Head Notes: whether under the common law of New Zealand awards of exemplary damages in cases of negligence are, or should be, restricted to cases of intentional wrongdoing or conscious recklessness.
Privy Council Appeal No. 10 of 2002
“A” Appellant
v.
Michael Bernard Bottrill Respondent
FROM
THE COURT OF APPEAL OF NEW ZEALAND
—————
REASONS FOR REPORT OF THE LORDS OF THE JUDICIAL
COMMITTEE OF THE PRIVY COUNCIL, OF THE
9th July 2002,
Delivered the 6th September 2002
Present at the hearing:-
Lord Nicholls of Birkenhead
Lord Hope of Craighead
Lord Hutton
Lord Millett
Lord Rodger of Earlsferry
[Majority judgment delivered by Lord Nicholls of Birkenhead]
1. On 9th July 2002 their Lordships announced that they would humbly advise Her Majesty that the appeal should be allowed. Their Lordships said they would give their reasons later. This they now do.
2. The question raised by this appeal is whether under the common law of New Zealand awards of exemplary damages in cases of negligence are, or should be, restricted to cases of intentional wrongdoing or conscious recklessness.
3. The pros and cons of exemplary damages have been much debated. The debate still continues. In the United Kingdom differing views were recently expressed on this issue: see the decision of the House of Lords in Kuddus v Chief Constable of Leicestershire Constabulary [2001] 2 WLR 1789. That is not the issue on the present appeal. Moderate awards of exemplary damages in appropriate cases are an established feature of the law of New Zealand. The Parliament of New Zealand has confirmed the existence of the court’s jurisdiction to award exemplary damages, and to do so in cases of accidental personal injury: see section 396 of the Accident Insurance Act 1998. The court exercises this power with considerable restraint. Awards are reserved for “truly outrageous conduct” which cannot be adequately punished in any other way: see Dunlea v Attorney-General [2000] 3 NZLR 136.
4. The present appeal concerns, not the existence of this jurisdiction in New Zealand, but its outer limits. The issue raised is whether the court’s power to award exemplary damages is bounded only by the need for the defendant’s conduct to be so outrageous as to call for condemnation and punishment. Is this the demarcation of the court’s jurisdiction in cases of negligence? Or is the jurisdiction more specifically, and more narrowly, confined?
The facts
5. These questions of law arise in a singularly unhappy case of medical negligence which has aroused much concern in New Zealand. It concerns the wholesale misreading of cervical smears in the Gisborne area.
6. Dr Bottrill is a pathologist. He retired six years ago. Before then he was in private practice in Gisborne. For many years he was effectively the only pathologist examining cervical smears taken from women in the Gisborne area.
7. The Pap smear is a method of screening for cervical cancer and its precursors. A sample, taken from the cervix, is processed in a laboratory and examined under a microscope. This examination usually enables the examiner to report that the cells are normal, or reveal low grade squamous intraepithelial lesion (“SIL”), or high grade SIL, or invasive cancer. Low grade SIL calls for monitoring. High grade SIL calls for intervention. It is completely curable, but failing intervention it will progress to invasive cancer. So prompt diagnosis is of fundamental importance.
8. Between November 1990 and December 1994 Dr Bottrill examined four smears taken from the plaintiff Mrs A. Mrs A was born in 1968 and trained as a nurse. In November 1990 Dr Bottrill reported low grade SIL and in December 1990 “no atypical cells seen”. He gave a similarly clean bill of health on examination of the third smear, in May 1992. In December 1994 he reported high grade SIL, and recommended referral for assessment. Investigations followed, and Mrs A was diagnosed as suffering from invasive cervical cancer. She received extensive treatment, including a radical hysterectomy and extensive radiotherapy. The treatment was extremely unpleasant and had several consequences. The radiotherapy destroyed her ovaries. She could have no more children. The surgery left her with a weakness in her left leg. She suffered depression and was unable to work for some time.
9. Subsequent investigation revealed that all four slides examined by Dr Bottrill had been misread or misreported. The first three should have been reported as revealing high grade SIL and the fourth invasive carcinoma. High grade SIL, the immediate precursor of invasive cancer, was present as early as November 1990. Reading slides is not an exact science. Abnormality is a question of degree. But Dr Bottrill’s reports on both the second and third slides were two reporting categories away from the correct readings. Had any of the initial three slides been correctly reported Mrs A’s treatment would have been far less severe and her prognosis much better. She would not have needed a hysterectomy or radiation.
The proceedings
10. Mrs A made a successful claim for accident compensation. Disciplinary proceedings against Dr Bottrill resulted in a finding of conduct unbecoming a medical practitioner. Mrs A brought court proceedings against Dr Bottrill, claiming exemplary damages. After a four day trial Young J, in a careful and lucid judgment, dismissed the action. He applied the legal principle stated by Tipping J in the leading case of McLaren Transport Ltd v Somerville [1996] 3 NZLR 424, 434:
“Exemplary damages for negligence causing personal injury may be awarded if, but only if, the level of negligence is so high that it amounts to an outrageous and flagrant disregard for the plaintiff’s safety, meriting condemnation and punishment.”
11. Young J had no doubt that Dr Bottrill was guilty of professional negligence. But the judge concluded “by a narrow margin” that the case did not fall within the very limited category of negligence cases warranting an award of exemplary damages.
12. Two developments then took place, both as a result of publicity accompanying the trial. Mrs A became aware of ten other women whose cervical slides were misreported by Dr Bottrill. In seven of the ten cases the women had at least two slides misread. In seven cases they had slides revealing high grade SIL read as normal. In four instances women had two high grade SIL smears read as normal.
