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Accident Compensation Cases

Akavi v Taylor Preston Ltd (HC, 13/09/94)

Judgment Text

Master J C A Thomson
In this case the plaintiff sues his former employer for exemplary damages arising out of an accident which occurred on 12 March 1993 while the plaintiff was employed by the defendant as a scalper on the mutton chain. As a result the plaintiff suffered severe head injuries. He has been permanently, partially incapacitated. He pleads that the defendant was negligent in the ways set out in his statement of claim. He seeks exemplary damages of $150,000. In his second and third causes of action he pleads breaches of the Factories & Commercial Premises Act 1981 and of The Machinery Act 1950 On The face of it the claim is clearly one which prior to the Accident Compensation Act 1972 would have been brought as a claim for general damages in negligence for breach of duty of care. 
The defendant applies to strike out the proceedings pursuant to rule 186 of the High Court Rules on the ground that it does not disclose any reasonable cause of action. The defendant draws the Court's attention to the principle to be applied in respect of the Rule as set out in South Pacific Manufacturing Company Ltd v NZ Security Consultants and Investigations Ltd [1992] 2 NZLR 282 where Casey J said at p311: 
“It is well established that the discretion to strike out is one to be sparingly exercised, and would be justified only, if on the material before the Court and in the present state of evolution of the common law, the case as pleaded was so clearly untenable that the plaintiff could not possibly succeed. ”
Like all applicants who apply under the Rule Mr Ford acknowledged the difficulty of succeeding in such all application but then (as such applicants invariably do) sought to have the Court apply the principle set out by Richardson J in the same case where that learned Judge said at p305: 
“Applying well-settled principles the Master properly directed himself that the jurisdiction is one to be sparingly applied and That if the Court is left in doubt whether a claim may lie the application must be dismissed, but if the claim depends on a question of law capable of decision on the material before the Court the Court should determine that question even though extensive argument may be necessary to resolve it. ”
He also directs attention to the fact that the defendant was prosecuted by the Inspector of Factories on 5 November 1993 and pleaded guilty to a charge under s 17(1) of the Machinery Act 1950 and thereupon a further prosecution laid under the Factories and Commercial Premises Act 1981 was withdrawn. The maximum fine under the Machinery Act 1950 is $5,000. The Judge fined the company $2,000 and ordered $1,000 of that amount to be paid to the plaintiff. He submits that if this claim is allowed to proceed the defendant will suffer double punishment. 
Mr Ford prefaced his argument by conceding that in appropriate cases exemplary damages may be awarded and even in cases involving personal injury by accident within the meaning of the Accident Rehabilitation and Compensation Insurance Act 1992. Donselaar v Donselaar [1982] 1 NZLR 97Has partially negative history or cases citing, but has not been reversed or overruled[Yellow]  is authority for that proposition. 
The argument for the defendant, however, is that on the pleadings the plaintiff cannot get over the threshold test which must be satisfied before a Court will recognise a claim for exemplary damages. Mr Ford submits that as a matter of law an industrial accident can never entitle an employee to an award of exemplary damages where the conduct complained of on the part of the employer is negligence, simpliciter. He contends that is all that is pleaded in support of the claim for exemplary damages in this case. 
