Monetary damages Introduction


Chapter 4
Monetary damages Introduction


One of Durkheim’s most important contributions to the sociology of law was to consider criminal and civil law sanctions together, and within this framework to consider the nexus between restitution as a legal sanction and societies characterized by contractual relations. His observations about the increasing mildness of criminal justice may be challenged in this era of punitiveness. This has been the basis for much ‘refutation’ of Durkheim’s thesis concerning the decrease in retributive sanctions in the modern era. Yet we should also consider that in keeping with his overall proposition, criminal justice has been vastly overshadowed in its reach by civil law, and civil law usually is associated with compensation rather than punishment. In other words, relatively speaking the hypothesis could still be entertained that restitutive sanctions have become dominant in modernity.


It is fair to say that compared to criminal justice, contract law has expanded its reach considerably over the past two centuries. To the extent that societies become fully commodified, contract law is ubiquitous – even if it usually lurks unnoticed in the fine print attached to almost every commercial or employment agreement, and even if most contract and tort law disputes are settled out of court (Macauley 1985; Cane 1993:5).1 Embodying many elements shared with contract law, tort law has expanded from a marginal domain in the early 1800s to a central legal field that in important ways governs the array of accidental and unintended harms generated in industrialized and commercial operations (Friedman and Ladinsky 1967). In addition, remedies in contract and tort law have increasingly taken the form of compensation. As will be argued, in contrast to the eighteenth century, the remedies as of right now do not require completion of a contract in breach – which merely ties the parties to their original agreement. Rather it insists that the breach be ‘compensated’ specifically by the award of an amount of money. Likewise, tort law has become more specifically compensatory and less punitive in the last century, especially through its close connections with the array of social and private insurance apparatuses.


While this reflects the vision of contractual societies supporting restitutive sanctions, nevertheless there is a hidden catch of the greatest significance. Durkheim, like Bentham before him, rather supposed that a modernizing society was one in which contractual individualism would gradually become the telos of social and governmental relations. This was true for the nineteenth century that Bentham foresaw, and upon which Durkheim based his hypothesis. But about the beginning of the twentieth century, the course of liberal governance changed direction in a fashion summed up by Atiyah’s (1979) memorable phrase ‘the fall of freedom of contract’. The regulatory manoeuvres of the interventionist state, coupled with the growth of trades unions and the emergence of massive corporations and monopoly relations, constricted the play of contract law and thus of contractual damages. In pursuit of ‘social’ justice, the state imposed legal requirements on contracting parties, for example with respect to consumer protection and industrial safety, that overrode the ‘freedom’ of contractual relations.


In the same process, the government of many social harms through tort law and tort damages did become more compensatory. However, it did so by moving beyond a narrowly contractual model of law: tort changed in the direction of a focus on socially distributive justice rather than narrowly individualistic compensation. In turn, this shift was imbricated with the expansion of a ‘social’ approach to governance more generally which invented and then extended the reach of social insurances and other welfare assemblages. Indeed, this process was to threaten the very existence of tort law by displacing it with what were claimed to be more ‘just’ and more ‘efficient’ insurance technologies of compensation. Thus, while it could be said that with development of a ‘modern’ society restitutive sanctions were certainly promoted – as Durkheim foresaw – this was done in many ways at the expense of individualistic contractual governance.


Yet, this corrected version is also misleading, for the award of monetary damages in the heyday of the contractual ‘era’ of the nineteenth century arguably was not primarily about compensation. With respect to contract law, it is clear that while compensation did emerge as a governmental model during the 1800s, a primary aim of legal governance was to develop and normalize legal subjects who took responsibility for the foreseeable consequences of their actions. In the nineteenth century, contract law became part of a disciplinary assemblage. While damages were directed at compensation, at the same time they inflicted a punishment intended to reinforce certain techniques of the self in contractual relations. In the case of tort law, which was very closely modelled on contract, much the same was true. Indeed, rather than tort law being associated with increasing compensation, the nineteenth century was associated with a narrowing of eligibility for compensation precisely to the extent that the law became characterized by contractual ideologies. In the eighteenth century, responsibility for compensating harms had been associated with a strict liability model. Yet, as will be seen, the growth of such pivotal ‘Victorian’ liberal doctrines as privity of contract meant that responsibility could be assigned only to a more restricted class of those who visited harm on others. In particular, industrialists and other entrepreneurs would benefit from this restriction on compensation. Workers and the public would suffer. Horwitz (1977) famously, if contentiously, argued that this reflected naked class interests.


