in the court of appealwebopac.ttlawcourts.org/libraryjud/judgments/coa/2005/mendonca… ·...

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REPUBLIC OF TRINIDAD AND TOBAGO:

IN THE COURT OF APPEAL CIVIL APPEAL NO. 84 of 2005

BETWEEN

ARON TORRES

Appellant

AND

POINT LISAS INDUSTRIAL PORT DEVELOPMENT CORPORATION LIMITED

Respondent

PANEL: Warner, J.A.

Mendonca, J.A. Weekes, J.A.

APPEARANCES: For the Appellant: Mr. Neebar and Mr. Ramgoolam.

For the Respondent: Mr. P. Deonarine and Mr.Rahman.

Date of delivery: May 10, 2007

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JUDGMENT

Delivered by A. Mendonca, J.A.

(1) The Appellant was employed by the Respondent as an estate constable.

He was employed under a contract of employment that provided, inter alia, that

the contract might be terminated “by either party giving not less than one (1)

week’s notice to the other party”. On November 14, 1007 the Appellant was

summoned to the security office of the Respondent for a meeting with Estate

Sergeant Lezama, who at the time was the acting head of security of the

Respondent, and Estate Corporal Connor. At the meeting the Appellant and

another estate constable, who was also present at the meeting, were accused of

stealing electronic items from a secured warehouse of the Respondent. Lezama

informed them that warrants for their arrest, as well as a search warrant, had

been issued and that police as well as customs officers were outside waiting to

arrest them. Lezama further indicated that he had had a meeting with the chief

executive officer of the Respondent and his instructions were to get their

resignation and in exchange the intended prosecution would not be pursued.

(2) Both the Appellant and the other estate constable resigned orally at the

meeting. According to the Appellant he was scared and intimidated. After they

left the meeting Connor came after them with a sheet of paper and demanded

their written resignation. Both of them complied. The letter of resignation was in

the following terms:

Sir, I have to report for your information effective immediately due to

unforeseen circumstances beyond my control, it was nice working with the

Corporation for a short while and I wish the department success.

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(3) As it turned no arrest warrants had ever been issued. A search warrant

was issued about one (1) month after the meeting. There was no one waiting to

arrest the Appellant or the other officer.

(4) The Appellant commenced these proceedings claiming, inter alia:

1. a declaration that the letter of resignation is void and/or amounts to

an unlawful and/or wrongful dismissal;

2. damages for wrongful dismissal.

(5) Before the trial Judge the Appellant contended that the termination of his

employment was unlawful in that it occurred in circumstances that amounted to a

constructive dismissal. The trial Judge stated that whether there was a

constructive dismissal turned on whether the threats amounted to a breach of the

term of trust and confidence and good faith implied by law in the contract of

employment. He had little hesitation in holding that they did. The threats

induced the resignation and removed any notion of voluntariness. The Judge

stated:

“On the facts no particulars and no evidence was presented to the

Appellant at the meeting; what he was presented with was the threat of

immediate imprisonment by police or customs officers before any

investigation had been carried out by the Respondent; the only warrant

issued was dated December 12, 1997. The warrants of arrest and search

did not exist at the time of the threat. I find therefore that such threat not

to have been lawful and to amount to a breach of the contract of

employment ….

On the evidence, I have no doubt that the threat extinguished any

voluntary element in the resignation; it was demanded then and there and

was given”.

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(6) The Judge therefore held that the claim of the Appellant in constructive

dismissal had been made out. In view of the terms of the contract of employment

which provided that the contract may be terminated by one week’s notice the

Judge awarded damages equivalent to one (1) week’s salary of $540.00. He

ordered that the Respondent pay the Appellant’s costs on the petty civil courts’

scale.

(7) The Judge however refused to grant the declaration sought by the

Appellant. Further, during the course of the trial an application was made by

Counsel for the Appellant, in the course of his address in reply, to amend the

statement of claim to claim exemplary damages. That application was refused.

In his judgment the Judge indicated:

“That application I rejected summarily in the exercise of my discretion as

too late”.

(8) There has been no challenge to the conclusion that there was a

constructive dismissal of the Appellant. The Appellant however in this appeal

challenges the following aspects of the Judge’s judgment:

(a) the refusal to grant the declaration sought;

(b) the refusal to grant leave to amend the statement of claim to

include a claim for exemplary damages;

(c) the quantum of damages awarded; and

(d) the order that the Respondent pay the Appellant’s costs in the

Court below on the petty civil courts’ scale.

(9) I will deal firstly with the refusal to grant the declaration. The Judge in

refusing to grant the declaration stated tersely:

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“In the exercise of my discretion, I decline to order a declaration”.

(10) The granting of a declaration is indeed a matter of discretion and the

exercise of the Judge’s discretion should not be disturbed unless it can be shown

that he proceeded on some wrong principle. It is a proper exercise of the Court’s

discretion to refuse the grant of a declaration where it is more appropriate to

grant a remedy other than a declaration. The remedy of a declaration is

generally refused in wrongful dismissal cases where the appropriate remedy is

an award of damages. In his judgment in the Court of Appeal in Vine v National

Dock Labour Board [1956] 1 ALL E.R. 1, 8 Jenkins L.J. stated:

“In the ordinary case of master and servant, however, the repudiation or

wrongful dismissal puts an end to the contract, and a claim for damages

arises. It is necessarily a claim for damages and nothing more. The

nature of the bargain is such that it can be nothing more.”

