Swiftly does it! Swift v Carpenter clarifies the approach to accommodation claims in personal injury matters

Swift v Carpenter [2020] EWCA Civ 1295

The Court of Appeal has now clarified the approach to accommodation claims in complex personal injury matters.

The issue: When a claimant in a personal injury action requires a more expensive property on account of their disability, then ordering a sum to purchase a new property provides a windfall for their estate upon their death.

Previous law: In Roberts v Johnstone [1989] QB 878 the Court set out the method for calculating accommodation claims. The calculation under that method was: capital difference x discount rate x lifetime multiplier.  However, it has received some criticism and saw very modest or nil awards to some Claimants leading to under compensation.  In practice it required most claimants to “borrow” from other heads of loss in their damages awards in order to purchase a property. This was also made more difficult with soaring house prices across the country.

Decision: The Court of Appeal in Swift held that the case of Roberts represented “authoritative guidance” and was not prescriptive.

The Court considered a range of methodologies such as a lump sum or a Periodical Payments Order award based on the cost of an interest only mortgage but rejected this due to the unavailability of any suitable products. It also considered a loan from the Defendant, but again due to the regulatory and practical issues rejected this approach. It also considered shared ownership, but again this was unpracticable.

The Court concluded that the reversionary interest (which would be a value based at the hypothetical date of death) provided the best answer. This means awarding the full additional capital cost of the accommodation to the claimant, and then deducting the value of the reversionary interest (that is, the value of the interest that the compensator would have in the property if the additional award were to revert to the compensator on death).

The Court held that a ‘market value’ approach to valuing the current value of a future interest in property was the best measure of the value as to what people will pay to acquire it.  The rate of return to apply is +5%.

Formula: The formula for the calculation of accommodation awards in therefore now:

Damages award: D = (P – B) – R

Value of reversionary interest is: R = (P – B) x 1.05 to the power of -L

R = reversionary interest

P = value of property now required

B = value of property owned but for the accident

L = predicted life expectancy, by reference to Ogden tables 1 or 2 and 28

The future: The Court accepted that their guidance should not be regarded as a straitjacket to be applied universally.  There may be cases where it is inappropriate. Irwin LJ held, ‘…for longer lives, during conditions of negative or low positive discount rates, and subject to particular circumstances, this guidance should be regarded as enduring.’

In particular, the Court accepted that cases involving short life expectancies ‘may require a different approach.’

For now, substantial awards are likely; but this is by no means a settled issue and in appropriate cases expect argument about whether the Swift approach is applicable.

Outcome: For Mrs Swift, she has now concluded her 7-year legal battle with a further damages award of £800,000 compared to the nil award ordered in 2018. The calculation now looks like this:

1. Cost of the property now required as per the judgment of Lambert J: £2,350,000
2. Value of the Claimant’s existing property per Lambert J: £1,450,000
3. Capital shortfall: £2,350,000 – £1,450,000 = £900,000
4. Claimant’s life expectancy per Table 2: 45.43 years
5. Value of the reversionary interest: £900,000 x 1.05 -45.43= £98,087 *
6. Damages award = £900,000 – £98,087 = £801,913