Harris v Digital Pulse Pty Ltd
[2003] NSWCA 10
•07/02/2003
| Reported | (2003) 44 ACSR 390 |
| Decision : | (2003) 56 NSWLR 298 (2003) 21 ACLC 934 |
New South Wales
| Court of Appeal |
CITATION : HARRIS v DIGITAL PULSE PTY LTD [2003]
NSWCA 10HEARING DATE(S) : 31 July 2002 JUDGMENT DATE : 7 February 2003 JUDGMENT OF : Spigelman CJ at 1; Mason P at 64; Heydon JA at
229DECISION : See paragraph 478 CATCHWORDS : Equity - application for leave to appeal - appeal -
concurrent proceedings - whether exemplary
damages can be awarded for breach of fiduciary
duty - punitive damages - compensatory
damages - contumelious disregard for plaintiff's
rights - breach of employment contract - initiation
of secret business enterprise - conscious
wrongdoings - exemplary damages in tort - status
of exemplary damages at common law and in
legislation - deterrence - rate of interest on
defaulting fiduciary - equitable remedies -
equitable wrongs - allowances - breach of
confidence - financial loss - breach of contract -
unjust enrichment - account of profits - equitable
rules - criminal sanctions in equity - doublerules - criminal sanctions in equity - double fusion fallacy - employer's duties - penal - punitive
- punishment - prophylactic - restitution - legal
regulation of commerce - law reform commissions
- international perspectives on exemplary
damages and fiduciary relationships - The
appellants were employees of the respondent
company. At the beginning of their employment
they signed employment contracts that contained
terms preventing them from competing with the
company while they remained employed. During
their employment, the appellants secretly
established their own business and secured
contracts with prospective clients of the
respondent. The respondent sued the appellants
for breach of contracts of employment, breach of
fiduciary duty and breach of duty under the
Corporations Act 2001 (Cth). In addition to the
usual remedies, the respondent also sought
exemplary damages. The respondent was
successful, receiving an account of profits from
both appellants for breach of contracts and
fiduciary duty, equitable compensation from one
of the appellants for breach of duty and misuse of
confidential information, and exemplary damages
for breach of fiduciary duty. The appellants
sought leave to appeal against the orders for
exemplary damages. - Held by Spigelman CJ andpunishment - fusion of common law and equity - and allowing the appeal: - There is no power in equity to award exemplary damages for breach of fiduciary duties by an employee.
LEGISLATION CITED : Accident Compensation Act 1982 (NZ)
Australian Industries Preservation Act 1906 (Cth)
Civil Liability Act 2002 (NSW)
Copyright Act 1968 (Cth)
Corporations Act 2001 (Cth)
Crimes Act 1900 (NSW)
Defamation Act 1974 (NSW)
Judicature Act 1873 (UK)
Law Reform (Law and Equity) Act 1972 (NSW)
Motor Accidents Compensation Act 1999 (NSW)
Supreme Court Act 1970 (NSW)
Trade Practices Act 1974 (Cth)
Transport Accident Act 1986 (Vic)
Workers Compensation Act 1987 (NSW)CASES CITED : See attached PARTIES : CHRISTOPHER HARRIS v DIGITAL PULSE PTY LTD FILE NUMBER(S) : CA 40301/02 COUNSEL : Claimants: Mr P B Walsh / Mr D A Allen
Opponent: Mr M L D Einfeld QC /Mr A BulleySOLICITORS : Claimants: Catalyst Partners
Opponent: Dibbs Barker GoslingLOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT ED 50032/00 FILE NUMBER(S) : LOWER COURT Palmer J JUDICIAL OFFICER :
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IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEALCA 40301/02 ED 50032/00
SPIGELMAN CJ
MASON PHEYDON JA
7 February 2003
CHRISTOPHER HARRIS v DIGITAL PULSE PTY LIMITED
Judgment
1 SPIGELMAN CJ: I have had the advantage of reading the judgments of submissions. For the reasons given by Mason P, leave to appeal should be given.
2 The judgment and the submissions in this case adopt the terminology of “exemplary damages”. I do not find that to be appropriate. “Damages” are a remedy at common law. The issue before the Court is whether a punitive monetary award can be made in equity. Inexact use of terminology is here, as so often, prone to cause confusion of thought. The use of the word
“damages” with respect to both compensatory damages and exemplary damages obscures the fact that a common law litigant who received an award of the latter has not in fact suffered any “damage” in the relevant
respect. The fact that compensatory damages at common law and equitable exemplary damages as a “criminal sanction”. I would not adopt that characterisation and do not agree with those passages of his Honour’s reasons. Furthermore, whilst accepting Heydon JA’s analysis of the authorities, I believe the present case can be determined on a narrower basis.
compensation have a similar justification does not necessarily indicate that
a different kind of monetary award at common law, which has come to be
referred to as a form of “damages”, can or should be reflected in equity.
3 I am in general agreement with the reasons of Heydon JA save in one
respect. In his judgment, particularly under the subheading “The Judicial
4 It is, in my opinion, unnecessary and undesirable to decide this case on
the basis that a punitive monetary award can never be awarded in equity.Remedial flexibility is a characteristic of equity jurisprudence.
5 The present proceedings should be determined on the basis of whether a particular relationship is that of employer/employee. However, the appropriate level of generality is, in my opinion, to characterise the case as a relationship created by contract between the parties, in which one party has a fiduciary obligation to act in the interests of the other in relevant respects. Should a power to make a punitive monetary award be asserted in such a case?
power to make a punitive monetary award should be acknowledged with
respect to the kind of fiduciary relationship in the case before the Court.Applying the Judicial Method
6 This case raises fundamental issues about the principled development of
the law. The declaratory theory of the law which held that judges simply
reveal the law as it has always been, rather than change it, has long since
been abandoned. It was, in any event, an approach pertinent only to the
common law strictly so called. The law applied by courts of equity has neverbeen so confined.
7 In his classic lecture “Concerning Judicial Method” (Reprinted in Jesting
Pilate, Law Book Co, Australia 1965) Sir Owen Dixon identified what he
called (at 154) “the high technique of the common law” in the following way(at 158):
“It is one thing for a court to seek to extend the application of
accepted principles to new cases or to reason from the more
fundamental of settled legal principles to new conclusions or
to decide that a category is not closed against unforeseen
instances which in reason might be subsumed thereunder. It
is an entirely different thing for a judge, who is discontented
with a result held to flow from a long accepted legal
principle, deliberately to abandon the principle in the name of
justice or social necessity or of social convenience. The
former accords with the technique of the common law and
amounts to no more than an enlightened application of
modes of reasoning traditionally respected in the courts. It is
a process by the repeated use of which the law is developed,
is adapted to new conditions, and is improved in content. The
latter means an abrupt and almost arbitrary change.”
