private parking legal opinion

IT’S NOT FINE.Parking on Private Land:A Legal Opinion and Advice Update

July 2015

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Contents

Introduction 3

Advice Trends:

Advice sessions at Citizens Advice Bureaux 4

Advice given by the Consumer Helpline 5

Self-help on Citizens Advice Scotland Website 6

Case Studies 7

Legal Opinion explained 9

Legal Opinion of Mark Lindsay QC

Supplementary Note by Mark Lindsay QC

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Introduction

itizens Advice Scotland has been campaigning on the charges levied on drivers in private car parks by private parking management firms. Our It’s Not Fine1

report in October 2014 detailed the issues that an increasing number of consumers were experiencing. These issues commonly included:

unclear terms and signage,

punitively high charges for small infractions,

lack of adequate appeal methods that take into account mitigating

circumstances, and

aggressive and misleading debt collection practices.

Since the publication of our report, we have seen an upsurge in clients seeking advice across our Service: face-to-face advice, telephone advice and self-help advice via our advice website have all increased.

This trend in Scotland has been echoed in the rest of the UK where the RAC produced a report looking at issues and legal arguments regarding English and Welsh law on parking charges in February 20152. Media coverage of the issue has also been high including an undercover investigation by the BBCs Watchdog program in May 20153.

This latest report publishes a wide reaching legal opinion taken by Citizens Advice Scotland on the legality of such charges in Scotland and how they are handed to Scottish drivers. We also present the latest statistics on issues brought to the Citizens Advice Service in Scotland on private parking supported by case studies.

1 Citizens Advice Scotland, It’s Not Fine, October 2014, www.cas.org.uk/publications/its-not-fine

2 RAC Foundation, Private Parking – Public Concern, February 2015,

www.racfoundation.org/research/mobility/private-parking-public-concern-report 3 BBC, Watchdog Programme – Private Parking, June 2015,

www.bbc.co.uk/programmes/articles/r9w2hNCTvRRTBrdQH17nWh/private-parking

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http://www.cas.org.uk/publications/its-not-fine

http://www.racfoundation.org/research/mobility/private-parking-public-concern-report

http://www.bbc.co.uk/programmes/articles/r9w2hNCTvRRTBrdQH17nWh/private-parking

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Summary of advice

Advice sessions at Citizens Advice Bureaux

In the last two years CAB across Scotland have seen a steady increase in the advice sought about private parking. Over 4,800 issues with parking were advised on in 2014/2015 by staff and volunteers in Scottish Citizens Advice Bureaux.

In fact, parking saw the biggest increase in advice demand of any consumer related issue at Scottish CAB in 2014/15, with the number of issues jumping by 45% compared to the previous year. . Analysis of parking cases show that signage and enforcement methods are the two areas where most advice is given.

Figure 1: Number of issues regarding parking problems presented to Citizens Advice Bureaux in Scotland over the previous two years split by quarter.

Client demographics show a significant number of 65-79 year old clients compared with the overall client base of the service. This may suggest that older drivers are much more likely to seek advice if they receive one of these charges or indeed that they may struggle with the car parking rules due to unclear signage.

Age 18 - 24 25 - 34 35 - 44 45 - 59 60 - 64 65 - 79 80 +

Clients with parking issue

9% 13% 17% 31% 8% 20% 2%

All clients 8% 18% 19% 33% 9% 12% 2%

Figure 2: Comparison of age demographics of clients with parking issues at CAB against all CAB clients

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Advice given by the Consumer Helpline

The Citizens Advice consumer helpline reported a significant increase in the number of calls regarding issues with private parking in the last quarter of 2014/2015.

This is likely due to the campaign run by Citizens Advice Scotland to inform consumers of their rights and which also highlighted the fact they could get advice form the Service on this matter.

Figure 3: Calls made to the Citizens Advice Consumer Helpline by Scottish consumers regarding private parking.

Using the data from the phone line we are also able to analyse where consumers were being impacted by these issues. Interestingly, consumers in small towns and ‘accessible rural areas’ are disproportionately affected.

Urban/Rural Class Description All cases

Parking Cases

Large Urban Areas Settlements of 125,000 or more people 33.7% 33.2%

Other Urban Areas Settlements of 10,000 to 124,999 people 34.8% 33.2%

Accessible Small Towns

Settlements of 3,000 to 9,999 people and within a 30 minute drive of a settlement of 10,000 or more

9.2% 12.8%

Remote Small Towns Settlements of 3,000 to 9,999 people and with a drive time of over 30 minutes to a settlement of 10,000 or more

3.2% 1.8%

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Accessible Rural Areas

Areas with a population of less than 3,000 people, and within a 30 minute drive time of a settlement of 10,000 or more

11.7% 13.5%

Remote Rural Areas Areas with a population of less than 3,000 people, and with a drive time of over 30 minutes to a settlement of 10,000 or more

6.1% 5%

Figure 4: Comparison of Urban/Rural demographic of parking clients based on the Scottish Governments Classification Scheme

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While we know that the majority of car parks who operate schemes run by private parking management companies are in towns or cities, this may suggest that ‘commuter consumers’ who travel to a larger settlement to shop or do business are disproportionately affected. This may be due to the fact they are less familiar with the rules imposed in certain car parks in the town or city that they are visiting.

Self-help on Citizens Advice Scotland Website

Self-help information remains the most accessed form of advice for consumers regarding private parking charges with over 25,000 hits to our webpage ‘Parking Tickets on Private Land’ in March 2015 alone. This has increased from 4,000 in February 2013 – a dramatic

increase in the last two years.

Figure 5: Views of the Scottish parking on private land self-help page of the Citizens Advice Scotland website.

In March 2015 it was the most viewed page on our self-help website up from second the year before and 16th in 2012/2013. It has knocked long standing pages on the website such as divorce and jury duty from the top viewed page.

4 CAS used the Scottish Government Urban/Rural Classification Scheme to determine where callers

to the service lived based on their postcode, for more detail on the scheme see http://www.gov.scot/Topics/Statistics/About/Methodology/UrbanRuralClassification

http://www.gov.scot/Topics/Statistics/About/Methodology/UrbanRuralClassification

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Case Studies

AB across Scotland have continued to send case studies of some of the worst practices by private parking firms to CAS. Clients often cite unclear terms and

signage, punitively high charges for small infractions, lack of adequate appeal methods that take into account mitigating circumstances, aggressive and misleading debt collection practices in their advice sessions.

