Parking charge not an unenforceable penalty in the Court of Appeal

Parking charges are consistently challenged by motorists on the basis that they consider them to be penalties which are unenforceable in contract law.

In response to these disputes, those trying to enforce car parking charges rely on the decision of Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd 1915 to argue that the charge is not a penalty but is in fact a claim for liquidated damages on the basis of a genuine pre-estimate of loss. Since this case grey areas have remained on what constitutes an enforceable penalty, however a recent Court of Appeal decision has further clarified the position.

In the case of Parking Eye v Beavis 2015 EWCA Civ 402 the defendant was issued with an £85.00 charge after overstaying a two hour parking limit in a retail park owned by British Airways Pension Fund. After ignoring requests for payment, Parking Eye who manage the car park, issued court proceedings to recover the sum due. Mr Beavis argued that the charge was an unenforceable penalty. The Judge at Cambridge County Court held that the charge had the characteristics of a penalty in the sense in which that expression is conventionally used, but one that was commercially justifiable because it was neither improper in its purpose nor manifestly excessive in its amount.

Mr Beavis appealed to the Court of Appeal and argued that a contractual term by which a party undertakes to pay a sum of money on breach which exceeds the loss which the other can reasonably be expected to incur as a result of the breach is a penalty. In his view, such a term was nothing more than a deterrent designed to encourage the other to perform the contract. In response the claimant argued that although deterrence had played a large part in the development of the law relating to penalties, the true principles on the basis of which the courts decline to enforce penalties are those of extravagance and unconscionability.

The Judge therefore had to consider two issues, both of which are frequently raised by motorists:

1. Whether the charge is unenforceable at common law because it is a penalty; and

2. Whether it is unfair and therefore unenforceable by virtue of the Unfair Terms in Consumer Contracts Regulations 1999. ("The Regulations")

The Judge did not consider the clause to be an unenforceable penalty and stated that the modern approach to deciding whether any particular clause is unenforceable as a penalty requires an examination of its role from a number of different perspectives, including proportionality to actual loss, deterrence and commercial justification. In his view, 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. It was in his view commercially justifiable, both from the point of view of the Pension Fund as the landowner and Parking Eye and from the point of view of motorists at large.

The Judge held that the term imposing the parking charge in this case was not unfair within the meaning of the Regulations, because the size of the charge was similar to those levied by local authorities and because very clear notice had been given to consumers when they entered the car park. The Judge also held that there was no breach of the duty of good faith, since the terms of the contract were prominently displayed and clear to any motorist who might wish to use the car park. He said that the term did not cause a significant imbalance in the parties’ rights and obligations because the charge was no greater than that which a motorist could expect to pay for overstaying in a municipal car park.

Mr Beavis was unsuccessful in his appeal and the Judgment was upheld.

This is a positive outcome as it clarifies this area of law and reinforces the position that Debt Recovery Solicitors and parking enforcement companies have taken by enforcing breach of contract notices. Mr Beavis has permission to appeal to the Supreme Court and is said to be raising money to fund his appeal so it may not be over just yet. He has until 04.06.15 to file his notice of appeal.