Patrick West looks at the question of defending credit hire cases involving missing MOT certificates and the case of Ali v HSF Logistics Polska sp z oo [2024] EWCA Civ 1479
It is common to defend Credit Hire claims with a catch-all approach putting every potential issue in dispute particularly matters such as valid road traffic insurance and also whether a claimant had a valid MOT certificates. The basis for raising such defences is usually couched in terms arising from the well-known but often misunderstood legal principle ex turpi causa non oritur actio or (dodging the Latin) action does not arise from a dishonourable cause.
In Ali, the Court of Appeal led by Stuart-Smith LJJ, held that a claim for hire charges incurred after the claimant’s car was damaged in a road traffic accident was not defeated where, at the time of the accident, the claimant did not have a valid MOT certificate for his vehicle.
The driver appealed against the dismissal of his claim for credit hire charges incurred for a replacement vehicle while his car was being repaired following a road traffic accident in which the respondent’s lorry had driven into his parked car, causing damage which rendered the car unroadworthy.
The claimant hired a replacement vehicle on credit hire terms while his car was being repaired. In a fairly routine scenario the period of hire was 36 days; the total hire charges were £21,588.72.
The defendant admitted negligence but contested the claim for hire charges on the basis that the claimant’s damaged car did not have a valid MOT certificate in breach of the Road Traffic Act 1988 Pt II s.47(1). In this instance, the claimant’s MOT certificate had lapsed four-and-a-half months before the accident.
The defendant adopted a wholly routine approach to the MOT issue and argued that: (i) the absence of a valid MOT certificate meant that the claim for hire charges was ex turpi causa; and (ii) because there was no valid MOT certificate, the claimant had suffered no compensable loss when his car was rendered unroadworthy by the respondent’s tort which the Court described as the causation defence.
At first instance the Recorder found that the doctrine of ex turpi causa did not preclude recovery of damage but accepted the defendant’s causation argument that where the claimant’s pre-accident use of his own car was illegal, the accident could not be said to have caused the loss of use which he claimed to have mitigated by incurring hire charges and dismissed the claim for hire (upheld on appeal).
The defendant had argued that because the claimant’s pre-accident use of his car was illegal, the accident could not be said to have caused the loss of use which the claimant claimed to have mitigated by incurring hire charges.
However, the Court of Appeal was unable to accept that the causation defence was a proportionate response to the problem of claimants who had claims based on inconvenience and the need for suitable transport but who had, in one way or another, committed minor offences in relation to their damaged vehicle. The causation defence was ex turpi causa by another name but without the essential requirement of proportionality.
The Court of Appeal held that there was in fact a “fatal flaw at the heart of the respondent’s submissions on the causation defence”, which was the argument that the claimant in driving a car without MOT certification had in fact suffered no loss as a result of the respondent’s tort. Pursuant to Lagden v O’Connor [2003] UKHL 64, [2004] 1 A.C. 1067, [2003] 12 WLUK 131, the loss which fell to be compensated in such a case was inconvenience (Lagden).
The Court held that it was clear that the fact that a claimant did not have a valid MOT certificate for the car did not alter the fact that they had been deprived of its use or the fact that that deprivation would have caused inconvenience but for the hiring.
The respondent’s tort had undoubtedly caused the claimant to suffer the inconvenience of being unable to satisfy his need for convenient transport. As a matter of loss, that was not affected by the absence of a valid MOT. What the absence of the valid MOT meant was that, when satisfying his need for convenient transport, the claimant had been committing an offence and exposing himself to the risk of prosecution.
The Recorder’s finding that X’s claim for hire charges was not barred by the principles of ex turpi causa was not merely unchallenged but clearly right.
The Court conducted a tour of the authorities on ex turpi. The leading authority on the modern law of ex turpi causa is Patel v Mirza [2016] UKSC 42; [2017] AC 467. Although not a tort case the Supreme Court principles are to be considered of general application. Ex turpi rested on the foundation of public policy and concentrated primarily on the quality of the claimant’s conduct. Two public policy considerations are paramount:
(i) a person should not be allowed to profit from his own wrongdoing; and
(ii) the law should be coherent and not self-defeating.
