What are exemplary damages?
Exemplary damages, also known as punitive damages, is awarded to punish the Defendant for his wrongdoing and serve as a deterrence.
When are exemplary damages awarded?
The English case of Rookes v Barnard sets out two circumstances when exemplary damages are awarded. Firstly, when there is oppressive, arbitrary or unconstitutional action by government servants. Secondly, when the defendant’s conduct was calculated to make him a profit which may well exceed any compensation payable by him.
Why are exemplary damages awarded?
Lord Devlin in Rookes v Barnard set out three considerations for awarding exemplary damages. Firstly, the plaintiff must be the victim of the defendant’s “punishable behaviour”. Secondly, any award of exemplary damages must be used with restraint. Thirdly, the court must consider the financial means of the parties.
Lord Devlin’s views on exemplary damages was affirmed by the House of Lords in Broome v Cassell & Co. The Broome case also clarified the second circumstance expounded by Lord Devlin, namely that the defendant must have made a calculated decision to commit a wrongdoing knowing that he stands to profit far more than whatever compensation he would be made to pay.
An example of a defendant falling under this second category of exemplary damages would be the case of Cheong Fatt Tze Mansion Sdn Bhd v Hotel Continental Sdn Bhd (Hong Hing Thai Enterprise Sdn Bhd, third party). Here, the High Court held that the defendant clearly knew that he may have to pay damages for wrongdoing but executed his plans anyway knowing that the potential profits will far exceed the damages payable.
Other instances when exemplary damages was awarded in Malaysia include for wrongful detention of property (Tan Kau [email protected] Ching Hai v Tetuan Teh Kim Teh Salina & Co (a firm) & Anor) and in the case of trespass to land (Cheng Hang Guan & Ors v Perumahan Farlim (Penang) Sdn Bhd & Ors).
The quantum of exemplary damages depends on the facts and circumstances of the case, bearing in mind the primary objective to punish the wrongdoer (Taz Logistics Sdn Bhd v Taz Metals Sdn Bhd & Ors). However, any quantum awarded must be “principled and proportionate” (Ramzan v Brookwide Ltd).
In Thompson v Commissioner of Police of the Metropolis and Hsu v Commissioner of Police of the Metropolis, the English Court of Appeal opined that any contributory misbehaviour of the plaintiff ought to reduce or eliminate the award of exemplary damages. In any event, it was suggested that the upper limit of exemplary damages ought not be more than three times the basic damages awarded.