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    Credit Hire & Illegality

    Azeem Ali
    Post by Azeem Ali
    February 28, 2024
    Credit Hire & Illegality

    In almost every credit hire case, the defence will plead “ex turpi causa non oritur action”. This translates into English as “no cause of action arises from illegal or flagrantly immoral acts”. It also referred to as the defence of illegality, which is the term I will use in this article. Due to the frequency with which this issue is pleaded, it is certainly not something that can be overlooked. Indeed, there are occasions when claimants will have their full hire claims dismissed on the basis of illegality.

    In the context of credit hire, this issue of illegality usually rears its head due to a lack of vehicle documents, in most cases no MOT and/or no insurance - the scope of this article will therefore be confined to this. I will not cover the situation of “immoral acts”, which is likely to be a rare situation in credit hire cases.

    I will deal with the article in the following ways:

    (a) why the issue of illegality is important;

    (b) the basis of the defence of illegality;

    (c) how the defence of illegality applies in credit hire cases;

    (d) examples of how courts have decided illegality in credit hire cases;

    (e) practical implications on credit hire of the defence of illegality and

    (f) conclusion.

    Why is the issue of illegality important?

    The defence of illegality is nothing new and was well established by a case as far back as the year 1775, where Lord Mansfield stated in Holman v Johnson (1775) 1 Cowper 341: No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act”.

    Whilst it may be referred to as the defence of illegality, in many respects it is not a defence, to be availed for the benefit of the defendant. It has higher considerations and that is one of public policy. This was made clear as far back as 1775, when Lord Mansfield stated: “The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say”.

    Indeed, a judge can perhaps take the point of his or her own motion.

    As Lord Sumpton in the Supreme Court stated in Les Laboratoires Servier v Apotex Inc [2015] A.C. 430 at [23]: “It is because the public has its own interest in conduct giving rise to the illegality defence that the judge may be bound to take the point of his own motion”.

    It's such an important issue that that it goes beyond any defence and it’s really a public policy consideration. Whilst for practical purposes it is more likely to be an issue if the defence raises it, the fact that the judge can raise it of her/his own motion signifies how important this issue is.

    The basis of the defence of illegality

    There have been many different interpretations given by courts as to what this defence of illegality constitutes. This is why in Clerk and Lindsell (23rd edition, Chapter 3.05), the authors remark “A problem which has troubled the courts has been a lack of clarity as to conceptual foundation of ex turpi causa. Indeed, just about the only thing on which there has been judicial agreement is that the law on the illegality defence in tort is a mess”.

    Fortunately, with the Supreme Court case of Patel v Mirza [2015] 2 W.L.R. 405, there has been some much-needed clarity provided, (in my view)so I will not go through all the competing theories canvassed over the years.

    Much needed clarification is provided in paragraph 120 of Patel v Mirza, which states;

    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

    So, in simpler language, what the Supreme Court is saying is this:

    For a defence of illegality to succeed it must be shown that it would be contrary to the public interest – this condition is satisfied where it would be harmful to the integrity of the legal system.

    To arrive at its conclusion, the court considers a three stage process:

    (1) the purpose of why that criminal law was passed and whether the denial of the claim will help that purpose;

    (2) any other public policy reasons that may be impacted by the denial of the claim and

    (3) whether denial of the claim would be proportionate to the illegality by the claimant.

    In the Court of Appeal case of Henderson v Dorset Healthcare University NHS Foundation Trust [2021] A.C. 563, in paragraph 77 it was stated that the case of Patel v Mirza: “... does not mean that Patel represents “year zero” and that in all future illegality cases it is Patel and only Patel that is to be considered and applied. That would be to disregard the value of precedent built up in various areas of the law to address particular factual situations giving rise to the illegality defence. Those decisions remain of precedential value unless it can be shown that they are not compatible with the approach set out in Patel in the sense that they cannot stand with the reasoning in Patel or were wrongly decided in the light of that reasoning”.

    Whilst the case of Henderson suggests that Patel is not the only case to be considered and decisions before this case can be considered if they are not contrary to its decision, in my view for everyday day purposes in court, the three-stage process in Patel is likely to be the focus of most courts.

    How does the defence of illegality apply in credit hire cases?

    Usually, this defence finds its way in the pleaded defence by putting the claimant to strict proof that there is no illegality, in that the claimant must show that she/he had the relevant driver documents (most often no insurance and no MOT) at the time of the accident.

