Smokers and bangers

No income tax, no VAT, No money back, no guarantee
Black or white, rich or poor, We’ll cut prices at a stroke….

-John Sullivan

One of the issues that arises from time to time in credit hire cases, is that a claimant who has an accident and loses the use of his vehicle, and subsequently hires a car on credit hire terms will be found to have been driving his own vehicle, without the benefit of a valid MOT, or road tax, or even without insurance. Such claimants may be hardened criminals, or simply hapless about their affairs.

In such circumstances, the question will arise as to whether his claim for damages for loss of use, is barred by reason of the doctrine of illegality, or as it would have been called 20 years ago in the Old Language, ex turpi causa non oritur damnum. I have argued this point many times over the years for both insurance companies and claimants, with it has to be said, varying degrees of success.

An interesting variation which has arisen in recent months, is to argue that irrespective of the illegality defence, the defendant may rely on the argument of betterment. The argument runs something like this: before the accident the claimant had an unroadworthy car, which may have been functionally sound, but could not lawfully be used on the road. He, by hiring a replacement hire car with insurance/road tax/MOT has obtained a replacement that is qualitatively superior and represents betterment. The damages for loss of use/hiring a car should be reduced to “nil” accordingly.

Although I have seen judgments where at least two district judges have found such an argument compelling, I have to say that it seems wrong on a number of levels. The first and most obvious is that it seems conceptually confused: an argument on illegality might be dismissed through the front door, but then is allowed back in through the rear door, with a change of name to produce the same result.

The second and perhaps more fundamental point, is that it misunderstands what the doctrine of “betterment” is, and how it is applied in the context of a hire claim.

In any case involving a credit hire claim, there is likely to be an element of “betterment”, in that unless the claimant is hired a make and model of hire vehicle identical in age and condition to his own, the issue of betterment will arise.

Hire vehicles are usually fleet vehicles, new or no more than three years old. The Claimant will inevitably then have a hire vehicle that will probably be of better quality than his own, which may be a £500 “smoker” or an “old banger”. Yet he may recover the market cost of hiring the hire vehicle without deduction for “betterment” despite having a nicer vehicle to drive. In practical terms, he simply will not have a choice to hire a more equivalent vehicle in terms of age and condition from a mainstream hire company which maintains a fleet.

The reason he may so recover damages, is that the law in this context does not require a deduction for “betterment” to be made unless a defendant tortfeasor passes through some high evidential hurdles: this has been clearly established since the decision of the House of Lords in the case of Lagden v O’Connor [2004] 1 AC 1067 approving the case of Harbutts Plastice v Wayne Tank and Pump Co [1970] 1 QB 447 where Lord Hope found :

Of course, the facts in these two cases were quite different from those in this case. But I think that the principles on which they were decided are of general application, and it is possible to extract this guidance from them. It is for the defendant who seeks a deduction from expenditure in mitigation on the ground of betterment to make out his case for doing so. It is not enough that an element of betterment can be identified. It has to be shown that the claimant had a choice, and that he would have been able to mitigate his loss at less cost. The wrongdoer is not entitled to demand of the injured party that he incur a loss, bear a burden or make unreasonable sacrifices in the mitigation of his damages. He is entitled to demand that, where there are choices to be made, the least expensive route which will achieve mitigation must be selected. So if the evidence shows that the claimant had a choice, and that the route to mitigation which he chose was more costly than an alternative that was open to him, then a case will have been made out for a deduction. But if it shows that the claimant had no other choice available to him, the betterment must be seen as incidental to the step which he was entitled to take in the mitigation of his loss and there will be no ground for it to be deducted.

Although that case concerned incidental benefits, arising from the fact of a credit hire relationship, it is apt to apply to cases where the issue is the reasonableness of a new hire car being hired in place of a “smoker” or “old banger” giving a qualitative improvement to a claimant, or where there is alleged to be a qualitative difference in the hiring of a vehicle with insurance/road tax/MOT, in place of a vehicle without those elements.

In such circumstances it is clear from the above citation of authority that where betterment is alleged, the burden lies on a defendant to prove that as part of a defence of failure in mitigation. Moreover it is not enough to show an element of betterment: the defendant would necessarily have to show (i) that the claimant had a choice to hire a replacement vehicle without insurance/tax/MOT and (ii) what the lesser cost of hiring such a vehicle would have been instead of the damages claimed. If the claimant had no such choice the betterment must be seen as incidental to the step which was entitled to take in the mitigation of his loss and there is no ground for it to be deducted.

These points illustrate the essential flaws in the argument: it cannot logically be argued that the claimant should have committed a further criminal offence in order to mitigate his loss. It was not a choice open to him. If any illegality defence has failed, a claimant is entitled to recover his claim for damages for loss of use, quantified as the cost of credit hire, and the presence of insurance/tax/MOT on the replacement vehicle is simply an incidental element of the hire which does not serve to reduce the damages by a single pound. A defendant is usually going to be better off arguing illegality, where there are stronger points to be made than “betterment”, but I suppose I had better leave those arguments to a later post as they are quite involved.

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