13. The second development was that public concern at the state of affairs revealed by the evidence at the trial led to the Health Funding Authority carrying out an investigation into the reporting of cervical smear results in Gisborne. All slides read by Dr Bottrill were submitted to re-reading in Sydney. The report from the Sydney laboratory covered 857 slides. The report was alarming. It showed that Dr Bottrill’s false reporting rate was 50 per cent or higher. He had been reporting as normal more than one slide in every two which, in fact, revealed high grade SIL.
14. In the light of this fresh evidence Mrs A applied for a re-trial. On 28 March 2000 Young J granted the application. At the trial he had concluded that Dr Bottrill was not as grossly incompetent as Mrs A asserted. He had reached this conclusion essentially on two bases. If Dr Bottrill had been as incompetent as suggested, he would have expected other significant errors to have come to light before the trial. The false readings in respect of one woman, Mrs A, were not necessarily indicative of gross incompetence. The new evidence very substantially undermined a significant step in his reasoning in dismissing the claims for exemplary damages.
15. Dr Bottrill appealed. The appeal was heard by a five judge court, comprising Richardson P, Gault, Thomas, Blanchard and Tipping JJ. By a majority of four to one, Thomas J dissenting, the court allowed the appeal and dismissed Mrs A’s application for a retrial. The court defined the circumstances in which an award of exemplary damages may be made in cases of negligence more restrictively than in the citation from the judgment of Tipping J in McLaren Transport Ltd v Somerville [1996] 3 NZLR 424, 434, set out above. The court held that, applying this more restrictive approach, the new evidence from Sydney afforded no justification for revisiting the conclusions reached by the judge at the trial.
16. Mrs A sought leave to appeal to Her Majesty in Council. Leave to appeal was not of right in this case. When granting leave Richardson P noted it would not ordinarily be appropriate to grant leave to appeal against an interlocutory decision of the kind involved in the present case where the court applied well settled principles for deciding whether a new trial should be ordered and where an appeal against Young J’s original decision was extant, thus raising the possibility of two successive appeals to London. Richardson P continued:
“However, counsel for Dr Bottrill consents to the granting of leave in this case of great importance, the parties submit that early consideration by the Privy Council of the underlying legal issue as to the test governing the availability of exemplary damages for medical negligence cases is desirable in the public interest and, importantly, Ms Fisher on behalf of Mrs A has elected to abandon the appeal against the original substantive decision. In these circumstances it is in the public interest that leave to appeal be granted.”
The scope of exemplary damages in cases of negligence
17. The Court of Appeal, in a judgment given by Richardson P on behalf of himself and Gault and Blanchard JJ, defined the scope of exemplary damages in cases of negligence as follows [2001] 3 NZLR 622, 641 (in paragraph 62):
“… exemplary damages may be awarded for negligence only in those cases where the defendant is subjectively aware of the risk to which his or her conduct exposes the plaintiff and acts deliberately or recklessly taking that risk. That inquiry involves an objective assessment of whether the defendant’s conduct amounted to deliberate or reckless risk taking and so whether in that latter situation he or she was subjectively reckless. That test of conscious risk taking will be satisfied where on an objective assessment the defendant had an actual appreciation of the risk or was recklessly indifferent to the consequences and must be taken to have been content for the consequences to happen as they did. And where the particular risk was obvious but there is an absence of evidence as to the defendant’s actual state of mind, the circumstances may justify the inference that she or he was aware of it and accepted the risk that it could well happen.”
Richardson P observed that the considerations of principle and policy underlying exemplary damages in New Zealand weigh heavily in favour of confining the remedy in this way: see page 636, paragraph 41 and page 638, paragraph 53.
18. Tipping J at page 662 delivered a separate judgment, agreeing with the views of the majority. He amended the test he had adopted in McLaren Transport Ltd v Somerville [1996] 3 NZLR 424, 434, in this way at pages 664-665:
“Exemplary damages for negligence causing personal injury may be awarded if, but only if, the negligence is at such a level and is of such a kind that it amounts to a conscious, outrageous and flagrant disregard for the plaintiff’s safety, meriting condemnation and punishment. The concept of conscious disregard means that the defendant consciously appreciated the risk to the plaintiff’s safety caused by his or her conduct but nevertheless deliberately chose to run that risk.”
19. In his dissenting judgment Thomas J at page 643 was unwilling to see the scope of exemplary damages restricted by imposing the subjective element favoured by the majority. The essence of exemplary damages is condemnation of reprehensible wrongdoing which is totally unacceptable to the community. Cases of inadvertent negligence should not be put beyond the reach of exemplary damages.
Principle
20. The starting point for any discussion of the limits of the court’s jurisdiction to award exemplary damages is to identify the rationale of the jurisdiction. This is not in doubt, although different forms of words have been used, each with its own shades of meaning. For present purposes the essence of the rationale can be sufficiently encapsulated as follows. In the ordinary course the appropriate response of a court to the commission of a tort is to require the wrongdoer to make good the wronged person’s loss, so far as a payment of money can achieve this. In appropriate circumstances this may include aggravated damages. Exceptionally, a defendant’s conduct in committing a civil wrong is so outrageous that an order for payment of compensation is not an adequate response. Something more is needed from the court, to demonstrate that such conduct is altogether unacceptable to society. Then the wrongdoer may be ordered to make a further payment, by way of condemnation and punishment.
21. Thus, in distinguishing the essentially different roles of compensatory damages and exemplary damages Lord Devlin said a jury should be directed that if, but only if, the amount they have in mind to award as compensation is ‘inadequate to punish [the defendant] for his outrageous conduct, to mark their disapproval of such conduct and to deter him from repeating it’, then they might award exemplary damages: see Rookes v Barnard [1964] AC 1129, 1228. In Broome v Cassell & Co Ltd [1972] AC 1027, 1060, Lord Hailsham of St Marylebone LC approved this passage as a most valuable and important contribution to the law of exemplary damages.
