Accommodation Claims - September 2019

In some circumstances where a Claimant has become severely injured as a result of a Defendant’s negligence, they are likely to require alternative accommodation as their current home is no longer suitable for their specific needs.

Their new accommodation may require larger bedrooms and specialist bathrooms to accommodate wheelchair use, or they may require the support of a 24 hour care package, which then requires the availability of carers accommodation.

JF.JPG

The Claimant may also have a need for specialist therapy at home or the availability of sensory areas. Such specialist accommodation requirements are in addition to the everyday living needs of both the Claimant and their family, which was in place prior to injury.

A Claimant will require an accommodation report to outline their accommodation needs, outlining the likely cost of purchase, adaptation and relocation. A home may later be purchased and adapted for the Claimant, on the basis of the accommodation report and agreement with the Defendant.

The award of accommodation in a case such as the scenario noted above however, has long been contested.

It has long been established that a Claimant’s need for a specialist adapted home, as a result of the negligence of a Defendant, cannot be awarded the full capital cost of the property because to do so would “provide them a windfall over and above proper compensation”, quoting a number of articles on this matter, online.

The reason for this view is the argument that a Claimant, in their uninjured state would have purchased their accommodation with their earnings over the course of their life, and that the compensation of the loss of earnings, already forms part of the claim. It is viewed then, that if a Claimant receives the award for specialist accommodation and their other losses, such as loss of earnings, the Claimant could be “overcompensated” for their loss. It is also assumed that the value of the property would increase over the Claimant’s lifetime, resulting in a windfall to their estate upon their death.

Roberts v Johnstone sought to tackle this issue, and outlined that the Claimant would have to “borrow” the capital cost of a new home from other parts of the compensation (such as loss of earnings, pain and suffering etc), but would include the compensation for the loss of interest on the extra money that the Claimant must invest for the required accommodation. The loss of interest was achieved using a multiplier based upon life expectancy, and assuming a net rate of return of 2.5% per annum.

Since then, the discount rate was changed in 2017 to -0.75% and again in April 2019 to -0.25%.

At the time of the Roberts v Johnstone case, the rate of interest was 7-9 % net. The time for a healthy interest has now changed, with today’s interest rate being significantly lower. As a result of a change to the market conditions and subsequent discount rate, many accommodation claims utilising the Roberts v Johnstone formulae results in a "£NIL award”.

In the recent JR v Sheffield Teaching Hospitals case, Sir Rupert Jackson commented in the settlement of the case that “it is clear that sooner or later this Court is going to have to grapple with the Roberts v Johnstone issue in the new world”. In another case in Manna v Central Manchester University Teaching Hospitals, Sir Stephen Tomlinson commented on Roberts being “imperfect yet pragmatic”.

Mr. Jonathan France has been asked on a number of occasions to consider various alternative options within his accommodation report, such as interest-only mortgage payments or the cost of suitable rental property, for example. In the recent case of Swift v Carpenter, there were four options put forward to the Court, to allow a claim for £900,000 (over and above her present property) for accommodation.

The first option of an interest only mortgage was dismissed by the Court, as it resulted in a significant windfall. The second option on periodic payments was also dismissed, on the basis that if the Claimant lived to her full life expectancy, it too would result in a significant windfall. The third option was using the Roberts v Johnstone formulae, but substituting the discount factor the purposes of calculating loss – in this instance the Claimant claimed that the appropriate figure should be 2%. The fourth option was for the Defendant to cover the annual costs for a suitable rented home, to the value of £48,000 per annum, which like option one and two, was dismissed out of hand.

In this case, Mrs Justice Lambert commented that although the Robert v Johnstone is “imperfect”, she was in no doubt bound by the Roberts v Johnstone and therefore made no award in respect of additional capital cost of a property purchase.

An appeal has now been put in place on the 29th July 2019, and is due to be heard in March 2020. It was originally proposed to be heard in July 2019, but has been postponed to March 2020 for further experts from different disciplines to be approached, namely an IFA/mortgage borrowing expert, a valuer/surveyor, an economist and actuary. The experts will comment on the following issues:

  • Indexation of borrowing costs

  • The impact of inflation

  • Investment return and discount rates

  • Mortgage rates, products and the costs of borrowing for the purchase of property

  • And valuation of potential reversionary interest in any property purchased

The outcome on the above case is of profound importance to not only the Claimant, but also the Defendants, insurers and various representatives within similiar cases, where accommodation forms part of the claim.

For France and Associates list of services for litigation purposes and in instances where funds are available for Property Finding, Suitability Reports and Design Services, see https://www.franceandassociates.co.uk/services.

Sources: Byrom Street Chambers, Mayo Wynne Baxter