Part 25 of the Civil Procedure Rules (CPR) allows a court to make an order for an interim payment when the defendant is insured or is a public body and where the claimant has obtained judgment or can show that it is likely that if the case went to trial, he would secure judgment for a substantial figure.
CPR 25.7 provides that the interim payment should be for a sum no more than "a reasonable proportion of the likely amount of the final judgment".
Prior to the amendment of the Damages Act 1996 by the Courts Act 2003, the usual practice of judges hearing applications for interim payments was to consider both parties schedules of loss and then make a conservative preliminary estimate of the likely total final award. The judge would then order an interim payment which allowed a comfortable margin in case his estimate turned out to be too generous.
Since 2003, a trial judge has had the power to make an order for periodical payments, regardless of the wishes of the parties to an action. Consequently, awarding large interim payments can affect the trial judge's freedom to order periodical payments.
In Cobham Hire Services Limited v Benjamin Eeles [2009] EWCA Civ 204, the Court of Appeal gave guidance on the approach which a judge should take when considering an application for an interim payment in a high value personal injury case where the trial judge may wish to make a periodical payments order (PPO).
Benjamin Eeles suffered a serious head injury in a car accident when he was nine months old. Liability was not disputed and judgment was entered with damages to be assessed at a later date when it was possible to properly quantify the claim as Benjamin was still developing.
Interim payments amounting to £450,000 were made and used, in part, to extend the five bedroom family home and provide a therapy room.
When Benjamin was 11, his parents, with the agreement of some of their medical advisers, concluded that the current family home would not meet his increasing needs. Brightlingsea Hall, a house with 9 bedrooms and a bungalow in the grounds, came on to the market in 2008 and an application was made for a further interim payment of £1.2 million to allow the purchase and refurbishment of this property.
Foskett J approached the application by making a conservative valuation of the overall capital value of the claim at £3.5million. He observed that an interim payment of £1.2million would, if granted, bring the total sum of interim payments to just less than half of the full value of the claim and that it would not, therefore, exceed a reasonable proportion of the likely final award for the purposes of the CPR part 25.7.
The respondent was ordered to make a further interim payment of £1.2 million and subsequently appealed.
Lady Justice Smith in the Court of Appeal said that although the power to order an interim payment was discretionary, it was not unfettered and a judge had no authority to make an order for more than a reasonable proportion of the likely final judgment. In a case where a PPO was likely to be made, the amount of the final judgment was the actual capital sum awarded.
The capital sum is likely to consist of past losses, damages for pain and suffering, interest and accommodation costs. It does not include the notionalised capital value of the heads of damage which are likely to be made the subject of a PPO e.g loss of earnings, costs of care, case management fees, therapies, equipment, increased holiday costs and Court of protection costs.
The appeal judges assessed the likely amount of the capital award in Eeles to be £590,000. As the trial judge was likely to make one or more PPO's, there was very little room for a further interim payment, taking in to account the payments of £450,000 previously made. The Defendant's appeal was allowed and no further interim payment was ordered.
The Court of Appeal went on to give guidance on the approach to be adopted when considering interim payment applications in substantial personal injury claims.
The judge's first task is to assess the likely amount of the final judgment or capital sum to be awarded, leaving out of account the heads of future loss which the trial judge may wish to deal with by PPO. This assessment should be carried out on a conservative basis.
The judge is then entitled to award a reasonable proportion (which may be a high proportion) of that sum as an interim payment.
If the judge can confidently predict that the trial judge will wish to award a larger capital sum than that covered by general and special damages, interest and accommodation costs alone, he may include additional elements of future loss in his estimate of the likely amount of the final judgement.
Before taking such a course, the judge must be satisfied by evidence that there is a real need for the interim payment requested. For example, where the application is for money to buy a house, he must be satisfied that there is a real need for accommodation now, as opposed to after the trial and that the amount of money sought is reasonable.
The judge does not need to decide whether the particular property proposed is suitable. That is a matter for the Court of Protection, where it is involved. He must not, however, make an interim payment order without first deciding whether expenditure of approximately the amount he intends to award is reasonably necessary.
If satisfied, by evidence and to a high degree of confidence, that there is an immediate need for a capital sum that exceeds a reasonable proportion of general damages, special damages, interest and capitalised accommodation costs, the judge will be justified in making the interim payment requested.
The guidance provided in Eeles has been applied in various cases over the last 6 months. The claimant in Chrissie Johnson v Serena Compton-Cooke [2009] EWHC 2582 (QB). was aged 19 and had suffered a severe brain injury in a road traffic accident. An application was made for an interim payment of £1.67million, to include a lump sum of £1.1million for accommodation and also care costs for 12 months.
The applicant submitted that the final capitalised award at trial would be approximately £3.25 million. The judge, however, estimated a lump sum payment of around £1.75 million, since some of the applicant's expenditure could be regarded as excessive and it was not possible to predict whether the trial judge would capitalise all heads of claim or wish to make a PPO.
Previous interim payments amounted to £900 000 and the judge ordered a further interim payment of only £600 000 which he considered amounted to a reasonable proportion of the conservatively assessed final sum. There was no provision in the award to allow the applicant to obtain new accommodation as the judge considered the current rented property to be adequate. This case re - enforces the requirement not to fetter the trial judge.
By contrast, in FP v Taunton & Somerset NHS Trust [2009] EWHC 1965 (QB), a wrongful birth claim, interim payments of £500,000 had already been made and the applicant requested a further sum of £1.5 million to cover the cost of alternative accommodation and of providing care for two years.
The judge assessed the capital value of the claim at around £1.8 million and awarded an interim payment of £1.2 million. He was satisfied of the need for accommodation and the reasonableness of the figures. Whilst the interim payment of £1.2million was a high proportion of the likely amount of the final judgment, a reasonable proportion could be a high one, provided that the assessment was conservative.
Accommodation was also an issue in Kirby v Ashford & St Peter's Hospital [2008] EWHC 1320. The claimant was a child aged just over 2.5 years, with spastic quadriplegia as a result of negligence at birth.
An interim payment of £850,000 had been made to cover the cost of care and accommodation and a further interim payment of £350,000 was sought by the applicant, who estimated that the capital sum recoverable at trial would exceed £1.2 million. He and his family were living in rented accommodation as a short term measure and had identified a property which would apparently meet the applicant's needs.
The Court held that it was likely that a capital award of at least £909,885 would be made by the trial judge and that the current interim payment of £850,000 represented a high proportion of that sum. There was, however, a reasonable need for a property to be purchased before trial as it was not reasonable for the applicant to remain in inadequate and unadapted premises until the date of trial.
The value of the property selected by the applicant, however, was in excess of the estimate provided by his accommodation expert. The judge allowed purchase costs based on the expert's assessment and ordered an interim payment in the sum of £150,000.
It is clear from these decisions that claimants will have to give tactical consideration as to the timing of applications for interim payments and to the sums sought. They will be obliged to establish a need for an interim payment and this will require increased preparation, with detailed schedules and expert evidence as mini quantum trials take place at an interim stage. There is also likely to be a greater scrutiny of the amount spent on accommodation and this may be limited to the sum which is supported by expert evidence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