However, while legal liability was surely altered in a way that favoured capital, Horwitz mistakenly assumes that the governmental rationale for tort law primarily was compensatory. Rather, it can be argued that the primary purpose of tort law had shifted ground away from compensation with the rise of liberal contractualism. As White (2003:62) has argued, in the nineteenth century tort actions



… had not principally been conceived as devices for compensating injured persons. Compensation had been a consequence of successful tort action, but the primary function of tort liability had been seen as one punishing or deterring blameworthy civil conduct. A conception of tort law as a “compensation system” is a distinctly twentieth century phenomenon brought about by an altered view of the social consequences of injuries.


As with contract law, the main purpose of nineteenth century tort law had been to create and enforce the emergence of a new kind of liberal legal subject: the ‘reasonable man’ who used foresight and prudence to govern a foreseeable but uncertain future.


Against Durkheim, then, it begins to appear that contractual forms of law are rather ambiguously related to restitution. In the nineteenth century, they are the site of a regime that was at least as much punitive as compensatory. It was only when contractual individualism was reined in by social and distributive forms of justice that restitution emerges as the pivotal rationale of civil law. This suggests once again that instead of ‘reading off’ legal sanctions as an effect of production relations, in this case the division of labour, we need to look elsewhere. I will argue that it is particularly through consumption relations that these changes are effected. In the twentieth century, protection of the consumer became a major theme in reshaping monetary damages. At the same time, money was to prove the medium through which transformation would be effected. For example, the development of Worker’s Compensation in the early years of the twentieth century effectively made liability insurance mandatory for employers. Closely linked with this, in the first third of the twentieth century, a series of developments in Britain and the United States widened the liability of manufacturers for injuries to the consumers of their products. These developments greatly extended the need for public liability insurance. The development of widespread ownership of automobiles extended this further again. Through their shared remedy of money, and its use as the vehicle for redistribution of risk, civil law and insurance began to overlap and integrate. Law’s reliance on insurance served to make compensatory sanctioning viable and led to a significant growth in the liability insurance industry. In turn, the operation of this assemblage of tort and insurance meant that a form of private welfare state grew up alongside the state system. As producers and distributors built the costs of liability insurance into the price of products and services, so consumers paid for compensation to those of their number who were in some way harmed by the goods they all purchased. Monetary remedies, prices and insurance form a circuit through which security is provided to the privileged sector that is ‘in’ the consumer market.




Money – punishment and discipline


In common law, the idea of specifically compensatory damages is a surprisingly late arrival on the scene. The classic statement in this respect is by Baron Park in Robinson v. Harman ([1848], 1 Ex 850) to the effect that ‘(the) rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’.2 The choice of words here is very precise, setting up what is essentially a hypothetical ‘as if’. In the eighteenth century, the more normal course of the law would have been to require the specific performance of the contract. Of course, this would not be ‘compensation’ for a broken contract, but simply a requirement that the contract be fulfilled. At that time, some part of the contract must have been performed if it were to be recognized at law. If a load of grain were contracted to be delivered, then the courts would require delivery of the grain or perhaps return of the purchase price. In this arrangement, money damages as compensation need have no part to play. However, during the first half of the nineteenth century several changes were making specific performance problematic.


In the first place, the rise of a volatile and ‘free’ commodity market created situations in which specific performance of a contract was no longer what the plaintiff sought. For example, a decision to purchase a load of grain may have been based on the purchaser’s calculation that the price of grain was about to increase. Suppose the purchase was motivated entirely by an expectation that an opportunity for resale profit would arise. If the contract were breached and the grain not delivered, then by the time the matter came to court, the market conditions may have changed. A remedy of specific performance – to enforce delivery of the grain – may have been worse than useless. The successful plaintiff would be left with a load of grain for which she had no use: the opportunity to profit had been lost, and by now, the market price for grain may even have fallen below the contracted price. In a commodified market, some other remedy than specific performance was needed.


