Key points
• Penalty car parking charges, designed to deter shoppers from overstaying, are enforceable
• Should the government regulate, or set a cap on, parking fines levied by the owners and operators of private car parks?
Motorists are not entitled to park on private land without the landowner’s permission. However, the owners and operators of car parks serving retail and other properties often permit visitors to park for a limited period of time without requiring any payment from them. On the flip side of the coin, they often reserve the right to charge motorists for overstaying.
Provisions in the Protection of Freedoms Act 2012 appear to endorse such charges. Prompted by the excessive amounts charged by some vehicle-clamping operators, the legislation prohibits private sector wheel-clamping and vehicle removal, but contains provisions enabling private landowners to obtain details of a vehicle’s registered keeper. Armed with this information, landowners can then seek payment of their parking charges. However, charges for parking and overstaying made by the owners and operators of private car parks are not subject to any statutory limits. Consequently, motorists must look to the general law when challenging charges that seem exorbitant or unfair.
Parkingeye Ltd v Beavis [2015] EWCA Civ 402; [2015] PLSCS 125 is the first case in which charges for overstaying have been tested in court. It examines the common law rules relating to penalties in a consumer-facing context, as well as the impact of the Unfair Terms in Consumer Contracts Regulations 1999, and such was the interest in the case that reports suggest the courtroom was full to overflowing.
Common law
The motorist accepted that, by making use of the car park, he had entered into a contract with the operator under which he agreed to leave within a period of two hours, and that his failure to do so constituted a breach of contract in respect of which there was a flat rate charge of £85 (reducible to £50, if paid promptly). The court accepted that the charge was designed to deter motorists from abusing the car park and that the operator had not suffered any financial loss because the motorist had overstayed his welcome. Indeed, because the operator paid the owner of the retail park for the right to manage the car park and retain any parking charges that it collected, it actually profited when motorists overstayed.
Traditionally, the courts have treated contractual terms as penalties if they require a party to pay or forfeit a sum of money that exceeds the loss that the other can reasonably be expected to incur on a breach of contract. Penalty clauses are unenforceable. By contrast, provisions for the payment of liquidated damages, representing a genuine pre-estimate of the loss that the innocent party expects to incur as a result of a breach, are enforceable.
The court decided that it would be inappropriate to apply this simple test here. This was not a commercial transaction and the fact that the charge was intended as a deterrent did not, of itself, invalidate it. The proper approach was to apply the principles that underpin the law on penalties and to consider whether the payment required was extravagant or unconscionable. The fact that a contract provides for payment on breach of a sum that significantly exceeds any loss suffered may strongly indicate this. However, other factors may rob a payment of that character.
The charge was justifiable for several reasons. The provisions in the Protection of Freedoms Act 2012 suggest that parliament considered that parking charges like this should be recoverable if they are clearly advertised to motorists, as they were in this case, and are not in themselves grossly unreasonable. Visitors to the retail park were being offered valuable free parking and it was legitimate to limit use of the car park for the benefit of retailers and customers. Furthermore, the operator risked losing its contract to manage the car park if it failed to ensure a constant turnover of cars and, while it could have charged less for overstaying, it would be uneconomic to collect such charges. Therefore, the £85 charge was neither extravagant nor unconscionable.
Unfair term
The court did not doubt that a contract term that entitles a car park operator to recover disproportionately high parking charges from motorists who overstay their welcome falls within the scope of the Unfair Terms in Consumer Contracts Regulations 1999. However, it rejected the claim that the charge was unfair and unenforceable in this case. The charge was similar to those levied by local authorities in municipal car parks. There was no want of good faith, or concealed traps or pitfalls. The car park operator had displayed prominent signs advertising the charge for overstaying to those entering the car park and there was no significant imbalance in the parties’ rights and obligations.
What next?
The owners and operators of private car parks will be relieved by this decision. Motorists charged similar sums for overstaying in private car parks might have tried to obtain refunds, had the court agreed that the charge was unenforceable, on the ground that they had paid up under a mistake of law and were entitled to restitution.
Two further points are worth noting. First, the decision does not offer car park owners and operators carte blanche when fixing charges for overstaying. The court upheld the charge in this case only because it did not consider it to be extravagant or unconscionable. Secondly, the motorist has been granted leave to appeal to the Supreme Court, with the hearing fast-tracked to take place this month. Consequently, we have not heard the last word on this subject yet.
