Court of Appeal will Ensure Greater Payments for Claimants

15 Oct 2020

A Court of Appeal ruling last week has established a new method of compensating severely injured claimants for the cost of purchasing accommodation to fit their needs.

The judgment in the case Swift v Carpenter will ensure greater payments for claimants. Whilst defendant lawyers have argued that the previous method of calculation (referred to as a Roberts v Johnstone calculation) was fair, claimants often struggle to cope with their ongoing disabilities and feel that they have had to put up with under valued accommodation costs for some time.

The facts of the case in question were that the claimant, Ms Charlotte Swift, received damages in excess of £4 million after losing her leg in a road traffic accident. However, whilst her injuries and other elements of her claim were satisfactorily compensated, she did not receive the c.£800,000 claimed for total cost of purchasing larger accommodation to provide for her needs. Following the judgment she is now entitled to these additional damages.

Lord Justice Irwin, having heard extensive evidence from actuaries for both parties, commented on the effect of the Roberts v Johnstone formula stating: “it cannot be full, fair or reasonable compensation to award no damages in respect of a large established need”. He concluded that a deduction of reversionary interest was the way forward, setting the base reversionary interest rate at 5% – a figure which he described as “cautious” given the difficulty of predicting future house prices and other economic factors. Whilst this guideline will not be appropriate in every case, and exceptions will apply, in cases with a long life expectancy during conditions of negative or low positive discount rates, the guidance should be considered as “enduring”.

An example of how to calculate the damages under the new “Swift v Carpenter”, approach, using the figures from the case, is set out below:

1. £2,350,000 (cost of new, adapted house) – £1,450,000 (old house) = £900,000.
2. 1.05 Xy (multiplying by a selected power) 45.43 (for life expectancy) = 9.1755
3. £900,000 / 9.1755 = 98,087
4. £900,000 – £98.087 = £801,913 damages

Tom Hartigan, Partner in Trethowans’ Personal Injury team commented: “This judgement is of enormous significance and will make a real difference to the quality of life of thousands of severely injured claimants in the future. The formula previously used to calculate accommodation costs very often resulted in a shortfall when purchasing suitable property. This meant that claimants were effectively out of pocket through no fault of their own. Fortunately, this has now been rectified by the Court of Appeal so claimants no longer have to use compensation intended for their on-going needs such as medical costs, care, treatment and loss of earnings to fund the shortfall”.

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