, so compensation is not exclusive to the civil law. Increasingly, the criminal law, in seeking to include victims of crimes within the. Although the primary aim of the criminal law remains punishment and deterrence, the criminal law does increasingly contain measures designed to compensate victims of crime.

If civil law punishment is to be regulated, limited where necessary and used to its greatest effect where this is desirable, then it should be acknowledged in the law. The political and social utility of exemplary damages should also be considered. Exemplary damages are a means of deterring abhorrent behaviour and breach of constitutional rights not only on the part of the State, 11 but also on the part of increasingly powerful non-state actors, against whom there might otherwise be no effective deterrent.

In the United States, for example, punitive awards have most commonly been made against large corporations which have abused their very considerable power. Indeed, it is relevant to mention a historical point. As far as the abuse of power by public authorities is concerned, exemplary damages as a form of control developed because there was, for some centuries, a lack of specific machinery to deal with either problem.

By now, with the development of a mature system of administrative law with a range of controls over public authorities, judicial review of administrative action, tribunals, the Ombudsman etc. Nevertheless, as used sparingly by the courts to counter malign and oppressive misconduct, exemplary damages remain an effective tool.

The objections to exemplary damages set out below are principally procedural ones, and are concerned with preserving the rights of the defendant and preventing the plaintiff from gaining an undeserved windfall at the defendant's expense.

The arguments in favour of exemplary damages emphasise the utility of such damages and point to their important role in supplementing the criminal law and in ensuring that the rights of the individual are respected. Hussey [] 3 IR See also Appendix 1. Conway v INTO , op. There will be cases where a wrongdoer will be subjected to trial, and possibly penalties, in both the civil and the criminal systems.

This state of affairs would appear to conflict with the principles of ' autrefois convict ' and ' autrefois acquit ', which stipulate that someone who has already been acquitted or convicted should not be subjected to a second prosecution for the same offence. In response, it can be argued that the risk of double punishment can be averted by effective co-ordination between the civil and the criminal justice systems. Provisions which would exclude exemplary damages where there had been a prior conviction or criminal penalty, or which would require any prior criminal penalty to be taken into account in the assessment of exemplary damages, would effectively address this issue.

Such measures have been put in place in some other jurisdictions, and the possibility of similar legislation in this jurisdiction is discussed further below. A key difficulty with exemplary damages is that they result in plaintiffs receiving a large sum of money to which they have no real entitlement.

For, whereas compensatory and aggravated damages are related to the injury or loss suffered by the plaintiff, exemplary damages are made with reference to the behaviour of the defendant alone, and a large award of exemplary damages may accrue to a plaintiff even where he or she has suffered relatively little injury.

However, some commentators question whether the 'windfall' to the plaintiff is unjustified. They point out that, although exemplary damages do not compensate for loss, they have to go to someone.

Seen in this light, exemplary damages are not a 'windfall' but rather a 'bounty'. Alternatively, if the argument from the notion of a 'windfall' is accepted, the situation may be addressed by legislation stipulating that a portion of the exemplary award should not go to the plaintiff, but should be recovered by the State.

Legislation to this effect has been put in place in a number of US states, a point considered below. Cassell [] 1 All ER at p. Exemplary damages are awarded by a court without any of the safeguards which are afforded to a defendant in the criminal process.

Despite this, an award of exemplary damages may impose a harsh burden on the defendant. The civil law, it is argued, is procedurally unsuited to the imposition of such harsh punitive measures, and is inadequate to protect the rights of the defendant.

Against this, it can be argued that the safeguards present in the criminal law are necessitated by the severity of the punishment it may impose, a severity that may not be matched by exemplary awards in civil cases. Criminal charges may result in the loss of liberty, but the consequences of an award of exemplary damages are purely financial. Furthermore, it is arguable that the stigma associated with an award of exemplary damages is not so great as that attached to a criminal conviction and that, therefore, the same stringent procedural safeguards are not warranted.

Alternatively, the problem can be addressed through legislation, to provide, for example, for a higher standard of proof to apply in relation to exemplary damages than normally applies in civil cases. The Irish Constitution's guarantees of due process and fair procedures may place constraints on the operation of exemplary damages.

The constitutional guarantee of trial in due course of law, in Article 38, applies solely to criminal trials. It can apply to exemplary damages only if they are characterised as criminal, and this, as discussed below, 20 would be contrary to the case law on the necessary ingredients of a criminal case. In regard to this issue of principle as to whether exemplary damages should be characterised as criminal, it is interesting to note the dicta of the Supreme Court in O'Keeffe v Ferris , 21 a case relating to the constitutionality of section of the Companies Act, , which imposed certain punitive sanctions.

The case suggests that some punitive elements are acceptable within the civil law. The section allowed for shareholders to lose the protection of limited liability in circumstances where a company was being wound up and they were shown to have acted fraudulently. It also provided for a wrongdoer to repay a sum, which could amount to more than the sum he had earned from his wrongdoing. Counsel for the plaintiff argued that the section contained a disguised criminal sanction, and was thus contrary to the stipulation in Article 38 1 of the Constitution that no person should be tried on a criminal charge save in due course of law.

This construction of section was rejected by the Court, which held that the section did not create a criminal offence,. See for example the dicta of Lord Reid in Broome v. It was therefore constitutional. The Court pointed out that several of the indicia of a criminal offence were not present in the section: The Court was prepared to tolerate some punitive element to the section without this raising any questions as to its civil law status.

