S v Attorney-General

[2003] NZCA 149

IN THE COURT OF APPEAL OF NEW ZEALAND

CA43/02

BETWEENS

Appellant

ANDTHE ATTORNEY-GENERAL

Respondent

Hearing:7, 8 and 9 April 2003

Coram:Blanchard J
Tipping J
McGrath J
Anderson J
Glazebrook J

Appearances:  S M Cooper and R H E Ablett-Hampson for Appellant

H S Hancock, C J Mathieson and I C Vernon for Respondent

Judgment:15 July 2003 

JUDGMENTS OF THE COURT

Judgments
Para No
Blanchard, McGrath, Anderson and Glazebrook JJ	[1]
TIPPING J	[97]

BLANCHARD, McGRATH, ANDERSON AND GLAZEBROOK JJ (DELIVERED BY BLANCHARD J)

Introduction

[1]       This appeal and the appeal in the case of W v Attorney-General, CA227/03, in which judgment is also delivered today, concern claims for compensatory and exemplary damages against the Attorney-General on behalf of the Department of Social Welfare (as successor to the Department of Education) by victims of child abuse, including sexual molestation, committed by foster parents with whom they had been placed by the Superintendent of Child Welfare acting under the Child Welfare Act 1925.  The abuse occurred before 1 April 1974 and hence before the first accident compensation legislation came into force.  The findings in the High Court of abuse by the foster parents are accepted by the respondent.

[2]       The primary questions raised by the appeal and the Crown’s cross-appeal relate to whether the claims are barred under the Limitation Act 1950 and/or because the appellant had cover under the Accident Rehabilitation and Compensation Insurance Act 1992 (the ARCI Act); whether the Crown is liable for breach of a fiduciary duty owed to the appellant; whether the Crown is vicariously liable for the tortious acts of the foster parents; and whether this is an appropriate case for an award of exemplary damages against the Crown.

The High Court judgment – factual findings

[3]       We will call the plaintiff by his initials BS.  The facts of his case are fully recounted in the judgment of Ronald Young J which is reported at [2002] NZFLR 295.  We can therefore provide a shorter version although the complexity of the facts requires more than a mere summary.

[4]       BS was born on 15 December 1958.  He was one of eight children of a Mr and Mrs G who lived in North Otago.  His mother suffered recurrent mental illness.  His father seems to have been of limited ability.  Both accepted that the children needed to be cared for by the Department and that placement with foster parents was desirable.  The matter was handled with a degree of informality.  BS and his three brothers were classified by the Department as being subject to preventive supervision, a category without statutory recognition.  It was applied to children from needy families and was a means by which the Department was able to provide financial support.

[5]       It was considered better that BS and his three brothers should, if possible, be kept together.  It was also hoped that they could be adopted together.  In April 1960 Mr and Mrs G gave their consent.  In the same month BS was placed with a Mr and Mrs S with a view to adoption by them along with his three brothers who also came under their foster care.

[6]       There was an issue at trial over whether Mr and Mrs S were licensed by the Superintendent to care for the children under s43 of the Infants Act 1908.  The Judge concluded, on balance, that they were licensed.  That finding was challenged only faintly in this Court.  It seems to us that nothing turns on the point since it is plain from the evidence that the Department considered Mr and Mrs S to be suitable foster parents and that it would have licensed them if there had been a previous omission to do so and that had been drawn to the Department’s attention.  Any absence of a licence at a relevant time was not shown to be causative of the abuse suffered by BS.

[7]       It was also asserted at trial that, instead of placing BS in this informal way with the foster parents, the Superintendent should have sought an order making him a ward of the State.  It was suggested that he should then have been kept in a State children’s home.  The Judge rejected this claim.  He considered that, in the circumstances, adoption was understandably seen as the preferable course for the four boys.  He remarked that keeping siblings together as far as possible was seen as highly desirable.  The chances of finding another home which would adopt the four boys were slim given the mother’s regular admission to a psychiatric hospital, the perception that some of the boys were of limited intellectual capacity and the fact that significant numbers of babies, seen as more attractive for adoption, were available.  (It can be observed that to have kept BS in an institution except for a limited time may have been contrary to s19 of the Child Welfare Act – see para [51] below.)

[8]       Adoption could not proceed immediately, however, because Mr and Mrs S were not yet in a financial position to support themselves and the children on a small farm which they had recently purchased.  State assistance under the preventive supervision scheme was required.  It was also considered unwise to proceed with an adoption before all the boys had bonded with the prospective adoptive parents.

[9]       There was no application for an interim adoption order.  Ronald Young J considered an argument that the placement was unlawful.  He found that an exemption from the need for an interim order, applying where a child was already in the care of the adoptive parents when placed for adoption, had not covered the situation.  But he was also of the view that the purpose of the legislation had been adhered to.  In his view the breach was “no more than technical”.  There was still protection of the children through a licensing system.  He could see

…little that is objectionable in the circumstances under which the four boys were placed with the S family for adoption.  It seemed the best option at the time to Child Welfare and it probably was.

The Judge also recorded his view that while an order making the children State wards could have been made and would not have stood in the way of adoption, there seemed little reason to make such an application.  He was also satisfied that Child Welfare had properly investigated Mr and Mrs S.  It had continued to monitor the placement with them, with glowing reports.  The Judge accepted that the longer the boys were left with Mr and Mrs S, the more difficult it would be to shift them, but the reality was that there were “few acceptable alternatives for the boys and certainly none as agreeable as the S’s appeared to be”.

[10]     The financial position of Mr and Mrs S did not improve and Child Welfare continued to provide monetary assistance.  Unfortunately, too, the relationship between the foster parents was breaking down.  Unbeknown to the Department, Mr S was committing assaults on Mrs S and also physically abusing BS on occasions.  Worse still, MS, a natural child of Mr and Mrs S aged about 30 and of limited intelligence, began sexually assaulting BS.  According to the evidence of BS, this included forcible anal penetration.  BS said he was only five and a half years of age when this occurred “on more than one occasion”.  While not doubting the genuineness of the plaintiff’s belief about what had happened to him, and having no doubt at all that BS was physically and sexually assaulted by MS, Ronald Young J was less certain about the reliability of allegations of anal intercourse.  But he saw the distinction as being of little significance in the case overall.

[11]     By August 1963 Child Welfare was concerned about the household and believed that the marriage was probably at an end.  An officer of the Department concluded that Mrs S had been a good mother to the children, who were seen as “a happy family unit” with her and making good progress.  She could not adopt the children on her own but wished to continue to care for them.  Committal proceedings to make the children State wards were considered, but with the intention that the children would in practice remain with Mrs S.  There was some consultation with the natural parents who, having previously believed that the children were already adopted, were nevertheless content for Mrs S to continue to have full care of them.  No committal proceedings were taken.  We agree with Ronald Young J that they are unlikely to have made any practical difference.

[12]     The Judge also rejected the view that the failure to take committal proceedings was motivated by a departmental wish to save money.  Having examined the evidence on that point, we would take the same view.  It is worth noting, as Ronald Young J did, that the Department was conscious of the social stigma involved for a child who was made a State ward.  The power to apply for a committal order was used sparingly.

[13]     In July or August 1964 Mr and Mrs S formally separated and Mrs S moved house with the four boys.  As a licence under the Infants Act was specific to a particular house, it would have lapsed when the move occurred.  The Child Welfare file is silent about whether a further application was made and granted.  The Judge had no doubt that any such application would have been readily granted by Child Welfare given their observation that Mrs S was an excellent parent to the boys, as indeed seems to have been the case up to that time.  She had not to that point been involved in any abuse. 

[14]     After the separation and the move, which was the first of several, Mrs S seemed to change character so far as her relationship with the children was concerned.  She began beating them regularly, particularly on Friday evenings, using a studded dog collar on their backs, buttocks and upper legs.  In the case of BS this punishment continued until he was about 14, i.e. until 1972. 

[15]     In 1967, when he was nine, sexual abuse by Mrs S began.  BS shared a bed with his foster mother.  She would take his hand and use it to masturbate herself.  This practice continued regularly, and certainly without his consent, until about July 1968.  The Judge found that all of the alleged physical and sexual abuse by Mr and Mrs S and MS had been proved, save in the limited respect already mentioned.

[16]     The departmental records show regular inspections of the homes in which the family was living from time to time.  The reports remained generally positive although it has to be said that they did overlook the fact that the sleeping arrangements did not comply with the departmental manual, which required that each child should have a separate bed and no child over the age of six should sleep in a room occupied by any person of the opposite sex over that age. 

[17]     No complaints of abuse of any kind were made by BS or his siblings to departmental officers.  BS appeared to progress reasonably well.  He passed his School Certificate, although not without some difficulty, and was accredited with University Entrance, studying at a university and passing two units part-time.  He dropped out of university and during the 1980s his employment record was patchy.  He was drinking heavily.  A marriage failed after about a year.  He was, however, in continuous employment with a government department from 1991 to 1995. 

[18]     In 1993 Mrs S died.  BS attended her funeral.  He was considerably affected by this event.  He began to discover facts about his childhood.  In 1995 he confronted Mr S and MS about their abuse of him.  He consulted lawyers about suing MS and the Department but did not take any action until 1996 when Mr S also died.  In April 1996 BS began counselling for psychological problems.  In September 1996 he made an application for leave to issue the present proceedings.

[19]     It should also be recorded that he brought a claim against MS which was settled on payment to BS of damages of $20,000 and an amount of costs.  He also made claims under the ARCI Act and received some compensation payments.

