2 Exemplary, aggravated, additional
and restitutionary damages
150. Damages in civil courts are intended to compensate
the claimant for financial and non-financial loss following a
wrong with the intention that the victim be put in as good a position
as he or she would have been if the wrongful act had not been
committed. Exemplary damages, however, are an exception to this
rule as they are intended to punish the defendant for the wrongful
act and consequently an award will "overcompensate"
the victim. Aggravated damages compensate the claimant for injury
to feelings when his or her distress was exacerbated by the circumstances
in which the injury was caused or by the conduct of the defendant
after the wrongful act was committed.[159]
Exemplary damages
151. Exemplary damages developed under the common
law. A court can only award exemplary damages where the facts
fall into one of the two "categories" of wrongful act
where they are available, unless exemplary damages are provided
for by statute.[160]
The two categories are:
- oppressive, arbitrary or unconstitutional
action by a public servant, or
- where the defendant's wrongful conduct was calculated
to make a profit which might well exceed the compensation payable
to the claimant.[161]
The likelihood of an award of exemplary damages is
further limited by the overriding discretion given to the court
not to award them in any given case.
152. Exemplary damages are controversial. Critics
say that their punitive function does not belong in the civil
courts and that matters of punishment and deterrence should be
the concern of the criminal justice system. In 1997, the Law Commission
examined the use issue and concluded that exemplary damages formed
an effective deterrence against wrong-doing and that deterrence
was a valid aim of the civil courts, separate from the role of
the criminal justice system. Removing the profit of wrongdoing
from the wrongdoer was, the Commission concluded, a particular
deterrence. The Commission recommended the extension of exemplary
damages for these reasons.[162]
153. In November 1999, the Government accepted other
recommendations from the report but rejected the proposals on
exemplary damages on the grounds that: "The purpose of the
civil law on damages is to provide compensation for loss, and
not to punish. The function of exemplary damages is more appropriate
to the criminal law, and their availability in civil proceedings
blurs the distinctions between the civil and criminal law. The
Government does not intend any further statutory extension of
their availability."[163]
Indeed, in The Law on Damages consultation, it proposed
repealing the one provision in statute allowing exemplary damages,
and replacing it with a power to award aggravated damages. Section
13(2) of the Reserve and Auxiliary Forces (Protection of Civil
Interests) Act 1951 provides that various civil judgments cannot
be enforced against a member of the armed forces without the permission
of a court. In a successful claim against someone who has acted
without the court's permission, exemplary damages may be awarded.
The Government believes this provision has seldom "if ever"
been used.[164]
154. The Law on Damages consultation did not
receive many responses to this proposal. The only objections recorded
were:
…that the concepts of exemplary and aggravated
damages were fundamentally different and replacing one with the
other would confuse rather than clarify and would mean anyone
affected being worse off…just because no cases had arisen
under the 1951 Act didn't mean that they wouldn't, and that legislation
should not be amended just for the sake of tidiness….[and]
that the existing common law categories for exemplary damages
would not catch some competition law claims (eg for abuse of a
dominant position) and should be extended.[165]
155. We asked witnesses whether the Government was
confusing the different functions of exemplary and aggravated
damages. Tim Petts, of the Bar Council, opposed the repeal primarily
because exemplary damages have a deterrent effect because they
allow for the removal of any profit made by the defendant form
the wrongful act and members of the armed forces should not lose
this protection. Ultimately, in his view, this reform was probably
unnecessary.[166] Des
Hudson of the Law Society told us: "There really is, I think,
a very difficult issue of principle about whether this is a task
we want to assign to the civil justice system as opposed to a
criminal justice system, which is more about punishment. It is,
therefore, a finely balanced argument and it is difficult to marshal
the arguments pro or against with any degree of certainty..."[167]
156. Sir Henry Brooke commented: "It is clearly
sensible to include the tidying-up provisions of Clause 9."[168]
Professor Andrew Burrows, however, expressed "serious misgivings"
about this clause. Noting that aggravated damages and exemplary
damages are distinct but frequently confused - the first being
essentially compensatory with "overtones of punitive damages",
the second solely punitive- Professor Burrows observed: "there
is nothing to be gained by abolishing the only statutory reference
to exemplary damages in s. 13(2) of the Reserve and Auxiliary
Forces (Protection of Civil) Interests Act 1951. That subsection
is of little practical importance. Even worse would be to replace
exemplary damages by aggravated damages for the reasons given
above."[169]
157. While supporting the limits on exemplary damages
Beachcroft, a firm of solicitors, had reservations about the proposal:
we question whether it is appropriate to change
the terminology to aggravated damages, which are already the subject
of some confusion. For example it is rare for aggravated damages
to be awarded in civil claims for injury and yet it is relatively
usual that such awards are made in civil employment claims. Aggravated
damages, save in employment claims, are awarded in a relatively
limited set of circumstances and we consider that the inclusion
of the terminology aggravated damages as opposed to exemplary
damages may solve one problem but create another.[170]
158. We see some force in the argument that amending
legislation simply to 'tidy it up' is unwise and invites unintended
consequences. We appreciate that in the Government's view exemplary
damages should be confined to the common law. However, Ministers
should carry out a wider review on that issue before acting; replacing
'exemplary' with 'aggravated' damages in section 13(2) of the
Reserve and Auxiliary Forces (Protection of Civil Interests) Act
1951 simply confuses the different functions of these two awards.