Significantly for the present purposes, the Court's reasoning was expressly based on an analogy with exemplary damages and with the leading Irish cases on exemplary damages: It is true that fraud is an ingredient in many criminal offences, but it is also an ingredient in various civil wrongs While much stress has been laid by counsel for the plaintiff on the need to protect the citizen from injustice in the course of proceedings, the entitlement of victims of wrongdoing to be safeguarded is something to which the court must also have regard and the court, therefore, upholds the paramount objective of this legislative provision, which is to protect those who may have been wronged.

This case suggests that the Supreme Court is willing to take a flexible approach to the presence of some punitive elements within the civil law, at least where these are important for the protection of individual rights. It is true that further rights of fair procedures derive from Article Fair process standards are also contained in Article 6 of the European Convention on Human Rights, but the majority of these guarantees apply to criminal trials only and it is likely that they would not affect exemplary damages cases.

However, exemplary damages awards which interfere with rights guaranteed by the Convention, such as freedom of expression, may run the risk of being struck down. Although there is no authority to this effect, in Tolstoy Miloslavsky v United Kingdom , 27A the European Court of Human Rights found an exceptionally large award of compensatory damages in a defamation case to be contrary to the right of freedom of expression enshrined in Article This right is limited in two respects: The Court accordingly concluded that the award was prescribed by law.

However, the Court held that, although it was acceptable for a jury to make a very substantial award of damages in appropriate circumstances, under the Convention, the award must bear a reasonable relationship of proportionality to the injury to reputation suffered by the defendant in the case. The Court considered that the scope of judicial control over the award of damages did not offer adequate or effective safeguards against a disproportionately large award.

Accordingly, it was held that there had been a violation of Article In making this determination, the Court noted that the express purpose of the award had been to compensate and not to punish.

The Court considered that the award was especially open to question since there was no requirement in the national law that the award be proportionate to the injury.

This case is a limited authority since it refers only to cases where the right to freedom of expression contained in Article 10 is impinged upon. It does not affect awards of damages, either compensatory or exemplary, that do not interfere with the exercise of this right. Awards similar to those made in the McIntyre or the Conway cases, for example, would not be affected. Nevertheless, the case may have implications for the compatibility of certain exemplary awards with the Convention, and possibly also, by analogy, with the protection of freedom of expression under the Constitution.

It is possible, though not certain, that, where there was a large punitive. However, the aim of an award of exemplary damages is clearly different to that of a compensatory award, and the need for exemplary damages awards in order to defend rights might be an additional factor which would render an exemplary award acceptable, even where it interfered with Article One argument for tolerating a punitive and exemplary element within the civil law is that the criminal law does not always have the capacity to effectively punish and deter all harmful or outrageous conduct.

In areas where extremely harmful conduct has not been made criminal, or where a wrong is criminal but a decision is taken not to prosecute, exemplary damages may prevent a wrongdoer escaping with complete impunity. Related to the argument made above in i is the significance of exemplary damages in vindicating the personal rights contained in the Constitution, and deterring breaches of those rights either by the State or by other powerful non-state actors.

In England, in a very different constitutional context, the English Law Commission has also emphasised the role of exemplary damages in protecting civil liberties. In the Irish courts, exemplary damages have been clearly defined as punitive and deterrent in nature and distinct from aggravated damages. The current Irish law allows for the recovery of exemplary damages across a wide range of torts and actions for breach of constitutional rights.

It is the action for breach of constitutional rights which gives a distinct aspect to the Irish law of exemplary damages. Conway v INTO, op. This role in regard to the Constitution distinguishes the Irish law of punitive damages from that of England and would seem to ensure and indeed necessitate their retention, at least to some extent, in Irish law, as a means of protecting individual rights under the Constitution.

To date, exemplary damages have not been awarded in a large number of cases, and the topic has been discussed by the Supreme Court on only a few occasions. The rarity of exemplary damages awards, and their relatively modest quantum, is demonstrated by the cases set out in Appendix 1 of this Report. Hederman J's justification of the award was based on the need to prevent abuses of power by the State:. One of the ways in which the rights of the citizen are vindicated, when subjected to oppressive conduct by the employees of the State, is by an award of exemplary damages.

McCarthy J appeared to envisage a broader scope of recovery for exemplary damages, however, and rejected Lord Devlin's dicta on the basis that the restrictions he imposed were contrary to the dynamism of the common law. In Conway , exemplary damages were awarded for breach of constitutional rights, which was the issue which arose on the facts of the case.

The Supreme Court did endorse a broad scope for exemplary damages. In his judgment, Finlay CJ distinguished the various categories of damages, identifying aggravated damages as distinct from exemplary or punitive damages, and confirming that 'punitive damages' was purely a synonym for exemplary damages. The most significant aspect of the case is the very strong statements by Finlay CJ and McCarthy J which place a high value on exemplary damages as a necessary means of vindicating constitutional rights.

See Consultation Paper at para. McCarthy J also rejected the categorisation. O'Flaherty J, delivering judgment, reviewed the definitions of aggravated and exemplary damages and reiterated the law as set out in McIntyre , noting that:. On the other hand, exemplary or punitive damages are a separate category. They are not compensatory at all. In Todd v Cincelli , 47 Kelly J refused to award exemplary damages on the facts, but did not raise any principled objection to the award of exemplary damages in what was a purely tortious cause of action.