High Court judgment – summary

[20]     In summary, and as relevant to this appeal, the findings of Ronald Young J, with an indication of the matters still in contention, are as follows:

(a)A claim for the assault and battery committed by Mr and Mrs S was found to be statute barred.  There is an appeal against that finding.

(b)Claims in negligence and breach of fiduciary duty were found not to be statute barred.  This finding is not the subject of any cross-appeal.

(c)BS had cover under the ARCI Act for his mental injuries and consequently is barred from bringing any claim for compensatory damages for personal injury, including mental injury.  This finding is the subject of an appeal by BS.

(d)The Department owed a duty of care to BS but had not itself been in breach of that duty.  This finding is not appealed by BS. 

(e)A direct claim in negligence, alleging breaches of duty of care by employees of the Department, failed.  There is no appeal.

(f)Mr and Mrs S were negligent when they allowed MS to abuse BS and when they either sexually, physically or emotionally abused him themselves.  The Crown had not argued otherwise.

(g)But for the accident compensation bar, the Crown would have been vicariously liable for Mr and Mrs S’s negligence.   This finding is the subject of a cross-appeal.

(h)There was no breach of fiduciary duty by the Department.  BS appeals this finding.

(i)A claim for exemplary damages against the Crown failed.  BS appeals this finding.

Accident compensation scheme bar?

[21]     The abuse occurred before the first accident compensation statute, the Accident Compensation Act 1972, which came into force on 1 April 1974.  That statute and its successor, the Accident Compensation Act 1982, barred personal injury claims (including, from 1975, claims for mental injury) where there was cover under the scheme but gave no cover for, and did not bar, claims for personal injuries suffered before 1 April 1974.  It is the Crown’s case that the position changed under the ARCI Act as from 1 July 1992.

[22]     The relevant provisions of the ARCI Act are:

4        Definition Of “Personal Injury”

(1)        For the purposes of this Act, personal injury means the death of, or physical injuries to, a person, and any mental injury suffered by that person which is an outcome of those physical injuries to that person, and has the extended meaning assigned to it by section 8(3) of this Act.

…

8        Cover For Personal Injury Occurring In New Zealand

(1)       This Act shall apply in respect of personal injury occurring in New Zealand on or after the 1st day of July 1992 in respect of which there is cover under this Act.

(2)       Cover under this Act shall extend to personal injury which—

(a)       Is caused by an accident to the person concerned; or

(b)       Is caused by gradual process, disease, or infection arising out of and in the course of employment as defined in section 7 or section 11 of this Act; or

(c)       Is medical misadventure as defined in section 5 of this Act; or

(d)       Is a consequence of treatment for personal injury covered by this Act.

(3)       Cover under this Act shall also extend to personal injury that is mental or nervous shock suffered by a person as an outcome of any act of any other person performed on, with, or in relation to the first person (but not on, with, or in relation to any other person), being—

(a)       An act that is within the description of any offence listed in the Schedule 1 to this Act; and

(b)       An act that was performed in New Zealand, or outside New Zealand where the person on, with, or in relation to whom the act was performed was ordinarily resident in New Zealand when the act was actually performed (even if the person is ordinarily resident in New Zealand on the date on which the personal injury is deemed to have been suffered).

(4)       For the purposes of subsection (3) of this section, it is irrelevant that—

(a)       No person can be or has been charged with or convicted of the offence; or

(b)       The alleged offender is incapable of forming criminal intent.

…

11       Cover In Respect Of Personal Injury Caused By Gradual Process, Disease, Or Infection Where Exposure Occurred Before 1 April 1974

(1)       Subject to subsection (2) of this section, where any person suffers personal injury caused by gradual process, disease, or infection from exposure of that person before the 1st day of April 1974 arising out of and in the course of employment within the meaning of section 7 of this Act, the person shall be entitled to cover under this Act as if that personal injury had been suffered on or after the 1st day of July 1992 or such later date as is determined under section 7(5) of this Act.

…

63     Claims

(1)       Every claimant for cover under this Act shall lodge a claim in the prescribed form.

(2)       Except as provided in subsection (2A) of this section, no claimant shall be entitled to any payment in respect of personal injury unless that claimant lodges a claim for cover within 12 months after the date on which the personal injury is suffered.

(2A)     A failure to lodge a claim in respect of personal injury within the time specified in subsection (2) of this section shall not be a bar to payment in respect of that personal injury if the Corporation is of the opinion that the Corporation has not been prejudiced in determining cover or payments in respect of that personal injury by the failure to lodge the claim within the time specified.

(3)       For the purposes of this section, where a claim involves medical misadventure or conduct of a kind described in section 8(3) of this Act, the personal injury shall be deemed to have been suffered on the date on which the person first received treatment for that personal injury as that personal injury, being treatment of a kind for which the Corporation is required or permitted to make payments either directly or under an agreement or contract or arrangement under section 29A of this Act, irrespective of whether or not it makes any payment in the particular case.

(4)       The Corporation shall not make any payment in respect of any rehabilitation, compensation, grant, or allowance for which an itemised written application has not been made.

(5)       Every claim or application made under this section shall be signed by the claimant unless it is necessary for the claim or application to be signed by another person on the claimant's behalf. Any person signing a claim form on behalf of a claimant shall state his or her relationship to the claimant and the reason why the claimant is unable to sign the form.

(6)       The Corporation shall, within 1 month after a duly completed claim for cover in respect of personal injury is first lodged, acknowledge receipt of the claim and provide, for the information of the claimant, general information about the rights of review and appeal available under this Act.

[23]     Ronald Young J found that BS had suffered nervous and mental shock as a result of acts which were within the offences in Schedule 1 to the ARCI Act.  That can be accepted, although it is to be observed that the sexual offences are in that schedule given their modern terminology (post the Crimes Amendment Act 1985 which, for example, substituted the crime of “sexual violation by rape” for “rape”) which might in itself suggest that the ARCI Act was looking forwards rather than backwards.  However, we place no great weight on that point.  The Judge concluded from his consideration of s8(3) and s63(3) that BS had cover under the ARCI Act and that it would be wrong to allow him to claim compensatory damages for his mental injuries arising from the sexual abuse.  His claims for compensatory damages therefore failed.

[24]     It is quite apparent that the argument put before us by Mr Ablett-Hampson, for the appellant, on this aspect of the case differed considerably from that in the High Court.  We accept the gist of his argument, although expressing our conclusions in our own way.

[25]     Three considerations lead us to the view that the extension in s8(3) was not intended to apply unless the mental or nervous shock, i.e. the event giving rise to the shock, occurred after the ARCI Act came into force, and also to the view that there is no coverage under the ARCI Act – and consequently no barring of a common law claim - for the injury suffered by BS.  First, the primary provision in subs(1), which was the subject of the extensions in subs(2) and (3), clearly requires that the personal injury – a phrase which by s4 includes the mental or nervous shock referred to in subs(3) – shall have occurred on or after 1 July 1992.  There is nothing in subs(3) indicating that the extension relates to the time of the injury as well as to its nature.  We do not accept Mr Hancock’s argument that “occurring” in subs(1) refers to the consequences of the injury so that if they manifest themselves after 1 July 1992 the injury can be said to have occurred at that time.  In our view, the word obviously and naturally refers to the event of the accident (the sexual abuse).  If it were otherwise, claims could be brought under the ARCI Act for other forms of latent personal injury suffered long ago but first noticed on or after 1 July 1992.

[26]     Secondly, it is most unlikely that Parliament would have taken the radical step of giving cover for injuries received prior to the first accident compensation scheme, and in the process depriving people of existing common law rights, without making that very explicit, as in fact it did in s11 which does clearly extend cover under the ARCI Act to gradual process injuries resulting from exposure before 1 April 1974 in the course of employment.  Surely if retrospective coverage was also to be given to mental or nervous shock injuries within the description in subs(3) which had occurred before the accident compensation scheme, that would have been done by a section along the lines of s11.

[27]     Thirdly, it is plain that s63, both from its position in the statute – in Part 5 relating to claims for payment – and from its own content, deals not with cover but with the claims process for someone who already has cover under Part 2.  Subsection (3) is said to apply only for the purposes of s63, not more generally.  For that limited purpose, the making of a claim, it gives extra time by deeming the injury to have been suffered on the date of the first treatment.

[28]     Nothing in the parliamentary debates on the ARCI Act indicates an intention to deal with pre-ACC accidents or to take away vested common law rights other than for gradual process injuries.  Parliament’s concern in s63 was with the time for claims for persons with cover under the Act who had not appreciated that they were injured.  Other than in s11, Parliament was not dealing with persons who had no cover because their personal injury pre-dated ACC.

[29]     We were invited to construe the provisions of the ARCI Act by looking at the equivalent sections in the Accident Insurance Act 1998 which does extend cover for this kind of injury suffered before 1 April 1974 where treatment is first received after 1 July 1999.  But that would, we think, be an inapt method of statutory construction.  The question is what Parliament intended in 1992, not what it may have intended in 1998 with some years of further experience of the effects of the scheme.

Limitation Act defences

[30]     A claim in tort for bodily injury, which includes mental injury (Owen v Residual Health Management Unit [2000] 3 NZLR 475), must be brought within six years from the date on which the cause of action accrued and requires leave if filed more than two years and less than six years after the cause of action accrued: s4(1) and (7) Limitation Act 1950. As well as claiming for assault and battery and negligence, BS also alleged breach of fiduciary duty by the Department, in respect of which the same limitation period may be applied by analogy: s4(9).