In Donselaar the claim was by one brother against another for exemplary damages following a physical assault with a hammer. Cooke J (as he then was) said at p104, in the course of making certain observations as to the type of situation that could give rise to a claim for exemplary damages in the light of our Accident Compensation Acts as follows: 
“Nevertheless I respectfully think that a high-handed trespass, whether to person or property and whether by a public officer or a private citizen, is the very type of case which the power to include some punitive element in the damages awarded to the victim might occasionally be found to satisfy the community's sense of justice ”
At p105 he said: 
“The range of situations in which the action for punitive damages survives in a personal injury situation will not be great. The conduct will need to be wanton, so that it is unlikely that anything but an intentional tort would be involved There do not seem to be many personal injury situations outside battery where there will be any scope for an action. ”
And at p106: 
“I think that there is a need to have effective sanctions against the irresponsible, malicious or oppressive use of power; and also to maintain a punitive remedy for the commonplace types of trespass or assault, if accompanied by insult or contumely, which touch the life of ordinary men and women … but at all events this is no time for the law to be withholding constitutional remedies for high-handed and illegal conduct, public or private, if it is reasonably possible to provide them. ”
At p107 he said: 
“The Courts will have to keep a tight rein on actions, with a view to countering any temptation, conscious or unconscious, to give exemplary damages merely because the statutory benefits may be felt to be inadequate. ”
And further at p107: 
“The present case is also an example, in my opinion, of a claim for exemplary damages that should not be entertained. The way in which the first plaintiff's case was pleaded and his evidence led at the trial suggests that, despite the use of the words ‘exemplary or punitive’ in the prayer for relief, in substance what were being sought were damages for physical injury and injured feelings. The reamended statement of claim refers to being rendered unconscious, pain, suffering, indignity, mental suffering, disgrace and humiliation … On the evidence of the first plaintiff himself, taken as a whole, a prima facie case for the serious and exceptional remedy of exemplary damages was not made out. ”
Counsel also referred to similar passages in that case which appear in the judgments of Richardson J and Somers J to the same effect. Mr Ford also relied on Taylor v Beere [1982] 1 NZLR 81Has partially negative history or cases citing, but has not been reversed or overruled[Yellow]  which emphasises that exemplary damages are awarded in special circumstances only and are given to punish a defendant for heinous conduct in inflicting the harm complained of. He referred To Auckland City Council v Blundell [1986] 1 NZLR 732 a case of alleged assault and battery by a traffic officer, where Cooke P said at pp 739, 740: 
“An official might assault someone when simply and honestly trying to do his duty, thinking even mistakenly that it was necessary to use force to control the person. Then there would be no case for punishing the officer. But on the other hand if a jury is satisfied on the evidence that the officer acted in bad faith, deliberately using more force than he had to, or high-handedly or contemptuously, that would be an abuse of his public position. For that conduct he might deserve to be punished, and the jury would then be entitled to punish the officer, or the employer responsible for his actions, by exemplary or punitive damages. ”
The learned Judge went on to say at p740. 
“It is to be hoped that directions to juries on these lines will suffice to prevent immoderate awards and to enable exemplary damages to fill the legitimate role left for them by the Donselaar decision ”
It is apparent to me that since the early 1980's claims for exemplary damages have flourished, resulting in Judges being required to ponder the extent to which a basic principle of our common law, namely, that where a wrong is shown the Courts will provide a remedy, should be circumscribed by clear statutory provision taking away or restricting a particular recognised remedy. 
In Green v Matheson [1989] 3 NZLR 564Has Litigation History which is not known to be negative[Blue]  the Court of Appeal had to consider proceedings arising from the 1988 Cartwright Report on the cervical cancer enquiry at the National Women's Hospital in Auckland. The plaintiff pleaded three causes of action, namely trespass to the person, breach of fiduciary duty, and negligence. The statement of claim included a disclaimer that the plaintiff did not claim that she had suffered personal injury by accident. The causes of action were allowed to stand but no claim for damages other than exemplary damages was held to be maintainable if the conduct complained of occurred on or after 1 April 1974 
It seems to me the Court of Appeal in allowing the claim for exemplary damages to stand in that case adopted a somewhat wider perspective than intentional application of force upon which it focused in Donselaar. Mr Ford properly drew my attention to the decision of Temm J in Tucker v Bell (Auckland Registry) CP 1909/90, 5 September 1991, where a claim for exemplary damages was allowed to stand, the plaintiff having suffered physical disfigurement from an apparently unsuccessful cosmetic surgery operation, and to McDonnell v Wellington Area Health Board & Anor (unreported) High Court, Wellington, 16 December 1993, where the Master refused a strike out application in a case where the plaintiff claimed general and exemplary damages for mental and nervous shock following allegations that a plaintiff's wife had been allowed to bleed to death due to lack of competent care. Counsel for the defendant, however, submitted that that case should be limited to its special facts because damages for nervous shock had been specifically eliminated as a ground for obtaining compensation under the Accident Rehabilitation and Compensation Insurance Act 1993. 