22. In principle the limits of the court’s jurisdiction to award exemplary damages can be expected to be co-extensive with this broad-based rationale. The court’s discretionary jurisdiction may be expected to extend to all cases of tortious wrongdoing where the defendant’s conduct satisfies this criterion of outrageousness. Any departure from this principle needs to be justified. Otherwise the law lacks coherence. It could not be right that certain types of outrageous conduct as described above should attract the court’s jurisdiction to award exemplary damages and other types of conduct, satisfying the same test of outrageousness, should not, unless there exists between these types a rational distinction sufficient to justify such a significant difference in treatment.
23. The next point to note is that, in the nature of things, cases satisfying the test of outrageousness will usually involve intentional wrongdoing with, additionally, an element of flagrancy or cynicism or oppression or the like: something additional, rendering the wrongdoing or the manner or circumstances in which it was committed particularly appalling. It is these features which make the defendant’s conduct outrageous. Either that or at the very least, in cases of negligence, the defendant was aware of the risks involved but he proceeded with a reckless indifference such that this conduct, too, evokes a sense of outrage. Such conscious recklessness approaches very closely to intentional wrongdoing.
24. Overwhelmingly, in the exceptional cases where questions of exemplary damages fall to be considered at all, the defendant’s misconduct will be of a subjectively advertent nature as just described. Overwhelmingly, in cases of negligence, whose essential ingredients are objective in character (“ought to have known”), an award of exemplary damages will be appropriate only where the defendant’s wrongdoing was intentional or consciously reckless.
25. It is not surprising, therefore, that when describing conduct meet for an award of exemplary damages judges have often used adjectives or phrases primarily, or even solely, aimed at advertent conduct. These include: malicious, vindictive, high-handed, wanton, wilful, arrogant, cynical, oppressive, and contumelious disregard of the plaintiff’s rights.
26. However, if experience in the law teaches anything, it is that sooner or later the unexpected and exceptional event is bound to occur. It would be imprudent to assume that, in the absence of intentional wrongdoing or conscious recklessness, a defendant’s negligent conduct will never give rise to a justifiable feeling of outrage calling for an award of exemplary damages. “Never say never” is a sound judicial admonition. There may be the rare case where the defendant departed so far and so flagrantly from the dictates of ordinary or professional precepts of prudence, or standards of care, that his conduct satisfies this test even though he was not consciously reckless.
27. Indeed, the “advertent conduct only” limitation, as it may be called, adopted by the Court of Appeal presupposes this is so. The very purpose of adopting this limitation is to exclude from the scope of the court’s jurisdiction to award exemplary damages cases which otherwise would fall within it. The court’s definition of the boundary is intended to exclude all cases where the defendant’s wrongdoing was not deliberate or consciously reckless, and it is intended to do so regardless of the circumstances. Thus, the limitation serves to exclude cases from the jurisdiction even if they satisfy the outrageous conduct criterion. Cases not satisfying this criterion are outside the court’s jurisdiction anyway.
28. So the crucial question arises: considered as a matter of principle, what is the basis on which cases of outrageous but “inadvertent” conduct are to be excluded from the scope of the court’s jurisdiction to award exemplary damages? Why should the courts set themselves to exclude exemplary damages in every such case, whatever the circumstances? Such a rigid exclusion accords ill with the rationale of this jurisdiction. It is at odds with the underlying principle, and in that regard it is an artificial limitation.
29. Several reasons are put forward in answer to these questions. One reason is founded on the anomalous character of exemplary damages. Awards of exemplary damages differ from other monetary payment orders made in respect of tortious conduct. They serve a quite different function. Their function is not to compensate. Their primary function is to punish. They also serve as an emphatic vindication of the plaintiff’s rights and as a deterrent. Punishment is a function normally reserved for the criminal law. Typically criminal law punishes advertent conduct, not inadvertent conduct. From this it is an easy and seemingly attractive step to conclude that, as with punishment for crime, so with exemplary damages regarding tortious conduct, the defendant’s conduct must be advertent.
30. This reasoning is not compelling. For the most part crimes require advertence, but this is not always so. Criminal law is not exclusively confined to cases of advertent conduct. The analogy with criminal law cannot therefore furnish any reason in principle why exemplary damages in cases of negligence must always be confined to cases of intentional wrongdoing or conscious recklessness.
31. Nor does the analogy with the ingredients of the tort of misfeasance in public office really assist. The fact that intention or reckless indifference is a necessary ingredient of that tort can hardly be regarded as setting a minimum standard for awards of exemplary damages across the whole field of tortious conduct.
32. Another reason advanced is that if the jurisdictional boundary is not drawn along the dividing line between advertent and inadvertent conduct, then in cases of negligence it is impossible to draw a clear line at all. Without such a dividing line the only distinction between cases of negligence within the jurisdiction and those outside it will be a difference of degree.
33. The logic of this argument is impeccable, but it leads nowhere, as a matter of principle. Differences in degree can be none the less real in this context. Courts are well able to identify the presence or absence of that something extra which turns a case of grossly negligent conduct into conduct which is quite outrageous.
34. It is said that a test of this nature would necessarily create uncertainty over the reach of exemplary damages. Their Lordships have no reason to believe that difficulties were experienced in practice while Tipping J’s statement in McLaren Transport Ltd v Somerville [1996] 3 NZLR 424, 434, was regarded as a correct statement of the law. The reality is that there will be an element of forensic uncertainty in borderline cases whatever test is adopted. A degree of uncertainty is inevitable, with a standard such as outrageous conduct. If there is an additional prerequisite of intention or conscious recklessness there will, here also, be an element of uncertainty. There will be uncertainty over whether a court will be prepared to infer that the defendant was aware of the risk and went ahead recklessly indifferent to the consequences. Driving a car at an altogether excessive speed in a residential area, or driving over a busy cross-roads when traffic lights have turned yellow and are just turning red, are illustrations.
