Mr Justice Ritchie’s recent decision in Smout v Wolfrun Hotels Ltd provides helpful guidance upon the circumstances in which it is permissible for the court to award interest at more than the conventional rate, confirming that the purpose of an interest award is compensatory and not punitive.
In 2018 Mr Smout was running towards a Greggs bakery when he fell on an uneven pavement for which the Defendant was responsible. The Defendant defended the claim in a manner which was described by Ritchie J as “rude”, “rather outrageous” and featuring “written abuse.”
Mr Smout established liability. He was awarded general damages of £4000 and special damages of £125. In addition, by reason of the Defendant’s litigation conduct, the trial judge awarded interest on general damages at the rate of 6%, rather than the normal 2% rate. As a result of this interest award, the Claimant beat his Part 36 offer of £4500.
Allowing the Defendant’s appeal, Ritchie J. said:
“There are various methods for the Courts to deal with inappropriate conduct by parties to litigation. Costs can be awarded on an indemnity basis. The party can be deprived of the costs it might otherwise be awarded as a result of its conduct. However, no authority has been put before me that abusive or unprofessional conduct by the representative of a Defendant company has previously justified a tripling of the conventional interest rate awarded on damages for pain, suffering and loss of amenity. Whilst it is true, that the statute provides a broad discretion when awarding interest on damages generally in all forms of litigation, for all types of loss, it is clear that the body of case law built up since the 1970s has, for good reason, produced the conventional interest rate on awards for pain, suffering and loss of amenity.”
In addition, he concluded that it would be double counting for the Defendant to be penalised for its conduct first by an award of a higher rate of interest on general damages, and then because that higher rate tipped Mr Smout into beating his Part 36 offer.
It is by no means unheard of for an award of interest to be the difference between the success or failure of a Part 36 offer, especially in lower value claims. Smout provides a helpful answer to attempts by either party to obtain an advantage by seeking to persuade the court to depart from the conventional 2% rate.
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