The Court of Appeal has ruled
that parking fines or charges issued in private car parks which are punitive in
nature are lawful. This article considers the background to the issue and the judgment
of the Court of Appeal in ParkingEye Ltd
v Beavis [2015] EWCA Civ 402.
Background
When an individual parks their vehicle
in a private car park a contract between the driver of the vehicle and the
owner or operator of the car park is formed. Typically, in exchange for paying
a price, the driver can leave their vehicle in the car park for a period of
time; the car park owner or operator agrees to allow the driver to park their
vehicle if the driver agrees to pay the price. More often than not, the greater
period of time the driver wishes to stay, the greater the price will be.
However, parking will sometimes be free, but subject to a maximum stay: the car
park owner or operator agrees that the driver may park for free if the driver
agrees not to stay beyond the maximum period of time allowed.
When a driver does not pay the
price, or stays beyond the time for which they have paid, or stays beyond the
maximum free period of parking, they breach the contract between themselves and
the car park owner or operator. A fine or charge is then normally issued to the
driver by the car park owner or operator for that breach of contract. Signs in
the car park will often specify the level of the fine or charge.
The law does not allow the
parties to a contract to impose penalties upon one another for breaching the
contract; penalties are unenforceable. The parties are only allowed to agree a sum to be paid by the party in breach
of the contract which genuinely pre-estimates the loss the other party has
suffered by reason of the breach (known as ‘liquidated damages’). It was formerly
thought that any sum required to be paid in excess of the genuine loss would be
unenforceable as a penalty. In the case of private car parking charges, this
was thought to mean that a charge in excess of in the region of £50 would be
regarded as a penalty, since the car park operator would not lose more than
that through issuing the fine and through other drivers being unable to park.
So is a car parking charge or
fine of £85 lawful? On the face of it, it seems significantly in excess of what
a car park owner or operator could be expected to lose by a driver overstaying.
That was the issue that arose in ParkingEye
Ltd v Beavis [2015] EWCA Civ 402.
ParkingEye Ltd v Beavis
Mr Beavis parked in a car park at
a retail park in Chelmsford owned by British Airways Pension Fund. The car park
was managed for the Pension Fund by ParkingEye. The car park had numerous signs
displaying a maximum stay of two hours free parking. Overstaying could result
in a charge of £85. ParkingEye made no money from running the car park apart
from parking charges. Mr Bevis overstayed the two hour period by 57 minutes and
a charge of £85 was duly issued to Mr Beavis by ParkingEye. When Mr Beavis
refused to pay ParkingEye started proceedings to recover the sum.
Mr Beavis contended that the sum
was a penalty, and therefore unenforceable. He also contended that the charge
was unfair and therefore unenforceable under the Unfair Terms
in Consumer Contracts Regulations 1999. Following a trial at the County
Court in Chelmsford, it was held that the charge was not a penalty and Mr Beavis
could be required to pay it. Mr Beavis appealed the decision to the Court of
Appeal.
In the Court of Appeal, Lord
Justice Moore-Bick, giving the leading judgment, held as follows:
1. The law had always refused to
enforce what are considered to be ‘unconscionable and extravagant’ bargains.
2. Earlier cases had said that the essence of a penalty (which is unconscionable and unenforceable) was a payment stipulated to deter breach of a contract. Meanwhile, a contractual term requiring payment of a pre-estimate of genuine loss resulting from a breach of contract (liquidated damages) was legitimate, since this could be recovered through the courts in the ordinary way if necessary.
3. Earlier cases had said that a sum payable for breach of a contract would be a penalty if the sum was extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably result from the breach of contract. Thus if the sum required to be paid was clearly a deterrent, it was likely to be regarded as extravagant and therefore a penalty. This was the traditional view.
4. However, more recent cases had shown that a simple separation between either liquidated damages or a penalty was not sufficient. In some cases the sum required to be paid for breach could not possibly be regarded as liquidated damages, but had nevertheless been enforceable because it was not extravagant or unconscionable and was justifiable for other reasons, normally commercial reasons. That was to say, a sum which exceeds what could be regarded as genuine damages may not be regarded as penal if it could be commercially justified and its dominant purpose was not to deter breach.
5. If a commercial justification could be a reason to allow recovery of more than actual loss, it was difficult to see why others reasons could not justify such recovery also. The underlying principle was that the court will not enforce a bargain for an extravagant and unconscionable amount.
6. ParkingEye made no money from running the car park apart from parking charges. So it made no loss from Mr Beavis' overstay. But there could be an indirect loss to ParkingEye. It would lose the contract with the car park owner if it failed to make sure that there was free parking available for a limited period for customers of the retail park. That would then be a loss to ParkingEye and would damage its commercial reputation. So ParkingEye did have a commercial interest in people not overstaying the 2 hours free parking.
7. It was clear that the charge in this case was a deterrent. But that did not necessarily lead to the conclusion that the charge was extravagant and unconscionable. The traditional approach of comparing the amount required to be paid compared with the maximum possible loss was inappropriate. It was necessary to return to first principles, namely, that the court will not enforce an agreement for payment (in the event of breach of the contract) of an amount which is extravagant and unenforceable. While an amount grossly exceeding the possible loss would normally be a strong indicator or extravagance and unconscionableness, other factors may rob the bargain of that character. Those factors may be commercial or otherwise. In the present case, the charges were justified for commercial and social reasons. There were obvious benefits to consumers and retailers in having free parking for limited periods; but that could only be achieved if there was a mechanism to prevent abuse of free parking. The charge to prevent this would have to be big enough to be deterrent in nature, and economically worth collecting through the courts. Further, there was support from the Protection of Freedoms Act 2012; its terms showed that Parliament considered it is in the public interest that parking charges should be recoverable, provided that they are clearly brought to the attention of motorists. The charges were not grossly unreasonable. Therefore they were not to be regarded as a penalty.
8. As to the argument under the Unfair Terms in Consumer Contract Regulations that the charge was unfair, the issues were whether ParkingEye acted contrary to the requirement of good faith in imposing an £85 fee, and, if so, whether it caused a significant imbalance in the parties’ rights and obligations to the detriment of Mr Beavis. It could not be said that ParkingEye acted contrary to the requirement of good faith because it had clearly displayed the terms on signs. It also could not be said that the charge created a significant imbalance between ParkingEye and Mr Beavis because public authorities successfully managed their carparks with fines and there was no sign that such an approach created an imbalance in the parties' rights and obligations. Therefore the term was not unfair under the regulations.
9. Accordingly, the charge was
not a penalty or unfair, and Mr Beavis could be required to pay it. Lord Justice
Patten and Sir Timothy Lloyd agreed.
Comment
The decision is somewhat
surprising. By departing from the conventional approach to penalties the Court
of Appeal has made legitimate charges that were previously thought of as unenforceable.
It will be an unwelcome decision for motorists, who will now be liable to pay
parking charges that are not ‘unconscionable and extravagant’ in amount.
However, that is not the end of the matter. Mr Beavis has been granted permission
to appeal the decision to the Supreme Court, so the Court of Appeal’s decision
may yet be overturned.
The judgment can be read here.
What are your thoughts on the
judgement?
