Couch v Attorney-General (No 2)
[2010] NZSC 27
•24 March 2010
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IN THE SUPREME COURT OF NEW ZEALAND
SC 49/2006
[2010] NZSC 27BETWEENSUSAN COUCH
Appellant
ANDTHE ATTORNEY-GENERAL
Respondent
Hearing:23 March 2009
Court:Elias CJ, Blanchard, Tipping, McGrath and Wilson JJ
Counsel:B P Henry for Appellant
D B Collins QC Solicitor-General, J C Pike and R Kirkness for Respondent
Judgment:24 March 2010
JUDGMENT OF THE COURT
AThe appeal is allowed for the reasons given in this judgment and that of 13 June 2008.
BThe order of the Court of Appeal is set aside and the proceedings are remitted to the High Court for hearing.
CThe respondent is to pay to the appellant costs of $27,500 together with reasonable disbursements as fixed by the Registrar. Costs in the lower Courts are to be fixed by those Courts in the light of this Court’s judgment.
REASONS
Para No
Elias CJ [1]
Blanchard J [45]
Tipping J [73]
McGrath J [181]
Wilson J [248]
ELIAS CJ
[1] In 2002 the Privy Council in Bottrill v A held:[1]
[U]nder the common law of New Zealand the Court’s jurisdiction to award exemplary damages in cases of negligence is not rigidly confined to cases where the defendant intended to cause the harm or was consciously reckless as to the risks involved.
[1]Bottrill v A [2002] UKPC 44, [2003] 2 NZLR 721 at [63] per Lord Nicholls, Lord Hope and Lord Rodger; Lord Hutton and Lord Millett dissenting.
In the present appeal the Supreme Court overrules that decision and reinstates the view of the Court of Appeal in Bottrill.[2] I dissent from the conclusion. It re‑introduces a “cause of action” condition for exemplary damages despite earlier rejection in New Zealand, Australia, and Canada of similar attempts in the United Kingdom at such restrictions as unprincipled and arbitrary. It requires construction of a “species of negligence”[3] in which intention or conscious recklessness is an element, in order to exclude a remedy of otherwise general application once liability in tort is established. The restriction is justified on the basis that exemplary damages are “anomalous”. Such assessment rests in part on the erroneous but persistent view that making an example of the defendant is not a proper function of the law of torts. That view has been accurately characterised as question-begging.[4] It is unhistorical[5] and was rejected in New Zealand by all members of the Court of Appeal in Taylor v Beere.[6]There, by rejecting confinement of exemplary damages to categories, the Court of Appeal affirmed that they are awarded under a principle of general application.
[2]Bottrill v A [2001] 3 NZLR 622 (CA) per Richardson P, Gault, Blanchard and Tipping JJ; Thomas J dissenting.
[3]As it was described by the Solicitor-General in argument and as adopted by Tipping J at [75].
[4]By Lord Wilberforce in Broome v Cassell & Co Ltd [1972] AC 1027 (HL) at 1114; and Cooke P in Re Chase [1989] 1 NZLR 325 (CA) at 332–333. See Urenv John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 130–131 per Taylor J and at 149–150 per Windeyer J. And see Nicholas McBride “Punitive Damages” in Peter Birks (ed) Wrongs and Remedies in the Twenty‑First Century (New York, 1996) 175, who says at 195 that it is “a conclusion masquerading as an argument”.
[5]As described by Taylor J and Windeyer J in Urenv John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 136–139 and 152–153.
[6]Taylor v Beere [1982] 1 NZLR 81 (CA) at 85 per Cooke J; at 90 per Richardson J; and at 95 per Somers J; see also Cooke J in Donselaar v Donselaar [1982] 1 NZLR 97 (CA) at 106.
[2] All members of this Court are in agreement that exemplary damages are available in negligence and are not confined to the intentional torts, rejecting the high ground on which the Attorney-General sought to justify strike out of the proceedings. The majority imposes however the precondition of subjective recklessness proposed by the majority in the Court of Appeal in Bottrill but rejected by the Privy Council. This “species of negligence” arises where the defendant consciously appreciates the risk of causing harm and deliberately runs that risk.[7] Such subjective recklessness was described by Tipping J in his concurring opinion in the Court of Appeal Bottrill as achieving “a policy synthesis with the intentional tort approach”,[8] at least for personal injury cases.[9]
[7] See Tipping J at [100]–[101].
[8]At [173].
[9]Although this case concerns personal injury, as other members of the Court acknowledge, their reasoning is equally applicable to all cases of negligence. See Blanchard J at footnote 172 at [68]; Tipping J at [178]; McGrath J at [246]; and Wilson J at [259].
[3] The arguments for and against the position now adopted in this Court were rehearsed at length in the judgments in the Court of Appeal and the Privy Council in Bottrill. I am in agreement with the reasons given by Thomas J, dissenting in the Court of Appeal, and by Lord Nicholls, delivering the majority judgment of the Privy Council. It would be superfluous to repeat them. I concentrate, rather, on the reasons why I am unable to agree with the revision undertaken by the other members of this Court, both in terms of the substance of the argument and in terms of the occasion for departing from a recent decision of high authority.
[4] In summary, I would decline to impose as a matter of law a precondition for the award of exemplary damages that the defendant must consciously run the risk of harm to the plaintiff. Such precondition restricts the general exemplary jurisdiction to mark society’s condemnation of outrageous behaviour by the defendant which is insufficiently addressed by other remedy, and is contrary to the general application of the exemplary principle recognised in Taylor v Beere. It treats the occasion for exemplary damages in negligence as depending on conscious appreciation of the harm likely to be suffered by the plaintiff rather than as arising more broadly out of the conduct of the tortfeasor and despite foreseeability of harm not being an element of the cause of action in negligence. It saps the vitality of the exemplary principle in meeting the needs of modern New Zealand society, and turns on the creation of a subcategory of the tort of negligence on no sound basis. These points are addressed in what follows under headings which reflect this summary. I deal first however with suggestions that Bottrill represents a deviation and is out of step with other Commonwealth jurisdictions.
[5] In addition, I consider there is no sufficient basis on which to depart from New Zealand decisions of recent and high authority in Taylor v Beere and Bottrill. No occasion to reassess the decision of the Privy Council in Bottrill arises on the basis of any misunderstanding about the operation of New Zealand’s accident compensation system[10] because the statutory scheme operates outside the exemplary principle, as was made clear in Donselaar v Donselaar.[11] Since the requirement of subjective recklessness imposed by other members of this Court is not confined to cases of personal injury, reliance upon the New Zealand accident compensation system as justifying the restriction[12] is perhaps surprising. “Floodgates” concerns[13] are not substantiated and seem inconsistent with legislative endorsement of the exemplary principle.[14]
[10] Compare Tipping J at [108]; and see McGrath J at [212].
[11]Donselaar v Donselaar [1982] 1 NZLR 97 (CA). This is further explained below at [29].
[12]See Blanchard J at [67]; Tipping J at [96]; McGrath J at [240]–[241]; and Wilson J at [252].
[13]Described by Blanchard J at [66] and Tipping J at [135].
[14]As further explained below at [30].
[6] Moreover, the preliminary hearing in the present case was not appropriate for reconsideration of the approach in Bottrill.[15] This case concerns a more complex setting of statutory responsibilities and vicarious liability, against a background of incomplete pleadings, and without factual context. The dangers are illustrated by statements which bear on the question of vicarious liability,[16] on which we heard no argument and which (because of the admission of vicarious liability) is not in issue. I develop the view that the appeal is not suitable for reconsideration of Bottrill notwithstanding that the point is effectively overtaken by the judgment of the majority on the substantive point, because of the importance of consideration of the circumstances in which it is proper for this Court to decline to follow a decision of its own or of the Privy Council on appeal from New Zealand. The claim for exemplary damages should in my view be allowed to proceed. Any questions of law that remain in contention after trial will then be considered after the facts have been found. Since the plaintiff has indicated that she will plead conscious recklessness, the course here adopted by the Court will not save the parties the expense of trial.
[15]For reasons explained below at [32]–[41].
[16]See Tipping J at [158]–[161].
[7] I write separately only on the Bottrill point. I agree with the reasons given by Tipping J for holding that s 317 of the Accident Compensation Act 2001[17] is no bar to a claim for exemplary damages for personal injury. And I agree with the reasons he gives for holding that no immunity for the Crown can be derived from s 86 of the State Sector Act 1988, a most unlikely source for such sweeping immunity which would clash not only with the purpose of s 6(1) of the Crown Proceedings Act 1950 but also with s 27(3) of the New Zealand Bill of Rights Act 1990. I agree with Tipping J that the immunity s 86 confers is in respect of internal responsibilities within the Executive, reorganised under the State Sector Act, and does not provide an immunity for government employees from primary tortious liability.
Background
[17]The Act formerly entitled the Injury Prevention, Rehabilitation, and Compensation Act 2001.
[8] Susan Couch was the victim of a serious attack by a parolee under the supervision of the Probation Service. She brings a claim in the High Court against the Attorney-General seeking exemplary damages for failure by the Service to exercise reasonable care in the parolee’s supervision. The proceedings were struck out in the Court of Appeal on the grounds that the claim in negligence could not succeed because no duty of care was owed by the Probation Service to Ms Couch.[18] That result was reversed by this Court in its judgment of 13 June 2008.[19] We held that a duty of care cannot confidently be excluded as a matter of law on a preliminary basis and will turn on the facts found at trial. An alternative ground for strike-out, that exemplary damages are not available for a claim in negligence for personal injury in New Zealand (a ground that the Court of Appeal did not have to consider because of the view it took that there was no duty of care), was not reached at the earlier hearing in this Court. The appeal was accordingly adjourned for further argument, and the claim was not formally reinstated pending determination of the alternative ground.
[18]Hobson v Attorney-General [2007] 1 NZLR 374 (CA).
[19]Couch v Attorney-General (on appeal from Hobson v Attorney-General) [2008] NZSC 45, [2008] 3 NZLR 725.
[9] The parties were invited by the judgment of 13 June 2008 to reconsider whether they wished to pursue the additional basis for strike-out ahead of trial, in the light of the discussion in the judgment of the principles upon which strike-out is available. At a directions hearing to consider whether the availability of exemplary damage was suitable for determination as a point of law before trial, counsel for the Attorney-General indicated that the arguments at the resumed hearing would be that s 317 of the Accident Compensation Act 2001 is a bar to the claim and that, in addition, exemplary damages are not available for the tort of negligence. The first argument entailed reconsideration of the decision of the Court of Appeal in Donselaar (which counsel for the Attorney-General suggested was to be distinguished because the cause of action there was in trespass). The second was contrary to the assumption upon which Bottrill was argued in the Court of Appeal and Privy Council. (The disagreement in that case turned on the further question whether exemplary damages for the tort of negligence could be awarded only in cases of intention or advertent recklessness.) As had been foreshadowed at the first hearing before us,[20] counsel advised that, if unsuccessful in these strike-out points, the Attorney-General would take the position at trial that exemplary damages would not be appropriate if the Probation Service was unaware of the risk of harm to Ms Couch, thereby inviting the court at trial to exclude on the facts the possibility left open as a matter of law by the Privy Council in Bottrill. That would not have precluded a challenge to Bottrill post trial to this Court should exemplary damages have been awarded on findings of fact that the Probation Service had not been conscious of the risk to Ms Couch.
[20]And recorded in footnote 11 of my reasons for that judgment.
[10] It was accepted at the directions hearing in this Court that the points concerning the effect of s 317 of the Accident Compensation Act 2001 and the availability of exemplary damages for the tort of negligence were points of law suitable for determination ahead of the facts. The first is a question of statutory interpretation. The second takes the high ground that exemplary damages are not available for this tort, a conclusion that depends on acceptance of “hardening of the categories”.[21] If the Attorney-General were successful in either of these arguments, the claim would properly be struck out as disclosing no cause of action. The two points were accordingly set down for argument at a resumed hearing.
[21]Williams and Hepple consider this condition to be “one of the worst that can afflict a legal system”: Glanville Williams and BA Hepple Foundations of the Law of Tort (London, 1976) at 28.