[31]     The Judge rejected an argument for the defendant that he should treat all the other claims as effectively an action for assault and battery.  He said that the plaintiff’s case was that the defendant by its negligence or breach of fiduciary duty had allowed the foster parents to perpetuate the abuse which in turn caused the plaintiff’s psychiatric disability.  While the assault and battery were essential elements of these causes of action, he said, they were no more than a part of it.

[32]     Dealing with the assault and battery head, Ronald Young J said that BS had always known of the sexual and physical abuse.  He had not consented to assaults by MS and by Mr S.  He had not claimed in relation to MS that he had not understood what was happening to him or that he consented in any way.  As he got older he was able to fight off Mrs S’s assaults with the dog collar.  He was understandably indignant about these assaults.  Mrs S’s sexual abuse was in a rather different category.  While clearly he did not like the experience, “he did not understand it was sexual abuse or what it meant until his early adulthood”.  But the Judge was certain that by his early 20s BS understood what had happened and that it was wrong.  Thus, the Judge said, the only aspect of lack of true consent was “cured” by his knowledge by 1980/1981.  He saw the case, in this respect, as being similar to P v T [1998] 1 NZLR 257 at 260.

[33]     The Judge then considered whether BS’s delay in issuing proceedings was excused because he continued to be under a disability: s24 of the Limitation Act.  He concluded, however, that BS did not suffer from unsoundness of mind in the sense referred to by this Court in T v H [1995] 3 NZLR 37 at 49 and 61. Although the expert evidence was that BS suffered from post traumatic stress disorder (PTSD), the Judge said that none of BS’s symptoms related directly to his capacity to analyse and solve a problem. In his view there was no evidence that the PTSD or related depression inhibited BS’s capacity to sue at all:

At the very time when his PTSD and depression may be seen to be at its worst he was able to bring together the facts which constitute his case and to instruct counsel and to institute proceedings.

[34]     The Judge accordingly concluded that the Limitation Act barred the cause of action based on vicarious liability for assault and battery by Mr and Mrs S and MS.

[35]     But Ronald Young J took the view that the other claims could proceed.  First, he accepted that, applying a reasonable discoverability test, it could not reasonably be said that BS should have discovered that he had a cause of action against the Department until early 1995.  It was not until Mrs S’s death and funeral in 1993, which had a profound effect on BS, that he began for the first time to consider the role Child Welfare had played in his life.  He was not in a position to assess the link between the Department’s actions and his circumstances until he had obtained most of the available departmental file in February/March 1994.  Until then he did not know nor, the Judge thought, even imagine what, if any, role it had or should have played in his life:

He knew nothing of the circumstances under which he came to be with the S’s, of the proposed adoption, of his natural parents’ attitude, of the consideration by Child Welfare of his legal status or of any decision Social Welfare made concerning his welfare.  Nor had he linked at all his physical and sexual abuse with inadequate Child Welfare action.  This was hardly surprising given he knew little or nothing of the facts surrounding Child Welfare’s involvement in his life.

[36]     The Judge also said:

The link with Child Welfare was of course once removed from the primary source of his abuse [in] the S family and thus less clear.  Child Welfare’s involvement in his life was in his eyes no more than an occasional visit during his childhood.  A sophisticated appreciation of the link between Social Welfare’s involvement and his abuse was required.  And an appreciation that there may be facts to be found relevant to Child Welfare’s involvement in his life was also required.  It is hardly surprising he did not consider any such links until the traumatic events surrounding Mrs S’s death.

[37]     Ronald Young J found that it was not until early 1995 that BS made the link between the abuse he suffered as a child and his psychiatric disabilities.  It was clear to the Judge that from 1978 to 1993 when Mrs S died that BS had a number of problems coping with his day to day life, including excessive alcohol consumption, problems with keeping employment and unstable relationships.  After Mrs S’s funeral, as his focus turned to the events of his childhood his mental health deteriorated.  He had serious episodes of depression and a lengthy period off work.

[38]     A forensic psychiatrist, Dr Crawshaw, had prepared two reports at the request of the Court under s100 of the Judicature Act 1908.  He had given evidence and been cross-examined.  It was Dr Crawshaw’s opinion that there was strong evidence that BS’s adult problems with PTSD and depression had their origin in his childhood and emotional, physical and sexual abuse; and that BS did not understand this link until he began counselling.  The PTSD had prevented him making the connection and indeed had dominated his adult life.  The Judge saw no reason to disagree with these conclusions and accepted Dr Crawshaw’s evidence.  He found that the application for leave was therefore made within the two year period from the time when BS could reasonably have been expected to discover the cause of action against the Department.

Assault and battery – awareness of lack of consent and disability

[39]     The appellant’s case is that the Department is vicariously liable for assault and battery committed by the foster parents and MS.  Time therefore runs as it would do if the claim were against the foster parents themselves.  There is no allegation of any concealment by the Department.  The argument for the appellant against the High Court’s finding that he became aware of his lack of consent of the abuse by the time he was 22 or 23 had to overcome the established test, in cases of assault and battery involving child abuse, where damage is not an element of the cause of action, that time begins to run when the victim first has a realisation that he or she did not give a considered and free consent to the abuse: M v H (1999) 18 FRNZ 359 at 363.  We have not been persuaded that, on the basis of this test, the Judge was wrong in his finding.  Indeed, on the evidence before the Court, there could be little doubt that, although the appellant may have remained for many years unable fully to confront and address his experience of child abuse, he remembered what had been done to him and knew that it was wrong.  Crucially, also, he knew that he had not consented to it.  He must have become aware at least by his early 20s that he had always had a right not to consent.  In other words, as the Judge found, by the early 1980s he had discovered that the assault and battery was unconsented to.  It is irrelevant in relation to the tort of assault and battery that he may yet have had no appreciation of the damage thereby caused to him because, as we have already observed, damage is not an element of the tort, as it is with negligence.

[40]     We have found more difficulty with the question of whether BS suffered from a disability within s24 inhibiting him from bringing a proceeding.  Section 24 of the Limitation Act provides:

24       Extension of limitation period in case of disability

If, on the date when any right of action accrued for which a period of limitation is prescribed by or may be prescribed under this Act the person to whom it accrued was under a disability,—

(a)       In the case of any action in respect of the death of or bodily injury to any person, or of any action to recover a penalty or forfeiture or sum by way thereof by virtue of any enactment where the action is brought by an aggrieved party, the right of action shall be deemed to have accrued on the date when the person ceased to be under a disability or died, whichever event first occurred; or

(b)       In any other case the action may be brought before the expiration of 6 years from the date when the person ceased to be under a disability or died, whichever event first occurred,—

notwithstanding that, in any case to which either of the foregoing paragraphs of this section applies, the period of limitation has expired:

…

[41]     Section 2(2) states that for the purposes of the Act a person shall be deemed to be under a disability while he is an infant or of unsound mind.  In T v H [1995] 3 NZLR 37 at 49 Hardie Boys J said that a person who from established psychiatric or psychological causes is unable to bring him or herself to initiate proceedings is to that extent of unsound mind and so under a disability while that condition lasts. Members of the Court took the view that the deeming provision covered the only circumstances in which a disability can be found. Tipping J said, however, that if a plaintiff is shown to be capable of doing some things pertaining to his affairs, but to be mentally unable to pursue his rights then, for limitation purposes, that person should be regarded as “of unsound mind”: p61. That statutory phrase is unfortunately chosen, but all that it involves in this context is that by reason of a recognised mental condition caused by child abuse the plaintiff has been disabled from bringing a legal claim against those with legal responsibility for the abuse.

[42]     Ms Cooper submitted that, in the part of his judgment dealing with incapacity, the Judge had effectively ignored Dr Crawshaw’s evidence, which he accepted in relation to the claim in negligence, of the effects of PTSD and depression on BS’s functioning.  Dr Crawshaw had said that a symptom of PTSD was that a person can develop “tunnel vision”, shutting down stimuli apart from those they are focusing on.  Such a person can do well in some areas of their life but at the expense of other functions.  Dr Crawshaw believed the appellant tried to get on with his life and “parked” or repressed his childhood trauma.  This was a coping mechanism so he could get on with his life.  Counsel said that it makes a nonsense of the test in T v H to expect a victim of abuse to initiate proceedings when, because of the very result of the abuse, they are unable to face up to its consequences and obtain advice or take any action in relation to it. 

[43]     The submission for the respondent, presented by Mr Mathieson, was that, while it might be that confronting issues of abuse and taking legal action were difficult and distressing for BS, as for any other litigant, it did not follow that he was incapable in a legal sense.  Avoidance of the issue did not amount to a lack of capacity or inability to sue.  The Judge was said to have rightly found that none of the symptoms of PTSD related directly to the appellant’s capacity to analyse and solve problems.  Dr Crawshaw had said that the appellant had suffered no damage to his cognitive functioning.  No factual basis had been advanced to disturb the Judge’s findings on disability.