Thus, in the early Australian action of Kelly v Clarkson in 1813 (O’Malley 2004), when the court dealt with a case of refusal to accept delivery of wheat at an agreed upon price, it did not enforce delivery but awarded damages of £80 to the wheat seller. Damages were set on the principle that the seller would have to dispose of the wheat on a falling market – and thus suffer an avoidable loss. The quantum of damages was set by the difference between the price agreed in the contract and the price of wheat at time of sale. In this emerging form of remedy, money had ceased to be merely a medium of exchange internal to the contract, but had become abstract capital in volatile ‘free market’ conditions. What was appearing was a new category in law – an ‘expectation interest’ – an interest in a calculated future that had been frustrated. Thus it was that in Robinson v. Harman the court regarded ‘compensation’ as being defined in terms of money, for making money is now regarded as the point of contractual agreements. More than this, money not only represented specific profits but abstract profit: profit that was never made but that existed only in the rational calculations of the contractors.


The degree to which such monetized abstraction could be extended is well illustrated by the action of Howard v. Teefy ([1927] 27 SR (N.S.W.) 307), an action over loss of opportunity suffered when a contract to lease a racehorse was breached. The court ruled that the calculation involved was not how much the plaintiff ‘would probably have made in the shape of profit out of his use of the horse’. It was reasoned that it was impossible to decipher this. It was dependent on races that were never run, wagers that were never made, and odds that were never set. Instead, the court decided the damages were to be calculated in terms of ‘how much his chance of making this profit, by having use of the horse, was worth in money’. Money has now been assigned an abstract meaning but the court gives us no guide as to how it measured this lost opportunity in money terms. In many examples of compensatory damages relating to lost opportunities, it would be possible to calculate the amount of compensation, say, by examining the way prices had fluctuated in the period between the breach of contract and the court hearing, and thus producing a more or less certain estimation of the lost profit. Money replaces money in such cases, even if the money compensation relates to profits never realized. But in examples of lost opportunities of the sort at issue in Howard v. Teefy money is being made to ‘compensate’ for a value that cannot be calculated by any straightforward money-to-money calculus. The court’s assessment of what this opportunity is worth presumably was made in terms of an imaginary of the reasonable man, and his valuation of this chance.


As Atiyah (1979:195) makes clear, such an approach to money and money damages would have been alien to eighteenth century lawyers



To give the plaintiff what he ‘expected’ to make on the bargain, without requiring any performance from him, generally seemed, on the contrary, a very strange idea. Indeed it might almost have smacked of usury. Was the plaintiff to get damages for doing nothing? Was he entitled to have his mere expectations protected?


In the eighteenth century, expectation damages would most likely have been refused, and only actual rather than abstract losses compensated (Atiyah 1979:142–148). However, by the nineteenth century ‘compensation’ can be read literally as the meaning of money supplied by commodification – in the domain of profit, the domain of production. Money represents capital, and the form of relations in which this is embedded is that which Marx (1976) referred to as ‘generalised commodity production’.


In the liberal political vision, this resort to money damages also fitted with, and helped to create, the imagery of the laissez faire economy. The remedy of specific performance had come to be seen as involving the state in an unwanted degree of interference or even coercion. The court would have to stand over the plaintiff in a civil dispute to ensure that he or she behaved in conformity with the contract (Kercher and Noone 1990). A critical feature of the money sanction was its reduction in apparent coercion: as long as no criminal offences were involved, the liberty of the individual to elect not to perform a certain action in the domain of civil society or the economy is preserved. The price of this liberty is the amount the defendant would have to pay in money for any harm to the expectations (or other recognized interests) of contracting parties. In contract law, therefore, the emergence of money damages as compensation brings this area of civil sanctioning into line with what has been said about the fine. In a utilitarian sense, it is the payment of a premium for the right to perform an action that the state disapproves of, but is unwilling to put a stop to by the use of incapacitating sanctions such as imprisonment. Like the regulatory fine, damages in contract law may often result from carelessness rather than a deliberate decision, but in the same fashion, they are a licence ‘paid in arrears’, or even a ‘premium’ paid for action beyond the norm. With the emergence of ‘expectation damages’ of the kind mentioned above, it had now become possible to imagine an ‘efficient breach’ of contract – where a contract would be broken when the defendant detected an opportunity that would deliver surplus profit over and above the damages that would in consequence arise in a civil action. Even though courts often frown on such calculated breaches, in utilitarian terms these are economically efficient acts in which a net gain is produced. Money damages at law have become a part of the currency of commodified relations.


Of course, as with fines, payment of damages will be enforced coercively if necessary – but normally they are just a morally loaded money transaction. Yet, while there is a relative reduction in coercion when compared to previous sanctions such as specific performance, it is clear that money is also a key punitive device in the service of discipline. Money damages serve to promulgate and enforce emerging norms of contractual relations even while acting to compensate those harmed by breach. This was clear, for example, with the establishment of money compensation for harm to expectation interests: from the time they were invented, any contractual party who failed to make ‘reasonable’ calculations of how a breach would harm the other party’s reasonable expectations would run new risks of having to pay compensation. A liberal vision of the prudent subject exercising calculative foresight was being enforced by money sanctions at those points where failure act to appropriately created harm to others.


Thus, in a line of decisions beginning in 1854, the common law courts began to establish clear guidelines as to what constitutes ‘reasonable foreseeability’ in contracts. For example,



Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such a breach of contract should be such as may fairly and reasonably be considered as arising naturally, that is, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it


(Hadley v Baxendale [1854] 156 ER 145)


The decision in Hadley v Baxendale set in place certain ground rules for reasonable dealings that – through the guarantee of law and its money sanctions – were to provide an enforceable regime for government of business relations. Inter alia, the court’s ruling meant that in the event one party to the contract stood to gain or lose in some unusual fashion from the contract, unknown to the other, or as the result of some possibility the other party ‘reasonably’ did not consider as bearing on the contract, then the award of damages would be restricted to what the court decided was reasonably foreseeable. The court reasoned that ‘had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case’ (Hadley v Baxendale [1854] 156 ER 150). Previously, it was the breach itself, not what had been or should have been foreseen, that was relevant (Barton 1987:41).


For Patrick Atiyah and others this is regarded as a ‘triumph of the entrepreneurial ideal’, because ‘the idea of responsibility based on the foreseeable consequences of one’s action was central to utilitarian philosophy’. This is a fair call, even though in practice it probably owed little to the theorists of liberalism and more generally emerged from the changing practical requirements of entrepreneurs who employed lawyers and thereby generated cases (O’Malley 2004; Wrightman 1996:7–75). As Barton (1987) expressed it, with respect to damages ‘the history of the law of contract, from the early eighteenth century to the twentieth, is the history of the process whereby matters of fact were converted into matters of law’. Compensatory monetary damages were now set in place not simply as a reflection of the commodification or capitalization of economic relations. At the same time they provided a sanction that enforced these relations and also produced the liberal ‘reasonable’ subject – all of this while appearing through the medium of money as not affecting the liberty of law’s subjects.


Much the same kind of development was occurring with respect to money damages in tort law, which in the nineteenth century was very closely tied up in the ideology of contract.3 Whereas in eighteenth century law the emphasis had been more on the harm rather than fault – although falling short of anything like a universal doctrine of strict liability for harm – during the nineteenth century foresight came to be the central issue shaping both liability to pay damages and access to compensation at law (White 2003:14–15; Gregory 1951).4 In this way, money damages enforced prudence and foresight primarily through two broad doctrines – privity of contract and negligence – worked out in the nineteenth century.


Privity of contract represented an attempt to come to terms with new situations increasingly coming before the courts in the nineteenth century. The old law had put great stress on a generalized liability for harm to others, because most injuries were likely to occur in relations between people who knew each other, more or less on a day to day basis and so owed each other duty of care as familiar citizens. In particular, this applied to the personal and paternalistic relations existing between ‘masters and servants’. However, in an urbanizing and industrializing society, relations between strangers were becoming far more the norm, and relations in businesses and industries becoming far more distant in social, organizational and supervisory respects. As well, individuals were increasingly imagined as autonomous, the free and voluntary subjects released from the paternalism of the old order. Responsibility and paternalism sat in an uneasy relationship in this new order. In such a society perhaps it is not surprising that a ‘reasonable’ way of governing such contacts between strangers was to apply the norms of contractual relations: responsibility for others was limited to commitments voluntarily undertaken. Relations between strangers had of course existed before – but the new industrial and urban settings not only magnified the scale and frequency of such relations. As well, as Rabin (1981:945) has argued, they also created new types of risks for strangers not generally confronted by old law.


