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Causation of loss in Credit Hire Claims – an alternative form of illegality Defence

14 September 2023
The absence of a valid MOT in a claim for damages for the repayment of vehicle hire charges following a road traffic accident gave rise to a separate type of illegality defence.  

DWF acted upon instructions from RSA's Foreign Claims Unit, on behalf of TVM Verzekeringen for the Respondent in the recent case of Ali v HSF Logistics Polska sp zoo (2023) in which Mr Justice Martin Spencer found that the Claimant's failure to ensure his vehicle had a valid MOT in place 4 ½ months prior to the accident, gave rise to "an alternative form of illegality" defence in the context of both causation and / or mitigation of loss, as 'but for' the accident the Claimant would not have obtained such an MOT in the hire period.

Defendant Insurers are frequently presented with credit hire claims in circumstances where it subsequently transpires that the Claimant's damaged vehicle did not have a valid MOT, Insurance Certificate, or road fund licence, at the material time. Until relatively recently, Defendants  sought to rely on Agheampong v Allied Manufacturing (London) Limited ([2008]  6 WLUK 740 , a decision of the lower courts in which HHJ Dean QC (as he was) explored the principles of ex turpi causa in a credit hire claim where the Claimant was not insured  to drive his own vehicle.

The lower courts are familiar with the application of this doctrine and the various different forms of illegality that can arise in credit hire claims. Most recently, this was pleaded in Agbalaya v London Ambulance Service (Central London CC, 17 February 2022, HHJ Letham, unreported) – a decision which Mr Justice Martin Spencer specifically referred to in his  Judgment - when a separate nuanced defence to credit hire claims borne out of some accepted form of illegality on the Claimant's part was enunciated on grounds of causation.

The decision of the High Court in Ali –v- HSF Logistics Polska, which is the subject of this article, will be welcomed as providing some much needed clarity on the interpretation of the law in the area of credit hire claims, and specifically when it is accepted that some form of illegality (such as there being no MOT) subsists on the Claimant's side.


On 20th February 2021, the Defendant's Employee's lorry was involved in a collision with Mr Ali's parked and unattended Volvo XC60. The Claimant's vehicle was damaged as a result of the collision and was sent for repair. Mr Ali entered into a credit hire agreement for a replacement vehicle and subsequently issued proceedings against the Defendant seeking an award of damages comprising  Hire (claimed in the sum of £21,588.72), Repairs (claimed in the sum of £2,184.22), and Recovery (claimed in the sum of £354.00).

Liability was not disputed although the claims for Hire, Repairs, and Recovery, were all denied. Moreover, the Defendant raised the issue of ex turpi causa pleading "…the Claimant's accident damaged vehicle did not have a valid MOT during the period of hire, as such the Defendant refers to the case of Agheampong v Allied Manufacturing (London) Ltd and states that the claim for hire charges are ex turpi causa"

It was common ground between the parties that the Claimant's Volvo did not have a valid MOT Test Certificate, despite requiring one (having first been registered in 2013), approximately 4 ½ months  prior to the accident. It was also accepted that such a failure and / or omission to ensure that the Volvo had a valid MOT Test Certificate at the material time is, and was, unlawful.

First Instance Decision

In what Mr Justice Martin Spencer described as a "well-reasoned and insightful judgment" at first instance, Mr Recorder Charman dismissed the claim for credit hire charges in its entirety. The credit hire claim failed on grounds of causation, rather than on the basis of the strict ex turpi causa defence.

The decision followed the reasoning of HHJ Letham in Agbalaya, with Mr Recorder Charman determining that the causation defence was distinctly separate from that of the ex turpi causa one, namely:

"The causation defence is in my judgment a distinct defence which is capable of applying only to the credit hire element of the claim because it is based on the distinct nature of the credit hire claim. The diminution in value claim and the recovery claim are claims for losses caused directly by the accident itself in the case of the former, and an expense necessarily incurred in the case of the latter, because unless the car was recovered it could not be repaired. The credit hire claim is different. It is a claim founded in the principle of mitigation of loss.  If it succeeds, it does so because it is an expense reasonably incurred by a claimant in mitigation or avoidance of a claim for loss of use of their vehicle.  The question of whether a claimant acts reasonably in hiring a replacement vehicle is separate from any issue of illegality."

And further more:

"Even more fundamentally, in order for the issue of mitigation to arise, it is necessary for a claimant to have a loss of use claim in the first place.  If immediately before the accident a claimant does not have a vehicle which they were entitled to use on the public highway, they cannot claim for the loss of use of such a vehicle which they could use on private land only".

Recorder Charman observed, in following HHJ Letham, that there had to be a distinction between the Claimant having a merely "driveable" vehicle, and one that was "useable" on the public highway. That consideration was paramount in the consideration of a causation defence since it exposed the Claimant's true loss of use in reality, which is inextricably linked to the fundamental principle of mitigation of loss.

