Case Alerts

The facts of the matter will be very familiar to all those practicing within the travel industry. In brief,  X and her husband entered into a contract with Kuoni for an all-inclusive package holiday to Sri Lanka between 8 and 23 July 2010. On 17 July, whilst making her way to reception, X came into contact with N, a uniformed electrician who was employed by the hotel. N offered to escort X to reception via a short cut and in doing so, escorted X to an engineering room where he sexually assaulted X.

X issued proceedings against Kuoni for damages as a result of the hotel’s failure to properly perform its obligations under the contract; Kuoni being liable for the acts and omissions of its suppliers pursuant to Regulation 15 (1) of The Package Travel, Package Holidays and Package Tours Regulations 1992 (‘PTR’).

The matter was dismissed at first instance on the basis that the act of escorting a guest to reception did not fall within the holiday arrangements. Even if it did, Kuoni had the protection of PTR 15 (2) (c) (ii) in that there is no liability if the improper performance was due to an event which neither Kuoni nor the hotel, even with all due care, could foresee or forestall.

N had no criminal record or history which ought to have alerted the hotel to the possibility that such an action may take place following N’s employ. It seemed therefore that the hotel had been unable to foresee or forestall this event taking place.

X appealed and the case was also dismissed by the Court of Appeal who agreed that the act of an electrician escorting a guest to reception did not form part of the obligations under the holiday contract. The main consideration appears to be that this was not part of the role for which N was employed. The Court of Appeal went further and made obiter comments that an employee was not a supplier of services and therefore Kuoni could not be held liable for improper performance under PTR 15 as the event was not an act of Kuoni’s supplier.

X appealed to the Supreme Court who stayed the proceedings in order to refer 2 questions to the ECJ for guidance:

1. When a failure to perform the obligations under the contract are due to the actions of an employee of the supplier, can the Tour Operator rely upon the defence set out in PTR 15 (2) (c) (ii)? If so, by which criteria is the court to assess whether that defence applies?
2. Is an employee of a supplier to be considered himself as a supplier for the purposes of the above defence?

Dealing with the questions together, the ECJ has held that an employee of a supplier is not himself a supplier of services as the employee has not concluded any agreement with the Tour Operator, but merely performs work on behalf of the supplier. The employee’s work, in most cases, is intended to contribute to the performance of the obligations which the supplier has agreed to perform.

It follows therefore that a Tour Operator can be held liable if the acts or omissions of an employee of the supplier results in the improper performance of the obligations under the holiday contract. I would say that this reiterates the understanding which was held by the industry prior to the Supreme Court’s referral to the ECJ.

As to the availability of any defences, the ECJ distinguished between the defence set out in PTR 15 (2) (c) (i) and PTR 15 (2) (c) (ii); the former being the definition for force majeure and is therefore to be treated differently to the latter which is an event which cannot be foreseen or forestalled.

An event which cannot be foreseen or forestalled must be interpreted as being an event which does not fall within the control of the supplier. The acts of an employee do fall within the control of the supplier and therefore cannot be events which could not have been foreseen or forestalled by the supplier.

The ECJ concluded therefore that the defence set out in PTR 15 (2) (c) (ii) cannot be relied upon by the Tour Operator when there has been a failure to perform the obligations under the holiday contract following an act or omission of the supplier’s employee.

It is prudent to point out that the ECJ was asked to assume that an electrician escorting a guest to reception and the subsequent assault of that guest by the electrician would amount to an improper performance of obligations under the holiday contract.

Comment

It begs the question whether Kuoni ought to have pleaded the force majeure defence under PTR 15 (2) (c) (i) instead of the defence under (ii) and whether this would provide a more favourable outcome for Kuoni. It seems unlikely, as the force majeure defence also refers to events beyond the control of the party by whom the exception is pleaded suggesting the same interpretation will be applied, that is, the employee’s actions are not beyond the supplier’s control. However, the ECJ did see fit to make the distinction between the two defences and so perhaps consideration of consequences which could not have been avoided (i) would provide an alternative outcome to consequences which simply could not be foreseen or forestalled (ii).

