Punitive damages

Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Although the purpose of punitive damages is not to compensate the plaintiff, the plaintiff will receive all or some of the punitive damages award. Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Although the purpose of punitive damages is not to compensate the plaintiff, the plaintiff will receive all or some of the punitive damages award. Punitive damages are often awarded if compensatory damages are deemed an inadequate remedy. The court may impose them to prevent undercompensation of plaintiffs and to allow redress for undetectable torts and taking some strain away from the criminal justice system. Punitive damages are most important for violations of the law that are hard to detect. However, punitive damages awarded under court systems that recognize them may be difficult to enforce in jurisdictions that do not recognize them. For example, punitive damages awarded to one party in a US case would be difficult to get recognition for in a European court in which punitive damages are most likely to be considered to violate ordre public. Because they are usually paid in excess of the plaintiff's provable injuries, punitive damages are awarded only in special cases, usually under tort law, if the defendant's conduct was egregiously insidious. Punitive damages cannot generally be awarded in contract disputes. The main exception is in insurance bad faith cases in the US if the insurer's breach of contract is alleged to be so egregious as to amount to a breach of the 'implied covenant of good faith and fair dealing', and is therefore considered to be a tort cause of action eligible for punitive damages (in excess of the value of the insurance policy). In Australia, punitive damages are not available for breach of contract, but are possible for tort cases. The law is less settled regarding equitable wrongs. In Harris v Digital Pulse Pty Ltd, the defendant employees knowingly breached contractual and fiduciary duties to their employer by diverting business to themselves and misusing its confidential information. The New South Wales Court of Appeal held that punitive damages are not available both for breach of contract and breach of fiduciary duty. Heydon JA (as he then was) said there is no power to give punitive damages in respect of a claim in equity, although he was content to decide the case on the narrower ground that there is no power to award punitive damages for the specific equitable wrong in issue. Spigelman CJ concurred, although he emphasized that the contractual character of the fiduciary relationship in question, and refrained from deciding on whether punitive damages would be available in respect of equitable wrongs more analogous to torts. Mason P dissented and opined that there was no principled reason to award punitive damages in respect of common law torts but not analogous equitable wrongs. In England and Wales, exemplary damages are limited to cases in which at least one of the circumstances set out by Lord Devlin in the leading case of Rookes v Barnard has been met: Rookes v Barnard has been much criticised and has not been followed in Canada, Australia or New Zealand or by the Privy Council. It was strongly criticised by the Court of Appeal in Broome v Cassell, but on appeal the House of Lords upheld Rookes v Barnard. Another case that could arguably be seen as an example of punitive damages was that of Attorney-General v Blake in which the defendant profited from publishing a book detailing his work for MI5. The details were very old and therefore did not cause loss to the state. The publishing was, however, in breach of the contract of employment (and incidentally criminally in breach of the Official Secrets Act 1911). The defendant was required to give an account of his profits gained from writing the book.