Decision

Award Summary – January 2021 - 1

Published 8 December 2021

Applies to England and Wales

Publisher’s Note: The Pubs Code Adjudicator encourages openness and transparency in the operation of the Pubs Code etc. Regulations 2016. Publication of awards made in Pubs Code arbitrations, or summaries of those awards, enables the industry to better understand previous decisions and consider how the Pubs Code is being applied in individual cases. Neither the Pubs Code Adjudicator nor an arbitrator is bound to follow published awards in applying the law, but such awards can be used to support the industry’s consideration of the proper interpretation of the Pubs Code. Parties are encouraged to take independent professional advice about their situation.

The outcome of an arbitration is based on its own facts and the evidence produced in the case and is not binding in other cases where the landlord and tenant are not the same. The Pubs Code Adjudicator does expect a regulated pub-owning business to consider its understanding of the law in light of each award that makes a finding on the interpretation of the statutory framework and to adjust its behaviour towards tenants as appropriate. The publication of an arbitration award or an award summary does not mean the Pubs Code Adjudicator endorses the decision and it does not form legal advice about any issue.

This summary is provided to assist in understanding the arbitration decision. It does not form part of the decision or reasons for the decision.

Since this arbitration referral, the PCA has issued statutory advice on the time limit for referring a non-MRO dispute to the PCA for arbitration, which can be read here.

1. Summary of Findings

This arbitration referral was about whether an arbitrator had jurisdiction to deal with the matter. The arbitrator held that a referral by the Tied Pub Tenant (“TPT”) in relation to a gaming machine agreement dispute, was time barred and therefore, the arbitrator did not have jurisdiction to arbitrate the referral.

2. Background

The TPT had made a first referral arbitration against the pub-owning business (“POB”) on two grounds: firstly, in relation to the POB’s refusal to supply a Rent Assessment Proposal, and secondly in relation to the agreement on gaming machines operated by the POB being a tie and unlawful. The first arbitration was settled by way of a deed of variation which dealt with the first ground only and said nothing about the second ground on gaming machines.

The TPT then made a second referral in relation to the gaming machine agreement. However, the POB claimed that the arbitrator did not have jurisdiction to consider the second referral as they asserted that the deed of variation settled the first arbitration and that as the gaming machine agreement had been previously arbitrated under the first arbitration it could not now be re-arbitrated. The POB also claimed that the second arbitration referral was invalid due to it having been made to the Pubs Code Adjudicator (“PCA”) two days too early, and was time barred.

The TPT denied that the gaming machines dispute could not be arbitrated or that it was invalid or out of time.

Section 49 of the Small Business, Enterprise, and Employment Act 2015 (the “2015 Act”) provides that a TPT can only refer a dispute after the expiry of the period of 21 days beginning with the date on which the TPT notifies the POB of the alleged non-compliance. Section 49 also prohibits disputes being referred to arbitration more than 4 months after the date the dispute could have been referred.

3. Jurisdiction Challenge Issues

The POB argued that the arbitrator did not have the power (jurisdiction) to consider the gaming machine dispute for the following procedural reasons:

1. The deed of variation settled the first arbitration, including the issues raised about the gaming machine agreement.

2. As the current dispute about the gaming machine agreement had been previously arbitrated it could not now be re-arbitrated.

3. The arbitration referral about the gaming machine agreement was time barred.

4. The referral of the current dispute about the gaming machine agreement to the PCA was made before the expiry of 21 days from giving notice to the POB and was therefore invalid.

The TPT rejected the POB’s arguments stating that:

1. Pubs Code arbitrations should be low cost and simple, avoiding technical legal arguments or processes.

2. The deed of variation in the first arbitration did not settle the gaming machine dispute which was the subject of the second arbitration referral.

3. The current dispute about the gaming machine agreement can be referred to arbitration as it is a recurring dispute.

4. The TPT cannot sign themselves out of Pubs Code and so cannot enter into an agreement with a POB which would allow the POB to by-pass the Pubs Code.

4. Findings

4.1 Has the gaming machine dispute been previously dealt with?

The arbitrator held that the confidentiality of the first arbitration did not prevent reference to relevant issues from the first arbitration being disclosed in this arbitration. The matters in the first arbitration were relevant to the present arbitration and so could be disclosed.

The arbitrator then went on to consider if the matters referred to in the first arbitration could be referred again for arbitration.

The arbitrator considered the case of Lidl GmbH v Just Fitness Limited, Bannatyne Fitness Limited [2010] EWHC 30 (Ch) (“Lidl”). In Lidl, the dispute similarly had two limbs, but the parties had only arbitrated one, and had failed to agree to hold over the second limb to a future date. The court held in that case that the parties could not arbitrate the second limb at a later date.

However, the arbitrator in this case held that Lidl was not directly applicable as the first arbitration had been settled by agreement and the referral withdrawn, and no arbitration award was made.

The arbitrator held that the deed of variation entered into between the parties did not have the effect of preventing the TPT from making a second referral to arbitration on the gaming machine agreement, despite the overlap between the issues in the 2 referrals.

4.2 Timing Challenge

The POB argued that as the first arbitration had been settled in 2019, the current dispute about the gaming machine agreement had been made in 2020 and therefore the 4-month time limit under section 49 of the 2015 Act has been exceeded. The TPT argued that the referral was in time, as the breach was ‘recurring’.

The arbitrator concluded that a recurring breach was a series of distinct breaches rather than the continuing effects of the occurrence of a specific breach. The arbitrator also found that the alleged breach had crystallised when the deed of variation was entered into, and what happened since is simply a consequence of that breach.

The arbitrator held that the referral was made late and so the referral was time barred under s49(4) of the 2015 Act.

4.3 Whether the Referral had been made too early

The arbitrator found that whilst the referral to the PCA was made two days earlier than the prescribed 21 days required by section 49 of the 2015 Act, as the PCA did not take any steps to accept the referral until the 21 days had elapsed, the dispute had not been referred early.