The purpose of compensation in England and Wales is to put a negligently injured person back into the position they would have been had the injury not occurred. In most cases where someone has suffered a serious injury, they will need to purchase a new property that is able to meet their adapted needs.
The traditional way of calculating this sum - as set out in Roberts v Johnstone - meant a claimant could not recover a significant proportion of the property purchase costs from the defendant, leading to money awarded for other losses having to be used to enable a suitable property to be purchased. This approach was thought to be preferable, at the time, to the approach of claiming the whole purchase cost, as this would leave the claimant with a windfall if the property went up in value.
However, the problems of the traditional approach were compounded further when the discount rate fell to -0.25%. In Swift v Carpenter the Court of Appeal felt that the traditional approach no longer represented fair and reasonable compensation for a claimant in the context of modern property prices and a negative discount rate.
The Judgment in Swift v Carpenter means that damages for accommodation are to be calculated by awarding the additional cost of the new property, less the present market value of the reversionary interest in that property. The present market value of the reversionary interest will be determined by experts. In the particular case in question, the additional value of the property was £900,000 and the reversionary interest was £98,087 and the sum awarded for purchase of the property was £801,913.
Amy Greaves, principal associate, said: “The judgment of the Court of Appeal is welcomed today to give claimants with ongoing cases, where a new property is required, more certainty as to how the loss should be calculated and claimed within their claim. Lord Justice Irwin rightly pointed out in his judgment that this decision should not be seen as a straightjacket and will not work for every case, particularly where there is a short life expectancy. However, it gives certainty in the majority of cases and also makes it clear that alternatives to the traditional approach can be considered in all cases”.
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 2023