England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/04/2012

Mr Justice Tugendhat :

1. The Claimant was born in October 2006 and so is now aged 5. He suffers from Quadriplegic Cerebral Palsy. His disabilities are severe. He has very limited mobility, significant medical problems and severe cognitive impairment. He has very limited vision. He requires constant supervision and 24 hour care. He was born at West Suffolk NHS Hospital in circumstances which gave rise to this claim for negligence. Liability has been admitted and on 8 November 2010 judgment was entered for damages to be assessed. An interim payment of £100,000 has been made.
2. On 28 March 2012 the Claimant issued an application notice in which he asked the court to order that the Defendant make an interim payment on account of damages in the sum of £740,000 to provide suitable accommodation for the Claimant. After the hearing I indicated that I would make that order and give my reasons in writing later, as I now do.
3. The only schedule of damages, and the only evidence, before the court is that put forward on behalf of the Claimant. The Claimant's schedule of loss is dated 13 December 2011. It would have been provided in September 2011 but for a further catastrophe that befell the Claimant. On 21 August his mother died suddenly. He is now cared for by his father with the assistance of carers. He lives with his father and his little sister in a rented bungalow.
4. The evidence before the court includes statements made by the Claimant's mother in October 2010 and May 2011 and by his father in October 2011. There is a report dated 27 June 2011 from the following: Dr Rosenbloom, Consultant Paediatric Neurologist dated 27 June 2011, Claire Broughton, Occupational Therapist, dated 26 July 2011, Mary Clegg, Chartered Physiotherapist dated September 2011, Leslie-Caroll Few, Paediatric Speech and Language Therapist, dated August 2011, Albert Reid, Chartered Educational and Clinical (Child) Psychologist, dated May 2011, and Stephen Cumbers, Architect, dated July 2011.
5. Mr Cumbers visited the Claimant's home in February 2011. His report is very detailed. He recorded that the family had been living at that rented bungalow since July 2009 paying rent of £595 per month. It has undergone no adaptations apart from the installations of ceiling mounted hoists in the Claimant's bedroom and the family bathroom and a temporary ramp to the back door. There is no other means of wheelchair access. It is in a village about eight miles south west of Norwich. It has a number of deficiencies as a home for the Claimant which Mr Cumbers describes. It has a floor area of 96.29 sq meters, whereas in the opinion of Mr Cumbers, what is required is a floor area of more than twice that amount namely 193 sq meters. It is unnecessary for me to set out the deficiencies in the property, because it is common ground that it is unsuitable for the Claimant. Having considered bungalows that might be suitable for adaptation to meet the Claimant's requirements Mr Cumbers states that the average cost of such properties is some £360,000 and that the likely cost of extending and adapting such a property would be about £330,000.
6. Dr Rosenbloom considers that the Claimant's life expectancy is only to the age of 21. Thus the multiplier claimed for future losses, if those are to be calculated on the basis of a lump sum, is 13.22 at 2 ½ %. But Dr Rosenbloom also states that the use of the average figure he mentions for a child such as the Claimant is likely to either under or over-estimate his actual survival to a significant degree. For that reason those advising the Claimant consider it appropriate that so far as possible damages for future loss should be paid by way of a periodical payments order ("PPO") so as to avoid to the greatest possible degree the risk of under or over compensation. In the schedule of loss, the claim is made for damages for future care, case management, occupational therapy, speech and language therapy, deputyship costs and loss of earnings to be awarded by way of PPO, but it is submitted that it is arguable that this should also include other recurring items of future loss such as physiotherapy, holidays and recurring items of equipment.

