PI Brief Update

Roberts v Johnstone: A New Accommodation - Nigel Spencer Ley, Farrar's Building

19/06/17. If the method for calculating damages for the additional capital cost of new accommodation set out in Roberts v. Johnstone [1989] 1 QB 878 is applied strictly using the new discount rate, a claimant purchasing more expensive accommodation as a result of his disability will have to pay damages to the defendant.

Can that really be the law? The purpose of this article is to see where the rule in RvJ now stands with a negative discount rate, and to suggest some possible solutions.

The problem

The logic underlying lump sum awards of damages for future loss is that the award should gradually be used over the claimant’s lifetime so that by the time he dies it has reduced to zero.

Let us assume that in a particular case the additional purchase cost required by a disabled claimant is £250,000. Why shouldn’t the claimant simply receive damages of £250,000 to cover this head of loss? The answer is that this would offend against the logic underlying awards set out above. When the claimant died, the value of the damages invested in the property would not have reduced to zero, but would likely be worth at least the additional purchase price, and possibly a great deal more. The claimant would therefore have been over-compensated, and his estate would receive a windfall.

The solution in RvJ

RvJ was a cerebral palsy claim. The claimant sought damages of £68,500 for the additional cost of purchasing a bungalow. The trial judge awarded only £28,800. The claimant appealed. In the earlier case of George v. Pinnock [1973] 1 WLR 118 CA the court suggested that the solution to the problem was to award the notional mortgage interest costs on the additional sum needed for the purchase. On appeal the claimant pointed out that as mortgage interest rates were then 9.1% per annum, using this approach would actually result in greater damages than awarding the full additional capital cost. It was argued that in these circumstances the full additional capital cost should be awarded.

The Court of Appeal disagreed...

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