Unfair Parking Contracts

Many NHS and similar public authority car parks are now run by commercial parking companies. However, the terms and conditions of their parking and subsequent enforcement of them is, in my opinion, unfair and unenforceable.

Take, for example, the terms and conditions governing the pay-and-display parking at my local hospital, Queen Alexandra Hospital. These are displayed near the pay-and-display ticket machines (see picture above), or at regularly spaced intervals up lampposts in the pay-and-display parking areas (see picture right).

It is not obvious with whom a visitor to the hospital is contracting for car parking services. The display next to the ticket machine mentions 3 parties: Carillion, Portsmouth Hospitals NHS Trust and, right at the bottom with the least prominence, Parkshield. Parkshield also give themselves the official sounding trading name of PCP Parking Enforcement Agency, but do not be fooled. There is nothing official about this “Enforcement Agency”; it has no statutory powers of enforcement. It is merely Parkshield Collection Limited, a private limited company formed on 12 December 2011, being a service provider at the end of a contractual chain with Portsmouth Hospitals NHS Trust or the landowner of the parking spaces.

Parking without a parking ticket in Queen Alexandra Hospital is not an offence under the Road Traffic Regulation Act 1984 or Traffic Management Act 2004. The Civil Enforcement of Parking Contraventions (England) General Regulations 2007 do not apply. However, Parkshield and many other private operators dress themselves up as being official. They will often use the same terminology as under these Acts and their regulations, particularly in the use of terms such as “penalty charge notice” and regarding an appeals process and their enforcement powers.

The Parkshield terms and conditions themselves are not exactly well written. It would be difficult to state that these were “expressed in plain, intelligible language”, but to the extent that this means there is any doubt, the interpretation most favourable to the visitor must prevail (see reg 7 of the Unfair Terms in Consumer Contracts Regulations 1999). The terms and conditions appear to be made up of the following:

• an obligation to pay and display a ticket purchased at the machine, at the scale of charges shown
• an obligation to pay £60.00 within 14 days if any of a set of terms and conditions are breached. These are listed under the heading “TERMS”:
  1. Failure to obtain/purchase & display face up a valid ticket for the correct period/tariff.
  2. No parking in excess of the time period paid for.
  3. No parking on hatched lines, in roadway or in reserved or permit only spaces.
  4. No parking in disabled parking spaces without displaying a current disabled badge.
  5. Failure to park within a lined bay.
  6. No staff parking.
• an obligation to pay a ‘standard charge’ of £100.00 reduced to £60.00 if payment is received within 14 days from date of issue, with additional unspecified card processing fees

I am particularly interested in the obligation to pay £100.00 (or the discounted £60.00). I believe that this obligation is either a straight forward penalty, and thus enforceable under English contract law, or is an unfair term under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), and so not binding.

Penalty

It is settled law that a penalty is unenforceable under English contract law. So what is a penalty? If a provision is intended to deter a party from breaking a contract and is not a genuine attempt to provide compensation to the innocent party for breach, then it is more likely to be considered to be a penalty, following the most recent case law on penalties (Murray v Leisureplay PLC [2005] EWCA Civ 963). It is clear from Parkshield’s terms and conditions that the parking charge of £60 or the standard charge of £100 only applies if there is a breach (“contravening the terms and conditions stated”).

Imagine that you bought a parking ticket at the QA, but that it slipped off the dashboard, or that you were 5 minutes late getting back to your car. Would £60 (or £100, if you held out on receiving a penalty charge notice) be appropriate compensation for Parkshield where there had been no loss other than possible cost of issuing a penalty charge notice (ticket not displayed, but available for proof of payment) or £5.20 (maximum difference in time bands in scale of charges)? I would argue that that it would be excessive, and therefore a penalty.

Unfair Term

Even if Parkshield were able to claim that their charge of £60 or £100 was not a penalty, would the term be unfair under UTCCRs? Clearly no visitor can negotiate the terms of their parking; this is a take it or leave it deal. The visitor, or consumer, is therefore being required to agree to a “contractual term which has not been negotiated” which is certainly “to the detriment of the consumer” (reg 5(1) of the UTCCRs). As to whether this term would be unfair, perhaps the indicative and non-exhaustive list of terms which may be regarded as unfair at Schedule 2 to the UTCCRs can assist? “Terms which have the object or effect of- … (e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation;” – gotcha. Under UTCCRs, an unfair term is not binding on the consumer.