THE LEGAL FRAMEWORK

7. The applicable law is not in dispute. CPR Part 25.6 makes provision for applications for interim payment orders, and CPR Part 25.7 specifies the conditions to be satisfied and the matters to be taken into account. The Claimant has obtained judgment and so satisfies one necessary condition. CPR Part 25.7(4) provides that "the court must not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment".
8. The approach to be adopted by the court is set out by the Court of Appeal in Eeles v Cobham Hire Services Limited [2009] EWCA Civ 204; [2010] 1 WLR 409 at paras 43 to 45 as follows:

43."The judge's first task is to assess the likely amount of the final judgment, leaving out of account the heads of future loss which the trial judge might wish to deal with by PPO. Strictly speaking, the assessment should comprise only special damages to date and damages for pain, suffering and loss of amenity, with interest on both. However, we consider that the practice of awarding accommodation costs (including future running costs) as a lump sum is sufficiently well established that it will usually be appropriate to include accommodation costs in the expected capital award. The assessment should be carried out on a conservative basis. Save in the circumstances discussed below, the interim payment will be a reasonable proportion of that assessment. A reasonable proportion may well be a high proportion, provided that the assessment has been conservative. The objective is not to keep the claimant out of his money but to avoid any risk of over-payment.

44. For this part of the process, the judge need have no regard as to what the claimant intends to do with the money. If he is of full age and capacity, he may spend it as he will; if not, expenditure will be controlled by the Court of Protection.

45. We turn to the circumstances in which the judge will be entitled to include in his assessment of the likely amount of the final judgment additional elements of future loss. That can be done when the judge can confidently predict that the trial judge will wish to award a larger capital sum than that covered by general and special damages, interest and accommodation costs alone. We endorse the approach of Stanley Burnton J in Braithwaite. Before taking such a course, the judge must be satisfied by evidence that there is a real need for the interim payment requested. For example, where the request is for money to buy a house, he must be satisfied that there is a real need for accommodation now (as opposed to after the trial) and that the amount of money requested is reasonable. He does not need to decide whether the particular house proposed is suitable; that is a matter for the Court of Protection. But the judge must not make an interim payment order without first deciding whether expenditure of approximately the amount he proposes to award is reasonably necessary. If the judge is satisfied of that, to a high degree of confidence, then he will be justified in predicting that the trial judge would take that course and he will be justified in assessing the likely amount of the final award at such a level as will permit the making of the necessary interim award. "

9. So much is agreed. But there is a major issue of principle raised by Mr Spencer. That arises in relation to Roberts v Johnstone [1989] 1 QB 878. The law is conveniently summarised in McGregor on Damages 18^th edition paras 35-206 to 35-211 which read as follows (omitting references):

"35-206 In 1973 George v Pinnock established that a severely disabled claimant could claim for the additional costs of providing special accommodation for him to live in … over the cost of his existing living accommodation which was now wholly unsuitable for his injured condition… Since this time successful claims of this nature have become very familiar; illustrative from the reports are Moriarty v McCarthy and Roberts v. Johnstone. Sometimes a home is bought which may or may not require adaptation for the claimant, sometimes a home is built suitable for his needs and sometimes the existing home is adapted to his needs.

35-207 The amount awarded has never been the difference between the value of the new or adapted accommodation over the value of the existing home in its existing state but rather the interest upon that difference over the period that the new or adapted accommodation will be needed, generally the claimant's lifetime. To allow the full cost of the accommodation acquired over the proceeds of the existing accommodation disposed of or, as the case may be, the full value of the adapted accommodation over its value before adaptation, would leave the extra value in the hands of the claimant, or of his estate when it is no longer required for them. The full cost is recoverable only of any adaptations of the accommodation, required by the claimant's condition, to the extent that these do not increase the value of the property, it being well known that adaptations for disabled use not only may add but may even diminish the value of property…

35-208 For a time the courts were prepared to award interest at a rate that would allow the claimant to borrow in order to pay for the required accommodation or the required adaptations but in Roberts v Johnstone the Court of Appeal called a halt to this generous practice. The reason for so doing was this. Inherent in this method of computing the damages attributable to the need for special accommodation was the danger that, with a multiplier at the top of the range which a young disabled claimant could easily command, the resulting amount would exceed the capital cost upon which it was designed to be interest. This situation eventually became a reality in Roberts v Johnstone. The chosen multiplier of 16 when applied to a mortgage rate of 7 per cent took the figure above the cost of the new accommodation, specifically to 112 per cent of the cost. Such an amount the court clearly could not award; it did 'not comply', as Stocker LJ said, 'with the reasoning behind George v Pinnock'.