An East of Scotland CAB reports of a client who has received a parking charge through the post which states she stayed 28 minutes over the allowed free time of the car park. The client wasn’t aware that the car park had restrictions as she has parked there before for even longer with no issue. The parking charge demand is for £120 and she has been receiving threatening letters from solicitors who state if she does not pay she faces County Court Judgments (these are not applicable in Scotland). A consumer in the West of Scotland reported that he had received a parking charge for parking in a taxi bay at a supermarket. The client says there were no signposts or marking that where he was parked was a taxi bay and disputes this fact. After contacting the firm they claimed to have photographic evidence however when he asked to see it they refused. The firm are requesting him to pay £140 in parking charges. A West of Scotland CAB reports of a client who had parked in a car park which was advertised as ‘FREE PARKING’. When she came back to her car she found a ticket on the windscreen demanding a £100 payment. It turns out that although the car park is free it is on condition that you take a ticket from the machine after putting your number plate details into it. The client only realised this after reading the notice on the machine in the car park as the signs just advertised free parking for four hours (which she had complied with). The client had appealed the charge but the company ignored her appeal letter and she has been sent a new demand for £160 threatening court action and bailiffs (who don’t operate in the Scottish legal system). The client is now very worried that people will turn up at her door demanding large sums of money. A consumer in the East of Scotland reports that he received a parking ticket after parking for two hours at a retail park. The signage says ‘3 hour free parking’ in large writing but on closer inspection in small writing at the bottom it states ‘on match days 1 ½ hours max’. The client has no idea if it was a ‘match day’ or not and feels this is completely unfair to have rules that people wouldn’t know if they applied or not. A consumer based in the East of Scotland regularly uses a pay and display car park but one day the machine for paying was out of order. She took a photograph as proof of this. The consumer has since received a letter from a parking firm demanding payment of £100 for not displaying a ticket. She had appealed sending the evidence the machine wasn’t working but the firm won’t

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accept her appeal stating she should have phoned them at the time. The client is particularly aggrieved as she uses this car park regularly and feels like the firm have no respect for repeat customers.

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Legal Opinion explained

Why a legal Opinion?

The status of the law surrounding private parking charges in Scotland is complex. The main relevant area of law is that of contract. This area is not covered by legislation but instead has been developed through common law: law developed by judges through decisions in cases which set a precedent to be followed.

In England and Wales the common law has recently considered the issue of private parking charges in the case of Beavis v. Parking Eye5 and the RAC Foundation published the Opinion of John de Waal QC which explores the legal principles likely to apply in England and Wales.

However, the law in Scotland is different from the law in England & Wales. In private parking in particular there are some major differences which mean that the recent case and the Opinion of John de Waal QC do not directly apply.

CAS wanted to take steps to clarify the law in Scotland around private parking charges and so we commissioned Mark Lindsay QC to provide a legal opinion on the likely Scots Law position.

The Legal Opinion

As well as setting out a general overview of the law relating to private parking charges in Scotland, Mr Lindsay QC also offered some clarity on the grounds of challenge for charges.

The potential for challenge falls in to two categories – in situations where the signage has been unclear, and where the charges are punitively high.

1. Signage: Was a contract formed?

The charge is the result of a contract between the driver and the owner or manager of the land on which the car is parked. The terms and conditions on the signs set out the contract to park and so a driver should have a chance to read these before choosing to park. If they then leave the car, they have agreed to the terms and conditions and have a contract.

5 [2015] EWCA Civ 402

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If there is not a valid contract then the charge cannot be enforced and so the first aspect of the Opinion focuses on this: when is a valid contract formed?

The legal opinion suggests there are certain minimums the signs must meet:

The driver should have reasonable opportunity to read the signs before parking the vehicle

It is the responsibility of the car park (owner or management company) to make sure the signs are:

o displayed in a prominent location – for example at the entrance to the car park and at other places in the car park

o visible to drivers when they are parking – for example, there should be a sign on the way in to the car park and not only on the back wall of a car park

o sufficient font size and type so that drivers can read the signs in their car– drivers should be able to see the signs and the terms from in their car, they shouldn’t have to park and get out of the car to have to read the terms

o in a format which people recognise as outlining contractual terms and conditions:

The signs should be so noticeable and clear that no reasonable person could claim to be unaware of what they said or meant.

The fact that someone did not read the signs does not stop a contract being formed if there were signs that met the standards above but a driver didn’t read them.

2. The Level of the Charge

If the signs were clear and a contract was formed, the fact that a driver has broken that contract means they may face a financial charge. It is legal that there is a charge but there is a question about the level of the charge.

The maximum charge which both the British Parking Association (BPA) and the Independent Parking Committee (IPC) recommend is £100. However, of the cases analysed by CAS in our “It’s not Fine” report, we found that 30% of clients were charged more than this.6 Using the recommended maximum charge of £100 as a guide, CAS asked Mr Lindsay QC for his opinion on whether the level of these charges was lawful.

6 http://www.cas.org.uk/system/files/publications/It%27s%20Not%20Fine%20report.pdf at page 8

http://www.cas.org.uk/system/files/publications/It%27s%20Not%20Fine%20report.pdf

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Like with contract law, the law in Scotland is different from the law in England & Wales. There is no legislation which sets a definitive level but instead the rules come from common law. The law in Scotland says that while there may be a charge for breaking a contract, this charge should not be so high that it can be considered a penalty. Penalties for breach of contract are not enforceable so this raises a question: when does a charge become a penalty which is unlawful?

In Scotland, the common law gives some guidance. Although it will be different depending on the circumstances of an individual case, any charge for breach of contract must be a “genuine pre-estimate of loss”. In other words, it is for the company to show what it lost because a motorist overstayed and the charge should be based on that calculation.

The actual losses sustained will vary depending upon the particular circumstances of the private car park. This actual loss will also vary depending on how long the driver overstayed, and potentially what time of day the overstay happened. They may include the profits which were lost from potential customers who were unable to find a parking space because of overstaying vehicles and therefore did not purchase any goods or services from the owner, and a reasonable administration charge.