However where there are exceptional circumstances the court will grant a

declaration. So that in the Vine case a declaration that the plaintiff’s dismissal

was illegal, ultra viras and invalid was granted since the court was there

concerned with a statutory scheme affecting the plaintiff’s employment which

gave him “a number of rights and imposed a number of obligations going far

beyond any ordinary contract of service”.

In the House of Lords, in the Vine case Viscount Kilmuir, L.C. in his speech

stated ([1956] 3 ALL E.R. 939, 944):

“First, it follows from the fact that the plaintiff’s dismissal was invalid, that

his name was never validly removed from the register, and he continued in

the employ of the National Board. This is an entirely different situation

from the ordinary master and servant case. There, if the master

wrongfully dismisses the servant, either summarily or by giving insufficient

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notice, the employment is effectively terminated, albeit in breach of

contract. Here, the removal of the plaintiff’s name from the register being,

in law, a nullity, he continued to have the right to be treated as a

registered dock worker with all the benefits which, by statue that status

conferred on him. It is therefore right that, with the background of this

scheme, the court should declare his rights”.

(11) In this case the circumstances are very different from what obtained in the

Vine case. I can see no exceptional circumstances in this case to warrant the

grant of the declaration sought in addition to an award of damages. In the

circumstances I think it was a proper exercise of Judge’s discretion to refuse the

declaration and the appeal on this aspect fails.

(12) The trial Judge, as I have already mentioned, refused an application to

amend the pleadings to include a claim for exemplary damages on the basis that

it was made “too late”. Of course once the Appellant decided to seek an award

of exemplary damages that had to be pleaded (see R.S.C. O. 18 r 8 (3)). Before

this Court, Counsel for the Respondent drew the Court’s attention to the fact that

the refusal of the amendment was also an exercise of the Judge’s discretion and

the Court should not disturb it unless the Judge proceeded on some wrong

principle.

(13) Counsel however accepted that an amendment may be made at any

stage of the proceedings, even during or after the closing addresses, and

therefore, without more, the application could not be said to be too late. Under O.

20 r. 5 (1) an amendment may be granted at any stage of the proceedings on

such terms as to costs or otherwise as may be just and in such manner (if any)

as the court may direct. The Judge in the exercise of his discretion to amend

therefore should be guided by his assessment of where justice lies. In a case

such as this, where the amendment sought is not within O.20 r. 5 (3)-(5), then

subject to the consideration of the impact of the amendment on the

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administration of justice, it is, generally speaking, an appropriate exercise of the

Judge’s discretion to grant an amendment no matter how late it is made if the

prejudice to the parties may be compensated by an order as to costs. After all,

the purpose of an amendment is to formulate the real issues between the parties.

Of course, in determining whether a party can be adequately compensated by

order as to costs the Court should consider all the circumstances and may take

into account such matters as the strain litigation imposes on the litigants,

particularly if they are personal litigants rather than corporate entities; the

anxieties occasioned by facing new issues; the raising of false hopes; and the

legitimate expectation that the trial will determine the issues one way or the other

(see Ketteman v Hansel Properties Limited [1987] 2 WLR 312). The Court

should also take into account the impact on the administration of justice if an

amendment were to be granted.

(14) In this case there is nothing to suggest that the prejudice to the

Respondent should have occasioned the refusal of the amendment. Although

the effect of the amendment was to introduce a claim for exemplary damages for

the first time, the relevant evidence was before the Court. The Appellant’s claim

for exemplary damages focused on the circumstances in which the Respondent

obtained his resignation. Indeed this was the factual issue before the Court and

the Respondent had also led evidence on this issue. The amendment would not

have occasioned the need for any further evidence nor would it have occasioned

the need for an amendment to the Respondent’s pleadings. It is therefore not

surprising that when pressed as to what prejudice the Respondent would have

suffered by the amendment, Counsel for the Respondent could point to none and

indeed accepted that the Respondent would have suffered no prejudice as a

consequence of the amendment.

(15) What the amendment would have required was of course further argument

on the availability of exemplary damages and, if it were available, the quantum.

When argument was concluded, the Judge reserved his judgment to a date to be

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notified. The judgment was delivered a little more than two (2) months thereafter.

In the interim the points raised by the question of an amendment to include a

claim for exemplary damages could have been conveniently dealt with in written

arguments which is a practice that has become quite common in this jurisdiction.

In the circumstances the amendment would not have negatively impacted on the

administration.

(16) In the circumstances I think that the Judge should not have disallowed the

amendment as being too late. He failed to weigh in the balance all the relevant

circumstances. Had he done so, he would have come to the conclusion that the

justice of the case would have been met by granting the amendment. But this

begs the question whether exemplary damages are available on a claim that is

essentially in contract. If it is not available then the amendment should be

refused as being useless.

(17) Exemplary damages are of course awarded in the law of tort. Damages in

the usual sense of the term are awarded to compensate the victim of the wrong.