Enforcement

I don’t know how Parkshield goes about seeking to enforce its terms and conditions, but if they were to send me a parking charge notice, I’d be inclined to politely refuse their demands until they could show a legal basis for them. In the end, if they got as far as serving a statement of claim (issuing court proceedings), I’d apply for the case to be heard in the Small Claims Court (as way below the £10,000 threshold). In a Small Claims Court neither party is liable for the legal costs of the other, no matter who wins the case. At worst, I’d have to pay the £100 plus Parkshield court fee (about £35).

Note: This is my own take on Parkshield and similar parking companies’ terms and conditions, and is posted here for discussion only and not for anyone to rely upon as legal advice. In particular, I am no expert on Small Claims Courts and whether a defendant’s application to have a small claim transferred to that Court would always be successful.

There is more that could be analysed about this typical scenario. How is it that Parkshield can get registered keeper information from DVLA? Upon what legal basis is a registered keeper deemed to have entered into the contract to pay the excess £60 or £100?

HMV – Heist My Vouchers

Community Trade Mark E8741522

My son, like many over Christmas, was given an HMV gift card. He was looking forward to going down to HMV Gunwharf Quays on Saturday to cash it in. So when he heard that HMV were no longer honouring gift cards, he asked me how was this legal. After all, if your dad’s a lawyer, you expect him to know these things.

It’s an interesting question. The answer is a moral one, rather than a question of illegality. It is not unlawful to breach a contract.

In reality what HMV has done is breach its consumer contracts with gift card holders. By refusing my son’s gift card HMV will be breaching its contract with my son, the assignee of the gift card agreement formed when the buyer of the card bought it. Any argument by HMV that it has the contractual right to refuse to accept the card will not stand up. The card itself refers to other terms and conditions – these usually are not presented or explained to a consumer buying a gift card at the time of purchase, so cannot be considered to have been properly incorporated into the consumer contract (see, for example, the classic Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163). A purchaser of a gift card online may have had to click through the relevant terms and conditions, so it is possible that HMV could claim online consumers are bound by the terms and conditions – it’s impossible to check right now, as the administrators have suspended any sales activity on the hmv.com website.

The question of incorporation is in any event irrelevant. Any term giving HMV the ability to avoid honouring a gift card would be unfair and unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). In particular, thanks to Google’s web cache, it is possible to read the HMV gift card terms and conditions. These include:

9. HMV reserves the right to add to or waive these terms and conditions on reasonable notice for legal, security or regulatory reasons or to discontinue the gift card scheme at any time in the event of circumstances beyond its reasonable control. Customers will be notified in advance via in-store displays and the HMV website in the event of any such change.

HMV cannot, surely, consider that this gives it the right to suspend gift cards indefinitely, particularly upon any argument that going into administration was ‘beyond its reasonable control’? This must be an unfair term under reg 5(1) of the UTCCRs? In addition, any claim by HMV that it has a right to refuse gift cards must also fall within the scope of the Unfair Contract Terms Act 1977. Section 3(2)(b) may not make use of HMV’s clause 9 possible, if a court agrees that the term used in this manner is unreasonable.

So why can’t my son nip off to Portsmouth County Court and file a small claim against HMV? The answer is that whilst HMV is in administration, no-one can commence proceedings against it without the leave of the administrators or the court (see paragraph 43(6) of Schedule B1 of the Insolvency Act 1986). It is unlikely that anyone at Deloitte will give my son the time of day, yet alone permission to bring a claim against HMV. Clearly the administrators will not be in a hurry to permit consumers to enforce their rights – it is suggested that there may be up to £100m value of gift cards in circulation.