However the charge is worked out, a driver is entitled to ask a parking company to break it down for them:

In his opinion, the £100 charge recommended as a maximum by the BPA and the IPC is likely to be an unenforceable penalty because it is not a genuine pre-estimate of the parking company’s loss. It follows that any charge over £100 is also likely to be unenforceable.

3. Different kinds of ‘contract’

As the signs are the basis for a contract between the driver and the parking company, there is the potential that they can make different kinds of contracts.

The first kind of contract is between a driver and the parking company that they will only stay in the car park for a set period of time (for example two hours of free parking). If the driver overstays then they have broken their contract and they face a charge for doing so.

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The second kind of contract is one which says that a driver will only stay for a set period of time and after that time passes, the price to stay in the car park is, for example, £100.

In the first opinion we asked for, we had focused on the first kind of contract. However, the IPC suggested that some contracts might be of the second kind and so we asked Mr Lindsay QC for further advice. His advice was clear. It is the substance of the contract which is important and not the form - £100 is likely to be considered an unenforceable penalty no matter what kind of contract the sign sets out.

Summary:

Opinion of Mark Lindsay QC

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OPINION of SENIOR COUNSEL For CITIZENS ADVICE SCOTLAND

Re

PARKING CHARGES ON PRIVATE LAND

________

INTRODUCTION

1. I refer to the Memorial for the Opinion of Counsel and note that I have been instructed to advise on the following matters. For ease of reference a summary of my advice is provided in bold type.

a) At what point can an individual be deemed to have entered a contract with the parking company? When the individual parks his car in the private car park after having had a reasonable opportunity of reading the conditions of contract prior to parking.

b) What are the minimum requirements in the display of terms and conditions outlining the basis upon which any contract is formed? The notices require to be so prominent and clear that no reasonable person could claim to have been unaware of the terms and conditions incorporated into the contract by the notice.

c) What is the legal status of the charge? The charge is contractual in nature. It is therefore governed by the civil law and not by the criminal law. If it is enforceable it will be characterised as a liquidate damages provision. If it is unenforceable it will be characterised as a penalty clause.

d) Is the maximum charge of £100 recommended by British Parking Association (“BPA”) and Independent Parking Committee (“IPC”) lawful? If the £100 charge is not a genuine pre-estimate of loss then it will be deemed to be an unenforceable penalty clause. In most cases a charge of £100 is likely to be held to be an unenforceable penalty as


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it will be extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

e) Are charges higher than this maximum recommended charge lawful? Such higher charges are unlikely to be enforceable.

f) What would parking companies have to establish to demonstrate their charges as a genuine pre-estimate of loss? In order to demonstrate that the parking charges are a genuine pre-estimate of loss the parking company will require to show that its likely actual losses sustained as consequence of the motorist overstaying are broadly comparable with the parking charge.

g) What legal grounds might be relied upon to challenge a charge? The grounds of challenge will depend upon the individual circumstances of the motorist concerned. However, in general, a parking charge could be challenged on the grounds that it was not validly incorporated into the contract. If it was validly incorporated into the contract it could be challenged on the grounds that it was an unenforceable penalty. Finally, charges which have increased because of a failure to pay promptly may be challenged on the grounds that they are unfair for the purposes of Regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999/2083.

2. This Opinion will now consider all of these issues in greater detail.

3. Charges may be levied by the owner of the private car park, by the occupier of the private car park if it has been leased from the owner or by parking companies who have been engaged by the owners or occupiers to administer the parking charges on their behalf. For ease of reference this Opinion will simply make reference to the parking companies to cover all three of these possible scenarios. The legal position will remain the same regardless of whether the charges are issued directly by the owner or by a parking company on its behalf.

A. ENTERING INTO CONTRACT

4. A motorist will enter into a contract with the parking company when he parks his vehicle in the private car park after having had a reasonable opportunity of reading the conditions of contract prior to parking. By parking his vehicle in the private car park after having had a reasonable opportunity to read the conditions


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of contract the motorist will be deemed to have accepted the conditions of contract; and thereby entered into a contract on these terms with the parking company.

5. The proposed conditions of contract will not be incorporated into the contract between the motorist and the parking company if the motorist has not had a reasonable opportunity to read them prior to parking his vehicle. This is because if terms are to be incorporated into a contract this must be done at the time when the contract is being made. They cannot be introduced at a later stage.

B. MINIMUM REQUIREMENTS OF SIGNAGE

The law

6. The terms on which one party contracts may be displayed on a notice. It may be sufficient to display a notice prominently so that it can be easily seen at the time of making the contract. For example, in W.N. White & Co Ltd v Dougherty (1891) 18 R. 972 printed conditions of sale were hung in front of an auctioneer’s rostrum. The buyer had not read the conditions, but he knew of them. The court held that the buyer was bound by the conditions. Similarly, in Wright v Howard, Baker & Co (1893) 21 R 25 notices in clear terms were posted at various places of work and were held to be incorporated into contracts of employment, even although many of the workmen may not have read the notices.

7. It is, however, a question on the facts of a case whether what was done was reasonably sufficient to bring a notice to the attention of the contracting parties. The leading Scottish case on this issue if the decision of the House of Lords in McCutcheon v David MacBrayne Ltd 1964 SC (HL) 28. In that appeal the carrier’s conditions were displayed on a bill at their office and on three bills on a ship. The pursuer had not read the conditions, had not had his attention drawn to them and there was no reason why he should have read them. The House of Lords held that in these circumstances the pursuer was not bound by the notices. This was because the defenders had failed to show that, by displaying copies of them, they had done what was reasonably necessary to bring the conditions to the notice of the pursuer.

8. There are no Scottish authorities applying these general principles to private car parks displaying notices warning of parking charges. However, there is no material difference between English and Scots common law regarding when terms are incorporated into a contract by reference to a public notice.


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Accordingly, it is permissible and of assistance to have regard to English cases dealing with private car parks and parking charges.

