In March 2019 Pump Court’s Antonia Ford published an article on Shadbolt v Stefanatica (unreported), in which the Claimant’s illegal act of failing to renew his vehicle’s MOT licence for some three months, was found not to have reached the threshold for rendering a credit hire claim unrecoverable on public policy grounds pursuant to the doctrine of ex turpi causa non oritur damnum (from a dishonourable cause damages do not arise). The judge in Shadbolt was particularly persuaded by evidence that the Claimant’s insurance status would have been maintained despite the mistaken lapse in MOT. Nevertheless, the Judge accepted that no damage flowed from the accident, since before the accident the Claimant had an unroadworthy vehicle due to its’ lack of MOT. The Judge found, therefore, that there was no loss to quantify by virtue of the credit hire claim. Whilst permission was granted for appeal, an appeal was not pursued.

The co-joined issues of the doctrine of ex turpi causa and causation, have now been the subject of an appeal in Ali v HSF Logistics Polska SP Zoo [2023] EHC 2159 (KB). Emma Sole considers the detailed judgement of HHJ Martin Spencer (of Molodi/fundamental dishonesty fame) in Ali.

The Facts

Mr Ali had incurred credit hire charges of over £21,500 following an accident in which his car was damaged. The Defendant argued that since Mr Ali’s car did not have a valid MOT, and there was no evidence of any intention to obtain one during the period of the car hire, the claim for credit hire could not succeed on grounds of illegality. The car was parked at the time of the accident.

First Instance & Agbalaya

The judge at first instance, Mr Recorder Charman, similarly to the judge in Shadbolt, rejected the ex turpi causa argument but dismissed the credit hire claim on grounds of lack of causation. The judge relied on the decision of HHJ Letham in Agbalaya v London Ambulance Service (unreported).

In Agbalaya the MOT records revealed that the Claimant had “a dismal” history of driving for lengthy periods without a valid certificate, including for a month leading up to and on the day of the accident. The Claimant gave evidence that she had intended to have the car booked for an MOT on the day of the accident, and that it would have passed, but the judge (HHJ Letham) was unconvinced by this. HHJ Letham identified an important distinction between a car that can be driven (“a driveable car”) and a car that can be lawfully used on the highway (“a useable car”). Only if the car is useable could it be said that there was a claim for loss of use when it was damaged and, therefore, a claim for credit hire. HHJ Letham determined that the Claimant had failed to prove that the car was a useable car at the time of the accident, and so failed to prove loss of use.

In Agbalaya HHJ Letham did, however, go further and hold that had he not dismissed the claim on grounds of causation he would have done so on illegality. HHJ Letham favoured a broad test; that a claim can be defeated by an illegality argument if it is, or a relevant part of it is, based substantially (and not therefore collaterally or insignificantly) on an unlawful act. The case of Patel v Mirza [2016] UKSC 42 was said to be a turning point, within which the Supreme Court gave guidance as to how Courts should address the issue of ex turpi causa; a “trio of necessary considerations” had to be borne in mind, in assessing whether the public interest would be harmed, although a formal, detailed approach was rejected (para 120):

“…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.…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.”

Drawing matters back to the issues at hand, in the context of a loss of use claim following a road traffic accident, HHJ Letham determined that the focus of a policy requiring an MOT certificate to drive on public roads, included both that unroadworthy vehicles can cause injury and death, but also that such a certificate ensures cars are tested in relation to emissions, which impacts air quality/health and also has environmental benefits. The countervailing public policy related to requiring drivers to drive with due care and attention and that, in the event of a negligent breach those who suffered loss as a result should be compensated by the tortfeasor. The judge rejected an argument that there was an additional countervailing public policy argument that denying the claim would have impact the rights of others, namely the credit hire company. This was one and the same. HHJ Letham determined that the illegal presence of the vehicle on the road was central to the damage that resulted.

Applying the principles to the case at hand HHJ Letham did not accept that the Claimant’s conduct amounted to an oversight, stating:

“The harsh truth is that this Claimant was a serial offender. I have already set out the lamentable history of her MoT testing. I have not accepted that her car was booked in for a test on the day in question and the evidence suggests that the car would not have passed its MoT had it been presented on the day in question.”

HHJ Letham therefore found, in Agbalaya, found that denial of the credit hire claim was not disproportionate and that the claim should be dismissed following the doctrine of ex turpi causa.

The first instance judge in Ali dismissed the argument based on ex turpi causa in an “impeccable” application of the principles set out in Patel and determined that it would not be proportionate to deny the credit hire claim; Mr Ali’s vehicle was parked at the time of the accident and there was no evidence that it was unroadworthy beyond not having a valid MOT certificate.

The judge did, however, dismiss the credit hire claim on the grounds of causation, finding that this was a distinct argument. The judge had found that Mr Ali was careless as to whether his car had valid MOT and that there was no evidence either way as to whether the car was in fact roadworthy. On that basis it was said that Mr Ali had not proved that he had lost the use of a useable car.

The Defendant appealed; essentially arguing that dismissing the claim on the grounds of causation was effectively allowing the rejected ex turpi causa argument through the backdoor.

HHJ Spencer’s Decision on Appeal

HHJ Spencer identified that the appeal essentially raised the question of whether the doctrine of ex turpi causa and lack of causation, in the context of the claim, were truly independent of each other.

Whilst HHJ Spencer noted that he had found the issue difficult to resolve he concluded that HHJ Letham in Agbalaya and Mr Recorder Charman in the present case, were correct. The doctrine of “ex turpi causa” and dismissing claims for no causation in the circumstances, were two different forms of illegality:

• Ex turpi causa: was an all-encompassing and extreme defence, a form of punishment. Consideration of proportionality is required balancing the all-encompassing effect against the loss and how heinous the illegality in question is.
• A second, more targeted, form of illegality directed towards a particular aspect of a claim can also be argued. Where a claim is affected by the lack of a value MOT (i.e. a claim for car hire), the Court can ask itself questions raised by the law of causation; how long would the Claimant have been without a useable car but for the accident? This flexibility enables justice to be done as between those who intended to get an MOT versus drivers like the Claimant in Agbalaya. This is not “ex turpi causa” in disguise, but a different entity altogether.

HHJ Spencer suggested that insurers who provide hire cars could protect themselves but including a clause that a policy-holder’s right to a hire car is conditional on the damaged car having a valid MOT.

HHJ Spencer concluded, therefore, that there was a form of illegality which did not relate to the whole of the action, but to the loss or damage claimed, and which was not a result of the application of public policy. It was a small step to ally this form of illegality to the principles of causation, as was done by Mr Recorder Charman and HHJ Letham.

Discussion

Typically, it seems that cases will very much depend on their facts. However, HHJ Spencer’s decision makes plain that defending a credit hire claim on the basis of there being no loss of a useable car can survive the rejection of an ex turpi causa argument. Moreover, defending a claim on the basis of lack of causation requires a more straightforward, factual, analysis rather than the balancing of public policy and questions of proportionality.

In circumstances where the only claim is one relating to loss of use Defendants might be best advised to pursue the simpler, and likely more effective, causation argument over and above reliance on the ex turpi causa doctrine.

Emma Sole