What Are Exemplary Damages?

Typically, a court can award damages when an individual or entity proves they suffered a loss. There are different types of damages awarded depending on the loss suffered. Below, we unpack exemplary damages – what they are, why a court grants them to a party, and what message they communicate to the community.

Ordinary Damages

Damages primarily compensate a party for the loss that they have suffered as a result of another party’s wrongdoing. A court awards ordinary damages to a party to place them in the position they would have been in had the wrongdoing not occurred. For example, a person may receive damages if another party fails to observe their contractual obligations. A party should be given no more or less than their actual loss – the intent is restitution rather than punishment.

Exemplary Damages

A court can award a party exemplary damages where it wants to do more than compensate a plaintiff (i.e. punish and deter a defendant, and send a message that the court considers this behaviour malicious). This characteristic distinguishes exemplary (or punitive) damages from other heads of damages. Interestingly, while the decision to award these damages is serious, the amount is not usually significant. Courts only award exemplary damages in exceptional circumstances, highlighting their gravity and significance.

The court also awards exemplary damages to deter the defendant and the wider community. For example, the Australian Law Reform Commission made a recommendation in their 2014 report on Serious Invasions of Privacy in the Digital Era that courts have the power to award such damages for matters involving the outrageous violation of a person’s privacy. These kinds of acts include behaviour such as posting revenge pornography to the internet. Exemplary damages are considered appropriate in situations where a person’s conduct displays a blatant disregard for the rights of another and enables a court to express the position that such behaviour will not be tolerated.

Effect of Statute

Statutes in many Australian states and territories have either eliminated or seriously restricted the ability of a party to recover exemplary damages. For example, in New South Wales the Civil Liability Act 2002 (NSW) prohibits a court from awarding exemplary damages in cases of negligence that result in injury and death. Similarly, Queensland courts can only award exemplary damages in cases unlawful conduct accompanied by the intent to cause personal injury. Courts typically do not award exemplary damages in the context of contract law.

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If you have any questions about what type of damages you may be entitled to recover, get in touch with our dispute resolution lawyers on 1300 544 755.