Exemplary Damages - Is The Door Re-Opened?

The long awaited Supreme Court decision in Couch was delivered in March of this year, and had good and bad news for plaintiffs seeking to sue for personal injury.

As is well known, the Accident Compensation Act 2001 ("the Act") compensates persons who suffer personal injury, but s317 of the Act then prevents them from making civil claim for compensation against possible defendants (even if there is a short fall in the ACC compensation)

The decision in Couch determined (1) whether civil claims for exemplary damages (effectively seeking to punish and condemn the defendant, rather than to compensate the plaintiff) were similarly barred by s317; and (2) set out the test the plaintiff would have to satisfy before an award for exemplary damages would be made.

What happened?

Ms Couch was one of the surviving victims of the 2001 Mt Wellington-Panmure RSA shooting. The shooter was parolee William Bell. Ms Couch sought to make a claim, not against Bell but the Department of Corrections, claiming the Department was negligent in the way it administered Bell’s parole conditions.

The good news for plaintiffs

The Supreme Court says exemplary damages for personal injury are not barred by s317 of the Act.

The bad news for plaintiffs

The test the plaintiff would have to satisfy before exemplary damages would be awarded is very high.

His Honour Justice Tipping at paragraph [150] of the judgment, discusses the test:

It follows that I agree with the Crown‘s submission that the concept of outrageousness is unsatisfactory as the sole criterion. It is far better to have a test which focuses objectively on the state of mind of the defendant as a precursor to any subjective assessment by the Judge or jury of whether the defendant‘s conduct was outrageous. This focus on the state of the defendant‘s mind also helps to underline that the consequences of the defendant‘s conduct are not the primary question. The more important question is the level of risk to the plaintiff‘s safety which the defendant consciously ran and the level of harm which the defendant appreciated would eventuate if the risk he was consciously running became a reality. This is a more principled basis for deciding whether exemplary damages should be awarded than the uncertain and amorphous concept of the defendant‘s conduct being outrageous.

Following the Supreme Court decision, the ultimate question is whether given the harm and risk actually appreciated by the defendant, the defendant’s decision to proceed with the conduct was outrageous – a subjective test assessing what the defendant actually considered (with the effect being that if the defendant did not consider the risk or foresee the harm, no exemplary damages would be awarded).

Conclusion - is the news really that bad for plaintiffs?

Well it is difficult to say how much of a practical difference a subjective rather than an objective test would make in this particular area of the law until there are a few cases that consider the test against particular facts.

Chief Justice Elias dissenting in favour of a subjective test commented at paragraph [44] of the judgment, that the cases in which the subjective vs objective test would make a difference would be rare.

While it will be hard to prove exemplary damages from an evidential point of view, awards of exemplary damage even for unintentional torts like negligence, are available, and are not barred by ACC, leaving victims of personal injury another avenue.

Please contact Kristal Mendez for more information.