Legal update: Interest wrangle has PI implications

This legal update concerns the case of Secretary of State for the Department of Energy and Climate Change and others v Jeffrey Jones and others.

It follows the 27 March decision arising from the Phurnacite Workers Group Litigation, which involves 183 claimants for personal injury arising from their work producing smokeless fuel briquettes (used to start and maintain fires).

The appeal arose from an earlier decision by the High Court that ruled interest should apply on the claimants’ disbursements at 4%, from the date the disbursements were paid rather than the conventional date of judgment. Interest was, therefore, accruing before the defendant was ordered to pay the claimants’ costs.

The claimants had funded their disbursements by ‘running account’ credit arrangements between themselves and their solicitors. This means that, in return for credit provided by their solicitors, interest of 4% above base rate was charged to the claimants if they were successful in their claims.

If unsuccessful, the interest would be claimed back from the legal expenses insurers.

In awarding the rate of 4%, the means of the claimants was considered – as was the likely rate they would have obtained if they had accessed credit elsewhere.

On appeal, it was argued that it should be the status of the solicitors and not the claimants that should be taken into account. The agreements were devices to enable the solicitors to charge interest and it was really a claim for interest that the solicitors were going to receive, not the claimants.

The appeal was dismissed. The court placed emphasis on the fact that these were personal injury claims brought by claimants of modest means, rather than a commercial dispute with wealthy parties.

This decision further supports the court’s discretion to award interest pre-judgment, and shines a spotlight on personal injury claims. The rate that is reasonable is with reference to the claimant, rather than the provider of the credit (the solicitors).

It remains to be seen whether firms with enough capital might be tempted to enter into these sort of funding arrangements in the future as a means to generate revenue from offering the complete personal injury package.

Adam Burrell
Partner, Berrymans Lace Mawer

This article was published in the 24 April/1 May edition of Post magazine.