Rightly or wrongly, parking fines are on the increase. It has been reported that local councils made a surplus of £756m in 2015/2016 from fines levied. Jordon Bray, solicitor at Shoosmiths, looks at the implications for lenders
Private parking fines are also on the rise. Reportedly 4.71m DVLA vehicle-keeper records were accessed by parking management firms over the course of 2016/2017; an increase of 28% from the previous year.
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Certainly the Supreme Court ruling of ParkingEye reinforced the imposition of charges exceeding actual loss where there is a legitimate interest to do so, such as covering operating costs of managing car parks. Amidst rising fines for parking and traffic contraventions, what protection is there for hirers and creditors alike?
Our Client (C) is a motor financier which as part of its business provides credit to consumers under hire-purchase agreements (HPA) regulated by the Consumer Credit Act 1974. The Hirer (H) accrued fines from his local council for traffic contraventions while using the vehicle supplied under the HPA. H failed to pay the penalty charge notices and consequently the council obtained warrants of control against him via the Traffic Enforcement Centre.
In turn, the Council appointed high court enforcement officers (HCEOs) to recover the sums outstanding. In doing, the HCEOs seized C’s vehicle, despite there being a live HPA in place with outstanding finance owing.
The H made an application for mandatory injunctive relief, which was unsuccessful at first instance. On receipt of a notice of seizure, C proceeded to terminate the HPA by virtue of H’s breach of an express clause that the Vehicle must not become been subject to seizure or enforcement.
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By GlobalDataThe Vehicle was worth around £14,500 and the balance outstanding under the HPA was circa £6,000. The HCEO offered to clear the finance, but asserted entitlement to the remaining £8,500 (the ‘Surplus’).
C made an application pursuant to Civil Procedure Rule 85; a claim on controlled goods (widely known as an interpleader claim). C’s Part 85 application was heard concurrently with the H’s appeal for injunctive relief before His Honour Judge Wulwik in County Court at Central London.
The Council and HCEOs contended that under Section 10 of schedule 12 of the Tribunal, Courts and Enforcement Act 2007 (TCEA 2007) an enforcement agent could take control of any goods of “the debtor”.
Pursuant to Section 3, Sch 12 of TECA 2007, references to “goods of the debtor…are references to goods in which the debtor…has an interest” and that “interest means a beneficial interest”.
As such, the question was whether a hirer can accrue a ‘beneficial interest’ in goods under an HPA.
The HCEOs considered that H accrued a beneficial interest by virtue of (i) the Surplus of circa £8,500 once the outstanding balance had been settled and/or (ii) an interest which increased proportionately with each instalment repayment which was made.
C submitted that H could not have obtained a beneficial interest in the Vehicle under the HPA because:
- H’s only right under the HPA is to remain in possession of the Vehicle during the period of hire in accordance with the express contractual terms. No single payment confers upon H any proprietary right or interest in the Vehicle.
- The contract details that in the event the HPA is terminated or H does not exercise the option to purchase at the end of the contract (having first paid all sums due), C is entitled to retain the sums paid during the period of hire, but they are also entitled to recover their Vehicle.
- C’s terms and conditions stated that upon termination “You must pay us…” the balance outstanding, but “less…if we repossess and sell the Vehicle, the net proceeds of sale, after deduction of expenses of repossession and sale.”
HJ Wulwik concluded that:
- An HPA is not an agreement to buy, and H’s duty was as a bailee until such times as the option to purchase had been exercised;
- The option to purchase only arose once all contractual instalments had been made;
When construing the clause for payment on termination, this was for payment from the H to C, as such it does not follow that H had any entitlement to any surplus proceeds of sale; - The hirer had no proprietary interest and no interest beyond a right to keep the vehicle during the duration of hire in accordance with the terms and conditions. Once terminated, this interest extinguishes along with the option to purchase, so H accrued no beneficial interest; and
- The C’s application and the H’s injunction were successful. The HCEO and Council were ordered to deliver up the Vehicle to C.
Consequences and Steps
Register your finance marker at HPI:
Any HCEO should be conducting HPI checks before seizing a vehicle; this should discourage seizure altogether.
Review your terms and conditions:
Does your HPA have a clause permitting termination if the vehicle was seized or enforced against? When construed, does the clause detailing liability on termination indicate the customer would be eligible to any surplus proceeds of sale exceeding the total amount payable? If so, consult your lawyers to get this changed.
The Power of the Option-to-purchase:
Crucially the customer is a bailee until such time as the option to purchase has been exercised. HCEOs cannot enforce a warrant of control against goods in which a customer has no beneficial interest.
We would recommend:
That you oppose any and all attempts by HCEOs to enforce a warrant in relation to your Vehicles.