35. A further practical feature may be noted. Judges often have to make findings about a party’s state of mind. Frequently there is a paucity of direct evidence on this. Judges have to draw inferences from all the surrounding circumstances. When considering the issue of reckless indifference to risks, a key question is likely to be whether the defendant, such as the car driver, was aware of the risks to which he was exposing others. In this situation judges sometimes use phrases such as “must have known” when they have difficulty in expressing their conclusion more firmly and finding that the defendant was aware, and did know, of the risks involved in behaving as he did. Judicial use of the phrase “must have known” is indicative of the evidential difficulties which may arise in such cases.
36. Tipping J’s clarification of his decision in the McLaren Transport [1996] 3 NZLR 424 case exemplifies this point. In his judgment in the present case [2001] 3 NZLR 622, 633, Tipping J explained that he ought to have said there was no direct evidence, but he was prepared to infer that Mr Stumbles, who grossly over-inflated the tyre, “must have appreciated the risk inherent in what he was doing”.
37. As a matter of principle, the court’s ability to award exemplary damages does not turn on niceties such as this. As Thomas J noted at pages 657-658, the necessity to observe the distinction between advertent and inadvertent conduct will distract courts from making a decision in accordance with the fundamental rationale of exemplary damages. If, having heard all the evidence, a judge firmly believes the case is so truly exceptional and outrageous that an award of exemplary damages is called for, his power to make an award is not dependent upon his being able conscientiously to find that the defendant was subjectively reckless. The absence of intentional wrongdoing and conscious recklessness will always point strongly away from the case being apt for an award of exemplary damages. That is a very important factor to be taken into account by the judge. But if the judge decides that, although the case is not one of intentional wrongdoing or conscious recklessness, the defendant’s conduct satisfies the outrageous test and condemnation is called for, in principle the judge has the same power to award exemplary damages as in any other case satisfying this test.
38. Moreover, the distinction between advertent and inadvertent conduct can itself be difficult to draw in this context. Take the case of someone who deliberately aims a gun at another person, believing it to be unloaded. He squeezes the trigger. The gun is loaded, and serious injury follows. Should not the court be able, in an appropriate case, to award exemplary damages in respect of such stupidly dangerous behaviour? If advertent conduct is a prerequisite, this case would be outside the court’s jurisdiction. The person who aimed the gun and squeezed the trigger did not intend to fire the gun or injure anyone. Nor did he consciously take a risk. He genuinely believed the gun was harmless. True, he acted deliberately when he aimed the gun and pulled the trigger. But those deliberate acts cannot be regarded as sufficient “advertence” for the purposes of an award of exemplary damages without departing from the suggested prerequisite of intentional wrongdoing or conscious recklessness. Treating such behaviour as advertent would be to give an artificially extended meaning to advertence.
39. This approach can be found in the Ontario Law Reform Commission’s Report on Exemplary Damages 1991. The commission recommended, at page 38, that punitive damages, which was its preferred nomenclature, should be awarded only where the defendant “advertently committed a wrongful act deserving of punishment” and where his conduct was exceptional. The commission then proceeded to give advertent wrongful conduct a meaning going beyond intentional wrongdoing or conscious recklessness. The commission’s recommendation was that the threshold prerequisite of advertent wrongful conduct should comprehend the case “where the defendant knew or ought to have known that the act was wrong” (emphasis added).
40. Their Lordships are of the view that, considered as a matter of legal principle, the arguments against restricting the jurisdiction to cases of intentional or consciously reckless conduct are to be preferred. The fundamental flaw in such a rigid limitation is that it fails to treat like cases alike. For the purposes of exemplary damages the basic question is always whether the defendant’s conduct satisfies the outrageous conduct criterion. The suggested rigid limitation treats some cases satisfying this criterion in a different way: if the harm was done intentionally or resulted from conscious recklessness, exemplary damages may be awarded. It treats other cases satisfying the same criterion in another way: in the absence of intentional wrongdoing or conscious recklessness, exemplary damages can never be awarded, whatever the circumstances. As a matter of principle, this is not a sound distinction.
Precedent
41. Their Lordships also consider that past experience, as expressed in observations or decisions of the higher courts in New Zealand and elsewhere in the common law world, supports the broader approach. Leaving aside England, still toiling in the chains of Rookes v Barnard [1964] AC 1129, courts in common law countries have remained true to the underlying rationale of the exemplary damages jurisdiction. Courts in all countries have openly recognised the exceptional and unusual nature of this jurisdiction. They have recognised the need to confine this remedy to truly exceptional and unusual cases. Punishment is primarily a matter for criminal law. They have, further, been well aware of the importance, and the difficulty, of confining the use of this remedy in cases of negligence.
42. In the face of all these features, for the most part courts have still remained unwilling to demarcate the boundaries of the exemplary damages jurisdiction with any form of spurious precision.
43. The point has not previously arisen for decision in New Zealand. Judicial observations made without this point in mind are of limited value. But the general tenor of judicial observations accords with the broad principle as already described. Rightly, exemplary damages are associated primarily with intentional wrongdoing. But the ultimate touchstone constantly mentioned is that of outrageous conduct by the defendant which calls for punishment.