[11] At the hearing, the argument that exemplary damages are not available for negligence at all was not greatly developed by counsel for the Attorney-General. Instead, counsel argued that the Privy Council decision in Bottrill was wrong. With hindsight, I consider it would have been preferable to have adhered to the approach envisaged at the directions hearing and to have declined to hear counsel on the Bottrill argument. For reasons developed further below, it is my view the reconsideration of Bottrill was not suitable for determination before trial. I remain of that view notwithstanding the arguments addressed to us.
Bottrill is consistent with previous New Zealand law and not shown to be inconsistent with Australian and Canadian law
[12] It is necessary to say immediately that I am unable to agree with suggestions that the present decision restores New Zealand law to a path from which the Privy Council decision in Bottrill caused it to deviate and brings New Zealand law “back into line with that of Australia and Canada”.[22]
[22] As Tipping J suggests at [171].
[13] First, the application of an established principle of general application to new circumstances is not deviation. That would be to treat application of exemplary principle as restricted to the categories of case in which it has formerly been applied, the position rejected by Taylor v Beere in 1982 in New Zealand. Indeed, on any view, Bottrill in both the Court of Appeal and the Privy Council was novel application of the principle because the availability of exemplary damages for negligence had not previously been upheld by an appellate court in New Zealand. It was however unexceptional because the application of general principle to the circumstances of the particular case is the method of the common law. What was exceptional was the limitation of the general principle by the Court of Appeal’s requirement that it applies in negligence only where harm results from conscious assumption of risk. The decision on the present appeal is similarly bold because it overthrows Taylor v Beere’s rejection of the reasoning on exemplary damages in Rookes v Barnard[23] and Broome v Cassell & Co Ltd.[24] In Rookes v Barnard the House of Lords came close to abolishing exemplary damages altogether, as Lord Reid made clear in the subsequent case of Broome v Cassell[25] (in which the House of Lords crushed rebellion by a strong Court of Appeal[26] to maintain the restrictions on exemplary damages introduced by the categories described in Rookes v Barnard). Since then, however, belief in the utility of the exemplary principle has been remarked upon judicially in New Zealand,[27] the United Kingdom,[28] and Canada.[29] In Canada, the United Kingdom and Ireland law reform projects have confirmed the usefulness of exemplary damages.[30] In Canada, exemplary damages are available to respond to outrageous conduct by the defendant in cases of contract and for breach of fiduciary obligations as well as across all torts.[31] In New Zealand, legislation has recognised such damages.[32] It is therefore surprising to see in the present case arguments for restriction of the exemplary principle developed from judicial reasoning in Rookes v Barnard and Broome v Cassell which start from the view that such damages are anomalous and to be strictly confined by judicially created categories.[33]
[23]Rookes v Barnard [1964] AC 1129 (HL).
[24]Broome v Cassell & Co Ltd [1972] AC 1027 (HL).
[25]At 1087.
[26] Broome v Cassell [1971] 2 QB 354 (CA) per Lord Denning MR, Salmon and Phillimore LJJ.
[27]Taylor v Beere at 91 per Richardson J.
[28]Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122 at [63] per Lord Nicholls.
[29]Whiten v Pilot Insurance Co 2002 SCC 18, [2002] 1 SCR 595 at [37] per McLachlin CJ and L’Heureux-Dubé, Gonthier, Major, Binnie, and Arbour JJ; LeBel J dissenting.
[30]Ontario Law Reform Commission Report on Exemplary Damages (1991); Law Commission for England and Wales Aggravated, Exemplary and Restitutionary Damages (LC247, 1997); Irish Law Reform Commission Report on Aggravated, Exemplary and Restitutionary Damages (2000).
[31]Whiten v Pilot Insurance Co 2002 SCC 18, [2002] 1 SCR 595 at [67] per McLachlin CJ and L’Heureux-Dubé, Gonthier, Major, Binnie, and Arbour JJ; LeBel J dissenting.
[32]Accident Compensation Act 2001, s 319.
[33]See Tipping J at [136]–[143].
[14] Secondly, I do not think it can be said that the position preferred in this case by the majority brings New Zealand law into line with the common law of Canada or Australia. The final appellate courts in those jurisdictions have not yet been called upon to decide whether conscious appreciation of the risk to the plaintiff is a precondition of an award of exemplary damages in negligence. But their refusal to accept the restricted categories suggested in Rookes v Barnard suggests that further categorisation is likely to be subject to searching scrutiny.[34]
[34]See Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 and Vorvis v Insurance Corporation of British Columbia [1989] 1 SCR 1085.
[15] In Australia there are judgments which refer with apparent approval to the Privy Council approach. The reasons of Kirby J in the High Court of Australia in Gray v Motor Accident Commission[35] (with which the majority did not express disagreement) and the judgment of Spigelman CJ in the Court of Appeal of New South Wales in State of New South Wales v Ibbett[36] (which was not on this point directly addressed by the High Court) indicate the view that awards of exemplary damages should not be confined to cases where the defendant intended to cause harm or was consciously reckless as to the risks involved. Kirby J in Gray considered that exemplary damages were available “whatever the subjective intention of the tortfeasor if, objectively, the conduct involved was high-handed, calling for curial disapprobation addressed not only to the tortfeasor but to the world”.[37] In Gray (where the question whether conscious recklessness is a condition for exemplary damages in negligence did not have to be resolved) the majority of the High Court considered that “‘conscious wrongdoing in contumelious disregard of another’s rights’ describes at least the greater part of the relevant field”,[38] a position consistent with the approach of the Privy Council in Bottrill. In the High Court in New South Wales v Ibbett,[39] it is the case that in a footnote[40] the Court indicated that it considered the views of the Privy Council in Bottrill and the Supreme Court of Canada in Whiten v Pilot Insurance Co[41] were to be contrasted with the statement in Gray that “there can be cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiff or persons in the position of the plaintiff”.[42] And it may be that the position in Australia in relation to negligence will yet move to requiring subjective recklessness in the sense of conscious assumption of risk of harm to the plaintiff. The Court of Appeal in New South Wales in State of New South Wales v Delly,[43] a decision decided after Ibbett, was however prepared to allow that subjective advertence to harm is not always necessary for an award of exemplary damages. But neither Ibbett nor Delly were cases where the cause of action was in negligence.[44] Further cases in Australia will no doubt require consideration of the general approach indicated by the High Court in Lamb v Cotogno[45] that exemplary damages express the Court’s condemnation of objectively reckless behaviour.[46] Lamb v Cotogno suggests that callousness provides sufficient justification for exemplary damages.[47] As things stand, it is drawing a rather long bow to maintain that the present decision brings New Zealand law into line with Australian law.
[35]Gray v Motor Accident Commission [1998] HCA 70, (1998) 196 CLR 1.
[36]State of New South Wales v Ibbett [2005] NSWCA 445, (2005) 65 NSWLR 168 at [40]–[44].
[37]At [86].
[38]At [14].
[39]New South Wales v Ibbett [2006] HCA 57, (2006) 229 CLR 638.
[40]Footnote 47.
[41] Whiten v Pilot Insurance Co 2002 SCC 18, [2002] 1 SCR 595.
[42]At [22].
[43]State of New South Wales v Delly [2007] NSWCA 303, (2007) 70 NSWLR 125 at [91] per Tobias JA and at [115] per Basten JA. In another decision of that Court, Port Stephens Shire Council v Tellamist [2004] NSWCA 353, (2004) 135 LGERA 98, Ipp JA at [402] considered that exemplary damages could be appropriate “where the conduct of the defendant is neither malicious nor conscious wrongdoing”.
[44]Ibbett arose out of trespass to land and assault; Delly was a case of unlawful arrest.
[45]Lamb v Cotogno (1987) 164 CLR 1.
[46]A point made by Spigelman J in the New South Wales Court of Appeal in Ibbett at [41].
[47]At [21].
[16] In Canada, the principal recent Supreme Court cases concerning exemplary damages have not arisen in negligence but in employment contracts. In Whiten, however, Binnie J (for himself and McLachlin CJ, L’Heureux-Dubé, Gonthier, Major and Arbour JJ) reviewed the purpose of exemplary damages more generally. Punitive damages were available to exact “retribution, deterrence and denunciation”[48] for “misconduct that represents a marked departure from ordinary standards of decent behaviour”.[49] They provided a “socially useful service” because only the plaintiff can be expected to invest the legal costs to establish that the defendant “behaved abominably”.[50] After reviewing the comparative position in England, Australia, New Zealand, Ireland and the United States, Binnie J concluded “the attempt to limit punitive damages by ‘categories’ does not work and was rightly rejected in Canada in [Vorvis v Insurance Corporation of British Columbia [1989] 1 SCR 1085 at 1104-1106] ...”:[51]
The control mechanism lies not in restricting the category of case but in rationally determining circumstances that warrant the addition of punishment to compensation in a civil action. It is in the nature of the remedy that punitive damages will largely be restricted to intentional torts, as in Hill, or breach of fiduciary duty as in M (K) v M(H), but Vorvis itself affirmed the availability of punitive damages in the exceptional case in contract. In Denison v Fawcett, the Ontario Court of Appeal asserted in obiter that on proper facts punitive damages would be available in negligence and nuisance as well. In Robitaille v Vancouver Hockey Club Ltd, the British Columbia Court of Appeal awarded punitive damages in a negligence case on the principle that they ought to be available whenever “the conduct of the defendant is such as to merit condemnation by the Court”. This broader approach seems to be in line with most common law jurisdictions apart from England.
[48]At [43].
[49]At [36].
[50]At [37].
[51]At [67] (citations omitted).
[17] The apparent approval with which Robitaille[52] is cited by the Supreme Court of Canada does not suggest insistence on conscious assumption of risk as a precondition for exemplary damages for breach of a duty of care under an employment contract. In that case the defendant hockey club believed that the player had psychological, not physical problems and so was not subjectively aware of the risk it exposed him to in requiring him to play. It was liable for exemplary damages when he was permanently disabled. In Whiten the Supreme Court appears to adopt the “broader approach” that exemplary damages are available whenever the conduct of the defendant merits condemnation, while acknowledging that “it is in the nature of the remedy” that intentional wrongdoing will usually be required.[53] Later references in Whiten to the intent and motive of the defendant,[54] referred to by Tipping J as “intentional elements” at [167], do not detract from the general approach and are part of a list of factors relevant to assessing the level of damages. They do not suggest that objective recklessness, if sufficiently outrageous, is not sufficient basis for an award of exemplary damages. Still less do they suggest a requirement that known risk be consciously run.
[52]Robitaille v Vancouver Hockey Club Ltd (1981) 124 DLR (3d) 228 (BCCA).
[53]At [67].
[54]At [113].
[18] Whiten was applied in Honda Canada Inc v Keays where the distinction between compensatory and punitive damages was again stressed.[55] The Supreme Court indicated in the context of a contractual claim for wrongful dismissal that exemplary damages “are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own”.[56] The requirement of “advertence” in relation to wrongful acts is not a requirement of conscious appreciation of the risk of harm, as is illustrated by the use of the same word by the Ontario Law Reform Commission in connection with objective recklessness.[57] In McIntyre v Grigg the Ontario Court of Appeal (citing with approval and emphasis a passage from Vlchek v Koshel[58]) rejected the suggestion that intention to cause injury was required before exemplary damages would be appropriate in negligence.[59] In describing the Robitaille case the Ontario Court of Appeal noted it had held that the advertence necessary for an award of exemplary damages included malice and “recklessness that indicates an indifference to the safety of others”.[60] But, “alternatively”, it allowed that the defendant may have “engaged in conduct that is so socially reprehensible that it justifies the award of punitive damages”.[61] Such cases illustrate Thomas J’s point about the “folly of clutching at the use of the word ‘advertent’ and seeking to convert it into a requirement that the wrongdoer be subjectively aware of the risk he or she is creating”.[62]Again, I do not think that the approach adopted by the Canadian Supreme Court provides support for a requirement of conscious assumption of risk before exemplary damages can be awarded for liability in negligence.
The “exemplary principle” is one of general application
[55]Honda Canada Inc v Keays 2008 SCC 39, [2008] 2 SCR 362.
[56]At [62].
[57]Ontario Law Reform Commission at 38 and 69.
[58]Vlchek v Koshel (1988) 52 DLR (4th) 371 (BCSC) at 375 per Gallaghan J.
