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Cite as: [1997] EWLC 247(6)

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PART VI

SUMMARY OF RECOMMENDATIONS

Aggravated Damages

6.1 We recommend that:

(1) legislation should provide that so-called aggravated damages may only be awarded to compensate a person for his or her mental distress; they must not be intended to punish the defendant for his conduct. (Draft Bill, clause 13)

(2) wherever possible the label damages for mental distress should be used instead of the misleading phrase aggravated damages. (Draft Bill, clause 13)

(3) recommendations (1) and (2) are not intended to restrict the circumstances in which damages for mental distress are recoverable other than as aggravated damages (for example, compensation for pain and suffering in personal injury cases or contractual damages for a ruined holiday).

Restitutionary Damages

6.2 We recommend that:

(4) no attempt should be made to state comprehensively in legislation the situations in which torts should trigger restitution; subject to recommendation (7), the development of the law of restitution for torts should be left to common law development.

(5) no attempt should be made to state comprehensively in legislation the situations in which equitable wrongs should trigger restitution; subject to recommendation (7), the development of the law of restitution for equitable wrongs should be left to common law development.

(6) no legislative provision should deal with whether (and if so, when) restitutionary damages may be awarded for breach of contract; the development of the law of restitution for breach of contract should be left to common law development.

(7) legislation should provide that restitutionary damages may be awarded where:

(a) the defendant has committed:

(i) a tort or equitable wrong, or

(ii)a civil wrong (including a tort or an equitable wrong) which arises under an Act, and an award of restitutionary damages would be consistent with the policy of that Act, and

(b) his conduct showed a deliberate and outrageous disregard of the plaintiffs rights. (Draft Bill, clause 12(1)-12(3))

(8) recommendation (7) should not prejudice any other power to award restitutionary damages for a wrong, nor remedies which also effect restitution for a wrong but which are historically distinct from restitutionary damages (eg an account of profits for an intellectual property tort). (Draft Bill, clause 12(5))

(9) the judge, and not the jury, should decide whether the defendants conduct showed a deliberate and outrageous disregard of the plaintiffs rights for the purposes of a claim to restitutionary damages, where both restitutionary damages and punitive damages are in issue in the same proceedings. (Draft Bill, clause 12(4))

(10)our proposed legislation should not deal with how the quantum of restitution is determined.

(11)our proposed legislation should not deal with the question whether (and if so, when) both compensation and restitution may be obtained for a wrong.

(12)our proposed legislation should not deal specifically with the problems raised by claims to restitution for wrongs committed by two or more defendants against one plaintiff (multiple defendant cases)

(13)our proposed legislation should not deal specifically with the problems raised by claims to restitution for wrongs by two or more plaintiffs from one defendant (multiple plaintiff cases)

(14)in the context of restitution for wrongs, it would be appropriate for judges - and so practitioners - to abandon the labels action for money had and received and account of profits in favour of the single term restitutionary damages (or, at a higher level of generality, restitutionary award or restitution).

Exemplary Damages

6.3 We recommend that:

(15)exemplary damages should be retained.

(16)our draft Bill should reflect our preference for the term punitive damages rather than exemplary damages. (Draft Bill, clause 1(2))

(17)the judge, and not a jury, should determine whether punitive damages should be awarded, and if so, what their amount should be. (Draft Bill, clause 2)

(18)punitive damages may only be awarded where in committing a wrong, or in conduct subsequent to the wrong, the defendant deliberately and outrageously disregarded the plaintiffs rights; (Draft Bill, clause 3(6); for conduct see clause 15(3)); and the narrower categories test of Rookes v Barnard should be rejected. (Draft Bill, clause 3(9))

(19)the cause of action test of AB v South West Water Services Ltd should be abandoned; instead:

(a) punitive damages may be awarded for any tort or equitable wrong; (Draft Bill, clause 3(3))

in this context an equitable wrong comprises a breach of fiduciary duty, a breach of confidence, or procuring or assisting a breach of fiduciary duty; (Draft Bill, clause 15(4))

(b) punitive damages may be awarded for a civil wrong which arises under an Act (including a tort or an equitable wrong), but only if such an award would be consistent with the policy of that Act; (Draft Bill, clause 3(4) and 3(5))

however, punitive damages must not be awarded for breach of contract or under an undertaking in damages.

