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Personal Injury in NZ

CL19 Exemplary damages

Exemplary damages
The issue in Donselaar v Donselaar [1982] 1 NZLR 97 (CA) was whether an action for exemplary damages following assault or battery could be brought in New Zealand where the act complained of causes personal injury. Although the claim for exemplary damages was dismissed, the Court of Appeal established that s 5(1) of the 1972 Act, which imposed a legislative bar on civil actions for compensatory damages, did not apply to claims for exemplary damages. This is despite the fact that the plaintiff suffered personal injury by accident covered by the Act. The Court reasoned that a claim for exemplary damages does not arise “directly or indirectly” from the plaintiff’s injury and so is not compensatory in character. Rather, the claim arises directly from the outrageous character of the defendant’s conduct and is a separate head of damages, not covered by the Act. The proviso was added that a “tight rein” will have to be kept on exemplary awards and that their purpose is not to compensate for an erosion of the benefits payable under the accident compensation scheme.
The function of exemplary damages in relation to the accident compensation scheme was reconsidered by the Court of Appeal in Daniels v Thompson [1998] 3 NZLR 22 (CA). The issue turned on whether a claim for exemplary damages could lie where the conduct forming the basis of the claim constituted a criminal offence of a sexual nature. A major implication for allowing a civil claim for exemplary damages is the likelihood of double jeopardy of the defendant where the same acts relied upon for the criminal proceedings are the subject of the civil suit. With Thomas J dissenting, it was held that because exemplary damages were designed to punish the acts complained of, either conviction or acquittal in prior criminal proceedings prevented a claim for exemplary damages as punishment had already been exacted. It was further added that there should be a stay of proceedings where a criminal prosecution was commenced or was likely. This absolute bar on exemplary damage awards where a person is convicted and punished or acquitted by the criminal law was reiterated in W v W (2000) 14 PRNZ 157 (CA).
Section 396 of the 1998 Act was enacted in response to these cases. This section reasserted the right to sue for exemplary damages in claims for personal injury covered by the Act, notwithstanding any actual or contemplated criminal proceedings. Now replaced by s 319 of the Act, this provision has been criticised as subverting the proper function of exemplary damages. It has also been argued that if exemplary damages are punitive in nature, it is difficult to maintain the civil remedy if a criminal sentence has already been imposed, as this raises the likelihood of double punishment. While this concern is reflected in s 319(3), it has been argued that this nevertheless undermines the primacy of the criminal jurisdiction. The question remains one of policy.
The issue of the appropriate test for exemplary damages has been the subject of some difference of opinion between the Courts with the Privy Council, in the case of A v Bottrill [2003] 2 NZLR 721 (PC), taking a different view to that of the Court of Appeal. The actions of a pathologist, Dr Bottrill, caused significant physical harm to the plaintiffs. The plaintiffs were unable to sue for compensatory damages because of the provisions of the Accident Compensation legislation. The High Court had initially dismissed their claim for exemplary damages on the basis that it regarded Dr Bottrill’s actions as falling short of the outrageous conduct required for an award of exemplary damages. New evidence came to light and a retrial was ordered by the High Court. The decision to order a retrial was overturned by the Court of Appeal who applied a more restrictive test stating that in order for exemplary damages to be available, outrageous conduct must be combined with an appreciation that the actions may cause damage to someone else but nonetheless deliberately or recklessly taking the action concerned. The Judges in the Privy Council were unanimous that a new trial should be allowed in order to assess the new evidence, although they were split 3:2 on which test should be applied. The minority suggested that the purpose of exemplary damages was to punish outrageous conduct and that no person should be punished unless they had a guilty mind however, the majority differed and favoured the traditional test holding that outrageous conduct was enough and the person sued need not have consciously appreciated the risks involved in their actions.
For further information on exemplary damages see the commentary to ss 317 and 319.

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