The object of exemplary damages however is to punish and includes notions of

condemnation or denunciation and deterrence (see Rookes v Barnard [1964] 1

ALL E.R. 367, 407). Exemplary damages are awarded where it is necessary to

show that the law cannot be broken with impunity, to teach a wrongdoer that tort

does not pay and to vindicate the strength of the law (see Rookes v Bernard,

supra 411). An award of exemplary damages is therefore directed at the conduct

of the wrongdoer. It is conduct that has been described in a variety of ways such

as harsh, vindictive, reprehensible, malicious, wanton, wilful, arrogant, cynical,

oppressive, as being in contempt of the plaintiff’s rights, contumelious, as

offending the ordinary standards of morality or decent conduct in the community

and outrageous. In Privy Council appeal No. 10 of 2002 A v Bottrill, Lord

Nicholls explained the rationale for exemplary damages as punishment for

“outrageous conduct”. He stated (at para. 20):

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“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 wrong doer

may be ordered to make a further payment by way of condemnation and

punishment”.

(18) Because the objective of exemplary damages is to punish they straddle

both the criminal and civil law. Punishment is a legitimate objective not only of

the criminal law but of the civil law as well. In an award of damages the

distinction between the compensatory and the punitive purposes of the award are

often blurred. This is borne out in the following passage from the speech of Lord

Reid in Cassell and Co. v Broome [1972] 1 ALL E.R. 801, 839:

“Then if it has been determined that the case is a proper one for punitive

damages the tribunal must turn its attention to the defendant and ask itself

whether the sum which it has fixed as compensatory damages is or is not

adequate to serve the second purpose of punishment or deterrence. If

they think that that sum is adequate for the second purpose as well as for

the first they must not add anything to it. It is sufficient both as

compensatory and as punitive damages. But if they think that sum is

insufficient as a punishment then they must add to it enough to bring it to a

sum sufficient as punishment.”

(19) In Cassell v Broome, supra, Lord Wilberforce (at para. 860)was careful

not to identify a rigid compartmentalization of the civil and criminal law:

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“It cannot lightly be taken for granted, even as a matter of theory, that the

purpose of the law of tort is compensation, still less that it ought to be, an

issue of large social import, or that there is something inappropriate or

illogical or anomalous (a question – begging word) in including a punitive

element in civil damages, or conversely, that the criminal law rather than

the civil law, is in these cases the better instrument for conveying social

disapproval, or for redressing a wrong to the social fabric, or that damages

in any case can be broken down into two separate elements. As a matter

of practice in English law has not committed itself to any of these theories;

it may have been wiser than it knew.

(20) In Taylor v Beere [1982] 1 NZLR 81, 90, Richardson J. noted with

reference to the law of tort:

“It is not simply a compensation device or a loss distribution

mechanism. It is a hybrid of private law and public interest issues

and concerns”.

(21) In this jurisdiction Rookes v Barnard has been followed and exemplary

damages in the law of tort have been awarded in accordance with the principles

set out in that case in the categories of case identified by Lord Devin. Of course

since at least Kuddus v Chief Constable of Leicestershire Constabulary

[2001] 3 ALL E.R. 193, it is not necessary to show that the cause of action had

been recognised before Rookes v Barnard as justifying an award of exemplary

damages.

(22) However, no authority in this jurisdiction was brought to the Court’s

attention in which exemplary damages were awarded in a contract case and my

research has not discovered any. (This is, of course, not considering cases

decided in the Industrial Court which by statue may award exemplary damages in

any dispute concerning the dismissal of a worker: see s. 10(4) of the Industrial

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Relations Act Chap. 88:01.) On the other hand there are cases in which

exemplary damages were refused on the basis that the claim was in contract.

(23) In High Court Action No. 97 of 1986, Lyons v Quamina and Others,

Blackman J. stated:

“There can be no exemplary or punitive damages merely for breach of

covenant for quiet enjoyment such damages only being awarded in certain

cases of tort. Breach of covenant is a mater of contract.

In High Court Action No. 491 of 1994, Forde-Woodley v Royal Bank Trust

Company (Trinidad) Limited, Jones J. said:

“Claims for exemplary damages are not maintainable in cases of breaches

of contract.”

(See also High Court Action No. 97 of 1992, Hadad v Elias per Permanand J.)

(24) These cases were all decisions at first instance. The point whether

exemplary damages could be awarded does not appear to have been argued

and in none of them is there any authority cited for the proposition. There

appears to be no case decided by this Court where the point was argued. It is

therefore open to this Court to determine on principle whether exemplary

damages should be allowed in claims in contract.

(25) In English law the case often cited as authority for the proposition that

exemplary damages are not awardable in contract is Addis v Gramophone Co.

Ltd. [1908-1910] ALL E.R. Rep. 1. The head note reads as follows:

“In an action for wrongful dismissal the jury, in assessing damages, are

debarred from awarding exemplary damages because of circumstances of

harshness and oppression accompanying the dismissal and injuring the

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feelings of the servant, and also from taking into consideration the fact that

the dismissal will make it more difficult for him to obtain fresh employment.

If some tort, e.g., assault, libel or slander accompanies the dismissal, that

cause of action is not merged with or extinguished by the proceedings for

the wrongful dismissal which the commission of the tort accompanied, but

it remains available to the servant as a remedy for the tort which has been

committed against him.”

(26) It has been argued that the head note wrongly states the ratio decidendi of

the case. For one thing exemplary damages was not an issue (see Johnson v

Unisys Limited [2001] 2 ALL E.R. 801 per Lord Steyn). Indeed the term

“exemplary damages” was mentioned only by Lord Atkinson and Lord Collins;

two of the six members of the court. Lord Atkinson thought that the damages

awarded to the plaintiff in the case could not be recovered as exemplary

damages. Such an award violated the general rule that damages for breach on

contract were in the nature of compensation and not punishment. Lord Collins

on the other hand considered that the damages awarded to the plaintiff were

recoverable as exemplary damages and he referred to several cases where such

damages were awarded for breach of contract.