The matter now goes back to the Supreme Court to provide their judgment as to whether the electrician was performing an obligation under the contract.

It seems that it will be a question of the facts in each individual case as to whether a specific act or omission is within the scope of the holiday arrangements. If they are, then whatever action the employee has taken to bring about the damage, the Tour Operator will be liable and will be unable to rely upon the PTR 15 (2) (c) (ii) defence.

To download this Case Alert as a PDF please click here.

If you would like to know more about this matter, please speak to your contact at Plexus Law:

Claire Scargill, Associate Partner

T: 020 7220 5930   |    E: claire.scargill@plexuslaw.co.uk

Whilst we take care to ensure that the material in this Case Alert is correct, it is made available for information only, and no representation is given as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the contents of this Case Alert do not give specific legal advice, should not be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss which may arise from reliance on information or materials published in this Case Alert.

 

 

 

 

 

 

 

Background

• Claimant claimed damage to her property as a result of poor standard of installation of cavity wall insulation. Claimant’s case being that the installation was so poor that her property suffered significant damp, requiring removal of the CWI, reinstatement of the property internally and externally.
• Claimant’s case supported by expert evidence.

In written judgment handed down on 18th January 2021, the Claimant’s expert evidence was described by HHJ Saffman as being “unimpressive”,  and “troubling”’.

Extracts from Judgment of HHJ Saffman:

• In this case I have to say that I did not find Mr Hodgson to be an impressive witness. I have recorded at length from paragraph 70 to 129 above his oral evidence. In my view, that section of this judgment only has to be reread to identify the areas where Mr Hodgson’s evidence was troubling. I set out some of those below but my observations are not exhaustive.
• It was troubling that a significant plank of the Claimant’s case relates firstly to the impedance of evaporation and secondly, penetrating damp caused by the transfer of moisture over the surface of Isothane in the cavity but that neither appear in the report or any addendum notwithstanding that the need to do so is likely to have become obvious following [previous case].
• It is equally troubling that Mr Hodgson’s report contains the various obvious errors. There is the wholly inappropriate reference to saturation and impregnation of Isothane notwithstanding that the inappropriateness of those expressions was obvious, if not before Bibi, then certainly after it. Additionally,there are the errors which I enumerate in paragraph 88 which have not been corrected. Even if these latter were corrected I would be troubled by the fact that Mr Hodgson ever thought that a cavity needed to be no less than 50mm in width for the insertion of Isothane or that Isothane was not suitable for installation in uneven walls when that is quite manifestly not the case. Also of concern was his reference to cracks. When challenged about these it seems that in fact he was referring to hairline cracks but these as a fact do not contraindicate the installation of Isothane. In the same vein, in his report he complained of the absence of cavity brushes when it is conceded that these are not needed. And of course, his report refers to there being no omitted areas when manifestly the basement was omitted.
• It is equally troubling that his report makes no mention of black mould anywhere on the upper floors except to say that none was detected but that in his oral evidence, suddenly, he recalls (from a visit 11 months earlier) that there was black mould in a wardrobe on the upper floors. It is also troubling that no photograph was taken of that mould notwithstanding that Mr Hodgson recognises that his practice was to photograph areas displaying mould.
• His evidence in relation to the necessity for a DPC was equally troubling. I do not think that it can be said that the BBA certificate makes it clear that Isothane cannot be installed where there is no DPC or a defective one. In the end, Mr Hodgson seemed to me to impliedly accept that when he stated that following a meeting in 2015 the BBA had sent out a letter to their accredited contractors to tell them that an effective DPC must be in place before Isothane was installed. I refer to this paragraph 116 above. It is extraordinary that the existence of such a letter should only have come to the attention of the court during the course of his oral evidence and after he had been carefully taken through all the documents which he suggested indicated that a DPC was necessary but which in fact did not do so. It is equally extraordinary that the latter has not been produced.
• Even his evidence concerning voids lacked a certain logicality. They were the basis of his assertion that water can track across Isothane at the bottom of a void to the inner leaf. But the only voids that he has found with the borescope are at the bottom of the cavity where there is little, if any, Isothane.
• There was equally some illogicality in my view about his concern relation to debris in the cavity where such debris appeared to be in areas which lacked Isothane. Equally, I was not convinced by his evidence as to the use to which a thermal imaging camera can be put. I do not think that it could be seriously doubted that such a camera simply measures heat radiating from a surface and that in those circumstances it can only be a possible pointer to the existence of areas which may be damp but it does not detect damp itself.
• In relation to the mode in which a damp meter should be used, Mr Hodgson was very clear that search mode was reliable but really one only has to read the manufacturer’s instruction manual to which I refer in paragraph 55. That states that measure mode readings are “precise and specific”. Search mode readings are ideal for making rapid surveys and to pinpoint areas of concern that may justify more extensive investigation. They are an alternative to measure mode when measure mode is impractical. All this is not suggestive of search mode being as accurate as measure mode.

