ParkingEye win Cambridge test case

The judgment for the Cambridge test case was delivered by HHJ Moloney today in Southend at 10:00am.

He ruled for ParkingEye in both cases, explaining his judgement as follows.

The charges WERE penalties, but were commercially justified.

There WAS a contract in a free car park. The consideration from the motorist was the promise to leave after 2 hours.

ParkingEye DO have standing to bring the case in their own name. They were principals, not agents

Prankster Analysis

This is a very interesting decision because it opens the doors for other industries to start charging what they like as penalties.

For instance, medical booking agencies representing GP's could charging £100 for not attending appointments. Hotel booking agents could charge 20 times the room rate for a failure to turn up or cancel on time. The legal arguments would be identical.

However, the BPA code of practice still requires that charges be a genuine pre-estimate of loss, and so any parking company must still abide by this or risk loss of access to the DVLA database.

HHJ Moloney admitted he was trailblazing here. This is the first judgment where consumers have been ruled against on the grounds of commercial justification.

The decision that parking chaos would result if these charges were not allowed is surprising, and flies in the face of evidence from other car parks where lower charges are imposed and chaos has not resulted. No hard evidence was offered from either side that the removal of ParkingEye would result in a loss of income to the landowner. The Prankster does know that B & Q terminated the ParkingEye contract, and suspects that aggressive enforcement was the overriding cause. The Prankster suspects B & Q were happy to pay ParkingEye's penalty clause to terminate early, and estimates that they would not have done this unless they lost huge sums - perhaps even 6 figures, due to losing customers who then never returned and shopped elsewhere.

Certainly one of the defendants in this case has never used the retail park again, and The Prankster knows of other people who have paid ParkingEye's penalty charges and never returned to the shops. ParkingEye's gain is therefore the retailers loss.

The decision that ParkingEye was the principal was surprising. However HHJ Moloney's reasoning is interesting and it is clear that this is a special case, only relating to this car park and others where ParkingEye pay £1,000 a week.

Therefore, in most other claims made by ParkingEye, and indeed perhaps other car park operators, the decision of this case is easily distinguished. Thus, this might not turn out to be the 'test case' that HHJ Moloney hoped for; instead a judgment only applicable to a few car parks.

The key phrases in the judgment are, in The Prankster's opinion;

5.7 Here, it appears to me that the financial provisions of this contract give the best clue to its real nature so far as the question of principal or agent [...] ParkingEye is paying the landowner for the valuable privilege of being able to run a car park for ParkingEye's own profit. Moreover, as the Claimant points out, [...] the landlord does not take any percentage or other direct share in the sums received by ParkingEye and is not even entitled to an account of them.

Thus, we can easily distinguish most of the other car parks ParkingEye runs because:
1) ParkingEye does not in general pay a weekly rate to the landlord
2) In many cases, such as Corporation St Preston, the landlord does take a percentage of the parking charges (15%)
3) In most car parks, the landowner is entitled to an account of the charges, and indeed is required to have an account of them. This can be shown in two ways. Firstly, ParkingEye supply their customers with a web logon, where they can see the charges issued. The Prankster has shown screenshots of these before in previous blogs. This is normally detailed in clause 8.1 of their standard contract.

8.1 [...] ParkingEye shall notify the Customer of the web address for accessing the website in order for the customer [...] to monitor the data generated at the Site

It is not known why HHJ Moloney missed this clause. Perhaps it was redacted in the contract given to him, or perhaps this site has a different contract to the usual.

The second way the landowner is entitled to an account of the charges is more fundamental. On most of their sites ParkingEye collect the charge for breach of contract as an agent on behalf of the landowner. They then keep this money as a service charge, but this gives rise to a VAT liability. ParkingEye therefore raise a VAT only invoice to the customer. Thus, the customer knows exactly how much money ParkingEye is collecting every month, because they have to pay VAT on it.

This is detailed in clause 3.11 of ParkingEye's standard contract.
3.11 The Parties acknowledge that the Revenue from the Charges retained by ParkingEye is consideration for the Services and that the supply of the Services attracts VAT at the standard rate. As such ParkingEye will generate a monthly VAT only invoice to the Customer to reflect the additional amount to be paid in VAT in respect of the monies received for the Services. The Customer agrees to pay all such invoices within thirty days of receipt on the Due Date

It is not known why HHJ Moloney missed this clause. Perhaps it was redacted in the contract given to him, or perhaps this site has a different contract to the usual.

It seems then that this decision is of limited use to ParkingEye. It is only applicable to a small minority of car parks and moreover it does clearly establish that the charges are penalties. The fact that there was found to be commercial justification in this case can be challenged on legal grounds in other cases because this is a still a small claims decision with no previous consumer-based case law and is not binding. It can also be challenged factually, since it is perfectly possible to run a car park business in other ways which do not require penalty charges.

The Prankster will keep his eye on developments.

Happy Parking

The Parking Prankster