Interest on Pain, Suffering, and Loss of Amenity

Last month the High Court handed down  judgement on an appeal in a small and rather overlooked personal injury claim relating to a fall outside of a barber shop. The appeal dealt with an interesting question in law, specifically: when can (or should) the Court break from the conventional rate of 2% interest on damages for pain, suffering, and loss of amenity?

In October 2018, the Claimant, Mr Smout, was jogging along the pavement towards Greggs when he tripped and lost his footing outside the Defendants premises. As a result of this fall the Claimant suffered a break to the fifth metatarsal in his right foot. Mr Smout brought a claim against the Defendant, alleging that they were responsible for maintaining that stretch of pavement and, having failed to do so, were responsible for his injury.

Throughout proceedings, even before the claim had been issued, the Defendant, through its representative Mr Singh, had maintained a campaign of ‘written abuse’ against the Claimants representatives. One such exchange involved Mr Singh stating to Mr Khan, a Chartered Legal Executive, “If you were a solicitor, I would have you struck off for incompetence but unfortunately you never made the grade.” Mr Khan maintained his composure throughout and, in an act of foreshadowing, reminded the Defendant that “all such correspondence are able to be put before the judge dealing with the case, and so you may wish to moderate your tone in future.”

Following a short trial in March 2022 it was found that the Defendant was responsible for maintaining this section of pavement and was, therefore, liable for Mr Smout’s injury. The presiding Judge awarded Mr Smout the sum of £4000 for pain, suffering, and loss of amenity and special damages of £25 for travelling expenses and £100 for personal care. It is worth remembering that the purpose of damages, whether in contract or tort, is to compensate the injured party for their loss or damage. It is not in anyway intended to punish the Defendant.

At a separate hearing, which the Defendant did not attend, the Judge turned to the issue of interest and costs. Counsel for Mr Smout submitted that due to the Defendants rude and abusive conduct the interest for pain, suffering, and loss of amenity should be awarded at a higher rate than the usual 2%. Counsel submitted that 6% would be appropriate, which the Judge accepted.

As a consequence of the 6% interest award, Mr Smout managed to beat his Part 36 offer and in turn triggered those provisions leading to a further 10% additional liability for damages and interest at 10% on costs.

The Defendant appealed on eight separate grounds though only two survived to be heard, with the others either being abandoned or dismissed. Both grounds related to the award of interest.

The starting point for the Court was establishing if the Judge was right to award interest in the first place. It is well accepted and, indeed, common ground that the purpose of interest on damages in personal injury cases is to compensate the injured party for being kept out of his money. It is also in the inherent jurisdiction of the Court to award interest “at such a rate as the Court thinks fit,” per the County Courts Act 1983, section 69, and its counterpart in the Senior Courts Act 1981, section 35A. The Court agreed with the first instance Judge that it was correct for interest to be awarded on the sum for pain, suffering, and loss of amenity.

Turning instead to the rate of interest, the Court had to consider the question of under what circumstances can the ‘conventional’ interest rate be increased by a trial judge based on the conduct of the parties. Counsel for Mr Smout has submitted that an increased interest rate should be awarded on the basis of the Defendants conduct throughout the defence and the abusive emails which had been sent. To determine if this was appropriate the Court turned to the history of interest and its purpose.

There is a long and uncontroversial history to the conventional interest rate, originating in 1970 where the Court if Appeal laid down guidelines as to the appropriate rate of interest for pain and suffering. In Pickett v British Rail Engineering the House of Lords (as it then was) held that interest on general damages for pain and suffering should be at the Special Investment Account Rate. However, two years later in Birkett v Hayes the Court of Appeal ruled the interest rate should be set at 2% per annum – what would come to be known as the conventional interest rate. This was to account for the fact that the awards for damages were updated annually for inflation, and so all that was needed was to account for the loss of investment profit that a Claimant could have made as a result of being kept out of his money. The 2% rate was subsequently upheld by the House of Lord in 1983 in Wright v British Railway Board.

This rate stood unchallenged until 2000 when, in Lawrence v Chief Constable of Staffordshire, the Court of Appeal rejected an argument that the rate should be adjusted to 3% to match the investment rate which had recently been changed. In rejecting this argument, it was held that it would be inappropriate to link the interest rate on general damages to the net rate of return on index linked government securities. Holding that the 2% rate was appropriate, Maw LJ considered the comments of Eveleigh LJ in Birkett v Hayes, that it is not right to determine the rate of interest upon the basis that a Defendant should be penalised.

Indeed, as recently as 2015 in Reinhard v Ondra 2015, Warren J stated, “It is common ground that an award of interest is intended to compensate the claimant for being kept out of his money after it should have been paid, not, of course, as a punitive measure,” firmly reiterating the longstanding position.

Turning back to Smout and Wulfrun, the Court held that the Judge at first instance was wrong to award interest at a rate of 6%, and instead substituted the rate of 2%. The consequences of this were that Mr Smout had now not beaten his Part 36 offer, and so the award of indemnity costs, interest on costs, and the additional liability on damages was also set aside.

Concluding its Judgement, the Court demonstrated the myriad of ways in which the Courts can sanction a party for its conduct in litigation.

Evaluating if the Judge would have penalised the defendant for its conduct in costs, had the interest been calculated correctly, the Court agreed he would have and therefore awarded costs on a standard basis up until the start of the abusive correspondence and on an indemnity basis from the abusive correspondence starting. Going on to consider the costs of the appeal, the Court held that despite the Defendants appeal succeeding the reason the appeal was necessary in the first place was, partly, because the Defendant had failed to appear at the hearing where costs and interest was determined. In addition to this, the Part 36 point arose due to the Defendants abusive conduct. Finally, during the appeal hearing, the Defendants representative continued to make rude and abusive comments about the Claimants solicitor. As such the Court made no order for costs on the appeal meaning both sides would bear their own costs.

Smout v Wulfrun serves to reiterate two key points:

• Damages, and interest on those damages, are not a punitive measure and should not be used as such. They exist solely as a means of compensating the injured party for their loss or damage, and as compensation for being kept out of their money.
• Just because litigation is by its very nature contentious, there are consequences for failing to conduct yourself appropriately, as the Defendant in this matter found.