A BLOG BY JOHN M COLLINS
Mr John M Collins
This blog concerns the case of JR v Sheffield Teaching Hospitals NHS Foundation Trust [2017] PIQR Q3. William Davis J gave an impressive and comprehensive analysis of the many problems in that case. JR, who was born in 1992, in the course of delivery suffered from intracranial haemorrhage and brain injury. As a result he experienced severe spastic cerebral palsy and significant cognitive impairment. This was a consequence of the negligence of the Defendant hospital and the issues for the Judge to resolve concerned various questions which were in dispute regarding various consequences of the disaster at the time of JR’s birth.
I propose to deal with one issue only, which strikes me as perhaps the most difficult of the issues to be considered by William Davis J, namely the question of accommodation for JR. There was no doubt that at the time of the hearing of the issues as to quantum and damages JR was living along with his parents and elder sibling in a 3 bedroomed bungalow and that was wholly unsuitable to his needs. It was common ground that a new property had to be purchased and adaptations to that property would be required.
One might have thought, therefore, that the correct conclusion in order to provide proper compensation for JR would be that, as part of his damages, he should recover the cost of suitable accommodation for the future. One might indeed have thought that as JR was put into a position whereby he was totally where he was by reason of his manifest disabilities caused by the negligence of the Defendant, that he was in need of special accommodation where he would not have been in need of any such accommodation had it not been for his injuries, the Defendant should pay for that accommodation. But that is not how the Courts have dealt with the matter. In George v Pinnock [1973] 1 WLR 118, the disabled Plaintiff had bought more suitable accommodation by way of a bungalow in Dorset. She claimed as additional damages the whole or alternatively some part of the capital cost of acquiring that bungalow. The Court of Appeal rejected that contention and held ‘the Plaintiff still has the capital in question in the form of the bungalow’. They were prepared to award a sum to cover greater expenses of accommodation which would not have been incurred had the accident not happened.
In 1982 in Chapman v Lidstone Forbes J held that the correct mode of calculating the proper sum for acquiring fresh accommodation in a case such as this was to take the annual net cost, that is to say the cost of a mortgage, after deducting tax relief on the gross rate of interest and then prevailing over the Claimant’s lifetime, less the actual proceeds of sale of the original property. Both Forbes J and the Court of Appeal in Roberts v Johnstone [1989] QB 878 rejected the idea that the Court could simply award the net total difference between the old and the new premises. In Roberts v Johnstone it was held firmly that that means of calculation would result in a windfall to the Plaintiff’s estate because the asset would remain intact at the date of the Plaintiff’s death. The Court of Appeal, following Wright v British Railways Board [1983] 2 AC 773, held that the annual cost of purchasing fresh residential property should be considered in terms of lost income and investment, because the sum expended on the house would not be available to produce income. That they considered would be a figure of 2% per year at the time of Roberts v Johnstone, the annual rate of a standard mortgage was 9%, even after taking into account tax relief and to use at that rate at that time would give the Claimant more than the value of a property being purchased. The Court of Appeal in Roberts v Johnstone laid considerable stress upon the fear that the result of what might seem a common sense award would be that the Claimant would in fact recover not merely the value of a right to live in a property for life but would also leave what would be a windfall for the Claimant’s estate after his or her death and so provide benefits to his heirs as well as to himself.
My personal view is that this fear played an excessive role in the decision of the Court of Appeal. One has to bear in mind that if the Claimant had not suffered the traumatic injuries, he would have been in a position not simply to earn what on average someone in his or her position would have been able to earn, but all sorts of little extras which arise from the fact that most people in realityby good fortune or simply chance or entering into competitions and undertaking additional remunerated work do in fact accumulate in their lives rather more than in theory one might expect them to have earned based upon general statistics. Accordingly, the average person is in a position to make a provision to at least some extent for their family and other beneficiaries. I can see no good reason why it should be regarded as in some way to be deprecated that by a fair and generous settlement for a person who by no fault of his is deprived of the opportunities of enhancing his or her financial position should obtain rather more than in strict logic that person should receive. That is, after all, what happens in relation to fatal accident claims.
