A terrible thing happened to Susan Couch when William Bell left her for dead in the Panmure RSA club back in 2001. It should never have taken place, and the fact it did is shaming to everyone involved in his "care".

But the Supreme Court's just announced – as well as very long and legally detailed – decision that she can now seek damages against the Corrections Department for failing to properly monitor Bell while he was on parole makes it likely she won't get any special compensation for her ordeal.

What's that, you say? Surely a decision that she has a right to sue means that she's now a step closer to receiving justice for her injuries. That's what you'd think from this story, or (albeit in more nuanced tones) this one.

But the Supreme Court's judgment is a perfect example of how you can win a legal battle and in so doing lose the whole campaign. Understanding what I mean by that statement requires a fair bit of background explication.

Before Susan Couch can get a red cent from Corrections, she needs to do two things. First, she has to establish that there is in New Zealand law a "cause of action" against the department that can deliver her the remedy of damages. Second, she needs to prove that the facts of the case fit that cause of action.

The case up until now has focused entirely on this first step. Couch has claimed that Corrections owed her a legal "duty of care" in overseeing Bell's parole that they breached negligently, and that this negligence was so extreme that "exemplary damages" should be awarded to punish the department. Corrections has in turn disputed that this claim has any legal basis.

The first bit of this first step actually was resolved back in 2008, when the Supreme Court overturned an earlier Court of Appeal decision and ruled that Corrections might owe Susan Couch a legal "duty of care" when monitoring Bell. (Note that the Supreme Court did not say the department did owe her such a duty, just that it could do so as a matter of law; the actual existence of any such duty would then fall to be decided at trial on the particular facts of the case.)

The Supreme Court's latest ruling relates to the second bit of the first step: if Corrections did in fact owe her a "duty of care", could Couch get "exemplary" damages from Corrections if it breached this duty? This again needs a bit of teasing out.

Imagine someone carelessly crashes their car into yours, and neither of you have insurance. You can sue them for "general" damages to pay for the cost of repairing your car. You might also be able to sue them for "aggravated" damages if the crash had an especially severe effect on you (i.e. you were on your way to the airport to catch a flight for a relaxing holiday, which you then missed due to the accident).

But Couch can't claim these sorts of damages from Corrections for the physical harm she suffered, as our ACC legislation stops you getting them for a "personal injury", however caused. Therefore, the only possible form of remedy available to Couch are "exemplary" damages. Such damages are intended not to compensate the person harmed by the negligence, but to punishthe person responsible for the harm.

Back in 2002, the Privy Council (which at that point still was New Zealand's highest court) underlined that such damages are available even where negligence has caused a personal injury (i.e. falls under the ACC legislation). It then said that the appropriate case for awarding such damages is where:

the defendant departed so far and so flagrantly from the dictates of ordinary or professional precepts of prudence, or standards of care, that his conduct satisfies this test even though he was not consciously reckless.

The Supreme Court didn't disagree that "exemplary" damages are available in theory in Susan Couch's case. But a majority of the Court significantly raised the bar on what she will have to prove in order to get them. In fact, they've raised it so high that it may well be almost impossible to jump over. Here's what Justice Tipping, who wrote the Court's leading judgment, said about the issue:

exemplary damages may be awarded if, but only if, the defendant deliberately and outrageously ran a consciously appreciated risk of causing personal injury to the plaintiff. Whether running such a risk should be regarded as outrageous will depend on the degree of risk that was appreciated and the seriousness of the personal injury that was foreseen as likely to ensue if the risk materialised.

In other words, Couch will have to show that the Corrections Department (in the sense of at least some of its employees) knew that the careless way it was managing Bell's parole posed a physical risk to people like her, but that it just didn't care about that risk and continued to act in the same way. Not should have known the risk, or would have known the risk had it thought about it, but actually knew of the risk.

Of course, whether Corrections had such knowledge is a factual question that can only really be answered at trial. But it's going to be a pretty tough test to meet – far harder than the one the Privy Council previously laid down. Which is why I suspect that Couch's victory in the Supreme Court may well end up costing her any hope of seeing any money from this whole sorry saga.

One last point to note. The Privy Council's Bottrill decision in 2002 overturned a Court of Appeal judgment that had adopted a test just like that now set out by the Supreme Court. Two of the judges who wrote that Court of Appeal decision were Justices Tipping and Blanchard – both of whom have now reinstated it by overturning the Privy Council's view.

So can we see this decision as representing a kind of revenge by the New Zealand bench on its previous colonial masters in London?