JR (A Protected Party by his Mother and Litigation Friend JR) v Sheffield Teaching Hospitals NHS Foundation Trust: First High Court analysis of Roberts v Johnson calculations since the announcement of the new discount rate

In this post Thea Wilson of 12 KBW discusses the recent decision of Davis J in JR  v Sheffield Teaching Hospitals NHS Foundation Trust.  The Court dealt chiefly with the discount rate change in relation to accommodation claims and with lost years claims. In relation to the former, it was held that no capital sum was recoverable; in respect of the latter that a claim would be allowed even where there were no dependents.

The Facts

The Claimant, aged 24 at the time of the hearing, was born prematurely. He had a breech presentation but was delivered vaginally. It was admitted by the Defendant that in those circumstances, the Claimant should have been delivered by caesarean section and that as a result of their employees’ negligence, the Claimant suffered intracranial haemorrhage and brain injury.

At the time of the hearing, the Claimant suffered moderately severe cerebral palsy and significant cognitive impairment. He had severe motor impairments, no effective movement of his lower limbs, significant impairment of his upper limbs and slurred speech. The medical consensus was that JR’s life expectancy had been reduced and that it was now 70.

Most of the heads of loss had been agreed by the parties, subject to the approval of the Court and the case came before Mr Justice William Davis for this approval and to decide the following heads of loss:

  • Loss of earnings and pension
  • Cost of care
  • Aids and equipment
  • Physiotherapy
  • Accommodation
  • Assistive technology
  • Travel and transport
  • Court of Protection fees

Most of these issues merely required an analysis of reasonableness and necessity, however in respect of loss of future earnings/pension and accommodation, there were issues of legal principle to be decided. 

The Court’s decision on Roberts v Johnson accommodation claims

In respect of accommodation, it was agreed that the current accommodation of JR was wholly unsuited to his needs and that a new property must be either purchased and adapted or constructed.

The Court’s approach in such claims has been long-established by Roberts v Johnstone [1989] QB 878. There the Court of Appeal approved the proposition that damages for accommodation costs should not represent the full capital value of the asset, since that would remain intact and represent a windfall to the Claimant’s estate at his or her death; rather, an annual figure should be adopted. Consideration was given to using the annual mortgage interest to reach the appropriate figure however that was rejected since, given the rate of mortgage interest prevailing at that at the time, this would have led to recovery of a sum exceeding the capital value of the house. The Court held that it was better to consider the lost income by reference to return in risk-free investment and the loss of the yield on the capital value spent on the property. The figure was fixed at 2% and subsequently increased to 2.5% when the discount rate was set at that figure.

In February of this year the Lord Chancellor exercised her power to revise the personal injury discount rate and set it at -0.75%. This change causes significant problems with the traditional Roberts v Johnson approach, applied in hundreds if not thousands of cases in the last nearly 30 years. Although multipliers have increased, with a negative discount rate the normal calculation would produce a negative figure for an accommodation claim.

In the present case, the Defendant argued that the conclusion that must be taken from the Lord Chancellor’s statement is that there is at present no ability to obtain a positive return on a capital fund based on a risk-free investment. The sum expended on a house would otherwise have earned no income unless invested into real property. JR had suffered no loss and there was therefore no need to compensate him; the proper approach was to allow a zero for the cost of accommodation.

The Claimant argued that Roberts v Johnson was a pragmatic solution to the problem of providing accommodation, and that whilst the decision is binding the percentage set was ‘arbitrary’ and not necessarily fixed at the discount rate. The Claimant invited the Court to depart from the discount rate when setting the return and to adopt 2.5% as the annual figure. To avoid a windfall in light of the increased multipliers, it was suggested that the benefit should be capped at the capital cost of the accommodation to be purchased.