8 The orthodox approach to developing the law of equity has never been
more pithily stated than it was by Bagnall J in Cowcher v Cowcher [1972] 1WLR 425 at 430:
“I am convinced that in determining rights, particularly
property rights, the only justice that can be obtained by
mortals, who are fallible and are not omniscient, is justice
according to law; the justice which flows from the application
of sure and settled principles to proved or admitted facts. So
in the field of equity the length of the Chancellor’s foot has
been measured or is capable of measurement. This does not
mean that equity is past child bearing; simply that its
progeny must be legitimate – by precedent out of principle. It
is well that this should be so; otherwise no lawyer could
safely advise on his client’s title and every quarrel would leadto a law suit.”
9 The terminology of legitimacy was also employed by Deane J in
Muschinski v Dodds (1984-85) 160 CLR 583 at 615 where his Honour said:
“The fact that the constructive trust remains predominantly
remedial does not, however, mean that it represents a
medium for the indulgence of idiosyncratic notions of fairness
and justice. As an equitable remedy, it is available only when
warranted by established equitable principles or by the
legitimate processes of legal reasoning, by analogy,
induction and deduction from the starting point of a proper
understanding of the conceptual foundation of suchprinciples.”
10 Although the use of the word “legitimate” does beg the question to a J’s case the formulation is “by precedent out of principle”. Deane J refers to the processes of analogy, induction and deduction and the centrality of long established equitable principles.
certain degree (see M J Tilbury Civil Remedies Vol 1 Butterworths, Sydney,
1990, p11), each of the formulations of Bagnall J and of Deane J, which I
understand to be to the same basic effect as each other and that of Dixon
11 The application of the traditional judicial method for decision making – in
the way identified by Dixon CJ, Bagnall J and Deane J - is the principal
underpinning of the institutional legitimacy of the judicial function of
developing the law. Reasoning by analogy, induction and, deduction,
sometimes leads to a result which differs substantially from the pre-existing
understanding of the law. It is the process that is incremental, not
necessarily the result.
12 One mode of reasoning that is, in my opinion, incompatible with the
traditional common law judicial method – using “common law” in its broad
sense - is the identification of a principle at a high level of abstraction, fromwhich is derived a rule of particular application. Such an approach appears
to me to be at the heart of the reasoning of Palmer J and of the submissions
urged on this Court by the Respondent. The general principle appears to be:
Persons who go beyond merely breaching their obligations to others and act
in contumelious disregard of those obligations should be subject to condign
punishment. From that general principle there is to be deduced, with
respect to each specific field of the law of civil obligations, a rule
empowering the court to award “exemplary damages” to the party to whom
the obligations so breached were owed.
13 It is not, in my opinion, permissible in our system to identify a principle
at a high level of abstraction – as if contained in a code of general
application to civil obligations – and apply it to all aspects of the civil law.
The common law, again in the broad sense which includes equity - develops
from the bottom up, not from the top down (cf Richard A Posner,Overcoming Law, Harvard U.P., 1995, Chapter 5).
14 Our law is not based on a single code of civil obligations from which
specific rights and duties can be deduced. Our legal tradition is much
messier than that. Each of tort, contract and equity, constitute distinct
bodies of doctrine with their own history. There is an interaction between
each area of law and the lines are often blurred, but they remain distinctbodies of doctrine.
15 The separation of equity and common law is of greater strength in
Australian jurisprudence than appears to have become the case in other
nations with similar traditions, including Canada and, it appears, New
Zealand. This may be due to the force and influence of extra-judicial
writings on equity based on university lectures delivered by practitioners
who became judges, particularly Sir Frederick Jordan’s Chapters on Equity in
New South Wales, reprinted in Sir Frederick Jordan Select Legal Papers Legal
Books, Sydney 1983 and Meagher Gummow and Lehane’s Equity: Doctrines
and Remedies originally published in 1975. (The significance of the latter is
emphasised by Heydon JA in “The Role of the Equity Bar in the Judicature
Era“ in Geoff Lindsay (ed) No Mere Mouthpiece: Servants of All, Yet of None,Butterworths, Australia, 2002 at 80-81).
16 Australia, perhaps particularly New South Wales where the judicature
system was not adopted until 1970, has its own tradition in equity
jurisprudence based on these publications and the education of generationsof Australian lawyers.
17 Professor J H Baker has drawn attention to the significance of the of equity as a body of law in the common learning of the Australian legal community appears to be based on such a professional consensus. In such respects, differences between Australia and other jurisdictions with similar traditions may be expected to occur.
professional consensus of legal practitioners as a dimension of the legal
system distinguishable from formal sources of law, like reported cases and
statutes. (See J H Baker The Law’s Two Bodies: Some Evidential Problems in18 The heart of the “fusion fallacy” – as it has come to be called in Australia - is the proposition that the joint administration of two distinct bodies of law means that the doctrines of one are applicable to the other. That is no more true of equity and common law than it was and is true of tort and contract
within the common law context. That is not to say that one body of law does
not influence the other. It is only to say that they remain conceptuallydistinct.
19 In Norberg v Wynrib [1992] 2 SCR 226 at 272, in a passage quoted with then was, said:
approval in a four judge joint judgment of the High Court in Pilmer v Duke
“The foundation and ambit of the fiduciary obligation are
conceptually distinct from the foundation and ambit of
contract and tort. Sometimes the doctrines may overlap in
their application, but that does not destroy their conceptualand functional uniqueness.”
20 Equitable remedies, including equitable compensation have elements
that may be seen to be more punitive or deterrent than common law
remedies available in similar factual situations. This may occur, for
example, by reason of the application of different rules of liability, principles
of causation or tests for remoteness. The integrity of equity as a body of law
is not well served by adopting a common law remedy developed over time
in a different remedial context on a different conceptual foundation. The
fact that exemplary damages are awarded in tort is, in my opinion, not abasis for asking “Why not?” in equity.