Citing Conway , he held that the facts before him did not justify an award of exemplary damages as described in that case. He held that, even if the circumstances had merited an exemplary award, the principle that exemplary damages should not be awarded where compensatory damages constituted sufficient punishment and expression of disapproval would, in this case, exclude exemplary damages.

The awards of compensatory and aggravated damages together constituted a sufficient expression of public disapproval of the defendant's actions. Unreported, Supreme Court, 27 February Unreported, High Court, 5 March at p.

Our research found a wide divergence in the approach of different jurisdictions to the presence of punitive and deterrent elements in damages. This ranged from the complete rejection of all punitive elements to damages, which is the norm in civil law countries, 48 to the very well established and often controversial tradition of punitive damages in the United States.

This tradition of non-compensatory damages was cast into doubt by the judgment of the House of Lords in Rookes v Barnard , 50 but has since re-asserted itself in many common-law states. Exemplary damages have a long history in the English and in the Irish common law.

Their recovery is recorded in a series of English cases of the seventeenth century, in which exemplary awards were used to deter heavy-handed action by the Government. For instance, two such exemplary damages awards arose out of the Government's suppression of John Wilkes' The North Briton.

Pratt LJ stressed the punitive and deterrent functions of the damages award. In the English courts, the common law of exemplary damages was clarified but also significantly restricted by the House of Lords decision in Rookes v Barnard. He stated that whilst aggravated damages were a species of compensatory damages awarded for increased mental distress caused by the manner in which the defendant had committed the wrong, exemplary damages were punitive in nature.

Consultation Paper, Chapter 4 at paras. See generally Consultation Paper at paras. See infra Chapter 5 at paras. Nevertheless, Lord Devlin stopped short of eradicating exemplary damages from the English law completely, for two reasons.

First, he found that through their long history, exemplary damages had become so well entrenched in the English law that the House of Lords did not have the power to abolish them. The first category listed above is essentially that of Wilkes v Wood and the other North Briton cases which have been central to the development of exemplary damages in English law. The second category uses exemplary damages for what is akin to a restitutionary purpose: Exemplary damages awarded under these circumstances could, however, be potentially much larger than restitutionary damages available in the same case.

In Broome v Cassel , 61 the House of Lords adopted a broad interpretation of this second category, ruling that the defendant did not have to have made a precise financial calculation in order for exemplary damages to be awarded. The hope of profit was sufficient. The breadth of this category was also made clear in the case of Drane v Evangelou , 62 where the defendant landlord had sought to profit from a trespass against his tenant by removing the tenant from the apartment and thereby gaining a home for some relatives.

The profit gained was not directly financial, but was nonetheless judged sufficient for exemplary damages to be awarded. Thus, the scope for recovery of exemplary damages as envisaged by Rookes v Barnard is a limited one. The availability of exemplary damages in English law has been further limited by subsequent cases. Although the House of Lords in Broome v Cassell adopted a broad interpretation of the categories set out by Lord Devlin, the Court of Appeal, in the later case of AB v South West Water Services , 63 confined the range of torts in respect of which exemplary damages could be recovered.

The Court held that exemplary damages were excluded for all those torts for which they had not already been awarded prior to the decision of the House of Lords in This was based on the assumption that the intention of the House of Lords in Rookes v Barnard had been to restrict the award of exemplary damages, and therefore the categories it established.

See Consultation Paper at paras. The decision in the South West Water case has been widely criticised, however, as placing an arbitrary limitation on exemplary damages. The English Law Commission has taken the view that the present unprincipled state of the English law of exemplary damages is unsatisfactory, and has recommended that exemplary damages should be recoverable on a principled basis for all torts.

The majority of common law jurisdictions allow for a broader recovery of exemplary damages than is the case in England. The limitations set out in Rookes v Barnard have been expressly rejected by the courts of Canada, Australia and New Zealand. In Canada, the courts have accepted the award of exemplary damages in respect of a range of torts, including, in exceptional cases, negligence.

The Canadian courts have stressed that exemplary awards should be confined to cases where there is extreme misconduct on the part of the defendant, meriting particular condemnation or punishment.

The Australian courts have taken a similar approach to that of Canada, relying on a requirement of exceptional misconduct to limit the number of exemplary damages awards, rather than confining their recovery to particular torts. Exemplary damages will be awarded by the Canadian courts for negligence only where the plaintiff has been deliberately exposed to a risk without justification, i. Vorvis v Insurance Corporation of British Columbia ; op. In the case of Taylor v Beere. The court stressed the importance of exemplary damages as a means, complementary to the criminal law, of achieving social control in an increasingly diverse and multi-value society.

It seems plain then that exemplary damages are available for constitutional or non-constitutional torts. As to whether exemplary damages may be awarded for breach of contract, the position is uncertain. Traditionally, at common law, exemplary damages were not available for breach of contract, a situation which reflected the law's emphasis on freedom of contract and the exclusively private law nature of contractual obligations.

The award was justified on the basis of Lord Devlin's first category in Rookes v Barnard , since the dismissal of the plaintiff could be characterised as oppressive or arbitrary action on behalf of the government.