(20)punitive damages may be awarded in addition to any other remedy which the court may decide to award, but may only be awarded if the judge considers that the other remedies which are available to the court will be inadequate alone to punish the defendant for his conduct (the if, but only if test); (Draft Bill, clause 3(7) and 3(8))

for these purposes the court may regard deterring the defendant and others from similar conduct as an object of punishment. (Draft Bill, clause 3(10))

(21)in deciding whether to award punitive damages, the court must have regard to:

(a) the principle that punitive damages must not usually be awarded if, at any time before the decision falls to be made, the defendant has been convicted of an offence involving the conduct concerned; (Draft Bill, clause 4(1))

when applying this principle a court must ignore section 1C of the Powers of Criminal Courts Act 1973. (Draft Bill, clause 4(3))

(b) any other sanctions that have been imposed in relation to the conduct concerned; (Draft Bill, clause 4(2))

(22)in deciding the amount of punitive damages the judge must have regard to the principles that any award:

(a) must not exceed the minimum needed to punish the defendant for his conduct; (Draft Bill, clause 5(1)(a))

(b) must be proportionate to the gravity of the defendants wrongdoing. (Draft Bill, clause 5(1)(b))

for these purposes the court may regard deterring the defendant and others from similar conduct as an object of punishment. (Draft Bill, clause 5(3))

(23)in deciding the amount of punitive damages, the judge must consider, where applicable, the following matters:

(a) the state of mind of the defendant;

(b) the nature of the right or rights infringed by the defendant;

(d) the nature and extent of the benefit that the defendant derived or intended to derive from his conduct;

(e) any other matter which the judge in his or her discretion considers to be relevant (other than the means of the defendant). (Draft Bill, clause 5(2))

(24)our draft Bill should lay down (in some instances by amending, and in other instances by restating previous law) the main elements of the remedy of punitive damages; but subject to this, the law relating to punitive damages should continue to apply and be open to future common law or statutory development. (Draft Bill, clause 1(1))

(25)punitive damages should not be awarded unless they have been specifically pleaded by the plaintiff, together with the facts on which the party pleading them relies. (Draft Bill, clause 3(2))

(26)the defendant should be allowed to show that he does not have the means, without being caused undue hardship, to discharge the punitive damages award which the court has decided to grant; where the defendant satisfies the court that this is so, the court must award a lower sum which it considers avoids that hardship. (Draft Bill, clause 6(2))

(27)our draft Bill should provide that the defendants means include the fruits of any contract of insurance against the risk of liability to pay punitive damages. (Draft Bill, clause 6(4))

(28)where a court has decided to award punitive damages, it must indicate the amount which it is minded to award, irrespective of the defendants means; (Draft Bill, clause 6(1)); and if the court has reduced an award of punitive damages on account of undue hardship to the defendant (under recommendation (26)) the court should record what sum would have been awarded, but for that reduction. (Draft Bill, clause 6(3))

(29)no proportion of a plaintiffs punitive damages award should be diverted to a public fund.

(30)our special multiple plaintiffs scheme should apply where conduct of a defendant involves torts, equitable wrongs or statutory wrongs against two or more persons. (Draft Bill, clause 7(1))

(31)once punitive damages have been awarded to one or more multiple plaintiffs in respect of the defendants conduct, no later claim to punitive damages shall be permitted for that conduct by any multiple plaintiff. (Draft Bill, clause 7(4))

(32)if the court intends to award punitive damages to two or more multiple plaintiffs in the same proceedings, the aggregate amount awarded must be such that, while it may properly take account of the fact that the defendant has deliberately and outrageously disregarded the rights of more than one person, it does not punish the defendant excessively for his conduct. (Draft Bill, clause 7(3))