[44]     Our review of the evidence reveals that Dr Crawshaw stated it to be his opinion that BS’s PTSD served as “a significant and major barrier to him bringing proceedings”.  He said that BS became “significantly depressed when he tried to overcome the barrier to him finding out about his past and finding a way to bring about proceedings”.  He described PTSD as being in this respect a major obstacle.  He said it was of some significance that once BS had knowledge of the relevant issues, was “released” by the death of his caregiver, Mrs S, and had appropriate medical and psychological support, he then had vigorously pursued the legal claim.  He was able to overcome the effects of his disorder “when he was given more information, had affirmation that his situation was not right and was given appropriate psychological and medical support.”  Dr Crawshaw was not cross-examined about this opinion, nor was it put to BS himself that he was not disabled from bringing a proceeding for assault and battery at an earlier time.  It seems to us also that the Judge has formed his view that there was no disability by mistakenly concentrating on skills which BS possessed which enabled him to function, albeit somewhat erratically at times, in employment and to pass some exams.  That is, with respect, to miss the point which Dr Crawshaw makes, that such a person can function well in areas of their life which do not require them to face the abuse, as obviously litigation against someone responsible, directly or indirectly, for the abuse would require them to do.  The Judge also referred to the skill and determination which BS brought to the litigation when he did take action – obtaining access to Social Welfare files, obtaining legal advice, instructing counsel and making inquiries for witnesses.  But that would appear to overlook Dr Crawshaw’s further point that, although BS was suffering further trauma, he had been “released” by the death of the person whom he had regarded as his mother and who had sexually abused him and he was being assisted by counselling.

[45]     We have reached a different view from the Judge and conclude that BS was under a disability which operated upon him until 1995.  His proceeding for assault and battery was therefore brought in time.

Crown’s vicarious liability for the negligence of foster parents

[46]     Ronald Young J found that although the Department owed BS a duty of care based on its assumption of his care and control, it had not been established on the facts that the Department had been negligent in its conduct towards him.  As there has been no appeal directed towards that finding, it is unnecessary to review the reasons given by the Judge.  He also found that Mr and Mrs S were themselves in breach of their duty of care to BS to provide for him a reasonable standard of care.  Clearly, he said, they breached that duty “when they allowed [MS] to abuse [him] and when they either sexually, physically or emotionally abused [him] themselves.”  He recorded that the Department had not argued otherwise.  Nor did it do so on this appeal, accepting that there was negligence of this kind by Mr and Mrs S.  Counsel did not seek to argue before us that because the allegations against Mr and Mrs S were of intentional acts of assault and battery, the claim could not be brought in negligence: see Williams v Milotin (1957) 97 CLR 465 at 470 and New South Wales v Lepore (2003) 195 ALR 412 at paras [92], [162] and [311]. On the other hand, in Canada negligence claims for intentional acts appear to have been allowed: see, for example, B(M) v British Columbia [2001] 197 DLR (4^th) 385. We leave the question open. The focus in this part of the case in this Court was, instead, on whether the Crown ought to be held vicariously liable for Mr and Mrs S’s breach of their duty of care in committing their various assaults on BS.

[47]     The Superintendent was exercising powers under the Child Welfare Act 1925, the long title of which provided that it was an Act to make better provision

…with respect to the maintenance, care, and control of children who are specially under the protection of the State; and to provide generally for the protection and training of indigent, neglected, or delinquent children.

[48]     The Superintendent of the Child Welfare Division of the Department of Education was charged with administration of the Act.  Under s7 the Minister of Education was given power to establish institutions, including receiving homes where children might be received and maintained pending the making of arrangements for their admission to suitable private homes, as provided for in the Act, or until they might otherwise be dealt with in accordance with the Act.

[49]     Section 12 empowered the Superintendent, on an application by a parent or guardian or by a person having custody or control of a child, to assume control of the child for such period and on such terms as to cost of maintenance and otherwise as agreed on by the parties.  Although the arrangements made with the natural parents were relatively informal, the Superintendent had clearly assumed control of BS with their agreement.  In respect of such a child, s12(2) gave the Superintendent the same powers and responsibilities as if the child had been committed to his care, i.e. by court order, save that guardianship was not deemed to be vested in the Superintendent.

[50]     Section 13 provided for a committal to be made by a Children’s Court placing a child in the care of the Superintendent if the child was neglected, indigent or delinquent or not under proper control or was living in an environment detrimental to its physical or moral wellbeing.  On committal the Superintendent was given the powers and rights of a guardian: s16. 

[51]     Section 19 directed that children committed to the care of the Superintendent or in respect of whom the Superintendent assumed control by agreement, as he did in the case of BS, should not, save in exceptional cases, be permanently maintained in an institution.  Section 20 provided that the Superintendent or an officer of the Child Welfare Division authorised by the Superintendent was empowered to arrange for “any suitable person” to take charge of such a child on such terms as to maintenance, education, training and employment of the child and as to the payment (if any) to be made by the Superintendent in respect of maintenance as might be agreed between the parties with the approval of the Minister, which approval could be general or could apply to a particular child or children or classes of children.  (No issue about the terms of any ministerial approval has been raised in this case or in W v Attorney-General.)

[52]     The final matter which should be mentioned is that the Superintendent or an officer authorised by him could in their absolute discretion cancel any such arrangement and take possession of the child and place it in an institution and arrange for its being taken in charge by any other suitable person: s20(2).  Section 48(2) of the Infants Act gave a power of inspection of a foster home and the ability to remove a child in cases of emergency.

[53]     Against this background, the Judge concluded that Mr and Mrs S were the agents of Child Welfare in the sense that they undertook its responsibility to look after the children “when their parents abandoned them”.  Child Welfare put Mr and Mrs S in this position by placing BS with them and leaving him with Mrs S.  But Child Welfare retained complete control of the children (if they wished to exercise it).  Mr and Mrs S undertook on behalf of the State “normal” parental duty, receiving payment for BS’s food and clothing but no remuneration.  Child Welfare undertook supervision of their “parenting”.

[54]     The facts exhibited to the Judge some aspects of employer/employee, independent contractor and principal/agent relationships.  Overall, he said, it was difficult to characterise it as any one of these relationships but, because the function of looking after BS was one which Child Welfare was obliged to perform for an abandoned child (either itself through a State or private institution or through foster or adoptive parents), he saw the relationship as more closely one of principal and agent.  He said that the connection between the authority conferred on Mr and Mrs S by the State and the abuse could hardly be closer.

[55]     In determining that the abuse arose in the course of that relationship the Judge referred to the decision of the House of Lords in Lister v Hesley Hall Ltd [2002] 1 AC 215 in which a privately owned school was held vicariously liable for sexual abuse of boys by the warden of their boarding house. Turning to questions of policy, the Judge observed that, in accordance with Lister, there would be vicarious liability if a child in State care in an institution were sexually abused by an employee of the institution.  If State agencies were not to be vicariously liable where they dealt with children informally, thereby avoiding “statutory projections [sic: protections?]” and formal care in favour of informal care, then the very statutory regime designed to protect children might itself be undermined.  The State, either through its institutions or through foster care, had an economic cost in accepting responsibility for children whose parents could not look after them.  The Judge saw an analogy with the position of an employer who uses an employee’s work and skills for economic advantage and might reasonably be expected to have a corresponding liability for losses incurred in the course of the same employment.  He rejected a “floodgates” argument for the Department, saying that if indeed there have been large numbers of foster parents who have abused children in their care, then litigation may expose why this has occurred and in turn improve Social Welfare practice, which the Judge described as a positive outcome.  He noted also the limited opportunity for awards of damages given the accident compensation scheme and the principles governing awards of exemplary damages.  He could see no compelling policy reasons against imposing vicarious liability in the circumstances of the case.

[56]     It was the submission for the respondent on the cross-appeal that the relationship between the child, the foster parents and the State was entirely governed by the 1925 Act; that there was no relationship of employer and employee or other relationship giving rise to an agency and that in any event a sexual violation by a foster parent of the child was outside the scope of any possible agency or authority given by the Superintendent.  While the placement of the child in the home of the foster parents may have created the opportunity for sexual abuse, what had occurred had no nexus with the abuser’s role in the home and was not and could not have been detected by the regular inspections.  The State was not engaged in a profit-making enterprise.  If liability were visited upon it vicariously that cost could not be passed on as a trading company could pass it on to customers.  Imposition of liability would not increase the protection of other children.  It could not create incentives for the protection of children in circumstances where it had been found that there was no negligence by the Department.  It would simply impose an indeterminate liability upon the Crown and would lead to an erosion of the trust which it is essential that the State must have in the foster parents it chooses. 

[57]     Ms Cooper submitted for BS that the appropriate characterisation of the relationship between the foster parents and the State was one of agency.  She said that the appropriate test was whether the Department had the requisite degree of control which made the relationship akin to that of an employment.  The Superintendent had made all the arrangements, approved the homes and possessed the authority to remove a child at any time.  There was supervision through social workers employed by the Department.  The Department controlled the funding of the arrangements.  It could not escape liability by now labelling the foster parents as independent contractors to whom it had entrusted day-to-day care.  Ms Cooper submitted that there was a close connection between what had been done and what the foster parents were engaged to do.  Their care of the child was expected to involve considerable intimacy as is normal between parent and child.  There was naturally an increased risk of sexual abuse in such circumstances.  The sexual abuse by Mrs S had, for instance, taken place in the context of the plaintiff being required to share her bed.  There were not the usual protections that would have applied in a State institution, in particular the greater degree of supervision by persons employed by the Department.  The foster parents had been invested with a high degree of power and intimacy.

[58]     Ms Cooper also submitted that the imposition of liability on the Crown would provide an incentive for more adequate vetting and supervision of foster parents.  Counsel said that there is a considerable cost to society if appropriate mechanisms are not put in place to protect vulnerable children.  She pointed out that victims of sexual abuse are disproportionately represented in the criminal justice system and in users of the mental health services and often need to receive State benefits because childhood abuse has rendered them unable to take up employment.