Historical Continuity
21 One of the considerations relevant to any decision to develop law in a
particular direction is whether or not there have been relevant changes in
the economy and society which the law must serve. During the course of
argument I raised the issue whether the emergence, over recent decades,
of intangible property as a much more substantial proportion of the
community’s wealth is of this character. I have, however, concluded that
this is not a proper basis for development of the law with respect to thefiduciary relationship with which these proceedings are concerned.
22 The particular situation before the Court does not give rise to anything
novel. The exploitation by an employee of the relationship which
employment enables him or her to develop with an employer’s customers is
not a new phenomenon. There has been no relevant change in economic or
social circumstances.23 The fact that the relevant behaviour has occurred in the same kind of context over the course of centuries, without equity having developed a remedy of the character now urged on the Court, of itself indicates that the
Analogy with Tort or Contract?
exemplary damages are not recoverable for breach of contract. (See Butler
v Fairclough (1917) 23 CLR 78 at 89; Whitfeld v De Lauret & Co Limited
(1920) 29 CLR 71 at 81; Gray v Motor Accident Commission (1998) 196 CLR
1 at 6-7; Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 11028 The argument in this Court proceeded on the basis that in Australia be changed in this regard is a matter for the High Court.
29 In his judgment, Mason P poses the question of whether the
development of equity jurisprudence should proceed by way of analogy with
tort or by way of analogy with contract. It is not apparent to me that
analogical reasoning at this level of generality is appropriate. Each is a
distinct body of law with its own integrity.30 In Norberg v Wynrib, in which McLachlin J concluded that exemplary
damages could be awarded in equity, her Ladyship, consistently with her
earlier emphasis on the conceptual distinctiveness of different areas of the
law, was cautious in her references to analogy at this level of generality.
(See at 298: “Insofar as reference to tort principles may be appropriate …”
and “Quite apart from analogies with tort …”.)
contract and equity. This has the merit of consistency. However, in this, as
in a number of other fields, Canadian equity jurisprudence, perhaps under
the influence of United States law, has developed in a quite different way to
that of Australia. (See e.g. Breen v Williams (1996) 186 CLR 71 esp at 83,
94-95, 112-113, 137; Pilmer v Duke Corp at 194; Bodney v Westralia
Airports Corporation Pty Ltd (2000) 109 FCR 178 at 200-205; Sir Anthony
Mason “The Place of Equity and Equitable Remedy in the Contemporary
Common Law World” 1994 110 LQR 238 at 246-248; S Dorsett “Comparing
Apples and Oranges: The Fiduciary Principle in Australia and Canada after31 Canadian law acknowledges a power to award exemplary damages in and Access to Medical Records” 1995 17 Syd LR 433 esp at 439-443.)
32 In many respects Canadian fiduciary law has developed as an addition to
the law of tort. This has not happened in Australia. Canadian authorities on
equity must be treated with considerable caution. (The distinctiveness of
Canadian equity jurisprudence is highlighted by D Waters “The Reception of
Equity in the Supreme Court of Canada (1875-2000)” (2001) 80 Can Bar Rev
620; J Berryman “Recent Developments in the Law of Equitable Remedies:
What Canada Can Do For You” (2002) 33 VUWLR 51.)33 In his reasons for preferring the tort analogy, in my opinion, Mason P has
given insufficient weight to the historical development of the law of tort
which was closely connected with the development of criminal law. Many
torts constituted crimes and accordingly, civil litigation raised issues of
public interest, particularly involving a breach of the peace. In such a
context it was entirely appropriate that considerations of punishment and
deterrence arose in the context of actions in tort.34 As Windeyer J said in Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR
118 at 149-150:development of the law in a case of this kind is inappropriate.
24 The importance of historical continuity in equity was emphasised by
Viscount Simonds in Chapman v Chapman [1954] AC 429 at 444 where hisLordship said:
“… the range of [Equity’s] authority can only be determined
by seeing what jurisdiction the great equity judges of the
past assumed and how they justified that assumption … It
may well be that the result is not logical, and it may be asked
why, if the jurisdiction of the court extended to this thing, it
did not extend to that also. But, my Lords that question is as
vain in the sphere of jurisdiction as it is in the sphere of
substantive law. We are as little justified in saying that a
court has a certain jurisdiction, merely because we think it
ought to have it, as we should be in declaring that the
substantive law is something different from what it has
always been declared to be, merely because we think we
ought it to be so. It is even possible that we are not wiser
than our ancestors. It is for the legislature, which does not
rest under that disability, to determine whether there shouldbe a change in the law and what that change should be.”
25 Since his Lordship delivered that judgment, courts of appeal have
assumed the right to overrule their own decisions, but there remain
significant limits on the development of the law by judges. In my opinion,
the assertion for the first time of a power to make monetary awards of a
punitive character in equity transcends those limits in the context of
conduct that has been the subject of consideration over the centuries and,
to use Viscount Simonds phrase, “the great equity judges of the past” havenever seen the need for any such power.
26 This is not to say that nothing must be done for the first time It is to
acknowledge and respect the collective wisdom of our predecessors who,
with respect to disputes of a kind that have occurred many times, have
never felt the need to be able to award a monetary sum for the purpose ofpunishment, deterrence, denunciation or vindication.
27 There is no relevant precedent. Nor, save in one respect, is there any
process of deduction, induction or analogy by the application of a
permissible method of judicial reasoning which can lead to that result. Theexception is an analogy with the law of tort.
“Compensation is the dominant remedy if not the purpose of
the law of torts today. But fault still has a place in many
forms of wrongdoing. And the roots of tort and crime in the
law of England are intermingled. Some things that today are
seen as anomalies have roots that go deep, too deep for
them to be easily uprooted.”
35 As Heydon JA notes, with further references, there was no such historical
“intermingling” between crime and either contract or equity.
36 To the extent that reasoning by analogy at this level of generality is obligations in terms of ‘undertaking’ and ‘agreement’, albeit imputed by operation of law. Furthermore, I find the extra judicial writings of Finn J, one of Australia’s most significant scholars on fiduciary law, to be persuasive when he identifies an expectation interest on the part of a beneficiary and states it in terms reminiscent of contract law.
appropriate, I believe that the contract analogy is more appropriate.
37 In Hospital Products Limited v United States Surgical Corporation (1984)156 CLR 41 at 96-97 Mason J said:
“The accepted fiduciary relationships are sometimes referred gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.” [Emphasis added]
to as relationships of trust and confidence or confidential
relations … viz., trustee and beneficiary, agent and principal,
solicitor and client, employee and employer, director and
company, and partners. The critical feature of these
relationships is that the fiduciary undertakes or agrees to act
for or on behalf of or in the interests of another person in the
exercise of a power or discretion which will affect the
interests of that other person in a legal or practical sense.
