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Contractual Parking Charges - Fair and Enforceable

06-May-2015
06-May-2015 17:23
in Contract
by Timothy Salisbury

ParkingEye Ltd v Beavis [2015] EWCA Civ 402

Last month, the Court of Appeal gave its judgment in favour of a car park operator in holding as enforceable a charge under a contract with a motorist, incurred by the motorist as a consequence of staying beyond the permitted free time.

Although the parking charge was argued to be a penalty, the court enforced it considering it commercially justifiable.

Summary of decision:

  • Charges for motorists overstaying the period of permitted free parking are enforceable and do not fall foul of the Unfair Terms in Consumer Contracts Regulations where the charge is neither extravagant nor unconscionable.

  • In considering whether terms are penal in nature, the court will take a commercial approach to whether the charge levied is commercially justifiable, notwithstanding that it may not represent the amount of damages which a court would ordinarily award for breach of contract.

  • Although in this case the matter was considered as a contract, it may be possible to construe similar arrangements as a license to use a car park, subject to certain conditions, coupled with the agreement to pay a charge if the terms of the licence were not adhered to.

Background to appeal

The Appellant, Mr Beavis, made an appeal against the decision to award £85 to ParkingEye Ltd. The main questions considered by the judge at first instance were: (a) whether the parking charge was a penalty and therefore unenforceable under common law and (b) whether the parking charge was unfair under the Unfair Terms in Consumers Contract Regulations.

Arguments and consideration by the Court of Appeal

Mr Beavis argued that the parking charge acted as a deterrent to prevent motorists staying longer than permitted, with no other function. He also submitted that the term became a penalty because the sum due to be paid by the motorists would exceed the expected loss of the car park operator.

ParkingEye Ltd and the Court of Appeal both accepted that it was difficult to distinguish the term from a penalty due to its function. Nevertheless, the Respondent reminded the court of two vital considerations which must be taken into account when considering the enforceability of a penalty; namely ‘extravagance’ and ‘unconscionability’. These two principles go together:  a penalty could be considered extravagant if the sum is unnecessarily excessive in comparison to the loss incurred but that does not automatically make the penalty unenforceable. The extravagance of the penalty may be tolerable should it be commercially justified, otherwise the courts consider it unconscionable and thus unenforceable.

The Respondent also identified the consequence of ParkingEye Ltd not having control over how the parking space could be used and this played a part in justifying the parking charge.

The Court of Appeal surveyed the authorities to ascertain both the historic and modern approach by the courts to assessing whether a clause was penal and thus unenforceable. The Court concluded that there was an emphasis on the proposition that if a charge was commercially justifiable and was not predominantly to deter breach, it would be not considered penal. Further, the modern approach was to demonstrate greater flexibility and a willingness by the courts to recognise the underlying principles on which the doctrine of penalties as a while rests in order to determine the outcome in any case.

The Court of Appeal also considered an alternative relationship between the parties, which was not argued by the parties. Instead of a contract existing between them, it could have been appropriate to characterise the motorist as having a licence to use the car park. Under this view, the parking charge is a conditional payment in which the motorist chooses to pay should they exceed the limited free parking time. Nevertheless, this approach would not have affected the decision made by the Court of Appeal; whether by a breach of contract or using a facility longer than permitted, the motorist nevertheless incurs a charge.

Decision of the Court of Appeal

The Court of Appeal held that although the parking charge imposed by ParkingEye Ltd was similar to a penalty, the charge was justified when taking a commercial approach as it was neither extravagant nor unconscionable. Although the principal object of the charge was to deter overstaying, it was neither improper in its purpose nor manifestly excessive in amount, having regard to the level of charges imposed by local authorities and others for overstaying in public car parks. Further, were the charge lower, then it would become uneconomic for the car park operator to enforce the charge. It was thus commercially justifiable.

With reference to the Unfair Terms in Consumer Contracts Regulation 1999, the Court of Appeal also held parking charges were not an unfair term in the contract between car park operators and motorists. It was a non-excessive charge made payable under the contract following a breach and is enforceable, although Moore-Blick LJ did highlight that he had no doubt that a disproportionately high charge would fall within the scope of the Regulations.

Finally, the case demonstrates the courts’ readiness to uphold public policy: should the judge have decided they were not going to impose the parking charge, this could place pressure on car parking operators to exclude free parking in order to avoid future commercial losses, thereby removing a valuable amenity from the motoring public.

Consequence for motorists and car park operators

As a consequence of the decision made in the appeal, motorists should adhere to notices and stipulations made by car park operators. Although an abuse of free parking does not usually result in huge financial risks, there are indirect consequences for an abuse of the freedom and the courts will take a commercial approach when considering such cases. Motorists should be aware that the courts are more willing, than not, to enforce the terms of the contract between car park operators and motorists should a breach occur.

Similarly, those businesses operating parking in parking enforcement on private land would be well advised to ensure that their penalties were broadly in line with the charges for overstaying in municipal car parks in order not to fall foul of either the general rule of enforcing penalties or the provisions of the Regulations.

 

© 2015 Chambers of Lawrence Power, 4 King’s Bench Walk, Temple, London, EC4Y 7DL. Tel: 020 7822 8822. www.4kbw.net  email jr@4kbw.net