The Supreme Court has rejected a claim that an £85 overstay fee at a Chelmsford car park was an unfair penalty.
The decision will be met with a sigh of relief by car park management companies across the country, as well as landowners who might have been drawn into hasty renegotiations of car park contracts had the decision gone the other way.
Lords Neuberger and Sumption, giving the court’s ruling, declined to abolish the “penalty rule” – to the effect that a term in a contract is unenforceable if it is penal – but explained that its true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.
However, they concluded that the charge imposed on Barry Beavis in this case was “not a penalty”.
They said: “In our opinion, while the penalty rule is plainly engaged, the £85 charge is not a penalty. The reason is that although ParkingEye was not liable to suffer loss as a result of overstaying motorists, it had a legitimate interest in charging them which extended beyond the recovery of any loss. The scheme in operation here (and in many similar car parks) is that the landowner authorises ParkingEye to control access to the car park and to impose the agreed charges, with a view to managing the car park in the interests of the retail outlets, their customers and the public at large.
“That is an interest of the landowners because (i) they receive a fee from ParkingEye for the right to operate the scheme, and (ii) they lease sites on the retail park to various retailers, for whom the availability of customer parking was a valuable facility. It is an interest of ParkingEye, because it sells its services as the managers of such schemes and meets the costs of doing so from charges for breach of the terms (and if the scheme was run directly by the landowners, the analysis would be no different).
“Deterrence is not penal if there is a legitimate interest in influencing the conduct of the contracting party which is not satisfied by the mere right to recover damages for breach of contract.”
They added: “None of this means that ParkingEye could charge overstayers whatever it liked. It could not charge a sum which would be out of all proportion to its interest or that of the landowner for whom it is providing the service. But there is no reason to suppose that £85 is out of all proportion to its interests.”
The court also rejected Beavis’ claim that the charge was unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
Beavis drove into a car park managed by Parkingeye at the Riverside Retail Park in Chelmsford. Prominent signs stipulated that the maximum stay was two hours, after which a parking charge of £85 would be payable (reduced to £50 if paid within 14 days). He stayed nearly three hours and was charged £85, which he refused to pay.
Parkingeye Ltd v Beavis Supreme Court (Lord Neuberger, Lord Mance, Lord Clarke, Lord Sumption, Lord Carnwath, Lord Toulson, Lord Hodge) 4 November 2015
John de Waal QC, David Lewis and Ryan Hocking (instructed by Harcus Sinclair) for the appellant
Jonathan Kirk QC, David Altaras and Thomas Samuels (instructed by Cubism Law) for the respondent
Christopher Butcher QC (instructed by Consumers Association) for the intervener