35-209 Unfortunately the Court of Appeal went to the other extreme and awarded the only the 2 per cent contended for by the defendant... The practical result to a move of a 2 per cent rate at a time when multipliers were still worked out on a 4.5 per cent discount rate was that claimants would at best obtain by way of damages in the region of one third only of the capital cost of their new accommodation … and were forced to resort to the monies awarded for general damages for non-pecuniary loss and to the extent they could afford to, to the award for the loss of earning capacity, for the remaining funding of the special accommodation to which they were entitled…

35-211 If this way of going about the computation continues as it appears to be doing, then claimants will be better off than formally as long as the discount rate remains above 2 per cent … However, the inequity, already pointed out, of not allowing the claimant sufficient money with which to acquire the needed accommodation, which the Roberts v Johnstone method, however applied does not give him, remains to a degree and quite often to a very substantial degree. One complete solution that has been suggested is that the claimant should be given the full purchase price but with a charge on the purchase property in favour of the defendant realisable on the claimant's death. But effecting this solution may be impractical".

10. According to the calculations made for the Claimant, this inequity is likely to occur in the present case, given the short expectation of life and the current discount rate.
11. Throughout the correspondence leading up to this application, and in paragraph 1 of the Defendant's skeleton argument, it is submitted that there will be an issue at trial as to whether the Claimant's future accommodation needs can adequately be met by his renting a larger property with modest adaptations. I noted that there was no reference in McGregor or the authorities cited to me, or elsewhere as far as I am aware, to any case in which a court or commentator has even considered whether a seriously disabled claimant's future accommodation needs can adequately be met by renting a property. Mr Spencer and Mr Hopkins both have very great experience of this field of the law, and neither of them was aware of any such discussion. No material has been put before the court to suggest that that is or could be a real issue at trial. Mr Hopkins states that consideration has been given in other cases to such future accommodation to the knowledge of those instructing him, but he put no written material before me.
12. There is of course no reason in principle why the future accommodation needs of a claimant should not be met by renting a property. But in practice there are obvious difficulties. It is unlikely that adaptations would be modest, and if they were to cost a significant sum, there would be no assurance that a claimant would only have to pay them once. A claimant would not have security of tenure for the full expectation of his life and thus may have to move from one rented property to another, paying for the adaptations in each case. Indeed the situation may be worse, because as Mr Hopkins reminded the court, in such a situation the claimant may even have to pay for the reinstatement of the property which he is leaving to put it back into the condition in which it had been before the adaptations had been made.