So surely HMV must be guilty of some criminal offence, given that they must have known they were at risk of going into administration after the Christmas period, in continuing to sell gift cards that they knew consumers would be unable to use? Perhaps. It will come down to an assessment of intention and timing. No doubt HMV’s directors will claim that right up until Monday this week, they honestly thought they could keep HMV on the road, so HMV’s continued sale of gift cards over the Christmas period – the peak time for the sale of gift cards – was legitimate. Instructions to stop the sale of gift cards were reportedly issued as soon as the decision was made on Monday to put the company in administration. Others may think, “Bollocks. You knew.” Suspicions would be particularly aroused if the HMV administration is under paragraph 22 of Schedule B1 of the Insolvency Act 1986, as entering into administration by this route requires the directors to make a statutory declaration as to the solvency of the company and to give prior notice in certain cases. This at least implies some knowledge of the state of the company prior to the date the administration started (and sale of gift cards was suspended). If that was the case, then it is possible that the directors could be required to answer to fraud charges (fraud by false representation – sections 1 and 2 of the Fraud Act 2006).

If the administrators succeed, then the gift cards may eventually be honoured. Alternatively, the administrators may sell what they can of the business of HMV as a going concern and liquidate the rest, in accordance with their duties in the Insolvency Act 1986, distributing the proceeds to the company’s creditors. Sadly, trade creditors including gift card holders will be unsecured creditors, who come bottom of the pile. Any available assets are first distributed to the secured creditors (those with a charge over some of the company’s assets) and preferential creditors (defined in Schedule 6 of the Insolvency Act 1986 – mainly related to employees’ remuneration and pensions). Only when these are paid and the administrators costs have been met, will the remaining assets, if any, be realised and shared out amongst the unsecured creditors. In most cases, there is nothing left by the time it gets to the unsecured creditors, who end up with nothing.

Whatever the outcome, I know I’ll be out of pocket. Like many parents – or the Bank of Mum and Dad, as we are sometimes known – I’ll be “honouring” the value of the gift card and giving my son the cash when we are in HMV.

Where there's a [lack of good] will, there's a way?

Community Trade Mark E4804522

Despite its age, the Commercial Agents Directive 86/653/EEC (as amended) continues to present problems.  There has been a steady stream of decisions from the Court of Justice of the European Union on the meaning of its provisions dealing with the agents’ rights in connection with the termination of agency.

The most recent decision is Case C‑203/09 Volvo Car Germany GmbH v Autohof Weidensdorf GmbH, handed down by the Court of First Instance on 28 October 2010. In this case a motor dealer’s agency agreement was properly terminated by Volvo giving two years’ notice. However, during the notice period the dealer breached the terms of the dealership agreement. Volvo only became aware of the breach after the termination of the dealership. As the breach would have entitled Volvo to terminate the dealership immediately, had it known, Volvo refused to pay the dealer’s claim for a goodwill indemnity, being the form of compensation under the applicable law that the dealer was entitled to upon termination or expiry of the agreement under Article 17 of the Commercial Agents Directive (the UK is unique in allowing either form of compensation under Article 17 to be used in commercial agents agreements). Volvo claimed that as it had grounds to terminate the dealership agreement, it could rely on the exemption from the right to pay the Article 17 indemnity or compensation at Article 18(a) of the Commercial Agents Directive.

Article 18 of the Directive states:

The indemnity or compensation referred to in Article 17 shall not be payable:

(a)  where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract under national law;

(b)  where the commercial agent has terminated the agency contract, unless such termination is justified by circumstances attributable to the principal or on grounds of age, infirmity or illness of the commercial agent in consequence of which he cannot reasonably be required to continue his activities; and

(c)  where, with the agreement of the principal, the commercial agent assigns his rights and duties under the agency contract to another person.

Although the case reached the Court of Justice in Luxembourg, the decision turned upon the words “because of”.  The Court of First Instance determined that the wording “because of” meant that there had to be a direct causal link between the breach by the agent and the principal’s decision to terminate the agency in order to extinguish the agent’s right to an indemnity or compensation.  Any provision in the Directive restricting an agent’s right to termination had to be interpreted narrowly against the principal.

