Interim payments in civil proceedings

What are interim payments?

Litigation is notorious for the length of time it can take, and because of this, financial difficulties for the claimant can arise whilst the case remains ongoing. For instance, the claimant may be waiting for a large debt to be repaid once judgment has been obtained; or a personal injury claimant needs urgent rehabilitation but cannot afford it because they are unable to work.

However, there are important statutory provisions allowing for interim payments to be made by the court before a final judgment is made. The purpose of interim payments is to relieve a claimant of undue hardship whilst their case is ongoing. An applicant for an interim payment must satisfy certain criteria before the court will make an interim payment order.

How do I apply for interim payments?

An application can be made either to the County Court or the High Court, depending largely on the value of the claim, and the complexity of the issues involved. Written evidence in support of the application must be given, including information about the amount applied for, what it is intended to be used for, what amount is likely to be awarded at the conclusion of the case, and which of specific grounds (below) the party believes it satisfies – and why.

Applications are usually made ‘on notice’ to the other side, and must be served at least 14 clear days before the hearing of the application.

In what circumstances will the application be allowed?

The Civil Procedure Rules set out five conditions, one of which must be satisfied on the balance of probabilities before the court can grant an interim payment:

  • Where the defendant has admitted liability to pay damages or some other sum of money;
  • Where the claimant has already obtained judgment against the defendant, so the defendant is liable for damages or for a sum of money which still has to be assessed;
  • Where the court is satisfied that if the claim was to be determined at trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against the defendant;
  • Where the claimant is seeking order for possession of land and the court is satisfied that if the case went to trial, the defendant would be held liable to pay the claimant a sum of money for the defendant’s occupation and use of land while the claim for possession was pending;
  • Where there are two or more defendants:
    • The court is satisfied that if the case went to trial, the claimant would obtain judgment for a substantial amount of money against at least one of the defendants (but the court cannot determine which) and;
    • Each defendant is either insured in respect of the claim; their liability will be met by an insurer under section 151 Road Traffic Act 1968; or is a public body.

How will the court assess the amount of an interim payment?

The court has to consider what is likely to be awarded at trial, and order an appropriate amount for an interim payment. The rules restrict the court’s discretion to a reasonable proportion of the figure for damages at trial.

Previous cases show that a ‘reasonable’ proportion can, in some cases, be a high proportion, provided that the assessment of the likely final award is made in a conservative manner. This emphasises the need for the courts to keep in mind the danger of overpayment, and the possible resulting hardship to a defendant.

When assessing the amount of the order, the court will take into account any existing counter-claim or contributory negligence on the claimant’s part.

The judge does not have to take into account the applicant’s need for the interim payment, or its proposed use of it, but would typically do so. What may be relevant is whether the applicant wants to use the money in a way intended to prejudice any subsequent issue in the trial. Also, the defendant’s resources (or lack thereof) could be an important consideration when assessing the amount of interim payment.

Interim payments could, in theory, be ordered in respect of any claim or counter-claim in the proceedings. In addition, interest but not costs may be included in the order.

What is the effect of the order at trial?

As a general rule, for the purposes of the main trial the existence of any interim payment (as well as Part 36 offers to settle) must not be disclosed to the trial judge until the issues of liability and quantum have been decided. Exceptionally, interim payments can be disclosed if the defendant agrees.

Once the court has made its final order, it will be made aware of the interim payment and adjust the award accordingly. This could, in some cases, require a repayment by the claimant.