The Windrush Compensation Scheme – is it enough?
For those hoping for confirmation of what approach the judiciary is going to take now that JR (a protected party) v Sheffield Teaching Hospitals NHS Trust is settled, sadly, this blog cannot provide that. However, this blog does take stock of the current situation, looks at how we got here and tries to offer some insight into where we might be going.
The issue of how to approach the provision of accommodation in claims where an injury requires significant additional accommodation needs has always been difficult. For some time, Claimants have been rightly claiming for:
The complication arises in relation to part 1 and the argument that ordering a Defendant to pay the full capital costs of the additional elements of the accommodation would not be just. This is because the Claimant’s estate would receive a “windfall” upon death – something which our legal system does not at present allow. On the other hand, if the Claimant cannot claim the additional accommodation costs, how is a Claimant to acquire accommodation appropriate for their needs?
In 1988, the Court of Appeal in Roberts v Johnstone laid down an approach which has remained good law to this day. It has come in for much criticism (see Kirsty Allen’s blog for more on this), but the premise can be summarised as follows:
An award should be made equivalent to the loss of income which would have been achieved if the capital had been invested, not in the property, but as a “risk-free” investment.
The flaw in this logic is that using capital may represent a loss far greater than simply the loss of investment opportunity. It is commonly pointed out by those acting for Claimants that in order to purchase a house more expensive than they would have otherwise had to, they will have to take money from heads of loss designated for other specific purposes. Therefore, to describe the Claimant’s loss as one of lost opportunity to invest risk-free, is often quite wrong – it is loss of the opportunity to use that capital for the purpose that it was given, for example, the costs of providing appropriate care.
Leaving this argument aside for a moment, the “Roberts v Johnstone” rule has evolved so that loss of income from a risk-free investment should be calculated by reference to the ‘Discount Rate’ (see Terrence Donovan’s blog for a helpful analysis of the Discount Rate and its recent reform). At the time of the judgment, this was set at 2% and was raised to 2.5% in 2001.
In March 2017 the Ministry of Justice reduced the discount rate from 2.5% to -0.75%. This is to reflect the fact that risk-free investments now represent a negative return (i.e. they are below the level of inflation). This has led to a significant uplift in damages in other areas of a claim but had the effect of completely wiping out the non-adaptation element of an accommodation claim. As pointed out by Terrence, in mathematical terms this makes sense – after all if the Discount Rate acknowledges that low-risk investments are not actually producing a return on investment, then it would hardly make sense to compensate the Claimant for the loss of non-existent investment income. If anything, this situation just highlights the somewhat shaky basis for the Roberts v Johnstone calculation.
Since news of the negative Discount Rate was announced by the MOJ in February of this year, lawyers have been wondering how the Courts would react. At the end of May, the first decision on the approach to Roberts v Johnstone in the era of negative discount rates was handed down.
In JR (a protected party) v Sheffield Teaching Hospitals NHS Trust the High Court determined that the impact of the negative discount rate was to extinguish any claim for the purchase of accommodation necessary as a result of the injury (this does not affect the adaption element of the accommodation claim). In many ways, it was an unsurprising decision. Short of ordering the Claimant to give credit for the negative figures that would be produced by applying the formula to the letter, the Judge was probably bound to apply the law in the manner he did. However, the narrative provided in the judgment effectively acknowledged that Roberts v Johnstone was no longer a suitable approach. The Judge said that “a fair and proper solution” should be found but reasoned that he was not in a position to find such a solution. Accordingly, permission was granted to refer the matter to the Court of Appeal and asked for it to be expedited. Given that the Roberts v Johnstone formula was conceived in the Court of Appeal, they have sufficient authority to overrule it.
So it came as some disappointment to the legal community (as one of the most eagerly awaited Clinical Negligence/Personal injury decisions for some time) when news broke in late October that the case had settled out of Court. The Court approved settlement at £800,000 for future accommodation, which was described by the Claimant as the cost of accommodation less the cost of the accommodation that the Claimant would of purchased in any event. Of course, we should not detract from the fact that both sides obviously believed that this was the right outcome. However it does continue to leave the area in a precarious position.
A number of alternative approaches to the Roberts v Johnstone formula have been mooted. Here are three:
Two slightly different approaches have also been forwarded, that arguably come closest to satisfying the issue in its purest form: that the Claimant’s should not be burdened with additional cost arising from their injury, whilst at the same time ensuring their estate does not receive a windfall upon their death.
These could, in effect, provide for suitable accommodation for the Claimant and extinguish their benefit upon their death (a concept which underpins the law of negligence). However, as you would imagine, both of these options come with substantial practical issues. Option 1 may actually be appealing to some Defendants, given the way property prices are increasing, and could be an attractive option to some personal injury Defendants with capital and an appetite for long term investment. However, in the context of clinical negligence claims (which the majority of these cases concern), it is very difficult in the current climate to see the NHS finding the capital needed to implement this.
Unfortunately, we are unable to offer any real insight into what the future holds. We can say with some confidence that this uncertain situation will not go on forever. However, the real question is whether a change to the Roberts v Johnstone approach will come about before the Discount Rate is raised back to a positive figure.
If you have been affected by the issues discussed in this blog, please contact a member of our Clinical Negligence team. Alternatively, you can contact us on 020 7814 1200 or email us at firstname.lastname@example.org.
This blog was written by Christopher James who is a trainee solicitor in our Clinical Negligence and Personal Injury team.
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