38 This passage, including the phrases “critical feature” and “undertakes or
agrees to act”, was adopted in the joint judgment of Gleeson CJ, Gaudron
and Gummow JJ in Concut Pty Ltd v Worrell (2000) 75 ALJR 312 at [17] and
in the joint judgment of McHugh, Gummow, Hayne and Callinan JJ in Pilmer vDuke Group Ltd (In Liq) at [70].
39 In Hospital Products Mason J went on to emphasise the significance of the
contractual foundation for a fiduciary duty. His Honour said at p97:
“That contractual and fiduciary relationships may co-exist accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”
between the same parties has never been doubted. Indeed,
the existence of a basic contractual relationship has in many
situations provided a foundation for the erection of a
fiduciary relationship. In these situations it is the contractual
foundation which is all important because it is the contract
that regulates the basic rights and liabilities of the parties.
40 His Honour’s reference to the predominance of the contractual relationship may not fully acknowledge the flexibility of equitable intervention with contractual rights and obligations. This part of his
Honour’s reasons has not been cited with approval in either Concut v Worrell or Pilmer v Duke Group. Nevertheless, the significance of the contractual foundation for the fiduciary duty is not questioned.
41 As to the expectation interest, Lord Hoffman said in Co-operative
Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 at 15:
“… the purpose of the law of contract is not to punish
wrongdoing but to satisfy the expectations of the party
entitled to performance. A remedy which enables him to
secure, in money terms, more than the performance due tohim is unjust.”
42 A similar emphasis on ‘satisfying expectations’ has been adopted by Finn
J in his definition of a fiduciary relationship in terms of when one person is
“entitled to expect” another to act in his or her interests to the exclusion of
his or her own interests. (See P D Finn “The Fiduciary Principle” in T G
Youdan (ed) Equity, Fiduciaries and Trusts Carswell, Toronto, 1989 at 5, 46-
47; P D Finn “Fiduciary Law and the Modern Commercial World” in E
McKendrick (ed) Commercial Aspects of Trusts and Fiduciary ObligationsClarendon, Oxford 1992 at 9.
43 The fiduciary duties in the present case are derived from the existence of
the contract of employment. The “undertaking or agreement” of the
employees to act in the interests of the employer, and the employer’s
“entitlement to expect” that that will occur – imputed to the relationship by
equity - is much closer to a contractual relationship than it is to
circumstances creating obligations in tort. If argument by analogy of thiskind is appropriate, I prefer the contract analogy.
44 Where, as here, the essential basis of the fiduciary duties is a contractual
relationship this Court should not develop for the first time a remedy which
is not available in the law of contract. This analysis does carry with it the
corollary that the refusal to develop the law should be confined to cases of
the character now before the Court, as identified above. There may be othercases in equity in which a tort analogy is more appropriate.
Precedent
45 In terms of precedent, the Respondents case lacks any sure foundation. It is the absence of precedent that highlights the novelty of the proposition advanced. The Court is called upon to develop the law of equity by asserting
a power to make a punitive monetary award for the first time.
46 As both Mason P and Heydon JA conclude, the criminal jurisdiction
exercised by the Court of Chancery in the 16th or 17th centuries is
irrelevant to the issues which arise in the present proceedings.
47 I place no reliance on the occasional references to punishment or
deterrence in a number of equity judgments to which the Court’s attention
was drawn. None of these references indicate anything in the nature of a
principle that equitable remedies should be fashioned in order to impose
punishment or to maximise deterrence, whether general or specific, or forpurposes of denunciation or vindication.
48 The Respondent points to two particular areas in which equity has interest – on the authorities choosing between 3% and 5% - as an amount payable to a beneficiary whose funds have been used by the fiduciary for his or her own purposes and compounding interest at yearly rests. Heydon JA has analysed the relevant authorities. I wish to add two observations.
fashioned remedies with what could be characterised as penal
consequences. The first is the determination of just allowances for a
defaulting fiduciary, whose egregious behaviour is taken into account to
assess such allowances on a less liberal scale, or perhaps denied altogether.
49 The first thing to note about these lines of authority is that each is
concerned with the computation of a specific monetary amount on a basis
which is inherently susceptible to variation. There is no principled basis
upon which a rate of remuneration or a particular interest rate could be
adopted and applied. There is no single rate, or principle of computation,
which reflects what it was that the beneficiary has lost, or the fiduciary has
gained, by reason of the default. In each case there is a range of a
legitimate choice. In such contexts it is perfectly understandable that the
conduct of the fiduciary is a relevant consideration in determining where,
within the relevant range, justice between the parties indicates the choice
should be made. This process offers no analogy with the award of a
separate and discrete remedy, over and above any damage to thebeneficiary or profit to the fiduciary.
50 The second characteristic of these two lines of authority, which is
pertinent for present purposes, is that each involves a balancing exercise of
justice inter partes, i.e. between the fiduciary on the one hand and the
beneficiary on the other hand. What should the fiduciary receive, and
accordingly the beneficiary pay, as a “just” allowance for the skill exercised
by the fiduciary. Can, in all the circumstances, the fiduciary be heard to say
that amongst the interest rates he or she would hypothetically have earned
for the beneficiary across the spectrum of risk, if the money had been
properly applied, that he or she would have chosen a lower rather than a
higher interest rate? The authorities do not suggest that any public interestis engaged.
51 A punitive monetary award does not involve a balancing of rights and
interests between two parties. It involves the imposition of a burden upon
one party for purposes unrelated to the relationship between the parties. No
doubt in each case, i.e. when just allowances are assessed on the less
liberal basis or the hypothetical interest rate is computed on a higher basis,
the beneficiary receives an advantage by reason of the conduct of the
fiduciary being regarded as especially inappropriate. However in neither
case does the beneficiary receive an amount of money which bears the
characteristic of a windfall, and no other characteristic.
52 Equity is concerned with the conscience of both parties, so that a
balancing exercise is always required. This is an important principle, in the
sense that the word is used by both Bagnall J and Deane J. It is by reason of
a balancing process of what is just inter partes, that a subsidiary principle to
the effect that equity does not punish can be deduced, albeit not as a
principle that will be applied in a rigid way. (See esp Vyse v Foster (1872)LR 8 Ch App 309 at 333.)