[59]McIntyre v Grigg (2006) 274 DLR (4th) 28 (ONCA) at [69]–[70].
[60]At [65].
[61]Ibid.
[62]Bottrill (CA) at [105].
[19] Exemplary damages are a general remedy available irrespective of the grounds of liability in tort (which, depending on the elements of the particular tort, may or may not entail intention) wherever compensation to the plaintiff is inadequate to respond to the outrageousness of the defendant’s conduct. The general application of the “exemplary principle” (as Richardson J described the underlying rationale[63]) follows from and was affirmed in the rejection of closed categories of case in which such damages are available.[64] Exemplary damages are distinct from compensatory and aggravated damages, although the distinction was not always observed before Rookes v Barnard imposed order in that respect. They are available only when the amount required to make good the plaintiff’s loss and any additional affront to him (properly reflected in aggravated damages) is unequal to mark the affront to community values occasioned by the defendant’s conduct. Compensatory damages and aggravated damages are assessed on what is due to the plaintiff, but exemplary damages mark the difference between that amount and the amount the defendant ought to pay,[65] in what Lord Devlin described as “vindicating the strength of the law”.[66] The policies which underlie compensatory and exemplary damages overlap however because both reflect the general ends of tort law. Those ends include punishment and deterrence, as has long been accepted in New Zealand law.
[63]Taylor v Beere at 88.
[64]In Australia in Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118; in Canada in Vorvis; in New Zealand in Taylor v Beere, Donselaar and Re Chase [1989] 1 NZLR 325 (CA).
[65]This distinction between “what the plaintiff ought to receive” and “what the defendant ought to pay” was made by Lord Hailsham in Broome v Cassell at 1077–1078.
[66]Rookes v Barnard at 1226.
[20] In this connection, Cooke P and Richardson J in separate cases both had occasion[67] to cite with approval the views of Lord Wilberforce in Broome v Cassell:[68]
It cannot lightly be taken for granted, even as a matter of theory, that the purpose of the law of tort is compensation, still less that it ought to be, an issue of large social import, or that there is something inappropriate or illogical or anomalous (a question-begging word) in including a punitive element in civil damages, or, conversely, that the criminal law, rather than the civil law, is in these cases the better instrument for conveying social disapproval, or for redressing a wrong to the social fabric, or that damages in any case can be broken down into the two separate elements. As a matter of practice English law has not committed itself to any of these theories: it may have been wiser than it knew.
[67]Re Chase [1989] 1 NZLR 325 (CA) at 333 per Cooke P; Taylor v Beere at 90 per Richardson J.
[68]At 1114.
So, Richardson J in Taylor v Beere took the view that tort law “serves various social purposes”: “it is not simply a compensation device or a loss distribution mechanism”.[69] It was not, he thought, inappropriate for a jury or judge “to register condemnation of outrageous conduct on the part of a defendant in tort proceedings beyond what is properly allowed for in the award of compensatory damages (including aggravated damages for the harm and insult to the plaintiff)”.[70]
[69]At 90.
[70]Ibid.
[21] In Taylor v Beere in 1982 the Court of Appeal declined to follow the views expressed in Rookes v Barnard that exemplary damages are “anomalous” and their availability restricted to specified categories of case.[71] The hostility towards exemplary damages implicit in the reasons of Lord Devlin in Rookes v Barnard and demonstrated in the reasons of Lord Reid in Broome v Cassell has not been part of New Zealand law. In rejecting the narrow categories proposed in Rookes v Barnard to confine exemplary damages, Richardson J in Taylor v Beere expressed the view that “any other categorisation which attempts to limit the generality of the application of the exemplary principle is likely to be susceptible to similar criticisms”.[72] The Court of Appeal in Taylor v Beere preferred the broader approach adopted by the High Court of Australia in Urenv John Fairfax & Sons Pty Ltd[73] and affirmed for that jurisdiction on appeal by the Privy Council.[74] On this view, and as the historical review of the origin of exemplary damages in Uren explained, exemplary damages are not properly treated as “anomalous”.[75] In Canada, similarly, the Supreme Court declined to limit the availability of exemplary damages to the categories described by Lord Devlin in Rookes v Barnard.[76] Nor did the Court of Appeal in New Zealand in Taylor v Beere accept suggestions made in Broome v Cassell[77] that the availability of exemplary damages should be confined to those torts in which they had been awarded prior to 1964, when Rookes v Barnard was decided. More recently in the United Kingdom, the House of Lords in Kuddus v Chief Constable of Leicestershire Constabulary[78] has moved closer to the view taken in Canada, Australia and New Zealand (without yet striking off the chains of Rookes v Barnard completely) in holding that exemplary damages are not confined to those torts in which they had been awarded before 1964.[79] The judgments in Kuddus affirm that whether exemplary damages are available depends on the behaviour of the defendant, rather than on the cause of action.[80]
[71]In addition to statutory jurisdiction, the categories of exemplary damages were restricted to cases of oppressive, arbitrary or unconstitutional action by servants of the government and cases in which the defendant’s conduct was calculated to make a profit.
[72]At 92.
[73]Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118.
[74]Australian Consolidated Press Ltd v Uren [1969] 1 AC 590 (PC).
[75]At 136–139 per Taylor J and at 152–153 per Windeyer J.
[76]Vorvis v Insurance Corporation of British Columbia [1989] 1 SCR 1085.
[77]At 1076 per Lord Hailsham and at 1130–1131 per Lord Diplock.
[78]Kuddus v Chief Constable of Leichestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122.
[79]The House of Lords reinstated a claim for exemplary damages for misfeasance in public office which had been struck out on the basis that no such award had before been made in a case of misfeasance in public office.
[80]At [7]–[8] per Lord Slynn; at [44] per Lord Mackay; and at [68] per Lord Nicholls.
[22] In New Zealand the “exemplary principle” is not confined to intentional torts. It prompts no “synthesis”[81] of the intentional torts and negligence because it is available on establishment of liability (whatever the elements of the cause of action) where the outrageous conduct of the defendant is insufficiently condemned by compensatory and aggravated damages. Because the ends of punishment and deterrence will usually be sufficiently achieved through compensatory and aggravated damages awards, exemplary damages have been rare in New Zealand. But their restriction in negligence to cases of subjective recklessness would “evade the underlying principle”, as pointed out by Clement JA in the Appellate Division of the Alberta Supreme Court in respect of the restrictions attempted in Rookes v Barnard:[82]
The case recognizes the principle of exemplary damages, but in restricting its application it, in my opinion, does injustice to the principle. The basis of such an award is actionable injury to the plaintiff done in such a manner that it offends the ordinary standards of morality or decent conduct in the community in such marked degree that censure by way of damages is, in the opinion of the Court, warranted. ... It is the reprehensible conduct of the wrongdoer which attracts the principle, not the legal category of the wrong out of which compensatory damages arise and in relation to which the conduct occurred. To place arbitrary limitations upon its application is to evade the underlying principle and replace it with an uncertain and debatable jurisdiction.
[81]Bottrill (CA) at [173] per Tipping J.
[82]Paragon Properties Ltd v Magna Envestments Ltd (1972) 24 DLR (3d) 156 (ABCA) at 167.
These remarks were cited with approval by Richardson J in Taylor v Beere.[83]
The outrageous conduct of the defendant need not be in relation to conscious risk-taking
[83]At 91–92.
[23] It is not accurate to characterise the difference between the Privy Council and the Court of Appeal in Bottrill as turning on “whether the negligence was outrageous”.[84] The jurisdiction to award exemplary damages arises where the conduct of the defendant is “so outrageous as to call for condemnation and punishment”.[85] The conduct may however be in the “manner or circumstances” in which the tort was committed and which make it “particularly appalling”.[86] The distinction is illustrated by Lamb v Cotogno where the High Court of Australia accepted that callous conduct following commission of the tort and not itself comprising an actionable wrong could occasion an award of exemplary damages if outrageous.[87] In Rookes v Barnard Lord Devlin had taken the view that everything which aggravates or mitigates the defendant’s conduct is relevant to a claim for exemplary damages.[88] So in defamation cases it is established that the relevant conduct continues until judgment.[89] In Vorvis, there was disagreement between the members of the Supreme Court of Canada about whether exemplary damages for breach of conduct could be awarded if the conduct relied on did not constitute in itself an actionable wrong. The majority suggested that exemplary damages might, unusually, be awarded in cases of breach of contract, although in such cases the misconduct would also amount to an actionable wrong.[90] Wilson J, joined by L’Heureux-Dubé J, took a broader approach, considering rather that the task of the Court was simply “to assess the conduct in the context of all the circumstances and determine whether it is deserving of punishment because of its shockingly harsh, vindictive, reprehensible or malicious nature”:[91]
In his dissent in the Court of Appeal in the present case Anderson JA applied the principles set out by Linden J in Brown v Waterloo Regional Board of Commissioners of Police and concluded that the conduct of the defendant both before and after the wrongful dismissal should be considered. I agree. This broader approach is required if the court’s purpose is to punish highhanded, vindictive or otherwise shocking and reprehensible conduct by the defendant.
...
Undoubtedly some conduct found to be deserving of punishment will constitute an actionable wrong but other conduct might not.
[84]See Tipping J at [91].
[85]Bottrill (PC) at [4].
[86]At [23] per Lord Nicholls.
[87]At [21]. See also, in relation to defamation The Herald & Weekly Times Ltd v Popovic [2003] VSCA 161, (2003) 9 VR 1 at [425], and Taylor v Beere at 84 per Cooke J.
[88]At 1228.
[89]Praed v Graham (1889) 24 QBD 53 (CA); Broome v Cassell at 1071–1072 per Lord Hailsham.
[90]At 1106–1107 per Beetz, McIntyre and Lamer JJ.
[91]At 1129–1130.
Wilson J then adopted the statement of Clement JA in Paragon Properties Ltd v Magna Envestments Ltd[92] set out above at [22]. In the subsequent case of Whiten the Supreme Court of Canada maintained the position that exemplary damages must depend on an actionable wrong in addition to breach of contract, but found it in that case in breach of the additional obligation of good faith to which the insurer was subject.[93]
[92]Paragon Properties Ltd v Magna Envestments Ltd (1972) 24 DLR (3d) 156 (ABCA).
[93]In Vorvis there are suggestions the actionable wrong would need to constitute a tort, but in Whiten Binnie J considered that the requirement for an actionable wrong was not restricted to tortious conduct (at [79]).
[24] The approach to contract is not directly in point here. The broad approach adopted in Whiten seems to me however to be consistent with the views of Wilson J in Vorvis. In any event, I am in agreement with the reasons of Wilson J on the point and consider they are supported by the decision of the High Court of Australia in Lamb v Cotogno. They also accord with the approach preferred in the New Zealand cases of Taylor v Beere, Donselaar, and Re Chase[94] and are consistent with the terms in which Lord Nicholls described the basis of the jurisdiction in Bottrill. I too would not exclude the application of the exemplary principle in cases where the reprehensible conduct of the defendant does not itself constitute the actionable wrong. In particular, the misconduct of the defendant need not in itself entail advertent assumption of risk in respect of the harm suffered by the plaintiff,[95] for the convincing reasons given by Thomas J in the Court of Appeal in Bottrill.[96] The Privy Council in Bottrill accepted that the standard of outrageousness was not likely to be reached by conduct which is “grossly negligent”[97] without more. Indeed, it is hard to conceive of a case in which advertent misconduct will not feature in a case appropriate for exemplary damages. Such advertence need not, however, in itself constitute the actionable wrong. In the case of systemic failure (such as is alleged here), for example, it may be sufficiently outrageous if there is consciousness of the inadequacy of the systems in place or deliberate indifference to responsibility, even if the harm that eventuates is not foreseen.[98]
[94]Re Chase [1989] 1 NZLR 325 (CA).
[95]Compare Tipping J at [110].
[96]At [145].
[97]At [33] per Lord Nicholls.
[98]Compare Blanchard J at [65].
