Date: Tue, 6 Dec 2005 15:57:36 +1300

From: Geoff McLay

Subject: VL and punitive damages

Hi

Two years ago the NZ Court of Appeal indicated in cases alleging abuse by foster parents, that awards for exemplary damages through vicarious would be rare but not impossible - firstly if the actual tortfeasor cannot be identified and therefore punished and second if the tortfeasor could be "identified" with the defendant as being so far up the chain of command.

It is very difficult to actually explain what the Court meant by this, so I have given you the extracts below.

Geoff

S v Attorney-General - [2003] 3 NZLR 450

[The Court had to consider whether the Department of Social Welfare ought to be held to be variously liable for abuse committed by foster parents]

[68] It seems to us that the more appropriate characterisation … 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.

…

[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 …

[The Court then went on to consider whether the Department ought to be vicariously responsible for exemplary damages. The Court emphasised that exemplary damages were not designed to make up for inadequate compensation or provide an additional monetary remedy.]

[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 … 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.

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.

In the companion case W (15 July 2003) 227/02, the Court of Appeal had to consider whether the failure of a senior social worker in failing to respond to an allegation that a foster father was being rude might merit an ward of exemplary damages against the Department.

[53] Guidance is to be found in the opinion of the Privy Council, though in a vastly different factual setting, in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 3 NZLR 7 at 12, which can be adapted to fit the situation of a government department rather than a trading company. It is necessary to look at the substantive rule – here, that a person is liable for exemplary damages if that person acts in outrageous disregard for the rights of the plaintiff – and then to work out whether it is proper to apply it to a government department, as to which we have no doubt, and, if so, how it is appropriate to apply it. In Meridian the Privy Council said that the Court has to fashion a special rule of attribution for the particular substantive rule. This involves determining whose act (or knowledge or state of mind) was for this purpose, i.e. attribution of conduct, intended to count as the act etc of the defendant. Rephrased for the current circumstances, the question in this case would be: for the purpose of attributing outrageous conduct whose act ought to count as the act of the Department? It cannot possibly be said that the foster parents acted as the Department so no exemplary damages can on this basis be awarded for their actions. But it is arguable that the position is different in relation to the acts and omissions of Mrs Von Hartitzsch. She was, as a Senior Child Welfare Officer, the person responsible for EW’s placement and supervision and the person to whom EW brought, in vain, her complaints. Mrs Von Hartitzsch evidently had … authority to represent the Department in her dealings with EW. In the circumstances it is therefore arguable that her acts and omissions should be attributed to the Department and that, if her acts and omissions were so bad as to be deserving of being marked by an award of exemplary damages, then an award should be made against the Department. But, for reasons which now follow, we find it unnecessary to reach a final conclusion on that question.

[The court denied that there was anything in her behaviour beyond negligence]

----------------------------------------------------------------------
From: DAVID CHEIFETZ
Sent: Tuesday, 6 December 2005 2:42 p.m.
Subject: Re: ODG: 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."

<<<< Previous Message  ~  Index  ~  Next Message >>>>>