Damages

Claim for £203,500 rejected and Claimant awarded nominal damages only of £500 to reflect the fact there were voids in the cavity.

Claimant’s expert

Claimant’s expert conceded, in evidence:

• His description of how damage occurred was completely wrong
• Reference to omitted areas was wrong
• It is wrong to say that Isothane cannot be used in uneven cavities
• It is wrong to say the cavity must be at least 50mm
• It is wrong to say there is any requirement to insert cavity brushes
• There is nothing in Building Regulations requiring a DPC to be present in cavity walls (it was conceded that LABC and KIWA specifically allow installation without a DPC)
• It is wrong to say that all voids lead to condensation
• A number of his costings in the schedule of loss were not reliable

Conclusions

The use of standard allegations in such cases cannot continue. The concessions made by this expert in relation to allegations of breach and unreliable costings on quantum present Claimant’s with significant difficulties.

QBE/Plexus Law were represented by Lucas Fear-Segal of 2TG.

To view/download this Legal Update as a PDF please click here.

If you would like to know more about this matter, please speak to your contacts at Plexus Law:

Louise Wright, Partner

T: 0113 222 9063   |   M: 07867 459 491   |   E: louise.wright@plexuslaw.co.uk

Whilst we take care to ensure that the material in this Case Alert  is correct, it is made available for information only, and no representation is given as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the contents of this Case Alert do not give specific legal advice, should not be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss which may arise from reliance on information or materials published in this Case Alert.

 

 

 

 

 

 

 

 

 

 

 

The Supreme Court has just handed down on 13 November 2020, a majority judgment (3:2) in Maughan v HM Senior Coroner for Oxfordshire regarding the standard of proof required in Inquests for verdicts of unlawful killing and suicide. By majority, the Supreme Court decided that the standard of proof required for such short form Inquest verdicts is the civil standard of “balance of probabilities” as opposed to the criminal standard of “beyond reasonable doubt” so such verdict findings will in future be much easier to establish than before.

The lower Courts in Maughan previously concluded that unlawful killing was a different category of verdict to suicide (as suicide was no longer a criminal offence) and found numerous reasons for unlawful killing to remain on the criminal standard of proof including:

• Inquests are not criminal proceedings and unlawful killing implies a crime. Unlawful killing can therefore be considered to have its own special status as an Inquest verdict.
• While an Inquest cannot determine any question of criminal liability on the part of a named person, the identity of the person will become knowledge as part of the Inquest process and therefore the higher criminal standard should apply.
• A conclusion of unlawful killing could cause the CPS to reconsider bringing criminal charges and therefore again the criminal standard is appropriate.

Although we are not surprised that the civil burden of proof has been found to be applicable in respect of suicide verdicts (as held by the lower courts in the Maughan case), the civil burden for “unlawful killing” has come as a significant change in the law which has potentially wide-ranging impacts.