44. Some leading examples will suffice. In Taylor v Beere [1982] 1 NZLR 81, 89, 90, a defamation case, Richardson J spoke of the appropriateness of a court registering condemnation of “outrageous conduct”: there will be cases where it is appropriate to mark in this way “the contumelious disregard by the defendant of the plaintiff’s rights”. In the contemporaneous judgment in Donselaar v Donselaar [1982] 1 NZLR 97, a case of assault, Richardson J at page 109 expressed himself similarly: exemplary damages are awarded because of the “outrageous manner” in which the defendant has conducted himself in the course of committing the tort. Cooke J at page 107, referred to the importance of judges keeping a tight rein on exemplary damages claims arising out of accidental personal injury. He pointedly added that if unmeritorious claims were successfully brought in any numbers the remedy of abolishing exemplary damages for certain classes of case lay in the hands of Parliament. In Green v Matheson [1989] 3 NZLR 564, 571, the plaintiff alleged she had been given medical treatment for purposes of research and experimentation without her consent. She claimed exemplary and other damages for trespass to the person, breach of fiduciary duty and negligence. Cooke J stated that an award of exemplary damages was to punish the defendant for high-handed disregard of the plaintiff’s rights “or the like outrageous conduct”. Tipping J’s summary of the law, in the context of personal injury claims, in McLaren Transport Ltd v Somerville [1996] 3 NZLR 424, 434, has already been cited above. He observed that once exemplary damages are allowed in cases of negligence causing personal injury, it is impossible to “shy away from the concept of degrees of negligence”. In Ellison v L [1998] 1 NZLR 416, 419, a case of allegedly negligent treatment by a dentist, Blanchard J noted that mere negligence would not suffice. He referred with approval to observations in an earlier unreported decision of the Court of Appeal in Cable v Robertson, 10 May 1996; CA 125/95, to the effect that exemplary damages are reserved for cases of “truly outrageous conduct which cannot be adequately punished in any other way”. They are awarded only “in serious and exceptional cases”.
45. In other countries also there is, as might be expected, much emphasis on the presence of intentional misconduct or conscious recklessness. But, here again, what is notable is that judges invariably qualify their remarks by leaving open the possibility of an award of exemplary damages in other cases. In Australia, in Gray v Motor Accident Commission (1998) 158 ALR 485, 489, 490-491, the judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ noted that the phrase “conscious wrongdoing in contumelious disregard of another’s rights” describes “at least the greater part” of the relevant field. This qualification was later repeated (“chiefly if not exclusively”) as part of the preface to the statement that exemplary damages could not properly be awarded in a case of negligence in which there was no conscious wrongdoing by the defendant. Kirby J said at page 507 that exemplary damages may be recovered whatever the subjective intention of the defendant “if, objectively, the conduct involved was high-handed, calling for curial disapprobation addressed not only to the tortfeasor but to the world”.
46. The Supreme Court of Canada recently seized the opportunity, in Whiten v Pilot Insurance Co [2002] SCJ No 19, to “clarify further” the rules governing whether an award of punitive damages ought to be made. Binnie J delivered the judgment of the court comprising McLachlin CJ and L’Heureux-Dubé, Gonthier, Major, himself, Arbour and LeBel JJ. After a comprehensive survey of the law in other common law jurisdictions, the court approved the “broader approach” adopted by the British Columbia Court of Appeal in the negligence case of Robitaille v Vancouver Hockey Club Ltd (1981) 124 DLR (3d) 228, 250, that punitive damages in a negligence case ought to be available whenever the conduct of the defendant was such as to merit condemnation by the court: see paragraph 67.
47. This issue was considered by the Supreme Court of the United States in Smith v Wade (1983) 461 US 30. Brennan J gave the judgment of the majority, comprising himself, White, Marshall, Blackmun and Stevens JJ. He noted, at paragraph 35, that most states under common law, although varying in their precise terminology, recognise that “punitive damages in tort cases may be awarded not only for actual intent to injure or evil motive, but also for recklessness, serious indifference to or disregard for the rights of others, or even gross negligence”.
48. The views of three recent reports of law reform commissions may be noted briefly. Reference has already been made to the recommendations of the Ontario Law Reform Commission’s Report on Exemplary Damages 1991 page 25. The Irish Law Reform Commission, in its Report on Exemplary Damages (May 2000), expressed the view at page 23 paragraphs 1.73-1.75 that the definition of misconduct necessary to ground exemplary damages should be strict enough to confine exemplary damages to the most exceptional cases, but this requirement should not be such as to exclude exemplary damages for negligence. The commission recommended in paragraph 1.75 legislation to the effect that exemplary damages should be awarded only where it has been established that the conduct of the defendant in the commission of a tort was “high-handed, insolent, vindictive or exhibiting a gross disregard for the rights of the plaintiff”. The recommendation of the English Law Commission in its Report on Aggravated, Exemplary and Restitutionary Damages (1997) (Law Com No 247) was closer to the views expressed by the Court of Appeal in the present case: “the defendant deliberately and outrageously disregarded the plaintiff’s rights”. The commission noted that this serves to exclude mere and even gross (non-advertent) negligence: paragraphs 5.44 to 5.52.
49. Overall this summary suggests that courts in other countries have not found it necessary in practice to restrict the scope of exemplary damages in cases of negligence to cases of intentional wrongdoing or conscious recklessness. Wisely, they have left the door ajar.
50. For these reasons the Board’s view is that, as a matter of principle and authority, intentional wrongdoing or conscious recklessness is not an essential prerequisite to an order for payment of exemplary damages. Legal principle does not require that the court’s jurisdiction should be limited in this way. On this their Lordships respectfully part company with the Court of Appeal. Thus one strand of that court’s reasoning falls away.
Policy
51. Their Lordships turn to the other strand: legal policy. The law must be practical as well as principled. The majority of the Court of Appeal [2001] 3 NZLR 638 paragraphs 49-52 referred to “three powerful legal policy considerations” pointing “strongly” in favour of its conclusion.
52. The first of these relates to the difficulty of drawing a line if intentional wrongdoing or conscious recklessness were not a prerequisite. This has already been discussed above.