[25] In Bottrill the wrongdoing relied on comprised the breach of the duty of care. It was claimed that the want of care was of such a degree as to be outrageous, warranting exemplary damages. Because the feature which was said to warrant exemplary damages was an element in the cause of action (breach of the duty of care), the Privy Council was not called upon to consider whether conduct additional to the elements of the tort but accompanying its commission or following it, could occasion an award of exemplary damages. Nor is there explicit discussion in the majority judgments in the Court of Appeal of the point. The focus is understandable, because the basis for the claim of exemplary damages was in that case put solely on gross negligence. Thomas J however pointed out the difference:[99]
A wrongdoer may deliberately act in such a way as to disregard the plaintiff’s rights without intending to do so or being consciously aware of the risk he or she is creating. Professor Williams has pointed out that conduct which may consist of inadvertent negligence in one respect may be combined with deliberate conduct in another respect.
[99]Bottrill (CA) at [109]; see Glanville Williams and BA Hepple Foundations of the Law of Tort (London, 1976) at 120.
[26] It is often said that the conduct of the defendant justifying the award of exemplary damages must be “contumelious”.[100] The adjective conveys the flavour that the conduct may be consciously high-handed or arrogant behaviour. As indicated, I consider it may be conduct accompanying or following the commission of the tort. It is not necessary that it be conduct in respect of an element of the actionable wrong, such as a requirement of conscious breach of a duty of care in the case of negligence. The test adopted by the majority in this case would however so limit it.
[100]See for example Taylor v Beere at 90 per Richardson J; Donselaar at 115 per Somers J; and Kuddus at [63] per Lord Nicholls.
[27] In Rookes v Barnard the first category identified by Lord Devlin as supported by authority for the award of exemplary damages where conduct was sufficiently outrageous to justify exemplary damages was high-handed infringement of rights by servants of the government.[101] The availability of exemplary damages to deter and punish “the arbitrary and outrageous use of executive power”[102] was a means of “vindicating the strength of the law”.[103] Lord Wilberforce in Broome v Cassell expressed the view that in the circumstances of modern society citizens required as much protection as formerly against “[e]xcessive and insolent use of power”.[104] In Kuddus Lord Nicholls acknowledged the role played by exemplary damages in the protection of civil liberties.[105] In such cases the availability of the salutary remedy of exemplary damages may serve the public interest when the actions which constitute the legal wrong (and are the source of liability) are accompanied by behaviour which is scornful, insulting, callous, or insolent, if such behaviour is sufficiently outrageous. “Contumelious” action on behalf of the executive may often entail conscious interference with rights. But in modern society, in which the public may reasonably rely on the discharge of responsibilities by those entrusted with public power and resources, it may be that inaction which amounts to shrugging off responsibility in some circumstances is as accurately described as high-handed or arbitrary even if the harm that eventuates is not consciously foreseen. That possibility should not be foreclosed.
Restriction of the exemplary principle is inconsistent with its continued vitality
[101]At 1226.
[102]At 1223 per Lord Devlin.
[103]At 1226 per Lord Devlin.
[104]At 1120.
[105]At [63].
[28] The vitality of the exemplary principle was remarked upon by Lord Wilberforce in Broome v Cassell,[106] by Cooke J in Donselaar[107] and by Lord Nicholls in Kuddus[108] and Bottrill.[109] Lord Hutton in Kuddus illustrated the social utility of the exemplary principle by reference to experience in Northern Ireland.[110] The discussion in Whiten already referred to in [17] indicates acceptance of the “socially useful service” provided by exemplary damages in circumstances where only the plaintiff has the incentive to achieve formal correction of outrageous behaviour. Similarly, in New Zealand Richardson J in Taylor v Beere considered “the utility of the exemplary principle” and “the felt need for this kind of civil remedy” to mark “heinous conduct in the course of tortious activity”, as he thought was demonstrated by decisions in a number of common law jurisdictions.[111] The hostility of Lord Devlin in Rookes v Barnard and Lord Reid in Broome v Cassell (echoed more recently by Lord Scott in Kuddus[112]) seems to have been overtaken by the insight that exemplary damages serve the needs of modern society. That may be why law reform projects in Ontario, England and Ireland have recommended retention of the exemplary principle (in Ontario, on the basis of objective assessment of outrageousness).[113]
[106]At 1114.
[107]At 106–107.
[108]At [63].
[109]At [41].
[110]At [75]–[79]. Lord Hutton observed that in cases where security forces, exercising powers which necessarily reduce the freedom of individuals in order to combat terrorism, act in gross breach of discipline and commit an unlawful act which is oppressive or arbitrary “the power to award exemplary damages... serves to uphold and vindicate the rule of law because it makes clear that the courts will not tolerate such conduct”. Such awards, he thought, “bring home to officers in command of individual units that discipline must be maintained at all times”.
[111]At 91.
[112]At [110]–[111].
[113]Ontario Law Reform Commission at 38 and 69; Law Commission for England and Wales at 100; Irish Law Reform Commission at [1.73]–[1.75]. See also the discussion of Thomas J in Bottrill (CA) at [102]–[110].
[29] In New Zealand the vitality of exemplary damages was affirmed in Donselaar,[114] notwithstanding statutory exclusion of compensatory damages for personal injury. Cooke J expressed the view that the non-compensatory functions of tort law, formerly also achieved by compensatory damages, would for the future in cases of personal injury fall to be fulfilled by exemplary damages alone.[115] That is a view sometimes misunderstood, as Thomas J pointed out in Bottrill.[116] Donselaar did not trigger legislative intervention, as might have been expected if it was thought inconsistent with the policy of accident compensation or with a wider public interest in the confinement of remedies in tort to compensation.
[114]See also ReChase and Auckland City Council v Blundell [1986] 1 NZLR 732 (CA).
[115]At 107.
[116]At [121].
[30] It is significant that when the Legislature did move to enact what is now s 319 of the Accident Compensation Act 2001, to reverse the restriction imposed by the Court of Appeal in Daniels v Thompson,[117] it did not introduce any cause of action refinement, such as by restricting the s 319 relaxation to intentional torts or by excluding exemplary damages where the defendant’s conduct, although objectively outrageous, is not subjectively advertent. With such legislative context, it is wrong to suggest that New Zealand’s accident compensation system provides distinctive local context which the Privy Council in Bottrill was not well-placed to assess and which justifies this Court in restricting the availability of damages for liability in negligence to cases of subjective recklessness. As Cooke P explained in Re Chase, the purpose of exemplary damages “is to punish the perpetrator of a tort, and they are outside the scope of the statutory compensation scheme”.[118] Moreover, the condition of subjective recklessness adopted by the Court in this judgment on the reasoning of the majority is acknowledged to attach also to non-personal injury cases. It cannot therefore be justified by reference to New Zealand’s accident compensation regime.
A “species of negligence”
[117]That exemplary damages could not be awarded in respect of conduct constituting a crime because civil punishment would cut across criminal punishment: Daniels v Thompson [1998] 3 NZLR 22 (CA).
[118]At 329.
[31] A requirement that subjective recklessness is a necessary threshold for liability to exemplary damages in negligence would restrict exemplary damages to a subcategory or “species of negligence”.[119] Tipping J in the Court of Appeal in Bottrill accepted the significance of the change in describing it as achieving a “synthesis” between the intentional and unintentional torts for the purpose of exemplary damages.[120] As Thomas J pointed out in the same case[121] and as is suggested by Lord Nicholls’s rejection of the analogy with misfeasance in public office,[122] the “synthesis” is achieved through the creation of the new “species of negligence”, based on conscious foresight. As Thomas J said:[123]
[N]egligence is regularly concerned with what the defendant “ought” to have known or “ought” to have done. The majority’s requirement of subjective awareness eliminates “ought” from the language of exemplary damages. No conduct, however heinous, that the defendant “ought” to have known would create a risk will be subject to condemnation and punishment by an award of exemplary damages.
He points out that a consequence of the insistence on subjective awareness “will effectively put beyond the reach of exemplary damages all human conduct, however blameworthy and deserving of condemnation, involving negligent omission”.[124] I agree with Thomas J that the requirement of subjective consciousness should not be imposed to put beyond the reach of exemplary damages[125]
negligent conduct which, because of its quality or extent, or its duration or repetitiveness, or casualness or indifference, or any other reprehensible feature, is adjudged to be beyond the bounds of what the community is prepared to tolerate without legal redress.
[119]See Tipping J at [75].
[120]At [173].
[121]At [134].
[122]At [31].
[123]At [139].
[124]At [138].
[125]At [101].
Bottrill should not be reconsidered on the present appeal
[32] It is open to this Court to depart from a decision of its own or of the Privy Council on appeal from New Zealand if it is right to do so because the rigid adherence to precedent would lead to injustice in the particular case or would unduly restrict the proper development of the law to meet the needs of New Zealand society.[126] That could be the case where the Court comes to the view that an earlier decision is wrong or has become wrong. But it would seldom be appropriate to take that course because of a difference in intellectual preference. The Privy Council decision in Bottrill is binding on all New Zealand courts apart from this Court. Departure from such authority is warranted only for good reason. That is discipline accepted in all common law jurisdictions by judges of final appellate tribunals, even when they disagree with the earlier decision.[127] Such respect for precedent is an aspect of the rule of law because “no judicial system could do society’s work if it eyed each issue afresh in every case that raised it”.[128] Here, no new arguments are put forward for one position or the other. We are invited to come to a different conclusion from the Privy Council by rehearsing yet again the same arguments earlier weighed. In this exercise we act as first and last court, lacking the benefit of considered judgments from the High Court or Court of Appeal. That cannot be avoided in cases where the Court of Appeal is bound by higher authority and the matter must be determined.[129] But the circumstance that a first consideration will be final should prompt great care, especially when a final court is asked to restrict the jurisdiction of the courts for the future. Any such restriction of jurisdiction is to be viewed with suspicion, for the reasons given by Cooke P in Re Chase:[130]
As indicated in Donselaar v Donselaar and other cases, it does not seem to me a legitimate function of the High Court, or this Court on appeal, to renounce or narrow inherent jurisdiction. The same applies to wide discretionary jurisdiction conferred by statute. Attempts to foreclose the categories of cases in which such jurisdiction may appropriately be exercised can be equally short-sighted. It is given to no Judge to foresee all the possible kinds of case, or all the shifts in what the public interest will require from time to time. Restraint in exercising such jurisdiction is quite another matter ...
[126]See Supreme Court Act 2003, ss 3(1) and 13.
[127]See, for example, Knuller (Publishing, Printing and Promotions) Ltdv Director of Public Prosecutions [1973] AC 435 (HL) at 455 per Lord Reid and R v Kansal (No 2) [2001] UKHL 62, [2002] 2 AC 69 at [27] per Lord Steyn.
[128]Planned Parenthood of Southeastern Pennsylvania v Casey 505 US 833 (1992) at 854 per O’Connor, Kennedy and Souter JJ for the Court, drawing on Benjamin Cardozo The Nature of the Judicial Process (New Haven, 1991) at 149.
[129]As indicated at [36] I do not consider that is the position here, where the claim cannot be struck out and the point of law can be raised after trial if it in fact arises.
[130]At 333 (citation omitted).
[33] I have expressed my agreement with the decision of the Privy Council in Bottrill, because other members of the Court have dealt with the argument that it should be overruled. My own view is that it is wrong to use this failed strike-out as an opportunity to overrule Bottrill. There are two reasons: first, experience since the Privy Council decision does not suggest the need for revision; secondly, it is undesirable that such significant revision be undertaken on preliminary argument and without the context of findings of fact.
(i) New Zealand practical experience since Bottrill does not prompt reassessment
[34] It has not been shown that experience in the eight years since the Privy Council decision has thrown up any practical problem with its result, such as might prompt reassessment. The fear that unmeritorious or extravagant claims may be made[131] is a floodgates argument put forward on the basis of impression. Like all such arguments, it is likely to be more alarming in future contemplation than in reality. Certainly the risk of extravagant awards was thought in Taylor v Beere to be one the courts were well-placed to contain.[132] The risk in a particular case of doubling up or topping up compensation, through failure to keep compensatory damages distinct from what is necessary to reflect the exemplary principle, is something the courts must be alert to in all cases, as Cooke J made clear in Donselaar.[133] The risk arises equally when personal injuries are not the basis of claim. Despite the advantage Parliament might be thought to have in assessing the validity of floodgates concerns, no such considerations prompted a restrictive approach in the enactment of what is now s 319 of the Accident Compensation Act 2001.
(ii) Reconsideration of Bottrill is inappropriate in the present appeal
[131]See Blanchard J at [66]; Tipping J at [135]; and McGrath J at [241].
