While exemplary damages are infrequently awarded in Australian compensation claims, it has long been held that where they are awarded, they need to be set at a level that “stings” and not merely irritates the wrongdoer.[1]
Similarly, it has been well established since the landmark House of Lords decision in Rookes v Barnard[2] that the financial position of the defendant is relevant in assessing exemplary damages; for the very reason that the award should be sufficient to be meaningful so as to have a deterrent effect.
In a recent decision of the High Court handed down on 17 June 2026, the Court has seemingly taken a step away from these principles in favour of a more moderate approach. In Austral (& Ors) v Northern Territory [2026] HCA 20, the court (by majority) reinstated an award of exemplary damages made by the primary judge but reduced it from $200,000.00 for each of the plaintiffs to only $50,000.00. This occurred in circumstances in which the court found the Northern Territory directly liable for the actions of prison officers who had unlawfully exposed the appellants to CS gas at a youth detention centre. The plurality (Gordon, Edelman, Gleeson, Jagot and Beech-Jones JJ) seemingly considered the deterrent effect to be more appropriate to cases where it was necessary to disgorge benefits gained by the tortfeasor. The plurality said:
“There are cases where large awards of exemplary damages are sometimes made due to features of the tortious conduct that require specific and general deterrence. For instance, deterrence is an important feature in instances where an award of compensatory damages would not be sufficient to disgorge actual or expected benefits to a defendant. The role of deterrence in such cases is similar to one type of account and disgorgement of profits, although an award of exemplary damages in these cases is a more “blunt instrument” than these remedies because the award is not limited to actual profits. In these cases, the award of exemplary damages aims, at least, to disgorge the profits made by a cynical wrongdoer, including, although not limited to, circumstances of wrongdoers who have “calculated that the money to be made out of … wrongdoing will probably exceed the damages at risk”.”[3]
In their judgment, the plurality considered that there was a need for proportionality in the awarding of exemplary damages. They said:
“Just as a fundamental concern in criminal punishment is proportionality with the wrongdoing, so too the quantum of an exemplary damages award must be proportionate to the wrongdoing in the sense of being moderate and not excessive when having regard to the wrongdoing. As with criminal law, achieving proportionality between penalty and wrongdoing can be assisted by consideration of principles of totality (a remedy commensurate with the wrong that also should not be crushing to the wrongdoer), parity, and consistency of penalty, and whether multiple instances of wrongdoing are founded on the same facts or course of conduct. These principles have been described as “analytical tools which assist in the determination of a reasonable application of the law”.”[4]
The members of the court in the majority also considered that awards of exemplary damages should be consistent with awards in other similar cases. They concluded:
“Nevertheless, even accepting that the means of a defendant (which are substantial in the case of the Northern Territory) can be important to the assessment of exemplary damages, the total award of $800,000.00 is an amount which substantially exceeds what was required to achieve appropriate moral retribution, deterrence, and denunciation. The amount also substantially exceeds the range of exemplary damages awards made generally for torts to the person.”[5]
While the High Court continues to recognise that there is a place for exemplary damages in Australian common law, this lean into proportionality will certainly ensure that there can be no “windfalls” for plaintiffs in our system of compensatory damages; but at the same time, reduces the ability of common law courts to punish and ideally deter, tortfeasors who act in contumelious disregard for the rights of others. For mine, I can’t help but feel that the judicial scorpion has possibly lost its tail.
[1] See, for example, the arguments in New South Wales v Ibbett [2006] HCA 57
[2] [1964] AC 1129
[3] At [114]
[4] At [111]
[5] At [146]
