SETTING OFF INTEREST AGAINST AN INTERIM PAYMENT: A HIGH COURT DECISION

The judgment of Mrs Justice Cox in Manna -v- Central Manchester University Hospitals NHS Foundation Trust [2015] EWHC 2279 (QB) is a veritable goldmine for anyone who writes about civil procedure or personal injury damages.  One of the, many, issues considered in the judgment issue of whether  an interim payment  in a personal injury case should be credited against special or general damages.

THE CASE

The claimant claimed damages for personal injury. An interim payment of £200,000 had been made.  An issue arose as to whether that interim payment should be be credited upon general damages or special damages. (The rate of interest on general damages is 2%, this is currently much higher than interest on special damages, albeit that interest on general damages only starts to run from the date of service of the proceedings). This led to a major difference. If interest were offset against general damages the offset was £7,460; the equivalent offset for special damages was £940;

KEY POINT

In the absence of any order or agreement to the contrary the court should infer that the interim payment was in relation to past special damages and the offset was consequently for the lower sum.

THE JUDGMENT ON THIS ISSUE
b) Credit for Interim Payment against Interest
  1. The aggregate rate of interest is agreed at 42.28%. In August 2013 and in accordance with the order of Swift J the Defendant made an Interim Payment of £200,000.00 to the Claimant. That is the only Interim Payment made in this case. The dispute between the parties is whether the Claimant should give credit for this Interim Payment by stopping the accrual of interest upon an equivalent sum of special damages or upon part of the claim for general damages.
  2. For the reasons set out in the Claimant’s closing submissions the question of what the Interim Payment on damages represents is financially significant. If credit is given by halting the accrual of interest on general damages from August 2013, the Defendant gets the benefit of a reduction in the interest claim in the sum of £7,460, the aggregate rate for interest on general damages from August 2013 to June 2015 being 3.73%. If, alternatively, credit is given by halting the accrual of interest on special damages from August 2013 the Claimant need only give credit for £940 of interest saved, the aggregate rate on special damages for the same period being 0.47%.
  3. Neither the Order made by Swift J nor the agreement between the parties relating to the payment of an Interim Payment of damages specifies what that payment represents. Nor is there any rule of Court specifying what the Interim Payment represents, CPR 25.7 referring to interim payments of “damages” and providing that the Court must not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment.
  4. The Claimant’s written submissions at paragraphs 5.6 – 5.9 seem to me to be entirely correct. Neither Counsel addressed this point in oral submissions. The usual assumption is that an interim payment will be sought and paid to a claimant to fund expenditure that will thereafter become part of the claim for special damages (see Cobham v Eeles [2010] 1 WLR 409, at paragraph 4). That applies in the present case, as the schedule of payments/purchases produced by Wendy Ruffle demonstrates. Indeed the Defendant is critical of the fact that more of the interim payment has not been used to fund additional care for Lamarieo. It therefore follows logically that credit should be given for interest on that sum from the special account rate. As counsel for the Claimant point out, it would have been open to the Defendant to seek the Claimant’s agreement to an offset against interest on general damages, when negotiating the interim payment, if the general damages rate were favourable to them. There was no such agreement in this case. The set off, in my judgment, should be against interest on special damages.

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