[132]At 92–93 per Richardson J.
[133]At 107.
[35] Cooke P’s warning in Re Chase as to the dangers of limited foresight when abjuring jurisdiction applies in particular in a preliminary determination of law ahead of findings of fact. Unless there is a clear and fatal flaw (such as statutory impediment) warranting peremptory determination, the court in such a case is required to identify legal principles for the future exercise of jurisdiction without the factual context to provide points of distinction in the cases of tomorrow. There is particular risk in areas of developing or disputed common law. Ex cathedra statements about the organisation and limitation of jurisdiction too often end in confusion or worse.[134] The risk may be illustrated by Rookes v Barnard itself, despite the high standing of those who comprised the Judicial Committee of the House of Lords in that case. In Rookes v Barnard the House of Lords was not faced, as we are, with a clear precedent to the contrary. It was attempting, rather, to impose order on an area of common law then acknowledged to have been confused, particularly because of lack of clarity in the different functions served by aggravated and exemplary damages. Those are not the conditions today in New Zealand law.
[134]In Broome v Cassell at 1085 Lord Reid made the point that it is not the function of judges “to frame definitions or to lay down hard and fast rules”. Their function is rather to enunciate principles “and much that they say is intended to be illustrative or explanatory and not to be definitive”.
[36] If undertaken, change should be in the context of actual facts wherever possible. That is the method of the common law. Such context is not always available. In Kuddus, for example, the lower courts had struck the claim out and so it was necessary for the House of Lords to consider the issues of law[135] ahead of findings of fact, a circumstance that Lord Slynn considered to have been unsatisfactory.[136] In the present case, we are not in that position. The claim was struck out in the lower courts not on the question of the availability of exemplary damages but because it was held that the defendant owed no duty of care to the plaintiff. In accordance with the views expressed in the judgment of 13 June 2008, the claim must be reinstated.
[135]Whether exemplary damages were available only in respect of causes of action in which they had been awarded before Rookes v Barnard in 1964.
[136]At [1].
[37] The blameworthy conduct of the defendant which is relied upon as justifying exemplary damages has not yet been properly pleaded. As is apparent from the reasons for judgment of 13 June 2008, even the facts giving rise to any duty of care and to the manner of its breach remain unclear and substantially unpleaded. The judgment of this Court concluded only that breach of a duty of care owed to the plaintiff cannot at this stage be excluded. As I indicated at [38] of my reasons in the earlier judgment, in identifying whether there was breach of a duty of care, knowledge of risk is likely to be key. The same consideration will be important and may well also be key on the claim for exemplary damages.
[38] It is acknowledged that the claim must proceed because conscious recklessness remains in issue in any event. In such circumstances, the view that we should entertain the legal point at this stage to save the parties the trouble of appeal after trial strikes me as justification that is stretched. It is the case that the trier of fact (whether judge or jury) may have to address any question of exemplary damages eventually reached in a sequenced way, according to whether it finds subjective recklessness or not, in order to preserve the ability to seek a reconsideration of the need for subjective recklessness. But the inconvenience of that course in the present case is outweighed by the undesirability of restricting jurisdiction and overruling high authority without at least the discipline of facts.[137] The facts as finally pleaded and as found at trial may well overtake the issue entirely. If the scope of exemplary damages is to be cut down and new limitations established, it is preferable that it be done on established facts and in a case where the issue is not conjectural.
[137]Compare Blanchard J at [47]; Tipping J at [79]; and McGrath J at [213].
[39] The background here of statutory duties and powers is an important point of distinction with Bottrill. The defendant is sued in respect of institutional failings in a government department. Bottrill was not a case concerning the conduct of public officials, with allegations of negligence amounting to both misfeasance and nonfeasance. I have suggested in my reasons in support of the judgment of 13 June 2008 that a defendant in such circumstances cannot be treated as though an indifferent bystander.[138] I would not foreclose as a matter of law at this stage the argument that, similarly, such a defendant may be liable for exemplary damages on
the basis of ignorance of circumstances of which the department or officials ought to have been aware. If Bottrill is to be reconsidered and we are to impose the view that such breach of duty, however outrageous, can never warrant the award of exemplary damages, such reconsideration should not simply apply the reasons that convinced in a much more simple case. Significant questions of legal policy here arise, not present or considered in Bottrill, concerning the purpose of exemplary damages, vicarious liability, and the liability in tort of public officials. Some are discussed in the reasons of the Court of Appeal in the present appeal but in my view they are not appropriate for consideration by this Court on preliminary hearing. These are areas of law which may be developing and in such a case consideration in a factual vacuum carries especial risk. In respect of such cases it would be wrong on preliminary argument to foreclose the jurisdiction to award exemplary damages for negligence accompanied by neglect of responsibility which is outrageous. Exemplary damages, as Lord Kilbrandon noted in Broome v Cassell, are based on the footing that “there is an element of public interest to be protected”.[139] As the Supreme Court of Canada was prepared to allow in Whiten, that public interest may only be addressed by a plaintiff with the incentive to establish that the defendant behaved abominably.[140] The jurisdiction to award exemplary damages in a proper case, in vindication of a public interest otherwise not readily able to be addressed, should not be denied on the basis of the limited argument addressed to us and without a proper factual context.
[138]Couch at [57].
[139]At 1134.
[140]At [37].
[40] Bottrill was not a case complicated by vicarious liability. The pleadings in the present case are still not clear as to the extent of reliance on the admitted vicarious liability for any tort committed by the probation officer. As indicated in the judgment of 13 June 2008, some of the claims of systemic failings describe direct liability of the Probation Service. To the extent however that the Probation Service may be liable for the negligence of the probation officer on a vicarious basis, it may be an open question whether the outrageous conduct which could justify an award of exemplary damages is only that of the probation officer or may also extend to the
conduct of the entity or persons vicariously responsible for her actions. The answer depends on legal policy, reflecting the public interests served by liability for exemplary damages and vicarious liability.[141] Some cases and commentators suggest that an employer vicariously liable for the tort of an employee, who has taken all reasonable steps to prevent harm (or perhaps more accurately to prevent the outrageous feature which warrants exemplary damages), should be liable only for compensatory damages.[142] Others recognise public interest in permitting such claims to promote higher standards.[143] The matter has not been addressed in the present appeal, it seems because of the undertaking given to the probation officer (reflected in the draft statement of defence) that the Attorney-General accepts vicarious responsibility for any exemplary damages awarded against her and perhaps because the basis of the exemplary claim is not yet pleaded. In my view it would be wrong for this Court to express any view on this difficult point. Whether some fault on the part of the person vicariously responsible is required for an award of exemplary damages raises significant questions of policy which it would be inappropriate to enlarge upon here in the absence of argument. Nor could it be considered in the absence of identification of the wrongful conduct of the vicariously liable defendant said to warrant exemplary damages.
[141]Thus, Lord Kilbrandon in Broome v Cassell at 1134 explained the rationale of exemplary damages as protection of the public interest. And justification for vicarious liability is expressed by Glanville Williams and BA Hepple Foundations of the Law of Tort (London, 1976) at 114 as being based on the ability of the employer “to change his system of work, or to change his staff, in such a way to minimise acts of negligence”. On such views, the public interest may be in deterrence and incentivisation of those vicariously liable.
[142]Thus the American Law Institute’s Restatement of the Law of Torts took the view that it would be improper “to award punitive damages against one who himself is personally innocent and therefore liable only vicariously” (2nd ed, Minnesota, 1979) § 909. And in Kuddus two of the members of the House of Lords considered that vicarious liability should be modified in respect of exemplary damages (at [47] per Lord Mackay; and at [108] per Lord Scott).
[143]See McGregor on Damages (18th ed, London, 2009) at [11-048]–[11-049].
[41] The case then is quite unlike the claim in Bottrill and raises complexities not contemplated there, touching upon uncertain and developing law and the responsiveness of New Zealand law to modern conditions. What this means is that it is unsafe to view the disposition of the present appeal as turning on a simple choice between the approach of the majority of the Privy Council or the approach of the majority of the Court of Appeal in Bottrill. If reassessment of Bottrill is to be undertaken and the jurisdiction to award exemplary damages restricted in negligence to cases where the defendant is conscious of the risk of harm to the plaintiff, it should be in a wider context than was necessary in respect of the argument as to whether Ms A should be granted a rehearing of her claim to exemplary damages on the basis of new evidence as to the scale and seriousness of Dr Bottrill’s errors.
Conclusion
[42] Bottrill is not a precedent that is restrictive of New Zealand common law. The effect of the decision should not be exaggerated. Although the possibility of exemplary damages for conduct that does not amount to conscious recklessness as to risk is not excluded as a matter of law, absence of conscious wrongdoing remains a substantial element as a matter of fact in the assessment (one of degree) whether conduct is outrageous enough to warrant an award of exemplary damages. Bottrill cannot be said to limit the responsiveness of New Zealand law to the developing circumstances of New Zealand society, such as might call for more anxious assessment. No compelling reason has been advanced for departing from it.
[43] Tipping J suggests that the choice between the approaches preferred by the Privy Council and by the Court of Appeal in Bottrill is essentially a choice of “legal policy”.[144] Legal policy in this is not however at large. While acknowledging that the availability of exemplary damages for negligence had not previously arisen directly for determination in New Zealand, Lord Nicholls pointed out that judicial observations in a number of cases in New Zealand and other common law jurisdictions were consistent with exemplary damages being available across the range of torts with “the ultimate touchstone constantly mentioned … that of outrageous conduct by the defendant which calls for punishment”.[145] He concluded:[146]
Overall this summary suggests that Courts in other countries have not found it necessary in practice to restrict the scope of exemplary damages in cases of negligence to cases of intentional wrongdoing or conscious recklessness. Wisely, they have left the door ajar.
[144]Tipping J at [91].
[145]Bottrill (PC) at [43].
[146]At [49].
[44] I, too, would leave the door ajar. In agreement with Thomas J, I would not eliminate the “ought” from negligence for exemplary damages. I would let this claim proceed, leaving it to the trier of fact to determine whether the conduct of the defendant warrants an award of exemplary damages. It is not possible to be confident that the claim for exemplary damages is clearly untenable. Conduct of the defendant may be outrageous and deserving of denunciation through exemplary damages not because it entails advertent appreciation of risk, but because it should have. It may be outrageous or deserving of denunciation through exemplary damages not because it entailed subjective recklessness as to the harm suffered by the plaintiff, but because it was outrageously indifferent to responsibility. It may be deserving of denunciation through exemplary damages because, even though the risk to the plaintiff was not foreseen, the conduct of the defendant was outrageously high-handed or cruel or contemptuous. Such cases are likely to be rare. But it would be wrong to renounce the general jurisdiction to award exemplary damages wherever the conduct of the defendant, although outrageous, is not consciously reckless as to risk.
BLANCHARD J
[45] I agree with the conclusions reached by Tipping and McGrath JJ. I write separately because the majority of this Court is declining to follow a decision of the Privy Council[147] and because it is necessary to say why I do not accept that it is premature or inappropriate for this Court in this case to take a position on whether exemplary damages can ever be awarded for inadvertent negligence, where the tortfeasor has not been conscious of the risk posed to the plaintiff by the act or omission which has been causative of injury (the Bottrill issue).
[147]Bottrill v A [2002] UKPC 44, [2003] 2 NZLR 721.
[46] At the outset, I should make it clear that I am proceeding on the basis that intentional wrongdoing, including subjective (advertent) recklessness, may be characterised as a form of negligent behaviour.[148]
Should a ruling be deferred?
[148]Gray v Motor Accident Commission [1998] HCA 70, (1998) 196 CLR 1 and B(M) v British Columbia 2001 BCCA 227, (2001) 197 DLR (4th) 385.
