Speed read

Charges for overstaying in car parks (e.g. you pay $65 for staying beyond a two hour free parking limit at the supermarket) are a nifty heads up on penalties in contracts, such as early termination charges (ETCs), which are very important in some B2B and B2C contracts.

There are quite a few appeal judgments, and some in the making, underpinning how potential penalties, such as ETCs, are to be handled.

One of these involves an £85 charge for being parked beyond the two hour free parking period in a retail mall.  The predominant purpose of the charge was to deter breach, in order to free up car parks for shoppers visiting the mall, rather than to recover lost revenues (after all, compliant parking was free of charge).

The English and Welsh Court of Appeal upheld the £85 charge as enforceable, but the case is heading to the Supreme Court at the end of this month, along with a parallel commercial case.

A major Australian decision might also go to appeal: we’ve written about this here, and built on it in this article.

We’re dealing here with contract issues around penalties, but at the end we also touch on additional challenges for suppliers, such as (a) incorporation of terms in the new contract, (it’s not for nothing that law students are taught all about “car park ticketing cases”) and (b) the unfair contract terms regime in the Fair Trading Act.

The Detail

Most of us hate the idea of being stung with, say, a $65 fine by overstaying in a car park, possibly also facing a clamped or towed car (meaning additional charges on top of the $65).

In private car parks, those charges are imposed contractually (although Wilson Parking call their enforcement arm, Parking

Enforcement Services, instead of Wilson Parking, which has the look and feel of an entity that issues and enforces fines).

This raises the question of whether those charges for breaching the contract - by parking beyond, say, the two hour free parking limit at a mall - are an unenforceable penalty, rather than the equivalent of enforceable liquidated damages.

That’s what Mr Beavis took ParkingEye, a car park management company, to the English Court of Appeal about.1 The £85 fine was far more than a genuine pre-estimate of loss (although, note that what defines a pre-estimate of loss is going through radical change and refinement this year, as we outline here). But could ParkingEye recover it? Not according to another 2015 English Court of Appeal case, El Makdessi v Cavendish.2 If the main objective was to deter breach by setting the charges high, this in itself would make the payment “extravagant and unconscionable,” and therefore, unenforceable.

However, the Court of Appeal in the car parking case distinguished it from El Makdessi, as these were commercial and not consumer-based. To do otherwise, “would fail to take account of the nature  of the contract, with its gratuitous but valuable benefit of two hours’ free parking, and of the entirely legitimate reason for limiting that facility to a two hour period.” 3

Therefore, to be unenforceable, the parking charge would have to be “extravagant and unconscionable” for reasons other than, simply, that the primary objective was to deter breach.

We can see ways in which that distinction can be criticised, but both cases – El Makdessi and ParkingEye - are being heard together on appeal later this month. The appeals will be heard by seven judges of  the Supreme Court, not just the usual five, emphasising the significance of these issues. We’ll report later on what happens, and how that interlinks with the major Australian decision on appeal in Paciocco v ANZ which we overview here. It is not yet known if the claimants in the latter case will be granted leave to appeal to the High Court of Australia.

Other issues

When suppliers such as car park management companies want to rely upon terms, they have some other challenges. First, there is the question of whether signs on the car park walls provide enough notice of contract terms, in order for the terms to be binding. We’ve outlined these issues here.

For example, is this Wilson Parking notice sufficient enough?

Click here to view image.

Second, questions arise as to whether the terms are potentially unenforceable as unfair contract terms, under recent changes to the Fair Trading Act. We’ve summarised these issues here.

By the time the ParkingEye case got to the Court of Appeal, that first issue was not being pursued and the second was decided in favour of the car park management company, under the English unfair contract terms regime. What would happen under NZ’s new regime?