No distinction was made between tortious conduct and breach of contract by a governmental authority. Although the case may not be sound authority for extending the availability of exemplary damages in all contract cases, it does suggest that the prohibition on exemplary damages for breach of contract may not be absolute. Where a breach of contract also constitutes a tort, it is likely that exemplary damages are available. See also Consultation Paper at para. Unreported, Supreme Court, 29 October at p.

Henderson distinguished and limited the earlier authority of Tai Hing Cotton Mill Ltd v Lieu Chong Hing Bank Ltd [] 1 AC 80, where the Privy Council had held that in cases of concurrent liability, contractual liability should be paramount, stating that there was not.

Although exemplary damages were not specifically referred to in the case, these dicta indicate that where there were claims in both tort and breach of contract, and exemplary damages were available for the tortious cause of action, the plaintiff could elect to sue in tort and recover such damages. In our Consultation Paper, we set out a number of basic options for reform with regard to the availability of exemplary damages.

It is intended that exemplary damages should only be awarded in cases of the most exceptional misconduct, 81 and where the incidental punitive effect of compensatory and aggravated damages is judged insufficient.

Of these, we do not favour restrictions along the lines of Rookes v Barnard as suggested in option 4. Given the hostile reception of the case internationally, and more particularly the need to allow for exemplary damages in constitutional cases, there are no compelling reasons for favouring this option. Option 1, which would extend the availability of exemplary damages to cases of breach of contract, would considerably expand the availability of exemplary.

To date, there is a dearth of Irish case law which has fully considered the award of exemplary damages in contract cases. Although, as has been mentioned above, some common law jurisdictions may allow for exemplary damages to be recovered in highly exceptional cases, the norm in the majority of jurisdictions is to exclude exemplary awards in contract cases.

The argument can be made against the award of exemplary damages in contract cases that a contract is quintessentially a matter of private law, which concerns only the parties to it, and that in the breach of a contract there is no public element which would justify a deterrent measure such as exemplary damages. Given the private nature of the contractual arrangement, it is argued, one party to a contract should be free to break the contract in the knowledge that the only consequences will be to compensate the other party to the contract for any loss.

On the other hand, it may be argued that there are exceptional cases of breach of contract in which the award of exemplary damages would be warranted. This is the approach often taken by the United States courts, 84 and by the US Restatement Second of Contracts , which allows for punitive damages in cases where the breach of contract is also a tort for which punitive damages would be recoverable.

However the Commission considers that an extension of exemplary damages to contract cases would be at odds with the traditional concept of contract law as having an exclusively private law character. We do not favour such a radical extension of the availability of exemplary damages. The Commission does not, however, recommend that exemplary damages for breach of contract should be prohibited by legislation; rather, any possible development of the law on this matter should be left to the courts where it can be judged on a case by case basis.

Option 2, the retention of exemplary damages for all torts and breach of constitutional rights, but their exclusion in cases of breach of contract approximates to the present common law position.

The Irish courts have not to date expressly excluded recovery of exemplary damages for any particular torts, and there has been no indication that they would favour such a restriction. We return to option 2 below. Option 3, the restriction of exemplary damages through legislation, to cases of breach of constitutional rights and to certain particular torts, was favoured by some of the Commissioners at the Consultation Paper stage.

The provisional recommendation of those Commissioners was that exemplary damages should be confined to constitutional cases and to cases of defamation.

In consultation, there was some objection to this approach as discriminatory. Legislation to confine exemplary damages to defamation alone amongst torts would, it was felt, single out defendants in defamation actions unfairly. The Law Reform Commission has already considered the availability of exemplary damages for defamation in the Report on the Civil Law of Defamation published in Although our enquiries with practitioners have shown that exemplary damages are rarely allowed to go to the jury in libel cases and are therefore only rarely explicitly awarded, 87 there will remain the possibility of an exemplary award in exceptional cases.

Both option 5, which restricts exemplary damages to constitutional cases, and option 3, which confines them to constitutional torts and other particular torts, would raise the concern that, as a means to claim exemplary damages, plaintiffs would claim for breach of constitutional rights where they would formerly have claimed in tort.

It may, in other words, encourage a tendency towards a 'constitutionalisation' of the law of torts, in order to circumvent limitations on exemplary damages recovery. It will be noted that we do not include the outright abolition of exemplary damages as an option for reform. This reflects the dicta of the Supreme Court in McIntyre and in Conway , which place a premium on the use of exemplary damages awards as essential means to vindicate the constitutional rights of individuals.

To abolish exemplary damages for actions involving breach of constitutional rights would be to deny plaintiffs this vital means to vindicate and defend their rights, and therefore would seem not to be open to the legislature under the Constitution. Returning to option 2 as has been specified above, it is recommended that exemplary damages should be awarded only where compensatory and aggravated damages have an insufficient punitive and deterrent effect, and where there has been exceptional misconduct on the part of the defendant.

However, given this context, we do not advocate restricting the scope of exemplary damages as regards the causes of action for which they may be awarded. We consider that restricting exemplary damages according to the quality of the defendant's misconduct would limit them to cases where compensatory damages would be an insufficient deterrent, and would also require moderation in the quantum of exemplary damages.