[47] Should the point of law upon which the majority of the Privy Council reversed the majority decision of the Court of Appeal in that case (the Bottrill issue) be revisited at this stage of the present proceeding? Is it suitable for determination before completion of the pleadings and of discovery and, indeed, before the facts have been found at trial? I would answer these questions affirmatively. I am not persuaded that any refinement of the relevant pleading or any wider factual context is required for the resolution of the legal issue which is now before us. We are not being asked to say what particular conduct of the probation officer or of her superiors was or was not in breach of a duty of care owed to the plaintiff/appellant. It can for present purposes be assumed that there has been gross negligence. The issue is simply whether, no matter how gross it was – if there can indeed be degrees of grossness – it is nevertheless insufficient for an award of exemplary damages if neither the probation officer nor her superiors had an appreciation that a failure to take general or particular steps or precautions in the supervision of Mr Bell posed a risk to Ms Couch or to someone in a like position. That does not require any advance determination of whether and in what respect there has been any gross negligence.[149]
[149] It is admitted that there was negligence on the part of the probation officer.
[48] In my view it is desirable to determine the Bottrill issue at this stage because the parties need to know where they stand on that legal issue before going to trial. It would be unfortunate, if the matter were to come to this Court again after trial, and the Court then declined to follow Bottrill (PC) and were consequently obliged to order a new trial because the jury had not been asked to say whether, if it found for the plaintiff, it did so on the basis of advertent or of inadvertent conduct by the defendant. Even if it were asked to make such a finding of fact, a further appeal would be inevitable if it found against the defendant on the basis of inadvertent negligent conduct. It is better that this complication, in what may be a lengthy and complex trial, is removed by a decision of this Court at this stage.
[49] It is true that we do not have the benefit of the views of the trial Judge and the Court of Appeal on the Bottrill issue but those Courts are bound by precedent to follow the Privy Council decision, and very properly can be expected to refrain from expressing their own opinions.
Privy Council precedent
[50] The Chief Justice takes the view that it would be wrong for the Court to depart from the recent Privy Council precedent of Bottrill; that it has caused no difficulties in practice; and that the position taken by the majority of the Privy Council is “a tenable view” on which no new arguments have emerged.
[51] It is right of course that this Court should be slow to overturn a Privy Council precedent. Occasions justifying doing so will be comparatively rare. It would be unsettling for New Zealand law if it were thought by litigants and lawyers that the Supreme Court would easily be persuaded to depart from law apparently settled by a decision of the Privy Council. It is certainly not enough that some criticisms may have been made of the decision in question. This Court is not bound by a Privy Council decision, even one on appeal from this country, but, to adopt what has been said in the High Court of Australia, the Court should depart from a Privy Council decision only “if in the proper performance of its duty it feels that it should do so”.[150] In my view, it should not do so unless it is satisfied that the Privy Council decision was not only in error but also inappropriate for the proper development of New Zealand law in New Zealand conditions. In the earlier decision of John v Commissioner of Taxation of the Commonwealth of Australia, five members of the High Court of Australia gave some guidance about when that Court regarded itself as having power to depart from its own earlier decision, adding that such a course is not lightly undertaken.[151] That guidance seems equally applicable to earlier decisions of this Court and of the Privy Council in New Zealand appeals. Four considerations derived from The Commonwealth of Australia v The Hospital Contribution Fund of Australia[152] are endorsed in the joint judgment in John:
(a)Whether there is already a principle carefully worked out in a significant succession of earlier cases;
(b)Whether in an earlier case there are differences between the reasons given by the Judges who were in the majority;
(c)Whether the earlier case has achieved no useful result but has led to considerable inconvenience; and
(d)Whether or not the earlier case has been acted on in a manner which militates against reconsideration.
[150]Barns v Barns [2003] HCA 9, (2003) 214 CLR 169 at [101] per Gummow and Hayne JJ, quoting Aickin J in Viro v The Queen (1978) 141 CLR 88 at 174.
[151]John v Commissioner of Taxation of the Commonwealth of Australia (1989) 166 CLR 417 at 438.
[152]The Commonwealth of Australia v The Hospital Contribution Fund of Australia (1982) 150 CLR 49 at 56–58.
These considerations are of some present relevance and I will come back to them after discussing the Bottrill case.
The Bottrill decision
[52] My reading of the case law leads me to the conclusion that the Privy Council’s decision in Bottrill is out of step with the way in which the law has developed both in New Zealand and in the jurisdictions with which we usually compare ourselves. It appears to be the only decision of a senior court, directly addressed to the issue, which expressly countenances exemplary damages for an inadvertent act of negligence. That of course does not make it wrong or unsuitable for New Zealand but it is an unpromising beginning.
[53] Little need be said of the prior law in this country and in Britain, which is fully described in the reasons of Tipping and McGrath JJ. It is, however, quite plain that prior to Bottrill in the Privy Council the New Zealand Court of Appeal had set its face against an award of exemplary damages where there was no consciousness of wrongdoing on the part of the defendant, for the reasons given by the Court of Appeal majority in that case. The Privy Council decision must also have come as a surprise in England, if intended to guide the courts there, not only because of its inconsistency with the first of the categories to be found in Rookes v Barnard[153] but even more so because it markedly diverged from what had recently then been said in Kuddus v Chief Constable of Leicestershire Constabulary, even by Lord Nicholls himself.[154] It came as a particular surprise in this country, too, when the Privy Council departed from its practice of not interfering with decisions of local courts based on policy grounds articulated in relation to local conditions.[155] The decision was less than rapturously received by most commentators in this country.[156]
[153]Rookes v Barnard [1964] AC 1129 (HL) at 1226 (oppressive, arbitrary or unconstitutional action by the servants of the government). The New Zealand courts have not confined exemplary damages awards to the Rookes v Barnard categories.
[154]Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122 at [63] per Lord Nicholls.
[155]See for example Australian Consolidated Press Ltd v Uren [1969] 1 AC 590 (PC); Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC); W v W [1999] 2 NZLR 1 (PC) and Lange v Atkinson [2000] 1 NZLR 257 (PC).
[156]Stephen Todd “A New Zealand Perspective on Exemplary Damages” (2004) 33 CLWR 255; Allan Beever “Punishing the innocent” [2002] NZLJ 359; Andrew Beck “Exemplary damages: the snake uncoils” [2002] NZLJ 361; and see in England Andrew Phang and Pey-Woan Lee “Exemplary Damages – Two Commonwealth Cases” (2003) 62 CLJ 32. Contrast J Manning “‘Never say never’: exemplary damages in negligence” (2003) 119 LQR 24.
[54] The position in Australia is not as Lord Nicholls thought it to be. The central passage in the joint judgment in the decision of the High Court of Australia in Gray v Motor Accident Commission makes that quite clear:[157]
No question arises here of an intentional wrong being committed by inadvertence. For present purposes it is enough to note two things. First, exemplary damages could not properly be awarded in a case of alleged negligence in which there was no conscious wrongdoing by the defendant. Ordinarily, then, questions of exemplary damages will not arise in most negligence cases be they motor accident or other kinds of case. But there can be cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiff or persons in the position of the plaintiff. (emphasis added)
[157]Gray v Motor Accident Commission [1998] HCA 70, (1998) 196 CLR 1 at 9. This passage is entirely consistent with the approach earlier taken in Lamb v Cotogno (1987) 164 CLR 1 at 9 where the judgment of the Court cited with approval Brennan J’s statement in XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 15 CLR 448 at 471 that “an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff’s rights and to deter him from committing like conduct again”. Further back, the same requirement, drawn from the first edition of JW Salmond The Law of Torts (Stevens & Haynes, London, 1907) at 102 had been endorsed by Windeyer J in Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 at 154.
Should Bottrill be revisited?
[296]See Dahya v Dahya [1991] 2 NZLR 150 (CA) at 160 per Richardson J.
[211] Is it appropriate for this Court now to depart from the principles stated in the Privy Council majority’s judgment in Bottrill? No legislative amendments have addressed the issue since that judgment was delivered in 2002. The area of exemplary damages is, however, one which the legislature has largely left to the courts, both before and since Parliament first abolished compensatory damages for personal injury in 1972. The legislature’s silence since 2002 does not indicate approbation of the Privy Council’s view.
[212] The scope of the remedy is an issue addressed by the courts of many jurisdictions in which it has been seen as one for determination in the context of local conditions. In New Zealand, the question has a particular local dimension because of the prohibition placed on compensatory damages by accident compensation legislation. The Privy Council recognised in Bottrill that the local court was better placed to make the evaluation of the relevant social considerations that a decision concerning the test for exemplary damages requires. The Judges in the majority were clear that they were making their own evaluation of the policy considerations only because they disagreed with the Court of Appeal’s view that, as a matter of principle, exemplary damages in negligence were confined to advertent conduct.[297] Of relevance also is that the Judges of the Privy Council were divided, with two joining what became the majority judgment delivered by Lord Nicholls, and two approving the approach taken by the Court of Appeal. Together, these considerations provide a strong argument for the Court to consider whether to depart from Bottrill.
[297]At [57].
[213] The issue is before us directly as the remaining ground of the Crown’s application, which is effectively a strike-out application. That context does not warrant our refusing to determine it. We must do so assuming that the facts pleaded by the appellant can be proved. In this respect the position this Court faces is the same as that faced by the Court of Appeal when it decided Donselaar. Nor does the lack of a determination of the Court of Appeal or High Court on the issue in this case provide a reason for declining to reconsider Bottrill. That will invariably be the position because those courts will be bound to apply the Privy Council decision concerned. Indeed, the procedure has advantages in the present case. If the claim survives the strike-out application, this Court’s judgment will clarify the basis on which an action is to be tried, avoiding the risk of appeals possibly making a retrial necessary.
[214] These are cogent reasons that persuade me the Court should address the arguments on the scope of availability of exemplary damages in negligence cases, involving personal injury.
The test for exemplary damages
[215] Although New Zealand departed from Rookes v Barnard in relation to its restriction of the categories of tortious conduct for which an award of exemplary damages might be made, the distinction Lord Devlin drew between aggravated damages and exemplary damages has been applied in New Zealand. Aggravated damages may be awarded to compensate for additional suffering for injury to feelings and dignity that results from the manner of a defendant’s conduct. Exemplary damages are separate and are awarded to punish and deter a wrongdoer; as Lord Devlin put it, “to teach a wrongdoer that tort does not pay”.[298] The clarification sets limits on the scope of exemplary damages which emphasise that they have no element of compensation. Lord Devlin also emphasised that awards of exemplary damages may only be made to a plaintiff who is the victim of the behaviour that is being punished. A person who is unaffected has no claim.[299]
[298]At 1227.
[299]Ibid.
[216] Determining the circumstances in which exemplary damages should be awarded in negligence has, however, been a controversial issue for the New Zealand courts. Negligent conduct covers a range of culpability and it has been difficult to specify when it reaches the threshold that makes a punitive award of damages appropriate. This difficulty is well demonstrated by the different views of the Privy Council and Court of Appeal in Bottrill, the judgments of each Court being reached by a majority.
[217] In Bottrill, a plurality of three of the five Judges of the Court of Appeal held that exemplary damages could be awarded for negligence only where the defendant is subjectively aware of the risk to which the negligent conduct exposed the plaintiff and acts deliberately or recklessly in taking that risk.[300] They could not be awarded if the conduct was merely inadvertent. This test required an objective assessment of whether there was deliberate or reckless risk taking, the latter turning on whether the defendant was subjectively reckless. The test was described as one of “conscious risk taking”, which was satisfied:[301]
where on an objective assessment the defendant had an actual appreciation of the risk or was recklessly indifferent to the consequences and must be taken to have been content for the consequences to happen as they did.
[300]At [41], [62] and [63] per Richardson P, Gault and Blanchard JJ.
[301]At [62].
[218] The three Judges decided that the element of the defendant’s state of mind under this test could be satisfied by proving circumstances which justified an inference of the defendant’s awareness of the risk and acceptance it could well happen. They emphasised that for there to be conscious risk taking, where there is no intention to harm, the “quality” of the defendant’s conduct has to so closely approach that involved in an intentional harming that the appropriate response is civil punishment.[302] An actual appreciation of the risk and taking it while hoping no harm would ensue would meet this test. So would a case where, viewed objectively, the defendant must have appreciated the risk and gone ahead indifferent to consequences.
[302]At [43].
[219] Tipping J, in a concurring judgment, stated the test in similar terms. He said that the level and kind of negligence had to amount “to a conscious, outrageous and flagrant disregard for the plaintiff’s safety, meriting condemnation and punishment.”[303] He agreed that the subjective state of mind involved in conscious appreciation of the risk to the plaintiff’s safety would usually be inferred from objective circumstances.[304]
[303]At [174].
