The Supreme Court has just handed down its decision in the case of ParkingEye Limited v Beavis which has helped to clarify what Lord Neuberger described as the "ancient, haphazardly constructed" law relating to penalty clauses.
In 2013 Mr Beavis went shopping at a retail park in Chelmsford. He parked in the on-site car park which was operated by the company ParkingEye under agreement with the landowner. Signs prominent at the entrance of and at intervals inside the car park stated that visitors were allowed to park for free for two hours. A charge would be levied against overstayers. The terms displayed on the signs amounted to a contract between ParkingEye and visitors who chose to park.
Mr Beavis parked for two hours and 56 minutes. ParkingEye sent him a demand for £85. Mr Beavis refused to pay and, when ParkingEye sued him, he pursued his case up to the Supreme Court.
Mr Beavis' chief argument was that the obligation to pay the £85 was an unenforceable penalty because ParkingEye had suffered no loss and the charge was levied solely for deterrent effect. Previous case law has identified these as the hallmarks of a penalty.
The Supreme Court said that the position was more nuanced. It was agreed that the £85 did not represent ParkingEye's loss. Rather, ParkingEye gained by motorists' breach of contract. It was also true that the purpose of the £85 levy was to deter motorists from overstaying.
However, the obligation to pay the £85 was not a penalty due to the following facts taken together:
- ParkingEye had a legitimate interest in charging overstaying motorists. Its business model was to maximise the efficiency of the car park for the landowner and to meet the costs of providing this service from the charges levied for motorists' breaches.
- The amount of £85 was not extravagant or unconscionable. It was comparable to the charges imposed by local authorities on public land and was below the cap of £100 set by the British Parking Authority in its code of practice.
This case has generated a wave of consumer panic that companies are free to levy large fines against customers for trivial breaches of contract or that parking operators will see it as a licence to charge overstaying motorists according to their whim.
That is not the case. The party enforcing the relevant provision must have a proper commercial justification for doing so, and any charge levied must be reasonable. Whether a Supreme Court judge's idea of what is reasonable is the same as that of the man on the street is debatable, but where parking is concerned perhaps the best advice remains, to paraphrase Lord Neuberger: "Get a watch."
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