We consider that this would constitute a sufficient restriction of exemplary damages. These methods of restriction are more principled and less arbitrary than a restriction of exemplary damages based on the cause of action. The remaining issue is whether the range of actions in which exemplary damages are available should be set out in legislation. In the consultation process, we noted the concern that was expressed that a legislative provision stating the wide availability of exemplary damages might lead to a flood of claims.

The rarity of exemplary damages awards in defamation cases reflects the distinct nature of compensatory damages in defamation actions. The recent case of de Rossa v Independent Newspapers Unreported, Supreme Court, 30 July confirmed that compensatory damages in libel cases have a vindicatory function and can also reflect the behaviour of the defendant at trial.

We do not favour, at this stage in the development of the law, a statutory provision which would state that exemplary damages are to be available in all tort cases. We consider that the present common law position, which leaves open the recovery of exemplary damages for a wide range of tort cases, should be retained, and that the further development of the law regarding the availability of exemplary damages should be left to the courts, informed by the circumstances of each case. Although, as has been made clear above, we do not consider that there is any reason why exemplary damages should be excluded in relation to particular torts, we nevertheless are of the opinion that it is unnecessary to state this in legislation, as it might make the law rigid.

The Commission recommends that the present common law position, which does not exclude the availability of exemplary damages for breach of constitutional rights, or for any torts, should be retained. The Commission recommends that the availability of exemplary damages should not be extended to cases of breach of contract.

The Commission recommends that both the punitive and deterrent purposes of an award of exemplary damages should be recognised, but the primary purpose of an award of exemplary damages should be the deterrence of conduct similar to the defendant's in the future. The Commission does not recommend that legislation is necessary in any of the areas covered in the three preceding paragraphs. We have already considered some of the broad arguments as to the acceptability of exemplary damages as a civil law remedy and have concluded that they are acceptable.

These arguments also inform and direct the debate on the extent to which exemplary damages should be available. If it is accepted that exemplary damages should be available to some extent, how should this be controlled? We do not recommend a solution of limiting the availability of exemplary damages by restricting the range of torts for which they may be awarded.

A second, and perhaps more principled method of limitation, is to impose a high standard of culpability on the part of the defendant, short of which exemplary damages cannot be awarded.

The effect of this is that, although exemplary damages will be available in respect of all torts, they will be awarded only in rare and exceptional cases under each of these tortious causes of action. It is crucial that exemplary damages should only be awarded in cases where punishment and deterrence are clearly warranted. The courts have in general insisted on a high standard of misconduct as a prerequisite for an exemplary award.

The definition of the misconduct necessary to ground exemplary damages should be strict enough to confine exemplary damages to the most exceptional of cases.

It should not, however, be such as to exclude completely the award of exemplary damages in any particular tort. In particular, although awards of exemplary damages in negligence cases are likely to be extremely rare, the requirement of exceptional misconduct should not be such as to exclude exemplary damages for negligence.

We favour a clear requirement that, before exemplary damages are awarded, the exceptional misconduct of the defendant should have been established. The Commission recommends legislation to the effect that exemplary damages should be awarded only where it has been established that the conduct of the defendant in the commission of a tort or breach of a constitutional right has been high-handed, insolent, vindictive or exhibiting a gross disregard for the rights of the plaintiff. On the facts of the case, exemplary damages were not awarded.

Our recommendation follows the provisional recommendation in the Consultation Paper at para. The terminology used to describe the categories of damages has caused confusion in the case law. In the interests of clarity, it is desirable that a single term should be employed consistently. To ensure that the quantum of both compensatory and exemplary damages are appropriate and moderate, it is of course necessary to identify and categorise each award that is made.

Where elements of both compensatory and exemplary damages exist in a single award of 'general damages', it will not be possible to judge with any accuracy whether the quantum is appropriate. There is another view that there is at present a tacit understanding between all those concerned that made possible the recovery of 'general damages' and discouraged exemplary awards.

The recent practice in the Irish courts has generally been to make separate and expressly labelled awards of exemplary and compensatory damages. The Commission considers that it is important that this practice should be continued. It is, of course, also important that where awards of aggravated or of restitutionary damages are made, they are separately identified. The Commission does not consider that there is any need for legislation on this matter, but that it should be left to the courts to categorise the award made.

The Commission considers that the courts should continue their practice of separately identifying awards of compensatory, exemplary, aggravated and restitutionary damages. Consultation Paper at paras. Aside from the core issue of whether and in what circumstances exemplary damages should be awarded, there arise many issues concerning the subsidiary regulation of exemplary damages. Despite their detailed nature, many of these questions are of crucial importance.

It is the adequate and principled regulation of matters such as the quantum of exemplary damages, their regulation in multiple plaintiff actions and their interaction with the criminal law that justifies their retention. As we have made clear above, the recommendation in this Report that exemplary damages should be available across a range of actions in tort and for breach of constitutional rights is based on the presumption that the quantum of such damages will be moderate and appropriate to the circumstances of each case.

Below, we consider a number of principles and mechanisms which can be used to regulate the quantum of exemplary damages. The Irish courts have not to date been faced with the exorbitant awards which have caused such controversy in the United States.

Nevertheless, there is a clear need to establish guidelines and restrictions to ensure that awards of exemplary damages are of a quantum appropriate to the wrongdoing and to the parties involved.

Exemplary damages must not be uncontrolled or arbitrary; they must be of an amount that is the minimum necessary to achieve their purpose in the context of the particular case. The fact that, in the majority of tort cases, damages are no longer assessed by juries has lessened the likelihood that the quantum of exemplary damages will spiral out of control.