The Appeal to the High Court

Mr Justice Martin Spencer upheld the first instance decision and dismissed the appeal.

He found that both Mr Recorder Charman and HHJ Letham were entirely correct to dismiss the credit hire claims on the basis that the court was being asked to consider "two different forms of illegality"; firstly one of ex turpi causa, which is "an all encompassing defence, which deprives a Claimant from any form of redress". As is acknowledged within the Judgment such a Defence is often an extreme one and requires considerations of public policy and proportionality. 

Secondly, and perhaps most significantly for present purposes, Mr Justice Spencer acknowledged that there does exist "a second, more targeted, form of illegality which can be directed towards a particular aspect of the claim being made" and that such a defence can exist "even if there is not this all-embracing form of illegality which deprives the Claimant of all claims arising from the accident"

The reason for that key distinction is because the court ought to consider the claim through the prism of causation and having regard to questions such as "but for the accident for how long the Claimant's vehicle would have remained without a valid MOT and therefore could not lawfully have been driven on the road".

Mr Justice Martin Spencer concluded…

"This alternative form of illegality is thus flexible and enables justice to be done by balancing the interests of the Claimant in receiving compensation for a loss reasonably incurred and the interests of the Defendant in not being required to compensate a driver for the period of use of a vehicle which was or would have been (but for the accident) unlawful, and it does this through the well-rehearsed application of the doctrine of causation. In my judgment, this is not ex turpi causa in disguise, but a different entity altogether."


Mr Justice Martin Spencer's judgment describes "a different entity altogether" when identifying the separate causation defence available to those insurers and defendants faced with credit hire claims arising out of some form of illegal use of the damaged vehicle (in the instant case, the absence of any MOT).

The decision is likely to make it more difficult for Claimants to discharge the burden of proving a loss of use justifying the incurring of credit hire charges when the pre-accident use of the damaged vehicle was illegal. Meanwhile, the decision provides a greater degree of flexibility to courts when it comes to assessing the merits of separate claims.  The ex turpi causa defence is acknowledged as a more extreme type of defence, whilst the defence in this case was based upon the application of the doctrine of causation of a particular head of loss.

The flexibility afforded by the approach in this case will assist courts in conducting a more forensic analysis of the meritorious and unmeritorious Claimant, which should be viewed as more preferable to the "one size fits all" ex turpi causa defence once so commonly applied by courts and utilised by defendants. As Mr Justice Martin Spencer commented in his Judgment, such considerations will potentially "delimit" the period of compensation claimed in these types of claims.

The Defendant's duty is to put the Claimant back in the position they would have been in but for any proven actionable negligence on their part. If the loss of use is of a vehicle that did not benefit from having a valid MOT, and there is no evidence that there was even going to be an MOT but for the accident occurring, then the Defendant cannot be said to have any liability to compensate a Claimant for credit hire charges that are said to have been incurred in mitigation of a loss of use which was illegal. 

Mr Justice Martin Spencer made various obiter observations in his Judgment around the provisions of motor insurance policies remarking that "It seems to me that those insurers can easily protect themselves by making it a term of the policy that the right to a replacement hire car is conditional on the damaged car having a valid MOT certificate at the date of the accident". And he acknowledged with justification that such clauses would act as incentives for all motorists to ensure that the use of their vehicle is "entirely lawful".

Historically the arguments in this field have often been predicated on outdated or unreported cases, which has sometimes led to a wholly inconsistent and incoherent approach to claims bearing many similarities to that one brought by Mr Ali in the lower courts. The Ali –v- HSF Logistics Polska decision provides a degree of clarity on the interpretation of which fundamental legal principles should be applied in credit hire claims, which is arguably long overdue.

Following the outcome, Tom Lawrence of RSA Foreign Claims Unit commented as follows;

"The outcome of this case serves as a remarkable testament to the seamless collaboration between our Principal , TVM Verzekeringen, RSA and the Foreign Claims Unit, and dedication of Gavin and his team in executing our credit hire strategy. This enduring partnership and development of the strategy has been cultivated over several years.

The Judgment signifies a moment of clarity in the courts' approach to credit hire claims pursued by un-meritous Claimants who attempt to exploit their own failure to adhere to the requirements expected of responsible road users. 

We remain steadfast in our commitment for my team to identify such claims, and to work closely with Gavin and his team to maintain a robust approach in safeguarding our principals from unreasonable credit hire claims in the future".

Read the judgment Mr Majid Ali –v- HSF Logistics Polska SP Zoo [2023] EWHC 2159 (KB) High Court of Justice Kings Bench Division of the Birmingham District Registry.

For further information please contact Gavin Perry and Daniel King

Further Reading