9. The first English authority which is of assistance is the judgment of the Court of Appeal in Mendelssohn v. Normand Ltd. [1970] 1 Q.B. 177. In that appeal Lord Denning M.R. dealt with the question whether a term on a notice board at a car park might have been incorporated into a contract where it was not obvious as the driver came in but was obvious when paying for parking at the end, and where the plaintiff had parked often before. At page 182 of his judgment he emphasised that such notices must be displayed prominently:

“He may have seen the notice, but he had never read it. Such a notice is not imported into the contract unless it is brought home to the party so prominently that he must be taken to have known of it and agreed to it…”

10. The second English case which is of assistance is the judgment of the Court of Appeal in Thornton v Shoe Lane Parking [1971] 2 QB 163. In that appeal the ticket stated the vehicle’s time of arrival and that it was to be presented when the car was claimed. In the bottom left hand corner in small print it was said to be "issued subject to conditions ... displayed on the premises." On a pillar opposite the ticket machine a set of eight printed "conditions" was displayed in a panel. In the second condition it was stated that the garage would not be liable for any injury to the customer occurring when his car was on the premises. The Court of Appeal held that since the plaintiff did not know of the exemption condition and the defendants had not done what was reasonably sufficient to bring it to his notice it did not exempt them from liability.

11. At page 173 Megaw LJ explained why the defendants had not done what was reasonably sufficient to bring the notice to the attention of motorists:

“I think it is a highly relevant factor in considering whether proper steps were

taken fairly to bring that matter to the notice of the plaintiff that the first attempt to

bring to his notice the intended inclusion of those conditions was at a time when

as a matter of hard reality it would have been practically impossible for him to

withdraw from his intended entry upon the premises for the purpose of leaving his

car there. It does not take much imagination to picture the indignation of the

defendants if their potential customers, having taken their tickets and observed

the reference therein to contractual conditions which, they said, could be seen in

notices on the premises, were one after the other to get out of their cars, leaving

the cars blocking the entrances to the garage, in order to search for, find and

peruse the notices! Yet unless the defendants genuinely intended that potential

customers should do just that, it would be fiction, if not farce, to treat those


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customers as persons who have been given a fair opportunity, before the

contracts are made, of discovering the conditions by which they are to be bound.”

12. The third English authority which is of assistance is Vine v Waltham Forest LBC [2000] 1 WLR 2383. In that appeal the plaintiff left her vehicle in one of two private parking spaces. On the wall of the space that the plaintiff did not park in, at a height of about 10 feet above the ground was a yellow notice which read: “No Parking. Any Vehicle left unattended is liable to be towed away or wheel clamped. Recoverable by the payment of a fine of £105.” There was no notice on the wall of the parking space that the plaintiff parked in. The notice was visible to a person who was standing up but the Range Rover in parked in that space would have obscured the notice for someone sitting in the driving seat of the plaintiff’s car. When she returned, she found her vehicle clamped by a contractor employed by the defendant council and was forced to pay £105, plus a £3.68 fee for using a credit card, to secure its release. The Court of Appeal held that if the person doing the clamping could not establish that the car owner saw and understood the significance of the warning notice he could be liable to the owner in damages; and as the plaintiff did not see the warning notice she was entitled to repayment of £108.68 or damages in that sum.

13. The Court of Appeal provided some useful guidance on the location and type of notice that would be required in order to incorporate conditions into the contract for parking a vehicle in a private car park. At page 2390 Roch LJ advised:

“Normally the presence of notices which are posted where they are bound to be

seen, for example at the entrance to a private car park, which are of a type which

the car driver would be bound to have read, will lead to a finding that the car

driver had knowledge of and appreciated the warning.”

14. Importantly, at page 2393 Waller LJ makes clear that a motorist cannot avoid terms being incorporated into the contract by simply failing to read the terms of a notice which clearly contained contractual terms and conditions:

“Circumstances in different cases will present different problems. But I would suggest that, absent unusual circumstances, if it is established that a car driver saw a notice and if it is established that he appreciated that it contained terms in relation to the basis on which he was to come onto another's land, but did not read the notice, and thus fully understand the precise terms, he will not be able to say that he did not consent to, and willingly assume the risk of being clamped.”

15. Waller LJ then explained why inadequate notice of the proposed contractual terms had been given in the particular circumstances of that appeal:


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“Thus in this case I would say: (1) it would be less clear than in many other circumstances to a motorist that they were trespassing in pulling off the road into an area where there was both a way in and a way out; (2) it would not be fair having regard to that factor and the position of the notice to say that any ordinary and sensible person should have realised at or before the time they parked their car that they would be clamped if they did so …”

16. May LJ made similar points at page 2395 of his judgment:

“But I would not exclude the possibility that a motorist, who appreciates that there are warning signs obviously intended to affect the use of private property for parking vehicles but who does not read the detailed warning, might, depending on the facts, be held to have consented to, or willingly assumed, the risk of his vehicle being clamped, if the unread warning sign in fact gives sufficient warning that trespassing vehicles would be clamped …

… I would also find, if it were necessary to the decision, that the sign in this case was not sufficiently prominently and clearly positioned and displayed to sustain any contention that she consented to, or willingly assumed, the risk of her vehicle being clamped. In so far as this would be a finding of fact which differed from anything found by the recorder, I derive it from the photographs and the plan which show the area and the sign as clearly to this court as they were shown to the recorder. It was not intrinsically obvious, apart from signs, that the area where Mrs. Vine parked was private property. It might have been part of the highway. The sign, which Roch L.J. has described, was on the wall beside the second of two bays and was not on the occasion in question visible from the driver's seat of Mrs. Vine's car when she parked it in the first bay because a van parked in front of her blocked the view.”

17. The guidance provided by these English authorities is not binding upon the Scottish courts but will be viewed as being highly persuasive.

Discussion

18. It is clear from these authorities that in order for a notice to incorporate terms into a contract reasonable steps must be taken to bring it to the motorist’s attention prior to the contract being entered into. Such reasonable steps will include displaying the notice in a prominent location at the entrance to the private car park and at other locations throughout the private car park where they will be visible to motorists when they are parking their vehicles. The notice must be in a format which the reasonable person would recognise as being one which contained contractual terms and conditions. It must also be of a sufficient size


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and type face so that it is easily legible to motorists in their vehicles. Notices which are only visible to motorists after they have parked their vehicles and left the private car park will not incorporate any terms into the contract.