Section 1 of the Courts Act, abolished jury trial for all High Court personal injury actions. Other High Court civil actions, for example defamation actions, may still be heard by a judge and jury. See the discussion of the role of the jury infra at paras. Following the principles developed in the English common law and enunciated by Lord Devlin in Rookes v Barnard , 4 the Irish courts have applied the requirements that: In Rookes v Barnard , 6 Lord Devlin set out three basic principles for the assessment of quantum in exemplary damages cases.

He held, first, that in order to recover damages, the plaintiff must have been the victim of the punishable behaviour involved. In our Consultation Paper, 11 we raised the issue of the extent of the investigation into the defendant's wealth that should be involved. Clearly, it is desirable to avoid unnecessary intrusions into the defendant's privacy.

For this reason, we provisionally recommended, at that stage, that the means of the defendant should be taken into account only on the application of the defendant to the court, where the defendant adduces evidence to the effect that he or she would be unable to pay the sum of exemplary damages imposed, or that such a sum would impose undue hardship.

This recommendation does not, however, allow a court to impose a particularly large award where there is a particularly wealthy defendant who would be unscathed by an award which would normally be considered large.

Given that the focus of exemplary damages is the behaviour of the defendant, we see it as one of the advantages of an exemplary damages award that it can be calibrated to impose effective deterrence on either a poor or more often a rich defendant. Commercial strategies which factor in the possibility of compensation to those they harm, or of fixed criminal penalties, are best undermined by exemplary damages.

It is therefore important that the wealth of the defendant should be taken into account so that a sum can be assessed which is appropriate to that defendant's means.

The Commission recommends that, in assessing exemplary damages, the court should be permitted to take into account the means of the defendant. We do not consider that there is any reason to take into account the means of the plaintiff. In the United States, it is now established that very large punitive damages awards may be held to be unconstitutional, as being contrary to the due process guarantees in the Constitution.

One of the principles of moderation which has been enunciated by the Supreme Court as indicative of whether a punitive award is constitutionally acceptable as not being excessive, is whether the award is proportionate to the harm suffered by the plaintiff, and therefore to the sum awarded in compensatory damages in the same case.

Johansen v Combustion Engineering Inc. See Lord Devlin in Rookes v Barnard, op. BMW v Gore, ibid. The award was against a large multinational mining company in respect of water pollution caused to streams flowing through property adjoining one of its mines. The award had been challenged on the grounds that it was disproportionate at a ratio of about However, the Court rejected this line of argument on the particular facts of the case.

It held that the strength of the State's interest in deterring environmental pollution justified the large award, irrespective of the relatively minor economic loss suffered by the plaintiffs. The court concluded that:. BMW has been applied in a series of other cases in the State and Federal courts. They have emphasised that the three guideposts set out in BMW are the primary but not the only factors to be taken into consideration.

The social function of exemplary damages awards has been emphasised. In the Consultation Paper, it was tentatively concluded 22 that, in contrast with the position in the United States, awards of exemplary damages would not be contrary to any of the due process standards set out in Article 38 1 of the Irish Constitution, and would not offend the principles of fair procedures and constitutional justice as developed by the Irish courts. To date, no awards of exemplary damages made in the Irish courts have been challenged as unconstitutional on the grounds that.

Discussed in the Consultation Paper at paras. It remains to be seen whether an unusually large exemplary damages award would be open to constitutional challenge under evolving notions of fair procedures or the equality and proportionality principles.

However, exemplary awards have been reduced by the Supreme Court on a different basis, namely the principles of moderation and restraint. In McIntyre v Lewis , 25 O'Flaherty J stated this principle and found that the exemplary award made in that case, which was twelve times the compensatory damages, did not bear a sufficient relation to compensation.

If the compensatory amount awarded includes aggravated damages then I believe if any award is made by way of exemplary damages it should properly be a fraction rather than a multiple of the amount awarded by way of compensatory damages including aggravated damages. Hederman J, in the same case, also stated that the exemplary damages should bear some relation to the damages awarded in compensation, and reduced the exemplary award accordingly. The principle that exemplary damages should be in proportion to compensation awarded in the same case is a useful means of preventing exorbitant awards.

It is, however, a somewhat arbitrary limitation. Exemplary damages and compensatory damages have, as discussed above, very different purposes. They are assessed according to entirely different principles. There is therefore no natural or necessary correlation between them. There may be cases where extremely malicious behaviour on the part of a defendant has, fortuitously, resulted in relatively minor injury to the plaintiff; the contrary also applies. The facts of the case of Johanson v Combustion Engineering 28 provide an illustration of this.

Given the emphasis placed by the Irish courts on the use of exemplary damages to defend and vindicate constitutional rights, there could well be cases where the importance of the rights at issue and the extent of the defendant's disregard of them could justify a large exemplary award, irrespective of the actual damage caused.

It is interesting to note the approach taken by the courts in New Zealand, where, in personal injury cases arising out of accidents, no compensatory damages are available. See supra , Chapter 1 at paras. See McIntyre v Lewis, op. The facts are set out in Appendix 1. McCarthy J dissented on this point.

