Swift v Carpenter & Anor

Damages for injury-related accommodation should provide full and fair compensation without excessive recovery. Where the claimant has a long life expectancy and the discount rate is negative or low, the additional capital cost should ordinarily be awarded after deducting the present value of the claimant’s notional reversionary interest.

That interest should be valued by a market-based approach. A 5% annual discount rate provides enduring guidance in such conditions, although it is not a universal straitjacket. Earlier guidance based on the claimant’s lost investment return may be revisited when significant economic change makes it incapable of achieving its compensatory purpose.

The claimant suffered serious lower-limb injuries in a road traffic collision. Lambert J awarded lump-sum damages exceeding £4 million and found that suitable accommodation would cost £900,000 more than the claimant’s existing home. Applying Roberts v Johnstone, however, the judge made no accommodation award because the applicable discount rate was negative.

The claimant appealed from [2018] EWHC 2060 (QB). The Personal Injuries Bar Association intervened. Following an adjournment, the Court of Appeal received economic, actuarial, financial and valuation evidence concerning alternative methods of compensating the accommodation need.

The central issues were whether Roberts v Johnstone remained binding, whether its approach should be replaced in modern economic conditions, and how any allowance for the capital retained by the claimant or her estate should be valued.

1. Appeal allowed. A claimant injured by another’s fault is entitled to full and fair, but not excessive, compensation. An accommodation award should therefore meet the established injury-related need while taking reasonable and workable steps to avoid a windfall to the claimant or the claimant’s estate.

2. Roberts v Johnstone established authoritative guidance suited to the economic conditions prevailing when it was decided. It did not establish an immutable principle of law. Appellate guidance directed to implementing a compensatory principle may be revisited when significant economic change makes it ineffective. A first-instance court should nevertheless ordinarily follow existing appellate guidance and identify the difficulty for an appellate court.

3. In conditions of negative or very low investment returns, the Roberts v Johnstone formula no longer provides fair and reasonable compensation. A nil award for a substantial, immediate accommodation need could not be justified by uncertain predictions about long-term property values, future equity-release products and the claimant’s ability to release capital when elderly and vulnerable. The respondent’s cash-flow model depended upon extensive conjecture and conflicted with the established multiplier-and-multiplicand assessment of discrete future losses.

4. For a claimant with a long life expectancy, the appropriate method is to award the additional capital cost and deduct the present value of the notional reversionary interest. A market-based valuation best measures the current value of that future interest. Because the existing market was small, the court adopted a cautious annual discount rate of 5%. The claimant’s established life expectancy could be treated as a term certain using Ogden table 28.

5. The guidance is not a universal straitjacket. It is intended to endure for longer-life cases during conditions of negative or low positive discount rates, subject to particular circumstances. Cases involving short life expectancy may require a different approach.

6. The £900,000 additional accommodation cost was reduced by a reversionary value of £98,087. The accommodation award was therefore £801,913. Irwin LJ delivered the leading judgment; Nicola Davies LJ agreed and added observations. Underhill LJ agreed with the result and the 5% market-rate approach, while emphasising its pragmatic character and its possible inapplicability to short-life cases.

1. Court of Appeal (Civil Division): By [2020] EWCA Civ 1295, allowed the appeal, quashed the refusal of an accommodation award and increased damages by £801,913.
2. High Court, Queen’s Bench Division: In [2018] EWHC 2060 (QB), Lambert J assessed the additional accommodation cost at £900,000 but, considering herself bound by Roberts v Johnstone, awarded nothing under that head. She granted permission to appeal.