Award Summary – December 2019 - 1
Published 5 January 2022
Applies to England and Wales
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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.
1. Summary of findings
The tied pub tenant’s (“TPTs”) claim for damages arising from the failure of the pub-owning business (“POB”) to send a rent assessment proposal (“RAP”) did fall within the scope of the referral submitted by the TPT to the Pubs Code Adjudicator (“PCA”) in which the TPT requested arbitration of the POB’s failure to serve the RAP.
However, at the time of the referral there was no “dispute” in respect of damages between the TPT and the POB within the meaning of section 48 of the Small Business, Enterprise and Employment Act 2015 (“the 2015 Act”). The arbitrator held that therefore they could not make a determination about a claim for damages due to lack of jurisdiction.
2. Factual background
The TPT requested a rent assessment from the POB. The POB asserted that it was not under an obligation to provide a RAP. The TPT disputed this assertion. The TPT made a referral for arbitration using the PCA’s standard form (the “Referral Form”).
Subsequently, the POB admitted that it had been under an obligation to provide a RAP as required under regulations 19(1)(b) and 20(1) of the Pubs Code, and that it had failed to do so and was thereby in breach of those regulations.
Whilst the POB also admitted that its failure to provide a RAP was capable of being referred to arbitration, it disputed that the TPT was entitled to bring a claim for damages for breach of the Pubs Code as part of its arbitration referral. In doing so, the POB did not acknowledge whether the PCA had jurisdiction generally to deal with damages claims, if such claims could be brought for breaches of the 2015 Act or the Pubs Code.
3. The dispute
The dispute concerned the following issues:
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Whether the claim for damages by the TPT in respect of the POB’s failure to send a RAP (the “Compensation Dispute”) was within the scope of the PCA Referral Form submitted by the TPT to the PCA (the “Referral Issue”);
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Whether there was a “dispute” between the TPT and the POB within the meaning of section 48 of the 2015 Act which enabled the TPT to refer the Referral Issue to the PCA (the “Dispute Issue”);
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If the arbitrator lacked substantive jurisdiction in relation to the Compensation Dispute whether the POB had properly raised an objection about jurisdiction so as to permit the POB to challenge it (the “Timing Issues”)
4. The applicable law
The arbitrator considered that Part I of the 1996 Act was applicable to this arbitration. Accordingly, the arbitrator had the power to rule on their own substantive jurisdiction to decide a case – under section 30(4)(a) the arbitrator may do so in an award as to jurisdiction.
The arbitrator considered that in accordance with sections 48 and 49 of the 2015 Act as well as regulation 44 of the Pubs Code, the core requirements of a referral are: (1) the existence of a dispute between a TPT and a POB and (2) a referral of that dispute by the TPT to the PCA. That dispute may be referred to the PCA only to the extent that it relates to an allegation that a POB has failed to comply with an arbitrable provision of the Pubs Code. The provisions of the Pubs Code in issue in this arbitration were regulations 19 and 20 of the Pubs Code, which are arbitrable.
5. The arbitrator’s findings
5.1 Compensation Dispute and Dispute Issue
The arbitrator held that they could not have jurisdiction to determine the Compensation Dispute if compensation was not part of what was ‘in dispute’ before the Referral Form was submitted. The POB argued that the absence of any reference to an entitlement to compensation in the Referral Form meant that this was not in dispute before the referral to the PCA. The TPT disagreed and argued that this was too narrow an approach.
The arbitrator held that in deciding whether a dispute exists, the word “dispute” should be given its ordinary and natural meaning. They considered that they should not adopt an over legalistic analysis of what the dispute between the parties is and that one needs to determine in broad terms what the disputed claim is. It cannot be said that the disputed claim is necessarily defined or limited by the evidence or arguments submitted by either party to each other before the referral.
The arbitrator agreed with the TPT that a “dispute” and a “claim” were not the same thing, but that did not mean that a dispute necessarily included any claim that might be made arising out of the circumstances in dispute. The arbitrator was of the opinion that whether a dispute includes a particular claim depends on the facts.
The TPT was entitled to refer to the PCA any dispute that related to an allegation that the POB had failed to comply with regulations 19 and 20 of the Pubs Code and the POB agreed that it was under an obligation to provide a RAP to the TPT. In correspondence, the TPT had stated that it was seeking to serve a Market Rent Only notice and to obtain relief which would force the POB to comply with its rent assessment obligations. However, the TPT had not, at any point before making a referral to the PCA, mentioned its alleged entitlement to compensation or any claim for monetary damages. The arbitrator considered that there was no “dispute” at the time of the referral about whether the TPT was suffering prejudice in consequence of the failure to send a RAP.
The arbitrator considered that if a dispute extends in substance to both the existence of a state of affairs and substantive remedies flowing from it, then whether an arbitrator can grant remedies other than those that have been asserted specifically depends on the substance of what is actually in dispute, taking a robust, common sense approach and not a legalistic one. They held that in this case the dispute was not concerned in essence or in substance with compensation. The focus of the dispute was exclusively on establishing the POB’s duty and on the performance of that duty. Claims were asserted for a declaration and relief requiring the POB to provide a RAP, but there was no indication that the TPT was seeking compensation, and no dispute in that regard.
The arbitrator also considered that a claim for breach of the Pubs Code did not automatically include a claim for compensation or damages. The arbitrator rejected the argument that section 49 of the 2015 Act automatically gave the right to any remedy arising in the event of non-compliance being found, whatever the scope of the prior “dispute”. Instead, the arbitrator considered that section 48 indicated that the matters referred depend on what is in dispute, and on what the tenant is entitled and chooses, to refer.
The arbitrator concluded that, in the circumstances, there was no “dispute” at the time of the referral within the meaning of section 48 of the 2015 Act which would enable the TPT to refer the Compensation Dispute to the PCA.
5.2 Referral issue
The arbitrator considered that the Rules of the Chartered Institute of Arbitrators (the Rules) should not be taken into account when making a determination about referrals or the Referral Form. This was because the rules of an alternative resolution body could potentially be followed instead if nominated by the arbitrator in the case. The arbitrator held it would be wrong to be influenced in interpreting a reference to the PCA by any procedural requirements of a set of arbitration rules that may or may not apply to the arbitration. Given that the arbitrator is permitted to apply the rules of any dispute resolution body, the rules will potentially not be known at the time of the reference to the PCA, and cannot be taken into account (or be required to be taken into account) by the person making the reference. Further, as a matter of law the proper interpretation of a document such as this must be judged in the circumstances existing and known to the parties at the time when it is prepared.
The arbitrator considered that they were only able to decide on matters which had been referred to arbitration. The arbitrator confirmed that, as well as the Referral Form itself, depending on the circumstances, other documents and information sent to the PCA could be taken into account when ascertaining which particular matters were referred to arbitration. However, they did not consider there to be a basis on which they could take into account correspondence sent to the PCA after the referral was accepted.
The arbitrator considered that in the circumstances the Compensation Dispute which the TPT had set out in its Statement of Claim, served a significant time after the Referral Form was accepted, was capable of falling within the scope of the dispute referred in the Referral Form. They considered that the breach of duty on which the TPT relied was essentially the same as that set out in the Referral Form.
5.3 Timing issues
If a party wishes to contest the jurisdiction of an arbitrator, under section 31 of the 1996 Act, they must do so no later than “the first step in the proceedings to contest the merits.” The arbitrator has discretion to admit delayed objections.
The arbitrator found that the POB had raised the jurisdiction issue before it took the first step in the proceedings to contest the merits of the claim for damages. The objection was therefore in time and was permitted.