The Key to a Successful Application for an Interim Payment: PAL v Davison [2021] EWHC 1108 (QB)

In PAL (a child by her mother and litigation friend COL) v Davison [2021] EWHC 1108 (QB) (judgment here), Yip J granted the Claimant’s application and ordered a further interim payment in the sum of £2 million to fund the purchase and adaptation of long-term accommodation that would adequately meet the Claimant’s needs. The decision in PAL demonstrates the importance of adducing proper and convincing evidence in support of an application under CPR 25.6, especially when the Claimant is seeking a significant sum of money that potentially exceeds the conservative estimate of the damages that are bound to be ordered as lump sums at trial.

The Facts in PAL

The 13-year-old Claimant suffered catastrophic injuries, including a brain injury, in a collision when she was struck by a car when walking along the pavement with her family. The severity of her brain injury is such that she is highly unlikely to regain real independence. The Claimant’s paediatric neurologist’s view is that a definitive prognosis is unlikely to be possible before the fifth anniversary of the accident, when the Claimant will be 17. The Defendants have not, as yet, obtained any expert medical evidence.

Liability is not in dispute. The Claimant had a privately funded package of care and therapies, which was funded by previous interim payments totalling £1,025,000.

When the Claimant was discharged from the Children’s Trust, the date of which was brought forward by reason of the Covid-19 pandemic, her family moved into a rented three-bedroomed house in Aylesbury. Her pre-accident family home was entirely unsuitable for her needs. The rented house that she was living in at the time of the application was subject to a 12-month tenancy, which was due to expire in the near future. The landlord had orally agreed to extend the lease for a further 12 months but no further.

In the circumstances, the Claimant applied for a further interim payment in the sum of £2 million to enable a property to be purchased and adapted to provide for her long-term accommodation needs.

The Law

The court may only consider making an order for interim payment where the conditions under CPR 25.7(1) are satisfied. This was not in issue in the case of PAL where liability was not in dispute. The sole issue before the court was the appropriate amount of such a payment.

CPR 25.7 provides as follows:

“…

(4) The court must not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment.

(5) The court must take into account –

(a) contributory negligence; and

(b) any relevant set-off or counterclaim.”

Further, it has been clearly established in Cobham Hire Services Ltd v Eeles [2009] EWCA Civ 204 that in a case where the damages, when finally assessed, are likely to include one or more periodical payments orders pursuant to Section 2 of the Damages Act 1996 (as amended by the Courts Act 2003), the judge on an interim payment application should generally refrain from ordering a sum of money that might fetter the trial judge’s freedom to allocate damages as he or she thinks fit, including making appropriate periodical payments orders.

In Eeles at [43] & [45], Smith LJ summarised the approach which a judge should take when considering whether to make an interim payment in a case in which the trial judge may wish to make a PPO:

“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.

…

We turn to the circumstances in which the judge will be entitled to include in his assessment of the likely amount of the final judgment additional elements of future loss. That can be done when the judge can confidently predict that the trial judge will wish to award a larger capital sum than that covered by the general and special damages, interest and accommodation costs alone. We endorse the approach of Stanley Burnton J in Braithwaite. 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 request 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 requested is reasonable. He does not need to decide whether that particular house proposed is suitable; that is a matter for the Court of Protection. But the judge must not make an interim payment order without first deciding whether expenditure of approximately the amount he proposes to award is reasonably necessary. If the judge is satisfied of that, to a high degree of confidence, then he will be justified in predicting that the trial judge would take that course and he will be justified in assessing the likely amount of the final award at such a level that will permit the making of the necessary interim award.”

The Decision in PAL

In PAL, the evidence before the court was thus:

