Parkingeye Ltd v Somerfield Stores Ltd

Factual and Procedural Background

This action concerns a claim by Company A against Company B for damages arising from an alleged breach of a written agreement dated 19th August 2005 ("the Agreement"). Company A was incorporated to exploit an automated car park monitoring system using automated number plate recognition technology ("ANPR"). Company A’s managing director played a central role in developing and implementing the system, which was designed to monitor parking durations and issue parking charge notices to vehicle keepers exceeding prescribed time limits.

Company B, operating several hundred retail stores with associated car parks, agreed to trial and subsequently implement the ANPR system at selected stores at no cost, with Company A entitled to retain all revenue from parking charges generated. The Agreement envisaged installation at 25 stores over 15 months, but only 19 were initially identified and ultimately 17 stores had the system installed and operational.

Following installation, various operational difficulties arose, notably disputes over free parking time limits, cancellation of charges, and the issuance of parking permits. Company B expressed concerns about the impact of the system on store reputation and customer goodwill, requesting adjustments and the removal of the system from certain stores. Negotiations and meetings took place between representatives of the parties from late 2005 through early 2006, but no final resolution was reached.

On 7th March 2006, Company B notified Company A of its decision to withdraw from the trial, citing operational issues and adverse effects on trade. Company A contended that this amounted to a repudiatory breach by Company B and commenced proceedings for damages. Company B denied liability, alleging that Company A had repudiated the Agreement by refusing to comply with instructions to vary free parking time limits and raised defences including illegality related to the content of parking charge notices and letters issued to motorists.

The court heard extensive witness evidence over nine days, including key executives from both parties, and expert accountancy evidence. The evidence revealed a fragmented and incomplete picture from Company B’s side, with some witnesses’ statements viewed with caution, whereas Company A’s managing director was generally found reliable. The court also reviewed contemporaneous documents, emails, and contract terms in detail.

Legal Issues Presented

1. Whether Company B was entitled to terminate the Agreement on grounds of repudiatory breach by Company A.
2. Whether Company A breached the Agreement by refusing to extend free parking time limits as instructed by Company B.
3. The proper construction and effect of contractual provisions concerning the selection of stores, parking permits, exemptions, and free parking time limits.
4. The enforceability of parking charges against motorists and whether such charges or their enforcement constituted penalties or unlawful demands.
5. Whether the form and content of parking charge notices and letters issued by Company A constituted tortious deceit or unlawful harassment, potentially rendering the Agreement illegal and unenforceable.
6. The appropriate assessment of damages suffered by Company A as a result of the termination of the Agreement.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court conducted a thorough analysis of the factual matrix, contractual provisions, and evidence. It found that the Agreement envisaged installation of the system at 25 stores, but only 19 were identified and ultimately 17 were installed. The court held that Company B was under no express or implied obligation to nominate further stores beyond those selected and that no breach arose from the shortfall in store numbers.

Regarding parking permits, the court concluded that Company B’s power to issue permits was limited to bona fide employees and visitors, not customers generally, and that the number of permits issued exceeded reasonable limits at some stores, constituting a breach of an implied term limiting permit issuance. However, the court rejected any suggestion that Company B had an unrestricted right to issue permits to all customers.

On exemptions from parking charges, the court found that Company B could make changes at its absolute discretion but must notify Company A. No evidence showed that Company B made such changes prior to termination. The court rejected Company B’s contention that damages should be assessed on the assumption that all customers would have been exempted or that free parking times would have been extended to effectively allow all-day free parking, holding such assumptions commercially absurd.

The court interpreted clause 2.9 as granting Company B the right, following consultation with Company A, to set free parking time limits, but only in good faith and with proper notice. It found no evidence that Company B gave unequivocal instructions to extend time limits which Company A refused to implement, nor that any such refusal constituted a repudiatory breach justifying termination.

Company B did not validly exercise any contractual right to terminate under clause 11.1.5 or 11.2.1. The purported termination letter did not invoke breach or contractual provisions but cited operational reasons. The court held that Company B’s termination was a repudiatory breach, entitling Company A to damages.

On the enforceability of parking charges against motorists, the court held that a contract existed between the motorist and Company A or Company B, formed by the display of clear signage specifying parking terms and charges. The charge of £75 was not a penalty but a contractual charge payable for exceeding parking limits, while the increased amount of £135 was likely a penalty and irrecoverable.

The court rejected Company B’s argument that the absence of a contract with motorists or the penalty nature of charges precluded Company A from recovering damages for lost revenue since the court’s concern was the loss actually suffered, not the merits of individual claims against motorists.

Regarding illegality, the court found that the form and content of the third letter in the parking charge notice series constituted a false representation amounting to the tort of deceit. The letter falsely represented that Company A had authority and intention to commence legal proceedings against recipients, which was untrue. This misrepresentation was intended to induce payment and some recipients likely suffered loss as a result. The first two notices and the fourth letter did not amount to deceit.

The court found no offence under section 40 of the Administration of Justice Act 1970 for unlawful harassment, holding that the two letters from the debt collection agency did not cross the boundary into oppressive or unacceptable conduct warranting criminal sanction.

On illegality affecting enforceability, the court held that the Agreement was not illegal as to formation or performance and that any illegality arising from the use of the third and fourth letters was collateral and did not render the Agreement unenforceable. Company A could therefore pursue its claim for damages despite having used unlawful means in some collection letters. However, Company A could not recover damages for losses attributable solely to monies collected through the unlawful letters unless those letters had been modified to remove objectionable features.

On damages, the court accepted the general approach of Company A’s expert, who projected historic revenue and payment ratios forward over the contract term, adjusted for costs saved on early termination. The court accepted that the number of stores should be limited to those actually installed and operational, that the number of parking permits should be capped at 25 per store, and that some modest extensions to free parking times would likely have been agreed if the contract had continued.

The court rejected Company A’s alternative expert calculation which assumed all additional charges would have arisen from excess permits, finding it commercially and factually improbable. The payment ratio used in the primary calculation was appropriate when adjusted for cancellations on grounds of negative publicity, for which Company A was entitled to separate damages.

The court concluded that Company A’s damages claim should be assessed broadly in accordance with its primary expert’s Basis 1 calculation, with modifications reflecting the court’s findings on store numbers, permits, exemptions, parking times, and negative publicity cancellations. The alternative Basis 2 and 2A calculations were rejected.

Holding and Implications

Company A’s claim for damages for breach of contract is upheld. The court holds that Company B wrongfully terminated the Agreement without valid contractual justification, entitling Company A to damages for loss of profits resulting from the premature termination.

The court finds that Company B was not entitled to terminate on grounds of repudiatory breach by Company A and that Company A did not breach the Agreement by refusing to extend free parking time limits as alleged. The court also finds that the Agreement was not rendered unenforceable by illegality despite Company A’s use of unlawful collection letters, which constituted tortious deceit but did not taint the Agreement itself.

The damages will be assessed primarily on the basis of Company A’s expert calculations, adjusted to reflect the court’s findings regarding the number of stores, parking permits, exemptions, time limits, and cancellations on grounds of negative publicity. No new legal precedent is established; the decision applies the law of contract, tort, and statutory offences to the facts of this case.