Mr Ford also referred me to Canadian and Australian authorities and submitted that in respect of the first cause of action what clearly emerges from the New Zealand Court of Appeal decisions he cited, and from the overseas cases, is that before an action for exemplary damages can even get off the ground, or pass the threshold test, a plaintiff needs to be able to establish a substratum of facts on the pleadings which, if proved at trial, would show that the case was serious and exceptional, and that the conduct complained of was so outrageous that punishment was called for, as an end in itself, in that there had been a conscious wrongdoing on the part of the defendant in contumelious disregard for the safety of the plaintiff. It is submitted that as a matter of law these elements cannot be satisfied in the setting of an industrial accident action and they certainly cannot be satisfied on any view of the pleadings in the present case which simply alleges negligent conduct 
As to the second and third causes of action, which seek exemplary damages for breach of statutory duty, Mr Ford submits that as the defendant was prosecuted under the Machinery Act 1950 and fined, that as a matter of law the plaintiff cannot recover exemplary damages in a civil claim because that would have the effect of punishing the defendant twice for the same offence. Archer v Brown [1984] 2 ALL ER 267 was relied on, as was a passage in Remedies for Torts and Breach of Contract, A S Burrows, (1987) where the learned author says at p245. 
“As laid down in Devonshire and Smith v Jenkins (1979) LAG Bull 114 CA and Archer v Brown [1984] 2 ALL ER 267, where a defendant has already been punished by the criminal law in respect of the facts upon which the plaintiff now founds his tortious action, no exemplary damages should be awarded since a person should not be punished twice for the same offence In the first of these cases the defendant had already been fined and, in the second, imprisoned for the conduct in question. ”
In reply to the defendant's submissions Mr Corkill for the plaintiff accepts that it is a fair criticism that on the face of the pleadings the action might appear to be nothing more than a common law claim for damages for personal injury as para 1.11 at present pleads: 
“The injuries and consequences pleaded herein were caused by the negligence of the defendant in one or more of the following respects. ”
However, he indicated that he proposed to amend that paragraph by adding the word “grave” to proceed the word “negligence”, so as to put beyond doubt, what he argues is already apparent in the statement of claim, namely that the plaintiff alleges recklessness and contumacious disregard of the plaintiff's welfare. Mr Corkill points to para 1 12, where the plaintiff pleads: 
“1 12 By failing to maintain a safe place of employment the defendant acted in a high-handed fashion, its conduct showing a reckless and contumelious disregard for the plaintiff's welfare. ”
Amended in that way, or by even stronger pleading, it does seem to me that the pleadings would then indicate circumstances in which exemplary damages could be warranted if, of course, they are held to be available as a matter of law. It is clear law that on a strike out application if it is apparent that by amendment to pleadings a cause of action can be demonstrated then the Court should not exercise the right to strike out. Such a serious step should not be taken merely because of defects in pleading and where such defects are capable of cure by amendment. 
Mr Corkill then dealt with the issue of whether exemplary damages are available where negligence is relied on. Counsel for the plaintiff points to two New Zealand cases, McKenzie v Attorney General [1992] 2NZLR 14 which was a claim in negligence brought by an employee against an employer for failing to provide a safe system of work when he was exposed to asbestos. Mr Corkill relies on the remarks of Cooke P at p 15 where the learned Judge said: 
“While claims for damages from personal injury caused by negligence in breach of a duty of care relating to personal safety or a fiduciary or other duty so relating, or by assault or battery or rape, are barred if arising after 1 April 1974, claims for damages for such torts as malicious prosecution, defamation, false imprisonment or trespass to land or goods, or for breaches of contracts not relating to personal safety, are not barred, notwithstanding that they may cause mental distress. The Act never bars, however, a claim for exemplary damages, although the effect of the Law Reform Act 1936 is that the conduct must be towards a living claimant. This freedom to claim exemplary damages remains whether the conduct occurred before or after the inception of the accident compensation scheme ”