[304]At [175].
[220] On appeal the Privy Council reversed the Court of Appeal’s judgment. The Judges in the minority[305] reasoned that, as the rationale for exemplary damages was punishment, rather than marking disapproval of outrageous conduct, exemplary damages should not be imposed, in the absence of intent to cause harm, unless the defendant had been subjectively reckless. They added as a qualification that the Court might infer subjective negligence where it found gross negligence.
[305]Lord Hutton and Lord Millett.
[221] The Privy Council majority[306] said that, ordinarily, a defendant who committed a tort would be required to make good the plaintiff’s loss including, where appropriate, by payment of aggravated damages. Exceptionally, exemplary damages could be awarded, in addition, to punish a defendant for conduct that was so outrageous that compensation was an inadequate response.[307] The cases involving negligence in which exemplary damages were appropriate would be exceptional and overwhelmingly cases in which the conduct was intentional or involved conscious recklessness closely approaching intentional wrongdoing.[308] The exceptional cases meeting the outrageousness test would also involve either intentional wrongdoing, with additional features making the conduct particularly appalling, or reckless indifference evoking a sense of outrage.[309] The Privy Council said that such conscious recklessness very closely approaches intentional wrongdoing.[310]
[306]Lord Nicholls, Lord Hope and Lord Rodger.
[307]At [20].
[308]At [24].
[309]As this case does not concern the question of whether exemplary damages could be awarded where deliberate but non-tortious outrageous conduct follows the commission of an inadvertent tort, that issue is better left to be determined another day.
[310]At [23].
[222] The majority also said that absence of intentional wrongdoing or conscious recklessness in any case pointed strongly away from the circumstances being appropriate for an award of exemplary damages. But even so, if the defendant’s conduct satisfied the outrageous test and condemnation was called for, the judge had power to award exemplary damages.[311]
[311]At [37].
[223] The basis for this additional element in the test is the attitude “never say never”. It was expressed this way:[312]
However, if experience in the law teaches anything, it is that sooner or later the unexpected and exceptional event is bound to occur. It would be imprudent to assume that, in the absence of intentional wrongdoing or conscious recklessness, a defendant’s negligent conduct will never give rise to a justifiable feeling of outrage calling for an award of exemplary damages. “Never say never” is a sound judicial admonition. There may be the rare case where the defendant departed so far and so flagrantly from the dictates of ordinary or professional precepts of prudence, or standards of care, that his conduct satisfied this test even though he was not consciously reckless.
[312]At [26] (original emphasis).
[224] Thomas J, who dissented in the Court of Appeal, had proposed a more straightforward test. Exemplary damages would be awarded if the negligent conduct was so outrageous and contumelious as to warrant an award.[313] In rare cases features of negligent conduct would be so flagrant that exemplary damages should be warranted notwithstanding the defendant was not subjectively aware of the risk created and did not deliberately take the risk.[314] It would be sufficient if the wrongdoer ought to have known that the conduct posed an unreasonable risk. This reflected the Judge’s view that exemplary damages served other functions of the law of torts as well as punishment.[315]
[313]At [77].
[314]At [80].
[315]At [95] and [101].
[225] As well, Thomas J considered that the distinction, drawn by the Court of Appeal majority, between inadvertent and advertent negligence would not be easy to draw in practice. It would necessarily distract the courts from focusing on reprehensible features said to warrant the remedy.[316]
[316]At [144].
[226] The Privy Council majority’s threshold for an award of exemplary damages accordingly adopts an ultimate criterion of outrageousness. Lord Nicholls referred to a difference in degree, involving the presence or absence of something extra which turns a case of grossly negligent conduct into conduct that is “quite outrageous”.[317] That conduct would qualify for an award of exemplary damages.
[317]At [33].
[227] At the same time, however, the majority also recognised the importance of an intentional or subjectively reckless element in deciding if wrongful conduct of a defendant should be subject of an exemplary damages award. Lord Nicholls said that it would be rare that cases not exhibiting either of these features will justify awards of exemplary damages and that their absence pointed strongly against any award.
[228] Indeed, this factor is given special emphasis in the judgment:[318]
Their Lordships cannot overemphasise what has already been indicated more than once. The cases where it is appropriate to make an award of exemplary damages are exceptional. The cases where it is appropriate to make an award of exemplary damages in the absence of intentional wrongdoing or conscious recklessness will be exceptional and rare indeed. It must always be kept in mind that compensation is not the purpose of exemplary damages. A perceived need for compensation, or further compensation, is not a proper basis for making an award of exemplary damages.
[318]At [64].
[229] These factors indicate that the Privy Council’s approach was largely an endorsement of the Court of Appeal’s view of the need for elements of intention or subjective recklessness before misconduct would qualify for exemplary damages. But as well, the Judges wanted to leave open as an additional possibility an award for outrageous conduct outside of that area. This was on the basis it seems that courts should “never say never”.
[230] On this analysis, which reflects by far the greater part of the Privy Council majority’s reasoning, there is probably little practical difference between the test those Judges favour and that favoured by the majority of the Court of Appeal.
[231] There is, however, a passage in the Privy Council’s judgment which, to my mind, is not consistent with this analysis. After referring to the “broad-based rationale” for exemplary damages, being that conduct committing a civil wrong was so outrageous that something more than an order to pay compensation was required, Lord Nicholls said:[319]
The Court’s discretionary jurisdiction may be expected to extend to all cases of tortious wrongdoing where the defendant’s conduct satisfies this criterion of outrageousness. Any departure from this principle needs to be justified. Otherwise the law lacks coherence. It could not be right that certain types of outrageous conduct as described above should attract the Court’s jurisdiction to award exemplary damages and other types of conduct, satisfying the same test of outrageousness, should not, unless there exists between these types a rational distinction sufficient to justify such a significant difference in treatment.
[319]At [22].
[232] This passage appears to set out a much broader approach to exemplary damages than is generally contemplated by the remainder of the judgment. Under it, exemplary damages may be awarded in tort wherever the wrongful conduct is outrageous and contumelious. This is not consistent with the general emphasis on an exceptional remedy that is rarely awarded in the absence of subjective recklessness. Nor is this test consistent with the theme in the majority judgment of allowing a narrow exception for an unexpected case.
[233] The majority[320] referred to the judgment of the Supreme Court of Canada in Whiten v Pilot Insurance Co,[321] observing that the Supreme Court had approved a “broader approach”, earlier adopted by the British Columbia Court of Appeal,[322] that punitive damages ought to be available whenever the conduct of the defendant was such as to merit condemnation by the court. The Supreme Court’s observation was, however, made in a passage in its judgment in which it had declined to take the categorisation approach to exemplary damages adopted in Rookes v Barnard.[323] The Supreme Court’s approval of a “broader approach” was confined to that context and had no wider significance.
[320]At [46].
[321]Whiten v Pilot Insurance Co 2002 SCC 18, [2002] 1 SCR 595 at [67].
[322]In Robitaille v Vancouver Hockey Club Ltd (1981) 124 DLR (3d) 228 (BCCA) at 250.
[323]Whiten at [67].
[234] The Supreme Court of Canada saw the mechanism for control of exemplary damages as lying not in restrictions of the categories of cases but in rationally determining circumstances that warrant punishment in addition to compensation in a civil action. It concluded that:[324]
[324]Ibid.
It is in the nature of the remedy that punitive damages will largely be restricted to intentional torts.
As well, it emphasised the importance of both the state of mind and conduct of the defendant. A principled approach was desirable.[325] The position taken in subsequent decisions of the Supreme Court of Canada also gives no support to the inclusion of a separate criterion of outrageousness as a sufficient basis for an award of exemplary damages. In Honda Canada Inc v Keays, the majority judgment said:[326]
[P]unitive damages are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own.
And later, in emphasising the exceptional nature of an award of exemplary damages:[327]
Another important thing to be considered is that conduct meriting punitive damages awards must be “harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”.
[325]At [70].
[326]Honda Canada Inc v Keays 2008 SCC 39, [2008] 2 SCR 362 at [62]. See also Prebushewski v Dodge City Auto (1984) Ltd 2005 SCC 28, [2005] 1 SCR 649 at [25] and [37], where the Supreme Court held that a statutory provision which allowed for awards of exemplary damages for “wilful” violations of the Act was less onerous than the “more exacting” common law test for exemplary damages which required outrageousness in addition to advertent conduct.
[327]At [68]. See also Performance Industries Ltd v Sylvan Lake Golf & Tennis Club Ltd 2002 SCC 19, [2002] 1 SCR 678, where the Supreme Court reiterated that exemplary damages would only be awarded in exceptional cases and where the award would serve a rational purpose.
[235] As I have earlier indicated, in 1982 New Zealand’s position on exemplary damages was aligned with the law in Australia rather than the more restrictive approach traditionally taken in England. The leading decision on the availability of exemplary damages in negligence in that jurisdiction is the High Court of Australia’s judgment in Gray v Motor Accident Commission.[328]
[328]Gray v Motor Accident Commission [1998] HCA 70, (1998) 196 CLR 1.
[236] In Bottrill, the Privy Council majority said that Gray provided an instance of its view that, while other jurisdictions place emphasis on the presence of intentional misconduct or conscious recklessness, they “invariably qualify their remarks by leaving open the possibility of an award of exemplary damages in other cases”.[329] It is true that in Gray the majority’s judgment[330] observes that the phrase “conscious wrongdoing in contumelious disregard of another’s rights” describes “at least the greater part of” the field and that the remedy is said to arise “chiefly, if not exclusively” in such cases.[331] But these observations are respectively made in the course of a general discussion of the kinds of cases in which exemplary damages are awarded and the exceptional nature of the remedy. The judgment then identifies as a different and narrower issue whether exemplary damages are available for negligence, rather than some intentional wrong, on which it concludes:[332]
[E]xemplary damages could not properly be awarded in a case of alleged negligence in which there was no conscious wrongdoing by the defendant. Ordinarily, then, questions of exemplary damages will not arise in most negligence cases be they motor accident or other kinds of case. But there can be cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiff or persons in the position of the plaintiff. Cases of an employer’s failure to provide a safe system of work for employees in which it is demonstrated that the employer, well knowing of an extreme danger thus created, persisted in employing the unsafe system might, perhaps, be of that latter kind. No doubt other examples can be found.
[329]At [45].
[330]Per Gleeson CJ, McHugh, Gummow and Hayne JJ.
[331]At [14] and [20].
[332]At [22]. Kirby J dissented at [84]–[86].
[237] I regard it as clear that the High Court of Australia in Gray did not wish to leave open the possibility of an award of exemplary damages in negligence actions, not involving conscious wrongdoing.[333] A decision by this Court not to follow the Privy Council, and to approve the Court of Appeal’s formulation of the test for liability for exemplary damages in negligence would bring New Zealand law into line with the view of the High Court of Australia.
[333]This is confirmed by the High Court’s subsequent judgment in New South Wales v Ibbett [2006] HCA 57, (2006) 229 CLR 638 at [47] and in particular footnote 56.
[238] Two linked considerations which underpinned the Court of Appeal’s reasoning in Bottrill are, in my opinion, of fundamental importance in deciding when exemplary damages are to be awarded. The first is that the primary purpose of exemplary damages is to punish a defendant for wrongful conduct. Deterrence of the offender is likely to be the effect of an award, as is vindication of the plaintiff who suffers harm and receives the damages. But these are both incidental consequences and should not divert the courts from the punitive purpose of the remedy.
[239] Secondly, because the focus of the courts is on punishment, it is the culpability of the defendant’s conduct that justifies an award of exemplary damages. Assessment of the degree of culpability is straightforward where a defendant intentionally causes harm. Where that is not the case, it is more problematic. If the claim is based on negligent acts, the defendant’s conduct must be sufficiently egregious to be deserving of the punitive remedy. The Court of Appeal’s approach in Bottrill was to set the threshold at acts taken with conscious recklessness as to the consequences. This test provides for the mental element that is appropriate for actions to be punished. That is not the case, however, with a test based on perceptions of outrageousness.[334]
[334]Carol Harlow “A Punitive Role for Tort Law?” in Linda Pearson, Carol Harlow and Michael Taggart (eds) Administrative Law in a Changing State (Hart Publishing Ltd, Oxford, 2008) 247 points out that the test for exemplary damages should be co-extensive with its rationale of punishment and that it would not be right to punish a defendant in the absence of a guilty mind: see 252–253, 269 and 270.