1. The three-bedroomed rented house the Claimant was living in was far from ideal and was only ever likely to provide a short-term solution. The landlord had not committed to a further lease and in any event, he had made it clear that the existing lease would not be extended beyond a further period of 12 months.
2. The Claimant relied upon the expert accommodation evidence from Mr Tom Wethers, who proposed the purchase of a four-bedroomed accommodation which would then be extended and adapted to provide the accommodation the Claimant would require. On the basis of Mr Wethers’s preliminary opinion, the Claimant’s representatives commenced a search for a suitable property and identified one specific property which the interim payment sought would be used to purchase. The asking price of the property was £1,250,000 but the vendors had agreed to sell it for £1,190,000. Mr Wethers estimated the costs of adaptation at around £612,000.
3. The Defendant obtained a desktop report from their accommodation expert (Mr Cowan) after the Claimant’s application had been made. Mr Cowan acknowledged that the current rental property was not suitable for the Claimant into the longer term and supported the move to a more suitable property. He agreed that the ideal solution was to purchase and extend a bungalow. He conducted an initial property search using a 5-mile radius and identified two suitable bungalows priced at £950,000 to £970,000 and two houses priced at £800,000 and £850,000. His costings to adapt a hypothetical bungalow were about £385,000 and for a hypothetical house were about £490,000.
4. Acting quickly, the Claimant was able to respond to the Defendant’s expert evidence before the application hearing. The evidence of the Claimant’s mother and case manager were that they had never seen the cheaper property identified by Mr Cowan. In any event, only one of the properties identified by Mr Cowan was still available at the time of the hearing, which supported the Claimant’s contention that there is a limited supply of suitable homes in the Aylesbury area. The only remaining property identified by Mr Cowan was located in Weston Turville. The Claimant’s mother provided cogent reasons as to why she did not wish to move there.

Against the above evidential background, Yip J applied the 2-stage consideration in Eeles.

Eeles stage 1

The clear principles that underpin the approach at stage 1 of Eeles is to estimate the likely amount of the lump sum element of the final judgment. With limited exceptions, the starting point is to look at the special damages “to date”. When the Claimant has other ongoing needs (e.g. care and therapy) that will require funding up to trial, the court must guard against allocating large elements of other pre-trial expenditure into an interim payment for accommodation. In the context of the application in PAL, Yip J decided that she must leave out of account the special damages which are likely to accrue in relation to the Claimant’s other needs. By dealing with the pot available for accommodation separately, any further interim payment applications can be considered on their own merits by reference to ongoing needs without the need to revisit the accommodation issue each time.

Adopting the above approach, Yip J arrived at the figure of around £1,835,000 to £1,933,000 as a conservative assessment of the likely lump sum award under Eeles stage 1. It clearly could not be said that the sum sought (i.e. 2 million) was no more than a reasonable proportion of the conservative estimate of the lump sum that would likely be awarded at trial.

Eeles stage 2

On the clear evidence before the court, Yip J was satisfied that the Claimant has a real and urgent need for accommodation now as opposed to after the trial. The evidence suggests that leaving the accommodation issue unresolved will risk real disruption to the Claimant and her family and is likely to be very stressful for her mother. She was satisfied, to a very high degree of confidence, that the purchase of a property is reasonably required at this stage.

The only available option under consideration is the property that had been identified by the Claimant’s mother and case manager, for which a purchase price of £1,190,000 had been agreed. Without making a finding in respect of the suitability of the property, Yip J held that 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.

The Defendants conceded that if the court reached the conclusion that the interim payment sought was reasonably necessary to meet the Claimant’s urgent accommodation needs, then there would be capitalised elements of future losses within the final award which would permit the making of the interim payment sought. In the circumstances, Yip J was satisfied, applying the second stage of Eeles, that she should order an interim payment in the sum of £2 million.

Takeaway Lessons

The Claimant in PAL owes her success to the thorough and responsive way in which evidence was presented to support her application. This is to be contrasted with the lack of supporting evidence in the case of Eeles, where the application for an interim payment to fund suitable accommodation was refused.

Claimants who are contemplating applications for interim payments will do well to remind themselves of the requirements set out in 25BPD.2 of the CPR. Further, in a case where the amount sought is likely to exceed the conservative estimate of the likely lump sum award in respect of general damages and special damages to the date of the application, the Claimant should adduce specific evidence that will allow the court to take into account additional elements of future loss in its assessment of the likely amount of final judgment.

The court has to determine an application for an interim payment on the evidence before it. Even though Defendants may only have 7 days in which to file and serve its evidence in response to an application for an interim payment (CPR 25.6(3) & (4)), they cannot complain about a generous order in the Claimant’s favour if they fail to adduce evidence to challenge the principle and amount of an interim payment order (Smith v Bailey [2014] EHWC 2569 (QB); Sellar-Elliott v Howling [2016] EWHC 443 (QB)). It is unusual for Claimants to make an application for an interim payment without first putting the Defendants on notice. Where the proposed application is opposed on substantive grounds, the Defendants should consider adopting a proactive approach and obtain the necessary evidence before being served with the application.

On the other hand, representatives for Claimants should also be prepared to act quickly when served with evidence from the Defendants to address any issues that are likely to influence the court’s decision. Such rebuttal evidence needs to be filed at least 3 days before the hearing of the application (CPR 25.6(5)).