This was true, for example, with respect to the rapidly growing field of transportation. Thus, in the case of Winterbottom v. Wright of 1842, it was ruled that the driver of a coach who had been injured because of equipment failure would have no claim to damages from the coach manufacturer, because no contract existed between them. In the view of Lord Abinger, presiding, ‘there is no privity of contract between these parties, and if the plaintiff can sue, every passenger or even any person passing along the road, who was injured by the upsetting of the coach might bring a similar action. Unless we confine the operation of such contracts as this to the parties that enter into them, the most absurd and outrageous consequences to which I see no limit, would ensue’ (Winterbottom v. Wright [1842] 152 ER 402). Of course, this may now appear itself as an outrageous statement. However, we view this from an era in which a much broader sense of social responsibility has become the norm, largely as a result of changes developing in the twentieth century. As many contemporary commentators – from Henry Maine to Emile Durkheim – also believed, in the nineteenth century contract as a form of sociability was displacing ascribed status as the telos for an entire society and appeared to very many as both ‘free’ and ‘just’ compared to the authoritarian ancien regime. Harm to an unknown driver, capable of looking after his own risks, and not within the sociable circle of contractual relations, appeared both reasonably unforeseeable and outside the realm of daily duty to strangers.


Negligence – in legal terms also an invention of the middle years of the nineteenth century – worked in terms of the same framework of liberal relations. In Baron Alderson’s words, negligence is ‘the omission to do something that a reasonable man, guided by those considerations which ordinarily regulate the prudent conduct of affairs, would do, or doing something which a prudent and reasonable man would not do’ (Blyth v Birmingham Waterworks [1856] 11 Ex 784). To punish negligence by the award of damages against a defendant in like manner reaffirmed reasonable foresight and prudence. Consider, for example, the so-called ‘fellow servant’ or ‘common employment’ rule. In 1837, Lord Abinger in Priestley v. Fowler ruled that a worker injured as a result of the negligence of fellow employee should have no right of recovery from the employer. Indeed, in words foreshadowing his ruling in Winterbottom v. Wright, he had stated that ‘(if) the master be liable to his servant in this action, the principle of the liability will be found to carry us to an alarming extent’. By contrast, under the previously dominant principle of respondeat superior, it was settled that the master was indeed responsible for the acts of his or her agent – something that ‘made sense’ in a world where masters and servants were closely connected by all manner of ‘paternalist’ bonds of social superiority and duty (Friedman and Ladinsky 1967:52–54). Now, however, in a world of contractual relations between independent and equal strangers, it was reasoned that this was unjust. How could the employer foresee or be held responsible for injuries resulting from the negligence of a worker’s fellow employees? As freely acting agents, the employees were expected to be responsible individuals in their own right. As well, being ‘on the spot’ they were best placed to act preventatively. To relieve these individuals of the duty to apply reasonable foresight and take appropriate precautions would, it appeared to the court, be likely to create more rather than fewer accidents.


Money damages ‘worked’ punitively in this liberal utilitarian imagery, through the same circuits of governmental reason as the fine. Payment of damages meant the foregoing of pleasures and satisfactions, and thus acted as an encouragement to conformity with the emergent relations and subjectivities of classical liberalism. By extension, similar rules enforced by the denial of money damages were created where a worker was injured as the result of an accident that she or he should have foreseen. This doctrine of ‘contributory negligence’ – almost absent in law prior to the middle of the nineteenth century – followed the pattern of creating self reliant and independent subjects, whose responsibilities in these respects were a ‘natural’ corollary of their freedom (Friedman 1973:410). If the plaintiff could be shown to have contributed in any significant degree to his injury, then an award of damages could be denied altogether.


