ParkingEye Ltd v Somerfield Stores Ltd  EWCA Civ 1338
Illegality no defence if incidental or peripheral to the contract.
The appellant, Somerfield, was a supermarket who contracted for the respondent, ParkingEye, to install and operate a monitoring system in. Somerfield’s car parks. The system recorded the number plates on customer’s vehicles and charged them if they overstayed the free period. ParkingEye was not paid by Somerfield but retained all the amounts generated from charging overstayers. ParkingEye sent demands in a series of letters to customers. In the third such letter ParkingEye falsely stated they had authority to bring civil proceedings against those who did not pay, committing the tort of deceit. Somerfield terminated the contract earlier than agreed. ParkingEye claimed damages for the lost revue it would have obtained under the contract.
Somerfield raised a defence to its own breach of contract in that as the contract was illegally performed it should be void.
The Court of Appeal found for the respondents. Although ParkingEye had performed an illegal act, this was only part of the coverall contract. Courts must consider several factors, including 1) the object and intent of the party seeking to enforce the contract, 2) whether the illegality was a major part of the contract or whether it was incidental or peripheral and 3) the nature of the illegality. ParkingEye had never intended their performance to be illegal, and the contract had mainly been carried out lawfully. Jacob LJ said (at 38) courts should avoid “unduly sanctimonious” or “disproportionate” applications of the illegality principle. To hold the contract void would have deprived ParkingEye of £300,000 worth of income. This was disproportionate. Therefore, the defence of illegality was rejected and Somerfield had to pay damages.