Partner, Paul Rumley, considers whether we have seen an end to claims for accommodation costs for severely disabled clients.
By Paul Rumley
Following the recent decision to reduce the discount rate to -0.75%, in the case of JR it was decided that nothing could be awarded for the costs of accommodation for a severely disabled Claimant. What are the options now for accommodation claims in the future?
The case of JR
The case involved a young man, now aged 24 years who was severely brain damaged at birth.
The admitted negligence of the Defendant had left JR with severe motor impairments including spasticity affecting the muscles of speech and swallowing, no effective movement of his legs together with fixed flexion deformities at the hip and knees and limited use of his hands. In practical terms JR was wholly dependant on others for most activities of daily living. In addition, his ability to understand, organise, process and act upon information was affected along with his level of attention and concentration.
It was agreed that JR, as usual, needed ground floor, adapted accommodation as a result of his disabilities.
The background to accommodation claims
It has long been established that where a Claimant needs specially adapted accommodation as a result of the negligence of a Defendant, they are not given the full capital cost of the property because to do so would give them a “windfall” over and above full compensation – namely, a Claimant would ordinarily have used their earnings to purchase a property in any event, and loss of earnings is also compensated for in a claim.
After some struggle to come up with what was acknowledged to be an “imperfect but pragmatic” solution to the need for more expensive, specially adapted property than the Claimant would have otherwise required resulted in the decision in Roberts –v- Johnstone.
The basis for an accommodation claim therefore developed as follows:
The problems with Roberts –v- Johnstone
Given the way in which the calculation is made, this never produced the full capital costs of the property. That was however the intention of the Court in the case, because awarding the full capital costs of the property would provide an “windfall” for the Claimant as set out above.
The decision, and basis for the calculation, necessarily accepts that capital would otherwise have been invested and therefore produced income. However, that position changed once a negative discount rate was set.
The decision in JR
The problems with Roberts –v- Johnstone have come to a head with setting of the discount rate at -0.75% earlier this year. That is because, as was pointed out in the case of JR, applying a minus discount rate not only produces a nil figure for the costs of accommodation but in reality they produce a theoretical liability to pay money to the Defendant. This is because with a negative rate of return upon investments, not only would the money equal to the capital costs of property no longer be producing any income, it would in fact be reducing in value.
What the Defendant therefore successfully argued in JR, was that there was no need to compensate the Claimant for a loss of return on the capital cost of the property because there was no prospect of any positive return on the capital based upon a risk-free investment in any event.
The Defendant further argued that whilst the Claimant would therefore have to use even more money from other heads of loss, and in particular his loss of earnings claim, in order to realistically fund purchase of the adapted property he needed that “borrowed” money would be repaid by the property being an asset of his estate.
The Judge in JR accepted that the negative discount rate means that Roberts –v- Johnstone no longer bears much relation to reality. However, he felt bound by the decision, and therefore awarded nothing for the accommodation claim – ordinarily such claims are worth between £200,000-£600,000.
So is there no hope for accommodation claims in the future?
Thankfully there is hope for a change to the current unsatisfactory position.
Firstly, the case of JR is being appealed, on the basis that the Court was not in fact bound by Roberts –v- Johnstone because the decision in that case was made at a time when discount rates were a positive figure. Once the discount rate became negative, the reasoning in the case could not withstand logical scrutiny and a different approach therefore now needs to be found.
Further, the Judge in JR considered 2 possible alternative ways to now deal with accommodation claims:
Unfortunately, because the Judge had no evidence in respect of either of the above options in JR, he felt unable to investigate those options any further.
It is necessary now to pick up the threads of possible alternative methods of calculating accommodation claims, as set out by the Judge in JR with a staged approach as follows:
It seems extremely unlikely to me that Defendants will want to, in essence, begin to accumulate a property portfolio in this way. It is therefore much more likely that the following wold be more acceptable to all parties:
The real benefit of the above is that it provides a logical, mathematical solution to the actual costs of providing the necessary property for the Claimant. It will also still result in a shortfall between the actual costs of the property, and the outcome of that calculation, which gets over the original hesitation of the Courts not to provide the Claimant with a “windfall” which they would get if they were awarded the full capital cost of the property.
In order to maintain, and ensure that the maximum amount of damages is recovered in the future for accommodation claims, it is vital that Claimants are appropriately advised in respect of that by specialist clinical negligence lawyers – otherwise, other Judges may be driven to make no award at all as the Judge felt he was in JR.
I eagerly await confirmation of the approved approach to be adopted but if you wish to discuss accommodation claims, or any other aspect of a claim for catastrophic injuries, then please do not hesitate to get in touch.
  EWHC 1245 (QB)
  QB 878
 Mr Justice William Davis
 George –v- Pinnock  1 WLR 118