Some of the potentially negative implications for corporate clients and insurers are set out below.

Unlawful killing/suicide verdicts

In respect of a verdict of suicide then there are two elements which a Coroner or Jury must establish that:

1. The deceased took their own life and;
2. They intended to kill themselves.

In respect of a verdict of unlawful killing then the elements that must be established are that:

1. Someone has been killed by one or more persons (known or unknown) and;
2. The killing was done without lawful excuse and;
3. The killing was in breach of criminal law.

Following the Supreme Court case of Maughan the Coroner or Jury can reach verdicts of unlawful killing or suicide when the evidence establishes, on the balance of probabilities, that this was the cause of death.

Practical implications

A verdict of unlawful killing is extremely serious indeed and could potentially lead to more individuals or organisations being charged with Gross Negligence Manslaughter or Corporate Manslaughter (under the Corporate Manslaughter and Corporate Homicide Act 2007) or alternatively serious health and safety breaches under the Health and Safety at Work Act 1974. Given that the criminal burden is no longer required for unlawful killing (as has always previously been the case), then this could lead to individuals and organisations not being prepared to properly engage with the Inquest process as there will be concerns that they could potentially incriminate themselves if unlawful killing is a potential Inquest verdict.

The other areas that could lead to difficulties arising from this Supreme Court decision in Maughan include:

1. The expectations of bereaved families who could be pushing for such verdicts.
2. More adversarial and/or defensive strategies pursued by Interested Parties despite an Inquest not strictly speaking being a forum to apportion blame or fault.
3. More detailed legal arguments at the Pre-Inquest Review hearing stage regarding disclosure, witnesses, the scope of the Inquest including the applicability or otherwise of Article 2 (“Right to Life”) and the need for a jury.
4. Concerns regarding individuals and corporations not engaging evidentially with the Inquest process due to concerns about criminal charges.
5. Any potential increase in challenges to such verdicts via Judicial Reviews.
6. There are already significant delays in the coronial system due to Covid-19 issues and this judgment could lead to greater delays in getting Inquests dealt with to the detriment of bereaved families.
7. Insurers will also have concerns about any potential findings of unlawful killing given that costs (both Claimants and Defendants) could significantly increase and any such verdict would significantly negatively impact civil claims.
8. The label of unlawful killing is also an extremely negative and emotive issue and should not be taken lightly given the adverse implications that it could have on both individuals and organisations personally and professionally and it could impact business generally and future tender opportunities.
9.  This decision could in future lead to inflationary pressures on commercial and D&O policies if costs relating to Inquest increase significantly.

 Future strategies

The national Plexus Regulatory Team is here to advise our corporate and insurance clients in respect of this judgment both in terms of current cases and future potential Inquests. The threat of an “unlawful killing” verdict however, needs to be taken very seriously indeed and detailed advice provided in respect of the evidence, strategies and potential outcomes and ramifications of such verdicts.

To view/download this Article as a PDF please click here.

If you would like to know more about this matter, please speak to your contacts at Plexus Law:

Anthony Baker, Partner

T: 0113 4681 702   |   M: 07811 545 321   |   E: anthony.baker@plexuslaw.co.uk

Whilst we take care to ensure that the material in this Legal Update  is correct, it is made available for information only, and no representation is given as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the contents of this Legal Update do not give specific legal advice, should not be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss which may arise from reliance on information or materials published in this Legal Update.

 

Defendant lawyers who regularly deal with credit hire cases are often left frustrated by bland, generic pleadings provided by claimants in relation to the often decisive issue of impecuniousity.

However, following the recent Court of Appeal ruling in Diriye v Bojaj [2020] EWCA Civ 1400 that should now change. In handing down his judgment Coulson LJ emphasised the need for claimants to engage with the litigation process and fully plead and particularise any assertion of impecuniousity at an early stage of proceedings. The appeal dealt with three points:

• Pleading of allegations of impecuniousity;
• The approach to relief from sanctions applications under CPR 3.9; and
• Whether “Signed for 1^st Class” service is covered by CPR 6.26.

