A recent decision of a two member panel of VCAT reiterates what has been orthodox in the Legal Practice List, and before that in the Legal Profession Tribunal: that damages for distress may be awarded in a negligence claim without the need to establish a medical condition. Such damages may be awarded in tort notwithstanding the general rule that they are not awarded in contract unless it is a term of the contract to prevent the kind of distress which is in fact suffered. The recent decision is Eaton v Owens  VCAT 1123 (Senior Member Howell and Member Shattock), the relevant parts of which are set out below, along with further comments by me.
It is sometimes said that such awards should be kept modest, but that is not true in Victoria: Boncristiano v Lohmann  VSC 228 (unanimous Court of Appeal). I agree with the Court of Appeal: the law is too fixated on pecuniary loss.
A compensation claim may always be made as part of a disciplinary complaint by a client of the respondent, and such complainants would be well advised to make clear that they seek compensation for distress (if they suffered distress) both within the disciplinary complaint, and also as a separate ‘other genuine dispute’ of the kind described in s. 4.2.2(2)(c) of the Legal Profession Act, 2004. Compensation for distress is obviously not claimable in the first species of dispute, the costs dispute (sub-s. (a)). Nor is it a ‘pecuniary loss’ and may not be claimed in the second species of dispute, the ‘pecuniary loss dispute’ (sub-s. (c)). But any pecuniary loss dispute in which a complainant desires compensation for distress may be expanded simply by adding the claim for compensation for distress within the third species of dispute, the ‘other genuine dispute’.
Legal regulators seem not to get that damages for distress are claimable in tort. I have just finished a case in which the Law Institute said, upon publishing a pecuniary dispute resolution request under the Legal Practice List, 1996 that the complainant sought damages for emotional distress and added, inappropriately, ‘(medical evidence will need to be supplied)’. In Aldersea v Public Transport Corporation (2001) 3 VR 499, Justice Ashley said at ff:
‘[The plaintiffs] … allege that they suffered distress – a term which embraces, as the cases show, things such as inconvenience, emotional suffering and vexation.
In tort and contract, and probably also in claims brought under the provisions of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1985 the law recognises a distinction between physical injury and distress. The latter describes a subjective, generally transient perception of, or response to, an event or events.
I very much doubt that it is a matter of expertise whether a person suffered distress; and, if so, what was its cause. A person will describe his or her perception of or response to certain circumstances, and the listener will readily conclude whether the person has described distress; and, if so, its apparent cause or causes.’
And the Legal Services Commissioner’s complaint form not so long ago warned, in the pecuniary loss part of the form, that compensation for ‘stress etc cannot be claimed’, but did not invite complainants to make an ‘other genuine dispute’. Happily, the current form contains no such warning.
What the Tribunal said in Eaton v Owens was:
‘5 If personal injuries are caused by a tort, or by a breach of contract, compensation for disappointment and distress is a component of the amount awarded for pain and suffering: Baltic Shipping Company v Dillon (1992- 93) 176 CLR 344 @ 359-360 (tort) and 362 (contract).
6 If no personal injuries are suffered, compensation for disappointment and distress can be awarded in tort: Baltic Shipping Company @ 369; Clarke v Shire of Gisborne  VR 991 @ 995-998; and Aldersea v Public Transport Corporation (2001) 3 VR 499 @ -.
7 If no personal injuries are suffered, the general rule is that compensation for disappointment and distress cannot be awarded for breach of contract: Baltic Shipping Company @ 380; and Aldersea @ . There are exceptions to the general rule, set out in Baltic Shipping Company @ 362- 363. The exceptions indicate that compensation for disappointment and distress could be awarded to Mr. Eaton if there was a breach by Ms Owens of an express or implied term in their contract of engagement to the effect that, if necessary, Ms Owens would deal with Mr. Eaton possessions, in the knowledge that he treasured them, in a way that would not cause disappointment and distress. This conclusion is supported by the decision on the facts in Baltic Shipping Company, and by Aldersea @ .
8 The present proceedings arose out of a request lodged by Mr. Eaton with a recognised professional association, Victorian Lawyers RPA Limited. The request was lodged pursuant to s.123 of the Legal Practice Act 1996, and it sought resolution of a dispute between Mr. Eaton and Ms Owens. A “dispute” was defined by that Act as including “any other genuine dispute between a person and a legal practitioner or firm arising out of, or in relation to, the provision of legal services to the person by the practitioner or firm”: s.122(1)(c).
9 Victorian Lawyers RPA Limited was unable to settle the dispute, with the result that each party became entitled to refer the dispute to the Legal Profession Tribunal for hearing and determination: see sections 128 & 132 of the Act. Mr. Eaton referred the dispute to the Legal Profession Tribunal. [The functions of the Legal Profession Tribunal were transferred to the Victorian Civil & Administrative Tribunal as from 12 December 2005.]
10 The Legal Profession Tribunal held in an earlier case that compensation for disappointment and distress could be awarded to the client of a legal practitioner in a dispute of the kind defined by s.122(1)(c): Harvey v Hardys  VLPT 5. A decision to the same effect was made by VCAT in Cahuas Riojas v Wilson  VCAT 2178 @ .
11 We conclude that there is power to award compensation to Mr. Eaton for disappointment and distress arising out of the provision of legal services, first, if Mr. Eaton can establish that a tortious act or omission on the part of Ms Owens caused him to suffer disappointment and distress or, secondly, if the terms of engagement included an express or implied term of the kind we have mentioned.’