The much anticipated and long-awaited decision in Swift v Carpenter was handed down by the Court of Appeal on Friday 9th October 2020. It was worth the wait. A sense of fairness has been restored, and the decision will be welcomed by claimants and their representatives alike.
Accommodation claims in serious injury cases have for the past few decades been calculated with reference to the formula prescribed in the case of Roberts v Johnstone.A perverse situation arose with the introduction of a negative discount rate in 2017, which meant that no loss arose when this calculation was applied. This position has understandably been the subject of much criticism and debate, given it was completely at odds with the overriding principle that a claimant should receive fair and reasonable compensation which puts them as closely as possible in the financial position they would have been in but for their injuries.
Fast-forward to the Swift v Carpenter case, in which the Judge at first instance declared herself bound by Roberts v Johnstone, and as such no award was made in respect of the additional capital cost of accommodation needed to meet the Claimant’s post-injury needs. This was despite the Judge accepting that the value of the accommodation that the Claimant legitimately needed following the accident was £900,000 more than the value of her pre-injury home.
Recognising this clear incongruity, the Judge granted permission to appeal.
The appeal was heard remotely by the Court of Appeal in June 2020. The Court was asked to consider in the first instance whether it was bound by the ruling in Roberts v Johnstone. Assuming it was able to depart from that decision, the Court was required to consider a suitable alternative approach to the calculation of the accommodation claim. The Court heard expert evidence from financial experts, and gave consideration to a number of possible issues and solutions advanced by the parties.
The judgment was unanimous and was handed down by Irwin LJ. Dealing with the first issue of the application of Roberts v Johnstone, the Court held that it was not bound by that decision, on the basis that it did not establish a legal principle but rather provided authoritative guidance regarding the awarding of fair and reasonable compensation whilst avoiding a possible windfall to a claimant’s estate. Given the anomaly caused by the negative discount rate, the Court held that it was right to depart from the formula in Roberts v Johnstone.
Moving on to the method of calculation to be adopted, the Court favoured the reversionary interest approach and held that the accommodation claim should be valued at the additional capital cost minus the value of the reversionary interest. The reversionary interest was calculated with reference to (i) a discount rate of 5% (the Court took account of evidence from reversionary interest experts when arriving at this discount rate, whose evidence supported annual rates of between 1.1% and 7%), and (ii) a life multiplier using table 28 (new table 36) from the Ogden Tables.
The upshot for the Claimant is that she was awarded the sum of £801,913, which was arrived at by deducting the reversionary interest calculated at £98,087, from the £900,000 needed to purchase the more expensive property necessary to meet her needs.
Impact of decision
The decision is Swift v Carpenter will certainly have a significant impact in serious injury claims, and those dealing with such claims will need to promptly reconsider the status of any Part 36 Offers that have been made on their cases. Pleadings will need to be adjusted to reflect the new approach set out in the Court of Appeal, and Insurers will need to revisit their reserves to ensure adequate provision has been made.
It is important to note, however, that when handing down the main judgment, Irwin LJ emphasised that the model applied in this case may not be appropriate for all situations, an obvious example being those cases involving claimants with a short life expectancy which would significantly reduce the accommodation award.
This does tend to suggest that further litigation surrounding accommodation claims will perhaps be inevitable, and indeed it is understood that the Respondent is seeking leave to appeal to the Supreme Court.
Accordingly one needs to be mindful that there may be cases which do not fit the model applied by the Court of Appeal in Swift v Carpenter (eg where the Claimant has a short life expectancy), in which scenario a different approach will require consideration. This will need to be looked at on a case by case basis. To this extent the clarity that we have all been hoping for has not been provided, and this issue is likely to continue to vex practitioners for some time to come.