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When is a penalty not a penalty?
The Schofield Sweeney litigation team has just acted for a car hire company in a dispute with a company which manages carparks.
In two cases, which were consolidated together, the carpark management company had issued parking charge notices to vehicles which had been hired out to individual drivers by Schofield Sweeney’s client. Those charges had not been paid by the drivers and the carpark company claimed payment from the hire company.
The hire company had responded to the claims made by the carpark company and had sent to it information about the drivers and also copies of the hire agreements which made the drivers responsible for, “ensuring that all fines and penalties relating to the use of the vehicle remain the hirer’s responsibility and the hirer indemnifies [the hire company] from such penalties …”
The agreements also said that, “the hirer will pay [the hire company] a further administration charge for the management of road traffic offences if it is able to redirect those to the hirer.”
The hire company relied upon sections 13(2) and (3) of Schedule 4 to the Protection of Freedoms Act 2012 and argued that the person hiring the vehicle had to sign a statement acknowledging responsibility for any parking charges. Section 13(2) says that the carpark company could not recover from the hire company any unpaid parking charges specified in a penalty notice if within 28 days the hire company gave to the carparking company a signed statement to the effect that the vehicle was hired to a person named in an agreement, provided a copy of the agreement and a statement of liability signed by the person hiring the vehicle.
Section 13(3) says that the statement of liability must, “contain a statement by the hirer to the effect that the hirer acknowledges responsibility for any parking charges that may be incurred with respect to the vehicle while it is hired to the hirer …”
When the combined cases came before the court, the District Judge dismissed both claims on the basis that he concluded that a reasonable ordinary member of the public would understand the expression “all fines and penalties” to include parking charges. The Judge said that the law did not require the words “parking charges” to be included in the agreement, but required “words to that effect”, and that the clauses in the hire company’s agreement taken together drew a distinction between road traffic offences and other fines and penalties and that an ordinary reasonable member of the public would understand that the provisions in the hire agreement would cover parking charges of the deterrent and punitive nature of those imposed by the carpark company.
The carpark company appealed that decision to the Circuit Judge. At the appeal, the carpark company argued that their parking charge was not a punitive measure but was simply a contractual offer for people to park subject to the terms and conditions of the carpark and that the charge was made for breach of contract. The carpark company also argued that the hire company’s terms and conditions had not been drafted sufficiently widely to cover parking charges. It said there had to be specific reference to parking charges in the agreement.
Fortunately, common sense prevailed and the Circuit Judge, having considered the parties’ arguments, gave judgement concluding unequivocally that, “fines and penalties as set out in the car hire company’s terms and condition included parking charges.” He dismissed the appeal.
Whilst in themselves the penalties which the carparking company had claimed from Schofield Sweeney’s client were not significant, the wider principle made this an important case for the company which it was keen to contest.
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