Handing down judgment, Coulson LJ said that claimants were not entitled to “advance a rubbishy case in stages from pleading to witness statement to trial” in the hope that eventually defendants may take a commercial decision to settle the case.

Facts of the Case

The matter stemmed from a road traffic accident in May 2014 resultant from which the claimant/appellant, a minicab driver, brought a claim for damages which included a claim for credit hire charges pleaded at £12,048.29.

In the course of the litigation, the claim was allocated to the Fast Track and the court provided familiar directions in respect of credit hire which included an unless order in the following terms:

“The claimant shall be debarred from relying upon the facts of impecuniosity for the purposes of determining the appropriate rate of hire unless … By 4:00pm on the 4th April 2018, the claimant files and serves a reply to the defence setting out all facts in support of any assertion that the claimant was impecunious at the commencement of and during the hire of the vehicle in question.”

The Reply to Defence was posted to the respondent/defendant using the Royal Mail’s “Signed For 1^st Class Service” on the 4^th April 2018. However, the Reply was not signed for and not received by the Defendant until 9^th April 2018 putting the Claimant in breach of the order.

The Claimant made an application for relief from sanctions which was heard by DDJ Goodman at first instance who found that sending the documents by “Signed For 1st Class” was not effective service and dismissed the relief application applying the three-stage Denton test.

At the first appeal the decision was upheld, and the second appeal was heard by the Court of Appeal in October 2020.

Impecuniosity

The Claimant had advanced pleadings which are all too commonly seen in which the Claimant had made a one-line assertion to have been impecunious simply stating that the money he earned as a minicab driver was expended on bills and his family’s daily living.  Nothing else of relevance was provided and no figures offered. In addition, the Claimant’s witness statement had not taken the issue much further.

Coulson LJ referred back to the wording of the unless order which required a pleading of “all facts in support of any assertion” of impecuniousity. He added that:

“They [defendants] are entitled to know the case they have to meet. They should not be expected to have to prepare for a trial where the critical item of claim depends on a one line assertion, and hoping that, as a result of the cross-examination of the appellant, the judge will reject the claim. That is not how civil litigation is supposed to work post-CPR.”

He added:

“Therefore, in considering all the circumstances of this case, I conclude that the appellant and his solicitors have never engaged with the need properly to plead and prove his impecuniosity in support of the claim for credit hire charges. They did not do that at the outset of the claim; they did not do so when the subject of an Unless Order; and they have not done so subsequently. In those circumstances, there was no basis on which the court could grant the appellant relief from sanctions.”

Service/Relief From Sanctions

Although the Court of Appeal held that “Signed for 1^st Class” did fall within the parameters of CPR 6.26, the Reply had still been served two days late. Coulson LJ referred to the Denton test and considered it appropriate to consider the breach at stage 1 of the test, concluding that the breach was both serious and significant.

It had been submitted that the breach was not significant because it had no effect on the court proceedings, but Coulson LJ firmly rejected the assertion that significance can only be measured by whether the court timetable had been imperilled. He said:

“If a breach was required adversely to affect the court timetable before it could be called serious or significant, that would be uncomfortably and unacceptably close to the pre-CPR regime, where the defaulting party could get away with repeated breaches of court orders simply because the other side could not show that they had suffered specific prejudice as a result. That is not now the law.”

Significantly he added:

“Even if the breach in this case had been confined to the delay in service, that would not make it insignificant. Parties to civil litigation need to make clear the important elements of their respective cases at an early stage. Gone are the days of ambush and keeping important points up your sleeve. The aim of much civil litigation is to bring about a cost-effective settlement. If a claimant delays in providing critical information, particularly where he has been ordered to provide it by way of an Unless Order, that delay adversely affects the other side’s ability to a take a view about the strength or weaknesses of the claim they face. The effect on the ligation in question should not be measured simply by whether or not the trial date can still be met; in properly run litigation, the aim must be to avoid having a trial date altogether.”

