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Written on 15th October 2020 by Susan Brown

A recent Court of Appeal decision has changed the amount of compensation that a severely injured person can claim for the extra cost of buying a home that is suitable for their disability. The Court of Appeal’s judgment means that injured claimants who will have additional accommodation needs over an expected long lifespan can now claim the extra cost of buying a more suitable property.

This is the first time that the law has allowed claimants to recover a sum towards the purchase of a property since the personal injury discount rate was reduced to a negative rate. In some cases, claimants will still need to supplement the accommodation payment from compensation recovered for other losses, such as general damages.

Why has the law changed?

The law has changed following the Court of Appeal’s judgment in the recent case of Swift v Carpenter, a claim arising from a car accident which left the passenger with severe injuries, including an amputation. She made a claim against the driver of the car and was awarded substantial compensation, but the trial judge was compelled by the existing law to disallow her claim for the extra costs of buying a home which was more suitable for her lifelong disability. The judge gave her permission to appeal, giving the Court of Appeal the opportunity to review the law. When the case was appealed, the Court of Appeal judges ruled that the existing Roberts v Johnstone approach to calculating claims for increased accommodation capital costs in serious injury cases is unfair to claimants, as interest rates and the personal injury discount rate have decreased since 1989 when Roberts v Johnstone was decided. 

The Court of Appeal recommended a new way of calculating the claimant’s additional capital costs of accommodation, stating that this new method should be the standard approach in claims for additional accommodation needs over a long life expectation. 

What has changed? 

The traditional calculation for additional capital costs of accommodation, set out in Roberts v Johnstone in 1989, allowed the injured claimant a small contribution towards the cost of buying a more suitable home. At that time, interest rates were high, so claimants were able to invest their compensation and receive a good return on their investment. The aim of the Roberts v Johnstone approach was to protect defendants from over-compensating claimants by using a formula which applied the discount rate to an annual accommodation cost figure. Claimants found that by the time their claim for accommodation costs had been discounted in this way, it didn’t cover the costs of buying the house. Claimants were left having to use compensation money which had been allocated to meet other needs so that they could meet their urgent need to buy more suitable accommodation. Interest rates have reduced dramatically since 1989 and the personal injury discount rate is now a negative figure. This helps injured claimants, by increasing their claim for long term costs, such as essential care, but had the opposite effect on the Roberts v Johnstone accommodation calculation, leaving the claimant with a theoretical negative claim for accommodation.

What do the changes mean for injured claimants?

The Swift v Carpenter judgment means that many seriously injured claimants now have a better way to calculate their claim for their increased accommodation costs. The new method allows them to claim the difference between the value of their pre-injury accommodation and the purchase price of a home that is better suited to their disabilities. A discount is then applied to that sum to give credit for a ‘notional reversionary interest’, based on the claimant’s predicted lifespan, and a fixed discount rate of 5%, protecting the defendant from paying for the family or estate’s enhanced housing when the claimant no longer needs it after his or her death. The Court of Appeal’s intention is that this reduction for the ‘reversionary interest’ should be small enough that the claimant is not prevented from buying a suitable home.

Does Swift v Carpenter change accommodation claims for claimants with short lifespans? 

The Court of Appeal judges made it clear that their decision in Swift v Carpenter was intended to apply to claimants who have a long life expectation, like the amputee claimant in that case. They did not give any guidance in relation to accommodation claims where the claimant has a shorter life expectation, and for whom the new method does not work, owing to the disproportionately high ‘reversionary interest’ leaving the claimant without enough money to buy a suitable home. 

Boyes Turner’s clinical negligence specialists are acclaimed for our experience and outstanding expertise in helping severely injured clients claim, recover and make the best use of their compensation. We are now updating our clients’ ongoing claims to give them the best possible benefit from the recent change in the law. As always, we are committed to negotiating and structuring each client’s settlement to ensure that their compensation meets their needs in the best way possible, whatever their circumstances or predicted lifespan.

If you are caring for a family member who has suffered a severe injury from medical negligence and would like to find out more about making a claim, contact us by email on