Swift v Carpenter - the final answer on accommodation claims?

Swift v Carpenter - the final answer on accommodation claims?

Richard Baker, barrister at 7BR and a member of the APIL Executive Committee, considers the long awaited Court of Appeal judgment in Swift v Carpenter [2020] EWCA Civ 1295. Richard appeared for the claimant in Manna v Central Manchester University Hospitals NHS Foundation Trust and JR v Sheffield Teaching Hospitals NHS Trust.

The question of how the court should approach claims for special accommodation has occupied personal injury lawyers since the change of the discount rate into the negative rendered the Roberts v Johnstone formulation unworkable. The decision of the Court of Appeal in Swift v Carpenter  [2020] EWCA Civ 1295 purports to answer that question but also addresses bigger questions regarding the nature of pragmatism in the laws attempts to provide compensation to the injured victims of negligence.

Charlotte Swift was an active, sports-orientated 39 year old who suffered serious lower limb injuries in a road traffic collision, caused by the negligence of Malcolm Carpenter. Those injuries led to the amputation of her left lower leg and significant disruption to her right foot and caused disabilities that created the need for her to live the remainder of her life in adapted and accessible accommodation. By the time that the appeal was heard it was agreed between the parties that the additional cost of this accommodation would be £900,000.

At trial, the claimant faced the same problems in relation to accommodation as the claimant in JR v Sheffield Teaching Hospitals NHS Foundation Trust  [2017] EWHC 1245 (QB). The method of calculation set down by the Court of Appeal in George v Pinnock [1973] 1 WLR 118 and Roberts v Johnstone [1989] QB 878, based upon the application of a life multiplier to a multiplicand derived from the discount rate would no longer function to provide an award of damages in circumstances where the discount rate was negative. The formula therefore faced a true existential crisis – could it be right that two essentially pragmatic decisions created with the intention of providing an award of compensatory damages to a claimant without conferring an avoidable windfall could continue to operate as binding authority if changing circumstances meant that applying the formula left a claimant undercompensated to the extent that they would have to redistribute funds that would otherwise be spent on other heads of loss to pay for accommodation. 

The defects in the Roberts v Johnstone formula were not created by the change in discount rate. A review of the original authority confirms that the claimant in Roberts v Johnstone was able to purchase their accommodation using their award of general damages. The court’s approach in seeking to categorise the loss as one of a loss of return on an investment was therefore logical within the context of what had actually happened in that case. By the time that the Court of Appeal considered the Roberts v Johnstone formula in Manna v Central Manchester University Hospitals NHS Foundation Trust [2017] EWCA Civ 12 the environment had changed and Tomlinson LJ observed:

'The exercise in which the court is thus engaged is in modern conditions increasingly artificial. The assumption underlying the approach is that the claimant will be able to fund the capital acquisition out the sums awarded under rubrics other than accommodation. But in modern times residential property prices have increased rapidly while general damages for pain, suffering and loss of amenity have remained at their traditional levels. Whilst Peter is no doubt robbed to pay Paul, it must often by the case that the accommodation assessed by the court as suitable is simply not purchased.'

In her judgment at first instance in Swift Mrs Justice Lambert noted Tomlinson LJ’s description of the authority’s 'imperfect principles' but also observed that she had no doubt that she was bound by Roberts v Johnstone to reject any approach that would confer a ‘windfall’ or ‘overcompensation’ to the claimant. In her view, the principle that a claimant must not be overcompensated in respect of a claim for accommodation could therefore lead to the conclusion that the claimant should recover nothing. 

The problem faced by the Court of Appeal was whether it too was bound by Roberts v Johnstone, if not, whether the claimant suffered any loss in relation to accommodation, and if so, by what means that loss should be valued. 

In answering the first question, Irwin LJ noted that in Knauer v Ministry of Justice [2016] UKSC 9, the Supreme Court had drawn a distinction between decision based on principle, which should be subject to the usual rules of precedent, and decisions that provide practice and guidance. In his view the underlying and immutable principle behind the quantification of damages in personal injury claims is the desire to provide fair and reasonable compensation but not overcompensation. Decisions of the courts, including the decision in Roberts v Johnstone, might provide practical guidance on how that principle might be achieved in a given situation but: 'are explicitly based on the conditions of the day.' It follows that: 'the reasoning in Roberts v Johnstone was a means to an end rather than a principle, or end in itself. If there is a justified call to alter the means by which that end (fair compensation but not overcompensation) is reached, and another means is available, it appears to me this court should be ready to contemplate a change in the guidance to be given.' 