[59]     The vicarious liability of an employer for sexual abuse committed by an employee has been the subject of recent decisions by the Supreme Court of Canada in Bazley v Curry [1999] 2 SCR 534, (1999) 174 DLR (4^th) 45 and by the House of Lords in Lister v Hesley Hall.  In Bazley a foundation operating residential care facilities for emotionally troubled children was found liable for the paedophilic assaults of an employee whose duties ranged from general supervision to intimate activities like bathing and putting children to bed.  The judgment of McLachlin J, for the Supreme Court, is notable for its explanation of the policy concerns which underlie the imposition of vicarious liability.  There were said to be two fundamental policy concerns: (a) the provision of a just and practical remedy for the harm, and (b) deterrence of future harm.  As to (a), where the employer put into the community an enterprise which carried with it certain risks and they materialised and caused injury to a member of the public, despite the employer’s reasonable efforts, it was fair that the person creating the risk should bear the loss when the risk ripened into harm.  As to deterrence of future harm, the Court said that fixing the employer with responsibility for the employee’s wrongful act, even though the employer was not negligent, might have deterrent effect.  Imaginative and efficient administration and supervision could reduce the risk the employer had introduced into the community.

[60]     The Supreme Court of Canada said that the fundamental question was whether the wrongful act was sufficiently related to the conduct authorised by the employer to justify imposition of vicarious liability.  It would generally be appropriate where there was a sufficient connection between the creation or enhancement of a risk and the wrong that accrued therefrom, even if unrelated to the employer’s desires.  In determining the sufficiency of that connection relevant factors were said to include:

·     the opportunity the enterprise afforded for the abuse of power,

·     the extent to which the wrongful act furthered the employer’s aims (and hence was more likely to have been committed by the employee),

·     the extent to which the wrongful act was related to friction, confrontation or (as presently relevant) intimacy inherent in the employer’s enterprise,

·     the extent of the power conferred on the employee in relation to the victim, and

·     the vulnerability of potential victims to wrongful exercise of that power.

[61]     The Court required Canadian trial Judges to investigate the employee’s specific duties and determine whether they gave rise to special opportunities for wrongdoing.  The greater the amount of time the employee was permitted or required to be with the child, the greater the opportunity for abuse.  If, in addition, the employee was expected to supervise the child in intimate activities like bathing or toiletting, the opportunity for abuse became greater still.  The risk of harm might also be enhanced by the nature of the relationship the employment established between the employee and the child.  Employment that put the employee in a position of intimacy and power over the child (i.e. a parent-like, role-model relationship) on its own often created a considerable risk of wrongdoing.

[62]     In Lister a majority of their Lordships (the exception being Lord Hobhouse of Woodborough) appeared generally to endorse the approach taken by the Canadian Supreme Court but there was less discussion of questions of policy.  Reference was made to Salmond’s statement that a wrongful act was deemed to be done by an employee in the course of employment if “it is either (a) a wrongful act authorised by the master, or (b) a wrongful and unauthorised mode of doing some act authorised by the master”: Salmond and Heuston on the Law of Torts, 21ed, p443.  In the first edition of Salmond on Torts (at pp83-84), it was pointed out, the statement had also been made that “a master…is liable even for acts which he has not authorised, provided they are so connected with acts which he has authorised, that they may rightly be regarded as modes – although improper modes – of doing them”.  Lord Steyn observed that this was the germ of the close connection test adumbrated by the Canadian Supreme Court in Bazley.  The judgments in Lister direct attention to the closeness of the connection between the employee’s act and the duties of the employment.  Alison Todd, Vicarious Liability For Sexual Abuse (2002) 8 Canterbury Law Review 280 at 300-301, suggests that the “close connection” test might be better expressed as the “scope of the risk” test and that, when applying the test, it is helpful to take into account the policy factors discussed in Bazley which help to indicate whether there is a significant connection and inform the underlying idea:

For liability to be imposed, more is required than the mere fact that the defendant had contributed to the coincidence of time and space in which damage could happen.  The concept of risk provided an answer to this problem.  When analysing whether a defendant has caused loss, it is helpful to ask what was the scope of the risk created by the defendant’s conduct.

[63]     The recent entry into this debate by the High Court of Australia in New South Wales v Lepore (2003) 195 ALR 412, dealing with whether school authorities are vicariously liable for sexual assaults on pupils by teachers, is notable for the variety of views expressed in no fewer than six separate judgments. No common position emerged. Gleeson CJ and Kirby J appeared generally to favour the approach taken in Canada and England, while Gummow and Hayne JJ did not. Callinan J rejected the application of vicarious liability to situations of intentional wrongdoing by employees. Gaudron J’s analysis was based on estoppel and McHugh J did not find it necessary to discuss the question. The case is accordingly of limited utility.

[64]     There are two obvious differences between the situations in Bazley and Lister and the facts in this case and in W v Attorney-General.  The first is that we are concerned with an “enterprise” conducted in accordance with powers conferred on the Superintendent by a statute which in effect, directed him not to maintain children coming into his care in State institutions on a permanent basis “save in exceptional cases” and consequently obliged him to arrange for the placement of such children with suitable persons as foster parents.   The second difference is of course that the foster parents were not employees and were not remunerated.  At most, they received sums intended to offset their expenditure on the foster children.

[65]     In S v Walsall Metropolitan Borough Council [1985] 1 WLR 1150, an extempore decision of two Judges in the Court of Appeal, it was held that an English local authority was not vicariously liable for the negligence of foster parents with whom it had placed a child in its care. This case, not cited to us by counsel on either side, was decided well before the developments in the law of vicarious liability to which we have referred and related to a statutory scheme which differs from that in the Child Welfare Act.

[66]     In contrast, in recent cases coming before the British Columbia Court of Appeal the Crown has been held liable for abuse committed by foster parents, but there has been some difference of opinion concerning whether the foster parents should be regarded as independent contractors, with liability being imposed on the Crown because its duty of care was non-delegable, or whether they were agents for whom the Crown was vicariously liable.  In A(C) v Critchley (1998) 166 DLR (4^th) 475, in the leading judgment of McEachern CJBC at 506, it was said that vicarious liability must be imposed upon the Crown because through its officials it had conferred virtual 24-hour-day parental authority over the children to the person who had abused them and the Crown had the power to and did effectively control the operation of his facility. The connection between his authority and the wrongs he had committed could hardly have been closer:

In other words, the wrongs were committed by a surrogate parent in the course of discharging on behalf of the Crown the very responsibilities imposed by law upon the Crown.

But earlier (at p502) the Judge had commented that prima facie Mr Critchley was an independent contractor discharging responsibilities on behalf of the Ministry that the Ministry could not, on an operational basis, discharge itself except with respect to children in actual custody.  The contract between him and the Ministry had expressly stated that he was an independent contractor and not an employee of the Crown.  But, the Judge went on, this distinction between independent contractors and employees “may be blurred in many cases where there are overlapping obligations” (p503).

[67]     In B(KL) v British Columbia (2001) 197 DLR (4^th) 431 two Judges considered that the relationship of foster parents and the Crown was probably better characterised as that of independent contractor rather than employee and imposed liability on the basis of a non-delegable duty analysis, but Prowse JA imposed liability both on that basis and vicariously. The same split is apparent in B(M) v British Columbia (2001) 197 DLR (4^th) 385.

[68]     It seems to us that the more appropriate characterisation, as Ronald Young J thought, is of an agency.  For, while there was certainly no employer/employee relationship, the position of the foster parents was not established by means of any formal contract and they were not undertaking a business venture for profit (or loss).  The Superintendent had a duty imposed upon him by statute to take care of the children.  He was obliged to fulfil that duty by placing them in suitable private homes where there was supposed to be adherence to practices in accordance with a Departmental manual and continued Departmental monitoring.  The Department had a right of inspection and a right to remove any child at any time.  The children were said, in the words of the long title to the Child Welfare Act, to be “specially under the protection of the State”.  That protection cannot have been intended to diminish when a fostering arrangement was made.  We think that in this setting it would be quite inappropriate to regard such an arrangement as constituting the foster parents as independent contractors.  Because of the continuing statutory duty of the Superintendent to provide for the special protection of each child, the foster parents should be regarded as having been made agents of the State, albeit that their agency was of an unusual, indeed unique, nature.

[69]     The further question is whether the sexual and other abuse of BS by his foster parents can be said to have occurred in the course of the performance of the agency duties of the foster parents.  By analogy with the facts in the Canadian cases and in Lister, we have no doubt that it can, and that such abuse was sufficiently connected with the purpose of parenting for which the placements were made, even though it was absolutely contrary to the intentions of the Department.  The foster parents were empowered to exercise fulltime parenting control over BS in the course of which they were expected to supervise or assist him in intimate activities.  He was therefore particularly vulnerable to a wrongful exercise of power by the persons to whom the Department had entrusted him.  There was always a risk of sexual abuse of a foster child from a foster parent who had not been carefully enough selected or whose perverted tendencies had not previously surfaced.  The placement of BS in a foster home, though effectively directed by the legislation, necessarily put him in a place where day-to-day supervision by departmental personnel could not be expected as it would have existed for a child in an institution run by the State.

[70]     Therefore, no matter that it did so for good reasons and in response to the dictate of Parliament, a Department of State, by placing children in private homes where their condition necessarily was not able to be monitored as regularly and fully as in an institution, has created or increased a risk of child abuse.  That factor, together with recognition of the special obligation of protection of children imposed on the Superintendent as a surrogate of the New Zealand community, renders it fair that compensation for the innocent victim’s serious and long -lasting injury should be borne by and distributed amongst the community; for else it will not be compensated at all and the community obligation will not have been recognised.  In all the circumstances, the imputation of an agency and the imposition of vicarious liability is justified.