53. As to the other two policy considerations, their Lordships’ reading of the majority judgment of the Court of Appeal is that the factor most influencing the court’s view is the existence of the statutory accident compensation scheme in New Zealand. This legislation bars proceedings for damages arising out of accidental personal injury suffered by a person in New Zealand. This bar should not lead the courts to extend the role of exemplary damages to reflect any assumed inadequacies in the legislative scheme. That would be to subvert the social and economic policies underlying the scheme and require people to carry insurance cover or self-cover themselves against compensation liability intended to be paid for by accident compensation premiums: page 637, (paragraph 45).
54. The court’s concern is that, although exemplary damages are intended to punish the defendant and not to compensate the victim, those who are injured by the negligence of others may all too readily see the court’s continuing jurisdiction to award exemplary damages as providing a means to augment their statutory compensation. The consequences for the public interest would be “unacceptably expansive”: page 638, paragraph 51. If the need for conscious appreciation by the defendant of risk to the plaintiff were not a prerequisite, the class of potential claimants would be so wide and the circumstances for consideration so variable that “the practical limits of the potential liability for punishment would be very difficult to predict” (paragraph 51). This would have economic and social policy implications, including the responses of those at risk of proceedings and, in particular, the cost of the services they supply. There would also be insurance ramifications (paragraph 52).
55. The importance, or weight, properly to be given to social considerations such as these is a matter of judgment. Clearly, a local court, with its knowledge of local conditions, is much better placed to make this evaluative judgment than their Lordships’ Board. A court composed of New Zealand judges is better able to perceive where, on balance, the public interest lies than is a court sitting in London whose members are wholly or predominantly United Kingdom judges. Hence the practice of the Board is not to substitute its own views for those of the Court of Appeal on questions of the policy of the law in New Zealand. This practice has already been followed once in relation to exemplary damages, in the case of W v W [1999] 2 NZLR 1.
56. There is a complication in the present case. The Court of Appeal evaluated the policy considerations on the (mistaken) basis that considerations of principle require the advertent conduct only limitation. The correct approach is to evaluate the policy considerations against the background that, far from according with principle, this limitation would represent a departure from basic principle. The Court of Appeal did not carry out this exercise.
57. This places the Board in a difficult position. In the circumstances their Lordships consider they should adopt the following approach on this aspect of the appeal. The policy considerations are to be evaluated on the footing that, as a matter of principle, intentional misconduct or conscious recklessness is not an essential prerequisite of the court’s jurisdiction to award exemplary damages. Their Lordships should consider whether, on this footing, the stated policy reasons can be regarded as being by themselves sufficient to justify introducing this restriction into the common law of New Zealand. In doing so their Lordships should not depart from the views of the Court of Appeal unless the stated reasons appear to the Board to be clearly insufficient to justify the introduction of this restriction.
58. The stated policy reasons are essentially “floodgates” arguments. The court is concerned at the prospect of an increase in claims for exemplary damages for personal injuries and the social and economic implications this would have. In Daniels v Thompson [1998] 3 NZLR 22, 29-30, Henry J referred to the “recent upsurge in [claims for exemplary damages] … said to be attributable, at least in part, to the accident compensation scheme, and more recently the reduction in benefits payable under it”.
59. Here it is important to distinguish between an increase in the number of unsuccessful claims and an increase in the number of successful claims. Although the former do not result in awards of exemplary damages, they do involve defendants in expense and inconvenience. As to these claims, it must be questionable whether the advertent conduct only limitation would have a significant effect on the flow of claims for exemplary damages in negligence cases. Claimants who are prepared to assume the burden of proving that the defendant’s conduct satisfies the outrageous criterion would seem unlikely to be deterred by having to shoulder the further burden of persuading the court that the defendant “must have known” of the risks. Moreover, it is in any event difficult to see how the possibility of a spate of ill-founded claims can be a good reason for raising the exemplary damages threshold. That would be to limit the scope of the substantive law in response to the possibility of procedural problems. That would be to exclude the good along with the bad, the well-founded claims along with the ill-founded.
60. As to concern at the prospect of an increase in the number of awards of exemplary damages, their Lordships have difficulty in seeing the basis for anticipating any significant increase. As already noted, the settled practice in New Zealand is for judges to exercise this discretionary jurisdiction with great restraint. Awards, when made, are moderate. There is no reason to suppose this practice will change. Their Lordships are therefore at a loss to understand how retention of the McLaren Transport approach is thought to be likely to give rise to difficulties on this score. Similarly with the social and economic implications: the risk of awards of exemplary damages already exists, for the medical profession and others.
61. In this regard a further feature must be noted. In 1998 Parliament confirmed the existence of the court’s jurisdiction to award exemplary damages. When it did so the scope of this jurisdiction was generally understood to be as stated in the McLaren Transport case. Parliament was seemingly content with this state of affairs. Their Lordships consider this is a significant pointer away from the Court of Appeal’s conclusion on the policy issues.
62. Overall, and with great respect to the Court of Appeal, the Board is of the opinion that the policy reasons mentioned briefly by the court do not point to the conclusion favoured by the court, especially when it is recognised that the advertent conduct only limitation propounded by the court is not in accordance with underlying principle.
63. For these reasons their Lordships consider that under the common law of New Zealand the court’s jurisdiction to award exemplary damages in cases of negligence is not rigidly confined to cases where the defendant intended to cause the harm or was consciously reckless as to the risks involved.
64. That said, their Lordships cannot over-emphasise what has already been indicated more than once. The cases where it is appropriate to make an award of exemplary damages are exceptional. The cases where it is appropriate to make an award of exemplary damages in the absence of intentional wrongdoing or conscious recklessness will be exceptional and rare indeed. It must always be kept in mind that compensation is not the purpose of exemplary damages. A perceived need for compensation, or further compensation, is not a proper basis for making an award of exemplary damages.
