July 9, 2014

By Brian Babcock

1. What are punitive damages?

Punitive damages are amounts awarded in tort or occasionally in contract cases to punish a wrongdoer for particularly bad behaviour, to promote respect for the law and provide deterrence, that is, to discourage both the wrongdoer and others from repeating the bad behaviour.

2. Are they awarded in every case?

No. Punitive damages are the exception, not the rule. They used to be very rare in Canada and are becoming less rare. But they are still not commonly awarded.

3. When are they awarded?

When the injured party has already have been fully compensated for their actual losses, and the court must feel that the total awarded is not enough to have the desired deterrent effect.

4. How does the court know when further deterrence is required?

When the behaviour was high-handed, malicious, vindictive, or oppressive – such as an abuse of power.

5. How much are they?

There are no set amounts. Traditionally modest, there have been a few million dollar awards recently. Though in a recent high profile case, a million dollar award was reduced to $100,000 because the Court of Appeal considered the total damages enough deterrence with that amount for punitive damages.

6. How does this compare to England and the US?

Punitive damages are more common in Canada than they are in England, but less common than in the United States. The amounts in the United States also tend to be higher. In the United States, juries often consider bad behaviour broadly, not just related to the individual who was harmed in a particular case. Even in the United States, though, the large jury verdicts that get blaring headlines are often reduced on appeal, with much less publicity.

7. How do they differ from “aggravated damages”?

Aggravated damages are sometimes confused with punitive damages because they also relate to the manner of the wrongdoing. Unlike punitive damages though, aggravated damages are intended to compensate the injured person for an actual loss – the additional loss beyond their other damages. Aggravated damages are awarded in certain types of contract cases, where there are almost never damages for pain and suffering. They also are sometimes awarded where a tort was intentional or malicious. Where aggravated damages are awarded, punitive damages are less likely, or often at a lower amount.

8. What about “exemplary damages”?

This is an umbrella term sometimes used to lump together punitive damages and aggravated damages – both of which are awarded to make an example of the wrongdoer’s bad behaviour. Because it is confusing, lawyers and judges are moving away from using it.

9. Who gets the money?

As with all damages the money goes to the injured person.

10. But if they were already fully compensated, doesn’t that result in a “windfall”?

This is a controversial subject, but under current law in Canada, it is well established that the money goes to the injured person. This acts as an incentive to pursue them in appropriate cases, and it is the injured party who suffered the particular harm. No one else is more entitled than the injured person. ‘Better a windfall than insufficient deterrence’ is the prevailing view at this time.