THE BACKGROUND TO THIS APPLICATION

13. The circumstances leading up to this application are unfortunate. As Mr Hopkins pointed out, this application is being heard only some eight months before the trial is due to start. That is a relevant factor, but the fact that it is being heard after so long a delay cannot be attributed to those advising the Claimant.
14. Over a year ago, on 17 March 2011, Ms Patton, the solicitor for the Claimant, spoke to Kennedys for the Defendant and explained the difficulty in finding suitable accommodation for the Claimant given that his life expectancy is limited, as is likely to be common ground. She pointed out the difficulty with renting.
15. On 19 April 2011 Kennedys stated, as I do not doubt to be the case, that it is not the practice of the NHSLA to purchase properties for claimants to live in. While not disputing the current property is unsuitable for the Claimant Kennedys stated that they would ask their client's accommodation expert to advise upon whether there are properties available to rent which would require only modest adaptations.
16. On 13 July Mrs Patton wrote stating that the advice of leading counsel and the Claimant's accommodation expert is that rental is not an option. She extended an invitation to the Defendant to attend a meeting to discuss a possible solution.
17. On 3 August Kennedys wrote stating that they still had not heard from the Defendant's accommodation expert and that they were not instructed to arrange a meeting at that time.
18. On 23 September Kennedys wrote that the Defendant's accommodation expert confirmed that there is no reason in principle why the Claimant could not rent a suitable property which would require only minor adaptations costing in the order of £10,000. They attached 36 pages of property particulars.
19. On 27 September Ms Patton, having read the material provided, wrote that the minor modifications to the Claimant's present accommodation do not suffice for his disabilities and that attempts to arrange further modifications had not yet been approved by the landlord. She didn't accept that any of the properties details of which she had received from the Defendant would be suitable for reasons she set out. Again she pressed for a meeting.
20. On 28 September 2011 Kennedys asked for the Claimant's reports on life expectancy and accommodation before they would be willing to attend a meeting. That information has been provided, as was the Claimant's schedule of loss on 24 January 2012.
21. On 21 February 2012 Ms Patton wrote that they would have to apply for an interim order. Further letters remained unacknowledged. Nothing further was heard until the skeleton argument for the Defendant provided the evening before this hearing.

EELES STAGE 1

22. Mr Spencer submits that the heads of damage which are bound to be, or likely to be, ordered as lump sums include:

i) general damages for pain and suffering and loss of amenity (PSLA)

ii) interest on general damages for PSLA

iii) past financial losses

iv) interest on past financial losses

v) Accommodation.

23. The total of these figures as set out in the schedule of loss is £1,193,307. That includes a capital sum in respect of accommodation in the amount advised by Mr Cumbers namely £360,000, as part of a total figure for accommodation of £739,006. If instead the calculation is done in accordance with Roberts v Johnstone the claim for acquisition costs for the property would be £118,963.48, which represents a shortfall on the cost of £140,986.52. So instead of a claim in respect of accommodation of £739,000 it would be £498,000. The total claim would then be £952,320.67 instead of £1,193,307.
24. However Mr Spencer recognised that the court would be unlikely to proceed for the purposes of an interim payment simply on the basis of the figures in the schedule of loss. He therefore produced two calculations discounted by 25%. The first calculation includes the capital cost of accommodation and is as follows:

PSLA	202,500.00
Interest on PSLA	5,037.00
Past gratuitous care	26,793.75
Past paid care/case management	18,618.65
Past expenses	16,733.55
Past regular expenditure	4,297.87
Interest on specials	6,685.00
Accommodation	739,006.03
TOTAL	£1,089,661.85

25. Mr Spencer submitted that for the purposes of this application a reasonable proportion of that sum would be 80%, namely £871,729.
26. In the alternative he put forward a calculation in accordance with Roberts v. Johnstone. The accommodation cost is reduced to £498,019.50 and so the total is £848,685.33. The reasonable proportion, namely 80% of that figure, is, he submits, £678,948.
27. Mr Spencer accepts that the court would need to take into account (in effect by deduction from these figures) the interim payment of £100,000 which has already been made. But some of this has been spent on items which were not incurred at the date the Schedule of Loss was served, so he submits that on a rough and ready basis the figure to be deducted would be £50,000. The resultant figures would be £847,549 (including the capital cost of accommodation) and £628,948 (in accordance with Roberts v. Johnstone).
28. In the course of his oral submissions Mr Hopkins addressed some of those figures. He submitted that given the Claimant's life expectancy and limited insight the figure for pain and suffering and loss of amenity would be £225,000, with a corresponding drop in the interest claimed on that figure. He also submitted that insufficient discount was being given for the fact that the past gratuitous care, which is the largest item, had been provided in the family home in a non-commercial setting. So there would be no incidence of tax and national insurance to be included. He said the Defendant would contend at trial that the discount should one third. This would reduce the claimed figure to £86,039. He also submitted that for the purposes of the present application the sum should be reduced by 25% to £65,429 to provide a conservative estimate of he likely award based on the evidence currently before the court. A reasonable proportion, if that is taken to be 80%, of the total sums likely to be awarded as damages in a lump sum, would be £341,623 x .80 = £273,298. After deducting the £100,000 interim payment already made, the balance would be £173,298.
29. These figures do not include accommodation costs because, he submits, renting a property long term may be an option. If the accommodation costs are to be included, then Mr Hopkins would for present purposes, accept the calculation made for the Claimant in the sum of £498,019.50 of which 80% is £398,415. A total of £398,415 and £173,298 is £571,713.
30. In the absence of any support from any decided authority, or any commentator, and in the absence of any evidence, I see no likelihood of the final judgment including an assessment of damages based on continuing renting accommodation for the Claimant.
31. If the final judgment includes provision for accommodation in accordance with Roberts v. Johnstone, then on the calculations for the Claimant the shortfall between the sum sought of £740,000 and the discounted calculation of £628,948 is £110,052. On Mr Hopkins calculation the shortfall is £168,286.