(27) In any event the Addis case is a decision of the House of Lords and

though highly persuasive is not binding on this Court. Moreover since Addis was

decided almost one hundred years ago there have been recent developments in

English law that might influence the English courts to confront the issue whether

exemplary damages should be awarded in a contract case. The first such

development is the case of Kuddus, supra. As mentioned this laid down that in

deciding whether to award exemplary damages it was not necessary to show that

the cause of action had to recognised before 1964 (the year in which Rookes v

Barnard was decided) as justifying an award of such damages. Kuddus was a

case in tort but in deciding as it did the Courts now have to focus on the features

of the conduct of the wrongdoer rather than the cause of action. If the conduct is

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sufficiently outrageous and falls into the categories outlined in Rookes v

Barnard, then the award should attract exemplary damages. It is difficult to

understand why the law should require a higher standard of conduct from the

tortfeasor, a stranger, than it does from the parties to a settled relationship under

a contract.

(28) The other development is A, G. v Blake [2001] AC 268, where the House

of Lords sanctioned an order requiring the defendant to account to the plaintiff for

the benefits received from a breach of contract. In so doing the House of Lords

went beyond compensation to the plaintiff and recognised that an account of

profits could be awarded to punish breaches of contract where other remedies

are inadequate. As Lord Hobhouse stated (at p. 295) in his dissenting speech in

Blake when referring to the speech of Lord Nicholls, who gave the majority

judgment:

“The speech of my noble and learned friend explores what is the “just

response” to the defendant’s conduct. The “just response” visualised in

the present case is, however it is formulated, that Blake should be

punished and deprived of any fruits of conduct connected with his former

criminal and reprehensible conduct.”

Thus, an award aimed at punishment in certain circumstances may be

acceptable in the law of contract.

(29) Other jurisdictions in the Commonwealth have considered the question

whether exemplary damages should be allowed for breach of contract.

(30) In Hospitality Group PTY Ltd. v Australian Rugby Union Ltd. [2001]

FCA 1040, the Federal Court of Australia citing the Addis case stated that:

“Exemplary damages cannot however be recovered for breach of contract”.

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(31) In New Zealand the question was considered by the Court of Appeal in

Paper Reclaim Limited v Aotearoa International Limited [2006] NZCA 27, the

court held that it was not open to the claimant to seek exemplary damages for

breach of contract. The court however left open the question whether exemplary

damages were recoverable in circumstances where the breach of contract also

constituted a tort for which exemplary damages were recoverable. In coming to

its decision the New Zealand court was influenced greatly by the report of the

England and Wales Law Commission “Aggravated, Exemplary and Restitutionary

Damages (Law Com. 247/1997) and the Irish Law Reform Commission report on

“Aggravated, Exemplary and Restitutionary Damages” (L.R.C. 60-2000). Both of

the reports, although recommending the retention of exemplary damages,

recommended that the availability of exemplary damages should not be extended

to cases in contract. With respect to the former report, the report of the England

and Wales Law Commission, the reasons that exemplary damages should not be

extended to contract claims were as follows:

“A range of reasons cumulatively lead to that recommendation. First,

exemplary damages have never been awarded for breach of contract.

Second, contract primarily involves pecuniary, rather than non-pecuniary,

losses; in contrast the torts for which exemplary damages are most

commonly awarded and are likely to continue to be most commonly

awarded, usually give rise to claims for non-pecuniary losses. Thirdly, the

need for certainty is perceived to be greater in relation to contract than tort

and, arguably, there is therefore less scope for the sort of discretion which

the courts must have in determining the availability and quantum of

exemplary damages. Fourthly, a contract is a private arrangement in

which parties negotiate rights and duties, whereas the duties which obtain

under the law of tort are imposed by law; it can accordingly be argued that

the notion of state punishment is more readily applicable to the latter than

to the former. Fifthly, the doctrine of efficient breach dictates that

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contracting parties should have available the option of breaking the

contract and paying compensatory damages, if they are able to find a

more remunerative use for the subject matter of the promise. To award

exemplary damages would tend to discourage efficient breach.

(32) With respect to the latter report, the report of the Irish Law Commission

the court noted that it considered that “an extension of exemplary damages to

contract cases would be at odds with the traditional concept of contract law as

having an exclusively private law character”.

(33) The New Zealand position is to be contrasted with the Canadian

jurisdiction where exemplary damages are allowed for breach of contract. In

Whiten v Pilot Insurance Company [2002] 1 S.C.R 595, the Supreme Court of

Canada approved an award of exemplary damages in the amount of CDN

$1,000,000.00 made against an insurance company where the company had

acted in breach of its contractual duty of good faith and had resisted the insured’s

claim arising out of the destruction of her home by fire on the basis of arson

where there was no air of reality to the allegation of arson. The court held that an

award of exemplary damages in a contract case is attainable but it requires an

“actionable wrong” in addition to the breach sued upon. The “actionable wrong”

need not constitute the tort.

(34) The question whether exemplary damages are available in contract was

also considered by the Supreme Court of Canada in the earlier case of Vorvis v

Insurance Corporation of British Columbia [1989] 1 S.C.R. 1085. This case

also decided that exemplary damages are available but there was some

uncertainty after it was decided whether a breach of contract need to be

accompanied by conduct constituting a tort. This was clarified in Whiten.

