As a lawyer specialising in complex and serious injury cases, I was delighted to read the landmark judgement of the English Court of Appeal in Swift v Carpenter (2020). This long-awaited decision outlines a new approach to calculating compensation claims for accommodation costs.
The purpose of an award of damages is to put a person back into the position they would have been but for the accident. Compensation should be fair and reasonable but prior to Swift v Carpenter, it was anything but. The problem was compounded by negative discount rates. This meant claimants who suffered the most serious, life-changing injuries requiring the purchase of alternative suitable accommodation were, for years, inadequately compensated. It is likely Swift will be followed in the Scottish Courts heralding a more equitable solution to a problem that has vexed personal injury lawyers for years.
Where a claimant sustains serious injury, their accommodation may no longer be suitable for their needs. For example, a severe spinal cord injury confining an individual to a wheelchair, renders a two-bed upper flat unsuitable. A property needs to be single storey with additional rooms for carers, storage and a therapy room. If the full additional cost of purchasing alternative accommodation was claimed, that would mean a potential windfall for the claimant’s estate, as property is generally considered to be an appreciating asset.
To avoid such a windfall, Roberts v Johnstone (1989) set out a formula for providing compensation for future accommodation costs based on the loss of the use of capital used to purchase a more expensive suitable property. The claim was set down as the capital difference between the new and existing property x discount rate x life expectancy.
In our example of a two-bedroom unsuitable flat valued at £150,000 and a four-bed bungalow valued at £400,000, pre-2017 and using the R v J formula, the claim for future accommodation costs for a 30-year-old male claimant would be £185,000.
Whilst discount rates remained positive at 2-2.5%, the R v J formula avoided windfall, but a claimant was often forced to use funds from other heads of claim (e.g. future wage loss or compensation for pain and suffering) to make up the shortfall.
From around 2017, with the advent of negative discount rates at -0.75%, the R v J formula proved completely unworkable. Many claimants were unable to recover damages in law for future accommodation costs. This resulted in inadequate levels of damages to those who suffered serious injuries, going against the laid down maxim that damages awarded should be fair and reasonable.
Using the same formula with a negative discount rate of -0.75%, R v J produces an award of -£1,340,000! In other words, nil recovery for future accommodation costs.
Swift sets out to redress the problem (in times of negative discount rates) for a seriously injured person needing larger accommodation. The calculation allows the injured person to claim full extra costs of accommodation less a discount to reflect ‘reversionary interest’. The same example for our 30-year-old male allows him a claim of £233,300 for accommodation costs.
As a personal injury lawyer, acting on behalf of those seriously injured in road traffic collisions, especially motorcyclists, I welcome the Swift decision.
Furthermore, the Court has specified that the formula for calculating accommodation costs should not be seen as a ‘straitjacket’ to be applied universally and rigidly so this leaves scope for the formula to be revisited in the event of a significant change to the discount rate.
Roz Boynton - Solicitor, Road Traffic Accident Law (Scotland) LLP