Writing in an article for the Personal Injury Law Journal in May 2005 the barrister Julian Matthews neatly summarised the concerns of many in the defendant lobby as follows: “The objection stems from the view that certain claimant lawyers use the mechanism of the interim payment quite cynically as part of a ‘claim building’ exercise, ‘over-providing’ for the claimant in the short term and anticipating the court’s undoubted reluctance to undo something that has already been put in place and that the claimant has come to rely on”.
Until very recently there appeared to be very little a Defendant could do about this. A series of cases (see Stringman –v- McArdle ) have established that once liability is established the Claimant is entitled to a reasonable proportion of the damages they are likely to recover, and that how they intend to use these damages is not the business of the Defendant or the Court, subject only to the role of the Court of Protection if the Claimant is a protected person. However, the impact of Periodical Payment Orders (PPOs) has at last led the Court of Appeal to reconsider this area and a recent case, Eeles v Cobham Hire Services, adds a modicum of common sense to the principles governing interim payments in the post PPO landscape.
BackgroundTo illustrate the difficulties for a Defendant, in a recent case I tried and failed to prevent a substantial interim payment. The Claimant suffered brain injury at birth, liability had been admitted, and initial investigations into the value of the claim had been made. As part of that enquiry the parties had jointly obtained an accommodation report. The well-respected expert concluded that the Claimant’s current home was unsuitable, could not be made so, and that the Claimant needed to move. He concluded that around £600,000 had to be spent on a new home which would then need to be altered to meet the Claimant’s needs. So far, so typical.
It was not at all surprising therefore when an application for an interim payment was made. However what was a surprise was the amount sought. The Claimant’s solicitors had, without reference to me, obtained a second opinion on accommodation needs factoring in numerous other selection criteria (relating to the size of the rooms viz the current home, length of commute for Dad, local social network etc) and the new expert concluded that there was only one road in the entire neighbourhood where the whole package could be put together. At the top of the property boom in 2008, the going rate for a property of sufficient size in that road was £2.3 million. Allowing further funds to adapt the property the Claimant was therefore seeking an interim payment of £2.5 million. As an earlier interim payment of £250,000 had already been paid the total sought upfront was therefore £2.75 million.
Conflicting argumentsIn essence the Claimant’s argument in my case was a simple one. Ultimately, it is the Claimant’s money and why should she or her advisers not be able to do with it what she pleases? As it could be shown that the full value of the claim was going to be at least £3-4 million there was no realistic prospect that awarding a total interim payment of £2.75 million was going to over-compensate the Claimant. Subject to the supervision of the Court of Protection, why shouldn’t she have as much of the money as she wanted up front to spend on what she liked?
One of the key arguments made on behalf of the Defendant was that the extent of the interim payment sought would make it extremely difficult to achieve final settlement of the claim on anything other than a lump sum basis. By way of example, if, say, £3 million is spent on accommodation out of a total damages pot of £5 million isn’t the Claimant spending today what he or she should be saving for the future to fund a PPO? It was argued that this would have very negative cash flow effects for the NHS and other Defendants. It was also argued that the effect would be to frustrate the desire of the Court and the wider executive to promote PPO settlements.
However, the counter-argument made by the Claimant was that the Court rules on interim payments in CPR25 had not been amended when PPOs were introduced. Had it been the intention of the Ministry of Justice to consider the effect on the ability of the trial judge to order a PPO when considering a substantial interim payment the rules would have been so amended. Having heard the arguments, and despite the views of the joint accommodation expert, the High Court allowed the Claimant the full interim payment sought, much to my frustration.
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Eeles and the outbreak of common sense
Evidently at first instance in Eeles, where the factual scenario
was very similar to my own case, the Judge reached the same
conclusion. The Claimant’s mother and litigation friend sought an
interim payment of £1.2 million to purchase and refurbish a
property. The Judge at first instance concluded that the full value
of the claim was likely to be around £3.5 million and that the
interim payment sought (coupled with earlier interims totalling
£450,000) could not be said to exceed a reasonable proportion of
the likely value of the claim. He ordered the interim payment
On appeal the Court of Appeal overturned the Judgment and in doing so also provided helpful guidance on the approach that should be employed in substantial cases where a PPO settlement is very likely to be the best way to settle the claim for both parties. Junior counsel for the defendant was the same Julian Matthews, led by Simeon Maskrey QC, also of 7 Bedford Row, who represented the Claimant in the anecdotal case mentioned above (and another below). The Court of Appeal strongly endorsed the first instance decision of Stanley Burnton J in Braithwaite v Homerton Hospitals NHS Foundation Trust  as reported in Claims-on-line in May 2008.
The fundamental principle accepted by the Court of Appeal in Eeles is that an interim payment cannot be made for more than a reasonable proportion of the capital sum which will be awarded on final settlement, as distinct from the full capitalised value of the claim. So, to re-examine the example above, if the full capitalised value of a claim is £5 million but £4 million of that is likely to be paid in PPOs, an interim payment could not be made for more than a reasonable proportion of the remaining £1 million. Clearly keen to put down a marker for the future, the Court of Appeal indicated that from now on a judge would need to consider the following questions before making an interim payment:-
- What is the likely amount of the final judgment leaving out of account those elements of the claim that the trial Judge might wish to deal with as a PPO? This assessment will usually extend no further than past special damages and PSLA and, usually, accommodation costs.
- Conservatively, and on a reasonable assessment, what will that final judgment figure be?
- Conservatively, what is a reasonable proportion of that final judgment?
- A judge can only include additional elements of future loss in his assessment of the final judgment if; he is able to confidently predict that the trial judge will want to award a larger capital sum, he is satisfied by evidence that there is a real need for the expenditure now, and, to a high degree of confidence he is satisfied that the expenditure is reasonably necessary.
For those representing Defendants, contesting interim payment
applications has often felt like fighting a losing battle.
Anecdotally, the rather glib approach of “it’s the Claimant’s
money….” has led to Claimants being housed in properties which were
not only wildly excessive but also often unsuitable to a severely
injured Claimant’s needs at the cost of money needed for future
In another case dealt with by my firm the Litigation Friend used an interim payment to purchase a split-level property which the joint accommodation expert had warned against both in terms of value and suitability. Other experts described it as a “Footballer’s pad”. The Claimant with severe cerebral palsy could not access a large part of it in his wheelchair, the wet rooms were not safe for him to shower in and the built-in WiFi had to be ripped out when the seizures he started to experience were linked to this. The accommodation award within the settlement was for far less than the purchase price but it must have been approved by the Court of Protection.
This decision should go some way towards levelling the playing field between the parties for the foreseeable future and avoiding similar scenarios to those set out above. Recognition that the amount of the interim payment has to be assessed conservatively in the light of the ability of the trial judge to order a PPO should now lead to a more realistic approach. It should also present an obstacle to the sort of ‘claims building’ that has been described.