So, did the German dealer get away with its breach?  It would appear so, as clearly the termination of the agency was not linked to the breach.  However, the Court did hint that in calculating the indemnity to which the agent was entitled, the German Bundesgerichtshof that made the reference to the Court of Justice could perhaps rely on the qualification to the right set out in Article 17.  Article 17(2)(b) of the Directive states:

[the commercial agent shall be entitled to an indemnity if and to the extent that] the payment of this indemnity is equitable having regard to all the circumstances

UK Trade Mark 2353422

Perhaps a more straightforward case is Gledhill v Bentley Designs (UK) Limited [2010] EWHC B8 (Mercantile), where the agent, Stephen Gledhill, let fly at the managing director of the principal, Bentley Designs (UK) Limited.  In a voicemail message to the MD’s personal mobile phone, the agent made it clear where he stood, saying of the MD:

I think you are an absolute shit, I really do. You are a despicable, horrible little excuse for a human being.

The agent did attempt an apology by letter, but this was clearly an exercise in self-justification rather than an expression of true remorse.  If you are going to make an apology, it does not help to include statements like:

I do feel however that there was a fair degree of justification in my actions when looking at the circumstances from my perspective.

It may not be too much of a surprise to learn that the Mercantile Court had no trouble in finding that the implied reciprocal term in an agency, similar to an employment contract, that neither would “without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee” (Mahmud v BCC [1997 ICR 621), had been breached by the agent.  The breach was deemed serious enough, or in the words of Judge Simon Brown QC, “was a course of conduct calculated, or at least very likely, to destroy or seriously damage the relationship of confidence and trust”, to warrant immediate termination of the agency by the principal.  This meant, of course, that the agent lost any right to an indemnity or compensation.  This might otherwise have been relatively substantial, given that the agency was profitable, earning the agent around £85,000 pa in commission.

What damages will I get? (Part II)

Benetti Shipyard, Livorno (by VP)

This must be the shipping/damages season.  After a case dealing with reliance damages (blogged here), we also have a case that has reviewed the status of liquidated damages clauses: Azimut-Benetti SpA v. Healey [2010] EWHC 2234 (Comm).

A liquidated damage is legal jargon for a loss or expense that can be costed.  If the value of the loss was not known or unascertained, it would be an unliquidated damage.  A liquidated damages clause sets out to define what damages will be paid to an innocent party if the other (defaulting) party breaches the contract.

The offending clause was contained in a Yacht Construction Contract dated 25 September 2008.  This was for the construction of no ordinary yacht, but was for a white 60 metre luxury yacht from the Benetti builders in Italy for a price of €38 million (the picture above, by VP, shows a comparable 62 metre yacht in the Benetti shipyard.  For pictures of the luxurious interior of similar yacht, the Bistango, go to http://www.bistango.net/).  The liquidated damages clause stated:

Upon lawful termination of this Contract by the Builder it will be entitled to retain out of the payments made by the Buyer and/or recover from the Buyer an amount equal to 20% of the Contract Price by way of liquidated damages as compensation for its estimated loss (including agreed loss of profit) and subject to that retention the Builder will promptly return the balance of sums received from the Buyer together with the Buyer’s Supplies if not yet installed in the Yacht.

The Buyer did not pay the first instalment, 10% of the Contract Price, on the due date of 17 October 2008.  The Builder then sought to enforce a guarantee given by Mr Healey under which he had guaranteed the Buyer’s obligations under the agreement.  If he were able to show that the liquidated damages clause was in some way unenforceable against the Buyer, then he would have no obligation of the Buyer to guarantee.  To do this Mr Healey needed to succeed in a claim that the clause was in fact a penalty.  Under English contract law penalty clauses are unenforceable.  As this is the law, there is often an argument between parties in a contract breach dispute about whether any given clause is an unenforceable penalty or an enforceable liquidated damages clause.  The classic test was first set out by Lord Dunedin in a House of Lords case, Dunlop Pneumatic Tyre Co Limited v. New Garage and Motor Co [1915] AC 79 (at 86-87):

The question whether a sum stipulated is a penalty or liquidated damages is….to be….judged of as at the time of the making of the contract, not as at the time of the breach… It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

This led to the common formulation in liquidated damages clauses that the pre-determined amount payable by the defaulting party was a “genuine pre-estimate of the innocent party’s loss.”  So what about this case, where clause 16.3 appears to give the Builder 20% of the Contract Price as a result of its failure to pay the first instalment of only 10%?  Mr Healey’ counsel argued, as you would expect, that the parties cannot have assumed in these circumstances that the liquidated damages of 20% of the Contract Price was a genuine pre-estimate of loss.  Counsel for the shipbuilders noted that the clause said more than just “pay 20%”; it also required the builder to return the balance promptly and any ships’ fittings or other Supplies that had not installed.