65. For completeness one further point, peculiar to the position in New Zealand, should be mentioned. In his exposition already cited Lord Devlin made plain that exemplary damages are appropriate only if and in so far as an award of compensatory damages is insufficient in itself to punish the defendant. In New Zealand awards of compensatory damages are not made by courts in cases of accidental personal injury. So in such cases there can be no question of the need, if any, for punishment being satisfied by an award of compensatory damages.
66. This feature of the law of New Zealand throws no light on the answer to the question under consideration in this judgment. It does not assist in determining whether intentional wrongdoing or conscious recklessness is in every case an essential prerequisite to an award of exemplary damages. But it does serve to emphasise the need for much restraint in the exercise of this jurisdiction in New Zealand.
The application for a new trial
67. It follows from the above that the Court of Appeal misdirected itself in law in holding that the new evidence was irrelevant to the crucial factual issues in the case. Its decision on the new trial application cannot stand. The Court of Appeal set aside Young J’s order for a new trial on the ground that there was nothing in the Sydney evidence from which it could plausibly be argued that Dr Bottrill had a conscious disregard for his patient’s welfare. This feature of the new evidence ceases to be conclusive against a new trial, once it is appreciated that this feature is not an essential prerequisite to ordering Dr. Bottrill to pay exemplary damages, although the absence of conscious disregard for Mrs A’s welfare will be an extremely weighty factor.
68. Mrs A’s case is that this is a scandalous case of incompetence, crying out for exemplary damages. At the trial Young J decided against her claim by a narrow margin, as he put it. On the new trial application Young J was impressed by the “extraordinarily high level of errors” made by Dr Bottrill. The judge’s self-direction on the law was sound, as was his appraisal of the new evidence. In the exercise of his discretion he ordered a new trial.
69. Their Lordships see no ground requiring or entitling them to interfere with this exercise of discretion by the judge. He was uniquely well placed to evaluate the potential significance of the new evidence.
70. Their Lordships recognise that restoring the judge’s order for a new trial means that Dr Bottrill’s ordeal, already prolonged, will be prolonged further. Their Lordships were told he is not in good health, and that he has been pilloried in the press. But Mrs A, who has suffered grievously, should in all fairness and justice have an opportunity to present her case to a judge with the benefit of the new evidence. Through no one’s fault, she has not yet had that opportunity.
71. Their Lordships will humbly advise Her Majesty that this appeal should be allowed. The order of the Court of Appeal should be set aside. Young J’s order for a new trial will be restored. The respondent must pay the appellant’s costs before their Lordships’ Board and in the Court of Appeal.
Dissenting judgment delivered by Lord Hutton and Lord Millett
72. Two questions arise on this appeal. The principal question which gives rise to an important point of principle is whether under the common law of New Zealand awards of exemplary damages where the plaintiff sues for negligence are, or should be, restricted to cases of intentional wrongdoing or subjective recklessness. The second question is whether Young J was right to order a new trial.
73. We regret that we are unable to agree with the opinion of the majority on the principal question before the Board. In our opinion the Court of Appeal was not in error in holding that exemplary damages should only be awarded in those cases where the defendant was subjectively aware of the risk to which his conduct exposed the plaintiff and acted deliberately or recklessly took that risk.
74. An essential part of the reasoning of the Court of Appeal, stated in paragraphs 42 and 43 of the judgment of the majority, is that the primary purpose of an award of exemplary damages is to punish the defendant, and therefore such an award should only be made against a defendant who is consciously aware that his conduct is wrong or who appreciates the risk to which he is putting the plaintiff, so that the quality of his conduct so closely approaches that involved in doing intentional harm that civil punishment is an appropriate response.
75. In Rookes v Barnard [1964] AC 1129, 1221 Lord Devlin stated: “The object of exemplary damages is to punish and deter”. In W v W [1999] 2 NZLR 1, 2 Lord Hoffmann stated at page 2:
“The main purpose of exemplary damages (sometimes called punitive damages) is to punish the defendant.”
and at page 3:
“Punishment takes the form of damages which go to the victim rather than imprisonment or a fine which can afford [the plaintiff] only a more indirect satisfaction.”
76. In agreement with the Court of Appeal we consider that if the primary purpose of exemplary damages is to punish, it follows that punishment should not be imposed unless the defendant has intended to cause harm to the plaintiff or has been subjectively reckless as to whether his conduct will cause harm. In our opinion it would be contrary to well-established principle that punishment should be inflicted on a defendant, no matter how gross his negligence, unless he had a guilty mind – although a court may well infer subjective recklessness where it finds gross negligence. Many statements of this principle are contained in the authorities; we refer to two. In Sweet v Parsley [1970] AC 132, 156 Lord Pearce said:
“The notion that some guilty mind is a constituent part of crime and punishment goes back far beyond our common law.”
In Morissette v United States (1952) 342 US 246, 250-251 Jackson J, in delivering the opinion of the United States Supreme Court, stated:
“A relation between some mental element and punishment for a harmful act is almost as instinctive as the child’s familiar exculpatory ‘But I didn’t mean to’, and has afforded the rational basis for a tardy and unfinished substitution of deterrence and reformation in place of retaliation and vengeance as the motivation for public prosecution.”
There are exceptions to this principle in respect of a considerable number of statutory offences, many of which are of a regulatory nature, but, in our opinion, these exceptions do not diminish the force of the principle in its application to the question whether punitive damages should be imposed in the absence of a guilty mind.
77. Therefore we consider that the rationale of exemplary damages is not to mark the court’s disapproval of outrageous conduct by the defendant, rather the award is made to punish the defendant for his outrageous behaviour. The rationale does not apply where the defendant has not had the intent to harm or has not been subjectively reckless. In such a case, although the opinion of the court may be that the defendant’s conduct has been outrageous because, for example, his gross negligence has caused very grave harm to the plaintiff, it would not be right to punish him in the absence of a guilty mind by an award of exemplary damages.
