PHILLIP SMOUT v WULFRUN HOTELS LIMITED

Interest on personal injury damages is compensatory, not punitive. Although the court has a broad statutory discretion, that discretion must be exercised judicially and consistently with established guidance. The conventional 2% rate for general damages should ordinarily be followed. A defendant’s abusive or unprofessional conduct is properly addressed through costs, including indemnity costs, rather than by increasing interest on pain, suffering and loss of amenity. Interest must also be calculated correctly before deciding whether a Part 36 offer has been beaten. Otherwise, the resulting costs consequences may amount to double counting.

The defendant appealed from a County Court judgment awarding the claimant damages for a pavement accident, together with interest and costs consequences following the claimant’s Part 36 offer. Permission was granted on challenges to the interest rate and additional liabilities, while permission on other grounds was renewed at the hearing. The central issue was whether the Recorder had been entitled to increase interest on general damages from the conventional 2% rate to 6% because of the defendant’s conduct, thereby causing the claimant to beat his offer.

The appeal was allowed in relation to interest and the consequential Part 36 awards. The judgment for damages was upheld, but the interest and costs order was set aside and substituted.

1. Under CPR 1998 rules 52.20 and 52.21, the appeal was a review. The challenges to factual findings did not meet the high threshold identified in Grizzly Business v Stena Drilling [2017] EWCA civ 94.
2. Interest on personal injury damages is intended to compensate the claimant for being kept out of money that should have been paid. Under sections 35A(1) and 35A(7) of the Senior Courts Act 1981, the court has a broad but judicial discretion, and interest on damages exceeding £200 is required absent special reasons. The equivalent jurisdiction arises under section 69 of the County Courts Act 1984.
3. The conventional 2% rate for pain, suffering and loss of amenity, established by Birkett v Hayes [1982] 1 WLR 6 and upheld in Wright v British Railway Board [1983] 3 WLR 211, remains a guideline rather than a rigid rule. It should nevertheless be followed to promote consistency and settlement. The Recorder’s 6% award based on abusive conduct was legally unjustified.
4. Conduct could properly be reflected in an indemnity costs order. Increasing interest first, and then applying the benefits under Part 36 because that increase caused the offer to be beaten, would constitute double counting. General damages therefore attracted 2% interest, while past special damages attracted the full special investment account rate.
5. The substituted award was £4,346.45. The claimant had not beaten his offer on the corrected calculation. Indemnity costs were awarded from 4 February 2019, when the abusive correspondence began, with standard costs before that date. No order was made for the costs of the appeal.

• High Court (King’s Bench Division): on appeal from the County Court at Birmingham, the Recorder’s interest and consequential costs order was set aside and substituted. The damages judgment was upheld.