EELES STAGE 2

32. I note that in Eeles at para 43 the Court of Appeal said that it will usually be appropriate to include accommodation costs in the expected capital award.
33. Mr Spencer submits that in this particular case, given the Claimant's extreme needs and the challenges faced by his father in the absence of the Claimant's mother, the trial judge is likely to prioritise the Claimant's need for suitable accommodation. The trial judge is not likely to conclude that making an award of the shortfall (whether it be £110,000 or £168,000) limits the choices that the trial judge would make. Of course it will reduce the amount which the trial judge can order by way of PPO, but it is not likely that the judge will choose to make a PPO which precluded the purchase and adaptation of suitable accommodation in these circumstances.
34. Mr Hopkins reminds me that in Eeles in para 32 the court said:

"Of course, there will be a tension between the Claimant's need for an immediate capital sum and the desirability of the security of a substantial PPO. That tension cannot usually be resolved until the trial judge knows what sums are actually available to him. At the interim payment stage, the judge does not have those materials. If the judge makes too large an interim payment, that sum is lost for all time for the purposes of funding a PPO. It cannot be put back into the pot from which the trial judge will allocated the damages".

35. Mr Hopkins reminds me that the Defendant's Counter Schedule and expert evidence is due to be served on 10 April. The experts have yet to meet, the meeting being due by 10 July 2012. The necessary materials are therefore not before the court at this stage.
36. Mr Spencer responds that it is surprising given the imminence of the date for the Counter Schedule and expert evidence for the Defendant, that no evidence has been put before this court.
37. Mr Hopkins also reminds me of the passage in Eeles at para 38 where the court said:

"However there will be cases… in which the judge at the interim payment stage will be able confidently to predict that the trial judge will capitalise elements of the future loss so as to produce a greater lump sum award. In such a case, a larger interim payment can be justified. Those will be cases in which the Claimant can clearly demonstrate a need for an immediate capital sum, probably to fund the purchase of accommodation. In our view, before a judge at the interim stage encroaches on the trial judge's freedom to allocate, he should have a high degree of confidence that such a course is appropriate and that the trial judge will endorse the capitalisation undertaken".

38. Mr Hopkins submits that the present arrangements can continue until trial and that this court cannot have the degree of confidence required to make the order sought by the Claimant.
39. I prefer the submissions of Mr Spencer. In my judgment I can have the high degree of confidence that is required that the trial judge will allocate by way of damages in the form of a lump sum sufficient capital to enable the Claimant to be accommodated substantially in accordance with the requirements set out in the experts' reports which are before the court.
40. Because it is common ground that the existing accommodation is inadequate, I have not thought it necessary to set out in detail why that is so.
41. Accordingly, for these reasons I am satisfied that I can make the interim payment order in the sum of £740,000 which I stated at the end of the hearing I would make.

