Relief for JMW clients with serious injuries today as the Court of Appeal reaches its decision in the case of Swift v Carpenter

9th October 2020 Clinical Negligence

People who have sustained serious injuries and who need specialist housing as a result will now get much fairer compensation settlements following the Court of Appeal's decision today in Swift -v- Carpenter [2020] EWCA Civ 1295.

For decades lawyers had to follow the decision in Roberts v Johnstone, which left many people with serious injuries significantly undercompensated and needing to spend awards intended to pay for their essential care or equipment on their housing needs.

The Court of Appeal was careful to come to a decision that was fair to both claimants and defendants by trying to balance the need for “fair and reasonable compensation” for the seriously injured person in need of a “large an established need” and not to create a “windfall” to that person’s estate upon their death.

The decision in Swift means that the balance has finally been redressed for claimants meaning that they will no longer need to “rob Peter to pay Paul” in order to meet their lifelong accommodation needs. For example, claimants often end up using money from their loss of earnings or general damages award to make up this shortfall when this amount should be used for other purposes.

In today’s decision, the Court of Appeal has created a new, fairer formula for the calculation of specialist housing claims. Damages for accommodation will now be calculated by awarding the additional capital cost of the new property less the value of the reversionary interest in that property. This means that claimants will still need to give credit for how much the property has gained in value over their lifetime, but the way in which this is calculated is now much fairer.

The Law

For seriously injured claimants, the purchase of a suitable and generally larger more expensive property involves expense on their part. If the courts were to award the total purchase price of the property less the proceeds from the sale of an existing property, then it is argued that the claimant would be overcompensated because the capital value of the property would remain intact on the claimant’s death and represent a windfall to his or her estate. 

Under Roberts v Johnstone the solution developed by the courts to this problem was to treat the loss to the claimant not as a straightforward capital loss, but as the loss of an annual sum representing either the loss of the income on the capital expended, or the cost of borrowing the capital expended. This requires a rate of interest to turn the capital expenditure into an annual figure which has been fixed by the Lord Chancellor under section 1 of the Damages Act 1996 at 2.5% until the 20th March 2017 when it was reduced to -0.75% and to what it is now -0.25%.

If a claimant requires specialist adaptations to a property, which do not increase the value of a property, then the costs of those items are recovered in full along with the annual additional running costs. If the adaptations add value to the property, then this needs to be offset against the total. 

In Roberts v Johnstone the court set out a formula to calculate the claimant’s loss.  The annual additional cost of such a combination should be taken as 2.5% of the difference between the capital costs of the new accommodation and the net proceeds of sale of the claimant’s previous accommodation.

However, this formula resulted in significant shortfalls in the compensation awarded and the compensation required to actually purchase and adapt suitable properties. When the discount rate was changed to below zero in 2017, the effect was that defendants and insurers did not have to pay anything towards the purchase price of a property, which is what happened in the Swift case at first instance.

Ms Swift had been badly injured in a road traffic accident; her left leg was amputated and her right foot was also injured causing her ongoing problems with mobility. At the first hearing the court awarded nothing towards the purchase price of a more suitable property. However, the Court of Appeal ruling has overturned this earlier decision meaning that of the £900,000 she was seeking, the court awarded £801,913, the reversionary interest being calculated at £98,087. The present market value of the reversionary interest was calculated using an annual rate of return of 5% over the claimant’s life expectancy

The Court of Appeal commented that the methodology in Swift should be regarded as enduring for those with long life expectations and in when the discount rate is low or negative. Whether this applies to cases involving those with shorter life expectancies remains to be seen as shortfalls will still arise applying the new methodology. In those cases it may be possible to depart from the court’s guidance.


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Melissa Gardner is a Partner located in Manchesterin our Clinical Negligence department

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