It is submitted that the context in those comments were made clearly imply that a claim in negligence (which it was in that case) would not prevent exemplary damages being awarded if a proper case was made out. The second case referred to was Ivanson v Zendell Industries (unreported) 21/7/91 (Auckland Registry) where the plaintiff was subjected at work to chemicals including isocyanates which caused physical injury A strike out application failed. Mr Corkill also referred to two Australian cases Coloca v BP Australia Ltd and Thomson v James Hardy & Co Pty Limited (1992) ATR 81-153. The first involved negligent exposure to benzol fumes during employment and the second involved exposure to asbestos dust and fibres. Again in an employment context the Court held that at common law, in an appropriate case, a claim for exemplary damages was available in an action for personal injuries caused by negligence. The Court held that recovery of exemplary damage was not, in principle, confined to intentional torts and that recovery of exemplary damages was governed by the conduct of the wrong doer and not by the nature of the tort. Mr Corkill submitted that on the authorities there is a substantial weight of judicial opinion to the effect that in an appropriate case claims for exemplary damages can be considered which are grounded in negligence and in an employment context The key question he submits will be the conduct of the wrong doer He submitted that the issue in the end will not be one of law, but one of fact and degree. Mr Corkill referred me to an article written by Dr R Harrison, QC, in his publication “Matters of Life & Death” and quoted to me (inter alia) the following at p45: 
“An issue which now arises is as to whether, given the abolition by the 1992 Act of the lump sum awards and the restricted nature of what is substituted, namely the independence allowance, there is room for still further development of the role of exemplary damages in this context In the light of these and other fundamental changes to the coverage and compensation provisions of the 1992 Act discussed earlier, it is surely open to argument that a lower qualifying threshold for awards of exemplary damages is now justified. This would as dicta already discussed suggest operate by taking into account, when fixing the quantum of an award of damages, the extent of injury to the plaintiff's feelings, where the conduct of the defendant has had an aggravating effect. However, such a lowered threshold might also operate in relation to the assessment of the standard of conduct seen as warranting making of an award of exemplary damages. It can be argued that a failure by the courts to develop the scope of the remedy of exemplary damages in this way would, in the light of the scheme of the 1992 Act, leave too many glaring wrongs without effective remedy. Thus the common law should be permitted to develop so as to ensure the availability to victims of adequate civil redress for serious wrong doing, in accordance with the standards to be expected of the legal system of any civilized society ”
He also submits that the New Zealand of Appeal has already indicated that the remedy of exemplary damages may now have to do the work formerly carried out by compensatory damages. See remarks of Cooke P, for example, in Donselaar's case, at p107, where he said: 
“All in all, in a situation where the right course for this Court is far from self evident I think that we should try to meet a problem occasioned by the Accident Compensation Act by consciously moulding the law of damages to meet social needs. The only feasible way of doing so, without intruding into the field of compensation which the Act has taken over, appears to be to allow actions for damages for purely punitive purposes; and to accept that, as compensatory damages (aggravated or otherwise) can no longer be awarded, exemplary damages will have to take over part of the latter's formal role. In other words, as benefits under the Act are in no sense punitive, exemplary damages will have to do not only the work assigned to them by Broome v Cassell but also some of the work previously done by the other heads of damages. ”
Mr Corkill further relies on the following statement in Prosser on Torts (4th Edition) p11 where it is said: 
“It is not so much the particular tort committed as the defendant's motives and conduct in committing it which will be important as the basis of the award. ”
He also suggests that authors of Spry, Equitable Remedies (3rd Edition) p600 consider there is no sufficient reason why a Court of Equity may not in an appropriate case order the payment of exemplary or punitive damages. It is further submitted that such approach has recently been viewed with favour by the Court of Appeal in Aquacultural Corp v NZ Green Mussel Company Limited [1990] 3 NZLR 299. The case involved a breach of confidence in a commercial setting and the Court said, pp 301-302: 
“For all purposes now material, equity and common law are mingled or merged. The practicality of the matter is that in the circumstances of the dealings between the parties the law imposes a duty of confidence. For its breach a full range of remedies should be available as appropriate, no matter whether they originated in common law, equity or statute … applying the foregoing approach as to the available range of remedies, we see no reason in principle why exemplary damages should not be awarded for actionable breach of confidence in a case where a compensatory award would not adequately reflect the gravity of the defendant's conduct. ”
It is submitted that given the restrictions that have recently been imposed on the ability to receive accident compensation that the availability of exemplary damages may well have to be considered on a wider basis than previously. 
