November 19, 2015, by Richard Hyde
Are Parking Default Charges Unfair?
The Supreme Court has handed down judgment in ParkingEye v Beavis. It is a monster, spanning 316 paragraphs. The question of consideration, previously flagged up on the blog, was a damp squib, with all seven judges accepting the parties characterisation of the contract, with consideration consisting of the promise by ParkingEye that Mr Beavis could park and the promise by Mr Beavis to leave within 2 hours. This serves, again, to illustrate the rather limited nature of consideration required to form a contract.
The bulk of the judgment is devoted to the common law penalties rule, with all seven judges agreeing to an important restatement of the law. An analysis of this part of the judgment can be found here. However, this is outside the scope of this blog post. Instead, this post focuses on the part of the decision considering whether the £85 default charge fell foul of the Unfair Terms in Consumer Contract Regulations 1999, which implement the Unfair Terms Directive in UK law. Whilst the Consumer Contract Regulations have now been repealed, they have been replaced by Consumer Rights Act 2015, and the decision in the case has important implications for the determination of the fairness of terms under Part 2.
If a term is found to be unfair then it will not bind the consumer. Regulation 5(1) of the Consumer Contract Regulations provides that a “contractual term… shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.” In making this determination the court must have regard to all the circumstances surrounding the conclusion of the contract, all the terms of the contract and the subject matter of the contract. Section 62(4) of the Consumer Rights Act is to similar effect.
The Facts
Like the rest of the retail park, the car park of the Riverside Retail Park in Chelmsford is owned by the British Airways Pension Fund. ParkingEye provided “traffic space maximisation scheme” to the BAPF. It did not own the land and was not responsible for its upkeep. At the entrance to the car park, and scattered throughout it, were signs, described in the judgment as “large, prominent and legible,” that provides that the car park was free but was for customers of the retail park only, with a two hour maximum stay. In the event that the maximum stay was exceeded a “parking charge” of £85 would be incurred. A parking charge would also be imposed if the customer returned within one hour, parked outside the marked bays or parked in the disabled spaces without displaying a blue badge.
Mr Beavis parked in the car park for two hours and 56 minutes. He received a parking charge notice, demanding £85, which would be reduced to £50 if paid within 14 days. Mr Beavis refused to pay and ParkingEye brought proceedings against him in the County Court to recover the £85 pounds. Mr Beavis argued that he was not bound to pay the charge on the basis that it was unfair under the Consumer contract Regulations, noting that the graylist set out in Schedule 2, an indicative list of terms that may be regarded as unfair, included terms “requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.” Mr Beavis was unsuccessful both before the County Court and before the Court of Appeal.
The Supreme Court Judgment
The Supreme Court held, by a majority of 6-1, that the requirement to pay £85 was not unfair under the Consumer Contract Regulations, and therefore that Mr Beavis had to pay that amount. Lords Neuberger and Sumption gave the judgment for the majority with Lord Toulson dissenting. What was the basis for this holding? Lords Sumption and Neuberger, whilst acknowledging that the clause fell within the graylist, noted that the list is indicative only, and each term must be subjected to scrutiny in order to assess whether or not it is fair. In carrying out the fairness assessment, their Lordships applied the test set out by the Court of Justice of the European Union in Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa. In referring to the test in Aziz as authoritative they appear to put aside previous House of Lords authority interpreting the regulations, and in particular First National Bank. It is first important to note that a significant element of judgment is left to the national court to determine whether a clause is unfair. However, in making this determination they should be guided by the definitions of “significant imbalance” and “good faith” set out in Aziz:
– the concept of ‘significant imbalance’, to the detriment of the consumer, must be assessed in the light of an analysis of the rules of national law applicable in the absence of any agreement between the parties, in order to determine whether, and if so to what extent, the contract places the consumer in a less favourable legal situation than that provided for by the national law in force. To that end, an assessment of the legal situation of that consumer having regard to the means at his disposal, under national law, to prevent continued use of unfair terms, should also be carried out;
– in order to assess whether the imbalance arises ‘contrary to the requirement of good faith’, it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.
The court must also take into account whether the term is appropriate for securing the objectives pursued by the term, meaning that the importance of the term in the contractual relationship must be considered, as these form an important part of the circumstances surrounding the contract. The second criteria requires the party seeking to uphold the term to provide some evidence of their reasonable belief that the consumer would have agreed to the term in individual negotiations.
Applying these tests, Lords Neuberger and Sumption acknowledged that the term did give rise to a significant imbalance, as it allowed ParkingEye a remedy that would not have been available to them at common law. At common law, only the BAPF could recover damages, and only then in trespass to land for the occupation value of the parking space. However, the term did not contravene the requirement of good faith. The Court held that a reasonable motorist would have agreed to the terms of the contract. The court stressed that the motorist was able to avoid the risk of liability by simply not parking at the Riverside Retail Park, perhaps going to shop elsewhere. Further, even once parked, the Court suggested that avoiding liability was simple – “[a]ll that he needed was a watch.” This meant that a reasonable motorist would have reached the same terms through negotiation with ParkingEye, particularly given the appeals procedure and the provision of a reasonable grace period in the industry code to which ParkingEye were signatories. Further, the Court concluded that the charge was proportionate to the interest that ParkingEye (and the BAPF and other shoppers, who are able to park on their visits to the shops) had in the efficient management of car park space. The argument that the charge should be proportionate to the length of the overstay was rejected as a possible, but not necessary, method of ensuring fairness in the term.
In his dissent, Lord Toulson strongly attacked the finding of the majority that the term was in good faith. In particular he challenged the finding that the risk was entirely within the control of the motorist, and argued that the majority had failed to consider the imposition of a charge in circumstances other than an overstay. For example, £85 is charged if the shopper forgets his or her phone and returns within one hour to find it; it is charged if a motorist parks slightly over the line of a parking space because of the terrible parking of the car in the space next to the shopper. Lord Toulson argues that a competently advised shopper would not agree to such a term, but would instead only agree to a term which makes allowances for circumstance, allows grace periods and provides room for adjustment. Lord Toulson suggests that the majority substituted their own judgment of a reasonable clause for the judgment of the consumer, and that ParkingEye failed to discharge the evidential burden of showing that they had a reasonable belief that the consumer would have agreed to the term.
Implications
The judgment means that parking management companies are able to impose default charges on those who overstay, at least where there is a broad interest in ensuring the availability of parking space. However, this probably isn’t the end of the road for motorists who are faced with such a charge. First, in this case there was no challenge to the incorporation of the term into the contractual relationship between the business and the consumer. In many cases this will be an issue, particularly where the notices setting out the default charges cannot be clearly seen prior to the motorist parking. Second, merely because the imposition of an £85 charge was found to be “fair” in these circumstances this is not determinative of the fairness of other parking default charges. The court must examine the term in all the circumstances of the case, and large default charges are likely to be scrutinised carefully by the courts using the Aziz framework. A motorist is less likely to accept the risk of a default charge in circumstances where that default charge is significantly larger that £85. Further, where the car park location is not as closely tied to a set of businesses requiring turnover of available parking space, the courts may be less willing to find that the default charge is proportionate to the objectives pursued by the term. Finally, where the trader either claims to abide by the industry code of practice, and fails to operate grace periods, or where the tactics for recovering default charges can be characterised as aggressive, then the Unfair Commercial Practices regime, set out in the Consumer Protection from Unfair Trading Regulations, may enable regulators to take enforcement action, or for consumers to use the private law rights set out in Part 4A .
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