This clear and digestible judgment from Yip J provides an excellent example of the court’s approach to applications for substantial interim payments in cases where periodical payments are likely, applying the methodology outlined by the Court of Appeal in Eeles v Cobham Hire Services Ltd  EWCA Civ 204.
The claim underlying the application is tragic. The Claimant was a 13-year-old girl who was struck by the First Defendant’s car as she was out walking with her family. She suffered catastrophic injuries, including a severe brain injury. She was unable to walk and needed assistance with all aspects of daily living. Her life expectancy was reduced, but it was not possible to quantify the reduction. The available evidence suggested a confident prognosis would not be possible until at least five years post-accident.
Interim payments had already been received in the sum of £1,025,000 to deal with her immediate care and equipment needs. The present application was for a further £2,000,000 to enable the purchase and adaptation of a suitable property for her and her family. The Defendants had offered a payment of £1,250,000. The Claimant had obtained various expert medical reports but the Defendants had not yet done so, although both parties had managed to obtain accommodation reports for the purposes of the application. The Claimant’s accommodation expert identified one suitable property and, with adaptation costs, identified a need for £1,802,000. The Defendants’ expert had found a small range of properties, at a total cost (including adaptation costs) of around £1,300,000.
Eeles stage 1
Noting that this was plainly a case where a Periodical Payments Order was likely, Yip J set out the key passage from the judgment of Smith LJ in Eeles, setting out the first stage of the assessment the court needed to carry out  to :
“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.
For this part of the process, the judge need have no regard as to what the claimant intends to do with the money. If he is of full age and capacity, he may spend it as he will; if not, expenditure will be controlled by the Court of Protection.”
A question arose as to whether special damages “to date” in the passage above meant to the date of the application or to a predicted date of trial. Yip J dealt with this issue as follows at -:
“It seems to me that the starting point remains as stated by Smith LJ that strictly speaking the court looks at special damages “to date”. However, there will be many instances where it is entirely appropriate in making the conservative assessment at the first stage to bring in special damages which have not yet accrued but will do so before trial. I consider this a question of fact which inevitably depends on the context of the application. What is essential, is to keep in mind the clear principles which underpin the approach at stage 1 of Eeles. 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 court must avoid fettering the trial judge’s freedom to make an appropriate PPO.
It is easy to think of examples where the court can be confident that special damages yet to accrue will form part of the likely amount of the lump sum. In the case of an adult claimant, an ongoing claim for loss of earnings might fall into that category. The provision of gratuitous care on a basis which is expected to continue to trial might be another example. Even then, any advance payments in respect of special damages yet to accrue can give rise to some risk of over-payment. The longer the estimated period to trial, the greater the uncertainty and so the greater the risk.”
On that basis, it was open to the court to consider working into its assessment the likely damages for e.g. care and therapy to the date of a likely trial. Doing so would mean that the £2,000,000 sum sought in the application would certainly not be more than a reasonable proportion of the likely lump sum of damages. However, Yip J identified a need for caution, particularly where there was likely to be a need for further interim payments  to :
“If the court brings in the likely cost of care and other needs to trial when addressing Eeles stage 1 in relation to an interim payment which is expressly sought to meet the claimant’s accommodation needs, difficult issues may then arise further down the line. I accept the point made by Mr O’Sullivan QC on behalf of the defendants that the court must guard against allocating large elements of other pre-trial expenditure into an interim payment for accommodation. That is not to ignore the guidance at paragraph 44 of Eeles that the judge need have no regard to what the claimant intends to do with the money when addressing the first stage of Eeles. Rather, it is a case of acknowledging that the same sums cannot be spent twice. If they are brought in at this stage 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.
In those circumstances, it seems to me that I must leave out of account the special damages which are likely to accrue in relation to the claimant’s other needs when considering this application. Doing so, will avoid prejudicing future interim payment applications and/or the availability of funds to meet the claimant’s ongoing care and rehabilitation. The monies the claimant has already received are to be applied in that direction. It is envisaged that a further interim payment will be required around the end of this year or early next year. Taking out of the ‘pot’ required to be allocated for those needs in order to fund accommodation now would serve only to defer the problem. For that reason, on the facts of this application, I am unable to include all the anticipated special damages to trial in the Eeles stage 1 calculation.
What this meant is that the court was only able to take into account PSLA damages, special damages accrued to the date of the application, and the likely accommodation damages. However, adopting the cautious approach required by the authorities meant acknowledging (though not accepting) that the Defendant’s figures were markedly lower and there was a possibility they might be accepted at trial. If they were, then the £2,000,000 sought in the application was more than a reasonable proportion of the likely lump sum damages which could be taken into account in the application.
Eeles stage 2
However, this was not to be the end of the story, as Yip J went on to consider the second stage of the Eeles approach, in which Smith LJ addressed the circumstances where the court could build into its assessment of the likely final lump sum additional elements of future loss .
“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 general and special damages, interest and accommodation costs alone. We endorse the approach of Stanley Burnton J in the Braithwaite case  LS Law Medical 261. 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 the 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 as will permit the making of the necessary interim award.”
Applying that approach, Yip J said it was evident that it was necessary for the Claimant to purchase another property, and that on the evidence available to her, she was satisfied that the only property which was realistically available to the Claimant was that identified in her application (at a higher cost than those options proposed by the Defendants). Accordingly, the higher degree of expenditure was “reasonably necessary” at the present time. This did not mean, however, that the court was definitively deciding that the house was suitable – that would remain a live issue to be determined when the claim was resolved.
Having determined that it was “reasonably necessary” to expend the sum sought by the Claimant in purchasing a property, Yip J went on to say that it was sensible and necessary to ensure that the identified adaptions to the proposed property were covered by the interim payment. Accordingly, she concluded that the £2,000,000 sum sought by the Claimant was reasonably necessary, applying the second stage of the Eeles approach, and granted the application.
This case provides a useful example of a step-by-step approach to consideration of large interim payment applications in cases of catastrophic injury. The court will first consider “Eeles stage 1”, which involves a traditional consideration of a reasonable proportion of the likely final lump sum award, taking into account general and special damages to the date of the application, along with some very likely special damages to the date of trial where appropriate. If the sum sought is greater than a reasonable portion of the likely lump sum (adopting a conservative approach) the court may then go on to apply “Eeles Stage 2”, and consider whether, in any event, the expenditure is reasonably necessary such that a judge at trial would be likely to allocate some of the future damages to an immediate lump (as opposed to future periodical payments) sum to facilitate needed capital expenditure.
Find Lizanne Gumbel QC’s recent article on interim payment applications and more on our website here.