Additional damages in copyright
cases
159. Under the Patents Act 1971 and the Copyright,
Designs and Patents Act 1988 claimants can receive "additional
damages" in a successful claim for copyright infringement.
A 2006 review of intellectual property law recommended that the
system of damages in the area be reconsidered, in particular,
whether the available awards constituted an effective deterrent.[171]
160. In its consultation on damages the Ministry
of Justice noted the following:
The Government has considered the findings of
the [Gowers] review and the responses submitted to its call for
evidence. Respondents to the review suggested that damages should
act as a disincentive to infringement and that the sums of damages
awarded for infringement are inadequate. Some of the responses
complained that additional damages are rarely awarded by the courts.
But it appears that some claimants may believe that the risk of
losing a case is too great when weighing up the costs and benefits
of bringing an action, and consequently do not bring the case
or settle out of court. It is therefore difficult to assess whether
courts are refusing claims for additional damages, or whether
the cases are reaching them in the first place. Another issue
is whether in some cases the remedy may not be the real problem.
For example, counterfeiters can be sued for considerable damages
already, the real difficulty being catching them. Some rights
holders suggested that the current system of damages falls some
way short of the 'effective, proportionate and dissuasive' civil
remedies required by EU Directive 2004/48/EC on the enforcement
of intellectual property rights. However, the evidence submitted
to the Gowers Review preceded the making of the UK Regulations
to implement the Directive, and therefore did not take account
of the impact of those Regulations. We believe that the Regulations
fully implement Article 13 of the Directive on damages.[172]
161. The Government therefore proposed to replace
the provision for "additional damages" with a provision
for "aggravated damages and such amount by way of restitution."
The proposal was endorsed by "just under half" the consultees,
the other half being divided between "those who opposed the
proposal on the basis that the change would not provide clarity
in the law, and those who argued that the term should be extended
to include exemplary damages."[173]
Objections were also raised that "aggravated damages and
such amount by way of restitution" was unclear and would
not assist the court and the potential problems that may arise
when a company sues for a type of damages that is available for
"mental distress."[174]
162. The Law Society thought this provision unnecessary:
"It would seem to us it would be better to deal with that
anomaly [in the relevant acts] rather than leave a particular
approach for one classification of damages. It does not strike
the Law Society as a matter of the greatest importance, to be
frank."[175]
163. The Bar Council agreed, adding that this anomaly
had not caused any real difficulty:
From the Bar Council's perspective it seems odd
if you are looking to reform the area of aggravated exemplary
damages to pick these aspects. In fact, it creates a further anomaly
by making these the only two areas where the company can claim
aggravated damages for mental distress. Our view is that the matter
is best left alone as it stands as these provisions have not caused
any real difficulty in interpretation with the courts so far.
It is best left to further judicial development. ...Whether it
is a good idea for Parliament in two very limited areas to intervene
it seems to the Bar Council questionable.[176]
164. We have not seen evidence that the "additional
damages" provisions applicable to copyright infringement
cases have caused any great difficulty in the courts. In these
circumstances we recommend that Ministers consider whether it
is necessary to introduce a change and whether substituting 'aggravated
damages and such amount by way of restitution' is really an improvement.
In any consideration of this clause the Government should bear
in mind that aggravated damages are awarded for mental distress.
Applying the formulation "aggravated damages" therefore
seems inappropriate to cases of copyright infringement that are
frequently brought by companies.
159 Aggravated, Exemplary and Restitutionary Damages,
Law Commission paper No. 247 Back
160
Cf Merest v Harvey (1814) 5 Taunt 442, 128 ER 761. quoted
in Aggravated, Exemplary and Restitutionary Damages Back
161
Rookes v Barnard [1964] AC 1129 Back
162
Aggravated, Exemplary and Restitutionary Damages, para
1.30 Back
163
CP9/07 para 198 Back
164
CP9/07 para 199 Back
165
CP(R)9/07 p 55 Back
166
Q 35 Back
167
Q 37 Back
168
Ev 70 Back
169
Ev 32 Back
170
Ev 53 Back
171
The Gowers Review of Intellectual Property (December 2006) Back
172
CP9/07 para 213 Back
173
CP(R)9/07 p 9 Back
174
CP(R)9/07 p 39 Back
175
Q 42 Back
176
Ibid. Back
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