WHAT IS AN INTERIM PAYMENT?
An Interim Payment (“IP”) is defined in CPR 25.1(1)(k) as a “payment by a defendant on account of any damages, debt or other sum (except costs) which the court may hold the defendant liable to pay”. In effect, it is a sum of money advanced to a claimant from the total pot of compensation they will get at the end of their Personal Injury (“PI”) claim. They are generally obtained in complex PI/clinical negligence claims involving substantial damages and sometimes an as yet uncertain prognosis.
IPs can assist with the immediate/urgent needs of a claimant to access funds in order to cover treatment and rehabilitation, care, accommodation or adaptive equipment, lost earnings, etc. Compensation claims for serious injuries can and will often take years to settle or reach final resolution in court. IPs can be a lifeline to claimants in need of financial assistance before then, as is often the case where a claimant has suffered life-changing injuries.
Receiving an IP might also allow a claimant to pursue their claim fully, and ultimately obtain the proper compensation they are entitled to for their injuries – rather than feel pressured by financial constraints to accept an early and low settlement.
WHEN CAN ONE OBTAIN AN INTERIM PAYMENT?
At any point in the life of a claim, if the defendant admits liability it may be possible to agree for an interim payment to be made.
Alternatively, once proceedings have been issued (but not before the deadline for filing an Acknowledgement of Service – CPR 25.6(1)) an applicaiton can be made to the court to order an IP.
A claimant may make more than one application for an order for an IP – there is no limit on the number of applications, nor payments. The court can also order an IP be paid in instalments (CPR PD25B 3).
Also note, in the same way permission of the court will be required to approve any settlement on behalf of a child or protected party, the court’s permission is required too before making any voluntary IP in respect of a child or protected party (CPR PD25B 1.2).
WHEN WILL THE COURT MAKE AN ORDER FOR AN IP?
CPR 25.7(1) sets out the conditions to be satisfied:
MAKING AN APPLICATION FOR AN IP:
CPR PD25b 2.1 sets out that any application for an IP of damages must be supported by evidence dealing with:
Particularly cogent evidence will be expected and required in respect in particular of applications involving significant sums in relation to property, adaptations and care.
EFFECT ON FINAL COMPENSATION:
IPs are advance part-payments of the final compensation, not made in addition – so the final payment awarded or agreed will bear in mind the IPs already made, which will be taken off the final figure.
All PI compensation is tax-free, including IPs.
WHAT AMOUNT CAN BE PAID AS AN IP?
The court will only order (and so a defendant is also likely only to agree to pay) an IP of no more than a “reasonable proportion of the likely amount of the final judgment” – CPR 25.7(4). The court must take into account contributory negligence and any relevant set-off or counterclaim – CPR 25.7(5). If multiple applications for IPs are made, the total must be within the ‘reasonable proportion’ rule.
EELES v COBHAN HIRE SERVICES LTD  EWCA Civ 204:
Eeles first summarised the court’s approach to considering IP applications in PI claims – in particular, as to the amount. Before Eeles, there was a general perception that a claimant could have almost anything out of the total pot they would be awarded in the end. The general approach is that the judge should avoid ordering a sum that might fetter the trial judge’s discretion to allocate damages.
The judge must first:
For this part of the process, the judge need have no regard to what the claimant intends to do with the money – they may spend it as they will (if of full age & capacity).
However, the judge will be entitled to include in their assessment of the likely final amount of the final judgment, additional elements of future loss (i.e. those losses the trial judge may wish to deal with by way of a Periodical Payment Order (“PPO”)) – only when 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. Before taking that course, the judge must be satisfied by evidence that there is a real need for the IP requested, and a need for it now (as opposed to after the trial); the judge must also be satisfied the amount of money requested is reasonable.
THE HIGH PROPORTION:
Harry Brown v Guy’s & St Thomas’ NHS Foundation Trust (2011) Med LR 387; and AC v St George’s Healthcare NHS Trust  EWHC 3644 (QB):
In these cases, 90% of the capitalised sum was said to be a reasonable proportion (on the basis the capitalised sum estimate had been approached cautiously).
PAL (A Child) v DAVISON & Ors  EWHC 1108 (QB):
In PAL, Mrs Justice Yip reviewed Eeles, and gave further guidance as to the principles to be considered in an application for an IP (particularly where a final settlement might include a PPO), and effectively set out a 2-stage test. The test is really the same as set out in Eeles, but is a useful and perhaps clearer reminder of the approach to take in respect of IPs:
This case highlighted the importance of the claimant serving clear evidence to support what they propose to use their interim funds for, and why – in order for the court to find it reasonably necessary.
It also confirmed it is not for the court to determine the suitability of a particular property the claimant wishes to buy, but to look at the need for the purchase itself, and the reasonableness of the proposed expenditure.
DEFENDANT’S EVIDENCE IN RESPONSE:
Smith v Bailey  EWHC 2569 (QB): A defendant will not be able to defeat an application for an IP by simply stating there might be a finding of contributory negligence – they need a proper evidential basis for making that assertion.
Sellar-Elliott v Howling  EWHC 443 (QB): Similarly, if a defendant advances a positive case on causation, they will need to serve evidence in support of that case for the IP hearing.
PRACTICAL TIPS FOR IP APPLICATIONS: