Swift v Carpenter [2020] EWCA Civ 1467

Days after the judgment in Swift v Carpenter was handed down, Lizanne Gumbel QC (“EAG QC”) and John Whitting QC (“JW QC”) of 1 Crown Office Row gave a webinar in which they talked through some questions arising out of the judgment and provided their observations. Henry Tufnell has diligently transcribed their conversation for the purposes of this article, which is an abridged version of the webinar for those who missed it.

Introductory remarks

EAG QC: Swift is a Court of Appeal decision and it is binding; it would need to go to the Supreme Court to be displaced. The way in which all three judges decided on the different criteria from Roberts v Johnstone was that the economic conditions have changed to such an extent that it is fair to say that Roberts v Johnstone doesn’t fit accommodation claims in modern conditions and something needs to be devised that will. The solution that has been found is simple and applies to capital recovery, but it doesn’t tell us about betterment or about parental property and there is no suggestion in the judgment that one should take the latter into account. The only property that is taken into account in Swift v Carpenter is the adult’s own property and there is no discussion about running costs. The only discussion is how you work out the capital amount.

The theory of Swift is that if the Defendants are paying the outlay on the property of the disabled person it would be a windfall unless they got back something at the end of the Claimant’s life. Whilst you don’t actually pay anything back, you make the notional deduction for what the revisionary interest will be at the end of the Claimant’s life.

The best recovery for Claimants will be for cases with the longest life expectancy and the most expensive property. Now a lot of people have asked the question, well what if you aren’t going to need the property until age 30? I think that the simple answer and the one the Defendant will contend for is, if you are getting the capital outlay subject to the revisionary interest and if you are getting your loss of earnings at the time of the recovery, then probably the position is you take off what the uninjured property is from the outset and do one calculation, but there are no examples in the Court of Appeal decision to confirm that. There are various other calculations that might be appropriate, and which divide the calculation into separate periods. We discuss these further below.

Betterment – there is no mention of betterment. It seems to me that the only possible way of bringing in betterment is working out the Defendant’s share of the betterment in the revisionary interest and deduct that as well, it will usually be a small amount. They simply haven’t told us what to do on betterment.

JW QC: As with Roberts v Johnstone the courts have gone for an artificial construct to compensate the Claimant for what is an anomalous head of loss: the capital purchase cost of alternative accommodation will give the Claimant an asset which, uniquely, will appreciate in value. As with Roberts v Johnstone, the methodology prescribed in Swift means that the Claimant will never be fully compensated for the cost of purchasing suitable accommodation. That is because Swift requires:

  1. The value of the property which the Claimant would have purchased in any event to be deducted from the cost of purchase.
  2. An additional deduction of the value of the revisionary interest.

The balancing exercise between those disadvantages to the Claimant as against the disadvantage to the Defendant that the Claimant’s estate will have a windfall is anomalous to this head of loss, so whichever solution the Court of Appeal was going to come up with, they had to balance those two against one another.

The trouble is that the methodology of Swift means that the greater the shortfall to the Claimant by reason of the value of the revisionary interest, the less likely that the Claimant will be able to fund that shortfall from the award of general damages or future loss of earnings.

This is because the shorter the Claimant’s life expectancy, the greater the reversionary interest will be and, conversely, the lower the award will be for general damages or future loss of earnings. That in my opinion creates an internal paradox and an inherent unfairness. The only way that the Claimant has to fund the inevitable shortfall in the award which the Court will make to purchase suitable accommodation is by using the awards made for those heads of loss which are not going to have to meet actual, specific, needs in the future, such as care, case management, therapy, deputyship, aids & equipment etc. However, the lower the Claimant’s life expectancy, the greater the revisionary interest and the greater the deduction that will have to be made, then, inevitably, the lower the value of the heads of loss that are going to be available to meet that shortfall. A layperson would have some difficulty in understanding the logic of that methodology.

The utility of a methodology whose practical effect is inherently perverse is questionable. I believe that one can test the validity of a legal principle, or the value of it, by how logical it sounds when you explain it to your client. I am visualising the conversation now: telling my client that he won’t be awarded the cost of the accommodation that we all agree he needs and that he will have to meet the shortfall with the awards for general damages and loss of earnings, but the greater the shortfall the less likely he will be able to meet it.

It is also disappointing that the Court of Appeal had a once in a generation opportunity to consider one of the most vexed questions in clinical negligence and personal injury law and yet failed, comprehensively, to address all of the issues which that question raises – in relation, for instance, to the relevance of the parental home, wrongful birth, betterment and/or running costs. What is simply inexcusable is not only to offer an artificial and unsatisfactory solution which is inherently paradoxical and unfair, but then to say that it probably doesn’t apply to short life expectancy cases without offering either a definition of what a short life expectancy is, or an alternative methodology in such cases, leaving it open therefore for either party to say that Swift doesn’t apply.

I tried to test the process by looking at the 5% discount rate tables, as the Court of Appeal requires us to do, to calculate the reversionary interest. I found that if there is a five year life expectancy then there is a 75% reduction for the revisionary interest. For eight years it is a 66% deduction; for fifteen years it is a 50% deduction and then for thirty years life expectancy it is a 25% deduction. I ask rhetorically – what is the fair threshold beyond which it would be inappropriate to apply Swift? Is it fifteen years and 50%? Is losing 50% of the value of the property for the revisionary interest fair – meaning Swift should apply – but more than that would be unfair – meaning that it should not? I am sure that it will be a hotly contested battleground in the future.

With the one hand the Court of Appeal gave to Claimants by giving the balance between the property he needs and the property that he would have had in any event. With the other hand, it takes away by saying that the new methodology doesn’t apply to every case and says we are not going to tell you which cases it will apply to and which it doesn’t, and in cases of up to 15 years life expectancy, which isn’t uncommon, we will knock off 50%.

In fairness, Roberts v Johnstone had a similar effect, in that, as the Claimant only received 2.5% of the value of the property multiplied by the multiplier, it had a detrimental effect for those on a short life expectancy. That said, it was universally applied so at least you knew where you were in relation to it, but here I can see endless arguments about whether Swift applies to a particular case. In any event, in those cases where it does apply you will have this paradoxical effect that the less your ability to pay, the greater the shortfall will be, and it raises questions. Unfortunately, the simple solution that we have been looking for since Roberts v Johnstone was decided has not happened.

EAG QC: In terms of the short life expectancy, the Court of Appeal haven’t actually said that it doesn’t apply, they have said that we might have to look at a different way of doing it as it might not be very satisfactory. I think it will be difficult to say if the Claimant wants to apply the Swift v Carpenter methodology that it shouldn’t be applied, it is just whether the Claimant can find a fairer way to be compensated which in some short life expectancy cases will be the rental value. If the rental is more and is needed, then there will be strong case for having the rental, as otherwise you will be unable to meet the needs, where there is no loss of earnings claim. There is also this distinction between the short life expectancy cases where it is short for a child and short life expectancy for an adult where the adult will have a loss of earnings claim, it is just that they are only going to live to 65, rather than a child who doesn’t have a loss of earnings because they are only going to live to age 15. All of that has yet to be argued.

Does Swift apply to wrongful birth? If yes, whose life is it therefore calculated on?

EAG QC: There was one bit in the judgment where it said it won’t necessarily always be the life of the Claimant that you are calculating the reversionary interest on. The example that they discussed was a Claimant who has (vanishingly rare) a pre-ordained plan that they want to move to residential care when they are aged 70, and therefore the house can be given up at aged 70 and the Claimant can move into residential care. That is very unlikely, but it is at least some support that it may not be the life of the Claimant that you are calculating the revisionary interest on. Therefore, in a wrongful birth claim with a child who is severely disabled child and who is going to live much less long than the Claimant, it would have to be calculated on the child’s life, if shorter.

JW QC: Wrongful birth is the other big issue in terms of quantum, which is ripe for Court of Appeal review generally. There is a perennial argument over its scope and how long it lasts – one extreme is that it lasts only until the child reaches majority, or age 19/20 or some later date or, on the other hand, the entirety of life. Accommodation issues are inextricably tied to that, we don’t have an authority on that, making it another issue to take all the way to the Supreme Court.

EAG QC: In wrongful birth claims, the compensation calculation for buying accommodation for a severely disabled child is completely unclear. There was never a Court of Appeal decision on whether Roberts v Johnstone applied to wrongful birth claims. There were always arguments about whether, as wrongful birth claims are pure economic loss, the accommodation should be calculated differently from a personal injury claim. Those arguments will continue between Claimants and Defendants. Claimants will argue that the only criteria we have is that of the personal injury claim and we use that for other the heads of loss in wrongful birth claims, why wouldn’t we use that for accommodation claims. Defendants will argue its pure economic loss and therefore different.

JW QC: I agree, the trouble is that wrongful birth as a cause of action has mushroomed in last few years, as scanning has improved exponentially and that which you can detect antenatally has improved exponentially. So, a significant part of my work is wrongful birth and yet the quantification of it remains obscure, because nobody has taken it to the Court of Appeal to find out how one does it. There are therefore so many issues arising out of wrongful birth. This is just one of them.

EAG QC: I don’t think there is any quantified wrongful birth quantum decision after the decision that it is economic loss, there are only very old first-instance decisions that quantified it at all.

The other problem with wrongful birth claims, is as Lady Hale said – in wrongful birth claims the Court has departed from the normal rules of tort law by ruling that the Claimant cannot recover the whole cost of upbringing as they previously had. Putting the Claimant back in the position they would have been without the tort would mean the Claimant recovered for all of the cost of upbringing, as the Claimant wouldn’t have had the child at all. Once the court departs from the normal rule by saying the Claimant only recovers the additional costs the court has no parameters to assess anything else about the claim.

JW QC: We will be here for the rest of the day if we continue about wrongful birth.

Short life expectancy

EAG QC: My view is that we will use this formula if we can and if it really doesn’t provide for accommodating an injured Claimant for a very short life expectancy and rental is what the family are doing at the date of trial or settlement, and is what the family want to continue doing, then there will be a strong argument for recovering rental costs. The outcome for the time being will be on a case-by-case basis.

JW QC: Yes – to contextualise it – if you have a 5 year life expectancy then you would be looking, solely on the basis of the revisionary interest at a 75% reduction; then that goes down, with a 30 year life expectancy, to a 25% reduction. Then, as you go beyond that, towards normal life expectations then the reduction diminishes exponentially below that. In that middle ground (5 – 30 years) then there are going to be some interesting arguments. I agree with EAG QC that for the particularly short ones, people are going to be suggesting renting and other solutions like that.

EAG QC: Even if you are getting 25% recovery then it is 25% more than you were getting on the basis of Swift v Carpenter at first instance.

What do you say to clients?

EAG QC: The next question is – how should one explain the new methodology to clients. All that can be said is that the Court of Appeal has found that Claimants should be able to buy the property they need but have to give credit, if they are an adult, for the property that they are in already and credit that the property will have value at the time they die. The amount of credit to be given is worked out on how far ahead the Claimant is predicted to be going to die. The further ahead death is predicted to occur, the less the value now of the revisionary interest and therefore the smaller the reduction. Not much else that you can say.

JW QC: The client understands that property is an asset that appreciates. All that one can say is, look, your estate will have a huge windfall for which you are going to have to pay now and you are going to have to meet the shortfall that creates by utilising other aspects of your own heads of damages. I don’t think you can put it any more simply that that.

Claims where house would not have been bought until aged 35 and then might have upgraded once their earnings increase.

EAG QC: One question which I left to last, because it is one a lot of people have asked is what we do with the children claims where they wouldn’t have bought a house until aged 35 and then they might have upgraded once their earnings went up when they were 45 or 50. Do we work this out in stages or do we look at it on the basis that the ‘but for’ house has to be taken into account from the outset because the loss of earnings are recovered at the outset? I don’t know what the answer is and they give us no way of working it out in chunks. One of the paradigms they discussed was a house that wasn’t needed for 10 years, but oddly, and I don’t know whether else has understood example number 2, but the Court of Appeal seem to work out that you are not going to need it for 10 years but then you are going to need the whole cost and you don’t need to give credit for anything that you are living in now. Is that how you read number 2?

JW QC: I didn’t find the paradigms easy. The way I would approach this is to value the ‘in any event’ house on the basis of a weighted average. So, I would calculate the weighted average house cost based on the usual way that you would calculate a weighted average. If you take the property you get when you are 25 or 30 then the property you get when you are 35 and then the one you get at 45, it is a straightforward calculation to work out the weighted average cost of that property over the course of the lifetime. Then I would use that single average value as the one that I would deduct from the cost of the accommodation which the Claimant actually needs now. I think this is the simplest way, as there is only one cost to deduct from the cost of the accommodation that you actually need. Otherwise, the calculations become absurdly complex.

EAG QC: So, if you have a life expectancy of 40 years and you would have bought a property in 20 years, the first 20 years you wouldn’t have a property at all, as you are not taking into account parental property, do you only take off half of the total amount of discount?

JW QC: No, I would do it on the assumption that what Swift says is that you take off the total value in the ‘any event’ property now, so that is the figure that you need. You don’t then calculate this sort of blank period in the meantime. For the period that the Claimant would have been a homeowner, that’s your total period of homeownership over which you calculate your weighted average.

EAG QC: So, your weighted average is the difference between the first property being £350K and the second property being £700k but spread over the whole lifetime, not saying that you deduct something for the first 30 years. Whereas Robert v Johnstone we used to wait until 35 before giving credit.

JW QC: Now you are having to give credit now.

EAG QC: With reversionary interest because you are only giving credit at the end, it doesn’t seem that the same logic applies.

JW QC: Given that they require us to make a deduction for the full value that only arises in 30 years, but have to give full credit for it right now, then I don’t see why logically you wouldn’t calculate on the same basis now.

EAG QC: There might be an argument that if you weren’t giving credit for 30 years then you would be doing that on a -0.25% basis rather than on a 5% basis, so actually would be deducting more if you are waiting for the 30 years for the reduction.

JW QC: You could do that; I suspect you won’t.

EAG QC: I am suggesting the Defendant argument that if you are going wait for 30 years before you give credit then you have to give credit for more because you apply a -0.25% to the period for which you give credit.

JW QC: They don’t do that in the examples. I thought about that, ordinarily you would and therefore you uprate the value of it, as long as negative discount rate. They don’t appear to do that in their paradigms.

EAG QC: Some people will deduct it now, but individuals may want to raise arguments about that.

Transcribed by Henry Tufnell following a webinar, available on request from Events@1cor.com