[71]     This result may provide an incentive for the State to take even greater precautions in the future for the protection of children in its care by way of vetting and monitoring of foster parents.  We do not see that as likely to affect the Department’s trust in people who take on this role to an extent which has an adverse impact on the relationship.

[72]     If those efforts are successful even in only a few cases in preventing or limiting abuse of a child, there may well be savings in social costs of the kind to which Ms Cooper drew attention, to which we would add the costs of accident compensation claims by sexual abuse victims now that all emerging cases of child abuse are covered under the current legislation: see W v Attorney-General at para [29].

[73]     There is one qualification.  In considering whether the abuse occurred in the performance of Mr and Mrs S’s agency duties we have been speaking only of abuse committed by them.  There is also the abuse committed by their adult son, MS.  In relation to that we take a different view.  His conduct cannot be regarded as that of an agent of the Crown.  He was not appointed as a foster parent.  He was living in the same house but his assaults on BS had no apparent connection with the parenting roles of Mr and Mrs S.  There was no evidence, for example, that his sexual abuse of BS occurred on occasions when he had been asked by them to assist them with the care of BS.

[74]     Subject to that qualification, in agreement with the Judge we conclude that the respondent is vicariously liable for the negligence of the foster parents of BS.

Breach of fiduciary duty

[75]     BS pleaded that because the Superintendent and the Director-General of Social Welfare assumed power over him, they were in a fiduciary relationship with him and had a duty to look after him in a responsible way by ensuring he had a “stable, secure and safe living environment”.  The Judge said that, while not identical to the duties pleaded in the negligence cause of action, those pleaded duties were effectively the same.  Because of the views he had expressed in relation to breach of duty of care, the Judge did not consider a detailed judgment on fiduciary duty helpful.  He said his factual findings made it clear that, even if such a duty existed, there would not have been a breach.

[76]     The argument for the appellant on this ground of appeal concentrated on trying to establish that the Superintendent was a fiduciary for the children in his care, regardless of whether there had been a committal order.  Ms Cooper said that in a broadly similar case, Attorney-General v Prince & Gardner [1998] 1 NZLR 262, a pleading that the Department was under a fiduciary duty to act in the child’s or young person’s best interests and with the utmost good faith towards them was not struck out. In Canada it had been accepted in principle that a fiduciary duty may arise in cases akin to the present: A(C) v Critchley (1998) 166 DLR (4^th) 475.

[77]     We are content to proceed on the basis that the Superintendent was a fiduciary for a child placed in foster care.  The difficulty for the appellant is, however, the absence of proof that any breach of a duty which can properly be characterised as fiduciary was committed.  The breaches put to us as failures by the Department to act in BS’s best interests (acting informally rather than strictly in accordance with statutory requirements, failing to seek a committal order or to arrange an adoption), were in reality no more than alleged breaches of the duty of care.  As Ronald Young J said, the pleaded matters were effectively charges of negligence.  Negligent conduct by a fiduciary will render the fiduciary liable in negligence but is not a breach qua fiduciary, notwithstanding that the fulfilment of the role of a fiduciary is the setting for the negligent act or omission.  Nothing in the evidence in this case suggests that the Department was attempting to act other than in what it believed to be the best interests of BS, for example, in deciding not to apply for a committal order.  It was not in any way disloyal to BS nor did it act in bad faith or dishonestly.  And, of course, the allegations of negligence on the part of the officers of the Department have failed.

[78]     Ms Cooper submitted that there have been cases in Canada in which fiduciary breaches have been found even where there was neither a conflict of interest and duty nor bad faith by the Crown.  She cited Guerin v The Queen [1984] 2 SCR 35 and Blueberry River Indian Band v Canada (Indian Affairs and Northern Development) (1995) 130 DLR (4^th) 193. But we do not consider those cases, in a their particular statutory and factual setting, to be of general application. Where a person, though under some fiduciary obligation, merely fails to exercise reasonable skill and care, there is no reason in principle for the law to treat that person any differently from those who breach duties of care imposed by contract or tort: Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 681 and 687-8.

[79]     Faced with this difficulty, Ms Cooper attempted to demonstrate that in fact there had been a conflict of the Department’s interest and its duty.  She said it had not acted in the best interests of BS because of a desire to save money.  This had influenced its decision not to seek a committal order.  Having considered the passages of evidence to which Ms Cooper referred us, however, we are satisfied that the Child Welfare officers were not improperly motivated in their decisions by money.  Naturally as State servants in a Department operating within a budget fixed by Parliament they could not ignore the financial implications of their actions, but we find no evidence that they were thereby deflected from taking the actions they regarded as being in the best interests of BS.  The observation in a departmental memorandum to which Ms Cooper particularly directed attention, referring to the costs of a committal, had, as the Judge said, the flavour of an attractive consequence rather than a direction to the officer who would ultimately make the decision on a committal application.  It appears to us to have been no more than a confirmatory afterthought, the primary thought expressed being that the children were doing well with Mrs S.

[80]     The claim of breach of fiduciary duty was in our view rightly rejected by the High Court.

Vicarious liability - exemplary damages

[81]     Ronald Young J thought it highly probable that BS would have been able to claim exemplary damages successfully against Mr and Mrs S.  The Courts would, he said, be likely to conclude that their conduct was outrageous.  But, guided by this Court’s decision in Bottrill v A [2001] 3 NZLR 622, he said that for the Crown to be liable for the acts of Mr and Mrs S there would need to be shown some complicity or blameworthiness on the part of the Department. This had not been shown. He had already determined that there had been no breach of a duty of care by the Department. He had also rejected the submission that the Department had acted outside the statutory regime or had done anything which allowed or failed to prevent harm to BS. Child Welfare officers had made decisions in what they believed to be his best interests. Overall, the Department had provided reasonable supervision and care. He therefore awarded no exemplary damages.

[82]     It was Mr Ablett-Hampson’s submission that since exemplary damages would have been awarded against the agents for the respondent, Mr and Mrs S, they should be awarded against the respondent as the person found liable for their conduct.  That would be done to mark the Court’s disapproval of that conduct rather than to punish it.  Counsel said that exemplary damages serve a deterrent function.  They should be available against a principal where there is a risk of anonymity or unavailability of the actual tortfeasor.  If, because of the unavailability of the actual tortfeasor no award can be made, there will have been no “message of disapproval.”  The Court will not have shown its dislike of the conduct.  It was submitted that in cases where children have been badly let down there is an opportunity for the Court to show society, through exemplary damages, that children deserve the most exacting care and attention.  Without such awards there will be no effective check on inappropriate behaviour in this country since henceforth cases of this kind will not be able to be brought for compensatory damages because of the accident compensation scheme bar.

[83]     It was also submitted that an award of modest amount against the principal will encourage closer control and monitoring of the agent whom the principal has placed in a position where harm can be caused to a vulnerable person.  As a matter of policy, it was submitted, it is better that the principal be required to pay a penalty than that the plaintiff who has suffered from the conduct of the agent have no award.

[84]     Counsel for the Crown’s response was that an award of exemplary damages against a defendant who is liable only vicariously and has not itself done anything wrong would be contrary to the principle that a person should not be punished in the absence of wrongdoing.  Exemplary damages were said to be restricted to cases of outrageous disregard of the plaintiff’s rights and should be awarded only against the perpetrator.  There would be little deterrent effect in their award against an innocent defendant on a vicarious basis.  If there were to be a practice of awarding them on that basis it would undermine the accident compensation legislation.

[85]     There is limited guidance in decided cases.  In this country, the only fully considered decision is that of Prichard J at first instance in Monroe v Attorney-General, High Court, Auckland, A 617/82, 27 March 1985.  He upheld a jury’s verdict awarding each plaintiff $10,000 exemplary damages against the Police Department for assaults by unidentified police officers during the Springbok rugby tour.  He saw an “admonitory value” in a policy which permitted such awards by encouraging employers to exercise closer control and discipline over their employees.   He was also concerned that there might be a closing of the ranks in cases in which the employer knew which employee had committed the wrong but declined to identify them.  If there were no exemplary damages, conduct calling for condign punishment would go unpunished and there would be no means by which the injured party could invoke an expression of the Court’s disapproval of undisciplined and outrageous conduct.

[86]     In Kuddus v Chief Constable of LeicestershireConstabulary [2001] 3 All ER 193, a case about exemplary damages for misfeasance in public office, two members of the House of Lords expressed obiter views, in opposition to each other. Lord Hutton took essentially the same position as Prichard J had done, having the same concern about possible non-identification of the actual wrongdoer. He considered that the power to award exemplary damages on a vicarious basis served to uphold and vindicate the rule of law because it made clear that the courts would not tolerate such conduct by police or soldiers. It would serve to deter such actions in future as such awards would bring home to officers in command of individual units that discipline must be maintained at all times: paras 78 and 79.

[87]     Lord Scott of Foscote disagreed.  He saw an award of exemplary damages where the defendant was not a wrongdoer and the award would be met out of public funds as not adding anything at all to the deterrent effect of a trial judge’s findings of fact in favour of an injured person and the judge’s condemnation of the conduct in question: para 108.  In Lord Scott’s view, a defendant should not be liable to pay exemplary damages unless he had committed punishable behaviour, a principle which left no room for an award where liability was vicarious only.

[88]     We have earlier determined that the Crown is liable to compensate the plaintiff for abuse by his foster parents.  But it does not follow that it would be proper also to impose liability for exemplary damages on a vicarious basis.  In fact, when it is appreciated that the primary purpose of such damages is to punish a flagrant wrongdoer, not to provide additional compensation (in contrast to compensatory damages awarded on an aggravated basis), it might seem to be quite unfair to inflict a punishment upon someone who has been found not to have been complicit in the wrongdoing.  Exemplary or punitive damages would not then be a reflection of the culpability of the defendant.  Any “message of disapproval” would be delivered to the wrong person.  It is one thing to require a principal who has without neglect created a situation leading to injury to compensate the injured person; it is quite another to punish the principal for the sins of the agent.

