The issue of interim payments arises in many clinical negligence and personal injury claims involving serious injury. This is usually in a situation where the claim will not be settled for some time - either because quantification and settlement are not possible and/or because the parties cannot reach agreement leaving the claimant short of funds as a result of their injuries and/or needing funds for specific expenditure.
In cases where liability is admitted or likely to be admitted and moderate interim payments are to reimburse reasonable losses or for rehabilitation, the parties will usually reach an agreement on a sum to be paid by the defendant(s) to the claimant on account of their damages. Such interim payments could be to set off against the final figure for damages to be achieved or for specific expenditure such as a course of treatment for the claimant.
However, larger interim payments can be more contentious. A claimant is often seeking a large sum to fund requirements such as the purchase of a house or a care package and cannot progress these without a substantial interim payment. Defendants will be concerned that, by providing such large funds, they will end up being committed to compensating the claimant for whatever it is used for and losing arguments about what should be recovered. They will also worry that interim damages awarded are so high that they could affect the final award given by a court.
As a result, larger interim payments often cannot be agreed between the parties and require the court to hear the respective arguments and make an appropriate order.
The most recent case in this regard was PAL (A Child) v Davison & Ors  EWHC 1108 (QB) in which Mrs Justice Yip considered an interim payment in the case of a seriously injured 13 year old child where liability for her injuries had been admitted and she had been awarded a further interim payment of £2 million in order that suitable accommodation could be purchased and adapted. This was in addition to interim payments of £1,025,000 that had already been made.
The defendant agreed to make a further interim payment but only offered an additional sum of £1,250,000 which was sufficient to purchase the property the claimant wished to buy but not to cover all the other costs that would be incurred to adapt the property for her needs. The hearing was therefore to determine the level of an appropriate award rather than to focus on whether any further interim payment should be ordered at all.
The claimant’s injuries meant that she had been unable to return to her family home as it was not suitable for her needs and, at the time of the hearing, was living in rented accommodation which was agreed not to be a suitable long-term option.
In considering her judgment Mrs Justice Yip reviewed the previous significant case on this issue, Eeles v Cobham Hire Services Ltd  EWCA Civ 204, where the Court of Appeal gave guidance on the principles to be considered in an application for an interim payment, particularly where final settlement might include a periodical payments order and effectively set out a two stage test.
Eeles had set out the following guidance:
“The judge’s first task is to assess the likely amount of the final judgment, leaving out of account the heads of future loss which the trial judge might wish to deal with by PPO. Strictly speaking, the assessment should comprise only special damages to date and damages for pain, suffering and loss of amenity, with interest on both. However, we consider that the practice of awarding accommodation costs (including future running costs) as a lump sum is sufficiently well established that it will usually be appropriate to include accommodation costs in the expected capital award. The assessment should be carried out on a conservative basis. Save in the circumstances discussed below, the interim payment will be a reasonable proportion of that assessment. A reasonable proportion may well be a high proportion, provided that the assessment has been conservative. The objective is not to keep the claimant out of his money but to avoid any risk of over-payment.
“For this part of the process, the judge need have no regard as to what the claimant intends to do with the money. If he is of full age and capacity, he may spend it as he will; if not, expenditure will be controlled by the Court of Protection.”
Mrs Justice Yip stressed the need to balance the fact that a judge hearing an interim payment application should not be determining issues which are for a trial judge in order to decide what to award. However, a judge must equally consider the implications of an award that might be greater than the final lump sum a trial judge might have thought appropriate, thus affecting the nature of the award to be made.
She made clear that interim payments reflecting losses already incurred and evidenced have less chance of being contentious but that: “When considering an application for an interim payment to cover the claimant’s pre-trial needs, it may well be reasonable to include costs which have yet to be incurred but which will accrue before trial in the stage 1 assessment.”
Mrs Justice Yip felt here that an award which covered only past general damages and the capitalised accommodation claim was the best way forward as no other heads of loss were affected by the decision. However, she accepted that, on the defendant’s figures, a £2 million award was more than a reasonable proportion of the sum that might be awarded.
She then addressed the second part of the ‘test’ set out in the Eeles case and her view that this was about the court being satisfied that there was a real need for the interim payment requested and that the sum requested was reasonable and reasonably necessary. While this strays into the territory of the trial judge, the court in Eeles felt that, if this test was applied, it would be a reasonable measure of what a trial judge would be likely to award and thus a reasonable basis to permit an interim payment at that level.
In respect of the justification for an interim payment towards accommodation, Mrs Justice Yip stated: “I am satisfied on the evidence before me that there is a real need for accommodation now as opposed to after trial. Indeed, I am satisfied that there is an urgent need to secure suitable accommodation.”
This case was perhaps simplified in that the defendants agreed that there was an urgent need and that property purchase was the way forward. The issue then to be determined was not whether the particular property proposed was suitable but whether the expenditure proposed to be covered by the interim award was ‘reasonably necessary’.
The evidence before the court was that the property proposed to be purchased was, at that time, the only reasonable option. Reiterating that it was not her role to determine whether the property itself was suitable, only the proposed expenditure, Mrs Justice Yip said: “That price is within the range originally identified as appropriate by Mr Wethers, albeit at the upper end of the range. I am not deciding that the claimant should purchase that property nor am I deciding that the claimant will ultimately be entitled to damages assessed on the basis of that property. I do though consider that looking at the viable options today, it is reasonably necessary to incur the expenditure proposed in order to secure what appears to be the only available property to meet the claimant’s needs.”
That decision then accounted for an award of £1,190,000. The claimant had requested a sum of £2,000,000. In this respect Mrs Justice Yip held that: “It is sensible that the interim payment I award in respect of accommodation is sufficient to meet the full cost of purchasing, adapting and moving into the property. There is no benefit in leaving the job half done such that the claimant cannot take up occupation…
“There can be no question of the claimant anticipating full recovery of the costs from the defendants without having taken care to ensure that the expenditure is no more than is reasonable … I am not deciding precisely how much will need to be spent in total on the accommodation but only that expenditure of approximately the amount I intend to award is reasonably required. Proceeding on that basis, I am satisfied to a high degree of confidence that the sum of £2 million is reasonably required. That will cover the purchase and ancillary costs, the adaptations and relocation costs. There ought to be some surplus which can be applied to equipment and assistive technology which will be required once the new home is available. A careful account will no doubt be maintained by the professional Deputy. I am anticipating that further interim payments will be needed in due course. Any surplus once the accommodation costs have been met can be brought into the balance and applied to meet other immediate needs which will become special damages before trial. I am confident that making an interim payment at this level will not fetter the trial judge’s freedom to allocate future loss as thought appropriate.”
Mrs Justice Yip declined the suggestion by the claimant to exercise the jurisdiction of the Court of Protection and authorise purchase of the property and made clear her view that that decision needed to remain under the auspices of the Court of Protection.
Philippa Luscombe, partner in the clinical negligence and personal injury team at Penningtons Manches Cooper, comments: “This case does not necessarily raise anything new but it is a useful reminder of the approach to interim payment as set out in Eeles. It should also hopefully be good news for claimants, particularly children, where liability is resolved and there is an urgent need for suitable accommodation.”