Citation(2016) 28 SAcLJ 768
Date01 December 2016
Published date01 December 2016

In recent years the nature of remedial norms, in particular the nature of final court orders, has received significant attention, following a long absence of theoretical interest. Largely in response to the recent work of Stephen Smith, the authors consider some of the pressing theoretical issues concerning remedial norms, and argue, first, that Smith is correct in claiming that there is no legal duty on a wrongdoer to pay a sum of money damages to the victim of his wrong prior to any court order. Second, prior to a court order a wrongdoer does owe her victim a moral duty of repair, a duty which while morally recognised is not legally enforced; the authors characterise this moral duty as a Kantian duty of virtue. Complying with this duty is encouraged by the rules governing costs and settlement. Third, the authors argue that prior to the award of a formal court order, the relationship between the plaintiff victim and the defendant wrongdoer can only fruitfully be revealed through recognising that their relationship is governed by the trilateral structure of litigation in which the court norms in relation to each of them are clearly set out. Finally, the authors argue, pace Smith, that the Razian theory of authority is entirely adequate for explaining the authority of the court when it issues orders.

I. Introduction

1 In recent years the nature of remedial norms, in particular the nature of final court orders, has received significant attention, following a long absence of theoretical interest. The literature has two basic strands.

2 The first strand tries to make sense of the normative relationship between a wrongdoer, such as a party who breaches a contract or one who commits a tort, and the victim of the wrong, in the interval between the breach of duty and a final disposal of their legal dispute by the issuance of a court order in the plaintiff's favour.1 However, it is beyond the scope of any one article to go through all the ideas and arguments that this work has generated. Rather, our purpose here is to highlight certain issues which we feel most significantly shape our understanding of the remedial norms at work. By “remedial norms” we mean to cover those legal rules, rights, duties, powers and liabilities which constitute the law's response to the breach of a primary duty. What is a “primary” duty? The term “primary duty” originated in English-speaking jurisprudence with the British legal theorist John Austin,2 and it is a duty in law such as the duty in tort law not to batter another, or a duty acquired under a contract.3 As to this first strand of the emerging literature, our focus will be on the issue that has drawn perhaps the greatest amount of attention, which is whether or not a defendant who commits a tort or breaches a contract (which gives rise to a claim for damages for consequential loss) is under a distinct “secondary” or “inchoate” duty to compensate the plaintiff for that loss which arises immediately upon his breach of duty, that is, prior to the issuance of a court order.

3 The second strand comprises a smaller and even more recent literature which aims to analyse the nature and justification of courts issuing orders. Here, focusing on the work of Stephen Smith,4 we aim to give an account of final court orders, such as an order against a defendant to pay damages, drawing upon both Immanuel Kant's theory of law and Joseph Raz's theory of authority, an account which, it is

submitted, clears up some of the puzzles thrown up by the recent literature.
II. Does a defendant owe a “secondary” duty to pay damages for consequential loss immediately upon his commission of a breach of duty?

4 We first turn to Austin's own words. He said, “Those [rights] which I call primary do not arise from injuries, or from violations of other rights and duties” and “[t]hose which I call secondary … arise from violations of other rights and duties”.5 Austin's two-tiered structure of “primary” and “secondary” rights remains a powerful one, especially in English judicial thought, where the primary-secondary distinction is often regarded as an important distinction. As recently as 2001, the House of Lords (as it then was) reiterated that there is such a thing as a “secondary” obligation to compensate6 and to pay damages.7 In turn, the ubiquity of Austin's terminology in judicial language can largely be attributed to a single judge, Lord Diplock,8 who frequently employed the primary-secondary distinction in his judgments.9 In Lep Air Services Ltd v Rolloswin Investments Ltd,10 his Lordship held that:11

… [on the termination of a contract by X, and by the acceptance of a repudiation by Y, X's] primary [contractual] obligations come to an end … But for his primary obligations there is substituted by operation of law a secondary obligation to pay to [Y] a sum of money to compensate him for the loss … sustained as a result of [X's] failure to perform the primary [contractual obligations]. [emphasis added]