53 On the one hand it is oppressive to impose burdens on a defaulting
fiduciary which go beyond any benefit that he or she has received or any
detriment suffered by the beneficiary. On the other hand it is not just for a
beneficiary to receive a benefit in the nature of a windfall not reflecting any
detriment suffered or benefit which the beneficiary ought to have received.
The pertinence of the unjust enrichment of a beneficiary as a restraint on
equitable remedies was emphasised in the joint judgment in WarmanInternational Ltd v Dwyer (1995) 182 CLR 544 at 561.
54 Nevertheless there are occasions on which some such effect may occur
as a result of the operation of equitable doctrine. For example when a
defence of lack of clean hands or laches is made out. However, there is no
example of equity providing a remedy on the sole basis of punishment,deterrence, denunciation or vindication as this Court is called upon to do.
55 The joint judgment in Lamb v Cotogno (1987) 164 CLR at 9-10
establishes that the purpose of exemplary damages is not limited to
punishment or deterrence. The Court identified two other objectives. First,
appeasement of the plaintiff, to “assuage any urge for revenge … and to
discourage any temptation to engage in self-help likely to endanger the
peace” (to which I refer as “vindication”). Secondly, “to mark the court’s
condemnation of the defendant’s behaviour” (to which I refer as
“denunciation”). Accordingly, in that case, the attenuation of the deterrent
effect by reason of the existence of a scheme of compulsory insurance didnot affect the power to award exemplary damages.
56 In his reasons for holding that “exemplary damages” were able to be
awarded in equity, Palmer J relied on the full range of purposes which had
been identified in Lamb v Cotogno. The traditional hostility of equity to
penalties is not a complete answer to the Respondent’s case. Nevertheless,
each of the purposes identified by the High Court is primarily, if not
exclusively, a public purpose. None, in my opinion, involve a balancing
exercise inter partes. The closest is the element of vindication but that, asexplained in Lamb v Cotogno is designed to preserve the peace.
Incompatibility
57 Another reason for rejecting the power to make a punitive monetary
award in a context in which fiduciary obligations arise because of the
existence of a contractual relationship of a particular character, is because
such an award would be incompatible with the principles applicable to the
contract both at common law and in equity. I particularly emphasise
incompatibility with equity, acknowledging that the “foundation and ambit”
of fiduciary obligation is “conceptually distinct” from that of contract. Issues
of incoherence, which, as Mason P notes, has emerged as a concern ofcontemporary jurisprudence, arise.
58 I hypothesise the existence of a contract with an express term to the
same effect as the order in this case: that the employer could recover, for a
relevant breach, either damages or an account of profits plus $10,000. It is
clear that the reference to $10,000 would be struck down as a penalty. The
only question is whether equity would refuse relief on a no clean hands
basis, because of the same contumelious conduct as would justify a punitivemonetary award.
59 On the present state of the authorities in Australia, a penalty provision is
of no legal effect from the time the contract is formed. This is a rule of law
so that “the equitable jurisdiction to relieve against penalties withered on
the vine”. (AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 191 per
Mason and Wilson JJ. See also at 176 per Gibbs CJ.) The effect is as PriestleyJA said in Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1 at 39:
“… any discretionary element in the granting of the equitable
relief against the enforcement of the penalty vanished.”
residual equitable jurisdiction remains. (See AMEV–UDC at 195-196; Jobson
v Johnson [1989] 1 WLR 1026 esp at 1040; Meagher Gummow & Lehane’s60 This line of authority is binding on the Court. There is a view that some However, nothing suggests that, in the case of a contract enforceable at common law, equity would intervene to override the application of the common law doctrine of penalties on the basis of egregious behaviour on the part of the person seeking to set aside the hypothetical term as a penalty.
61 On this basis, a punitive monetary award is incompatible with the law
relating to penalties in contracts of this character, in the sense that an
express provision in the precise terms of the court order in the present case
would be regarded as of no effect, both at law and in equity. The law should
not be developed in a way that such incompatibility arises.62 Orders 63 I agree with the orders proposed by Heydon JA. 64 MASON P: At issue is the Supreme Court's power to award exemplary
damages for breach of an “equitable” duty of fidelity.65 The duty is “equitable” in the limited sense that it traces its presumptive
pre-history to principles administered exclusively in the English Court of
Chancery before 1873. Assuming the duty could have been identified in
1823 it would nevertheless have been enforced by any judge of the
Supreme Court of New South Wales since the 1823 Charter of Justice. Since
federation it has formed part of the unified common law of Australia
(Lipohar v The Queen (1999) 200 CLR 485 at 505-6).66 The judgment of Palmer J addresses an important matter of principle. The granted.
67 The respondent Digital conducts an information technology business that includes Web design. The appellants Messrs Harris and Eden were employed in marketing and web design respectively. Commencing in December 1999, they worked secretly for the benefit of their own business, which was
incorporated as Juice-D Media Pty Ltd (Juice) on 27 January 2000. Using their
employment as a springboard they did projects for existing or potential
clients of Digital. In some cases those clients were charged a fee, being
invoiced by Juice. Mr Harris was dismissed on 4 February 2000 and Mr Eden
resigned the next day.68 Digital sued the employees for breaches of contract, fiduciary duty, duties under the Corporations Act 2001 and other obligations. Their company Juice was also sued for its knowing participation in their wrongful
conduct. 69 The prayers for relief included claims for compensation, account of
profits and exemplary damages.fiduciary duties of loyalty and that Mr Harris had additionally misused
confidential information with respect to an Advertising Strategy document.70 Palmer J held that the employees had breached their contractual and as well as producing unjustified gains for the appellants and their company. The losses were not exactly commensurate with the gains, although Juice's profits were used as one integer in the assessment of the sum due by way of compensation.
