Court ruling on the cost of "Penalty fares"

Discussion in 'Fares Advice & Policy' started by DaveNewcastle, 27 Apr 2015.

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  1. DaveNewcastle

    DaveNewcastle Established Member Fares Advisor

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    Those who are interested in the amount charged under the "Penalty Fares" schemes, (including Northern Rail's "Failure to Pay" scheme) might be interested in this judgement from the Court of Appeal last week, concerning the amount of £85 charged by a private operator of a car park when a car was found to have over-stayed.

    ParkingEye Ltd v Beavis [2015] EWCA Civ 402

    I'm usually hesitant to let analogies between UK railway custom, practice and law and other disciplines be used to draw conclusions between those sectors, but this particular Appeal was very relevant, as it was focussed on just one question: is the amount of £85 so high that it must be seen as 'a penalty', or is it proportionate to the full and actual costs of the business and their operations? The answer to that question would determine whether or not the amount of £85 would be a lawful charge for the overstaying in a carpark, or whether it would be a penalty which, in law, the operators were not entitled to charge. By inference, it might be supposed that the answer could be relevant to the charges applied by Rail Operators to ticketless passengers.

    There had been a popular view among the motoring community (supported by the popular UK consumer forums) that these charges levied by private companies operating car parks were, in some way, unlawful, and they had been advising motorists to fail to pay their charges. Had this Appeal, by motorist Barry Beavis, been successful, then it might well have supported that view with a legal ruling.

    However, his Appeal was not successful. The Court was only asked to address the narrow question of the amount charged, and in the specific circumstances of Mr Beavis' incidents. The Court found that the amount of £85 did not reach the level that would be 'extravagant (or exorbitant) and unconsionable', there being a long standing tradition in Equity that penalties are 'unconsionable'.

    A popular reference on this forum when considering charges for breaches (particularly for forum member 34D) has somtimes been the case of Dunlop Tyre Co v New Garage and Motor Co [1915] AC 79 in which the amount charged was held to reflect 'liquidated damages' (i.e. a contribution to consequential losses). That argument was run in the hearing, but without success.
    The charge was also tested against the popular Unfair Terms in Consumer Contracts Regulations 1999, but not found to be "unfair".

    There are two reasons for me to hesitate to draw too much relevance for the Railway industry from this Judgement:
    - Firstly, the specifics of the car park in which Mr Beavis parked had a policy of free parking for the first 2 hours, followed by a charge of £85 (reduced to £50 for prompt payment). It follows that the operators have no revenue at all from the operation of that car park if it were not for oveer-staying motorists.
    - Secondly, Mr Beavis did not instruct a law firm to pursue the Appeal with the level of research and representation which might be expected if a 'test case' is to be of national significance. As might be expected, ParkingEye had instructed a skilled and experienced law firm to assist in advocating their position.

    On the first of those two points, the Court found "There are obvious benefits to both consumers and retail businesses in having free or cheap car parking available close to the shops for limited periods. That can be achieved only if there is some mechanism for ensuring that in most cases those who make use of the facilities do not abuse them by overstaying. That would not be achieved by a scale of charges graduated by reference to the length of the overstay unless they were sufficient to act as a deterrent. Moreover, the amount of the charge, however, calculated, would have to be large enough to justify collection."

    On the second point, it would not have my advice to launch a 'test case' with a pro bono QC on one side and a fully staffed team with access to all law libraries on the other.

    I thought that the significant summary for the Railway sector was burried in this statement from the Judgement: "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."

    Despite the dissimilarities, much of this reasoning does directly correspond with any test in law of the scale of charges imposed by railway operators when passengers are found to be travelling without a valid ticket.
     
  2. richw

    richw Established Member

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    This has possibly opened a new can of worms. If I am not mistaken this ruling due to how it's interpreted the charge would make the charges VAT-able.
    These companies business model worked on the fact that what they thought they were handing out was exempt from VAT. If it is the case HMRC might go sniffing about for a number of years of owed VAT.
    Penalties are VAT exempt, but the ruling has defined it is not a penalty. These companies have been accounting as funds collected as being penalty charges.
     
    Last edited: 27 Apr 2015
  3. Romilly

    Romilly Established Member

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    I don't think that the position is as straightforward as this: "penalty" is used differently in the two contexts. In the VAT context, "penalty" appears to be used to refer to an enforceable excess charge. In the judgement, "penalty" appears to be used to refer to an excess charge that is so exorbitant as to be unenforceable. In other words, the judgement was saying the parking charge in the particular case was non-exorbitant and was therefore an enforceable excess charge (which would appear to mean that there are no VAT implications).
     
  4. bignosemac

    bignosemac Established Member

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    The CoA decision is being appealed to the Supreme Court.

    Barry Beavis has already raised the necessary £6100 to lodge the appeal. £1600 to lodge the appeal and £4500 to lodge the appellant's bundle.

    Good luck to Mr Beavis turning over the perverse ruling of the CoA.

    It's something of a win-win though even if the decision is upheld. As it opens up the PPCs to huge VAT bills.

    And whichever way it goes I fully expect the next government to legislate in this area further. The last attempt by the Conservatives with the Protection of Freedoms Act 2012 has been an unmitigated disaster. Many of these PPCs are ex-clampers who continue to prey on motorists under the guise of car park management. They are doing zero management and in the vast majority of cases only make money from the charges imposed for supposed infringements of 'rules'. The sooner they are legislated out of existence the better.
    --- old post above --- --- new post below ---
    Those people have broken criminal law though. Overstaying in a private car park is at worst the civil offence of trespass.
     
  5. Bletchleyite

    Bletchleyite Veteran Member

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    How, then, do you expect business owners to manage their car parks to ensure they are kept available to their customers?

    I don't think these companies are completely unreasonable (though I do think "no return within" rules on supermarket car parks are silly, as it means you can't go back if you've forgotten something; it makes more sense to me to have it as a maximum period of parking in any 24 hour period, which is easy to enforce using entry/exit cameras).
     
  6. Kite159

    Kite159 Established Member

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    By employing the use of barriers and proper car park management, not just a camera on a stick (which if you do return has a habit of forgetting the first exit and 2nd entry and putting the time spent as 1st entry and 2nd exit - $$$)
     
  7. anme

    anme Established Member

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    I don't understand why motorists think they are entitled to park wherever they like, for nothing.
     
  8. Bletchleyite

    Bletchleyite Veteran Member

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    And you want to pay extra on your Tesco/Aldi/whoever shopping to pay for that, or perhaps even pay to park? Such things are not free. I don't; if they would just remove the "no return until" nonsense and replace it with a maximum stay period per 24 hour period/calendar day I would be completely happy with it.
     
  9. richw

    richw Established Member

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    I've never received a ticket. If the sign says stay for 2 hours max, I always ensure I'm gone in time
     
  10. LateThanNever

    LateThanNever Established Member

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    If that is what they really thought then all the more reason for the Supreme Court to overturn it. Are they really going to promote the legal quagmire of when is a penalty is not a penalty?
    But as the railway is buttressed by strict liability I doubt this stacks up. 'Failure to pay' charges are still a bribe to stay out of court, where the odds are - prima facie at least - stacked against the defendant. It's not, after all, as if the rail service (cf car parking) would not exist as a servicable entity without the charges!

    If supermarkets wish their customers to pay then they will be putting themselves only on a similar basis to the high street. Tesco try to avoid parking difficulties and with their current problems I rather doubt they'll want to do that!
     
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