Keoghs Insight

As all catastrophic injury handlers will know, accommodation often represents an expensive head of loss – the additional cost of capital involved in purchasing a suitable property, adapting it for a disabled user along with the increased running costs.

Historically costs have been calculated, per the Court of Appeal formula set out in Roberts v Johnstone 1989 QB 878, with reference to a multiplier, and the introduction of a negative discount rate (-0.75% from March 2017 and -0.25% from 5 August 2019 ) meant that accommodation claims were potentially wiped out.

We all now await the Court of Appeal decision in Swift v Carpenter. At first instance, in a judgment handed down on 3 August 2018, Lambert J assessed the required additional capital for a new property at £900,000 but the catastrophically injured claimant received no award for the capital cost of accommodation, the court being bound by the decision in Roberts v Johnstone (as had also happened in JR v Sheffield Teaching Hospitals NHS Foundation Trust 2017 EWHC 1245 (QB) where the claim was settled before it reached the appellate court). Permission was given for the case to go to the Court of Appeal.

The appeal, which was due to start in the Court of Appeal on 23 March 2020, has now been adjourned to 22 June 2020 for a remote trial. The Court of Appeal will consider the claimant’s suggested alternative approaches, none of which involve applying the current discount rate:

• Making an award on the basis of Roberts but substituting a 2% rate of return to calculate the loss - the claimant’s preferred option.
• The full capital cost of an interest only mortgage for the claimant’s lifetime.
• The defendant funding an interest only mortgage for the claimant’s lifetime via a PPO.
• The increased cost of renting adapted accommodation which would have amounted to around £48,000 per annum.

 Unusually, the Court of Appeal is set to hear evidence that was not heard at first instance from an IFA, a surveyor/valuer, an economist and an actuary on the following issues:

• Indexation of borrowing costs;
• Impact of inflation;
• Investment return and discount rates;
• Mortgage rates, products and the costs of borrowing for the purchase of a property;
• Valuation of a potential reversionary interest in any property purchased by the claimant.

The Personal Injuries Bar Association (PIBA) have been granted permission to intervene in the appeal to offer a wider view, independent of the competing interests of the parties. They accept that on any analysis the claimant has suffered a loss – the only issue is how that loss should be measured.

Hopefully the Court of Appeal decision will soon bring an end to the uncertainty that claimants and defendants are having to grapple with. In the meantime though, a further appeal to the Supreme Court is possible.

For more information please contact, Victoria Coleman.