Parkingeye Ltd v Somerfield Stores Ltd

A contractual right to choose parking time limits, subject to consultation, must be exercised in good faith and consistently with the agreement’s commercial purpose. A party cannot rely on an alleged repudiatory breach where no clear contractual instruction or unequivocal refusal has been established.

Automated parking charges may arise under contract. A basic charge for overstaying is not necessarily a penalty, but a substantial increase for late payment may be penal. Misleading threats of legal proceedings may constitute deceit, yet unlawful performance will not taint the principal contract where the contract was capable of lawful performance and the illegality was collateral and too remote.

ParkingEye supplied and operated an automated parking system at Somerfield stores under a written agreement dated 19 August 2005. The system was supplied without charge, with ParkingEye retaining parking charges paid by motorists. Somerfield terminated the agreement in March 2006, citing operational difficulties and alleged failures by ParkingEye to alter parking time limits and cancel charges.

ParkingEye claimed damages for wrongful termination and related contractual breaches. Somerfield alleged repudiatory breach, penalties, deceit, harassment under the Administration of Justice Act 1970, and illegality. The central issues were whether Somerfield had lawfully terminated the agreement, how its contractual powers over time limits, exemptions and permits operated, and whether the alleged unlawful collection methods defeated the damages claim.

1. Liability. Somerfield’s termination was not justified by any repudiatory breach by ParkingEye. Clause 2.9 permitted Somerfield, after consultation, to choose parking periods, but it did not establish any clear instruction which ParkingEye had refused. The discussions in February 2006 remained part of continuing negotiations. Even if there had been a remediable breach, an outright refusal and the contractual notice procedure had not been established.
2. Contractual construction. Somerfield had no obligation to nominate enough stores to complete the proposed 25-store trial. Parking permits could be issued only to staff and genuine visitors, not customers, and the evidence supported a maximum of 25 permits per store. The power to alter exemptions could not be used arbitrarily or to frustrate the agreement’s commercial purpose.
3. Motorists. The signs were sufficient to create contracts with motorists. The basic £75 charge for overstaying was, on the limited material, a contractual charge rather than a penalty. The additional £60 imposed for delayed payment appeared penal and irrecoverable.
4. Deceit and harassment. The third collection letter falsely represented that ParkingEye had both authority and an intention to issue proceedings. The elements of deceit were established. The sequence of notices and letters did not, however, cross the criminal threshold for harassment under section 40(1) of the Administration of Justice Act 1970. If it had done so, section 40(3) would not have assisted because the demands were not reasonable or otherwise lawful.
5. Illegality and damages. The agreement itself was capable of lawful performance and was not formed for an unlawful purpose. The deceitful collection method was collateral and too remote to render the principal agreement unenforceable. ParkingEye could therefore claim damages, but it could not recover loss dependent on the unmodified unlawful letters. The letters would probably have been amended had the agreement continued.
6. Quantum. The court rejected the permit-based Basis 2 and Basis 2A calculations. ParkingEye succeeded on the general Basis 1 approach, subject to adjustments for the 17 operational stores, likely modest time-limit extensions, the unlawful letters, saved costs and agreed negative-publicity cancellations. Quantum was to be determined after further submissions.