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Swift v Carpenter and the Cost of Special Accommodation - Carin Hunt, Outer Temple Chambers

20/10/20. The case of Swift v Carpenter was heard by the Court of Appeal on 23 -25 June 2020 and judgment is eagerly awaited by catastrophic injury practitioners. This article gives a quick overview of what is in dispute.

What are special accommodation damages?

Consider a Claimant whose injuries have resulted in him requiring a wheelchair to mobilise; he will need to move into specialised and more expensive accommodation than he previously occupied, likely a bungalow fitted to meet his particular needs. This is described by the courts as the claimant’s need for special accommodation.

How have special accommodation damages been calculated in the past?

The amount of damages to be awarded under the head of special accommodation has traditionally been assessed using a formula first relied upon by the Court of Appeal in the case of Roberts v Johnstone [1989] Q.B 878 (‘R v J’).

In R v J, the Court found that it would not be appropriate to simply award the Claimant the full capital cost of the new accommodation she required as a result of injuries caused to her by the Defendant, because that would leave her estate with a windfall upon her death.

Therefore, to avoid the ‘windfall problem’, the Court relied on a formula that, in the circumstances of the case, awarded the Claimant a significant proportion, but not the full amount of, the capital cost of the accommodation she required.

Why the appeal?

The R v J formula relies on the discount rate as one of its components and since the introduction of a negative discount rate (currently set at -0.25%), it has produced a negative figure. In JR v Sheffield Teaching Hospital [2017] EWHC 1245 QB, this was interpreted as giving rise to a nil award to claimants for the cost of their special accommodation.

In Swift v Carpenter the Court heard submissions on the following issues:

1. Whether it had jurisdiction to depart from R v J;

2. If so, should it do so; and

3. If so, going forward, what approach should be used to calculate damages for special accommodation?

Issues 1 and 2

For the Claimant, it was submitted that the Court has the power to revisit R v J and should do so, as the primary objective of the Court should be to compensate Claimants and to enable them to acquire the special accommodation that the Court has determined they reasonably need. The principle of full compensation must outweigh the desire to avoid a windfall to the Claimant or their estate.

In contrast,the Defendant submitted that the Court was boundto follow R v J because it had been followed by the House of Lords in Thomas v Brighton Health Authority [1999] 1 AC 345. Even if it was not so bound, the Defendant submitted that nonetheless the Court should follow R v J because the Claimant could prove no net loss was caused to her by its application.

Issue 3

Both parties also addressed the issue of appropriate alternatives to the R v J formula should the Court be inclined to abandon it.

The Claimant’s primary position was that the full capital value of the special accommodation should be awarded. This approach, it was submitted, would fully compensate victims and enable special accommodation to be purchased in all cases. Further, it avoids expensive inquiry into matters such as reversionary interests, rental yields and other variables - and will therefore be easy to understand both at negotiation stage and trial.

In the alternative, the Claimant submitted that the full capital value less the market value of a reversionary interest in the property should be awarded. The Claimant relied on the expert report of Mr Watson, an actuary, who calculated the value of the reversion based on its ‘market value’. The Defendant objected to this methodology on the basis that there is no real market for reversionary interests and certainly not in respect of residential properties occupied by a life tenant. The Claimant met this objection with a hybrid proposal: if the Defendant is to benefit from a deduction from the capital value of the special accommodation when damages are calculated, then it should do so on the basis that it is prepared to purchase the reversionary interest, thus creating a market for it. The Defendant objected to this proposal inter alia on the basis that Claimants will most often be reluctant to maintain an ongoing relationship with their tortfeasor’s insurer.

The Defendant’s proposed alternative to the R v J formula was based on the expert evidence of its actuary, Mr Robinson, and also involved valuing the Claimant’s loss by considering the value of the reversionary interest. However, the Defendant stipulated that, using such an approach, an appropriate yield or discount rate had to be adopted to reflect the balance of interests between the Claimant and the Defendant and the windfall that would accrue to the Claimant in the circumstances. Accordingly, this discount rate could replace the discount rate set by the Lord Chancellor in the operation of the R v J formula.

Carin Hunt, Outer Temple Chambers

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