The Court of Appeal of England and Wales has held that a parking fine of £85 was not a penalty, nor was it unfair.
A motorist, who had overstayed a two hour period of free parking, resulting in a fine of £85, argued that the fine was unenforceable on two grounds:
- The fine was unenforceable at common law because it was a penalty
- It was unfair under UK consumer protection law and therefore unenforceable
In determining whether the fine constituted a penalty, the Court looked at the commercial justification for the fine. In purely financial terms, no direct loss was suffered by the car park operator as the car park was free (for 2 hours) and therefore it suffered no loss in terms of income that might otherwise have been derived from another customer. However, the Court decided that it could have suffered an indirect loss because the mismanagement of the car park would be likely to result in the loss of the contract with the owner of the car park. Although the principal purpose of the fine was deterrence, there was significant commercial justification and the fine was not “extravagant or unconscionable”. For these reasons, the fine was deemed not to be a penalty under common law.
On the second point, under consumer protection legislation, a contract term is deemed to be unfair where it provides for a significant imbalance between the rights and obligations of the parties, to the detriment of the consumer. The Court ruled that the term setting out the fine was not unfair on the basis that it was prominently displayed on notices within the car park and the consumer was not deceived in any way. Further, the fine was not excessive when compared to that levied in other car parks.
This decision differs from the majority of cases involving penalty clauses in that, as the motorist had availed of two hours free parking, there was no economic relationship between him and the car park operator. Further, the car park operator suffered no financial loss if a motorist overstayed because if the space had been vacated, it would either have remained unoccupied or would have been occupied by another car free of charge. The fact that a fine is in place for deterrence purposes does not of itself mean that it is a penalty where it is not extravagant or unconscionable. The decision confirms the enforceability of this common procedure, used by both private companies and county councils.