ParkingEye Vs Beavis
LAST UPDATED 29th JANUARY 2016
ParkingEye versus Beavis and Wardley was a case of huge significance in the private parking industry. After the Protection of Freedoms Act was introduced, ParkingEye issued thousands of claims against motorists who had refused to pay their Parking Charge Notices for overstaying in private car parks. The claims were typically for £170, comprising the original £100 charge, plus court fee, plus expenses.
Historic contract law would suggest ParkingEye had no basis for claiming the £100 charge since it could in no way represent the loss they would have incurred for an overstay in a car park. Damages for breach of contract can only put the claimant back in the position they would have been in had the breach not occurred. In a free car park, the damages would therefore be little or nothing. As such, the £100 is clearly intended to be a penalty which would be unenforceable under contract law. This issue is known as genuine pre-estimate of loss which can be read about elsewhere on this site.
Despite this, since the issue is critical to ParkingEye’s business model, they put huge resources into legal enforcement, hiring expensive lawyers and filing hundreds of claims. Faced with a ParkingEye claim, and little legal knowledge, many motorists would simply give in and pay up. For those that went to court, it was largely a lottery; roughly a 50/50 split in terms of results.
In 2014, senior judge HHJ Moloney picked out ParkingEye versus Beavis and Wardley as a test case to set a precendent for similar future cases. Faced with hundreds of similar claims, Moloney wanted to make a persuasive ruling for lower courts (where the majority of cases are heard) so it would be simple for judges to make decisions, striking out defences. Barry Beavis, a chip shop owner, was one of the two defendents. He had ignored a parking ticket issued at Riverside Retail Park in Chelmsford, Essex.
Two initial hearings were adjourned. At the third hearding, ParkingEye was represented by Jonathan Kirk QC and David Altaras. Knowing that claiming the sum as a genuine pre-estimate of loss for breach of contract was not a winning argument, Kirk introduced the concept of commercial justification; he argued that higher amounts that would usually be considered penalties were needed to deter motorists, and therefore there was commercial justification.
Commercial justification had never been applied in consumer contracts before. It had been only applied in cases where the contract had been negotiated by parties of equal power with legal representation, and never for the purpose of deterrence of breaching contract. Despite this HHJ Moloney agreed with this argument, despite admitting in the ruling he was troubled with the decision. He explicitly stated that had there been a level playing field for legal representation (Beavis had no professional help), the verdict may have gone otherwise.
Court of Appeal
Moloney did however allow the decision to be appealed and arranged for the case to be fast tracked to the Court of Appeal. Of the two defendents, Barry Beavis decided to appeal, Wardley settled. ParkingEye agreed to waive their legal costs allowing Beavis to appeal without fear of huge costs should he lose. Sa’ad Hossain QC agreed to represent Beavis the case on a pro-bono basis.
The Consumer Association (also known as Which) also applied to intervene in the case, given the wider impact of such a ruling. They were worried that this interpretation of contract law could allow other business models could be structured around penalising consumers.
The case was heard on Tuesday 24th February 2015. On the 23rd April 2015 it was announced that the appeal was dismissed.
The Court of Appeal did not rule on the question of commercial justification. Instead, they ruled that ParkingEye’s charges should not be treated as penalties because they thought the level of charge (£85 in the Beavis case) is not ‘extravagant and unconscionable’, which they say is the true test of whether a clause is a penalty. One might argue whether an £85 penalty is extravagant and unconscionable; the author certainly believes £85 for an extra hour’s stay in a free car park to be unreasonably excessive!
The Court of Appeal granted permission to appeal at the Supreme Court, the highest civil court. Using a crowd funding site, Barry raised enough money to pay for this appeal to the Supreme Court. The case was joined to another case regarding penalties in contracts, Cavendish V Makedessi; a video of the hearing can be found here (which incidentally was their most watched case ever). The judgement was finally issued on 4th November 2o15.
The court found in favour of Parking Eye with 6 judges in favour, and 1 dissenting against the decision. The judgement runs to 212 pages (57,000 words) and effectively rewrites the doctrine of penalties in modern day terms. They decided that a clause will not be regarded as a penalty if it ‘serves a legitimate purpose’ and is not ‘manifestly excessive’, running contrary to the historic Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd case which was the leading authority on penalties.
The following is the Supreme Court’s press summary of the case:
Application to ParkingEye v Beavis
The court dismisses the appeal by a majority of six to one, and declares that the charge does not contravene the penalty rule, or the Unfair Terms in Consumer Contracts Regulations 1999.
Mr Beavis had a contractual licence to park in the car park on the terms of the notice posted at the entrance, including the two hour limit. The £85 was a charge for contravening the terms of the contractual licence. This is a common scheme, subject to indirect regulation by statute and the British Parking Association’s Code of Practice. The charge had two main objects: (i) the management of the efficient use of parking space in the interests of the retail outlets and their users by deterring long-stay or commuter traffic, and (ii) the generation of income in order to run the scheme.
Unlike in Cavendish v El Makdessi, the penalty rule is engaged. However, the £85 charge is not a penalty. Both ParkingEye and the landowners had a legitimate interest in charging overstaying motorists, which extended beyond the recovery of any loss. The interest of the landowners was the provision and efficient management of customer parking forthe retail outlets. The interest of ParkingEye was in income from the charge, which met the running costs of a legitimate scheme plus a profit margin. Further, the charge was neither extravagant nor unconscionable, having regard to practice around the United Kingdom, and taking into account the use of this particular car park and the clear wording of the notices.
The result is the same under the 1999 Regulations. Although the charge may fall under the description of potentially unfair terms at para. 1(e) of Schedule 2, it did not come within the basic test for unfairness in Regulations 5 and 6(1), as that test has been recently interpreted by the Court of Justice in Luxembourg. Any imbalance in the parties’ rights did not arise ‘contrary to the requirements of good faith’, because ParkingEye and the owners had a legitimate interest in inducing Mr Beavis not to overstay in order to efficiently manage the car park for the benefit of the generality of users of the retail outlets. The charge was no higher than was necessary to achieve that objective. Objectively, the reasonable motorist would have, and often did, agree to the charge.
Lord Mance and Lord Hodge both concur.
Lord Toulson (dissenting) would have allowed the appeal, on the grounds that the clause infringes the 1999 Regulations, which reflect the special protection afforded to consumers under the European Directive on unfair terms in consumer contracts. The burden is on the supplier to show that the consumer would have agreed to the terms in individual negotiations on level terms. It is not reasonable to make that assumption in this case, and in any event ParkingEye had not produced sufficient evidence to that effect.
The judgement came under criticism, particularly from those that are more familar with a better understanding of the industry than the judges in this case. The judgement states that the £85 charge was no higher than necessary. This seems to be conjecture from the judge that is not back up by the facts; for example, in this area penalties for on-street parking are less than half the £85. The judgement also justifies the charge as not being extravagent or unconscionable based on the fact that this practice is carried out around the United Kingdom. By that logic, one could argue the speed limit on the motorway is 90mph!
The consequence of this case is that the genuine pre-estimate of loss argument against high parking charges will no longer work. Parking charges do not need to represent loss, but instead not be extravagant or unconscionable. It does not, however, mean parking charges are enforceable if other arguments can be cited. We have a guide here that offers a number of ideas