Recently, in Manna v Central Manchester University Hospitals NHS Foundation Trust [2017] EWCA Civ.12, Tomlinson LJ recognised that using the formula in Roberts v Johnstone that is to say, working on a notional loss of investment income in a tax free yield on risk-free investment, was ‘in modern conditions increasingly artificial. The assumption underlying the approach is that the Claimant will be able to fund a capital acquisition out of the sums awarded under rubrics other than accommodation. But in modern times residential property prices have increased rapidly while general awards for pain, suffering and loss of amenity have remained at their traditional levels. Whilst Peter is in no doubt robbed to pay Paul, it must often be the case that the accommodation assessed by the Court as suitable is simply not purchased’. However, although he acknowledged that there were various anomalies affecting in the Roberts v Johnstone approach, he considered that it was ‘imperfect but pragmatic’.
In JR v Sheffield Teaching Hospitals NHS Foundation Trust [2017] PIQRQ3, William Davis J attempted to tackle the problem again. That was in the light of a fresh situation arising from the then Lord Chancellor’s decision to determine the discount rate at -.0.75%. Whilst the Judge considered that the costs of adaptations of an appropriate bungalow would be awarded, the effect of the mode of calculation in Roberts v Johnstone is although the capital cost of an appropriate bungalow before the adaptations was £900,000, the actual award would be nothing. This was on the basis that there was at present no ability to obtain any positive return on the capital fund based on risk-free investment and therefore there was no need to compensate JR for the loss of that return. The basis of Roberts v Johnstone was that there was an income which would have been earned by the sum expended on a house and therefore the formula had to take that into account in producing a figure. I do not propose to set out in detail the careful reasoning of William Davis J. His conclusion, based on the Roberts v Johnstone approach, seems to be entirely logical.
The result of his conclusion seems to be nonsense. Looking at the matter in practical terms, the injured person, we posit, requires special accommodation. The objection to a calculation based on Roberts v Johnstone in the present circumstances is that although the injured party has been put into a position where he or she has to acquire special accommodation which he or she would not otherwise have to acquire, that expenditure is not covered at all by the award of the Court. The basic reason given is likely by the Courts for a situation which has become entirely anomalous is that this avoids providing for a substantial windfall for the ultimate beneficiaries of the injured person’s estate. It seems to me that that can be achieved in a much simpler way which would retain the fairness of the award.
In my opinion, the Courts should start by looking at an arrangement such as is contemplated by s.149 of the Law Property Act 1925. What the Claimant requires is a life interest in the property which is to be acquired. That is surely achieved by a lease for 90 years as contemplated in s.149 of the Law of Property Act 1925 limited to the life of the Claimant. Of course, it can be argued that that figure will be in excess of the actual loss that the Claimant has suffered in two respects. The first is that to acquire a lease for the maximum period of 90 years it will involve a significant capital expenditure. That however can readily be calculated since in many parts of the country there is a preference for long leases rather than sales of freehold. Quite clearly a long lease will be able to be acquired for a lower figure than a freehold. On the other side, one must add to that the capital value of a notional rental which is customary for such a lease. From that should be deducted the sort of sum which would pay for an ordinary tenancy of the sort of property which the Claimant would have had to pay to accommodate himself or herself. Such a calculation would in my opinion be reasonably straightforward with the assistance of a surveyor or valuer. It might well lead to a fairly generous result, but it would certainly lead to a fairer result and in my opinion, when one is seeking proper compensation for a catastrophic injury which has been suffered through no fault of the Claimant, one should err on the side of generosity rather than the opposite.
Since I commenced this blog, I have discovered that the Claimant has appealed on this issue to the Court of Appeal. It would have been interesting to discover how they would have resolved the problem. But the Defendant hospitals trust settled that part of the claim for £800,000, so that we shall not know. Jackson LJ, in approving the settlement, expressly made it clear that in approving the settlement the court was not expressing any view about the merits of the arguments which would have been deployed. But the question cries out for speedy resolution.
Zenith PI: PERSONAL INJURY LITIGATION IN PRACTICE 