78. We consider that the 1997 report of the English Law Commission (Law Commission Report No. 247) supports the opinion of the Court of Appeal. The report states:
“5.46 We reject the existing, and overly restrictive, categories test, in favour of a single, general test which seeks to isolate especially culpable and punishment-worthy examples of wrongful conduct. We have selected the phrase ‘deliberate and outrageous disregard of the plaintiff’s rights’ as the clearest of the multitude of similar phrases which were used in England before Rookes v Barnard, and which have continued to be used in Australia, Canada and the United States, to describe when exemplary or punitive damages are available.
5.47 The minimum threshold is that the defendant has been subjectively reckless – to use criminal law terminology. The notion of ‘outrage’ imports the element of judicial discretion that we believe is inevitable, and essential, in this area. Factors that will no doubt be relevant in deciding whether conduct is not merely reckless but outrageous will include whether the wrong was intentionally committed, the extent and type of the potential harm to the plaintiff, and the motives of the defendant.”
79. In some cases the court looking at the consequences to the plaintiff of the defendant’s gross negligence might take the view that the defendant’s conduct had been outrageous even if he had not intended to harm the plaintiff or had not been subjectively reckless. However it is clear that the Law Commission considers that the defendant should, at least, have been subjectively reckless before exemplary damages can be awarded, and once subjective recklessness is established the commission considers that it is also necessary to establish that the conduct was outrageous.
80. The American Law Institute’s Restatement of the Law of Torts (2d) (1979), section 908 also suggests that punitive damages should not be awarded in the absence of evil motive or reckless indifference:
“(1) Punitive damages are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct and to deter him and others like him from similar conduct in the future.
(2) Punitive damages may be awarded for conduct that is outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others. In assessing punitive damages, the trier of fact can properly consider the character of the defendant’s act, the nature and extent of the harm to the plaintiff that the defendant caused or intended to cause and the wealth of the defendant.”
81. We further consider that there is substantial force in the points made in paragraphs 50 and 51 of the majority judgment of the Court of Appeal [2001] 3 NZLR 622, 638 in relation to uncertainty and unpredictability. If the plaintiff does not have to establish intent or subjective recklessness but is entitled to recover exemplary damages where, in the opinion of the court, the conduct of the defendant was so outrageous as to call for such damages, we think that there will be considerable uncertainty as to when exemplary damages will be awarded and it will be difficult for lawyers to give advice as to whether grossly negligent conduct in a particular case gives rise to the risk of such an award. Outrage is a subjective concept and if a sense of outrage is the principal factor to guide a judge, individual judges might well take differing views as to whether grossly negligent conduct in a particular case should be viewed as outrageous. There is bound to be uncertainty in some cases as to whether a judge will find intent to harm or subjective recklessness, but we consider that the uncertainty will be increased if the threshold test is not that of intent or recklessness but whether the defendant’s conduct was outrageous.
82. Therefore we consider that the Court of Appeal was right to hold for reasons of principle and policy that awards of exemplary damages should be confined to cases where the defendant acted deliberately to cause harm or was subjectively reckless.
83. However, although we would adopt the approach of the Court of Appeal in relation to the question of principle, we would differ from its opinion that, applying that approach, a new trial should not be ordered. What the plaintiff must show is that the new evidence is such “that, if given, it would probably have an important influence on the result of the case, though it need not be decisive”: see Ladd v Marshall [1954] 1 WLR 1489, 1491. We consider that this test is satisfied in the present case.
84. The fresh evidence from the Sydney laboratory in respect of 857 slides shows that Dr Bottrill’s false reporting rate was 50 per cent or higher. This evidence shows a high and constant degree of negligence on the part of Dr Bottrill. We consider that this fresh evidence adduced at a new trial would enable the plaintiff to advance a case of considerable force that Dr Bottrill must have been aware of the risks to which he was subjecting the women whose smears he was examining and could result in a finding that he had been subjectively reckless. Young J referred to such an argument in two parts of his judgment. He stated in his second judgment at paragraph 58:
“Dr Bottrill’s conduct in the present case, could perhaps be subjected to a recklessness analysis. Given the very high proportion of reading errors made by Dr Bottrill, it seems highly probable that any external quality control programme would have identified Dr Bottrill’s problem. He must have recognised that there was an appreciable risk, although perhaps only a very slight one, that in the absence of submitting himself to such a programme, preventable errors might occur. So his case could be framed as involving recklessness – that is he ran that risk because he was not prepared to incur the cost in money and the inconvenience in time of participation in an external quality control programme.”
And at paragraph 63:
“While it is certainly the case that there was no evidence put to me which suggests that Dr Bottrill was actually aware of the imperfections in the way in which he reported on smears, this may be an issue which the plaintiff would wish to explore in the light of the new evidence. One of the main reasons why I took the view that the plaintiff had not shown Dr Bottrill to be as incompetent as alleged was because it seemed to me that any such incompetence would have shown up before trial. In light of the material which has now emerged, that line of reasoning may now be able to be inverted. Given the extraordinarily high level of errors made by Dr Bottrill in reading and reporting on slides, it seems at least possible that Dr Bottrill was, from time to time, put on notice of circumstances which at least raised question marks as to his reporting. This is certainly not an argument which I could resolve against the plaintiff at this stage in the litigation.”
In our opinion these are valid observations and it would therefore be right to order a new trial at which the effect of the fresh evidence could be considered.
85. It follows that, whilst differing from the opinion of the majority on the issue of principle relating to the award of exemplary damages, we would humbly advise Her Majesty that the appeal should be allowed and that a new trial should take place.