Underhill LJ agreed with this approach but observed that revision of guidance offered by the court in personal injury claims should only be revisited in response to 'really significant changes' and will rarely if ever be revisited by a first instance court. 

Unusually, for an appellate court, the Court of Appeal heard evidence from a number of expert witness regarding the question of whether a claimant would in fact suffer a loss by purchasing accommodation. The ingenious argument offered by the defendant/respondent was that a claimant could utilise damages awarded in respect of rubrics of their claim that would not need to be realised for many years and thereafter release equity in the property in later life in order to finance those needs as and when they arose. This would notionally exhaust the claimant’s equity in their property by the end of their life, avoiding the risk that a windfall would be left to the claimant’s estate. This approach was, however, flawed as Nicola Davies LJ observed: 

'What is envisaged by the Respondent is that when the Appellant is approaching the age of 80, she will undertake a form of equity release on the property, or by some other means release capital, in order to provide necessary funding. In my judgment, this proposed course undermines the principle of full and fair compensation. Further, it will do so at a time of particular vulnerability for this Appellant, by reason of her age and disability.'

Having identified that the claimant would suffer a loss by purchasing special accommodation, the court sought to quantify that loss, whilst maintaining the underlying principle that the claimant should be compensated fully without being overcompensated. Interestingly Irwin LJ observed that: 

'There are well established examples in the field of tort where a degree of overcompensation has proved unavoidable […] If it were to prove impossible here to award a claimant full compensation without a degree of overcompensation, then it seems to me likely that the principle of fair and reasonable compensation for injury would be thought to take precedence.'

That issue did not however arise in this case, as the court’s pragmatic solution to the issue was to award the claimant the full capital value of the special accommodation but to deduct from that the notional value of the reversionary interest in the property. A claimant who wished to purchase accommodation but had no desire to leave that property to the beneficiaries of their estate, or had no dependents to leave it to, could sell the reversionary interest in the property to realise the missing capital. A claimant who wished to own their property outright could make up the difference in capital by investing their general damages in their accommodation. The court would calculate the value of the reversionary interest using a 5% discount rate. Based upon Mrs Swift’s table 28 life expectancy, the calculation would look as follows: 

1.05 ^ -45.43 = 0.1089

£900,000 x 0.1089 - £98,087.00 

£900,000 - £98,087.00 = £801,913.00 

The claimant’s loss was therefore calculated at £801,913.00

The court thereby provided a pragmatic solution that should give certainty to personal injury lawyers and a substantial award of damages in most but not all cases. Insofar as the solution purports to provide the claimant with a choice between making up the shortfall or selling the reversionary interest in their accommodation it must recognise that that choice will not exist for claimants with short life expectancies. If Mrs Swift’s life multiplier had been 10 rather than 45.43, her reversionary interest would have been valued at £552,521.93, much higher than her award of general damages. The solution offered by the court in those cases is that the claimant should recoup the shortfall by selling the reversion. In offering this solution it recognised the limited evidence that was available in valuing a reversion and hoped that there would be the: 'development of an expanded market over time [that will] give a better evidence base from which a reversion of the discount rate may be considered.' Underhill LJ recognised that cases of short life expectancy 'may require a different approach.' What that approach will be remains to be seen. It is not difficult to see the landscape of the future battlefield for accommodation claims. It will be claims brought by those whose short life expectancies render the reversionary interest approach unworkable, unpractical and/or unfair. The question is whether a pragmatic and workable solution can be found for those cases or whether, as the court observed elsewhere, it is necessary to fall back on the principle that overcompensation may be necessary if no alternative solution is available. This principle will undoubtedly encourage claimants to argue that the only solution for claimants with short life expectancies is the full capital value, without reduction.   

Richard Baker, barrister at 7BR and a member of the APIL Executive Committee, appeared for the claimant in Manna v Central Manchester University Hospitals NHS Foundation Trust and JR v Sheffield Teaching Hospitals NHS Foundation Trust.

The first edition of LexisNexis’  Coroners' Investigations and Inquests, edited by James Robottom, Rose Harvey-Sullivan, James Weston and Richard Baker, will publish in December 2020.




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