XL Petroleum (NSW) Pty Ltd v Caltex Oil

As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v. Harvey [61] substantial exemplary damages were awarded for a trespass of a high-handed kind which occasioned minimal damage, Gibbs C.J. saying:

I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him except large damages? 1. (1814) 5 Taunt. 442 [128 E.R. 761].

The social purpose to be served by an award of exemplary damages is, as Lord Diplock said in Broome v. Cassell & Co. [62] , "to teach a wrong-doer that tort does not pay". The purpose of restraint looms large in the present case. The jury were entitled to take into account that Caltex and XL were competitors in an industry in which, notoriously, competition for markets and for outlet sites has been intense. The jury were therefore entitled to form the view that a risk of repetition of Caltex' conduct in spiking a competitor's tanks was quite unacceptable, for the intensity of commercial competition might lead to violence and counter-violence among competitors if legal process proved inadequate to suppress the use of force. And if the jury formed the view that it was desirable to ensure that Caltex did not again spike the tanks of a competitor, the jury were entitled to assess exemplary damages in an amount that would be likely to have a deterrent effect - sufficient to make Caltex smart. In Uren v. John Fairfax & Sons Pty. Ltd. [63] , Taylor J. cited with approval a passage from the judgment of Grier J. delivering the opinion of the Supreme Court of the United States in Day v. Woodworth [64] . That passage included the following:

In actions of trespass, where the injury has been wanton and malicious, or gross and outrageous, courts permit juries to add to the measured compensation of the plaintiff, which he would have been entitled to recover had the injury been inflicted without design or intention, something farther by way of punishment or example, which has sometimes been called "smart money". This has been always left to the discretion of the jury, as the degree of punishment to be thus inflicted must depend on the peculiar circumstances of each case. Where exemplary damages may properly be awarded to deter a tortfeasor, evidence of his means is material not only to show that he can afford to satisfy a substantial judgment or to show that he has acted on contumelious disregard of the plaintiff's rights by taking advantage of his wealth, but to show what sum will be a sufficient deterrent against repetition of the conduct that attracts the award. No doubt the width of the jury's discretion in assessing exemplary damages has evoked judicial expressions of concern about employing the civil law to inflict punishment. But it is now beyond argument that, by the law of this country, it is proper to award exemplary damages by way of punishment of the tortfeasor: see per Taylor J. in Uren v. John Fairfax & Sons Pty. Ltd. [65] ; Australian Consolidated Press Ltd. v. Uren [66] . Clearly the jury in the present case must have awarded exemplary damages for that purpose. Although the amount which the jury assessed is much greater than I would have thought appropriate, I am quite unable to hold that the jury were not entitled to take the view that an award of $400,000 was necessary to provide an effective deterrent against a repetition of Caltex' conduct. As that view is not shared by a majority of the Court, I should say that, if I were to give effect to my own opinion, I would regard $150,000 as an appropriate award of exemplary damages. 1. [1972] A.C., at p. 1130. 2. (1966) 117 C.L.R., at pp. 136-137. 3. (1851) 13 How. 363, at p. 320 [14 Law. Ed. 181, at p. 185]. 4. (1966) 117 C.L.R., at pp. 136-137. 5. [1969] 1 A.C., at p. 642; 117 C.L.R., at p. 239.

I would allow the appeal and dismiss the cross-appeal.