interim payment

Litigation & Disputes / Court Applications
; Updated: 13 April 2015

When a creditor commences legal proceedings against a debtor to recover a debt, the ordinary course of events would require the creditor to wait until he has obtained final judgment of the court to commence enforcement proceedings for recovery of the sums due. In English courts, a person suing for a debt may apply to the court for an order that the debtor pay a sum on account of the final sum which is likely to be found to be due. In this way, the creditor seeks a down payment from the court on overall liability of the debtor from the court.

The procedure allows a creditor suffering hardship to take action to obtain some payment by way of a lump sum or by instalments of some of the debt due in anticipation of what the court believes will ultimately be found to be payable. Depending upon the facts of the case, the court may be inclined to make an order in circumstances where the sums paid would reduce the sum which is ultimately likely to be paid, for instance where the funds would be applied to repairing equipment or plant that would generate revenue for the creditor.

Applications for an Interim Payment

Part 25 of the Civil Procedure Rules permits a claimant to make an application for an interim payment at any time after the filing of the Acknowledgement of Service. The Acknowledgement of Service is due to be filed no later than 14 days after the defendant has been served with the claim form (if an Acknowledgement of Service has not been filed by this time, the claimant is at liberty to file an application for default judgment).

If the creditor elects to make an application for an interim payment, the application notice must be supported by evidence. That evidence must:

  1. be filed 7 days before the hearing.
  2. be served 3 days before the hearing of the application, if the debtor wishes to rely on the evidence at the hearing.
  3. state the amount sought by way of interim payment or down payment.
  4. must set out how the money will be applied or spent by the creditor.
  5. set out the ground(s) relied upon in making the application and how those grounds are satisfied. The grounds include, inter alia:
    1. where the court is satisfied that the claimant creditor is likely to succeed at the trial in obtaining a substantial sum of money.
    2. the debtor defendant has admitted liability for the debt.
    3. A judgment has been obtained, remains unquantified until an inquiry as to damages has been conducted by the court.

After the application is filed, the defendant debtor will have an opportunity to file and serve written evidence in response to the application. The evidence in response must be filed and served not less than 7 before the hearing of the application before the court.

In order to be successful in such applications, the claimant creditor is required to satisfy the court on the balance of probabilities that it would obtain judgment in its favour if the proceedings were to proceed to trial, rather than it being merely likely that it would obtain judgment.

A creditor is not restricted from making a single application for a down payment, although a cautious claimant would not make a second application if there were good reasons why the first application was not successful. Even in the event that the first application was successful, the court is likely to wish to be satisfied that there has been a material change in circumstances of the claimant which has had the effect of increasing the quantum of damages likely to be determined at the trial.

Determining the Amount of the Interim Payment

Also, the court will not order more than what it thinks is a reasonable proportion of the likely judgment which would be reached at trial. It will also consider any set-off, contributory negligence or counterclaim available to the defendant debtor. If it is the case that those defences have a reasonable chance of success at the trial, this factor is likely to affect the court discretion’s on the quantum of an interim payment, or whether it is inclined to make an interim order at all, as such sums affect the prospects of recovery of the creditor at the trial. Sums ordered to be paid by the court are sums on the account, and not final determinations of liability against the debtor. If it eventuates that the debtor has overpaid the creditor, the creditor will in all likelihood be ordered to repay the defendant debtor the excess at the trial.

In court claims for debt recovery, creditors are in a position to apply for relief at an early stage of the proceedings in suitable cases. The overall liability of the debtor may be reduced as a result of such an application. Furthermore, it may be the starting point to settling the negotiations without further need for litigation to obtain payment of the judgment debt.

If you like it, please share it!

Usage: The costs order against the respondent was seen to be substantial, the respondent was ordered to make an interim payment within 14 days of the court hearing.

Related Terms

summary judgment; default judgment; the trial.

Couldn't find what you were looking for?

Business Solicitors & Lawyers

For legal advice and more information on obtaining court interim payments and business judgments and litigation, contact us online or call 020 7353 1770.

Contact Us

Drukker Lawyers
30 Fleet Street, London ECY4 1AA
020 7353 1770