    In my view the first two stages of the test in Patel are narrowly defined against a claimant making a claim for credit hire. For example, looking at the first stage of the three stage criteria, it is fairly obvious that the reason that one is required to drive with insurance is for there to be there to be financial protection in the event of any damage caused to vehicles. Surely denying hire charges to a claimant who has driven without insurance would enhance the need for claimants to always be insured?

    Looking at the second stage for any other public policy reasons, it seems to me that there is a clear overlap with the first stage, namely the public policy reason that with insurance there is financial protection for the parties in the event of any damage caused to vehicles. For no MOT, it is fairly obvious that the purpose of the law is to prevent dangerous vehicles from being driven and other public policy reasons overlap with this purpose. It seems to me that speaking generally, the first two stages are relatively easy to find against a claimant in the context of having no driving documents.

    What is however clear is that the third stage of the criteria on proportionality in Patel v Mirza is a wide one. For example, in my view there would be a clear difference between a claimant who had been driving for years without an insurance document and a claimant whose monthly direct debit bounced on one occasion without their knowledge (the direct debit bouncing would mean that there was no valid insurance as no payment had been made, not an infrequent occurrence from my experience of criminal cases many years ago). In my view the seriousness of the offence would also be relevant for proportionality. It is clear that driving without insurance is more serious than driving a car without any MOT, as is reflected in the more serious criminal penalties for no insurance.

    The reason why the third stage provides the most flexibility in my view is that it allows the specific facts peculiar to the case to be considered.

    How have the courts approached illegality in credit hire cases?

    There is a wide variance as to how courts deal with this issue, and it's not surprising given the broad test for illegality, particularly under the third stage of the test. Different judges see the same factual matrix in different ways (akin to the “half empty half full glass” scenario), and this may depend on their background and simply “how they see things”.

    Some judges may consider driving without an MOT not to be such a serious offence. If you are a judge and previously spent any time at the criminal bar, you would be used to the Crown Prosecution Service withdrawing a MOT charge upon a plea of guilty to using a vehicle without insurance, as no MOT is not considered as serious as no insurance. This may affect your judgment as to how you approach driving without any MOT and you make take the view that it would be disproportionate to deny a claimant hire charges. Or a judge may take a particular view that driving without MOT is a serious offence, as it potentially endangers other road users. There are examples of actual cases below, these show the variety of approaches by judges on the issue of driving a vehicle without a MOT.

    It may be considered that using a vehicle without any insurance is far more serious than driving without a MOT. It is however my view that this issue is also not necessarily clear cut. I cited an example of a claimant's monthly direct debit bouncing on one occasion, leading to her/him driving a vehicle without any insurance. I am not sure that a court would be inclined to find that an illegality defence should succeed in those circumstances, particularly under proportionality, though again I emphasise that different judges may view this differently.

    Some Examples

    Interestingly these are all reported cases, despite three of the decisions being by Circuit Judges.

    Agbalaya v London Ambulance Service [2022] 2 WLUK 545 in the Central London County Court, involved a Claimant driving without MOT. There was a substantial claim of credit hire of about £145,000. The judge decided that as a causation point, the Claimant could not prove any loss for hire. This is because she did not have a MOT and therefore, she was not entitled to drive the vehicle. So, the causation point forms the ratio decendi (or reason for the decision).

    The Circuit Judge then went on to consider illegality in any event and was of the view that the credit hire claimed would have failed notwithstanding the causation point. In deciding the issue of proportionality, the judge took into account the poor history of non-compliance with MOT - in paragraph 61 he stated: “Not for the first time, the Claimant flouted those rules and in doing so potentially put the public at risk”. Whilst the illegality point was not the reason for the decision, the court made their position very clear on illegality in this case. The court also made the position clear that the seriousness of any offence did not make any difference to proportionality. From my experience however, many other judges will take into account the seriousness of the offence. This issue of seriousness which involves one's interpretation of Patel v Mirza would be a very lengthy topic and is therefore outside the scope of this article, save to state that from my experience different judges have dealt with this issue rather differently.