Counsel for the plaintiff also refers to Pearce v Accident Compensation Corporation (1991) 5 PRNZ 297Has Cases Citing which are not known to be negative[Green]  and Boustridge v Attorney General (Auckland Registry, 29 September 1993, per Blanchard J) The latter case was one in negligence. The claim was for damages for the mental consequences of an accident. It was alleged that the plaintiff was led to believe that he may have been exposed to HIV virus, and was therefore subjected to unnecessary suffering and distress. In the District Court the statement of claim was struck out. On appeal before Blanchard J His Honour said at p11: 
“The learned District Court Judge also gave as a reason for striking out the statement of claim that a remedy of exemplary damages does not lie in relation to non-intentional torts or those of omission rather than commission. In the present state of the authorities I think that this question still remains open although, because exemplary damages are awarded to punish a defendant for high-handed disregard of a plaintiff's rights, or acting in bad faith, or for abusing a public position or doing something equally outrageous, it will be very rare for exemplary damages to be awarded where a claim is made in negligence only. For this reason it may be thought unlikely, on the facts as the Court now understands them, that the plaintiff would succeed in obtaining exemplary damages, but the theoretical possibility exists. A common law claim for exemplary damages is not barred by the Accident Compensation legislation: Green v Matheson …  ”
That appears to be the most recent pronouncement on this difficult area of law and together with the other authorities cited persuades me that it would be wrong for the Court to strike out the statement of claim. I am reminded that in negligence cases it is often inappropriate to determine points of law as relating to negligence on an abstract level. 
Often overlooked in strike out applications is the reason that the discretion is to be rarely exercised is that the Court's very existence is to provide a forum for an aggrieved person to have his complaint aired and determined no matter how bizarre it may appear on its face. It is the very core of our judicial system that Mr Haddock should have his day in Court. 
As to the question of whether the defendant would suffer double punishment if the claim for exemplary damages was allowed to proceed Mr Corkill referred to s 10(4) of the Crimes Act 1961 which provides: 
“No-one shall be liable, whether on conviction on indictment or on summary conviction, to be punished twice in respect of the same offence. ”
and to R v Moore [1974] 1 NZLR 417Has Cases Citing which are not known to be negative[Green]  at 423 where the Court of Appeal stated: 
“But when we come to consider whether two offences can be considered to be substantially the same, it is necessary to point out that our Crimes Act contains in s 2 a definition of ‘offence’. For the purposes of the Act, unless the context of the Act otherwise requires, the word means ‘any act or omission for which any one can be punished under this Act or under any other enactment, whether on conviction on indictment or on summary conviction’. ”
It is submitted that the word “offence” in s 10(4) is as defined in s 2 of the Crimes Act and refers only to statutory offences whether under the Crimes Act or any other enactment dealing with offences. It is submitted that the principle of “double punishment” applies only to a criminal code, and not otherwise It does not apply to civil proceedings. 
I am referred to s 24(f) of the Criminal Justice Act 1985, which reads: 
“Where a Court sentences an offender to make reparation The following provisions shall apply: 
The sentence shall not affect any right that the person who suffered the loss or damage has to recover by civil proceedings any damages in excess of the amount recovered under the sentence. ”
Mr Corkill submits that the combined effect of s 10(4) of the Crimes Act and s 24(f) of the Criminal Justice Act is to leave open the possibility of exemplary damages. Section 10(4) he says applies only to the Criminal Code and that such result should not be considered surprising because it would not be fair that a private right should be extinguished by the State exercising its right to prosecute. The victim has no say as to whether the public right (that is to prosecute) should be exercised by the police or other prosecuting authority. If exercised, the victim has no formal right to be represented or otherwise participate — he may give evidence, and he may be asked to express a view as to reparation, but he has no right to do so, and certainly no right to be represented. Furthermore, Mr Corkill says that if the defendant's submission is correct and double punishment affects both criminal and civil proceedings, does that mean that if exemplary damages are awarded in a civil claim, before a criminal prosecution is brought, that such prosecution could not thereafter proceed? Mr Corkill argues that could not be right. It would create all sorts of anomalies. I uphold that submission. 