[89]     Exemplary damages are not intended, and should not be used, to provide an additional monetary remedy.  Where compensatory damages are able to be awarded vicariously against a principal they will provide the full and effective remedy, even in circumstances in which the actual wrongdoer cannot be found or is impecunious.  In this country, of course, the accident compensation scheme will ordinarily prevent an award of compensatory damages, but that does not mean that exemplary damages should be allowed to change their character and become a way of providing lump sum compensation if and to the extent that the scheme does not allow for it.  There is no warrant for the courts to attempt to make up for any perceived inadequacy in the accident compensation scheme.  That would, as counsel for the respondent said, merely undermine the scheme.  It would require employers to self insure against that risk or pay for insurance cover, if available, as well as meeting levies under the scheme. 

[90]     A further rationale for awarding compensatory damages on a vicarious basis has been said to be that it enables the spreading of losses amongst those better able to bear them.  But since exemplary damages are not concerned with losses, that rationale is inapplicable.It is also said that an award of exemplary damages has a therapeutic value to the plaintiff in that it mitigates the offence.  But that value is surely much less where the person who is punished is not the offender.

[91]     The single argument of cogency which can be put forward for awarding exemplary damages on a vicarious basis is that the punishment and denunciation of outrageous conduct within an enterprise controlled or supervised by the defendant may provide additional deterrence for the defendant and others, including its employees and agents, from behaving in such a grossly improper manner.  It can be said that, particularly in a jurisdiction where ordinary damages for personal injury cannot be awarded save in an exceptional case, it is desirable, even necessary, to make an example of the principal or employer whose agent or employee has behaved disgracefully and thereby encourage people in their position to take even greater precautions to avoid such behaviour or to detect and stop it at an early stage.  But it is debatable, in our view, whether in very many cases a principal whose own conduct has not been found to be negligent, or other principals who are already observing their legal duties, will be thereby provided with an additional incentive to take, on an economically sensible basis, further and effective precautions going beyond those required by an ordinary duty of care.

[92]     It can be said that in a jurisdiction with a no-fault accident compensation scheme and a bar on ordinary personal injury claims there are insufficient incentives to eliminate or reduce systemic negligence.  That may be so, but where there is negligence of that kind the liability of the principal will be direct rather than vicarious, as discussed in W v Attorney-General at para [53].  Furthermore, a New Zealand employer whose employee suffers injury from workplace negligence may have to face both criminal prosecution, with attendant negative publicity and the likely impost of a substantial monetary penalty, and also a substantial increase in future scheme levies.  In view of these factors the need for deterrence or incentive will not, even in an accident compensation environment, outweigh the unfairness of punishing an employer or principal which has not itself breached a duty of care.

[93]     The balance may possibly be different in a case in which an official of the State, for example a police constable, has deliberately, recklessly or (in the rare case contemplated by the Privy Council in A v Bottrill) in a grossly negligent manner directly inflicted personal injury on the plaintiff, particularly if, as in Monroe v Attorney-General, that official has not been able to be identified and so the wrongdoer has not been punished or disciplined.  We therefore leave open the possibility that in such a case the Crown may be held vicariously liable.

[94]     In the present case, however, the plaintiff will be fully compensated by an award of ordinary damages against a defendant well able to pay them.  The Department was not directly at fault and is not deserving of punishment.  There is limited value in denouncing the events in question further than is done by a compensatory award.  It seems most likely that departmental practices, now under a different statute, will have changed very considerably from those in the 1970s.  It cannot be assumed, and it has not been argued, that an award of exemplary damages in this case will encourage the Department to change its current practices to the benefit of future foster children.

[95]     We have accordingly reached the view that exemplary damages should not be awarded.

Result

[96]     The Court being unanimous, appeal is allowed and the matter remitted to the High Court for assessment of compensatory damages.  The cross-appeal is dismissed.  The appellant is entitled to costs on the appeal of $15,000 together with reasonable disbursements to be fixed if necessary by the Registrar.

TIPPING J

[97]     I agree that this appeal should be allowed and the cross appeal dismissed.  The background to the case and the issues arising have been fully set out in the judgment prepared by Blanchard J (the main judgment).  I agree with the reasoning in that judgment and have no wish to add to it save in respect of the points which I will address.  My own reasoning does not lead me to any different conclusion from that reached by the other members of the Court.  But on one point it differs sufficiently from that set out in the main judgment to induce me to write separately.

Relationship between foster parents and Department – vicarious liability

[98]     To avoid any risk of misunderstanding it is as well to start with a definition of terms.  This part of my judgment is concerned with vicarious liability, not direct liability under the doctrine of attribution.  Vicarious liability signifies the situation when party A is held liable for the conduct of party B, the wrongdoer.  If party B causes harm to the plaintiff by tortious conduct, party A, if vicariously liable, is responsible for party B’s conduct.

[99]     Direct liability arises if party B’s conduct is attributed to party A for the purpose in issue.  In such circumstances party B’s conduct is deemed to be party A’s conduct.  Attribution conventionally arises with corporations or other organisations of like nature which can act only through human beings.  Under the doctrine of attribution, if it applies to the case in hand, the conduct of party B, as the corporation’s human manifestation, is treated as the conduct of party A, the corporation.  In that situation party A is not regarded as vicariously liable, at least for present purposes, for party B’s conduct.  It is liable for its own conduct.

[100]   Our discussion in this case is concerned with vicarious liability strictly so called.  Hence I am not here dealing with circumstances said to create liability through the doctrine of attribution.  As noted above, in the attribution case the liability of party A to the plaintiff is direct not vicarious.

[101]   This case, and the case of W in which judgment is also being delivered today, concern sexual abuse perpetrated on the plaintiffs by foster parents.  The circumstances in which the plaintiffs came to be in the homes of their foster parents, and in which the sexual abuse took place, need not be repeated.  The main judgment finds that the foster parents were the agents of the Department of Social Welfare, albeit the agency is characterised as unusual, indeed unique.  The finding that the Department is vicariously liable for the misconduct of the foster parents is derived essentially from the conclusion that the relationship was one of agency.  I would not myself find this relationship to be of that kind.  In my view the relationship between the Department and the foster parents should be regarded as sui generis, ie. of its own special kind. 

[102]   I do not regard it as either necessary or desirable to seek to characterise the relationship in terms of existing categories where vicarious liability arises, such as that of principal and agent.  When the law encounters a relationship which does not fall naturally into one of the traditional categories which attract vicarious liability (primarily agency and employment), the best course in my view is to determine, as a matter of policy and analogy, whether vicarious liability should be found to exist.  If so, one party to the relationship becomes bound to compensate the person injured by the misconduct of the other party.  If, as here, the relationship arises in a statutory setting, the relevant policies and purposes of the statute may well have an important bearing on the vicarious liability question.

[103]   In this respect the reasoning process involved in determining whether vicarious liability should be held to exist bears some resemblance to the reasoning process involved in determining whether a duty of care should be held to exist in a novel situation in which the relationship between the parties is influenced or governed by statutory provisions:  see Attorney-General v Carter [2003] 2 NZLR 160 (CA). In each case the ultimate question involves what is fair, just and reasonable between the parties, including, in the case of vicarious liability, the interests not only of the parties to the relationship said to give rise to vicarious liability but also those of the third party injured by the conduct of the principal wrongdoer. The foster parents are the principal wrongdoers, and the Department is the party said to be vicariously liable for their actions. The primary tort committed by foster parents in sexual abuse cases is trespass to the person or, as it is more commonly called, assault and battery. The fact that the foster parents’ conduct was also characterised without demur as amounting to negligence, will be the subject of a separate comment below.

[104]   Given the commission of a tort or other wrong by the principal wrongdoer, two key questions arise in determining whether vicarious liability should be imposed.  They are (1) the nature of the relationship between the wrongdoer and the person sought to be made vicariously liable, and (2) the degree of connection between the wrong and the relationship.  As the foster parents in the present cases clearly committed wrongs causing damage to the plaintiffs, the first issue concerns the nature of the relationship between them and the Department. 

[105]   Before addressing that issue it is appropriate to mention the basis on which the law imposes vicarious liability.  Such liability becomes practically relevant in cases where the principal wrongdoer cannot be found or is not worth suing.  In circumstances of that kind the plaintiff will receive no compensation for the wrong, unless there is someone else who is vicariously liable.  Certain relationships between the principal wrongdoer and the person said to be vicariously liable are now conventionally regarded as giving rise to vicarious liability.  The main ones are the relationships of principal and agent, and employer and employee.  By contrast someone who engages an independent contractor is not vicariously liable for the independent contractor’s conduct, save where there is a breach of a non-delegable duty; see Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452.

[106]   One of the distinguishing features between the two categories from a policy point of view is the element of control.  In general terms there is more expectation of and capacity for control by parties in the former relationships than those in the latter.  Other strands in the jurisprudence underpinning the policy behind vicarious liability are ability to compensate, and concepts of loss distribution. 

[107]   The subject is briefly but usefully discussed in The Law of Torts in New Zealand by Todd & Others (2001 3^rd ed) at 1083, paragraph 22.2.  The learned authors draw attention to the decision of the Supreme Court of Canada in Bazley v Curry [1999] 2 SCR 534 as constituting the then most recent and comprehensive analysis of the policy considerations relevant to vicarious liability issues. In that case the primary policy considerations were said to be fairness and deterrence. It is not my present purpose to go into the theories propounded for vicarious liability in detail. Indeed the literature is replete with comments concerning the lack of any coherent or agreed jurisprudential underpinning.

