The purpose of compensation in England and Wales is to put a negligently injured person back in the position they would have been had the injury not occurred. If someone has sustained a serious injury as a result of negligence, in most cases, their accommodation needs will have changed. For example, if the injury has caused paralysis making them reliant on a wheelchair, they can no longer use the stairs and require single storey accommodation with widened doors and other adaptations. It is quite common in such claims for the costs of alternative accommodation to be included as it is often not possible to adapt the property occupied by the injured individual.
Historically, the Courts have followed the approach set in the case of Roberts v Johnstone using the calculation of capital cost of the property multiplied by the prevailing discount rate multiplied by the life multiplier.
The ‘discount rate’ is a rate applied to damages to account for the fact that the injured person will receive their compensation in a lump sum and that sum is discounted appropriately for any gain that may (or may not) be returned on that lump sum.
For a long time, and at the time of Roberts v Johnstone, the discount rate was 2.5% and a return was expected on any lump sum received. However, the discount rate has since changed and is currently -0.25%, meaning any money invested actually returns a small loss. This means the calculation in Roberts v Johnstone no longer results in a positive sum for the injured person where a property is required.
Tom Docker, an expert who provides reports for accommodation losses in serious injury claims, confirmed “In 1989, the Court of Appeal’s decision in Roberts v Johnstone was based on an imperfect principle aimed at not over-compensating the claimant via the value of their estate but since then, as the residential property market and mortgage rates have changed the formula had become increasingly antiquated; until a negative discount rate was introduced in March 2017.
Since then, I have advised on the pros and cons of various alternatives, such as the approaches canvassed by the Claimant in Swift v Carpenter, but none are ideal solutions. Therefore, I would be surprised if the Court will be attracted by those options, but would very much welcome an alternative to Roberts v Johnstone and the clarity it will, hopefully, bring.
There are several elements, besides the capital cost of a suitable property, to be considered when assessing a Claimant’s reasonable disability-related accommodation needs, but as a Chartered Surveyor and Valuer, I am glad to see the Court will hear evidence from one of my colleagues, who should be able to provide a practical insight into providing suitable accommodation for disabled Claimants.”
Amy Greaves, Principal Associate said “The Courts have grappled with this issue since the first minus discount rate, which has led to uncertainty in how to plead accommodation loss in serious injury claims. Parties on all sides of these claims are awaiting the outcome of the Court of Appeal decision to provide clarity to all clients. In addition to providing some much-wanted clarity, it will also be a good test of remote hearings which is something we will all have to deal with over the coming months.”
Disclaimer
This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024
