Interim payments: High Court provides guidance on ‘reasonably required’ payments

The High Court has recently considered the issue of interim payments in catastrophic injury claims, specifically the application of the principles in Eeles v Cobham Hire Services in circumstances where payment relates to a future loss.

PAL v Ethan Davison and others [2021] EWHC 1108 (QB)

The claimant in question was seriously injured in a road traffic accident. An interim payment was sought to fund accommodation and necessary adaptations to that accommodation. The two-stage approach in Eeles was considered, with Mrs Justice Yip concluding that the claimant’s request for £2 million was reasonably required per stage 2 of the approach.

Mrs Justice Yip outlined the importance of mitigating the risk of overpayment to the claimant but also ensuring that the claimant should not be kept out of money nor be required to make frequent applications for further payments.

Background

The claimant was seriously injured in a road traffic accident in 2019 when aged 13. An application was made for an interim payment of £2 million on behalf of the claimant to enable a property to be purchased and adapted to provide for her long-term accommodation needs. The defendants were willing to agree to a further payment of £1,250,000.

The claimant obtained expert accommodation evidence, the expert concluding that a four bedroomed bungalow would be suitable. The likely purchase price would be £800,000 - £1,250,000 with additional works costing £570,000 to ensure the property could be adapted to meet the claimant’s needs. There was a lack of suitable accommodation in the area but a two-storey house was identified on the same road as the current rental property. The interim payment sought by the claimant would allow this property to be purchased at £1,190,000, the expert estimating the cost of extending and altering the property to be £612,000.

The defendants’ expert agreed a bungalow would be ideal but, in the event that a suitable bungalow could not be found, the first floor of a house could be extended and adapted. In the local area, two potential bungalows were identified at £950,000 - £970,000 and two houses at £800,000 - £850,000 with £385,000 required to adapt a bungalow and £490,000 to adapt a house.

The claimant had received previous interim payments and over £500,000 remained. This money was intended to meet the claimant’s immediate needs and not to fund accommodation. The defendants accepted their offer of £1,250,000 would not be enough to allow the claimant to purchase and adapt a property but that the funds would allow the purchase of a property and a further payment could be sought to allow the necessary works to be undertaken.

Judgment

The case of Eeles v Cobham Hire Services Ltd [2009] EWCA Civ 204 summarises the approach a judge should take when considering whether to award an interim payment, and Mrs Justice Yip applied this two stage approach to the claim before her.

Eeles stage 1

The first stage is for the judge to assess the likely amount of the final judgment, leaving out the heads of future loss which the trial judge might wish to deal with by PPO. Awarding accommodation costs, including future running costs, as a lump sum is sufficiently established, meaning it will usually be appropriate to include accommodation costs in the expected capital award.

Mrs Justice Yip found from Eeles the starting point is that “strictly speaking the court looks at special damages “to date””. However, there will be many instances where it is appropriate to consider special damages which have not yet accrued but will before trial. She was clear that “the court’s task is to estimate the likely amount of the lump sum element of the final judgment. The objective is not to keep the claimant out of his or her money but to avoid the risk of overpayment.”

The claimant’s application submitted that all of the claimant’s likely costs to trial should be included. Mrs Justice Yip found that bringing in the likely costs of care and other needs to trial in relation to an interim payment expressly sought for accommodation needs may pose difficulties in the future. The defendant argued the “court must guard against allocating large elements of other pre-trial expenditure into an interim payment for accommodation”. The judge noted that if all costs are brought in before trial and relied upon to found an interim payment which is then used to fund accommodation “they will not later be available to fund care and other needs”.

Acknowledging that sums of money cannot be spent twice Mrs Justice Yip found she must leave out of account the special damages which are likely to accrue in relation to the claimant’s other needs; this would “avoid prejudicing future interim payment applications and/or the availability of funds to meet the claimant’s ongoing care and rehabilitation”.

In allowing the possibility that the defendants' expert evidence could be preferred at trial the judge found that £2 million was not “a reasonable proportion of a conservative assessment of the relevant heads of loss at stage 1” of Eeles.

Eeles stage 2

The second stage outlined in Eeles covers when a judge will be entitled to include the likely amount of the final judgment. This can be done when a 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. The judge must be satisfied that there is a real need for the interim payment requested.

Mrs Justice Yip was satisfied there was an “urgent need to secure suitable accommodation” for the claimant before the trial. The properties identified by the defendants’ expert were no longer available, leaving the property identified by the claimant’s expert at £1,190,000. The interim payment should meet “the full cost of purchasing, adapting and moving into the property”. With respect to the works required the judge was to decide whether the amount she intended to award was reasonably required. She concluded she was satisfied to “a high degree of confidence that the sum of £2 million, is reasonably required”, outlining she was confident that “an interim payment at this level will not fetter the trial judge’s freedom to allocate future loss as thought appropriate”.

Mrs Justice Yip was therefore satisfied, applying the second stage of Eeles, that she should order an interim payment in the sum of £2 million.

What can we learn?

• The judgment acknowledged that “a judge should not at the interim payment stage embark upon a mini-trial or seek to determine issues which are properly to be left to the trial judge”, however “the court must be alert to the possibility that the defendant’s contentions will be accepted at trial and keep in mind the risk of allocating too much to the lump sum element so fettering the trial judge’s freedom to allocate damages as he or she thinks fit”.
• Referring to special damages continuing to accrue before trial, Mrs Justice Yip gave the examples of an adult claimant with an ongoing claim for loss of earnings or the provision of gratuitous care which is expected to continue to trial. However, even in cases such as these any advance payments can give rise to some risk of over-payment and the “longer the estimated period to trial, the greater the uncertainty and so the greater the risk”.
• The judge was complimentary of the parties “sensible approach” to dealing with the interim payment requests. Practitioners should be mindful of the need to collaborate. Striking the right balance “will allow the claimant’s rehabilitation to continue while still leaving it open to the defendants to argue at trial that costs were not reasonably incurred”.