However, the judgments in Vorvis treat in more general terms with the question

of the availability of exemplary damages in contract.

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(35) In Vorvis there was a dissenting judgment but both the majority judgment

and the dissenting judgment agreed that exemplary damages were available in

contract. Where they differed was whether in addition to a breach of contract the

conduct of the contract breaker had to amount to an actionable wrong. In the

judgment of the majority it did. The minority however thought otherwise.

However, in so deciding the Court was of the unanimous opinion that in

determining whether exemplary damages should be awarded the focus should

be on the conduct giving rise to the claim not its legal category. McIntyre J. who

delivered the majority judgment of the court cited with approval the following

passage of the judgment of Clement J.A. in Paragon Properties Ltd. V Magna

Envestments Ltd. (1972), 24 D.L.D. (3d) 156 on the principle governing the

award of exemplary damages:

“The basis of such an award is actionable injury to the plaintiff done in

such a manner that it offends the ordinary standards of morality or decent

conduct in the community in such marked degree that censure by way of

damages is, in the opinion of the Court, warranted. The object is variously

described to include deterrence to other possible wrongdoers or

punishment for maliciousness, or supra-compensatory recognition of

unnecessary humiliation or other harm to which the claimant has been

subjected by censurable act. It is the reprehensible conduct of the

wrongdoer which attracts the principle not the legal category of the wrong

out of which compensatory damages arise and in relation to which the

conduct occurred. To place arbitrary limitations upon its application is to

evade the underlying principle and replace it with an uncertain and

debateable jurisdiction.

(36) Similar sentiments were expressed by Wilson J. on behalf of the minority.

(37) I prefer the Canadian position in that in my judgment exemplary damages

should be available in contract. I however do not agree with the position that

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exemplary damages should be awarded only where the breach of contract is

accompanied by an actionable wrong. I do not think that it makes much sense to

treat one contract breach different from another simply because one breach is

accompanied by conduct that amounts to a breach of some other law. In tort the

conduct that attracts exemplary damages does not do so because it amounts to

an independent actionable wrong. I see no need to introduce that concept in a

contract case. As Wilson J. remarked in Vorvis:

“I do not share my colleague’s view that punitive damages can only be

awarded where the misconduct is in itself an “actionable wrong”. In my

view, the correct approach is to assess the conduct in the context of all the

circumstances and determine whether it is deserving of punishment

because of its shockingly harsh, vindictive, reprehensible or malicious

nature. Undoubtedly some conduct found to be deserving of punishment

will constitute an actionable wrong but other conduct might not”.

Indeed if exemplary damages were awarded only where there is an independent

actionable wrong it invites the question whether damages are awarded for the

breach of contract or the other wrong.

(38) The conduct that attracts exemplary damages does so, as Lord Nicholls

stated in A Bottrill, supra, because it is so outrageous that an order for payment

on ordinary compensatory principles is an inadequate response. If that is the

broad based rationale for an award of exemplary damages I see no good reason

that it should be limited to cases in tort. As the judges point out in Vorvis what is

relevant is the quality of the conduct of the contract breaker and not the legal

category of the wrong. I would think that in the vast majority of case the contract

breach would not attract an award of exemplary damages but in the exceptional

case exemplary damages should” be allowed where the facts demand that they

be awarded”.

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(39) Having said that, I hasten to say that the reasons advanced by the

England and Wales Law Reform Commission and the Irish Law Reform

Commission for refusing to extend exemplary damages to contract cases are of

course not to be lightly dismissed. But with respect I do not find them persuasive.

I will briefly refer to the reasons and, except when I state otherwise, they are the

reasons set out earlier as contained in the report of the England and Wales Law

Reform Commission.

(40) The first is that exemplary damages have never been awarded for breach

of contract. This must be read subject to the opinion of Lord Collins in the Addis

case. However, as I have said there are indeed no cases in this jurisdiction

where exemplary damages have been awarded and there are cases where they

have been expressly refused. But in these cases the point was not really argued

and the position has now arisen where the issue may be considered on principle.

I think in the end it is really a question of policy and it is for this Court to decide

what the policy of the law of Trinidad and Tobago should be on this subject. The

fact that it may never have been done before is not to the point. As Lord Nicholls

remarked in A v Bottrill, supra, “Never say never is a sound judicial admonition”.

(41) Second is the reason that contract primarily involves pecuniary rather than

non-pecuniary loss such as is the case in the torts in which exemplary damages

are likely to be awarded. At least since the Kuddus case exemplary damages

may be awarded in any tort. These would include those that usually give rise to

a large element of pecuniary loss. In A v Bottrill exemplary damages were held

to be awardable in a case involving negligence which is a tort that usually gives

rise to a claim with a substantial element of pecuniary loss.

(42) It may however be that if the conduct has to be brought within the

categories of Rookes v Barnard that exemplary damages will continue to be

more commonly awarded in torts which usually give rise to non-pecuniary losses.