71 The judgment contained findings that enabled both equitable compensation and an account of profits to be calculated, but not completely. Compensation was to be calculated on the basis of determining
the gross amounts charged by Juice in the invoices it sent to the wrongly diverted customers and applying to those figures the profit margins that Digital would have realised had it carried out the work, less tax (Digital
Pulse Pty Ltd v Harris & Ors [2002] NSWSC 33, 40 ACSR 587 at [98]- [107]). The figure thus arrived would appear to be something less than
$10,000. In addition, Mr Harris was found liable to pay compensation in the
sum of $11,000 for his misuse of the confidential information.72 Alternatively, Digital was found entitled, at its election, to an account of
profits against the three defendants jointly and severally. (Exactly why all
three were liable in similar amounts is not explained.) These profits were to
be calculated on the basis of the gross profits actually received by Juice
from diverted projects, less provision for tax. The final orders disclose that
Digital elected to take the account of profits, calculated at $13,119.51.73 Leaving aside one minor matter, Palmer J next considered whether exemplary damages were appropriate, if available. He noted that the purposes of such damages were punishment, deterrence (both specific and
general) and amelioration of the victim's sense of grievance, thereby
abating the urge for self-help or violent retribution, to the danger of the
public peace (citing Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR
118 at 149 and Lamb v Cotogno (1987) 164 CLR 1 at 9 ). Later he spoke of
a threefold purpose of punishing the wrongdoer, deterring others of like
mind from similar behaviour, and vindicating the plaintiff’s outraged sense
of justice (at [132]-[133]).required (see at [173]), an award of exemplary damages which he fixed in
the sum of $10,000 against each employee. His reasons (at [118]-[140])
concluded that the employees acted with conscious dishonesty, in breach of
positions of trust and responsibility, and in a manner calculated to produce
harm to their employer and profit to themselves. The subversion of Digital's
business was carefully planned and clandestine. The employees' exultation
in their success demonstrated contumelious disregard of Digital's rights.74 His Honour held that the conduct of the employees merited, indeed Confidential information was misappropriated in the process and the employees had worked during Digital's time in the execution of their dishonest scheme. Palmer J concluded:
128. All of these circumstances, taken together, demonstrate deliberate wrongdoing for profit, in contumelious disregard of Digital’s rights, deserving of special condemnation and
punishment. To call a spade a spade, what Messrs Harris and namely, the business opportunities which should have been Digital’s, and by engaging in conduct in which they had no right to engage, namely, taking those opportunities for Juice in breach of their fiduciary and contractual duties of loyalty, Messrs Harris and Eden deprived Digital of its lawful rights, opportunities or advantages to derive business from the diverted projects. Both in a criminal court and in an equity court, the conduct of Messrs Harris and Eden bears the stigma of fraud….
Eden did was to defraud their employer of its valuable
business opportunities and its confidential information. …132 It is often said that the award of exemplary damages is “unusual and rare”: Coloca v BP (Australia) Pty Ltd [1992] 2 VR 441, at 448; Trend Management Ltd v Borg (1996) 40
NSWLR 500, at 509. But that is so because in the general run of cases it is unusual and rare to find that a defendant has been guilty of conscious wrongdoing in contumelious disregard of the plaintiff’s rights. It is in that sense alone that the remedy is exceptional: Gray v Motor Accident Commission at 9. Where the Court encounters a case of conscious wrongdoing in contumelious disregard of the plaintiff’s rights it must not shrink from expressing the community’s disapprobation of the wrongdoer’s conduct “in an emphatic and public way”: Gray at 34, per Kirby J. The Court must award exemplary damages to punish the wrongdoer, to deter others of like mind from similar behaviour, and to vindicate the plaintiff’s outraged sense of injustice.
134 In this case, although the damage inflicted on the of the Defendants’ dishonest conduct strikes at the heart of commercial integrity, upon which the business community, and ultimately the community as a whole, depends. Employers should feel able to entrust their business confidences to their employees with security. Employees should know that deliberate and dishonest breach of their fiduciary duties of loyalty, calculated to produce profit for themselves, will not go unpunished and that, at the end of the day, breach of those duties does not pay.
135 There is no doubt that the wrongdoing of Messrs Harris and Eden caused Mr Heil great distress. He says that when he discovered that his trusted employees had lied to him and
had diverted business opportunities to Juice, he felt betrayed. considered closing Digital down after five years of hard work. I accept that evidence. Mr Heil’s sense of injustice and outrage at the wrongdoing of Messrs Harris and Eden requires vindication by punishment of the wrongdoers.
75 His Honour also held that the employees’ actions would have been in clear breach of s232 (6) of the Corporations Law (now s182 (1) of the
Corporations Act 2001 (Cth)) were the appellants officers of the
respondent (a matter left undecided: see [131]).
76 The appellants do not dispute that it would have been open to award the exemplary damages had their breaches been of a different juridical nature.
77 Palmer J's reasons for concluding that it was open to him to award
exemplary damages for breach of fiduciary duty are set out at [141]-[172].
78 In summary, he recognised (at [151]) that Australian law did not permit
an award of exemplary damages for breach of contract (Gray v MotorAccident Commission (1998) 196 CLR 1 at 6). And he observed, correctly,
that the traditional view in Australia is that exemplary damages are
available only in tort or where expressly permitted by statute, and that they
cannot be awarded by a court of equity. There was no decided case upon
that point, however, and it was that issue which he had to consider (at [159]).
79 His Honour observed that the clear trend in recent English law was
opposed to a fixed list of tortious causes of action capable of carrying such
an award. He cited Kuddus v Chief Constable of Leicester [2002] 2 AC
122 where, with the exception of Lord Scott, their Lordships held that
exemplary damages served a valuable purpose in the law which precluded
confinement to a limited set of causes of action. More to the point, asPalmer J observed, Australian law had already arrived at this position in
Uren.
80 While acknowledging that these cases dealt only with tort, Palmer J held
that it was illogical and unprincipled to confine the remedy of exemplarydamages to tortious causes of action.
81 His Honour then turned to the specific question whether exemplary
damages were unavailable "in equity". He observed that academic opinion
was strongly divided. Reference was made to the decision of the NewZealand Court of Appeal in Aquaculture Corporation v New Zealand
Green Mussel Co Ltd [1990] 3 NZLR 299 where the majority (Cooke P,
Richardson, Bisson and Hardie Boys JJ) held that an award of such damages was an available option.
82 Palmer J cited 16th and 17th century cases in which Chancellors imposed
sentences of imprisonment, fines, the pillory and irons for wrongs such asforgery and perjury (see at [164]).
83 His Honour referred to account of profits as an instance of equitable
relief extending beyond compensation. And, in that context, he cited well-
known cases establishing that a defaulting fiduciary may receive a greater
or lesser allowance for work done depending upon the level of iniquity
involved. Palmer J also referred to the deterrent rationale for the basic
remedy of account as against a fiduciary, as expressed in an often cited
statement of James LJ in Parker v McKenna (1874) LR 10 Ch App 96 at124.
