‘Illegality and the law of contract is notoriously knotty territory’, says Sir Robin Jacob in ParkingEye Ltd v Somerfield Stores Ltd,  EWCA Civ 1338. The case arose from a contract to enforce parking charges at British supermarkets, where customers get a certain amount of free parking time but after that have to pay. Somerfield engaged ParkingEye to install – and then enforce – an automatic system to determine which customers owed money for extra time. The basic charge was £75 for overstaying, reduced by half if payment was made within 14 days of ParkingEye’s first notice. The charge went up to £135 after a certain length of time. ParkingEye sent a series of scary (and ‘illiterate’) letters, made to look as though they came from the police, to the owners of overstaying vehicles. The trial judge found that while the basic charge was not a penalty, the £135 was (and thus unenforceable). He also found that while the first two scary letters did not contain falsehoods, the third and fourth in the series clearly did, in representing that the debt was owed to ParkingEye (not Somerfield), that it was sent on Somerfield’s behalf (which it was not) and that ParkingEye had Somerfield’s authority to issue proceedings against defaulters (which it did not, and didn’t really intend to do anyway). When ParkingEye sued Somerfield for repudiation of the contract, the latter pleaded illegality as a complete defence, on the grounds that ParkingEye should not be able to rely on its own deceitful conduct. The trial judge agreed that ParkingEye had engaged in deceitful practices, but not that it had had ‘a firm and settled intention to act in an unlawful manner’ at the time it entered into the agreement with Somerfield. There was also evidence that Somerfield executives had agreed with ParkingEye about the content of letter 3, but the judge concluded that that agreement was collateral to the parties’ underlying agreement – which itself being free of illegality could not be vitiated as Somerfield contended.
The Court of Appeal upheld the trial judge’s decision. The main agreement was not, at inception, predicated on an illegal intention or an intent to perform illegally (although Sir Robin characterised the ‘intention from the outset’ rule as ‘distinctly odd’). The main contract was never intended to be carried out in a wholly illegal manner, so it could not be said that ParkingEye’s illegal means of performance had the effect of tainting the contract in its entirety. ‘Considered with a sense of proportionality’, it wasn’t fair to allow Somerfield to leave ParkingEye with no remedy for Somerfield’s own wrongful repudiation. Toulson LJ agreed, noting that the illegality was merely tortious and not central to performance of the main contract.
[Link available here].