[240] The other consideration of particular importance, which arises in the New Zealand context, is the accident compensation scheme and in particular its legislative bar on recovery of damages as compensation for personal injury. The Privy Council majority doubted that an increase in the number of awards of exemplary damages would follow from the addition of the test stated in its decision, because the settled practice in New Zealand was for judges to exercise the discretion to make awards of exemplary damages with great restraint.
[241] The conclusion I reach on the likely impact of continuing the Privy Council’s approach is to the contrary. I consider it will be destructive of the exceptional nature of the remedy. This is for two reasons. First, since 1992, the accident compensation legislation has not provided lump sum benefits for non-pecuniary loss. Although this development cannot, as a matter of principle, justify lowering the threshold for awards, it has unsurprisingly resulted in an increased number of claims for exemplary damages. The reality is that the only way those suffering personal injury can obtain capital payments in civil proceedings is through bringing claims for exemplary damages when they are available and, as earlier discussed, plaintiffs may bring proceedings claiming such damages as the sole remedy.
[242] The second reason is a point made by the minority Judges of the Privy Council. If plaintiffs are not required to establish intent, or subjective recklessness, of a wrongdoer but can recover exemplary damages if the conduct is outrageous, the standard becomes a very uncertain one. As the minority said:[335]
Outrage is a subjective concept and if a sense of outrage is the principal factor to guide a Judge, individual Judges might well take differing views as to whether grossly negligent conduct in a particular case should be viewed as outrageous.
[335]At [81].
[243] The problem with a stand-alone outrageousness test is that it requires the court to make an assessment without reference to precise criteria. Judges must apply the remedy if, as a matter of impression, they consider it appropriate in the case. The absence of principle tends to put the remedy in the gift of the trial court. If this test is retained, there will be considerable uncertainty within the legal system as to when such damages are available. Like cases will not be decided alike.[336] This, coupled with the strictures of the regime of limited statutory compensation, will lead to many claims and multiple appeals against decisions where the minds of judges will reasonably differ.
[336]These points are made in the valuable article: Peter Birks “Three Kinds of Objection to Discretionary Remedialism” (2000) 29 UWAL Rev 1 at 7 and 16.
[244] One such case is McDermott v Wallace. In the District Court, the Judge was “certain” that the defendant’s conduct met the test of outrageousness.[337] On appeal, the High Court Judge decided that the defendant’s conduct “fell far short” of outrageous conduct.[338] The High Court Judge did, however, grant leave to appeal to the Court of Appeal, recognising that the Privy Council’s test was not easy to apply in practice.[339] The Court of Appeal allowed the appeal on liability and upheld the District Court’s decision, observing that the District Court Judge was undertaking an evaluative role which required compelling reason for her views to be departed from.[340] It had not been shown that the Judge’s decision was plainly wrong.
[337]McDermott v Wallace DC Wellington NP296/97, 30 May 2003 at [74].
[338]Wallace v McDermott [2004] NZAR 747 (HC) at [27].
[339]Wallace v McDermott HC Wellington CIV-2003-485-1427, 20 September 2004 at [5].
[340]McDermott v Wallace [2005] 3 NZLR 661 (CA).
[245] It seems very unlikely on the Privy Council’s approach that the established approach of restraint in awarding exemplary damages could be maintained. That approach is built on the principle that there is a general need for intentional or conscious wrongdoing for exemplary damages to be awarded. The tendency will be for courts to apply a test which is solely that of outrageousness. Conscious recklessness will be an alternative test that ceases to be applied.
[246] For these reasons, I am satisfied that New Zealand should adopt an approach that confines all awards of exemplary damages to cases where the defendant acted intentionally or was subjectively reckless. I would not confine this principle to cases involving claims for such damages arising from personal injury.
Conclusion
[247] It follows that I am in agreement with Tipping J as to the test to be applied in respect of the appellant’s claim for exemplary damages, as to the disposition of the appeal, and as to the future course of the proceeding.
WILSON J
[248] This appeal raises three issues. Is the appellant’s claim for exemplary damages barred by s 317 of the Accident Compensation Act 2001[341] or by s 86 of the State Sector Act 1988, in combination with s 6(1) of the Crown Proceedings Act 1950? If not, should this Court revisit the decision of the Privy Council in Bottrill v A?[342] If it should, what test should be applied in determining whether the appellant can recover exemplary damages?
[341]For convenience, I use the current title of the accident compensation legislation, the name of which has come full circle from the Accident Compensation Acts 1972 and 1982 to the Accident Rehabilitation and Compensation Insurance Act 1992, the Accident Insurance Act 1998, the Injury Prevention, Rehabilitation, and Compensation Act 2001, and now back to the Accident Compensation Act 2001.
[342] Bottrill v A [2002] UKPC 44, [2003] 2 NZLR 721.
[249] These issues are all comprehensively discussed in the judgments of the other members of the Court. I will not repeat what they have said in any detail but, because of the importance of the issues, I set out as follows my views and why, in summary, I have reached them.
[250] I agree with Tipping and McGrath JJ[343] that neither s 317 nor s 86 and s 6(1) bar the present claim. It appears to me however that, in order to reconcile s 86 and s 6, it is necessary either to read s 86 as leaving employees who act in good faith liable to be sued, but not liable to the Crown, or to read s 6(4) as not applying to s 86. Neither interpretation appears to me to accord with the plain meaning of the relevant words. My view, like that of McGrath J, is that the conflict between the sections should be resolved by giving full effect to the words of s 86, with the consequence that public servants acting in good faith do not incur any personal liability but the Crown is liable for their acts or omissions. To leave those employees exposed to being sued seems to me to be not only contrary to the words of s 86 but also to be an outcome which Parliament would not have intended in enacting that section against the background of s 6.
[343]Tipping J at [84]–[90] (s 317) and [173]–[174] (s 86/s 6(1)); and McGrath J at [184]–[193] (s 86/s 6(1)) and [199]–[203] (s 317).
[251] Judgments of the Privy Council on New Zealand appeals bind the other courts in this country. Other Privy Council decisions prior to the establishment of the Supreme Court are probably also binding although, as the Court of Appeal noted in R v Chilton,[344] the point is not free from doubt. What is not in doubt however is that Privy Council decisions, whether on New Zealand appeals or otherwise, are not binding on this Court. Indeed, as McGrath J points out,[345] one of the purposes of establishing the Supreme Court was to enable important legal matters “to be resolved with an understanding of New Zealand conditions, history, and traditions”.[346] To fulfil that purpose, the Judges of this Court must be prepared to depart, if they think it right to do so, from a position taken by Judges from the other side of the world whose understanding of New Zealand conditions was necessarily limited. This Court will always have regard to the value of certainty and consistency in the law and will give great weight to a relevant Privy Council decision, but is free to depart from it. Because the courts which have considered a matter on appeal to the Supreme Court will have been bound to apply a relevant Privy Council judgment, they are unlikely to have expressed their views on whether it should be followed and this Court will therefore not have the benefit of those views. That is regrettable but unavoidable.
[344] R v Chilton [2006] 2 NZLR 341 (CA) at [112]–[113].
[345] At [208].
[346] Supreme Court Act 2003, s 3(1)(a)(ii).
[252] There are a number of reasons which in combination make the present appeal a paradigm for consideration of whether or not to follow the Privy Council. First, their Lordships reversed in Bottrill a judgment of the Court of Appeal[347] reached by a majority of four to one.[348] Secondly, the advice of the Board was given by a narrow majority, three to two.[349] Thirdly, the divergence of judicial thought in this area of the law has been such that the views of the majority and minority were each supported by persuasive authority. Fourthly, Bottrill involved a consideration of the accident compensation scheme, which is unique to New Zealand. Fifthly, Bottrill has not so far as I am aware been relied on as a precedent to any significant degree, in part because the hearing of proceedings in which it would have been relevant has been deferred pending the outcome of the present appeal.
[347] Bottrill v A [2001] 3 NZLR 622 (CA).
[348] Richardson P and Gault, Blanchard and Tipping JJ; Thomas J dissented.
[349]Lord Nicholls, Lord Hope and Lord Rodger were the majority; Lord Hutton and Lord Millett the minority.
[253] What then should be the test for the award of exemplary damages? This question comes down to a choice between two possible approaches. Exemplary damages could be awarded whenever the conduct of the defendant can be characterised as “outrageous”, as the Chief Justice has concluded, or they could be confined to where the conduct of the defendant is intentional or subjectively (consciously) reckless, as Blanchard, Tipping and McGrath JJ have held. For the following reasons, I prefer the latter approach.
[254] Exemplary damages are awarded to punish the defendant. The focus should therefore be on the mind of the defendant, in order to decide whether punishment is deserved. This focus is achieved by adopting a test of intention or subjective recklessness, but not by a test of outrageousness which requires an assessment of how the defendant’s conduct appears to others. That assessment may well be influenced by how those making it view the consequences, possibly unintended and unforeseeable, of the conduct.
[255] As a related point, whether conduct appears outrageous is a question of impression. In contrast, whether the defendant acted intentionally or with subjective recklessness, by deliberately running a risk, is a more precise and certain standard. While different triers of facts, be they judges or juries, may reach different conclusions on the same facts as to whether that standard is satisfied, the possibility
of like cases not being decided alike will be significantly increased if the test is whether those making the assessment are outraged by what the defendant has done or failed to do.[350] Undesirably, the outcome of the trial will therefore be much less predictable and settlement will be more difficult.
[350]McDermott v Wallace [2005] 3 NZLR 661 (CA), referred to by McGrath J at [244], provides a striking example.
[256] As I have already noted, there has been a wide divergence in the views expressed by judges as to what the test should be. It seems to me however that the weight of authority supports a test of intention or subjective recklessness.[351]
[351]See the discussion by Blanchard J at [52]–[56]; Tipping J at [92]–[94], [136]–[149] and [162]–[171]; and McGrath J at [233]–[237].
[257] The value of deterrence is a possible justification for exemplary damages. That consideration cannot however support the adoption of a test of “outrageousness”. An award of exemplary damages might deter the defendant from intentionally repeating the punished conduct or knowingly running the same risk again, or deter others who were aware of the award from knowingly acting in a similar way. Those who were not conscious of the risk could not however be deterred because the question of whether they should proceed, notwithstanding the risk, would not even cross their mind.
[258] Exemplary damages are anomalous in that, if awarded, they confer a windfall on a plaintiff who has already been compensated to the extent prescribed by law (the accident compensation scheme where there is personal injury, otherwise the common law). To the extent that the conduct of a defendant has aggravated the damage to a plaintiff entitled to compensatory damages, the plaintiff can and should be compensated through an award of aggravated damages. If exemplary damages were now being introduced into our law, there would be a good argument that, if awarded, they should be paid to the State. Being punitive in nature, such damages are closely analogous to fines, which are paid to the State (in contrast to sentences of reparation which are paid to victims and are compensatory in nature).[352] A restrictive rather
than an expansive approach should therefore be adopted in considering the scope of exemplary damages.
[352] Sentencing Act 2002, s 32.
[259] For these reasons, I think that the test should be whether a defendant has acted intentionally or with subjective recklessness. I would not confine this principle to claims resulting from personal injury. I cannot see any reason for doing so, and it would I think be undesirable to leave undecided the question of whether the principle is of more general application.
[260] Finally, I record my view that it is right that the test to be applied has been settled by this Court prior to the trial of the appellant’s claim. The question of what should be the test does not turn in any way on the resolution at trial of questions of fact. If the Bottrill test remained the law, it would have to be applied at trial. If the appellant succeeded and this Court subsequently changed the test, a new trial would be required. The parties might agree that the claim should be considered at trial on the alternative bases of “subjective recklessness” and “outrageousness” but that would further complicate what will in any event be a complex trial. If there is to be a jury trial, settling the issues on the alternative bases and explaining them to the jury would be extraordinarily difficult exercises.
[261] I therefore agree that the appeal should be allowed, with the consequences proposed by Tipping J.[353]
[353] At [180].
Solicitors:
Dennis Gates, Whangaparaoa for Appellant
Crown Law Office, Wellington for Respondent
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