Finally, the law had much to say about accidents that followed from the nature of the work, such as chemical injury in the tanning industry, or burns in a metal foundry. These harms, it was argued, must have been regarded as more than a remote possibility by the employee at the time of forming the contract of employment. A worker’s failure to have considered such an issue demonstrated irresponsibility – a lack of foresight and diligence in his own interests. The worker was thereby assumed to have made a ‘voluntary assumption of risk’ (volenti non fit injuria,or‘volenti’), and to have offset this by negotiating a higher wage. Having thereby been paid a premium wage for taking a risk – which of course was rarely the case in practice – the employee could have no right to compensation. It was not the law’s business to treat adults as though they were incapable of prudent self-government. This line of reasoning is most famously developed in the United States with Farwell v. Boston and Worcester Railroad Corp. In Justice Shaw’s words, whoever is employed ‘for the performance of specified duties and services for compensation, takes upon himself the natural and ordinary risks and perils incident to the performance of such services and in legal presumption, the compensation is adjusted accordingly’ (45 Mass (1842) 57).


While monetary damages did compensate, and while restriction of access to damages in the nineteenth century did work to the detriment of one class rather than another, more specifically they worked in tort law in a disciplinary fashion on all supposedly equal and autonomous legal subjects. Money damages enforced specific norms of reasonable foresight and care on workers just as in contract law they were doing so primarily among entrepreneurs. Liberalism in the 1800s accepted the Benthamite view that money damages work simultaneously to punish and to compensate, and that punishment and deterrence were probably the principal rationales of contract and tort law. While not only money can perform this double function, the money form also has specific properties that facilitate this. It might be said, for example, that to imprison a subject for criminal negligence provides both punishment to the offender and compensation to the victim. However, in such a model the state cannot appear but as an interested party in an act of coercion. Where negligence falls below the threshold of a criminal offence, which is by far the norm, the exercise of state coercion becomes problematic especially in laissez faire liberalism.


Because the money form appears as an act of compensation in which the state does no more than arbitrate between private parties, coercion remains at a low threshold – it can be punitive, even explicitly so, but like the fine does not lay hands on the offender. Ironically, because money can be attributed with this Janus-face, the distinction between what is punishment and what is compensation is necessarily problematic. Unlike, say, imprisonment, it is not clear what the purpose of the action is from the form itself. Prison is not just time, but specific kinds of action – while money is undifferentiated. Its meaning (as with the penal fine) has to be announced in some fashion. Consequently, during the later nineteenth century, when the common law began to draw a line between punishment and compensation, discursive problems emerged. In order to create ‘pure’ compensation, somehow ‘punishment’ had to be separated out and made different – a distinction of little concern in the previous century or more. Moreover, in the face of money’s bland face, ways had to be invented to ensure that damages were being granted in a ‘purely’ compensatory fashion.




Distinguishing punishment and compensation


In accord with what has been discussed thus far, Ogus (1973:5–6) has pointed out that before the late nineteenth century ‘compensation in the modern sense’ was only one purpose that was intended for an award of damages, and certainly among these punishment of the wrongdoer figured prominently: ‘large awards of damages in a civil process were regularly employed to punish or deter wrongful conduct’ (1973:28). In addition, juries, especially, were not to be switched on and off at will in this respect:



… the ability to use damages in a civil action as a means of punishing the defendant lingered on. Within the wide ambit of the jury’s discretion exercisable when damages were “at large”, that is, where an exact pecuniary loss was not claimed, there was ample room for a pecuniary element in the award. Indeed in the eighteenth century, the power of the jury to express its view of the defendant’s conduct by awarding large damages was regarded as a constitutional right.


(Ogus 1973:5)


While Ogus refers here to a lingering ‘confusion between compensation and punishment’, of course this is a kind of history in reverse – as if these are natural categories that needed to be untangled rather than distinctions that had to be created as distinguishable rationalities.5 I am not implying that the idea of compensation as distinct from punishment did not previously exist. Rather, my point is that compensation as a category that has to be separated out from punishment was not something that greatly concerned either Bentham, the jurists or juries of his time. Even more to the point, compensation had to be invented in a certain form that was not clearly articulated in common law until the middle years of the nineteenth century. Compensatory damages had become a form of money that did not seek to set up a status quo ante, often this was impossible – as in cases of injury or lost opportunities. Now money was also compensating for a hypothetical status quo that would have continued to exist or that would have come to exist but for the wrong. This has been seen to be the case in contract law in Robinson v. Harman of 1848, but, likewise in 1880, it was stated that compensation in tort law is ‘that sum of money which will put the party who has been injured in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation’. (Livingstone v. Rawyards Coal Co [1880] 5 App Cas 25,39).


