In ParkingEye Ltd v Beavis  EWCA Civ 402 the Court of Appeal considered the notoriously grey area of private parking charges.
It is a question that has troubled laymen and lawyers alike. Can private companies really get away with charging seemingly punitive fees for overstaying in a car park or failing to pay the proper fare? In ParkingEye Ltd v Beavis  EWCA Civ 402 the Court of Appeal had to decide that very question – and they decided that such charges were enforceable.
A disgruntled motorist appealed against an £85 charge given to him after staying in a car park longer than the free two-hour period. He argued;
- that the charge was unenforceable at common law because it was a penalty;
- alternatively, it was unfair and therefore unenforceable under the Unfair Terms in Consumer Contract Regulations 1999.
Such was the importance of the decision, the Consumer’s Association was an intervening party.
The position at common law
Generally the position has been that if a charge is no more than punishment for a specific act, to deter people from that act, it is a ‘penalty’ clause and as such is unenforceable. However, if that charge is a genuine reflection of the loss a party has suffered, the charge will be treated as ‘liquidated damages’ – and the clause will be enforceable.
This classic test is found in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd  AC 79 where Lord Dunedin also states:
- A clause will be held to be a penalty if the sum stipulated is extravagant and unconscionable in amount, when compared with the greatest loss that could conceivably be proved to have followed from the breach.
- It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility.
The law has since developed:
- Lordsvale Finance plc v Bank of Zambia  Q.B. 752 concerned a term which imposed a charge in the event of a creditor defaulting on a loan agreement. It was held that the clause was not a penalty. Though deterrence of breach was a purpose, it was not the dominant purpose.
- Cine Bes Filmcilik ve Yapimcilik v United International Pictures  EWCA Civ 1669 recognised that if a clause providing for payments on breach was “commercially justifiable”, it may not amount to a penalty even if it was not a genuine pre-estimate of loss.
- Most recently in El Makdessi v Cavendish Square Holdings BV  EWCA Civ 1539: Cristopher Clarke LJ stated that if the predominant function of a clause to deter breach or secure performance, and the clause required excessive payment with no commercial justification, it would be considered “unconscionable”.
Unfair Terms in Consumer Contracts Regulations 1999 (the 1999 regulations)
Clause 5 of the 1999 regulations provides that a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. If found to be unfair, it shall not be binding on the consumer.
ParkingEye: the facts
ParkingEye provided car parking services at a site owned by British Airways Pension Fund (“BAPF”). ParkingEye had a contract with the BAPF under which it paid a fixed weekly charge to the pension fund and was entitled to retain any charges it recovered (from those overstaying the free two hour period). 20 signs were prominently displayed in the car park – informing those entering that it was private property and that failure to leave after two hours would result in a parking charge of £85. The Defendant did not dispute overstaying the two hour limit by an hour.
At first instance, Judge Moloney QC (the designated civil judge for East Anglia) held that a motorist parked on the basis of the terms in the notice and therefore had entered into a contract with ParkingEye, thereby agreeing to pay the charge for overstaying. Whilst the charge did have qualities of a penalty, it was not “improper in purpose” or “manifestly excessive” and so was “commercially justifiable”. He also held that the undertaking to pay the charge was not an unfair term, so was not unenforceable under the 1999 Regulations. The Defendant appealed.
The Court of Appeal decision
On the one hand, there was no direct monetary loss. It could not be argued that the charge was a genuine pre-estimate of actual money lost because if the space had been given up, it would have been left unoccupied or taken up for free for two hours. However, there was an ‘indirect loss’ of sorts. This arose because ParkingEye was contracted to manage the car park for the pension fund and an express term of that contract was to only allow two hours of free parking. Failing to manage the car park by allowing motorists to flout the rule could lead to the contract being terminated and consequent financial loss. So the charge was, in a way, a deterrent – but there was an underlying commercial justification for the deterrence.
Moore-Bick LJ stated the judge below was correct in applying the “modern approach” – which required consideration of the clause from a number of different perspectives including proportionality to the actual loss, deterrence and commercial justification. He held that if a penalty is disproportionate in amount to the estimate of loss, it is a “strong indication” of the bargain being extravagant and unconscionable. However, in a case such as the present, social and commercial considerations meant that though the primary purpose was deterrence, it did not equate with extravagance and unconscionability. Those considerations were:
- Sections 56 and schedule 4 of the Protection of Freedoms Act 2012 gives operators of private car parks the right to recover parking charges. Evidently, Parliament considered it to be in the public interest to permit these kind of parking charges as long as they were brought to the attention of the motorists.
- This type of free parking had a social benefit to consumers and a consequent economic benefit to retailers. A mechanism was required to ensure that the free parking was not abused and the charge would have to be high enough to justify collection.
As such, the judge below had been right to find that the parking charge in this case was not extravagant or unconscionable and was therefore enforceable at common law.
In relation to UTCCR 1999, the Court of Appeal also found that the term was not unfair and was enforceable. Essentially, imposition of a charge of £85 was designed to create a regular turnover of vehicles for the benefit of the whole community. This did not create such a serious imbalance that rendered the agreement unfair, given that;
- the motorist was made aware of the term when entering the car park;
- charges such as this are frequently used by local councils to manage scarce resources;
- the charge was not excessively high, extravagant or unconscionable.
The Court of Appeal has thus decided that despite the prima facie deterrent nature of such parking charges, they perform a useful social and economic function. As a matter of public policy, they will not be unenforceable unless they are “extravagant or unconscionable” – but as demonstrated in this case, a charge can still be high without being “extravagant or unconscionable”. The court considers the regulation of parking, and therefore the associated charges, as being sufficiently important to society as a whole.
However, the Court of Appeal granted the Defendant leave to appeal to the Supreme Court – and for this Mr. Beavis has crowd funded almost £8,500 in the past month. It is yet to be seen whether this groundswell of public support will translate into a legal victory.
23 ESSEX STREET