Background
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, Repairs and Recovery.
Liability was not disputed although the claims for Hire, Repairs, and Recovery, were all denied. 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.
Previous decisions
At first instance and upheld at the High Court appeal, the Credit Hire charges were dismissed on the grounds that, if the Claimant's car should not have been on the road due to a lack of MOT, there was no loss of use claim for the Claimant so the claim was dismissed on causation grounds. Mr Justice Spencer acknowledged that there existed "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 Claimant took matters further to the Court of Appeal and that decision has now been handed down.
Court of Appeal decision
Lord Justice Stuart-Smith, providing the lead Judgment, overturned the previous decisions on the basis that the judge at first instance and Martin Spencer J in the High Court appeal were wrong to accept the causation defence and agreed with the Appellant that such a defence was "ex-turpi causa by another name but without the essential requirement of proportionality". Regarding the previous decision, LJ Stuart-Smith said as follows:
'The question on this second appeal is whether the Judges below were wrong to reject the claim which was formulated as a claim for the hire charges. The answer to this question is not entirely straightforward; but I think they were'.
The Court considered the case law on the illegality point and what was effectively 'illegal enough' to debar the Claimant from recovering hire charges, and decided that lack of MOT alone did not justify this. It was a relatively minor, non endorseable offence, and the penalties for bald tyres, defective lights and misspaced number plates were greater, and endorseable. LJ Stuart-Smith stated:
'Allowing recovery of the hire charges in the present case does not undermine the effectiveness of the criminal law; but there is a real risk that denying recovery (whether pursuant to the principles of ex turpi causa or the causation defence) may amount in substance to an additional penalty disproportionate to the nature and seriousness of any wrongdoing. 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'.
Impact of outcome
This is obviously a disappointing decision, but some comfort can be found in LJ Stuart-Smith's comments where he stated:
"Where I can accept that there may be relevant arguments to be had in other cases is in relation to the issue of reduction of damages to reflect the chance of criminal prosecution and/or fine and disqualification. However, the present appeal did not raise the question whether, or in what circumstances, the fact that a claimant did not have a valid MOT should lead to a different approach to the quantum of loss where a claimant has suffered inconvenience as a result of the defendant’s tort, whether that loss is treated as a claim for general or special damages."
Read with the earlier comments in the Judgment that had the Respondents position been right that:
"There is no obvious distinction to be drawn between use of a car in the absence of a valid MOT but in respect of which there is no evidence that it is not roadworthy, on the one hand, and cases of cars not otherwise shown to be unroadworthy but having (a) a defective light or (b) defective windscreen wipers or (c) having a non-conforming number plate."
Then, whilst the Court of Appeal were suggesting that these were "relatively trivial defects", those defects (and others) are now available to the Defendant to argue that there should be a reduction in the claim for loss of use, as assessed by the cost of hiring.
This is akin to a loss of chance position – what are the chances that the Claimant would be stopped by the authorities and the lack of MOT, tax, insurance or other defect noted, and as a result the vehicle be taken off the road?
This decision also leaves the key case involving both illegality and the causation defence, Agbalaya v London Ambulance Service [2022, Central London County Court, unreported], untouched, with no judicial criticism, and therefore available to plead in the right cases.
With the significant number of credit hire cases that go before the court, the overall savings for Defendant insurers could be considerable (albeit not as great as they would have been had the decision been upheld). It will be interesting to see how this area develops going forward.
