Dunlop Pneumatic Tyre v New Garage [1915] — Penalty Clause Rule

The rule against penalty clauses, articulated in Dunlop Pneumatic Tyre Co v New Garage and Motor Co Ltd [1915] AC 79 and modernised by the Supreme Court in Cavendish Square v Makdessi [2015], renders unenforceable any contractual clause that imposes a detriment on a party in excess of what could be justified as compensation for breach or protection of a legitimate interest. Private parking charges are contractual terms imposed on alleged breach — and must satisfy this test. The Dunlop test remains relevant alongside the Cavendish formulation.

Legal basis

Dunlop Pneumatic Tyre Co v New Garage and Motor Co Ltd [1915] AC 79; Cavendish Square Holding BV v Makdessi [2015] UKSC 67; ParkingEye Ltd v Beavis [2015] UKSC 67

How to identify this in your case

A private parking charge where the sum demanded is clearly extravagant or out of proportion to any identifiable loss or legitimate interest. Classic signs: charge is £100+ for parking in a completely free or underused car park, or the charge was dramatically increased after 'administration fees' were added by a debt collection agency.

Sample appeal wording

I am writing to dispute parking charge [reference] and to raise the common law rule against penalties. The charge of £[amount] purports to be a contractual charge for alleged breach of parking conditions. Under the long-established rule against penalties in English law — articulated in Dunlop Pneumatic Tyre Co v New Garage [1915] AC 79 and recently restated by the Supreme Court in Cavendish Square Holding BV v Makdessi / ParkingEye Ltd v Beavis [2015] UKSC 67 — a contractual sum is an unenforceable penalty if: (a) it is extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to flow from the breach; or (b) it is not a genuine pre-estimate of damage and cannot be justified as protection of a legitimate interest proportionate to the sum. This charge satisfies neither test. [State why.] It is therefore unenforceable as a penalty clause. I decline to pay.

Replace [PARKING DATE], [NtK DATE] etc. with your own dates before sending.

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Sources

Dunlop Pneumatic Tyre Co v New Garage [1915] AC 79
Cavendish Square Holding BV v Makdessi [2015] UKSC 67