19. In summary, the notices require to be so prominent and clear that no reasonable person could claim to have been unaware of the terms and conditions incorporated into the contract by the notice.

20. The matter will be judged objectively by the courts. If it would have been apparent to a reasonable person that the prominent and legible notice was importing contractual terms and conditions the fact that the individual motorist chose not to read the notice will not prevent the conditions from being incorporated into the contract between the parking company and the motorist.

C. LEGAL STATUS OF CHARGE

21. Parking on private land is not regulated by legislation. The relationship between the owner of a private car park and the motorist who parks his vehicle in the private car park is governed by contract. Accordingly, it is the civil law and not the criminal law which determines the parties’ respective rights and obligations. In particular, the Scots common law relating to the incorporation of terms into a contract by notice and to liquidate damages and penalty clauses will determine whether the charges are legally recoverable. If the conditions relating to the charges have been validly incorporated into the contract and are held to be enforceable as liquidate damages provisions, they can be recovered from the motorist as a contractual debt in civil proceedings.

D. LAWFULNESS OF £100 MAXIMUM CHARGE

Introduction

22. The maximum charge of £100 recommended by the British Parking Association (“BPA”) and the Independent Parking Committee (“IPC”) will be legally recoverable from the motorist if it is a genuine pre-estimate of loss. It will not be recoverable if it is a penalty or fine. Indeed, this is recognised by both the BPA and IPC in their respective guidance. The reason for this is the distinction the common law draws between enforceable liquidate damages provisions in contracts and unenforceable penalty clauses. As the relationship between the


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motorist and the parking company is a contractual one these common law principles apply to parking charges and will determine whether they are enforceable.

Liquidate damages and penalty clauses

23. Lord Macfadyen summarised the relevant legal principles in his Opinion in City Inn Ltd v Shepherd Construction Ltd 2002 SLT 781:

“[15] … For a contractual provision to be regarded as imposing a penalty, and

therefore as being unenforceable, it must, in my opinion, stipulate for payment by

one party to another of a sum of money which (a) is payable on the occurrence of

a breach of contract committed by the former party (EFT Commercial Ltd), and

(b) does not constitute a genuine pre-estimate of the loss likely to be suffered by

the latter party as a result of the relevant breach of contract, but is instead

unconscionable in respect that it is designed to operate in terrorem, or

oppressively or punitively (Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor

Co, per Lord Dunedin at p 86, para 2; Clydebank Engineering and Shipbuilding

Co v Castaneda; AMEV UDC Finance Ltd v Austin) …”

24. This statement of the law is frequently quoted before the Scottish Courts and was approved by the Inner House in Hill v Stewart Milne Group [2011] CSIH 50. It is these principles which will be applied by the courts to determine whether the parking charges are an enforceable liquidate damages provision or an unenforceable penalty clause.

Relevant English authorities

25. There are two English authorities which provide some assistance in determining whether a £100 maximum parking charge would be held to be enforceable by the courts. The first is the unreported decision of District Judge Wall in Excel Parking Services Limited -v- Hetherington-Jakeman, Mansfield County Court, 18th March 2008. In that case the Claimant operated an automated car park and claimed a parking charge of £100 from the Defendant for having parked her vehicle for a period in excess of the specified time limit. The charge in question represented an enhanced sum. The initial amount of the charge to which, it was said, she was liable was £60, which was discounted to the lower figure of £40 in the event of prompt payment. The higher sum of £100 was then demanded after she had failed to pay either of these sums.


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26. The District Judge accepted that there would have been a contract when the motorist entered the car park on the terms set out on the signs which she would have seen. However, there was nothing on any of the signs to inform a motorist that a charge or fine would be payable if a specified time limit was exceeded. Accordingly, the claim failed. But the District Judge also went on to consider whether the charge sought to be recovered was to be treated as a penalty. He held that the increase from £60 to £100 was a penalty because it was a sum which was "intended to effectively frighten or intimidate someone into making a payment promptly." He went on to note that there were undoubtedly overhead costs, not merely in operating the car parking system itself but also in collecting the charges. But he noted that he had no details of these costs and it seemed to him that the amount claimed was far beyond any costs which could realistically or reasonably have been incurred.

27. The second English authority which is of assistance is the judgment of Judge Hegarty in ParkingEye Ltd v Somerfield Stores Ltd [2011] EWHC 4023 (QB). In that case the ParkingEye system was designed to catch those who overstayed and induce them to pay the charges. The names and addresses of the owners of overstaying vehicles were, using the registration number, obtained from the DVLA. ParkingEye would then send a letter of demand for the charge. If no payment or response was received, a second, third and even fourth letter in stronger and stronger terms would be sent. The basic charge was £75, reduced to £37·50 if paid within 14 days of the “Penalty Ticket,” i.e. the first letter. Judge Hegarty held that this amount was not a penalty and was enforceable as against the motorist. However, if payment was not made within a specified time the charge increased to £135. Judge Hegarty held that this was a penalty and thus unenforceable.

28. Judge Hegarty deals with increased charge of £135 at paragraph [419] of his judgment and explains why it was an unenforceable penalty:

“419 It seems to me that, in the present case, it would be difficult for ParkingEye to justify, as against any motorist, a claim for payment of the enhanced sum of £135 if the motorist took the point that the additional £60 over and above the original figure of £75 constituted a penalty. It might be possible for ParkingEye to show that the additional administrative costs involved were substantial, though I very much doubt whether they would be able to justify this very large increase on that basis. On the face of it, it seems to me that the predominant contractual function of this additional payment must have been to deter the motorist from breaking his contractual obligation to pay the basic charge of £75 within the time specified, rather than to compensate ParkingEye for late payment. Applying the formula adopted by Colman J. in the Lordsvale case, therefore, the additional £60 would appear to be penal in nature; and it is well established that, in those circumstances, it cannot be recovered, though the other party would have at least a theoretical right to damages for breach of the primary obligation.”