[108]   At page 410 of the ninth edition (1998) of his Law of Torts, Professor John Fleming said that the doctrine of vicarious liability had “its basis in a combination of policy considerations”.  He then made reference to several other academic discussions of the subject, of which the most frequently cited is Atiyah’s Monograph Vicarious Liability, written in 1967.  The Law of Tort in Australia (1^st ed – 1985) by Trindade & Cane also contains a helpful review of the subject at 626ff.  The authors there observe that “a great many justifications for vicarious liability have been given at various times”.  They then proceed to analyse some of them.  It is apparent from their analysis that in the end a balance of competing policy factors should be struck when the Court is facing a novel situation. 

[109]   The 3^rd edition of Trindade & Cane (1999) does not contain any corresponding discussion.  It tends to adopt a category based approach which, with respect, in a novel case I do not favour.  The learned authors note the decision of the Court of Appeal in S v Walsall v Metropolitan Borough Council [1985] 1 WLR 1150 to which the main judgment has referred. I agree that the Walsall case has been overtaken by later authority and other relevant considerations.  It no longer provides a satisfactory guide to the appropriate resolution of the present issue. 

[110]   Further support for the view that the existence or otherwise of vicarious liability in a novel situation should be viewed from a policy, rather than a classification standpoint, can be found in Winfield & Jolowicz on Tort (15^th ed – 1998) at 727, and in Salmond & Heuston on the Law of Torts (21^st ed – 1996) at 430.  If I may borrow from and adapt the language of Salmond, classification does not enshrine a principle, it simply announces a result, namely that the person said to be vicariously liable either ought or ought not to pay.

[111]   It follows that in a novel relationship such as that between foster parents and a Department of State, what in my view is required is not so much an inquiry into whether the relationship can be pressed into a category which either mandates vicarious liability or does not.  Rather, there should be an examination of the nature of the relationship in comparison with the conventional ones.  A judgment must then be made as to whether, in the light of all relevant features of the relationship, the law should or should not impose vicarious liability for misconduct which has a sufficient connection with and is within the risks created by the relationship.  The way the courts have dealt with similar or analogous relationships will be instructive.  Ultimately, however, the court must make the necessary judgment after a careful appraisal of the particular case.

[112]   In my view the relationship between foster parents and the Department of Social Welfare in terms of the Child Welfare Act 1925 contains elements partaking of all three of the relationships described above.  In one sense the foster parents were the agents of the State, in another they were employed (albeit not contractually so) by the State, and in another they were independent contractors, given the large amount of freedom and discretion afforded to them in the actual bringing up of the children.  As the relationship arises in a statutory environment, the statute must also be examined to see what light it may shed on the issue.  The main judgment points out (at para [47]), that under the Child Welfare Act 1925 foster children were of necessity children “specially under the protection of the state”.  The Act was designed to provide for their protection.  The Superintendent of the Child Welfare Division was charged generally with the administration of the Act.  He was obviously expected to act through officers authorised for the purpose but the statutory scheme made it clear that committal orders under s13 placed the child in the care of the Superintendent and that foster care was to be preferred to long term institutional care. 

[113]   In this statutory setting it could well be said that while performance of the Superintendent’s duties to the child could be delegated, responsibility for improper performance could not.  This is another way of saying that in liability terms the duties were non-delegable:  see Cashfield House (supra) at 464. Hence the independent contractor dimension is neutralised.

[114]   It is also material to consider whether there should be any difference between institutional care and foster care as regards vicarious liability.  Clearly the Department would be vicariously liable if sexual abuse were committed by a staff member charged with the child’s care in the institution.  The staff member would almost certainly be employed by the Department and even if that were not so, the situation would probably be covered by the decision of the House of Lords in Lister’s case [2002] 1 AC 215. The existence of vicarious liability for children in institutions, but not for those in foster care, would produce an undesirable and potentially unjust anomaly.

[115]   When the appropriate analogies with conventional categories are balanced and the statutory environment is brought to account, I find myself in agreement with the conclusion reached in the main judgment.  Policy considerations also support that conclusion.  The Department should be held to be vicariously liable to compensate the plaintiffs for the damage done to them by their foster parents.

[116]   The second issue identified in para [104] virtually answers itself.  The sexual abuse was clearly within the compass of the risks which the relationship created, and was sufficiently connected with the relationship.  There is nothing I wish to add on this aspect to what is contained in the main judgment.

Accrual of causes of action for assault and battery and negligence

[117]   This case highlights the dissonance between the tests for when a cause of action arises in negligence as opposed to when a cause of action arises for assault and battery.  I am referring here to the date the cause of action accrues, not to the circumstances in which the plaintiff may have the time for suing extended on account of disability.  There is sometimes a tendency to merge these two issues which are discrete.  The disability test is the same, irrespective of the nature of the cause of action, but the accrual tests are not.

[118]   The point was not raised in submissions but I consider this an appropriate occasion to flag the desirability of revisiting the appropriateness of having different accrual tests.  In a case of assault and battery, which is an intentional tort, the cause of action accrues when the plaintiff first realises he or she did not give a considered or free consent to the conduct in question.  In the case of negligence, which is a tort of inadvertence or lack of care, the cause of action accrues when the plaintiff first makes or ought reasonably to have made the link between the harm suffered and the defendant’s wrongful conduct. 

[119]   It is not necessary to trace the development of the two approaches.  If realisation of the necessary link is regarded as the appropriate criterion in the negligence context, I find it hard to see why it should not be at least a criterion in cases of assault and battery.  Realisation of lack of consent no doubt features in such cases because the tort is one of intention.  Even if it remained necessary to realise lack of true consent, the addition of the need to realise the necessary link should be given serious consideration.  Better still the whole untidy question of limitation of proceedings in this field, and indeed generally, should in my view be given prompt legislative attention.  Five more years have passed since I made a similar plea, albeit in a different field, when writing for the Court in Gilbert v Shanahan Partners [1998] 3 NZLR 528 at 545.

Is assault and battery negligence?

[120]   In this case the arguments for the Department seem to have assumed that an intentional tort like assault and battery could also be characterised and sued for as the tort of negligence.  If the defendant deliberately causes the plaintiff physical and mental harm, it is not altogether easy to reconcile that mental ingredient of deliberation with the different mental state inherent in the tort of negligence.  This point is addressed in para [46] of the main judgment in this case, and in para [21] of the judgment in W’s case.  I agree that ultimately the question is not determinative and that we should leave the point completely open.  I acknowledge that in Canada, in contrast to Australia, the view has been taken that a tort of intention can be characterised and sued for as a breach of a duty of care, ie. as negligence.  Whether this dual characterisation is appropriate may be relevant to limitation issues (as we have seen).  It may also have relevance to vicarious liability in some cases. 

[121]   I express some disquiet that the point was not expressly addressed by the Crown in the present case in spite of inquiry from the Bench.  The impression I have is that the point was not recognised.  As it was not the subject of any formal concession I thought, at one stage, there might be good reason to seek further submissions so that the issue could be formally addressed.  I am, however, ultimately persuaded that because of the point’s apparent lack of materiality to the issue of damages, it is not necessary to do so.  I am not to be taken as suggesting that the point should or can be taken by the Crown at any future stage of this litigation.  For present purposes the Crown has made its bed and must lie in it.

Vicarious liability for exemplary damages?

[122]   To conclude I will write briefly in support of the main judgment on this topic.  The difference between ordinary damages and exemplary damages is the difference between compensation and punishment.  The ultimate purpose and effect of vicarious liability is to allow compensation to be awarded against someone else when that person is in a qualifying relationship with the principal wrongdoer.  A major policy plank is to give the plaintiff an effective remedy in circumstances where the remedy against the principal wrongdoer may be ineffective.  The policy reasons for the availability of compensation from the vicariously liable secondary party do not support a capacity to impose a punishment on that party.  It is one thing to say that the secondary party should compensate for the principal party’s wrongdoing.  It is quite another to say that the secondary party should be punished for that wrongdoing when that party’s own conduct does not deserve punishment.  I consider that far more harm and a far greater sense of injustice would be created by punishing those whose conduct did not deserve it, than by declining to do so. 

[123]   I do not find the deterrence argument persuasive in this context.  The kind of conduct which will render the principal wrongdoer liable for exemplary damages must of necessity be extreme.  It is doubtful whether ordinary prudent steps taken by the secondary party will be likely to deter or prevent such extreme conduct by the principal wrongdoer.  It cannot be in society’s interests to require unduly elaborate precautions to be taken.  That would risk serious economic inefficiencies.  The deterrent effect of liability to pay compensatory damages is as far as it is appropriate to go.  The fact that such damages cannot be awarded for personal injury should not be allowed to skew the issue of deterrence beyond what is reasonable and in the interests of society as a whole.

[124]   The understandable wish of plaintiffs to secure exemplary damages for outrageous conduct does not, in my view, outweigh the undesirability of exacting punishment from those who are not blameworthy.  Any notion that exemplary damages are a form of surrogate compensation must be firmly resisted.  When that is recognised the balance of all the relevant factors comes down firmly against the proposition that there should be vicarious liability for exemplary damages.  Punishment by proxy is not a doctrine that should take hold in our law.

Solicitors:

Sonja M Cooper, Wellington for Appellant
Crown Law Office, Wellington