84 The nub of His Honour's reasoning is found at pars [168]-[170]:
168 In proposing that exemplary damages be available for
breach of fiduciary duty, breach of confidence and procuring
or assisting in a breach of fiduciary duty, the United Kingdom
Law Commission, in its Report No.247 “Aggravated,Exemplary and Restitutionary Damages” said at para.5.55:
“But despite the absence of English authorities for
awarding exemplary damages for an equitable wrong,
we can ultimately see no reason of principle or
practicality for excluding equitable wrongs from any
rational statutory expansion of the law of exemplary
damages. We consider it unsatisfactory to perpetuate
the historical divide between common law and equity,
unless there is a very good reason to do so. Professor
Waddams argues,… the availability of exemplary damages
should not be determined by classification of
the wrong as a common law tort or as a
breach of an equitable obligation …
Indeed, we can see good reason for allowing punitive damages to be recovered against, for example, the dishonest trustee who acts in breach of his fiduciary duty or the person who dishonestly abuses another’s confidence. Thus if, as we propose, punitive damages are awardable in respect of the (common law) tort of deceit, it would be anomalous if analogously wrongful conduct could not also give rise to an award, just because the cause of action originated in equity. Moreover, ‘deterrence’ is an aim that is not alien to courts of equity. For example it is a clear aim of the commonplace equitable remedy of an account of profits awarded for breach of fiduciary duty or breach of confidence.”
169 In my opinion, the present position in Australia can be summarised thus. There is no authority which decides that exemplary damages cannot, as a matter of principle, be
given by a court of equity for breach of fiduciary duty. attract an award of exemplary damages in an action in tort cannot attract exemplary damages if the cause of action is equitable creates an anomaly which, in this country, is not justifiable either by precedent or by principle.
170 Consistency in the law requires that the availability of manifest disapprobation of the community, where a punishment is called for to deter the wrongdoer and others of like mind from similar conduct and where something more than compensation is felt necessary to ameliorate the plaintiff’s sense of outrage, then it should make no difference in the availability of exemplary damages that the court to which the plaintiff comes is a court of equity rather than a court of common law.
exemplary damages should be coextensive with its rationale.
85 Finally, Palmer J drew support from the civil penalty provisions of the
Corporations Act which permit the court to inflict punishment for
breaches of that Act which in former times were cognisable only in equity.
Appellants’ Submissions on appeal
86 The appellants correctly submitted that this case is the first in Australia
in which exemplary damages have been awarded in equity. No English casehas made such an award (see Law Commission (UK) Report 247,
Aggravated Exemplary and Restitutionary Damages 1997 at 5.54).
87 The appellants drew attention to some of the overseas cases, including
Deterrent role of exemplary damages
462 Glover: Commercial Equity: Fiduciary Relationships, paragraph [6.129] has advanced the following argument in support of the award of exemplary damages in equity.
“Fiduciary obligations and their sanctions are expressed with several other restitutionary scholars.”
prophylactic vigour – in large part to deter the disloyal
fiduciaries at large. This is for the encouragement of others.
It is not to do justice between the parties. Accordingly, gains
that fiduciaries make may sometimes have to be accounted
for to beneficiaries, even though they are made honestly and
not at anyone’s expense. Where fiduciaries cause losses , the
prophylactic counterpart is exemplary damages. It is not
compensation. A thief cannot be deterred simply by being
required to return stolen goods whenever he or she is
caught. Thieving may then on the balance of probabilities be
a profitable business. For a corresponding reason, a fiduciary
cannot be deterred from cynically causing losses by the
prospect, in some cases, of being required to put the losses
right. More is needed. Fiduciaries who cause loss to a
beneficiary in a cynical, malicious or particularly
reprehensible manner need to be deterred in an exemplary
way. If this is accepted, then the ultimate rationale of a
fiduciary’s duty of loyalty is not restitution, or not only
restitution. It is prophylaxis as well. ‘A prophylactic rather
than a restitutionary principle underlies fiduciary duties, as
This too is an argument for changing the law. It is not reasoning which identifies the desired conclusion within the law as it stands.
Further reasons against judicially-induced change
Modern statutes
463 The lack of favour shown to exemplary damages by Parliament in modern statutes is important in three ways. First, it suggests that any anomalies created by the present law in relation to exemplary damages are
not seen by Parliament as grounds in themselves for widening exemplary extend the power to award exemplary damages is a sign that the question of whether exemplary damages should be awarded in equity is one better dealt with by the legislature than by this Court.
damages. Secondly, if exemplary damages were henceforth to be granted in
equity, fresh anomalies might be created by reason of the difference
between a widened equitable position and a narrow statutory position.Law Reform Commissions
464 The fact that in England (Aggravated, Exemplary and Restitutionary (Report on Exemplary Damages (1991) p 74) Law Reform Commissions have recommended that punitive damages for equitable wrongs be introduced by legislation – recommendations which are entirely, of course, within their rights and acceptance of which by the appropriate legislatures is entirely within their rights – does not point against the conclusion either that equitable damages are not available as a matter of the current law or that they ought not to be introduced into the law by this Court. Indeed, the fact that so far as English law is concerned the Law Commission has seen it as necessary to recommend their legislative introduction supports the view that they are not part of the current law. And the fact that in Ontario the Law Reform Commission saw it as necessary to clarify the current law, as it then stood, supports the view that it was not as clear as the plaintiff in this case would have it. Similarly, the fact that both Commissions thought it necessary to recommend particular legislation is a sign that in a field of this kind, parliamentary legislation is the appropriate kind of legislation to adopt if the High Court is disinclined to intervene.
Legal regulation of commerce
465 It is often said that equitable doctrines apply to commercial affairs
more than they did in the past. If so, to grant exemplary damages for
breach of equitable duty would tend to conflict with other key bodies of law
regulating commercial affairs – the law of contract, the Trade Practices Act
and the Corporations Act. Exemplary damages are not available for breach
of contract, for contraventions of the Trade Practices Act or for
contraventions of the Corporations Act.
Consequences of election rules
466 A plaintiff able to establish an equitable wrong such as a breach of
fiduciary duty who can establish both that the breach has caused loss and
that the wrongdoer has made a gain is not entitled both to equitable
compensation and to an account of profits. It is necessary that an election
be made between them. At common law exemplary damages are not
recoverable unless actual damages are also recovered. If exemplary
damages are recoverable in equity, does it follow that a plaintiff who elects
against equitable compensation and in favour of an account of profits is
debarred from receiving exemplary damages? Or is it possible to claim both
an account of profits and exemplary damages? This was not an issue with
which the trial judge had to deal, because in relation to some wrongs the
plaintiff elected for, and obtained, equitable compensation, while in relation
to others, it elected for, and obtained, an account of profits. This problem
need not be resolved, but it illustrates how the change in the law which the
plaintiff calls for is not merely incremental and does not involve merelyselecting from an available range of existing remedies.
