When a claim is pursued on behalf of someone who has sustained serious injuries as a result of the negligence of another, their need for suitable accommodation will be considered, amongst other issues, when valuing the claim. The claimant may need accommodation on one level due to the nature of their disabilities, with room for live-in carers, therapy and the storage of large pieces of equipment. The issue that has vexed the courts is how the capital costs of such accommodation should be claimed, as well as the problem of balancing the cost of accommodation and its potential appreciation against what it is reasonable for the defendant to pay.
For many years, following the decision in Roberts v Johnstone, the approach has been to consider the loss of income that would be incurred by the claimant as a result of the capital spent on the property. The equation used to calculate this figure was as follows:
The capital cost of the property required x the prevailing discount rate x life multiplier (where the prevailing discount rate was the assumed rate of return on investments).
Over a long period, the discount rate was 2.5% and the Roberts v Johnstone calculation therefore gave rise to a figure that could be claimed together with the costs of adapting the property in full. A claimant invariably had to borrow from other heads of claim to fund the property purchase, but the Roberts v Johnstone claim provided a contribution towards the capital costs.
In more recent times, the discount rate has changed from a positive number to a negative number, currently being – 0.25%. The Roberts v Johnstone calculation does not ‘work’ with a negative discount rate and alternative approaches need to be considered.
The Court of Appeal is hearing an appeal in the case of Swift v Carpenter, which is due to recommence, by way of a remote hearing, on 22 June 2020 (the hearing is to be live streamed). Various alternative methods of claiming the capital costs of accommodation are to be considered by the court and it is hoped that the outcome of the appeal will provide some long-awaited clarity in this area.