16. Interim Payment and Security for Costs

Question 1

Who can apply for an order for interim payment?

Answer 1

the claimant

Question 2

Which time period must have expired before a claimant can apply for an order of interim payment?

Answer 2

The period for filing an acknowledgment of service (by D)

Question 3

What is the procedure for applying for interim payment?

Answer 3

(1) a copy of an application notice for an order for interim payment must be served at least 14 days before the hearing of the application; and
(2) be supported by evidence

If the respondent wishes to rely on written evidence, he must

• (a) file the written evidence, and
• (b) serve copies on every other party to the application

at least 7 days before the hearing of the application

If the applicant wishes to rely on written evidence in reply, he must

• (a) file the written evidence, and
• (b) serve copies on every other party to the application

at least 3 days before the hearing of the application

N.B. no need to file/serve evidence that has already been filed/served

Question 4

What form can interim payments take?

Answer 4

One sum or instalments

Question 5

What conditions need to be satisfied for the court to be able to make an order of interim payment?

Answer 5

(1) the defendant has admitted liability to pay damages or some other sum of money

(2) the claimant has obtained judgment against that defendant for damages to be assessed or for a sum of money (other than costs) to be assessed

(3) it is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money

(4) the following conditions are satisfied:
(a) the claimant is seeking an order for possession of land; and
(b) the court is satisfied that, if the case went to trial, the defendant would be held liable to pay a sum of money for the defendant’s occupation and use of the land while the claim was pending

(5) in a claim in which there are two or more defendants:
(a) the court is satisfied that if the claim went to trial, the claimant would obtain judgment for a substantial sum of money from at least one D, but the court cannot say from which one; and
(b) D’s liability will be met by an insurer or D is a public body.

Question 6

What is the limitation imposed on the quantum that can be awarded by way of interim payment?

Answer 6

The court must not order interim payment of more than a reasonable proportion of the likely amount of the final judgment

Question 7

What must the court take into account when determining the quantum of any interim payment?

Answer 7

(1) contributory negligence; and
(2) any relevant set-off or counterclaim

Question 8

What powers does the court have once an interim payment has been ordered or paid (either voluntarily or under an order)?

Answer 8

The court can make an order to adjust the interim payment

In particular it may:

(a) order all or part of the interim payment to be repaid;
(b) vary or discharge the order for the interim payment;
(c) order a defendant to reimburse, either wholly or partly, another defendant who has made an interim payment

N.B. the power to order reimbursement under (c) is only available if the D to be reimbursed made the payment that they made in relation to a claim for which they would have a claim for contribution, indemnity or other remedy against the person who is ordered to reimburse them. Additionally, the circumstances must be such that the court could make an order for interim payment (i.e. the conditions mentioned previously - D has admitted liability, judgment has been obtained for damages to be quantified, etc - have been met).

Question 9

When can the court make an order to adjust an interim payment without the need for the parties to apply for this?

Answer 9

If it makes the order when it disposes of the claim or any part of it

Question 10

What happens where the court makes an interim payment and the amount is more than the party’s total liability under the final judgment order?

Answer 10

The court may award him interest on the overpaid amount from the date when he made the interim payment

Question 11

What are the restrictions on disclosure of an interim payment?

Answer 11

The fact that a defendant has made an interim payment, whether voluntarily or by court order shall not be disclosed to the trial judge until, all questions of liability and the amount of money to be awarded have been decided unless the defendant agrees.

Question 12

What evidence must an application for interim payment of damages be supported by?

Answer 12

(1) The sum of money sought by way of an interim payment,

(2) The items or matters in respect of which the interim payment is sought,

(3) The sum of money for which final judgment is likely to be given,

(4) The reasons for believing that the conditions necessary for the availability of the court’s power to make such orders are satisfied

(5) Any other relevant matters

(6) In PI claims, details of special damages and past and future loss, and

(7) In a claim under the Fatal Accidents Act 1976, details of the person(s) on whose behalf the claim is made and the nature of the claim

Question 13

Who can apply for security for costs?

Answer 13

Defendants

Question 14

What must support an application for security for costs?

Answer 14

Written evidence

Question 15

What will the court do when it makes an order for security of costs?

Answer 15

(1) Determine the amount of security; and

(2) Direct (i) the manner in which; and (ii) the time within which the security must be given

Question 16

Under what conditions may the court make an order for security for costs?

Answer 16

If

(1) it is satisfied having regard to all the circumstances of the case that it is just to make an order; and

(2) an enactment permits such an order or one of the following conditions (‘gateways’) applies

• C is a company or other body of which there is reason to believe that it will be unable to pay D’s costs if ordered to do so; or
• C has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him

N.B. there are other gateways but these are the only ones that we need to know

Question 17

What does the court do if the effect of a security of costs order would be to prevent the person having to comply with it from continuing the litigation?

Answer 17

It should not normally make such an order

N.B. the burden rests with the respondent to show that this would be the effect of the order. It will have to show that it does not have the means to provide the security and that it cannot obtain appropriate assistance to do so.

Question 18

Should the parties go into the merits of the case in applications for security for costs?

Answer 18

• Not usually - this practice is strongly discouraged as it can result in the hearing become a full interlocutory hearing of the claim
• The merits should only be relevant where the party seeking to rely on the merits is certain or almost certain to succeed (i.e. in very obvious cases)

Question 19

Does the D have to show ‘on balance of probabilities’ that the claimant company will be unable to pay its costs to obtain a security for costs order?

Answer 19

No - it only needs to show that there is ‘reason to believe’ that it will be unable to do so.

BUT evidence showing that the company may be unable to pay is insufficient

Question 20

Does the focus of the gateway concerned with companies that will be unlikely to pay rest on their financial position at the time of the application or their future financial position?

Answer 20

The focus rests on the future.

Remember: orders should not be made which will have the effect of stifling the claim. Consequently, if the issue is that the company is currently impecunious then no security for costs order should generally be made. The point of such orders is to ensure that nothing happens in the future which will make the company unable to pay (e.g. they shouldn’t be allowed to enter into risky business ventures that may prevent them from paying D’s costs).

Question 21

If a company enters into liquidation, is this prima facie evidence that they are impecunious such that an order for security for costs ought to be granted (subject to the ‘just in all the circumstances’ requirement)?

Answer 21

Yes - this is prima facie evidence and would need to be rebutted

Question 22

For the gateway of ‘taking steps as to assets to hinder enforcement’ is the claimant’s motivation for taking these steps relevant?

Answer 22

No - often the claimant will have a reprehensible motive, but this is not necessary. The focus is on the effect of the steps taken. However, in determining whether it is ‘just in all the circumstances’ to exercise its discretion the court will consider C’s motive.

Question 23

If C has undisclosed assets, can this constitute a step taken to hinder enforcement?

Answer 23

Yes - it could lead to the inference that they have been put out of reach

Question 24

Do steps taken to hinder enforcement only qualify if they are taken after proceedings have been commenced?

Answer 24

No - even steps taken before commencement are relevant