In Patel, Lord Toulson JSC said at para 101:
“I would say that one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without (a) considering the underlying purpose of the prohibition which has been transgressed, (b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality. We are, after all, in the area of public policy.” (my emphasis)
The Court of Appeal referred to the issue of avoiding “overkill” and ensuring a proportionate response by the civil law including the observation of Bingham LJ in Saunders v Edwards [1987] 1 WLR 1116, 1134, that the courts have to steer a middle course between aiding or lending their authority to a person seeking to pursue or enforce an object or agreement which the law prohibits and being unduly precious at the first indication of unlawfulness and refusing all assistance to a plaintiff, no matter how serious their loss or how disproportionate their loss to the unlawfulness of their conduct.
Lord Toulson addressed the need for flexibility and the division of responsibility between the criminal and civil courts and tribunals:
“Punishment for wrongdoing is the responsibility of the criminal courts and, in some instances, statutory regulators … The broad principle is not in doubt that the public interest requires that the civil courts should not undermine the effectiveness of the criminal law; but nor should they impose what would amount in substance to an additional penalty disproportionate to the nature and seriousness of any wrongdoing.” [108] of Patel.
The Court of Appeal cited Lord Toulson’s judgment at para 120:
“The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case).
In assessing whether the public interest would be harmed in that way, it is necessary (a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) to consider any other relevant public policy on which the denial of the claim may have an impact and (c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts. Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way. The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate.”
Hewison v Meridian Shipping Services PTE Ltd [2002] EWCA Civ 1821; [2003] ICR 766 was extensively referred to by parties. It is a case which demonstrates where the doctrine of ex turpi should apply in light of proportionality.
The claimant was employed by the defendants as a merchant seaman and crane operator though he suffered from epilepsy, a condition which prohibited him from working in that capacity. He failed to disclose his condition on several occasions, including in answer to direct questions. On each such occasion his conduct amounted to the criminal offence of obtaining a pecuniary advantage by deception, which was punishable on conviction on indictment by a term of up to five years imprisonment. In 1995 he suffered serious injuries in an accident at work. In June 1997 he suffered an epileptic seizure at work which led to his being dismissed by the defendants. On his claim for damages for the 1995 accident, his employers admitted liability for the accident but challenged his calculation of damages for loss of earnings which was advanced on the basis that, but for the accident, he would have continued to work as a seaman until normal retirement age. The Judge dismissed that head of claim on the ground that the claimant was debarred on grounds of public policy from recovering for future loss of earnings as it would have involved him in continuing to deceive his employers by fraudulently misrepresenting that he was not suffering from epilepsy.
The decision was upheld by the Court of Appeal which held that although there was no principle of public policy that prevented the claimant from pursuing his cause of action for damages for negligence or breach of statutory duty against the defendants the claimant was debarred from recovering any loss in respect of his future earnings as a seaman (which of course arose from the wrongdoing).
Clarke LJ (with whom Tuckey LJ agreed) drew a distinction between cases of ex turpi causa non oritur actio (where the illegality barred the entire claim) and what he described as ex turpi causa non oritur damnum (where the illegality barred recovery of one or more heads of damage but not the entire action): “In my judgment an English court should not deprive a claimant of part of the damages to which he would otherwise be entitled because of the defendant’s negligence or breach of duty by reason only of some collateral illegality or unlawful act.”
However, on the facts of Hewison it was held that the illegality was neither collateral nor insignificant. In order to have earned money as a crane operator he would have had to deceive his employers and commit the serious offence of obtaining a pecuniary advantage by deception.
Other guidance considered by the Court of Appeal in Ali was from Vellino v Chief Constable of Greater Manchester Police [2001] EWCA Civ 1249; [2002] 1 WLR 218, that “Generally speaking a crime punishable with imprisonment could be expected to qualify”.
Flexibility of the common law was key and one can perceive the scales of justice in operation. The Court discussed the example of a person disabled by the defendant’s tort from carrying out legitimate work but who had not been paying tax on their income from that work. The law’s response is not to refuse all recovery; instead it awards the sum that represents the claimant’s loss of income but net of tax (see Hewison at para 36, per Clarke LJ) in a “balancing of the rights and obligations of the defendant, who owes a duty of care to the claimant despite the claimant’s historic and prospective failure to pay tax, and of the claimant, who is not entitled to profit from his illegal behaviour”.
