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.

ARC: “automatically renewable contract” or “another regulatory/regulation cock-up”?

Ofcom is clearly unhappy about communications providers who seek to handcuff customers to existing service contracts by ensuring that these contracts automatically renew – so called automatically renewable contracts (ARCs).  They set out their proposals to address ARCs in a consultation paper in March 2011.  However, these contracts are not new, which begs the question, why is Ofcom only dealing with these contracts now?

By Ofcom’s own admission, they first considered ARCs in the context of their review of additional charges in December 2008.  A cynic mights suggest that if they identified a problem at the end of 2008, why did it take over 2 years to suggest a solution?  Have Ofcom failed to use their powers of enforcement under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)?  Note the date of these regulations – 1999.  Were Ofcom negligent in failing to address ARCs even earlier than December 2008?  Is this a case of “another regulatory cock-up”?

To be fair to Ofcom, even if they had identified that ARCs were a problem at an early stage, then they would have needed the evidence and research to show that the automatic renewal of contracts was unfair, using the test at Regulation 6(1) of the UTCCRs:

“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.”

The necessary preliminary work was clearly undertaken, as shown by the annexes to the March 2011 consultation paper.  However, a quick route to dealing with ARCs has proved impossible as a result of a difficulty in the UTCCRs and the originating European Union Directive.  This difficulty surrounds the scope of the regulation/directive.  Put simply, regulators cannot address terms in consumer contracts that deal with price, even indirectly, as a result of Regulation 6(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.”

Ofcom have set out how they would address ARCs under the UTCCRs in their guidance on enforcement of UTCCRs (see paragraphs 97 – 103).  Although this suggests that there are plenty of grounds for Ofcom to intervene, the picture can easily be confused by the introduction of price discounts for consumers taking ARCs.  After the Supreme Court decision concerning the Office of Fair Trading and bank charges (Office of Fair Trading v Abbey National), these discounts put these ARCs outside of the reach of the UTCCRs.  This is the inevitable result of the wording of Regulation 6(2), from the 19th recital of Directive 93/13/EEC.

So, from a consumers point of view, this “price or remuneration” loophole is a significant gap in the consumer protection directive/regulation.  Shall we say “another regulation cock-up”?

Terms and conditions: a Faustian pact?

Playbill of the first performance of "Faust, The tragedy of the first part" by Goethe in Weimar on 29 August 1829

The online computer games company Gamestation pulled a clever terms and conditions stunt for April Fools’ Day, which caught out over 7,500 customers.  What they did was amend their online terms and conditions by including the following:

By placing an order via this web site on the first day of the fourth month of the year 2010 Anno Domini, you agree to grant Us a non-transferable option to claim, for now and for ever more, your immortal soul.

Should We wish to exercise this option, you agree to surrender your immortal soul, and any claim you may have on it, within 5 (five) working days of receiving written notification from gamestation.co.uk or one of its duly authorised minions.

We reserve the right to serve such notice in 6 (six) foot high letters of fire, however we can accept no liability for any loss or damage caused by such an act.

If you:
(a)  do not believe you have an immortal soul;
(b)  have already given it to another party; or
(c)  do not wish to grant Us such a license,
please click the link below to nullify this sub-clause and proceed with your transaction.

Had any customers clicked on the link, they would have been led to a page notifying them that the clause was an April Fool and congratulating them on being “so vigilant” by offering them a £5 voucher.

Consumers who purchased games online at Gamestation on 1 April 2010 should perhaps not be too concerned about the appearance of 6 foot letters of fire demanding their immortal soul, as a result of consumer protection legislation that makes the careful reading of standard terms and conditions less important.

Consumers are substantially protected by the Unfair Terms in Consumer Contracts Regulations 1999 (as amended). These regulations provide that where a contractual term which has not been individually negotiated causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer, then it is an unfair term.

If a seller or supplier attempts to include an unfair term, the term is not binding on the consumer.  However, the Regulations do not apply to terms that relate to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.

So provided a court does not consider that the grant of an option of an immortal soul is part of the price paid for a computer game, this Faustian clause is not binding.

"Life is not fair; get used to it."

Yesterday for the first time the handing down of a Supreme Court judgement was a major news event.  The outcome of OFT -v- Abbey National & ors was eagerly awaited.  Many bank customers had hoped for some good news and some cash back from their banks – always handy just before Christmas.  Sadly, the Supreme Court appears to have played Scrooge or the Grinch, and in today’s press the Court is given a rough ride for seeming to side with the banks.  This is slightly unfair, but as Bill Gates is often quoted as saying, “Life is not fair.  Get used to it.”

Fairness was not, as many reports wrongly assume, the central issue for the Supreme Court.  They did not rule that the banks’ charging mechanisms for unauthorised overdrafts were fair.  Instead, the Supreme Court decided that the banks charges for unauthorised overdrafts  (and other bank charges at issue) were part of the banks’ price and remuneration for providing retail banking services.  On that analysis, given that Regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999 (the “Unfair Terms Regulations”) states that the assessment of the fairness of a term in a contract “shall not relate . . .to the adequacy of the price or remuneration, as against the goods or services supplied in exchange”, it was clear that the Office of Fair Trading did not have jurisdiction to assess whether the banks’ unauthorised overdraft charges are fair using its powers under the Unfair Terms Regulations.

So how did this case reach the Supreme Court?  A crude summary suggests that at High Court the overdraft charges were considered not to be “in exchange” for any service, so fell outside the scope of Regulation 6(2)(b).  In the Court of Appeal, the charges were considered to be part of an overall package of services provided by the banks, but were considered to be “incidental or ancillary” and not part of the “core or essential bargain” between the banks and their customers.  As “incidental or ancillary”, the charges were ruled not to be within the scope of Regulation 6(2)(b). This meant that the OFT had power to assess the fairness of the charges.  Clearly, the banks thought otherwise and have been vindicated in their appeal to the highest court.

So is this the end of the battle for repayment of unauthorised overdraft charges?  As the Supreme Court were at pains to make clear, they were only called upon to make a ruling upon a narrow point of law.  It remains open for the OFT to consider if the terms governing the banks’ overdraft charges are unfair “if, contrary to the requirement of good faith, [they cause] a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer” (Regulation 5(1)), as in almost all cases consumers accept banks’ standard terms and do not negotiate their retail banking services agreements.