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29. At paragraphs [423] to [426] of his judgment Judge Hegarty considered whether the initial charge of £75 was also a penalty and concluded that it was not:

“423 Applying the formulation adopted by Colman J. in the Lordsvale case, it is necessary to determine, as a matter of construction, whether the predominant contractual function of the £75 penalty ticket is to deter the party from committing a breach of the contract. In essence, Mr Fealy's argument is that the primary obligations imposed upon the motorist are negative in nature, most notably not to stay for more than one hour. If he parks for longer than one hour, he is in breach of his contract and liable in damages. Those damages, it is suggested, will be small or nominal. Accordingly, any obligation to pay £75 in the event of such a breach must be regarded as a penalty and unenforceable.

424 This approach gains some support from the wording of the signs and in particular the statement that a "penalty ticket" might result from a "failure to comply" with the prohibitions which are then set out. But, as Mr Fealy himself acknowledged, the terminology, and in particular the use of the word "penalty", is not conclusive.

425 It seems to me that it is particularly important in the case of such an informal contract to see how the message on the signs would reasonably be interpreted, from an objective standpoint, by the ordinary motorist who wished to make use of the parking facilities. Any such motorist would be well aware that charges were normally made for the use of such car parks; and that those charges were commonly graduated, depending upon the time for which he parked. In this particular case, I think that the ordinary user of the car park would see the £75 "penalty ticket" as the price which he would or might have to pay if he used the car park for longer than a period of one hour.

426 If this is the price payable for the privilege, it does not seem to me that it can be regarded as a penalty, even though it is substantial and obviously intended to discourage motorists from leaving their cars on the car park for any lengthy period of time. I accept that this analysis is a little more difficult to apply to the other prohibitions set out on the signs. But those are very much subsidiary to the charges for exceeding the time limit; and, as it happens, there appears to have been no procedure for levying charges for a failure to park within the marked bays or for the improper to use a bay reserved for disabled users.”

Discussion


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30. Having regard to the foregoing general principles and to the English authorities which provide some guidance on the level of charges which will constitute an unenforceable penalty, the courts are likely to hold that a charge of £100 is an unenforceable penalty because it is not a genuine pre-estimate of the parking company’s loss.

E. LAWFULNESS OF CHARGES IN EXCESS OF £100

31. In light of the discussion in the foregoing chapter of this Opinion parking charges in excess of £100 are highly unlikely to be enforceable. This is because they will be viewed as an unenforceable penalty clause as such a level of charge will not be viewed as a genuine pre-estimate of loss; as it will be far in excess of any losses actually sustained by the parking company.

F. ESTABLISHING A GENUINE PRE-ESTIMATE OF LOSS

32. In order to demonstrate that the parking charges are a genuine pre-estimate of loss the parking company will require to show that its likely actual losses sustained as consequence of the motorist overstaying are broadly comparable with the parking charge.

33. As it is frequently difficult to quantify potential losses with precision, the charges merely require to be broadly comparable with what the actual losses might have been. In other words the parking charge stipulated for must not be extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

34. The owner will be able to include administration costs in his parking charges and this will not render the charges unenforceable.

35. The actual losses sustained by the owner will vary depending upon the particular circumstances of the private car park. They may include the profits which were lost from potential customers who were unable to find a parking space because of overstaying vehicles and therefore did not purchase any goods or services from the owner.


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G. LEGAL GROUNDS OF CHALLENGE

36. The legal grounds upon which a parking charge can be challenged will depend upon the individual circumstances of the case. The first issue to be considered is whether or not the conditions relating to the charges were validly incorporated into the contract. If the conditions relating to the charges were not incorporated into the contract because of inadequate notice then any civil action seeking payment of the charge could be defended on this ground.

37. If the conditions relating to the charges have been validly incorporated into the contract the next issue to be considered is whether they are an enforceable liquidate damages provision or an unenforceable penalty clause. If they are an unenforceable penalty clause then any civil action seeking payment of the charge could be defended on this ground.

38. In his Opinion for the RAC Foundation John de Waal, QC expresses the view that an early payment discount is really a price escalation provision and is therefore unfair for the purposes of regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999/2083. I concur with this conclusion for the reasons given by Mr de Waal in his Opinion. Accordingly, this is an additional line of defence which can be relied upon when the owner is seeking to recover a parking charge which has increased because of a failure to pay it promptly.

Supplementary Opinion of Mark Lindsay QC

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OPINION of SENIOR COUNSEL For CITIZENS ADVICE SCOTLAND

Re

PARKING CHARGES ON PRIVATE LAND

________

INTRODUCTION

39. I refer to the Memorial for the Opinion of Counsel and note that I have been instructed to advise on the following matters. For ease of reference a summary of my advice is provided in bold type.

a) Does an interpretation of the penalty charge as the price of parking substantively change the nature of Counsel’s advice in previous Opinion? Yes, if the charge is the contractual price for parking, rather than a charge which becomes payable upon a breach of contract by exceeding the maximum permitted time, the authorities relating to unenforceable penalty clauses will no longer apply. However, there are strong arguments to counter the Independent Parking Committee’s (“IPC”) new position. If the substance and reality of the charge is analysed, rather than its contrived legal form, it is clear that it is an unenforceable penalty payment which becomes payable upon a breach of contract.

b) If so, having regard to the Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083 (“the 1999 Regulations”) and other relevant factors, what impact does this interpretation have? If the court accepts that the charge is the contractual price for parking the authorities relating to unenforceable penalty clauses will no longer apply. This means that it would not be possible to argue that the charge was an unenforceable penalty because it was not a genuine pre-estimate of loss. In addition, if the charge was the price for parking it would be one of the core terms of the contract and therefore it would not be possible to argue that the charge was unfair in terms of the 1999 Regulations. However, even if the charge were held to be the price of parking, it would still be possible to argue that the terms relating to the charge had not been incorporated


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into the contract because of inadequate notice. In addition, early payment discount would remain a price escalation provision and would continue to be unfair for the purposes of regulation 5(1) of the 1999 Regulations.

40. This Opinion will now consider all of these issues in greater detail.

THE IPC’S CHANGE OF POSITION

41. In recent correspondence the IPC have raised with CAS their altered interpretation of the contract. The IPC now contend that the charge is the cost of parking and is not a penalty for a breach of contract. They have set out their new position as follows: “Many of our operators do not pursue charges for breach of contract. In fact their signage creates a contract with the motorist where the parking in certain circumstances is the price of such parking. Where the amount payable as a price the issue of damages and GPOL does not come into consideration as the EC directive on core terms of a contract prevents courts interfering with the core terms of contracts.”

