Popular search terms
Click each term for related articles
UK & Europe
Insurance & Reinsurance
The decision of the Court of Appeal in Swift v Carpenter has rewritten the rules for the calculation of future accommodation costs. Whilst the decision may be subject to efforts to appeal, this should not prevent defendants from considering the impact of the decision on both reserves and negotiation strategy.
To highlight the impact of the decision, we have set out 3 hypothetical examples in which the claimant has no change to their projected life expectancy based on the appropriate Ogden tables and then various examples where the claimant has a reduced life expectancy.
Example 1
A 34 year old man born on 13 January 1986 was seriously injured. He requires a new property which is valued at £1,000,000, and his existing property is valued at £200,000. The trial takes place on 1 November 2020.
Remaining life expectancy |
Award towards purchase costs required for new property |
Award as % of purchase costs required for new property |
---|---|---|
No change to life expectancy |
£731,251 |
91.40% |
40 years |
£686,363 |
85.79% |
35 years |
£654,968 |
81.87% |
30 years |
£614,898 |
76.86% |
25 years |
£563.758 |
70.47% |
20 years |
£498,488 |
62.31% |
10 years |
£308,869 |
38.60% |
Example 2
A 20 year old woman born on 1 November 2000 who was serious injured. She requires a new property valued at £1,500,000 and her existing property is valued at £150,000. The trial takes place on 1 November 2020.
Remaining life expectancy |
Award towards purchase costs for new property |
Award as % of purchase costs for new property |
---|---|---|
No change to life expectancy |
£1,303,797 |
96.57% |
55 years |
£1,257,759 |
93.17% |
50 years |
£1,232,275 |
91.27% |
40 years |
£1,158,238 |
85.79% |
35 years |
£1,105,258 |
81.87% |
30 years |
£1,037,640 |
76.86% |
25 years |
£951,341 |
70.47% |
20 years |
£841,199 |
62.31% |
10 years |
£521,217 |
38.60% |
Example 3
A 60 year man born on 5 June 1960 has been seriously injured. He requires a new property valued at £550,000 and his existing property is valued at £400,000. The trial takes place on 1 November 2020.
Remaining life expectancy |
Award towards purchase costs for new property |
Award as % of purchase costs for new property |
---|---|---|
No change to life expectancy |
£105,183 |
70.12% |
20 years |
£93,476 |
62.31% |
10 years |
£57,913 |
38.60% |
5 years |
£32,471 |
21.65% |
Reduced life expectancy
As you can see from the above tables and graph, should a claimant have a reduction in life expectancy, then this will have a dramatic impact in their possible award of purchase costs in contribution to the new property. This may therefore require claimants to use damages from other heads of loss to bridge that shortfall.
However, the Court of Appeal recognised that “this guidance should not be regarded as a straitjacket to be applied rigidly and universally”, and that in cases with short life expectancy, then a different approach may be justified. The specific circumstances of when the ‘straitjacket’ of Swift v Carpenter will be loosened are as yet unclear. However, what might an alternative approach look like?
In circumstances where the claimant has a life expectancy of less than 5-10 years, then it may be more appropriate for rental costs to be used. On the same basis, claimants aged 25 or younger will, as can be seen above in Example 2, recover a very substantial percentage of the purchase costs if their life expectancy is not affected by their injuries. Defendants may look to argue the appropriateness of using the Swift v Carpenter methodology where the award would be almost total.
Swift and Scotland
Whilst the decision is not strictly binding upon the Scottish Courts, the decision is highly persuasive and we expect that the Swift methodology will be utilised in Scotland. Any such move would be unsurprising given that any continued use of Roberts v Johnstone during a time of negative discount rates will continue to produce a nil damages award for future accommodation, the circumstances which prompted the assignation of Swift as a test case.
Upcoming webinar
Clyde & Co will be publishing details of an upcoming webinar to discuss the practical and wider implications of Swift v Carpenter shortly. The webinar will consider the basis of the judgment, and the consequences such as:
End