This article was first published in Lawgazette 14 January 2013
The standard rate of interest on general damages for pain and suffering and loss of amenities in personal injury cases was fixed at 2% a year by the House of Lords in Birkett v Hayes
[1982] 1WLR 816; [1982] 2 All ER 70. This was confirmed as appropriate by the Court of Appeal in Lawrence v Chief Constable of Staffordshire
[2000], The Times, 25 July. The appropriate rate of interest for special damages is the rate, over the period for which the interest is awarded, which is payable on the court special account (the Special Account Rate or SAR). After seven years at 6% this rate was reduced to 3% a year on 1 February 2009, to 1.5% on 1 June 2009, and to 0.5% on 1 July 2009 where it has remained ever since. With the UK economy seemingly at risk of a triple-dip recession, it appears unlikely that the SAR will rise again before January 2014 Interest since June 1987 has been paid daily on a 1/365th basis, even in a leap year such as 2012.
In cases of continuing special damages, half the appropriate rate from the date of injury to the date of trial is awarded. In cases where special damages have ceased and are thus limited to a finite period, there are conflicting appeal court decisions as to whether the award should be half the appropriate rate from injury to trial (Dexter v Courtaulds [1984] 1 All ER 70), or the full special account rate from a date within the period to which the special damages are limited (Prokop v DHSS [1985] CLY 1037). Simple mathematics suggests interest should run at half SAR, while the loss is continuing, and at full SAR thereafter. The House of Lords has confirmed that Department for Work and Pensions benefit should be disregarded when calculating interest on special damages (Wadey v Surrey County Council [2000] 1 WLR 820(HL)).
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