42. This Opinion will now explain why the classification of the charge as either the contractual price for parking or as penalty for breach of contract is an important issue when considering whether or not such charges are enforceable.

PENALTY MUST ARISE ON BREACH OF CONTRACT

43. In Scotland, the rules relating to penalty clauses have no application unless the penalty arises on breach of contract: see, e.g. Bell Brothers (H.P.) Ltd v Aitken 1939 S.C. 577, Granor Finance Ltd v Liquidator of Eastore Ltd 1974 SLT 296 and EFT Commercial Ltd v Security Change Ltd 1992 SC 414. This means that the rules on penalty clauses may be evaded if the contract provides for payment on an event other than a breach of contract. Accordingly, to decide whether or not a clause is penal the first stage is to decide if the clause is brought into operation by a breach of contract; the second stage involves the character of the clause and the distinction between liquidated damages and penalties.

44. These two distinct stages can be seen in the Opinion of Lord Macfadyen in City Inn Ltd v Shepherd Construction Ltd 2002 S.L.T. 781 at page 788A-B:

“[15] In my view this issue turns on the proper construction of cl 13.8.5 in the context of the contract as a whole. For a contractual provision to be regarded as


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imposing a penalty, and therefore as being unenforceable, it must, in my opinion, stipulate for payment by one party to another of a sum of money which (a) is payable on the occurrence of a breach of contract committed by the former party (EFT Commercial Ltd), and (b) does not constitute a genuine pre-estimate of the loss likely to be suffered by the latter party as a result of the relevant breach of contract, but is instead unconscionable in respect that it is designed to operate in terrorem, or oppressively or punitively (Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co, per Lord Dunedin at page 86, paragraph 2; Clydebank Engineering and Shipbuilding Co v Castaneda; AMEV UDC Finance Ltd v Austin).”

45. The law in England on this point is the same in all material respects: see, e.g. Export Credits Guarantee Department v Universal Oil Products Co. & Others [1983] 1 W.L.R. 399.

SUBSTANCE NOT FORM

46. The distinction between the sums due on breach and sums due when there is no breach can be a narrow one. Prior to the statutory regulation of hire purchase agreements there were a considerable number of Sheriff Court cases in which the court required to determine whether or not a payment was due as a result of a breach of contract. In these cases the court looked at the substance of the payment rather than just its legal form. For example, in Mercantile Credit Co Ltd v Brown 1960 S.L.T. (Sh. Ct.) 41 at page 43, Sheriff Substitute Murray emphasised the importance of looking at the substance or reality of why a payment was being demanded rather just its legal form:

“According to the argument of the pursuers … the Court has refused to intervene on the ground (the pursuers contend) that the penal results did not follow from breach of contract but from an option which was exercised by the hirer. (Associated Distributors Ltd. v. Hall [1938] 2 K.B. 83; cases referred to in Cooden Engineering Co.; and Bell Bros. v. Aitken (infra).) In all such cases, according to the pursuers' contention as I understood it, the law is powerless to intervene, however harsh and unconscionable the penal provisions may have been.

In my opinion, the pursuers' argument is not as impregnable as they contend, at all events in Scotland where the Courts prefer principles to precedents. I consider that the true approach to the present problem is to inquire how it was that the pursuer's right of claim arose in the present case. It undoubtedly arose directly from and because of the defender's inability to pay the stipulated instalments: in other words it arose from the defender's breach of contract … The financial results which I have set out in paragraph 6 were the inevitable result of the defender's breach of contract if the pursuers cared to exercise their rights under


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the agreement. If I am right in holding that they were penal in amount, then it follows from what I have stated above as a principle that they are not enforceable.”

47. After recognising the substance or reality of the circumstances which gave rise to the obligation to make payment, the learned Sheriff went on to say that the pursuers were disguising the true facts and that their argument was based upon a number of fallacies:

“In my opinion, the pursuers in this case are merely trying to disguise the above facts by not presenting the case in its true perspective. They say that the financial results did not arise from breach of contract but from the action which one of the parties (in this case the defender) took to determine the contract by exercising his option. The fallacy in that argument, in my opinion, is that, in so stating it, they have failed to distinguish between a claim and a right to claim. It is the right to claim which is the criterion in the principle I mentioned above. The fallacy would be more obvious if it had been the pursuers who had exercised their option and had transformed their right to claim into an actual claim: but the same fallacy underlies their present argument. What the law refuses to enforce is a right to claim a penalty, and that right arose in the present case as soon as the defender put himself in breach of contract through his inability to pay the instalment due … In my opinion, it is just as fallacious in the present case to say that what brought the penal provisions into being was the defender's option to exercise his right to determine the hiring. As I tried to indicate above, the pursuers' right to claim the penal consequences of breach had already been brought into being by the defender's breach of contract: there was nothing he could do to prevent the penal consequences in terms of the agreement. The provisions were already penal and unenforceable against the defender. His action in terminating the hiring did not alter the character of the pursuers' right under the agreement: all he did was to prevent it getting any bigger: he did not make good what was already bad.”

48. Finally, the Sheriff concluded by emphasising the importance of the option only being open for exercise as a consequence of the hirer’s breach of his primary obligations:

“I think further that it is fallacious to argue that the pursuers in the present case could not sue for breach of contract because the defender was not in breach of contract in terminating the contract, but was only exercising an option open to him in terms of the contract. By failing to implement his primary obligations the defender was plainly in breach of contract.”

49. A similar approach was taken by Sheriff Substitute Christie in Bowmaker (Commercial) Ltd v McDonald 1965 S.L.T. (Sh. Ct.) 33. At page 34 the learned


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Sheriff warned against deciding cases of this nature on the basis of a legal fiction and that the factual reality should determine whether the payment became due as a result of a breach of contract:

“In my opinion, it is quite unrealistic to regard the defender in the present case as having exercised an option to terminate the hiring. The exact circumstances of the return of the car are not specified all that is known about the matter is that he was in arrears with his instalments and that the car was surrendered. To decide this case as if the defender had considered the penalties provided for in clause 7 and had then decided to exercise the privilege of terminating the contract on these conditions would be to decide the case on fiction. The reality is that he was in breach of his contract and surrendered the vehicle; and he should pay the damages appropriate to a breach of the contract. This seems to me the line of reasoning followed in Mercantile Credit Co. Ltd. v. Brown (supra) and, if I may

respectfully say so, I think that this line of reasoning is sound.”

