Hundreds of people who thought they had lost out on compensation for burns caused by toxic leather sofas have been awarded payouts after all.

The largest consumer group litigation in the UK saw compensation of £20m agreed in April this year for 1,600 victims of the now banned anti-mould chemical which caused burns, lesions and breathing difficulties.

But one of the firms involved, Land of Leather, went bust leaving 408 customers fearing they would miss out.

Now the courts have approved a settlement under which the 408 claimants, including 55 children are to receive compensation payments of £1,800 each.

They all suffered skin complaints caused by the sensitising agent dimethyl fumarate (DMF) in leather sofas manufactured by Chinese companies.

Yesterday’s compromise was reached after it had initially appeared that the 408 customers of Land of Leather – now in administration – would miss out, as a judge had ruled that they were not entitled to compensation from Zurich, the company’s insurers.

That decision was due to be challenged in the Court of Appeal in January if yesterday’s settlement was not approved.

Urging the court’s consent, Frank Burton QC said that, given the risks of litigation, it was an “all or nothing” deal, which had been accepted by the majority.

He said that none of the children concerned were currently receiving any treatment and their advisers were satisfied that none had suffered any “catastrophic” injury or anything worse than any adult victim.

Once the source of the skin irritation – DMF – was removed, the problem ceased.

Even if the matter was successfully appealed, there would have to be another trial with implications for costs, he added.

Giving approval, Mr Justice MacDuff commented: “If this settlement doesn’t happen, they are all likely to end up with nothing.”