Supreme Court decision on penalty clauses – does this really affect NHS providers?

The Supreme Court’s recent decision in ParkingEye Limited v Beavis will bring some clarity to the often controversial issue of hospital car parking charges.

The court found that a parking charge will not be a penalty (and therefore unenforceable) nor unfair under the Unfair Terms in Consumer Contracts Regulations 1999 as long as the charge serves a legitimate business interest and is “not extravagant, exorbitant or unconscionable”. This decision follows the recently updated Department of Health guidance on NHS patient, visitor and staff car parking principles and a Private Member’s Bill, Hospital Parking Charges (Exemption for Carers) to make provision for exempting carers from hospital car parking charges.

Case summary

Mr Beavis parked in a private car park owned by ParkingEye which allowed for two hours free car parking. Signs erected inside the car park stipulated that a charge of £85 would be payable if the two hour “free stay” was exceeded. Despite the warnings Mr Beavis overstayed for nearly an hour and was charged £85.

Mr Beavis argued the purpose of the charge was a deterrent, it did not reflect actual loss and therefore amounted to a penalty. The point here is that if a clause in a commercial contract is found to be a penalty it is unlikely to be enforceable.

The Supreme Court considered previous authorities and decided that the true test in deciding whether a clause amounts to a penalty is whether:

1. a legitimate business interest had been served and protected by the clause; and if so
2. the provision made for that interest was not extravagant, exorbitant or unconscionable.

Decision

Applying the test to ParkingEye it was determined there was a legitimate interest in the provision and efficient management of parking, and the charge was neither extravagant nor unconscionable when compared to accepted practice around the UK and that motorists were clearly warned by signs. The charge also benefited the public by meeting the running costs of the free parking scheme.

So what does this mean for providers ?

In light of the public controversy surrounding the cost of hospital car parking, this decision should give some clarity to hospitals managing their own parking facilities with compulsory fees and charges. The key points are that charges must be clearly set out and apparent to motorists, and they must not be exorbitant in any event. What constitutes “exorbitant” will be open to interpretation - the decision has drawn criticism from commentators hoping to obtain greater clarity on the issue.

How we can help

Given the decision in Beavis and the DH’s refreshed guidance, a review of your hospital car parking charges, policies and procedures would be prudent to ensure they are fully compliant and limit the risk of challenge. Please do get in touch, if you require assistance, as we have an experienced team cognisant with these issues.