50. Finally, in the recent Court of Appeal case of ParkingEye Ltd v Beavis [2015] EWCA Civ 402 Lord Justice Moore-Bick made some interesting obiter dicta observations that the “reality” for the motorist was the same regardless of whether the parking charge was technically a sum payable on breach of contract or on the use of the facility for longer than the advertised period of free parking:

“23 It was common ground before us that a motorist making use of the car park enters into a contract with ParkingEye under which he agrees to leave the car park within a period of two hours. Failure to do so constitutes a breach of contract in respect of which he agrees to a parking charge of £85. For the purposes of the present appeal I am content to assume that that is so, but it seems to me that the relationship between the motorist and ParkingEye might be better analysed in terms of a licence to use the car park, subject to certain conditions, coupled with an agreement to pay a parking charge in the stated amount if the terms of the licence are not adhered to. On that basis it could be argued that the parking charge was no more than a conditional payment which the motorist could choose whether to incur or not and that the authorities on penalties for breach of contract were of no relevance.

24 ParkingEye did not seek to raise that argument before the judge or before us, and in those circumstances I do not think it is open to us to pursue it. However, even if it had done so, I doubt whether it would have materially affected the outcome. The origin of the rule against the enforcement of penalties lies in the unwillingness of equity to enforce penal bonds. As far as the motorist is concerned, it matters not whether the parking charge is technically a sum payable on breach of contract or on the use of the facility for longer than the advertised period of free parking. In either case the reality is the same: the motorist incurs a flat rate charge regardless of the length of time for which he overstays.”


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51. Accordingly, when considering whether the sums payable upon the expiry of the free period of parking are the contractual price for parking or a penalty for breach of the terms of contract, it is the reality of the circumstances and not the legal form which requires to be analysed.

DISCUSSION

52. If the foregoing approach is adopted when analysing the new approach advocated by the IPC it is arguable that it is a mere legal fiction, or disguise, to classify the charge as the price for parking. The motorist’s liability to pay the charge only arises if the motorist breaches his primary obligation of not parking for longer that the maximum period of free parking. The charge, with its flat rate nature, is designed to deter motorists from exceeding the maximum period of free parking. The flat rate charge is not a graduated charge related to actual periods of time, as one would encounter in a conventional commercial car park. In other words the flat rate charge closely resembles a penalty charge and is of an entirely different nature from the graduated parking fees encountered in a commercial car park.

53. If the flat rate charge is analysed from the true perspective it is clearly a penalty which become payable upon breach of the motorist’s primary obligation not to exceed the maximum period of free parking. The IPC’s argument that the flat rate charge is simply the contractual price for parking is artificial legal analysis which fails to disguise the true nature of the flat rate charge as a penalty payable if the maximum period of free parking is exceeded.

54. While much will depend on the particular wording of the contractual notices, in general such arguments would have reasonable prospects of successfully persuading the court that the charge was truly an unenforceable penalty and was not, upon proper analysis, the contractual price for parking.

CONCLUSION

55. If the foregoing arguments against the IPC’s new position are accepted by the courts, then the advice contained in my Opinion dated 23rd March 2015 remains unaltered. Flat rate parking charges of this type are unenforceable penalty payments, arising upon a breach of contract, which cannot be recovered as they are not a genuine pre-estimate of loss.


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56. Alternatively, if these arguments are not accepted by the courts and the flat rate charges are held to be the contractual price for parking, the authorities relating to unenforceable penalty clauses will have no application. This means that it will not be possible to argue that the flat rate parking charge is irrecoverable on the basis that it is unenforceable penalty.

57. However, even if the IPC’s new position is accepted by the courts, the conditions relating to whether or not the flat rate charges were validly incorporated into the contract remain unaltered. If the conditions relating to the flat rate charges were not incorporated into the contract because of inadequate notice then any civil action seeking payment of the charge could be defended on this ground; regardless of whether or not the charge fell to be classified as the price for parking rather than a penalty for breach of contract.

THE 1999 REGULATIONS

Regulations 5 & 6

58. Regulation 5 provides, where relevant:

“5.— Unfair Terms

(1) A contractual term which has not been individually negotiated 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.

(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term…”

59. Regulation 6 provides:

“6. Assessment of unfair terms

(1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.


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(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate–

(a) to the definition of the main subject matter of the contract, or

(b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.”

60. For present purposes, it is the exclusion contained in regulation 6(2)(b) which is of the greatest potential relevance when considering the applicability of the 1999 Regulations to flat rate parking charges.

Application of 1999 Regulations to flat rate parking charges

61. In paragraphs [20] to [47] of his Opinion for the RAC Foundation John de Waal, QC analyses the relevance and application of the 1999 Regulations to flat rate parking charges. I concur with this analysis and with Mr de Waal’s conclusions, which were advanced on the basis that the flat rate charges were payable upon a breach of the terms of the contract for parking by the motorist. In particular, I agree with Mr de Waal that the reasoning expressed by the House of Lords in Director General of Fair Trading v First National Bank [2002] 1 AC 481 has more application to flat rate parking charges than the later Supreme Court appeal of Office of Fair Trading v Abbey National plc and others [2010] 1 A.C. 696

62. On the other hand, if the court accepts the IPC’s new argument that the flat rate charges are the contractual price for parking these charges will become part of the “core terms” of the contract, rather than a “default provision” and it will no longer be possible to argue that the flat rate parking charge is “unfair” for the purposes of regulation 5(1) of the 1999 Regulations. This is because the flat rate charge would be part of the core terms relating to price and would fall with the scope of the exclusion contained in regulation 6(2)(b) of the 1999 Regulations.

63. However, even if the court accepts that the flat rate parking charge is the contractual price for parking, early payment discounts would continue to be price escalation provisions; and therefore would remain unfair for the purposes of regulation 5(1) of the 1999 Regulations.

64. If I can be of any further assistance or if Agents wish to discuss any matter arising out of this Opinion, they should not hesitate to contact me.

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