Parking Eye Case – Compensation in the absence of loss now permissible

- News,

Mr Beavis had the misfortune to park on car park managed by Parking Eye of Chorley, Lancashire, who use automatic number plate recognition cameras to record the comings and goings of cars in car parks they manage.

Here in Newcastle under Lyme, Morrisons and Aldi supermarkets use them and if an unsuspecting shopper stays even a few minutes beyond the allotted time, the shopper may expect an 85 pound parking charge to go with their grocery spend. That is how Parking Eye earn their revenue.

Overstaying the free time slot will automatically result in the issue of a penalty notice, which, in law, prior to this case, was either a request for the payment of pre-agreed damages for breaching the permission to park which had to reflect the loss incurred or was a penalty which bore no relation to the loss incurred and hence was unlawful. Students of contract law are taught in year one that contractual penalties are unlawful and unenforceable.

Mr Beavis overstayed his free time slot and duly heard from Parking Eye. Parking Eye’s argument was that their signage ( visible by day; often not illuminated at night) created a contract with the driver wherein the driver agreed to pay the overstay charge.

Mr Beavis argued that the charge did not represent a fair assessment of the loss which was actually no loss at all, and the charge was a penalty which was therefore unlawful.

Mr Beavis’ case went to the Supreme Court. The Court decided that it was not a penalty and was a proportionate means of controlling access to a car park with wider benefits for the public. It was therefore a pre-agreed damages payment which did not necessarily have to reflect any loss at all if it was proportionate AND there were wider public benefits in controlling car park use.

And that is the novel aspect – COMPENSATION IN THE ABSENCE OF LOSS !!!

Beforehand, it had been understood that contractual damages for breach of contract must reflect the actual loss sustained (otherwise a claim is a penalty and unlawful) but the Supreme Court has muddied the waters. There is now a much greater judicial discretion than had previously been understood to exist.

This has wider ramifications than a fight with Parking Eye. It makes it much harder to resist a contractual penalty clause so now, thanks to Parking Eye, we might see much greater use of draconian contractual penalties.