Accommodation claims following Swift v Carpenter

The long awaited appeal judgment in ­Swift –v- Carpenter [https://www.judiciary.uk/judgments/swift-v-carpenter/]was handed down this morning.  It is a welcome relief for existing and future claimants who have accommodation claims.

The premise of achieving compensation in a personal injury claim is simple.  The aim is to put the claimant, as far as possible, back in the same position they would have been had it not have been for the negligence.  Simple?  Not as far as the element of claims for accommodation are concerned.

Without going into too much detail as it is discussed extensively elsewhere, the calculation for working out how much a claimant is awarded for purchasing suitable accommodation following life changing injuries has always left claimants with a shortfall.  The leading caselaw has been Roberston –v- Johnstone.  The calculation takes the difference in the price of the current property and the price of the new property that is required as a consequence of the Claimant’s injury.  The discount rate is then applied to that difference and then the life multiplier.  This means that the claimant, to be able to purchase the new property has to make up the shortfall from other parts of the compensation.  The reasoning behind this approach is to avoid the claimant/their estate receiving a windfall from an increase in the value of property over time.

The reduction in the discount rate, first to -0.75 and then to -0.25 effectively left claimants without a remedy to the accommodation element of a claim.  The original trial judge in Swift considered she was bound by Roberts –v- Johnstone which meant she was unable to award anything for accommodation costs but gave leave to appeal.  The claimant argued that Roberts –v- Johnstone was not binding authority but rather pragmatic judicial guidance which was now wholly inappropriate.

In June 2020 the Court of Appeal heard argument from the claimant that

• Claimants should be awarded the full capital value of the new property required. They argued that any risk of a windfall was outweighed by ensuring claimants were fully compensated.
• In the alternative, it was argued claimants should be awarded the full capital value less the market value of a reversionary interest in that property.

Today, Irwin LJ giving the lead judgment, agreed with the claimant and stated the approach in Roberts –v- Johnstone “is no longer capable in modern conditions of delivering fair and reasonable compensation”.  He went on to provide guidance on how a claimant’s entitlement to the additional capital cost of special accommodation should be calculated and this follows the claimant’s alternative appeal submission above.

The methodology now looks like this:

1. Calculate the additional capital required, which is the difference between the cost of the property now required and the value of the claimant’s current property
2. Identify the claimant’s life expectancy (this could be fixed by clinical opinion, agreement or judicial finding and/or the use of Table 1 or 2 in the Ogden Tables.  This will be case specific)  In the Swift case this was 45.43 years.
3. Then calculate the multiplier to determine the value of the reversionary interest in the additional capital required.  Irwin LJ has provided a guidance discount figure of 5% per annum.  So, in practical terms to do this calculation enter 1.05, press the exponent key (control, shift and = on my keyboard) and enter -45.43.  This gives a multipier of 0.1089 for the Swift case.
4. Calculate the value of the reversionary interest in the additional capital required by multiplying this by the by the multiplier calculated in 3 above.  In the Swift case, the additional capital required was £900,000 x 0.1089 = £98,087.  This is then subtracted from the additional capital figure leaving the claimant with amount of the accommodation award.  In the Swift case this is £801,913 (£900,000 less £98,087).

Claimants are still left needing to borrow the value of the reversionary interest from the remainder of their compensation to be able to purchase the property but at least it keeps accommodation claims alive.

It is to be noted that Irwin LJ was at pains to stress that the 5% discount figure was guidance and not a fundamental legal principle which could not be deviated from, it is not a “straitjacket”, particularly where the life expectancy is short.  Further, should the discount rate return to a relatively high positive rate, then this judicial guidance may become inappropriate.