Supreme Court hands down judgment on penalties

This morning the Supreme Court handed down a landmark judgment in the conjoined appeals of Beavis and Cavendish. Jonathan Kirk QC and Thomas Samuels appeared on behalf of the respondent ParkingEye Ltd in the Beavis appeal.

Both appeals concern the common law of penalties. The Court concluded that the dichotomy between a “penalty” and “genuine pre-estimate of loss” was incorrect, and derived from a mis-reading of the decision in Dunlop over the last century. The correct question is whether the clause is “extravagant” and “unconscionable” (which will usually amount to the same thing), in light of any legitimate interest to be protected.

The new test is whether the clause is a “secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter.”

Summary of decision available here: Beavis v ParkingEye summary

Full copy of judgment available here: Beavis v ParkingEye judgment