It was noted that there had been some delay in bringing the application the explanations for which were described as being of “the dog ate my homework variety”.

In dismissing the application, the Court of Appeal also made reference to the submissions made on behalf of the Claimant that the Defendants had been responsible for the breach because of an unreasonable refusal to allow an extension of time in respect of the unless order.  Coulson LJ concluded that the Defendants had in no way acted unreasonably. Whilst it had been said in Denton that mistakes should not be taken advantage of where the failure was neither serious or significant, Coulson LJ said that this was a “relatively high bar” and that it was emphatically not designed to give carte blanche to the defaulting party to blame the other side for the delays caused by its own breach.

Comment

This case firmly places the onus on claimants to fully plead and particularise credit hire claims and pleadings of impecuniousity at the outset of the action. Defendants, having previously had to wait until disclosure and beyond, before being in a position to credibly assess a claimant’s financial position should now be in a position to do so at an earlier stage, allowing for costs protective offers to be made sooner and with a greater degree of justification.

It is interesting to note that Coulson LJ in his judgment made repeated reference to the need for the Reply to set out all the facts in support of an assertion to be impecunious. This could be read in conjunction with the recent amendments to CPR PD16 which provides an obligation on the  particulars of claim to set out “relevant facts” in relation to credit hire claims which pleadings still all too often fail to do.

When making relief from sanctions applications, lack of disruption to the court timetable is often cited as a reason for such relief to be granted. Coulson LJ confirms this is not the overriding consideration. Defendants should further not be fearful of refusing extensions where it is appropriate to do so.

To view/download as a PDF please click here.

If you would like to know more about this matter, please speak to your contact at Plexus Law:

Chris Dibb, Associate 

T: 01422 394 280   |   M: 07970 282 901   |   E: christopher.dibb@plexuslaw.co.uk

Whilst we take care to ensure that the material in this Legal Update is correct, it is made available for information only, and no representation is given as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the contents of this Legal Update do not give specific legal advice, should not be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss which may arise from reliance on information or materials published in this Legal Update.

 

Two Claimants who supported the false injury claims made by their supposed passengers have had their own claims thrown out and been found to have acted dishonestly.

The man and the woman had been involved in a genuine accident with a Co-op policyholder back in July 2017 and had seemingly legitimate claims for personal injury.  However, they then supported the false claims made by the woman’s brother and father who had also alleged to have been in the vehicle at the time of the accident.

Following an application made by Plexus Law acting for Co-op Insurance, all four claimants were found to have acted dishonestly and had their claims for injury dismissed by a judge.

The case arose from a genuine accident; the policyholder was stationary and parked when his adult daughter, who was in the front passenger seat, opened her door into a collision with an oncoming Volvo containing two of the claimants. Following the collision, both the policyholder and his daughter got out of the vehicle as did the occupants of the Volvo. The occupants of the Volvo were known to the policyholder’s daughter and she was able to say who was driving.

Both the policyholder and his daughter were able to look inside the Volvo and saw that there were child seats in the back meaning that there could not have been any adult rear seat passengers in the vehicle.

Following Plexus Law’s investigations, the four claims were disputed, and the claimants issued proceedings. A Defence was filed in which a formal allegation of fraud was pleaded against the claimants; on the basis that two of the claimants were not in the vehicle and against the other two claimants on the basis that they were supporting two phantom passenger claims.

Following the filing of the Defence and receipt of case management directions the Claimants’ solicitors were granted an order which removed them from the record as acting on their behalf. The Claimants, who continued as litigants in person, failed to comply with the court’s directions and as such an application was made for summary judgment and a finding of fundamental dishonestly.

The Defendant was represented by Tim Sharpe, of Temple Garden Chambers, at the hearing which was heard by way of telephone conference and attended by all four claimants.  The order sought by the Defendant was approved by the District Judge who not only ordered the claimants to pay the Defendant’s costs of over £6,000 but also ordered one of the claimants to make repayment of an interim payment which had been sent prior to the submission of a CNF.