Davis J held that whilst it was obviously correct that Roberts v Johnson was binding, it was not correct that that the percentage set was arbitrary; rather it was the rate of return on a risk-free investment. Applying that formula today results in a negative figure but that did not mean it was inherently wrong. The Claimant’s approach would result in a windfall to JR’s estate which would include the total value of the property which would almost certainly have appreciated significantly. It was desirable that a fair and proper solution should be found to the conundrum of providing a claimant with the means to purchase special accommodation, but Davis J considered that on the evidence available to him he was not in a position to find the fair and proper solution to the problem as a whole. He considered that maintaining the Roberts v Johnson approach was the only basis upon which he could proceed and he therefore allowed nothing for the capital cost of special accommodation. 

Comment

Davis J was right that it is highly desirable for a fair and proper solution to be found to the problem now presented by accommodation claims. Neither the Claimant nor the Defendant’s proposed solutions seemed to the right balance between justly compensating a claimant for the real loss suffered in respect of accommodation without providing the estate with a windfall after the claimant’s death. Permission to appeal has been given with the Judge suggesting that the matter should be expedited. It is hoped therefore that the important issue of the appropriate calculation of accommodation claims will be considered by the Court of Appeal shortly.

Whatever is decided could potentially make a significant difference to any claim. Roberts v Johnson has long been accepted as an “imperfect but pragmatic” approach to providing accommodation (per Tomlinson LJ in Manna v Central Manchester University Hospitals NHS Foundation Trust [2017] EWCA Civ 12 – decided in January 2017 prior to the announcement of the new discount rate). Having reached this approach, there has been very little judicial consideration of the possible alternatives. With the new discount rate, the approach can no longer be considered the pragmatic solution and a new one will need to be found.

Various alternative solutions to the difficult problem have been suggested: basing the calculation on annual rental or mortgage costs; requiring the defendant to purchase the accommodation with the Claimant having a life interest in it; and requiring the defendant to provide an interest-free loan for the purchase price. Davis J briefly considered with apparent approval the possibilities of allowing either an interest element on an appropriate mortgage over a 25 year term or requiring the defendant could take a reversionary interest in the property purchased (he had insufficient evidence to order either, however). Whilst these solutions are not without their problems (see for example the practical problems identified with renting a property identified by Tugendhat J in Oxborrow v West Suffolk Hospitals [2012] EWHC 1010), hopefully the Court of Appeal will be able to consider all possible solutions and assess which is the most pragmatic and just approach.

Whilst less immediately pressing, JR v Sheffield Teaching Hospitals NHS Foundation Trust is also noteworthy for its approach to a lost years claim by an adult claimant injured whilst still an infant.

It has long been established that an adult claimant who dies prematurely can recover loss of earnings for the period of ‘lost years’ during which those earnings would have benefited his dependents, whether or not such dependents existed (Pickett v British Rail Engineering [1980] AC 136). The Defendant did not dispute, and the Court found, that the loss of a pension should be treated the same as loss of earnings. The situation is different, however for a child claimant. In Croke v Wiseman [1982] 1 WLR 71 the Court of Appeal disallowed the lost years claim of a 7-year-old, catastrophically injured at 21 months. Griffiths LJ, who set out the majority view, held that the situation required too many hypotheticals and that the Court should refuse to speculate as to whether in the future there might have been dependants for the purpose of providing a fund of money in the form of a lost years award for persons who would never in fact exist. There is therefore a seemingly artificial dichotomy between the treatment of an adult and a child: where both are catastrophically injured and neither will have dependants as a result, only one could recover for lost years. The issue in this case was which side of that line an adult who had been catastrophically injured at birth. Davis J considered that the policy considerations underlying Croke did not apply to JR because he was an adult, that this fact undoubtedly changed the position, and that there was no reason not to allow lost years under Pickett.

The result of this decision would be that if a severely injured child claimant waited until adulthood before bringing a claim, they would recover more by way of damages as the claim would include lost years. Encouraging this delay is undoubtedly undesirable. Davis J considered this risk and took the view that in reality a lost years claim would rarely constitute a sufficient share of any award to justify such delay. Nevertheless, permission to appeal has been given on the issue and the Court of Appeal’s approach is awaited with interest. In particular if the Court takes the opportunity to comment upon whether the divide between the adult and child claimant is really a desirable approach.

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