I do not however believe that the Rookes v Barnard categories, which although

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very much forms part of our law in relation to the award of damages in tort should

be transported to contract cases. Rookes v Barnard was not applied in some of

the other commonwealth jurisdictions in so far as it held that exemplary damages

were available at common law in only two categories of cases. Here I refer to the

Australian, Canadian and New Zealand jurisdictions. To paraphrase Lord

Nicholls in A v Bottrill these jurisdictions do not toil in the chains of Rookes v

Barnard. In these jurisdictions that case was heavily criticised (see Uren v John

Fairfax and Sons Pty Limited (1965-66), 117 C.L.R. 118: Paragon Properties

Limited v Magna Envestments Limited (1972) 24 D.L.R. (3d) 156: and Taylor

v Bere [1982] 1 NZLR 81). I think the criticisms are warranted. To restrict the

application of exemplary damages to the Rookes v Barnard categories of

conduct is to evade the underlying principle of an award of exemplary damages

which is in essence to punish outrageous conduct. It is of course now too late to

say that in tort cases, Rookes v Barnard ought not to apply. But here the

question is whether exemplary damages should be available in contract. I think

the jurisdiction to award such damages should not be limited by saying that the

conduct accompanying the breach must be of a quality akin to be Rookes v

Barnard categories.

(43) The third reason is a need for certainty which is perceived to be greater in

relation to contract than tort. This is a valid observation. But there is also a need

in my judgment for an appropriate response from the law in cases where a

contract breaker behaves outrageously. Just as in tort where there is in the

exceptional case a need to convey to the tortfeasor and the general society that

the law cannot be broken with impunity and to vindicate the strength of the law so

too there is in the law of contract. In such cases, which would be rare, the price

of a loss of certainty is a price that is worth paying. But any concerns of a lack of

certainty can be diminished by the courts’ guidance in the quantification of the

damages. This is more so in this jurisdiction where awards of exemplary

damages have been restrained and within a narrow range.

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(44) Fourth is the notion that punishment is more appropriate in the law of tort

than it is in the law of contract. This is similar to the reason advanced by the Irish

Law Commission in refusing to extend exemplary damages to contract: to do so

would be at odds with the traditional concept of contract law as having an

exclusively private law character. However, if it is recognised that promise

keeping is not immaterial and has broader public or societal considerations,

which I think it does, a contract case cannot be regarded as the exclusive

preserve of the parties anymore than a case in tort can be. Both are in a mixture

of private law and public interest and concerns. In contract law an award of

exemplary damages may signal that it is worth keeping one’s promise.

(45) The fifth and final reason relates to the theory of efficient breach. This

theory dictates that contracting parties should have available the option of

breaking the contract and paying compensatory damages if they are able to find

a more remunerative use for the subject matter of the promise. The promisor is

therefore given the option not to perform his contract so long as he is prepared to

pay damages to the plaintiff on the normal measure; that is to say to put the

plaintiff in the same position as if the contract had been performed. The theory is

that the defendant will exercise this option only if the gains from the breach are

greater than the monies so paid over. The theory implies that the plaintiff is left

as well off from the breach as before while the defendant made better off (see

Daniel Friedmann, The Efficient Breach Fallacy (1989) 18 The Journal of Legal

Studies 1, 3).

(46) The theory of efficient breach has however been subjected to trenchant

criticisms. In his article The Efficient Breach Fallacy, the author sees no virtue

in the theory. In his conclusion (at pp. 23-24) he states as follows:

“The efficient breach theory of contract resist issues of both entitlement

and efficiency and succeeds on neither, as either a normative or a

descriptive matter. As a normative matter, parties in the contractual

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setting should be left free to define the ambit of their rights, and it is open

to them to stipulate that the promisor will be allowed to terminate the

contract subject to payment of damage. The efficient breach theory

assumes, however, that, even if they have not done so and even if they

intend to confer on the promisee a broader entitlement, the law will

nevertheless defeat their joint intention by granting the promisor an option

to breach. Such a limitation on the freedom of contract has little to

commend it. For those who believe in the parties’ freedom to determine

their rights, efficient breach means that the promisee’s contractual right

may be appropriated without his consent if that which was promised to him

can be used in a way that will yield profits exceeding his loss. However,

such a taking of an entitlement, for the sake of private gains, runs counter

to the very basis of private law.

In modern commercial-industrial society contractual rights constitute a

major form of wealth, and consequently their adequate protection

becomes of the utmost importance. Such a society is likely to reject the

idea that a person can be deprived of his bank account, his insurance

policy, a pension right subject to merely to payment of expectation

damages to be decided at a later date by a tribunal that might not correctly

appraise the damage inflicted.

Efficient Breach theory also fails as a general proposition on grounds of

efficiency. Its sole purported advantage is that it reduces the level of

transaction costs by removing the need of the promisor to negotiate a

release from the promise. But the gains here are generally illusionary

because the unilateral decision by the promiser provokes a dispute over

damages that may end in costly litigation.”

(47) It has been said that the theory is only one “possible moral conception

among a sea of many competing moral conceptions” (see Andrew Phang and

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Pey-Woan Lee, Restitutionary and Exemplary Damages (2003) 19 Journal of

Contract Law 1, 27). If it comes to a choice between the doctrine of efficient

breach and the “moral conception of promise keeping” I prefer the latter. I see

nothing in the doctrine of efficient breach that would persuade me that the courts

should not award exemplary damages in the appropriate contract case.