THE ALTERNATIVE CASE

42. Mr Spencer submits that I should also be confident that the trial judge will include in the award of damages the capital cost of suitable accommodation, and not the interest calculation in accordance with Roberts v. Johnstone. If that is right the sum of £740,000 is lower than the figure of £871,729, discounted as set out above, which the court is likely to award in the final judgment by way of lump sum.
43. Mr Spencer submits that Roberts v. Johnstone simply does not apply to this case. The issue that the Court of Appeal was addressing in that case was on facts where, applying the appropriate interest rate to the appropriate multiplier, there resulted a sum which exceeded the net total difference between the old and the new premises, with the result that the damages if awarded on this basis, would represent more than the full value of the assets (pages 891C-B). The court in that case was simply not concerned with facts where the appropriate interest rate and multiplier resulted in a substantial shortfall from the cost of reasonable accommodation.
44. Mr Spencer accepted that the reasoning behind George v Pinnock is binding on this court, namely that the damages awarded for accommodation costs should not result in the award of a figure of a capital sum which would remain intact at the Claimant's death and therefore represent a windfall to his estate. He submitted that this problem could be addressed in the manner discussed in McGregor at para 35-211, namely by the deputy giving an undertaking to the Defendant to pay any such surplus to the Defendant on the Claimant's death, such undertaking to be secured, if the Defendant should so wish, by a charge on the property.
45. Mr Spencer recognised, as submitted by Mr Hopkins, that the Law Commission in its Report "Damages for Personal Injury: Medical, Nursing and Other Expenses" (1999), report number 262 at paras 4.11 to 4.16 had considered the criticisms of Roberts v Johnstone, had recognised that it was "admittedly imperfect" (para 4.15) but did not recommend legislation to implement a different solution to the problems in question. However, speaking from his very great experience, Mr Spencer submitted that it was not easy to understand why the Law Commission considered that Claimants would be unlikely to choose damages on a different basis, or why if they did the complexity would render any drafting virtually unworkable in practice. He remarked on the complexity of PPO's as they are now commonly made.
46. Mr Hopkins submits that Roberts v Johnstone remains good law unless a higher authority says otherwise.
47. In the light of the conclusion I have already reached I do not need to express a view on this point. However, it seems to me that there is considerable force in Mr Spencer's submissions. Roberts v Johnstone does not address the issue that arises in the present case. However, I recognise that that approach to the issue of accommodation is now so well established that a court, at least in the first instance, and especially on an interim application such as the present, should not depart from it, or more precisely, should not proceed on the footing that the trial judge is likely to depart from it. In the circumstances I prefer to express no view.

CONCLUSION

48. It is for these reasons that I made the interim payment order in the sum of £740,000. I did not consider it necessary to form any view or to require any undertaking from the Claimant, to address the possibility that an award of damages which includes the capital cost of alternative accommodation may result in over compensation. That issue can be addressed at the trial.

POST SCRIPT

49. The evening before I handed down this judgment Kennedys provided me with a copy of a Briefing Noted dated 28 May 2010 by Mr Ian Gunn, a director of Personal Financial Planning, who is an independent financial adviser who specialises in personal injury and clinical negligence litigation. He refers to the problem in cases where a reduced life expectancy leads to a Roberts v Johnstone calculation which yields little by way of damages compared to the capital required. The Briefing Note records that in the case of Ryan St George v The Home Office (there is a judgment on other issues at Neutral Citation Number [2008] EWCA Civ 1068) it proved possible to find suitable rented accommodation and for there to be an order for periodical payments for rent instead of a Roberts v Johnstone claim. The note concludes with a statement that at the approval hearing Mackay J had said that the course adopted in that case of rental payments being made by way of periodical payments should have a more general application in other suitable cases. The Defendant did not ask to make further submissions to me on the basis of this document.