If you would like to know more about this matter, please speak to your contact at Plexus Law:

Chris Dibb, Associate 

T: 01422 394 280   |   M: 07970 282 901   |   E: christopher.dibb@plexuslaw.co.uk

Whilst we take care to ensure that the material in this Case Alert is correct, it is made available for information only, and no representation is given as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the contents of this Case Alert do not give specific legal advice, should not be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss which may arise from reliance on information or materials published in this Case Alert.

The Court of Appeal handed down their judgement on 9 October 2020 following the hearing of the appeal in Swift v Carpenter on 23-25 June 2020.

The Court of Appeal held it was not bound by the formula set out in Roberts v Johnstone, in place since 1989 as this does not result in fair compensation for Claimants.

In place of the Roberts v Johnstone formula which was based on the discount rate, damages for accommodation will now be calculated by reference to the additional cost of the new property less the present market value of the reversionary interest.

At first instance, Mrs Justice Lambert accepted the Claimant had a reasonable need for alternative accommodation following a road traffic accident in which she sustained injuries resulting in a below knee amputation of her left leg and serious injury to her right foot.  The increased capital costs of the required accommodation were £900,000.  However, due to the negative discount rate in place at the date of trial and bound by the decision in Roberts v Johnstone she made no award but did give permission for the Claimant to appeal the decision.

 

The issues for the Court of Appeal were:

 

1. Whether they were bound by Roberts v Johnstone?
2. If not, should they depart from Roberts v Johnstone?
3. If they should depart from Roberts v Johnstone what alternative is a fair and reasonable method of calculating compensation?

 

On the first issue the court held Roberts v Johnstone was authoritative guidance only.  This meant the Court of Appeal was entitled to revisit the guidance.  On whether they should depart from that guidance they held the Roberts v Johnstone formula no longer achieved fair and reasonable compensation and they should depart from this method.

A number of new methods for the calculation were considered including whether to award the full capital value of the reversionary interest or whether to reduce the capital award to reflect the notional revisionary interest value.  The Court of Appeal decided on the latter approach.

The Court held an appropriate rate for the reversionary interest was a more cautious rate of 5% than the return usually sought by investors in this market.

One constructive finding for insurers is the Court of Appeal’s comment that there may be cases where the guidance is inappropriate, leaving open an argument on the appropriate award, for example in cases involving a short life expectancy.  However, the Court did hold the guidance should only be revisited in the event of significant changes, and rarely by a first instance court.

The decision is not unexpected but will be disappointing for insurers who will be required to pay significantly more for accommodation claims, particularly at times when a negative discount rate is in force.  The court have arrived at a formula that appears simple but does not reflect the true loss to the Claimant and overcompensates Claimants in many ways.

 

Appendix: Example Calculation using figures from Swift

Reversionary interest = (Price of new property – Price of existing property) x 1.05 (to the power of the Claimant’s life expectancy taken from Ogden Table 1 or 2)

 

Cost of the property now required: £2,350,000

Value of the Claimant’s existing property: £1,450,000

Capital shortfall: £2,350,000 – £1,450,000 = £900,000

Claimant’s life expectancy per Table 2: 45.43 years

Value of the reversionary interest: £900,000 x 1.05 ^-45.43 = £98,087 ^*

Damages award = £900,000 – £98,087 = £801,913

For any further information regarding this matter please speak to your contacts at Plexus Law:

Julia Archer, Associate

T: 01 61 245 7929    |   E: julia.archer@plexuslaw.co.uk

Philip D’Netto, Partner

T: 0161 244 6915   |   M: 07970 318 434   |   E: philip.dnetto@plexuslaw.co.uk

Whilst we take care to ensure that the material in this Accommodation Update is correct, it is made available for information only, and no representation is given as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the contents of this Accommodation Update do not give specific legal advice, should not be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss which may arise from reliance on information or materials published in this Accommodation Update.