Obtaining an interim payment in a multi-party situation

The power of the English courts to make an interim payment before a case is finished can be a very useful mechanism. When it is clear that a defendant will have to pay a substantial amount at the end of the process, why should a claimant have to wait for the use of the money (or some of it at least)?  In particular why should a claimant have to wait when they have a pressing need for the money, for example for rehabilitation following a serious injury?

Complications can arise, however, when there are multiple defendants and there is a dispute between them about who is responsible for the harm done to the claimant, and thus who should be liable to make the interim payment. This question was addressed in the recent Court of Appeal judgment in Buttar Construction Limited v Arshdeep [2021] EWCA Civ 1408.

The facts

Mr Arshdeep was an Indian national who was in the UK on a student visa. During his summer holidays, he took a temporary job on a construction site in Swindon. He had only been working there for a few days when he was seriously injured in an accident; he had been passing bricks up to another worker on a higher level when the building collapsed, crushing him. Mr Arshdeep was left in urgent need of long-term rehabilitation, which he would have to fund himself rather than relying on state support.

Buttar Construction Limited (“Buttar”) was the main contractor on the building site, and Mr Arshdeep was working for one of Buttar’s subcontractors, called YKS. He brought a claim in the High Court for negligence against Buttar and YKS, as well as against two individuals who controlled Buttar and YKS respectively. He also made an application for an interim payment against Buttar and YKS. The judge ruled that each of Buttar and YKS should pay £150,000 to Mr Arshdeep on an interim basis. Buttar appealed that decision to the Court of Appeal.

The appeal

The main point of Buttar’s appeal was that it was YKS that should be found liable for Mr Arshdeep’s injuries and not Buttar, since YKS had been responsible for Mr Arshdeep’s work on the building site, and YKS should therefore be ordered to make the interim payment by itself.

Under the Civil Procedure Rules, an interim payment can be ordered if the court is satisfied that the claimant will obtain judgment for a substantial amount of money against a particular defendant, whether the defendant is the only defendant or one of several defendants (CPR 25.7(1)(c)).

An interim payment can also be ordered if there are several defendants and the court is satisfied that the claimant will obtain judgment for a substantial amount against at least one of the defendants, but the court cannot at this stage determine which one (CPR 25.7(1)(e)). Mr Arshdeep had applied under CPR 25.7(1)(e) for an order against both Buttar and YKS, but Buttar said that the court should have considered CPR 25.7(1)(c)) first because that would have resulted in an order against YKS alone; alternatively, under CPR 25.7(1)(e) the court should have decided that only YKS should make an interim payment rather than Buttar and YKS.

Secondly, one of the conditions for an interim payment under CPR 25.7(1)(e) is that all the defendants are insured (or else are public bodies, which was not relevant here). Both Buttar and YKS were insured but the insurers had not yet confirmed they would pay, and instead had reserved their rights. Buttar said that YKS’ insurers might avoid the policy, and that might mean Buttar could not recover its interim payment, if only YKS is found liable in the final judgment and not Buttar.

Finally, Buttar argued that the judge should not have ordered to make an interim payment where both Mr Arshdeep and YKS had very few resources. By the time of the final judgment Mr Arshdeep might have spent the interim payment on his rehabilitation and YKS might not have any funds, and YKS’ insurers might not pay out; which might mean Buttar could not recover the interim payment if the final judgment is against YKS alone.

The Court of Appeal’s judgment

The Court of Appeal dismissed the appeal. As far as the first ground of appeal was concerned, the Court said that there was no priority between the different parts of CPR 25.7(1), i.e. Mr Arshdeep could choose which basis he made his application on, and the High Court did not have to go through all the other bases for an interim payment before ruling on the application. The two sub-paragraphs in CPR 25 have different purposes: CPR 25.7(1)(c) applies where it is clear which defendant is likely to be found liable, and CPR 25.7(1)(e) applies where there is no such clarity. The Court of Appeal said that while some judges in the High Court might have formed the view that only YKS would be found liable in the final judgment, it was open to the judge to decide that judgment might possibly be entered against both YKS and Buttar. This meant CPR 25.7(1)(e) could apply here.

As for the second ground of appeal, the Court of Appeal noted that very little evidence had been filed about the insurance. There was no doubt that both YKS and Buttar held insurance policies, but the terms of those policies had not been disclosed and all that the insurance companies had said to date was that they reserved their positions while investigations were underway. While YKS’ insurers had suggested that there may have been “possible breaches” of the policy by YKS, they had not repudiated that policy. The Court of Appeal concluded that the existence of the policy was sufficient for the purposes of fulfilling the condition for an interim payment, even if there was a chance the insurers might subsequently avoid the policy.

Thirdly, the Court of Appeal accepted that the possibility of a defendant’s insurers not paying out is a factor that a judge should take into account when deciding whether to exercise their discretion to make an interim payment under CPR 25.7(1)(e). But the judge had considered that factor in this case, and Buttar had not demonstrated that the judge had reached a conclusion that was outside the ambit available to him. The Court of Appeal would therefore not interfere in the exercise of the judge’s discretion.

Comment

This is a good example of the complications that can arise in a multi-party situation. The case is only at an interim stage, and when the final judgment is handed down it is possible that only YKS may be found liable. It is also possible that YKS’ insurers may have refused cover by then. Buttar might be left in the position of not being able to recover the interim payment that it has made.

There is a balancing of interests here. Where the High Court has decided that a claimant is likely to recover a substantial amount in the final judgment, the claimant should not be penalised if it is not entirely clear at this stage that only one defendant will be held liable. Also, insurers should not have to pronounce whether they will provide cover or not, earlier than they would otherwise be required, just because an application for an interim payment has been made. This may lead of course to an outcome where a pecunious defendant ends up in effect subsidising an impecunious defendant; but that might not be the worst result in all the circumstances.