After Swift v Carpenter: Do you still need expert financial advice?

As 2020 drew to a close, the Court of Appeal’s judgement in the case of Swift v Carpenter dramatically simplified the process for future calculation of accommodation claims following personal injury or medical negligence, and brought the era of negative accommodation discount rate to a welcome close.

The introduction of a reversionary-interest-based system, set initially at five per cent, is a major victory for those who, under the previous negative discount rate approach, were denied financial assistance with obtaining suitable accommodation – to which the courts frequently agreed they were entitled – due to injuries that were no fault of their own.

But does this mean you no longer need to seek the assistance of an expert financial advisor for your clients’ claims? Not necessarily:

*The system may now be more simple, but that doesn’t mean it’s simple. The calculation of reversionary interest, and clients’ life expectancies, still involves a complex set of calculations which a financial advisor may be able to assist with in order to deliver your client the best outcome.

*The five per cent rate should not, the court noted, be seen as a “straitjacket.” While it is useful guidance for many cases, the judgement noted that in cases with shorter life expectancies, or where the claimant is likely to leave a property before the end of their life, such as to move in with family or into full-time care, or even due to simple market changes, an alternative approach may still be required. In these more complex cases where a more in-depth financial analysis may be required, professional financial advice could still prove vital.

*The judgement seems likely to result in higher payouts for injured claimants, but how best should a claimant receive these payments? Could a Periodical Payment Order be beneficial to best manage the sums awarded? What balance between capital and future income can best serve your client? Where lump sum investments are to be made, how can they best serve the needs of a claimant? A full financial analysis is still an essential tool for claimants.

Frenkel Topping is a market leader in the fields of both PPOs and effective long-term investment for victims of personal injury. The calculation of claims may have been somewhat simplified by this judgement, but how to manage the resultant award may need more professional guidance than ever before.

What did the court decide?

The court agreed that it was desirable to avoid over-compensation due to the appreciation of value on a property that is usually realised by the claimant’s estate following their death. This is precisely the outcome that the previous discount rate, introduced in 1989 following Roberts v Johnson, was designed to avoid.

Lord Justice Irwin, however, concluded that the RvJ approach is a crude and outdated one, particularly in the current era where a negative discount rate means claimants receive nothing for future accommodation needs. He noted: “I recognise the need to avoid a windfall to the claimant’s estate, if that can be achieved without prejudice to the cardinal principle of fair and reasonable compensation.  But to withhold all damages for the purpose of avoiding an eventual windfall seems to me to put a secondary principle before a primary principle: to put the cart before the horse.”

Irwin added: “This Appellant showed at trial she has a need for £900,000 which can only be awarded as a lump sum. Is that to be withheld in total because of a potential capital windfall, very probably to her estate after her death, which will not be valued until then? My answer is no. Such an outcome does not represent fair or reasonable compensation.”

He further dismissed the notion of using a lifetime rental model for future cases. This, he noted, would indeed avoid a windfall, but in cases with longer life expectancy this would be achieved at a greater cost than the actual value of the property.

Thus, having heard extensive evidence from actuaries for both parties, the court concluded a deduction of reversionary interest was the way forward, setting the base reversionary interest rate at 5% – a figure which the judge described as “cautious” given the difficulty of predicting future house prices and other economic factors.

In the case of Swift v Carpenter, where the claimant’s life expectancy following her injuries was deemed to be 45.43 years, this resulted in an award of £801,913. This was the £900,000 the court accepted was needed for new accommodation, minus reversionary interest of £98,087, calculated using the formula £900,000 x 1.05-45.43 = £98,087.


The judge made clear that, although this decision should be used as guidance for future decisions regarding accommodation costs, there must also be room for manoeuvre:

“It would be desirable to leave some degree of flexibility so that judges can, if appropriate, respond to changes in the market or particular or striking circumstances in a given case. The guideline rate should not be a permanent straitjacket. What was needed was an endorsement of a methodology, a tool which could be adjusted for particular circumstances if need be. It was of high importance to avoid a model which called for complex evidence.”

Frenkel Topping stands ready to offer advice on all aspects of the new methodology for calculating accommodation allowances. Contact us for more details.