The Law Commission

SUMMARY

Damages are normally concerned to compensate the plaintiff’s loss. But this is not always so. Sometimes damages are awarded to punish the defendant. These are called punitive (or exemplary) damages.

The law on punitive damages is widely considered to be in desparate need of rationalisation and modernisation. Under the present law, punitive damages cannot be awarded unless:

(1) the wrongdoer has committed a legal wrong for which punitive damages were awarded before 1964, and

(2) the wrongdoer’s conduct falls into one or other of two limited categories of case: abuse of power by servants of government (category one), or conduct which was motivated by the pursuit of profits (category two).

These limits are plainly irrational. Obvious illustrations of this are that: ¨ any wrong developed after 1964 (for example, sex discrimination or race discrimination) cannot trigger punitive damages ¨ a wrong which was recognised before 1964 cannot trigger punitive damages if one is unable to discover a reported case (perhaps due to the accidents of law reporting) in which punitive damages were awarded for that wrong before 1964 ¨ it is difficult to see why a private store detective who maliciously and falsely imprisons an alleged shoplifter should be immune from punitive damages when a police officer, who does exactly the same, is not ¨ it is difficult to see why it should make all the difference, as regards the availability of punitive damages, whether a person who beat up an old lady was paid to do so or not, or whether an author libels a person for profit, rather than simply out of malice.

ABOLITION OR PRESERVATION?

Although it is widely accepted that reform is needed, our consultation exercise revealed different views as to what path reform should take. One view was that rationalisation demands the abolition of punitive damages. This would leave punishment as the sole preserve of the criminal law. The other main view, and the one which we ultimately found persuasive, is that punitive damages should be preserved, but placed on a clear, principled, and tightly-controlled basis. Many consultees emphasised that to abolish punitive damages would needlessly remove a weapon in the judicial armoury that can be useful in fighting a wide range of outrageously wrongful conduct, including fraud, police misconduct, infringement of health and safety standards, environmental pollution and sex and race discrimination.

HOW SHOULD RATIONALISATION AND MODERNISATION BE ACHIEVED?

The Law Commission considers punitive damages should be placed on a clear, principled, but tightly controlled, footing. We therefore propose a detailed legislative scheme according to which: ¨ Punitive damages would be available for a legal wrong (other than breach of contract) if the defendant has deliberately and outrageously disregarded the plaintiff’s rights. ¨ The decision to award punitive damages, and their amount, would be matters for judges to decide; even where a civil trial is otherwise by jury, these matters would never be decided by a jury. ¨ Punitive damages would not be awarded where the defendant has been convicted of a criminal offence for the same conduct, or where another available remedy is adequate punishment. ¨ Some subsidiary good aspects of the present law on punitive damages would be preserved (eg on the standard of proof). ¨ Some subsidiary outdated aspects of the present law would be replaced by modern rules. For example, we recommend a diametrically opposite approach to the present law on survival of claims to punitive damages, so that the claim survives in favour of a deceased plaintiff’s estate, but does not survive against a deceased defendant’s estate.

AGGRAVATED AND RESTITUTIONARY DAMAGES

Our Report also makes recommendations relating to two other types of damages: ‘aggravated damages’ and ‘restitutionary damages’. ¨ Aggravated damages compensate for mental distress caused by the manner or motive with which the wrong was committed. There has been some confusion in the past about whether aggravated damages have the rather different purpose of punishing a wrongdoer. We recommend legislative reform which will remove the confusion once and for all. ¨ Restitutionary damages aim to strip from a wrongdoer gains made by committing a wrong. We think that restitutionary damages ought to be more widely available than at present, but that such development is, in general, best left to the courts. Our legislative proposals are therefore confined to ensuring that, wherever punitive damages could be awarded by a court, the court will also have available to it the less extreme remedy of restitutionary damages. Thus we propose that restitutionary damages should be available for a legal wrong (other than breach of contract) if the defendant has made gains by deliberately and outrageously disregarding the plaintiff’s rights.