To impose a strict correlation between the quantum of exemplary damages and that of compensatory damages in the same case is to introduce a degree of inflexibility into the law and, possibly, to undermine the effective and appropriate deterrent effect of some exemplary awards. The Commission does not therefore make any recommendation as to a strict rule of proportion between the two categories of damages.

However, we do recommend, in the spirit of existing legislation, a general principle that exemplary damages should bear some reasonable relation to compensatory damages, taking into account the circumstances of the case and the public interest in deterring and expressing condemnation of the wrongdoing involved. As noted above, one of the advantages of exemplary damages is that their quantum can be adapted to the circumstances of each case.

The quantum of exemplary damages is not fixed, and this allows the courts to achieve a measure of real deterrence even in respect of wealthy corporate defendants.

We consider that measures to cap exemplary damages across the board are not the most appropriate means of limiting exemplary damages quantum. Caps are a relatively arbitrary and inflexible means of limiting quantum. A cap on exemplary damages quantum would be an effective, but blunt implement with which to ensure that quantum is not excessive. A cap would tend to prevent an award of exemplary damages from perhaps having an appropriate deterrent effect.

Since caps will tend to standardise the level of exemplary damages awards, regardless of the financial circumstances of the defendant, they are likely to induce a situation where exemplary damages make only a minimal impact on more wealthy defendants. We recognise that the imposition of caps could be necessary in situations where the quantum of exemplary damages was out of control, as is perceived, by some commentators, to be the case in the United States.

In this jurisdiction, however, exemplary damages have been awarded in relatively few cases and have not been excessive. The Commission does not recommend that statutory caps should be imposed on, aggravated, exemplary or restitutionary damages.

Donselaar v Donselaar [] 1 NZR It should be noted that the plaintiff must, in accordance with the principle enunciated in Rookes v Barnard, op. As we noted in our Consultation Paper, there is inevitably some overlap in the effects of the various categories of damages, even when their distinct purposes are clearly defined.

Compensatory damages, though designed exclusively to compensate, may often have some incidental punitive or deterrent effect as exemplary damages have an incidental compensatory effect.

In cases where there is a relatively large award of compensatory damages, there is no necessity for a further award of exemplary damages. The Commission recommends that where compensatory including aggravated damages have a sufficiently punitive and deterrent effect, no additional award of exemplary damages should be made. We regard this essential and clear-cut rule as best stated in the form of legislation. By section 1 of the Courts Act, , jury trial was abolished for High Court personal injury actions, subject to some particular exceptions.

Actions such as defamation actions, and actions for false imprisonment, intentional trespass to the person and malicious prosecution, often still involve a jury, 36 and, in such cases, it is the jury that assesses the amount of damages, including exemplary damages, to be awarded. In defamation cases in particular, the suggested inconsistency of assessments of damages by juries has frequently been blamed for exemplary awards that are disproportionate or excessive.

But it must be. This point was also noted by Lord Devlin in Rookes v Barnard, ibid. On the other hand, it should be remembered that many jury verdicts come in at sums expected by lawyers involved, and that it is rare that there are outlandish awards which attract notoriety and are often the subject of notable appeal hearings.

If it is considered that these guidelines, or the rigour with which they are applied, are insufficient, then it is open to either the legislature or the courts to set out more concrete guidelines, for example, setting maximum amounts for exemplary awards in particular torts.

However, as we have indicated above, we do not favour this approach, as there may be good reasons why, on the individual circumstances of the case, an exemplary damages award should be considerably higher than other exemplary awards in respect of the same tort. There may be a fear that the jury will misunderstand or simply ignore these constraints, and make an excessive award regardless of the judge's advice. The jurors may also fail to comprehend the subtle distinction between aggravated and exemplary damages.

Where a jury does make an exemplary award that appears grossly excessive, there is of course the possibility that the award can be appealed to the Supreme Court where it may be overturned or reduced. Modern juries, however, are better educated and generally careful and conscientious in following directions clearly given by a presiding judge. The largest element is likely to be the reinstatement of property damage.

Take for example a factory which was burnt down by the negligence of a contractor. The claimant would be entitled to the direct costs required to rebuild the factory and replace the damaged machinery. The claimant may also be entitled to any consequential losses.

These may include the lost profits that the claimant could have been expected to make in the period whilst the factory was closed and rebuilt. On a breach of contract by a defendant, a court generally awards the sum that would restore the injured party to the economic position they expected from performance of the promise or promises known as an " expectation measure " or "benefit-of-the-bargain" measure of damages.

This rule, however, has attracted increasing scrutiny from Australian courts and legal commentators. Parties may contract for liquidated damages to be paid upon a breach of the contract by one of the parties. Under common law, a liquidated damages clause will not be enforced if the purpose of the term is solely to punish a breach in this case it is termed penal damages.

Courts have ruled as excessive and invalidated damages which the parties contracted as liquidated, but which the court nonetheless found to be penal. To determine whether a clause is a liquidated damages clause or a penalty clause, it is necessary to consider:. Damages in tort are generally awarded to place the claimant in the position that would have been taken had the tort not taken place.

Damages in tort are quantified under two headings: In personal injury claims, damages for compensation are quantified by reference to the severity of the injuries sustained see below general damages for more details. In non-personal injury claims, for instance, a claim for professional negligence against solicitors, the measure of damages will be assessed by the loss suffered by the client due to the negligent act or omission by the solicitor giving rise to the loss. The loss must be reasonably foreseeable and not too remote.