    However, in Jack v Borys [2019] 12 WLUK 606 the Circuit Judge in Newcastle Upon Tyne took the opposite view, in a case which involved a credit hire claim of about £6500. As I stated earlier in this article: “Different judges see the same factual matrix in different ways (akin to the half empty half full glass scenario)”. This was a case in which the Claimant had not had MOT for four and a half months before the accident. The judge stated in paragraph 4 that:

    Failure to have an MOT certificate due to an oversight could possibly give rise to a fine, but that is not what one would describe as criminal behaviour, in the true sense of the word. I am staggered that it was pleaded. I am even more staggered that it was argued before the District Judge”.

    The judge also categorically rejected any causation argument, stating amongst the reasons that notwithstanding the no MOT, the car was capable of being driven on the road and also considering the causation argument to be a way of allowing the illegality defence through the backdoor.

    Both of these cases are non-binding decisions. They are however both reported after the Patel v Mirza case and illustrates my point that there is a wide variance as to how courts deal with these cases.

    In Agheampong v Allied Manufacturing (London) Ltd [2008] 6 WLUK 740, a decision in the Central London County Court, the claim for the hire charges for 341 days was dismissed, where the Claimant did not have insurance for the vehicle. The court found that the vehicle would not have been insured for another 341 days, but for the accident. It was dismissed because of the illegality.

    In Morgan v Bryson Recycling Ltd [2018] 1 WLUK 546, the Northern Ireland High Court decided that the claim for hire charges for about £2250 must fail, due to there being no MOT which also invalidated the insurance. In paragraph 10 of the judgment it was stated that;

    In keeping with his forthright evidence, the Plaintiff does not dispute that if this incident had not occurred he would have driven the car, probably until his insurance came up for renewal in August 2016, well after the period of time for which he seeks to be compensated for the hire of an alternative car. Against that background the court has decided that he is not entitled to recovery under this head of damages, and to that extent the appeal is granted”.

    The case of Agheampong was however decided before the Patel case. In any event these decisions are not binding with the Agheampong being a county court decision, and the Morgan case being decided in the Northern Ireland High Court. What is clear however is that in both decisions the courts took into account how long the Claimants would have been without their driving documents, but for accident. So, the circumstances of the illegality are always very important.

    Practical implications on credit hire of the defence of illegality

    The issues of no MOT and no insurance are not to be ignored or taken lightly. The case of Patel v Mirza has in my view provided much need clarity. However, whether a claim is allowed or denied in any given case is very much based on the particular facts of any given case. This is turn depends on the temperament of the judge, as different judges will make different decisions on the same facts, apart from the more obvious cases. From my experience, there is a great deal of variance as to how courts deal with no insurance and how no MOT is dealt with, as having no insurance is considered a far more serious offence.

    It is however clear that hire companies and claimant solicitors need to be alert and vigilant if a claimant does not have the relevant driving documents. The precise circumstances and background as to why the claimant ended up driving without MOT and/or insurance are important. There is a difference between someone who has had poor history of compliance with MOT in the past as compared to someone who has had a “one off” for non-compliance. There is also a difference between who has had no insurance for two years and someone who has simply missed a direct debit for one month. From my experience, driving with no MOT is more likely to be dealt with less seriously than no insurance, though it all depends on the facts. Even on the same facts, different judges can come to different conclusions.


    (1) The issue of illegality is potentially relevant in almost every credit hire case. This is because it's pleaded in the defence in almost every case;

    (2) in my view it is likely that courts after the Supreme Court case of Patel v Mirza will be guided by the three stage process referred to in that case;

    (3) the three stage process to be considered can be simply explained as:

        • the purpose of why that criminal law was passed and whether the denial of the claim will help that purpose;
        • any other public policy reasons that may be impacted by the denial of the claim and
        • whether denial of the claim would be proportionate to the illegality by the claimant;

    (4) the reality is however that most courts will be more pre-occupied with the third stage of proportionality mentioned in Patel;

    (5) therefore particular attention needs to be paid as to the circumstances as to why the claimant did not have insurance or MOT documents.

    A history of non-compliance is likely to be held against the claimant, whereas a one off and short non-compliance is likely to favour the claimant on proportionality. However different judges will come to different conclusions on the same facts (“half empty, half full” analogy applies here): for example, the two cases of Agbalaya and Jack which were decided after Patel reflect how different judges see having no MOT in a different light.

    It is hoped that this article provides some clarity around this subject.


    Please note this article does not constitute legal advice for any specific case or cases or for any other situation.

    Azeem Ali
    Post by Azeem Ali
    February 28, 2024