As to the MOT issue in Ali, a valid MOT certificate is required to be in force for cars over a certain age and it is not possible to pay for such a car’s obligatory vehicle tax unless there is a valid MOT certificate in force when the keeper of the car comes to pay it.
Section 47(1) of the Road Traffic Act 1988 (“RTA 1988”) creates a summary criminal offence of using, or causing or permitting to be used, on the road a motor vehicle without an MOT, the maximum penalty for which is £1,000: see Schedule 2 of the Road Traffic Offenders Act 1988 (“RTOA 1988”) ). It is a “non-endorsable” offence. Therefore, when using his car on the road without a valid MOT, the claimant was exposing himself to the risk of prosecution and a fine which of course is very far away from the discussion of claimants facing imprisonment in Vellino above.
There is no general rule or principle to the effect that failure to hold a valid MOT certificate will automatically vitiate any insurance that would otherwise be in place; this will depend upon the terms of the policy. However, even if the policy did include a term entitling the insurer to avoid or cancel the policy, the circumstances in which and the extent to which an insurer may avoid liabilities to third parties are strictly limited: see sections 151 and 152 of the RTA 1988 . This issue was therefore deemed irrelevant to the appeal.
The Court observed that the criminal offence of failing to obtain an MOT certificate was regarded and established by Parliament to be a relatively minor offence which did not carry very great weight when considering proportionality. Thus, although allowing the claim for hire charges in the instant case might “just about” be said to tend towards being harmful to the integrity of the legal system, any harm was strictly limited, and it would be disproportionate to have refused the claimant’s claim on the grounds of ex turpi causa.
If the defendant succeeded the floodgates would be opened on claims involving a wide array of minor offences involving what the Court described as “trivial defects” such as a defective light; or defective windscreen wipers; or a non-conforming number plate (offences of a similar level in law): “The absurdity of such an outcome itself suggested that the causation defence was misconceived. When stripped to its bare essentials, the argument underlying the causation defence was not that X had suffered no loss of use, but that damages ought not to be recovered for loss of use where the use of the original vehicle would have had adverse legal consequences for the claimant as a matter of criminal law”(para.54).
As such, the court was unable to accept that the causation defence was a proportionate response to the problem of claimants who had claims based on inconvenience and the need for suitable transport but who had, in one way or another, committed minor offences in relation to their damaged vehicle. The causation defence was ex turpi causa by another name but without the essential requirement of proportionality (para.55).
Stuart-Smith LJJ concluded: “Refusing a claim for just over £21,000 because of the absence of a valid MOT which exposes the claimant to a potential fine of £1,000 raises immediate and troubling questions of proportionality. Questions of proportionality are properly raised and of central importance when considering ex turpi causa: but it is a surprising feature of the causation defence as advanced by the defendant that questions of proportionality do not appear to be engaged at all. This seems to me to be contrary to the proper approach that the common law should adopt when considering the strengths and weaknesses of a novel defence. At such a time the court should bear in mind Bingham LJ’s wise counsel that it should not be unduly precious at the first indication of minor infractions of the criminal law.”
He went on to add that in other cases it might be appropriate to reduce damages to reflect the chance of criminal prosecution and/or fine and disqualification but the defence in Ali simply raised an all or nothing argument and so it did not apply.
Some takeaway points for you:
- Ex turpi defences are not necessarily a get out of jail free defence.
- They may have no effect if proportionality weighs in favour of a claimant.
- Every case requires careful analysis but examination of the nature of the conduct complained of, its public policy impact and the penalties applied by the criminal law should all be considered.
- The case does not mean ex turpi is dead in credit hire: arguing a defence will however require some use of alternatives in terms of proportionate reduction of damages in addition to any arguments that the claim is completely barred.
Ali v HSF Logistics Polska sp z oo [2024] EWCA Civ 1479
Lagden v O’Connor [2003] UKHL 64, [2004] 1 A.C. 1067, [2003] 12 WLUK 131.
Patel v Mirza [2016] UKSC 42; [2017] AC 467.
Saunders v Edwards [1987] 1 WLR 1116, 1134.
Hewison v Meridian Shipping Services PTE Ltd [2002] EWCA Civ 1821; [2003] ICR 766.
Vellino v Chief Constable of Greater Manchester Police [2001] EWCA Civ 1249; [2002] 1 WLR 218
Patrick has a national practice, specialises in all areas of personal injury law. Find out more about Patrick here.