Financial losses are usually simple to quantify but in complex cases which involve loss of pension entitlements and future loss projections, the instructing solicitor will usually employ a specialist expert actuary or accountant to assist with the quantification of the loss. General damages compensate the claimant for the non-monetary aspects of the specific harm suffered.

This is usually termed 'pain, suffering and loss of amenity'. Examples of this include physical or emotional pain and suffering, loss of companionship, loss of consortium , disfigurement, loss of reputation, loss or impairment of mental or physical capacity, hedonic damages or loss of enjoyment of life, etc.

Judges in the United Kingdom base the award on damages awarded in similar previous cases. General damages are generally awarded only in claims brought by individuals, when they have suffered personal harm. Examples would be personal injury following the tort of negligence by the defendant , or the tort of defamation.

Speculative damages are damages that have not yet occurred, but the plaintiff expects them to. Typically, these damages cannot be recovered unless the plaintiff can prove that they are reasonably likely to occur.

Statutory damages are an amount stipulated within the statute rather than calculated based on the degree of harm to the plaintiff. Lawmakers will provide for statutory damages for acts in which it is difficult to determine the value of the harm to the victim.

Mere violation of the law can entitle the victim to a statutory award, even if no actual injury occurred. These are different from nominal damages, in which no written sum is specified. Nominal damages are very small damages awarded to show that the loss or harm suffered was technical rather than actual.

Historically, one of the best known nominal damage awards was the farthing that the jury awarded to James Whistler in his libel suit against John Ruskin. Many times a party that has been wronged but is not able to prove significant damages will sue for nominal damages. This is particularly common in cases involving alleged violations of constitutional rights, such as freedom of speech.

Contemptuous damages are a form of damage award available in some jurisdictions. They are similar to nominal damages awards, as they are given when the plaintiff's suit is trivial, used only to settle a point of honour or law.

The key distinction is that in jurisdictions that follow the loser-pays for attorney fees, the claimaint in a contemptuous damages case may be required to pay his or her own attorney fees. Court costs are not awarded.

Generally, punitive damages , which are also termed exemplary damages in the United Kingdom , are not awarded in order to compensate the plaintiff, but in order to reform or deter the defendant and similar persons from pursuing a course of action such as that which damaged the plaintiff. Punitive damages are awarded only in special cases where conduct was egregiously insidious and are over and above the amount of compensatory damages, such as in the event of malice or intent. Great judicial restraint is expected to be exercised in their application.

In the United States punitive damages awards are subject to the limitations imposed by the due process of law clauses of the Fifth and Fourteenth Amendments to the United States Constitution. In England and Wales , exemplary damages are limited to the circumstances set out by Lord Devlin in the leading case of Rookes v.

Rookes v Barnard has been much criticised and has not been followed in Canada or Australia or by the Privy Council. Punitive damages awarded in a US case would be difficult to get recognition for in a European court, where punitive damages are most likely to be considered to violate ordre public. Some jurisdictions recognize a form of damages, called, aggravated damages, that are similar to punitive or exemplary damages. Aggravated damages are not often awarded; they apply where the injury has been aggravated by the wrongdoer's behaviour, for example, their cruelty.

In certain areas of the law another head of damages has long been available, whereby the defendant is made to give up the profits made through the civil wrong in restitution. Doyle and Wright define restitutionary damages as being a monetary remedy that is measured according to the defendant's gain rather than the plaintiff's loss.

In some areas of the law this heading of damages is uncontroversial; most particularly intellectual property rights and breach of fiduciary relationship. Blake opened up the possibility of restitutionary damages for breach of contract. In this case the profits made by a defecting spy, George Blake , for the publication of his book, were awarded to the British Government for breach of contract.

The case has been followed in English courts, but the situations in which restitutionary damages will be available remain unclear. The basis for restitutionary damages is much debated, but is usually seen as based on denying a wrongdoer any profit from his wrongdoing.

The really difficult question, and one which is currently unanswered, relates to what wrongs should allow this remedy. In addition to damages, the successful party is entitled to be awarded their reasonable legal costs that they spent during the case. This is the rule in most countries other than the United States. In the United States, a party generally is not entitled to its attorneys' fees or for hardships undergone during trial unless the parties agreed in a contract that attorney's fees should be covered or a specific statute or law permits recovery of legal fees, such as discrimination.

The quantification of personal injury is not an exact science. In English law solicitors like to call personal injury claims as "general damages" for pain and suffering and loss of amenity PSLA. Solicitors quantify personal injury claims by reference to previous awards made by the courts which are "similar" to the case in hand.

The guidance solicitors will take into account to help quantify general damages are as hereunder:. The age of the client is important especially when dealing with fatal accident claims or permanent injuries. The younger the injured victim with a permanent injury the longer that person has to live with the PSLA. As a consequence, the greater the compensation payment. In fatal accident claims, generally the younger deceased, the greater the dependency claim by the partner and children.

Solicitors will consider "like for like" injuries with the case in hand and similar cases decided by the courts previously. These cases are known as precedents. Generally speaking decisions from the higher courts will bind the lower courts. Therefore, judgments from the House of Lords and the Court of Appeal have greater authority than the lower courts such as the High Court and the County Court.

A compensation award can only be right or wrong with reference to that specific judgment.

Background