The flight instructor of the helicopter reported that after acknowledging a landing clearance, he activated the HYD TEST switch to simulate a hydraulics failure. The student pilot responded to the simulated emergency and initiated a shallow approach for a “running” or run-on landing. Upon touchdown the helicopter veered left, toward the edge of the runway. The flight instructor applied corrective cyclic movement, which resulted in the helicopter becoming airborne. The flight instructor took control of the helicopter but struggled to maintain control without hydraulic assistance. The helicopter yawed to the left uncontrollably and impacted the ground. At the time of the accident, the pilot was landing the helicopter on runway 04R with wind from 050° at 4 knots, gusting 12 knots. The flight instructor reported that there were no preaccident mechanical malfunctions or failures that would have precluded normal operation.