Decision

Award summary – September 2017 – 1

Published 24 March 2021

Applies to England and Wales

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Award Issued: 2017

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.

Summary of the Findings

The tied pub tenant (“TPT”) claimed the pub-owning business (“POB”) had failed to provide a full response to their Market Rent Only (“MRO”) Notice (the “Notice”) in relation to a ‘trigger event’. The arbitrator found the POB did not have to provide a full response (free of tie proposal) in the circumstances.

1. Factual Background

The TPT realised the POB was managing two pubs it owned near the TPT’s premises under its own brands in direct competition with them. The TPT argued the date they became aware of this situation was a ‘trigger event’ under the Pubs Code (“the Code”).

The TPT said their right to send a MRO notice to the POB arose when they sent their ‘relevant analysis’ to the POB demonstrating that a trigger event had occurred (under regulation 25 of the Code). The relevant analysis must be sent within 56 days starting the day after the ‘trigger event’ occurred. The POB disagreed with the TPT, arguing that:

  • the TPT had not sent a ‘relevant analysis’;

  • the MRO Notice did not comply with regulation 23(3) which sets out what it must include;

  • the event the TPT specified occurred before the Code was implemented; and

  • the event did not meet the requirements for a ‘trigger event’.

The requirements for a ‘trigger event’ are set out in section 43(9) of Part 4 of the Small Business, Enterprise and Employment Act 2015 (the “2015 Act”) and regulation 7 of the Code.

2. Arbitrator’s Findings

2.1 Relevant Analysis

The TPT set out their ‘relevant analysis’ in a letter with their estimate of the decrease in trade which would result from the POB’s activities. The arbitrator found that the TPT’s analysis was not comprehensive enough and did not provide sufficient reasons, evidence, or justification. It could not therefore be a ‘relevant analysis’ as defined by regulation 25.

The arbitrator concluded that the TPT had no right to send a MRO notice and therefore the POB did not have to provide a full response. Although this meant the TPT’s claim could not succeed, for completeness, the arbitrator addressed the other issues raised.

2.2 Validity of the MRO Notice

The arbitrator concluded that the Notice did not comply with regulation 23(3) - which sets out what a MRO notice must include - and was therefore invalid because:

  • it did not include the date the ‘trigger event’ occurred – the arbitrator took the view this date was needed for the POB to work out whether the TPT had sent their ‘relevant analysis’ within the required 56-day period; and

  • the description of the event was not sufficient to demonstrate it was a ‘trigger event’ – the POB had set out its concerns to the TPT in relation to this lack of evidence but the TPT took no steps to address these.

The arbitrator noted that the TPT’s failure to provide an email address would not have been sufficient to invalidate the Notice. Correspondence showed the POB already had the TPT’s email address and other contact details.

2.3 Trigger event occurring before the Code was implemented

The two neighbouring pubs had re-opened before the Code came into force. The TPT argued that the relevant date for the ‘trigger event’ was not the date of re-opening but the date they became aware these pubs were operating under the POB’s brands.

The arbitrator noted that what the TPT had said earlier in the arbitration suggested the TPT was in fact aware of the alleged ‘trigger event’ (that the pubs were operating under the POB’s own brands) before the Code came into force.

2.4 Conditions for a “trigger event” (section 43(9) of the 2015 Act and regulation 7 of the Code)

The arbitrator did not consider there was sufficient evidence to demonstrate that the conditions for a ‘trigger event’ were met because:

  • the TPT did not prove there would be a significant impact on the level of trade they could reasonably have expected at the tied pub (section 43(9)(c) of the Act);

  • there was not enough proof to show a decrease in trade on a month-by-month basis over a continuous period of 12 months (“Condition A” (regulation 7 (2));

  • there was no proof to show that the trigger event would have an effect directly related to changes in the local area (“Condition D” Regulation 7(1)(5) of the Pubs Code); and

  • there was no evidence that only the TPT’s pub would be affected (regulation 7(1)(b)(i)). The TPT had argued that only their pub would be affected because there were no other tied pubs in the immediate area. But the arbitrator found difficulty in this argument as Condition C at regulation 7(4) was not limited to tied pubs only.

The arbitrator ruled in the TPT’s favour in relation to the following conditions (however, these findings were of academic use only and had no impact on the outcome of the arbitration).

  • The TPT could not have reasonably foreseen the takeover of the two neighbouring pubs under the POB’s own brands at the time they renewed their lease (section 43(9)(b) of the 2015 Act).

  • The event would likely have affected all pubs in the local area but not all pubs in England and Wales (“Condition C” – regulation 7(4) of the Pubs Code).

  • There was no evidence to suggest the TPT could have mitigated the loss in trade by the means the POB had suggested (“Condition B” regulation 7(3)(e)).

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