(48) In tort, cases do arise where compensatory damages are inadequate to

achieve a just result between the parties. The defendant’s conduct demands a

further response from the courts in the form of exemplary damages. So too in

contract, cases can arise from time to time where by reason of the defendant’s

outrageous conduct the normal measure of damages may be perceived to be an

inadequate response to achieve justice between the parties. In such cases the

courts should be in a position to grant an award of exemplary damages. One

such example is Nantel v Parisien (1981), 18 C.C.L.T. 79, a case out of Ontario,

Canada. Exemplary damages were awarded for breach of a lease when the

defendants were found to have acted in a “high handed and shockingly

contemptuous manner” and used their superior power to steam roll the plaintiff to

acquiesce and surrender her legal rights to the lease. In that case the

defendants broke the lease by breaking into the plaintiff’s premises, removing her

belongings and then demolishing the building even when the plaintiff attempted

to occupy the premises as she was legally entitled to do. Galligan J. noted that

on the facts of that case compensatory damages would be an inadequate

response. He stated:

“If this Court were to sanction the conduct of the defendants by

awarding the plaintiff for actual monetary loss plus nominal

damages, then in my opinion the law would say to the rich and

powerful, “Do what you like, you will only have to make good the

plaintiff’s actual financial loss, which compared to your budget is

negligible.” The law would say to such person as the defendants

“Trample on the smaller person’s rights, the sanction of that

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trampling will only be a relatively minor part of the cost of doing

business.”

In Vorvis Wilson J. made the following observations with which I concur:

“Although the general principle that punitive damages are not

awarded for breach of contract survives, there is no requirement

that the general principle be followed invariably. Certainly in the

vast majority of situations of contract breach, there would be no

possible issue of punitive damages arising. However, just as our

courts have recognised the utility of awards for damages for mental

suffering caused by breach of contract in appropriate

circumstances, so too should punitive damages be allowed when

the facts demand that they be awarded. It is clear that such

damages would rarely be awarded, but this does not mean that it

should never be done. To tie the hands of the courts by denying

them the power to penalise defendants, who flout contract law in a

high handed and outrageous fashion, is unwise and unnecessary.

Punitive damage awards should be part of the judicial arsenal in

contract cases in the same way as they are in tort cases. I see no

sound reason to differentiate between them.

(49) In the circumstances in my judgment I think it is appropriate in our

jurisdiction for a court to award exemplary damages in contract cases.

(50) The question that now arises is whether an award of exemplary damages

should be made in this case. I have already referred to the facts of this case and

there is no need to repeat them here. The conduct of Lezama was clearly

intended to intimidate and to instil fear in order to procure the immediate

resignation of the Appellant and it succeeded. Such conduct in my judgment was

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harsh and reprehensible and sufficiently outrageous to attract an award of

exemplary damages.

(51) Counsel for the Appellant raised the question of whether exemplary

damages should be awarded in this case as it is in essence the employer who

will be paying for the conduct of the employee. He referred to Mc Gregor on

Damages where it is stated (17 ed) at para 11 – 045 “Certainly it appears to be

unfair to impose a punitive award upon the innocent employer while at the same

time allowing the guilty employee to escape punishment.” However, as

McGregor on Damages recognizes there are other considerations (see para 11 –

045).

(52) It should be noted that awards of exemplary damages in tort have been

made in this jurisdiction against employers for the outrageous conduct of the

employee. One such case is Civil Appeal 159 of 1992 – Thaddeus Bernard and

the Airports Authority of Trinidad and Tobago v Nixie Quashie. While in that

case de la Bastide C.J. expressed the view that he would like to see the

employee himself satisfy the award of exemplary damages, the award which was

made was made against both employer and employee and was affirmed by the

court.

(53) The Quashie case was a case where an estate constable in the employ of

the Authority assaulted the respondent and unjustifiably arrested and charged

him. The estate constable and the Authority were held liable for assault, false

imprisonment and malicious prosecution. One justification for an award of

exemplary damages in such case, is that as one of the aims of exemplary

damages is deterrence, the award is more appropriately directed to the employer

as it may provide incentive to him to take measures to prevent a repetition of

such behaviour by other constables in its employ.

(54) The award of exemplary damages can be justified on similar grounds in

this case. If the employer did not authorise the way in which Lezama procured

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the Appellant’s resignation then it may serve as an incentive that it take stern

steps to ensure that such conduct is not repeated.

(55) In all the circumstances I think that an award of exemplary damages is

appropriate in this case.

(56) In Rookes v Barnard it was said that the court must ask itself whether the

sum awarded as compensation is adequate to serve the punitive aspects as well.

If but only if that sum is insufficient to do so should a sum by way of exemplary

damages be added to it. I do not think that there is any doubt in this case that

the normal measure awarded by the trial Judge is not adequate. In determining

what further sum should be added some consideration should be given to the

means of the parties particularly the means of the person liable to pay the

damages. Restraint must be exercised in the assessment. In the end as was

stated in Whiten the award must be rational and proportionality is the key to the

permissible quantum. On the issue of proportionality Binnie J. stated:

“An award of exemplary damages must be rationally proportionate

to the end sought to be achieved. A disproportionate award

overshoots its purpose and becomes irrational. A less than

proportionate award fails to achieve its purpose.”

