Calculating Accommodation Claims Following Swift v Carpenter

5th March 2021

In brief

Alex Tengroth discusses the recent long awaited Court of Appeal decision of Swift and how it will benefit severely disabled Claimants who require specialist adapted accommodation

In detail

Claimants who are seriously injured through medical negligence (or in personal injury claims) will require new, larger, accommodation, often single storey, in order to maximise their ability to maintain an independent life (and to provide the additional space required for live in carers or equipment).

Damages recoverable for such accommodation consist of two separate elements. Firstly, a claim for the difference in the capital cost between the Claimant’s existing (no longer suitable) property and the new property that is required. Secondly, a claim for the cost of the necessary adaptations to the new property to ensure it is suitable for the injured Claimant both now and into the future.

Whilst the second element is relatively straightforward to assess (in reliance upon an accommodation expert’s assessment and report), the first element requires a special calculation to adjust the full capital cost into a notional ‘loss’ suffered by the Claimant so as to prevent the Claimant from enjoying betterment (‘receiving a windfall’).

Accommodation claims used to be calculated in line with the 1988 Court of Appeal decision in the case of Roberts v Johnstone. That calculation assessed the ‘loss’ to the Claimant as the lost investment return that the Claimant would make if they had invested the sum representing the difference in the capital cost in a risk-free investment. However, that calculation was linked to the discount rate, and the viability of that calculation was dependent upon a positive discount rate being maintained.

Therefore, when the discount rate was reduced to a negative figure in March 2017 that calculation no longer worked and a new approach was required.

Before Swift v Carpenter was decided, different approaches for calculating the ‘loss’ were put forward by Claimants. These included:- (i) calculating the cost of an interest only mortgage upon the difference in the capital cost; (ii) calculating the increased cost of a rental property; and (iii) sticking with the
Roberts v Johnstone calculation and assuming a notional discount rate of 2%.

However, Defendants often refused to engage with the potential different approaches put forward, and often made no offer at all towards the difference in the capital cost.

There was, therefore, much need for clarity, and this was provided by the Court of Appeal in their decision in Swift v Carpenter in October 2020. In that case itself the injured Claimant required new accommodation with a difference in the capital cost of £900,000 and had a life expectancy of 45.43 years.

The approach that the Court of Appeal took to the calculation of the Claimant’s ‘loss’ was to calculate the reversionary interest and to deduct that from the difference in the capital cost.
The way to calculate the reversionary interest is to take the difference in the capital cost and multiply it by 1.05 to the negative power of the Claimant’s life expectancy.

In the case of Swift v Carpenter, this calculation amounted to a reversionary interest of £98,087, and deducting that figure from the difference in the capital cost confirmed the Claimant’s ‘loss’ to be £801,913 in respect of this element of the accommodation claim.

The new approach and calculation set out in Swift v Carpenter provides much needed clarity for valuing accommodation claims but it is not without potential problems. In particular, it may not be an appropriate calculation for Claimants with a short life expectancy because the reversionary interest will be so large (and the resulting ‘loss’ so small) that the Claimant may not be able to fund the difference in the capital cost.

Using Swift v Carpenter itself as an illustration, if the Claimant had had a life expectancy of only 10 years, the reversionary interest would have been £552,522, and the Claimant’s ‘loss’ would have been just £347,478.

However, whilst there are some such areas of uncertainty, there is no doubt that overall Swift is a welcome and long overdue breakthrough for Claimants in recovering adequate compensation under this heading commensurate with their long term needs.

If you or your family need the assistance of an experienced team of Clinical Negligence Solicitors surrounding an inquest or civil claim then please do not hesitate to phone us free on 0800 999 5585, request a call back or submit your case details.