The Court of Appeal has given its long-awaited judgment in the case of Swift v Carpenter which impacts on all Claimants who need to be re-housed due to disability caused by another’s negligence.
How the Courts assess “accommodation purchase” claims has been in a state of flux since 2017 when the Government changed the discount rate (the assumed rate of return on capital investment) to a negative figure. This change meant that the conventional Roberts v Johnstone calculation, which had been used to assess such claims since 1989, would necessarily result in a “nil” award.
The Courts have never provided the full “up-front” purchase cost for re-housing as the intention of compensation is to provide for a Claimant’s needs during their lifetime and such an award would lead to a “windfall” – overcompensating on death when the property forms part of a Claimant’s estate.
Under Roberts v Johnstone, an award for accommodation purchase costs was based on:
- additional capital cost – the difference in value between an existing home and one required due to disability;
- the discount rate;
- the Claimant’s life expectancy.
Since 2017, when the change to the discount rate led to a nil award under any Roberts v Johnstone calculation, there have been surprisingly few opportunities for the Courts to determine how a severely disabled Claimant should be compensated for the cost of purchasing a new home. As this is typically the largest single item of capital expenditure in any settlement, the Court of Appeal’s decision in Swift v Carpenter is of real importance.
The Court of Appeal has determined that:
- the Roberts v Johnstone approach is no longer appropriate;
- neither would an award of the full additional capital cost be appropriate;
- an appropriate award should reflect the additional capital cost of a property, discounted to reflect the current value of a notional reversionary interest (i.e. the value of the “windfall”).
The Court of Appeal adopted a “deliberately cautious” approach in the calculation of what discount should be applied, but on the particular facts involved in Swift v Carpenter, where additional capital costs of £900,000 had been claimed, the previous nil award was replaced with a sum of over £800,000.
It should be noted that the value of the reversionary interest is likely to increase as life expectancy decreases, so whilst the decision may not provide a complete answer to those Claimants with a short life expectancy, overall it is a very helpful decision for Claimants.
Subject to any appeal to the Supreme Court, Swift v Carpenter should settle the issue of how accommodation purchase claims are valued by the Courts and provide reassurance to Claimants who need to be re-housed due to their disability.