Accommodation Claims A Big Win For Claimants
The much-awaited decision of the Court of Appeal in Swift v Carpenter has at long last been handed down. Many in the legal community who specialise in medical negligence or serious personal injury claims have been awaiting this judgment with eager anticipation.
The decision is one of the most significant changes to this area of law for decades and significantly increases the awards that claimants will achieve.
Background To The Decision
To appreciate its significance, the background also needs to be understood. Frequently, in very serious injury cases, the claimant’s current property is unsuitable for his/her needs post injury in several ways:
- adaptation of existing or future accommodation may be required;
- there may be additional running costs;
- in serious cases, the claimant’s injuries may justify rehousing in more suitable accommodation (those who are brain injured, spinally injured or amputees typically fall into this category.
A claim is then made for the cost of a new property under the established case of Roberts v Johnstone using a time-honoured calculation based upon a conventional formula.
However, it has long been a pillar of the law of damages that a claimant should only be put in the position he/she would have been in if the wrongdoing had not occurred and betterment/ profiting is not permitted. For this reason ,the Government set a discount rate on damages which meant that, while claimants are reimbursed for accommodation needs due to their injury, they do not profit from any appreciation in value of a safe investment which would benefit their estate on death. That would be totally contrary to the law of compensation.
For a long time, the discount rate was set at 2.5% and calculating the formula under Roberts v Johnstone produced a sum for this head of damage. The current problem arose in March 2017 when the then Lord Chancellor reduced the rate to a negative figure of -0.75 %. It has since been revised upwards to -0.25% but is still negative. When the Roberts v Johnstone formula is applied to a negative discount rate it produces a nil figure – meaning that a seriously injured claimant recovers nothing for this head of loss which cannot be right.
Swift V Carpenter  EWCA CIV 1295
In October 2013, Charlotte Swift lost a leg in a road traffic accident on the M5 motorway when travelling as a front seat passenger. The driver of the vehicle was her then partner now husband, Malcolm Carpenter. Liability was admitted and Miss Swift was awarded damages of £4.1m at a contested quantum trial in 2018. The trial judge accepted that she needed to purchase special accommodation costing £900,000 more than her existing home but awarded nil damages under that head of loss, finding herself bound to do so by the Roberts v Johnstone formula. Miss Swift was granted leave to appeal against the nil finding.
The appeal involved reconsideration of the mechanism for assessing the loss to a claimant of having to fund alternative accommodation. The Roberts v Johnstone formula was alleged to be ‘unfit for purpose’ by reason of the current negative discount rate and more generally. Many alternative options were put to the Court of Appeal. These included the full capital cost of a property, a reversionary/life interest model and/or periodical payments to fund an interest free mortgage.
The Court of Appeal held that the old formula under Roberts v Johnstone was no longer the appropriate method for calculating claims for future accommodation as it did not provide full, fair or reasonable compensation, and should be replaced. Such claims are now to be assessed using a life interest /reversionary interest model and by calculating the ‘market value’ of the notional reversionary interest during the claimant’s expected life expectancy using a +5% investment rate, which is to be deducted from the full capital value of the increased cost of the special accommodation. Applying this “new” calculation, Miss Swift was awarded just over £800,000.00 for this head of damage alone compared to the nil award that resulted using the old calculation.
Practical Implications Of The Judgment
Many insurers will read this judgment with concern and will need to revise their reserves on relevant claims upwards. Claimants and their representatives will be delighted.
There is potential for a debate over whether the new mechanism should be used in claims where the claimant has a short life expectancy and if and when the discount rate changes. In his judgment, Lord Justice Irwin said he accepted that his guidance should ‘not be regarded as a straitjacket to be applied universally and rigidly’. He accepted that: ‘There may be cases where this guidance is inappropriate.’
However, for claimants with long life expectancy and during conditions of negative or low positive discount rate, this judgment should be regarded as ‘enduring.’