Nevertheless, once invented, it takes a particular kind of legal rationality to imagine compensation as if it were distinct from punishment. Take Ogus (1973:29–30) once more as an illustration. Focusing on the invented distinction between ‘exemplary’ (or ‘punitive’) damages6 and compensation, he suggests that there was



… confusion between “exemplary” and “aggravated” damages. For a long time the common law had recognised that actual loss to the plaintiff might be aggravated by the defendant’s aggressive or malicious conduct on the ground that it injured the plaintiff’s pride or dignity. The law would in short compensate the plaintiff for his justifiable humiliation. To the extent that damages are awarded on this basis they are, of course, compensatory and not punitive. But since both exemplary and aggravated damages are dependent on the defendant’s conduct, the line between them is sometimes difficult to draw and a reading of the early cases does not clearly reveal which was the subject of the award


Indeed, the suggestion is made that such distinctions between compensation and punishment only became possible when juries – to which questions of damages were almost entirely left until the early nineteenth century in England and Wales (Atiyah 1979:425) – were replaced by judges. To put this another way, having invented the distinction, it then required a ‘trained’ eye to implement it in a standardized or ‘just’ fashion. In this light, the distinction between punishment and compensation, far from being a natural kind, appears instead as a technical divide capable of satisfactory implementation only by expertise.7


As suggested, the divide between punishment and compensation represents a difficult task to the extent that the money form does not make evident where one function begins and the other ends, and in this governmental imagery only the eye of the judicial expert can be relied upon to discern the separation. Even then, the court’s difficulties remain palpable. In the leading Australian case, Justice Windeyer later expressed the contrast as follows:



Aggravated damages are given to compensate the plaintiff when the harm done to him by a wrongful act was aggravated by the manner in which the act was done: exemplary damages on the other hand are intended to punish the defendant, and presumably to serve one or more of the objects of punishment – moral retribution or deterrence.


(Uren v. John Fairfax & Sons Pty. Ltd. [1966] 117 CLR 149)


While seeking to make the distinction clear, the court highlights the fact that, in both forms of sanction, the focus is a ‘wrongful act’, and thus a punitive meaning remains available even in ‘aggravated’ damages, at least to those courts and juries concerned with moral condemnation.


At the same time, however, the distinction was clearly important within the imagery of the ‘non-coercive’ domain of civil law. Thus, more than a century after compensation was established as the aim of damages in contract and tort law, the English leading case of Rookes v. Barnard ([1964] AC 1129 (HL) 1221) was still wrestling with the perceived problem that courts were allowing punitive considerations to influence awards of damages. Lord Devlin argued that exemplary damages ‘usurped’ a function best left to criminal law. In this decision – which, it should be stressed, has not been strongly embraced in the United States, Canada or Australia – the court ruled that punitive or exemplary damages should only be awarded under restricted circumstances, except where expressly authorized by statute. First, Devline argued that exemplary damages may be awarded where there has been ‘oppressive, arbitrary or unconstitutional action by the servants of the government’. Second, they can be awarded where ‘the defendant’s conduct has been calculated by him to make a profit for himself which may exceed the compensation payable to the plaintiff’ (Rookes v. Barnard ([1964] AC 1129 (HL) 1226)).


However, this attempt at clarification contributed to another point of blurring or convergence. Clearly enough, punitive monetary damages and fines levied against corporations are very little different – except with respect to procedural issues (Mann 1993). This is even more so where conviction in a criminal prosecution under American antitrust laws serves as prima facie evidence of responsibility in an ensuing private action, and conditions relating to damages are provided by criminal law. Thus, under the Clayton Antitrust Act (1914 section 4), ‘any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue … and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee’.9

Only gold members can continue reading. Log In or Register to continue