(57) A proper award must therefore look at proportionality in several

dimensions. Some of these which can impact on the quantum of the award were

identified in Whiten to be: (1) proportionate to the blame worthiness of the

Defendant’s conduct; (2) proportionate to the degree of vulnerability of the

plaintiff; (3) proportionate to the harm or potential harm directed specifically at the

plaintiff; (4) proportionate to the need for deterrence; (5) proportionate even after

taking into account the other penalties both civil and criminal which have been or

are likely to be inflicted on the defendant for the same conduct; and (6)

proportionate to the advantage wrongfully gained by a defendant from the

misconduct. Applying these dimensions of proportionality to the facts of this case

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I can say at the outset that on the evidence there are no other penalties likely to

be inflicted on the Respondent. The other matters, however, require some

consideration.

(58) With respect to the to the blameworthiness of the Respondent, as was

noted in Whiten there are several factors that may influence the level of

blameworthiness. These include whether the conduct was planned and

deliberate, the intent and motive of the defendant, whether the defendant

persisted in the outrageous conduct over a lengthy period of time, whether there

was an attempt to conceal or to cover up his conduct, and the defendant’s

awareness that he was wrong. The conduct in this case was short-lived but it

was deliberate conduct designed to achieve a specific result. There is no doubt

that Lezama knew it to be wrong. He in fact gave evidence to that effect. He

also concealed his conduct. The Respondent’s defence in essence denied the

outrageous conduct.

(59) With respect to the degree of vulnerability of the plaintiff, the greater the

degree of vulnerability of the plaintiff and the abuse of power by the defendant,

the more deserving the conduct may be of punishment and the greater the need

for denunciation and deterrence. The Appellant, here was a junior officer in the

security set up of the Respondent. Lezama was the acting head of security.

Further, the Appellant was unrepresented at the meeting with Lezama and

O’Connor. There was a very obvious imbalance of power and influence and the

Respondent should not be permitted to abuse such power and influence.

(60) With respect to the harm or potential harm directed at the Appellant, it is

clear that the conduct was designed to achieve his resignation which it did. The

Appellant therefore lost his employment and arguably in circumstances which

could have affected his prospects of employment.

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(61) With respect to the need for deterrence, as I mentioned this is one of the

aims of an award of exemplary damages. It may provide the necessary impetus

to ensure that steps are taken to prevent a repeat of the conduct. The role

deterrence plays depends on the circumstances of the case. Where for example

the conduct complained of is typical of the defendant’s conduct, then the need for

deterrence may be greater. That, however, is not a consideration in this case.

(62) Lastly with respect to the advantage wrongly gained by the defendant, an

award of exemplary damages may be made to ensure that the defendant does

not profit from his wrongful conduct (see Nantel v. Parisen, supra). But this is

not a consideration in this case. Although the Respondent did obtain the

Appellant’s resignation and so obtained an advantage, the Respondent, pursuant

to the provisions of the contract of employment, could have terminated the

Appellant’s employment on one week’s notice or payment of one week’s salary of

$540.00 in lieu thereof. This is the amount that the Respondent was ordered to

pay by way of ordinary damages. When this is taken into account it cannot be

said that the Respondent profited from the wrongful conduct.

(63) In the circumstances I think that an award of exemplary damages of

$5,000.00 will meet the justice of the case.

(64) On the question of costs the trial Judge made an order that the Appellant

pay the Respondent’s costs on the petty civil court scale. The Judge did not give

any reasons for the order as to costs that he made nor is there any note on the

record of appeal of the submissions made by Counsel on the question of costs.

But very often the submission is made that as the plaintiff has succeeded in the

High Court in a matter which could have been commenced in a Petty Civil Court

if it were brought in that court he would have been entitled to costs on the scale

of costs applicable to that court so the High Court should at least award those

costs. It is therefore advisable to remind ourselves of what the Petty Civil Courts

Act provides on the question of costs in respect of matters that are brought in the

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High Court that could have been commenced in the Petty Civil Court. Section 50

of the Act provides as follows:

“If an action is commenced in the High Court that could have been

entered and tried in any Court held under this Act, the plaintiff may

have judgment in such action for the amount recovered by him if

successful, but without any costs; and if the defendant succeeds he

shall be entitled to his costs as between solicitor and client, unless

in either case the Judge before whom the action was tried certifies

upon the record the action was a fit and proper one to be brought in

the High Court.”

(65) The position therefore is that unless the High Court certifies upon the

record that the matter was a fit and proper one to have been brought in that court

a successful plaintiff is not entitled to his costs. If unsuccessful he may be liable

to pay to the defendant costs as between solicitor and client. If the court certifies

that the matter was a fit and proper one to have been brought in the High Court a

successful plaintiff should have his costs on the scale applicable to high court

actions and not on the petty civil court scale. Of course this is subject to the

discretion of the court to disallow any portion of the plaintiff’s costs on proper

grounds.

(66) In this matter despite the award of exemplary damages, the total award,

being less than $15,000, still brings this matter within the jurisdiction of the Petty

Civil Courts. However, I have little hesitation in saying that the question as to the

availability of exemplary damages makes this a matter that was fit and proper to

have been brought in the High Court. Accordingly the Appellant is entitled to his

costs in the court below to be taxed on a party and party basis pursuant to O. 62.

(67) In the circumstances I would allow the appeal and grant the amendment to

the statement of claim to include a claim for exemplary damages and order that

the Respondent pay to the Appellant an additional sum of $5,000.00 by way of

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exemplary damages. The order as to costs made by the trial Judge is set aside

and the Respondent shall pay to the Appellant the costs here and in the court

below to be taxed.

Dated this 10th day of May, 2007

Allan Mendonca

Justice of Appeal

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