The decision in Swift earlier in the month significantly changes how this head of loss is assessed in catastrophic injury cases. In the ten days since the judgment was delivered, there have been (virtual) acres of technical commentary and various on-line briefings have been held, including two that we facilitated and including our spreadsheet (attached at the end of this blog) which performs the new calculation.
The purpose of this blog is therefore neither to provide an in-depth analysis of the decision nor to offer a ‘how to’ guide to the new approach – however, please don’t hesitate to get in touch with Andrew Hibbert or me if we can help with that – but rather to draw out core points, below, which have become a good deal clearer after considered reflection on the outcome.
What we know as a result of Swift
- The Roberts v Johnstone guidance, i.e. ‘loss of return of on capital having to be tied up in the property’ was not binding because it could no longer yield fair and reasonable compensation.
- It has been replaced in Swift by using a notional market rate to work out life and reversionary interests in the property.
- This is achieved by an actuarial calculation which treats the life multiplier as a term certain in order to derive the power for discounting the capital difference between the before and after properties by the notional market rate of 5%.
- This part of the calculation is identical to that in table 35* of the eighth edition of the Ogden Tables but using 5% (* this was table 27 in earlier editions).
- The Court went to some lengths to emphasise it was providing practical and workable guidance for practitioners and first instance judges which would cover most circumstances.
What remains to be clarified
- What factors define cases of shorter life expectancy for which the new guidance is inappropriate and what approaches should apply there?
- How exactly to perform the calculation in cases in which an early interim payment has funded the property and in other cases with non-standard features such as property renting, multiple moves or accelerated purchase?
- What might be the effect of Court’s view that fair and reasonable compensation would be likely to take precedence if it was impossible to award full compensation without some degree of over-compensation?
- What might be the precise grounds of the rumoured appeal by the defendant and whether the Supreme Court might grant permission to hear them?