Double punishment
467 If there is in truth a deterrent or punitive element in existing equitable
remedies and the court adopts the practice of awarding exemplary
damages as well, there will be difficulties in ensuring that the defendant is
not punished twice.Change in the nature of property
468 Whether the nature and scale of intangible property and the
possibilities of its being damaged have changed so much as to justify the
grant of exemplary damages as a remedy is a policy question. Subject to
any role which the High Court considers is open to it, policy questions are
primarily for resolution by democratically elected politicians. Accordingly,
policy questions of that kind have no materiality at least on the particularissue before this Court.
Balance of defendants’ arguments
469 In view of the undesirability of this Court embarking on a course of seeking to change the law, the arguments advanced by the defendants against that course need not be considered. Nor is it necessary to consider
the intense controversies which have taken place about whether even at
common law exemplary damages should be narrowed or widened, though
the existence of these controversies highlights the inappropriateness of thisCourt attempting to change the law.
Conclusion on exemplary damages in equity
470 There is no power in the law of New South Wales to award exemplary damages for equitable wrongs. But a narrower proposition suffices for the purposes of deciding this case. There is no power in the law of New South Wales to award exemplary damages for equitable wrongs of the type
involved in the circumstances of this case. No English or Australian authority South Wales so as to create power to do so. Nothing in the authorities or the commentaries suggests why it should or why this Court has power to. In short, equity does not bear the same relationship to the instinct for revenge as the institution of marriage does the sexual appetite.
supports it. There is no convincing reasoning in New Zealand, Canadian or
If the jurisdiction exists, should it have been exercised?
471 In view of the conclusion just stated that the jurisdiction does not exist,
it is not necessary to deal with the defendants’ arguments on this point
beyond saying that the defendants’ primary argument, that exemplary
damages should be reserved to the most unusual cases, and the present
case was not at all unusual, is unattractive. If the conduct engaged in by the
defendants is common, there is much to be said for the most vigorous
exercise of whatever judicial powers there are to deal with it, and nothing to
be said in criticism of what the trial judge did in this case.
Costs
472 Part 52A rule 33(2) provides:
“Where - …
(f) in proceedings commenced after 1 October 1997, where a
plaintiff recovers:
…
(ii) … a sum not more than $225,000,
the plaintiff shall not be entitled to payment of his or her
costs of the proceedings unless, it appearing to the Court
that the plaintiff had sufficient reason for commencing or
continuing proceedings in the Court, the Court makes an
order for payment.”
The trial judge found a “sufficient reason” in the view that it was appropriate for the proceedings to be started in the Supreme Court rather than any other court because of “the difficulty and novelty of the question whether exemplary damages for breach of fiduciary duty can be awarded by a court in Australia”.
473 The defendants advanced two arguments in relation to the costs of the
trial. The first was that the plaintiff had no sufficient reason to initiate
proceedings in the Supreme Court. The second was that the costs order was
erroneous, whether or not the trial judge was correct about exemplary
damages, because the trial judge had failed to give weight to the extreme
lack of success of the plaintiff. It had claimed hundreds of thousands ofdollars and recovered but a small fraction of what was sought.
474 The trial judge recorded a concession by counsel appearing for the
defendants before him “that the novelty and difficulty of the question as to
whether exemplary damages can be awarded for breach of an equitable
duty warranted the proceedings being commenced in the Supreme Court
rather than in the District Court or the Local Court”. In the light of that
concession, it is not open to attack the trial judge’s conclusion. In any event,
while there may be some difficult and novel questions the answer to which
is so plain that the existence of the question would not amount to a
“sufficient reason” within the meaning of the rule, that cannot be said of the
present question. While the answer to the question is plainly in the
negative, the length and difficulty of the arguments advanced to this Courtindicate that it was a question deserving examination.
475 The trial judge’s costs order was justifiable, and should not be altered
even though the exemplary damages awards are to be set aside. The claim
was for about $500,000. The plaintiff had reason to distrust the first and
second defendants, each of whom had lied to him. Persons of that
character, to the perception of the plaintiff, might well have concealed
matters which could be exposed to light in litigation. The plaintiff alleged a
diversion of ten specific business opportunities. The plaintiff only
established that six were wrongfully diverted. In relation to one of these
there was no loss to the plaintiff or profit to the defendants. But it was not
unreasonable for the plaintiff to hope for a better outcome. The plaintiff did
have expert accounting evidence quantifying the damages in the range
$391,554-$587,953. Even if, as the trial judge found, that quantification was
wildly optimistic, it cannot be inappropriate for a plaintiff in these
circumstances to commence proceedings in the Supreme Court where the
issues involve difficult legal questions such as breach of fiduciary duty, the
contractual duty of loyalty, the quantum of actual compensation and the
amounts recoverable on accounts of profits. The Equity Division is far better
equipped than the District Court to consider these questions. All the judges
of the Equity Division are extremely experienced in relation to issues of that
kind, and few District Court judges are. Further, much of the trial was
devoted to a fight on liability, and though the defendants gave in on that
question, they only did so at the end of the trial.
476 In all the circumstances the costs orders of the trial judge should not bedisturbed.
477 The next question that arises relates to the costs of the appeal. The other hand, the appellants have achieved success to the extent of $20,000 in relation to exemplary damages. Very much the bulk of time in argument was taken up in relation to the question of exemplary damages. Balancing the large amount of time spent on exemplary damages against the very small extent to which the appellants enjoyed success, and taking into account the deplorable behaviour of the defendants which made the proceedings necessary, it seems just that there be no order as to the costs of the appeal, that is, each side will bear his or its own costs. That position, which is highly favourable to the plaintiff, results from the highly special circumstances of the present case.
sum in dispute in relation to costs was said to be of the order of $200,000.
Orders
478 The following orders are proposed.
1. Leave to appeal is granted.
2 The appeal is allowed in part.
3. Orders 6 and 7 of the trial judge are set aside.
4. No order is made as to the costs of the appeal.
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Last Modified: 02/10/2003
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