(33)provided the defendant consents to this, a court should take into account any settlement which the defendant may have reached with multiple plaintiffs in deciding:

(a) whether punitive damages are available, or

(b) if so, how much should be awarded

to multiple plaintiffs with whom the defendant has not reached a settlement. (Draft Bill, clause 7(2))

(34)several liability, rather than joint or joint and several liability, should apply to punitive damages (subject to recommendation (35) below); (Draft Bill, clause 8(1))

(35)recommendation (34) (several liability, rather than joint or joint and several liability shall apply to punitive damages) is without prejudice to:

(a) our recommendation that vicarious liability to pay punitive damages should be retained; (Draft Bill, clause 8(2)(a))

(b) the liability of a partner for the wrongs of his co-partner. (Draft Bill, clause 8(2)(b))

(36)our draft Bill should ensure that the right to recover contribution laid down in section 1 of the Civil Liability (Contribution) Act shall not extend to a liability to pay punitive damages that is several. (Draft Bill, clause 8(3))

(37)our draft Bill should clarify that a person may be vicariously liable to pay punitive damages in respect of anothers conduct. (Draft Bill, clause 11(1))

(38)our draft Bill should not define the circumstances in which one person may be vicariously liable for the wrongs of another; instead, it should assume the boundaries of the concept of vicarious liability as it exists at common law, or by statute, for the particular tort, equitable wrong or statutory wrong in question. (Draft Bill, clause 11(1) and 11(2))

(39)subject only to recommendation (40), the sum of punitive damages which a person is vicariously liable to pay for the wrong of another should be that which that other would be liable to pay, and should be determined on that basis. (Draft Bill, clause 11(2))

(40)where the court is assessing the sum of punitive damages which an employer is vicariously liable to pay for the wrongs of its employee:

(a) the award payable by the employer may be reduced (in accordance with recommendations (26)-(28)) if the court considers that the employers means are such that it would cause it undue hardship to be required to pay such sum as would otherwise be appropriate, (Draft Bill, clause 11(3)) and

(b) the award payable by the employer must not be reduced on the ground that the employees means are such that it would cause the employee undue hardship if he or she was to be required to pay such sum as would (disregarding the means of the employee) otherwise be appropriate. (Draft Bill, clause 11(3))

(41)if it is sought to establish a matter relating to the question whether punitive damages should be awarded, or to the question of their amount, the civil, and not the criminal, standard of proof must be satisfied. (Draft Bill, clause 10)

(42)our draft Bill should clarify that insurance against the risk of an award of punitive damages is not against public policy. (Draft Bill, clause 9(1))

(43)our draft Bill should ensure that, unless a future enactment expressly or clearly requires insurance against a liability to pay punitive damages, no enactment shall be construed to require it. (Draft Bill, clause 9(2))

(44)section 1(2)(a)(i) of the Law Reform (Miscellaneous Provisions) Act 1934 should be repealed and the Act amended so as to allow claims for punitive damages to survive for the benefit of the estate of a deceased victim. (Draft Bill, clause 14(1)-14(3))

(45)the Law Reform (Miscellaneous Provisions) Act 1934 should be amended in order to prevent punitive damages from being available against a wrongdoers estate. (Draft Bill, clause 14(1) and 14(3))

(46)section 13(2) of the Reserve and Auxiliary Forces (Protection of Civil Interests) Act 1951 should be amended, so that, in place of exemplary damages, it authorises an award of punitive damages to which our Act applies. (Draft Bill, clause 14(4))

(47)sections 97(2), 191J and 229(3) of the Copyright, Designs & Patents Act 1988 should be repealed. (Draft Bill, clause 14(5))

(48)Our draft Bill should provide that nothing in it applies to causes of action which accrue before its commencement. (Draft Bill, clause 16(1))

(Signed) MARY ARDEN, Chairman

ANDREW BURROWS

DIANA FABER

CHARLES HARPUM

STEPHEN SILBER

MICHAEL SAYERS, Secretary

11 September 1997