Date: Mon, 5 Dec 2005 20:41:48 -0500 (EST)

From: David Cheifetz

Subject: VL and punitive damages

Neil

I was going to ask how the NSWCA handled Canterbury Club v. Rogers, [1993] Australian Tort Reporter 81-246 at 62,547, 62,554 (N.S.W.C.A.) and McDonald v. State of New South Wales, [1999] N.S.W.S.C. 350 at para. 55 which I thought meant that the conduct of each defendant from whom punitive damages is claimed is to be considered separately but, from a quick skim, I see they distinguished Canterbury and didn't mention McDonald.

How do you square the Bryant result with XL Petroleum v. Caltex, (1985) 155 C.L.R. 448 (Aust. H.C.) per Brennan, J. at para. 3, 5?

When I was looking, some years back, at the problem, I found only one instance of Commonwealth scholarly support for the notion that vicarious liability extends to exemplary damages (North American usage is punitive damages! ;- it comes from the US). That was the United Kingdom Law Commission, Report No. 247, Aggravated, Exemplary and Restitutionary Damages (1997), Part V, at pp. 156-57, para. 5.188 - 5.193, recommended a general rule that liability for punitive damages be several rather than joint, effectively abolishing vicarious liability, stating: "A wrongdoer should be liable to punitive damages only where such award is available because of, and is assessed with reference to, his or her personal conduct." However, the Commission also recommended a limited number of exceptions where vicarious liability and joint liability should remain, one of which is the employer-employee relationship. The core of the reasons which the Commission gave for recommending the exception for the employer-employee situation was explicitly the deep-pocket principle (at pp. 159-60, para. 5.204 - 5.205, and at 161-68, para. 5.209 - 5.231.)

The Ontario Law Reform Commission in its Report on Exemplary Damages, (1991) at 57-58 recommended that "the courts should be directed to develop a rule of vicarious liability that is narrower than the ordinary respondeat superior rule used for compensatory damages, such that the employer would be vicariously liable for punitive damages only in the case of complicity, that is, where the employer tacitly approved of the employee's conduct."

Best regards,

David Cheifetz
Bennett Best Burn LLP

Neil Foster wrote:

Dear Jason and other colleagues;

Two recent decisions in NSW indicate that "exemplary" damages (which I think is the category our courts use for "punitive" damages designed to "teach a wrongdoer that tort does not pay" as Lord Diplock put it in Cassell & Co Ltd v Broome) can be awarded against an employer where the employer is vicariously liable. Both cases involved the police, but the general logic would not seem to be restricted to them. See for an example the trial decision in Houda v State of NSW [2005] NSWSC 1053 (25 October 2005) where a solicitor had been "roughed up" and falsely arrested after annoying a police officer; the award of exemplary damages is at paras [503]-[508]. More recently and with much greater consideration of the legal issues involved see the Court of Appeal decision in New South Wales v Bryant [2005] NSWCA 393 (16 November 2005) where Basten JA gives an excellent and carefully reasoned discussion of why vicarious liability includes liability to pay exemplary damages based on the behaviour of the employee.

Vicarious liability for the actions of a police officer needed to be imposed under s 8 of the NSW Law Reform (Vicarious Liability) Act 1983 which makes the Crown vicariously liable for the torts of those "in the service of the Crown", which under s 6 specifically includes police officers. To some extent his Honour's judgement (see [10]-[15]) depended on distinguishing the terms of the 1983 Act from the judgement of Kitto J in Darling Island Stevedoring and Lighterage Co Ltd v Long (1956-57) 97 CLR 36. That is, because the 1983 Act was clear that the State was liable for the "torts" of the officer rather than the "actions" of the officers, it was not possible to argue that it implemented the so-called "master's tort" theory represented by the judgement of Kitto J in that case. It seems fairly clear however that in a very polite and restrained way (Robert Stevens would be proud of him!) Basten JA was tip-toing around the clash of views represented by the judgements of Fullager J and Kitto J in the Darling Island case. It would be nice if the High Court would revisit the area and make it clear once and for all that the "servant's tort" theory is the one that courts apply these days.

In any event, UK colleagues may be interested to note that Basten JA at [29]-[30] also comments on some English decisions and legislation which he says support the view that an employer can be fixed with liability for exemplary damages, and in [7] distinguishes or refuses to follow some comments of Lord Scott of Foscote in Kuddus [2002] 2 AC 122 at 162.

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