Gary Herring reviews the recent judgment of the High Court in Majid ALi v HSF Logistics Polska Sp Zoo  EWHC 2159 (KB) and sets out the practical implications for ‘illegality’ arguments credit hire claims.
Following an accident on 20 February 2021 where his Volvo XC60 was collided with while parked, the claimant incurred hire charges totalling £21,588.72 under a credit hire agreement with Direct Accident Management Limited.
It transpired that the Volvo did not have a valid MOT certificate at the time of the accident, the previous certificate having expired 4 ½ months prior.
In addition, the Volvo’s insurance had been obtained in the name of the claimant’s cousin. The claimant had previously been disqualified from driving and the allegation was that he had obtained insurance in the name of his cousin without disclosing the conviction, in order to reduce the premiums. In other words, that the policy had been ‘fronted’.
At trial, the judge excluded the fronting issue on the basis that it had not been pleaded. As to the lack of MOT, having heard the claimant’s oral evidence, the judge found that the omission was “careless” and that the claimant was “not greatly concerned” about it. Further, while there was no evidence that the vehicle was in an unroadworthy condition, there was also no evidence that the claimant had planned to obtain an MOT certificate in the near future.
The defendant argued that the lack of MOT should render the claim for hire charges irrecoverable, on one or both of the following grounds:
The ex turpi causa argument would have succeeded in the event that the defendant had been permitted to rely on ‘fronting’ as an additional element of illegality. However, while it appears to have been finely balanced, the judge took the view that invoking an absolute bar on the recoverability of any damages as a result of the lack of MOT alone would have been disproportionate. The fact that the vehicle was parked and otherwise in roadworthy condition were referenced as factors in reaching the conclusion.
However, the hire charges were dismissed on the grounds of causation. Mr Recorder Charman stated:
“Mr Ali's credit hire claim fails because he has no loss of use claim, by reason of not having a vehicle which he was entitled to use on the public highway at the time of the accident by reason of the absence of an MOT certificate, and he has not established that he could and would [have] obtained a valid certificate at any time during the hire period. He therefore has no claim for loss of use, so cannot have reasonably occurred hire charges to avoid or mitigate such a claim."
The claimant appealed to the High Court, in essence arguing that it was wrong to separate out what is in reality the same illegality argument into two distinct strands. Having found that the illegality did not invoke ex turpi causa, the claimant sought to argue that it was not open to the court to find that the same illegality rendered the hire charges separately irrecoverable.
The appeal was dismissed by Mr Justice Martin Spencer, holding that the judge was right to disallow the claim for credit hire charges alone on a separate ground of causation. A distinction was drawn in his judgment between “the meritorious claimant” – i.e. where there may be a more innocent lapse of perhaps a few days – and the “unmeritorious claimant” – such as in the present case where there was a long period of illegal driving which was ‘careless’ and where there was no evidence of any intention to MOT the vehicle.
Spencer J considered that the question for the court was one of causation, namely “for how long would, but for the accident, the car has remained without a valid MOT and therefore could not lawfully have been driven on the road?”
This, he continued, “delimits the period of compensation and distinguishes between the meritorious Claimant (perhaps deprived of only a few days of car hire charges) and the unmeritorious Claimant (who fails to recover his credit hire charges at all)”
The judgment of Spencer J is significant as the first case concerning the issue of illegality in a credit hire context to be considered at binding High Court level. The judgment will be of considerable comfort to insurers rightly anxious to ensure that they are not obliged to compensate claimants who knowingly or “carelessly” drive illegally. As was identified by the judge, the requirement for an MOT certificate is an important requirement linked in many cases to the maintenance of insurance.
While the illegality concerned in this case was a lack of MOT, there does not appear to be any reason in principle why the same reasoning would not apply to vehicles which are being driven illegally for other reasons – for instance because they are in an unroadworthy condition. Indeed, it may be that additional elements of illegality would not just restrict the recoverability of credit hire charges on the grounds of causation but would invoke ex turpi causa thereby preventing the recovery of any damages at all. In particular, the judgment at first instance states explicitly that the fronting issue would have invoked ex turpi causa if only it had been pleaded. Further, it appears to be implicit that it may have been invoked in the event that the vehicle was either being driven (rather than parked) or had it not otherwise been roadworthy.
Therefore, while the judgment is certainly to be welcomed, it is clear that the lack of MOT remains far from a ‘black and white’ issue. If there is no additional or more serious illegality, then in the first instance a distinction will need to be drawn between innocent or short-term MOT lapses (“the meritorious claimant”) and either careless or deliberate longer term lapses (“the unmeritorious claimant”). In the event of the former, there is very unlikely to be any impact on the recoverability of hire charges.
Even in the case of the latter, this judgment would appear to leave it open to claimants to give evidence to the effect that they planned to MOT the vehicle in the short term and would have done so had the accident not occurred. On the face of it, this may mean that only the period up until the alleged intended MOT is irrecoverable. Insurers will want to treat such evidence with a healthy scepticism and should seek out objective evidence from other sources or documentation which may either corroborate or cast doubt on it.
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