The matter of double punishment was recently considered by Blanchard J in G v S CP 576/93, (Auckland Registry, decision 22 June 1994) where that learned Judge said at p48. 
“The matter which has concerned me is the possible element of double punishment: a criminal fine already inflicted and now the possibility of exemplary (or punitive) damages. An award of exemplary damages seeks to achieve recognised objects of the criminal law — deterrence and retribution: Donselaar v Donselaar [1982] 1 NZLR 97Has partially negative history or cases citing, but has not been reversed or overruled[Yellow] , 113 (Somers, J). It might at first blush be thought inappropriate to revisit the penalty once a case has disposed of in the criminal jurisdiction of the Court. A Judge hearing an exemplary damages claim might be placed in the position of ‘marking the exam paper’ of the sentencing Judge. That would be uncomfortable in a situation where both actions were brought in the same Court and particularly so if the later civil proceedings were in a lower Court However, the same discomfort might not be thought to exist if the matter were ultimately to be dealt with at appellate level. 
In Norberg v Wynrib (1992) 92 DLR (4th) 449 at 472 La Forest, J drew attention, in passing, to Canadian cases at first instance denying exemplary damages in circumstances where there had already been a criminal conviction, on the ground that they would constitute double punishment Other cases in this line include Natonson v Lexier [1939] 3 WWR 289; Radovskis v Tomm (1957) 21 WWR 658; Kirisits v Morrell (1965) 52 WWR 123 and N (JL) v L (AN) [1989] 1 WWR 438. In none of the Canadian first instance decisions, which have been found in the course of research done while this judgment has been reserved, has there been any discussion of the question or mention of any justification other than ‘double punishment’. In Papadatos v Sutherland (1987) 40 DLR (4th) 755, the only Canadian appellate decision I am aware of which is on point, the Quebec Court of Appeal left the matter open, though on the facts of that case an exemplary damages award made in the Court below was set aside because the defendant's imprisonment for a lengthy period was regarded as a substantial punishment 
It seems to me that there may be good policy reasons, quite apart from the uncertainty in this country about the continuing role of exemplary damages mentioned in the judgment of Cooke, P in Donselaar, for refusing to rule out an exemplary damages claim merely because there has been a prior criminal punishment for the same activity. In New Zealand, unlike Canada, no compensating claim can be made If a successful criminal prosecution were held automatically to block any claim for exemplary damages a prosecution might be felt to disadvantage a woman in need of money with which to rehabilitate herself. It would be contrary to good policy if a rule discouraged abused women from co-operating with the police, by giving evidence against sexual offenders, because the very act of giving assistance to convict would preclude a damages claim. Legal advisers might suggest to such women that their best interests lay in non-co-operation and, instead, making a civil claim for exemplary damages. Furthermore, it would be extraordinary if the availability of exemplary damages depended upon the sequence of events, i.e. whether a civil judgment preceded or followed criminal sentencing Certainly the Court, in considering whether to award exemplary damages, and the amount of them, ought to take account of any criminal punishment. That may sometimes mean that the damages award will be nominal or significantly reduced. But I venture to suggest that an earlier criminal punishment should not automatically rule out a civil claim by the complainant. ”
I conclude that this case, with appropriate amendments to the statement of claim, is one that is not so plainly untenable that it should be struck out at this stage. In saying that I bear in mind the need for the Court to hold a tight reign as alluded to by Cooke J in Donselaar. I can see there is a danger that by appropriate pleading the Courts could be flooded with common law claims for damages for personal injury disguised as claims for exemplary damages. But, given the criteria which a plaintiff will have to meet obtain judgment for exemplary damages and that in jury trials the Judge will refuse to let the case go to the jury if there is no evidence to support such a claim I do not think such risk is reason to strike out. Reduced availability and quantum of accident compensation may parallel the situation which occurred early this century when Courts began to extend the concept of negligence to permit common law damages to be awarded because it became notorious that the statutory compensation available under the Worker's Compensation Act was clearly inadequate The application to strike out is dismissed. Costs to plaintiff $750.00. 

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