This view was echoed by Lord Reid in the same case.12 This two-tiered structure, however, is not peculiar to English legal thought. Across the Atlantic, and predating Lord Diplock's statement, the American jurist Oliver Wendell Holmes Jr advanced a similarly two-tiered account of the normative picture, viz the “option” theory of contract.13 Responding to his contemporary, the English jurist Frederick Pollock, who argued that there was no immediate duty to pay damages in cases of contractual non-performance,14 Holmes insisted that it was not that the promisor actually (if implicitly) made a joint promise to perform or pay damages in the alternative; rather, the law simply imposed a legal duty to pay damages upon a breach.15

5 Those in favour of a duty to pay d amages which arises upon D's breach can be divided into two camps, one more or less aligned with Austin and Holmes, who hold that by operation of law a duty to compensate arises immediately upon the breach and those, by contrast, who agree that D has such a duty immediately upon the breach, but do not regard it as a “secondary” duty in Austin's sense. Rather, this camp, who might be called “continuation” theorists, argues that the primary obligation (such as a contractual obligation to deliver goods) continues to exist after a breach occurs, but is juridically altered so as to legally require a different performance, that is, a duty to compensate modelled upon a notion of repair.16 For the purposes of this article, we do not have to distinguish the two camps, for the question at issue is: On whatever theoretical justification, does the wrongdoer come under an immediate duty to pay damages?

6 In order to address that question in its purest form, we intend to focus on damages for consequential loss, eg, damages for economic losses flowing from damage to property or economic losses consequent upon a breach of contract. Why the focus on damages for consequential

loss? This turns on the distinction between what Zakrzewski and Smith call “replicative” and “creative” court orders,17 a distinction which we find sound and thus rely upon. In short, a “replicative” order is one which replicates a duty that the defendant already clearly owes to the plaintiff. Two examples suffice. Where a plaintiff seller brings an action on the price against the defendant buyer, the order that the court gives (assuming for the purposes of this example that the plaintiff does not also bring a claim for consequential loss for breach of contract) is simply an order that the defendant pay the price, that is, the debt under the contract of sale; the order then merely replicates the duty the defendant already had to pay the price.18 Similarly, where the court makes an order of specific performance against a defendant vendor of land, the defendant is ordered to do the very thing required under the original contract for the sale of land.

7 By contrast, a “creative” order is one which imposes upon the defendant a new duty which he never had to discharge prior to the order. In Smith's taxonomy, orders for the payment of damages for consequential loss are considered creative orders. This is because they do not replicate a duty the defendant had prior to the court's order. If this is correct, then it follows that the defendant had no legal duty, arising immediately on his breach of a primary legal duty, to pay compensation to the defendant for consequential loss. It is the supposed implausibility of the defendant owing such a duty which largely animates Smith's position in the debate. One of the features that Smith points out is that it seems very unlikely that a defendant could properly calculate the amount he should pay as damages for consequential loss, even with the co-operation of the plaintiff. It seems that only a court could authoritatively fix the amount of such damages, and Smith points out that the rules governing assessment of consequential damages are rules which are best understood as directed to the court,19 not to the defendant. If this line of thought is correct, a defendant in this position could not, in the absence of a court order fixing the amount of damages, discharge a legal obligation to pay damages prior to the court's order. Hence, such a defendant could not be under a legal obligation to do so.

8 What complicates matters are cases involving damages for non-consequential loss which look, at first glance at least, as if they might be determined in amount by the plaintiff and defendant prior to any award of the court. Consider, for example, two other sorts of damages claims. If D commits a trespass to goods, damaging P's car, then it might seem obvious that D could discharge an obligation to compensate P if P provides, say, three estimates for the cost of repair, and D pays the price of the middle estimate, which P accepts; similarly if P's claim is for what have been called “vindicatory” (or “substitutive”) damages.20 Vindicatory damages are not...

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