After a little argument and an examination of a complex email trail, the judge Mr Justice Blair was satisfied that the agreement had been entered into properly and with the assistance of appropriate legal advice.  Neither party could therefore claim that it did not know what it was doing.  In such circumstances,  Blair J noted that English courts will normally uphold the commercial agreement of the parties.  The clause was commercially justifiable and had a compensatory purpose.  It was not a deterrent, which would have rendered it objectionable and a penalty.  The Court seems to have been particularly persuaded that the obligation for prompt repayment under the clause of any balance was an important feature.  Blair J re-emphasised that a court must exercise caution before striking down a commercially justified clause; what the parties have agreed should normally be upheld (applying Philips Hong Kong Ltd v Attorney General of Hong Kong [1993] 61 BLR 41).

English court gets sniffy about being led by the nose

UK Trade Mark 777757

The recent Court of Appeal case of L’Oréal SA & Ors v. Bellure NV & Ors [2010] EWCA Civ 535 is probably the best, recent example of an English court attempting to tweak the nose of the Court of Justice of the European Union (formerly European Court of Justice)(CJEU) that you are likely to find. In its ruling the Court of Appeal acknowledged that it is bound by the European Communities Act 1972 to give effect to judgements of the CJEU and applied the CJEU ruling in Case C-487/07, a referral to the CJEU from the Court of Appeal at an earlier hearing on the case.  However, the leading judgement of Jacobs LJ does an excellent job of showing how unfair and perverse the ruling of the CJEU is when applied to the facts of the case. 

The case involved a small Belgian producer of smell-alike perfumes and its UK distributors, who sold the cheap versions of well-known designer brands to low-end retailers in bottles and packaging that were not identical but were generally similar to the brands’ packaging.  However, the defendants advertised the cheap perfumes in comparative lists which indicated by designer brands which perfume the cheap version smelled like.

 The brands brought various passing off and trademark infringement claims against the defendants.  Certain questions relating to the interpretation of the relevant parts of the Trade Marks Directive were referred to the CJEU for a preliminary ruling, and as a result the CJEU determined that use of a registered trademark in a price and smell comparison list could be a trademark infringement and that stating in comparative advertising that a product of service was an imitation or replica of a trademarked product can be prevented by the trademark owner.

 There are some notable passages in the judgement that show where Jacobs’ sympathies lay:  

Does trade mark law prevent the defendants from telling the truth?  Even though their perfumes are lawful and do smell like the corresponding famous brands, does trade mark law nonetheless muzzle the defendants so that they cannot say so?
…
I have come the conclusion that the [CJEU]’s ruling is that the defendants are indeed muzzled.
…
There is no good reason to dilute the [right of traders to make honest statements about their products] in cases where the speaker’s motive for telling the truth is his own commercial gain.
…
The [CJEU]’s decision in this case means that poor consumers are the losers. Only the poor would dream of buying the defendant’s products.  The real thing is beyond their wildest dreams. Yet they are denied their right to receive information which would give them a little bit of pleasure; the ability to buy a product for a euro or so which they know smells like a famous perfume.
…
If a trader cannot (when it is truly the case) say: “my goods are the same as Brand X (a famous registered mark) but half the price”, I think there is a real danger that important areas of trade will not be open to proper competition.” 

We have to agree with Jacobs LJ.  We would find it extremely difficult to advise a manufacturer or distributor of an imitation or replica product or service on how to advertise its products or services in comparison with a registered trade mark product or service.  The CJEU does not make it clear what it means by “unfair advantage” in the relevant provisions, nor what is meant by the CJEU’s opinion that “riding on the coat-tails” of a trademark is prohibited.  Is it even possible to cite a registered trademark in a comparative advertisement after the CJEU ruling?

This is not what the Trade Mark Directive or Comparative Advertising Directive should be about.