Vehicle Control Services Ltd v HM Revenue & Customs

Contractual capacity is distinct from the power to perform. A party may contract to confer a right which it does not itself possess, subject to liability for non-performance. Parking-permit terms may constitute an offer accepted by conduct when the motorist parks, with the permit providing consideration. Where the operator contracts with the motorist and retains enforcement charges, those receipts are not necessarily remuneration from the landowner for parking-control services. A licensee may obtain a remedy for trespass where necessary to vindicate rights granted by the licence, provided the remedy does not exceed those rights. On the facts, the charges were damages for trespass or breach of contract and were outside the scope of VAT.

Vehicle Control Services Ltd supplied parking-control services to car-park owners and occupiers. It issued permits and imposed charges on permit holders who breached parking conditions. The First-tier Tribunal held that VCS had contracted with motorists and that the charges were consideration for parking services. The Upper Tribunal rejected the existence of a contract with motorists, treating VCS as collecting damages for the landowner while retaining the proceeds as consideration for its services to the landowner. Its decision is reported at [2012] UKUT 129 (TCC) and [2012] STC 2065. The central issues were whether VCS contracted with motorists and whether it could enforce parking rights in trespass.

Lord Justice Lewison gave the judgment. Lord Justice Treacy and Lady Justice Hallett agreed. The appeal was allowed on both grounds.

1. Contract with motorists. The UT wrongly confused the making of a contract with the power to perform it. A person may contract to sell or grant rights in property which he does not own. Bruton v London and Quadrant Housing Trust [2000] 1 AC 406 illustrated that a contract may bind the contracting parties although it cannot bind the landowner.
2. The permit letter and its conditions amounted to an offer by VCS to permit the specified vehicle to use the designated parking area. Acceptance occurred by conduct when the motorist first parked after receiving the permit. The permit itself supplied consideration. The necessary elements of a contract were therefore present.
3. The arrangements did not make VCS merely an agent of the landowner. The landowner’s authorisation clause was insufficient to convert a services contract into an agency. VCS controlled the charges and enforcement action, had no accounting obligation to the landowner, and retained the opportunity to make money from motorists. Even if there had been an undisclosed-principal agency, VCS could still be bound by the contracts.
4. The charges collected from motorists were not consideration moving from the landowner for VCS’s parking-control services. They could therefore be damages for breach of contract or trespass and were outside the scope of VAT.
5. Trespass. The principles in Manchester Airport plc v Dutton [2000] QB 133 permit a licensee to obtain a remedy which protects, but does not exceed, the rights granted by the licence. The inquiry is the reach of the right and whether the defendant’s acts violate its enjoyment. Those principles are not confined to licensees with possession or occupation. Monsanto plc v Tilly [2000] Env LR 313 and Alamo Housing Co-operative v Meredith [2003] EWCA Civ 495 supported remedies tailored to the rights requiring vindication. Countryside Residential (North Thames) Ltd v T (2001) 81 P & CR 2 concerned the procedural form of an Order 113 claim and did not establish that a licensee lacked a substantive remedy.
6. VCS had contractual rights to eject vehicles and to impose parking charges where permit conditions were breached. A permit holder who accepted those terms could not deny VCS’s right to take the stipulated enforcement action. If a charge was imposed instead of towing, it could properly be regarded as damages for trespass.

• Court of Appeal (Civil Division) allowed VCS’s appeal, holding that contractual relations existed between VCS and permit-holding motorists and that the charges were not consideration from the landowner for VCS’s services.
• Upper Tribunal (Tax and Chancery Chamber), in [2012] UKUT 129 (TCC); [2012] STC 2065, rejected the contract analysis and treated VCS as collecting damages for the landowner, while regarding the retained charges as consideration for services supplied to the landowner.
• First-tier Tribunal held that VCS had contracted with motorists and that the parking and penalty charges were consideration for services subject to VAT.