Andrews v Aylott

When construing an order for enhanced interest under CPR Part 36, “interest” ordinarily means compensation for being kept out of money that is presently payable. It does not ordinarily extend to periodical payments that will become payable in the future, because receipt of those payments has not been delayed. The court should prefer, where possible, an interpretation that avoids a penal result. Where a settlement includes both a lump sum and future periodical payments, enhanced interest may therefore be confined to the lump sum element if that best reflects the order’s wording and purpose.

The claimant suffered severe injuries in a road traffic accident. The parties agreed that his damages should be reduced by 25 per cent for contributory negligence. Following a Part 36 offer, HHJ McMullen QC ordered enhanced interest on 33 per cent of the damages ultimately determined to be payable, under CPR 36.14(3)(a). The rate was subsequently compromised at 5 per cent.

The parties later agreed a settlement comprising a lump sum and index-linked periodical payments. The issue was how paragraph 5 of the earlier order applied to that settlement: whether enhanced interest applied to all damages, only the lump sum, or selected elements representing past loss.

1. Construction of the order. The word “interest” in paragraph 5 was to be given its usual meaning: a sum reflecting the actual or notional cost of being kept out of monetary compensation. The order had to be construed in context and, where possible, in a manner that avoided a penal consequence. The purpose of CPR Part 36 was to achieve a fairer result for a claimant, not to punish the defendant, as explained in Petrotrade Inc v Texaco Ltd [2000] EWCA Civ 512 and McPhilemy v Times Newspapers Ltd (No 2) [2001] EWCA Civ 933.
2. Future periodical payments. Periodical payments to be made in the future were not sums that the claimant had been kept out of. Enhanced interest on them would therefore be unjust, and an addition to future payments would more naturally be described as an uplift rather than interest. The court was provisionally in agreement with the approach in Pankhurst v White [2010] EWHC 311 (QB).
3. Rejected interpretations. The claimant’s capitalisation method was rejected because the capitalised figure was neither a sum “determined to be payable” nor the figure achieved by the settlement. The defendant’s proposed allocation based on an unagreed figure for past losses was also rejected.
4. Result. The proper interpretation was that enhanced interest at 5 per cent for 23 November 2007 to 3 April 2009 applied only to the agreed lump sum of £2,025,000. It did not apply to the future periodical payments.

The judgment concerned the interpretation of an order made by HHJ McMullen QC on 3 April 2009. An appeal concerning other points had been compromised, including reduction of the enhanced rate from 10 per cent to 5 per cent. The present court determined the meaning and application of paragraph 5 in light of the agreed settlement.