Decision

Award Summary – May 2021 - 1

Published 2 August 2021

Applies to England and Wales

Award Issued: 2021

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 Award

The arbitrator found for the pub-owning business (“POB”), as the tied pub tenant (“TPT”) submitted their referral for arbitration well outside of the 4-month time limit. The TPT’s claim therefore failed and the issues in dispute were not determined by the arbitrator.

2. Factual Background and Dispute

In September 2018, the POB produced a rent assessment and sent it via email to the TPT.

The Pubs Code etc. Regulations 2016 (“the Pubs Code”) at part 2 requires POBs to provide the TPTs with a minimum level of information and advice as specified at schedule 1, before a new tenancy agreement is entered into.

Prior to the grant of the lease, in November 2018, the POB emailed the TPT purportedly providing the TPT with the information required by schedule 1 of the Pubs Code. The TPT was then granted a 5-year lease commencing in March 2019.

On 20 June 2020, some 15 months after the lease commenced, the TPT wrote to the POB alleging that:

• The tied assessed rent offer was not ‘sound or achievable’ taking into account the PCA’s ‘Beer Waste & Duty Guidance’, as well as two published awards (E Anderson -v- Marstons PLC - ARB/000322/ANDERSON5 & E Anderson -v- Marstons PLC - ARB/000225/ ANDERSONE), on the basis that the effect of cask wastage and sediment had purportedly been concealed;
• The letting was a breach of part 2 and schedule 1 of the Pubs Code on the basis that the TPT’s business plan was not sustainable; and
• The POB had required the TPT to operate a ‘machine tie’ which was outlawed by the Pubs Code.

In this correspondence the TPT also gave the POB 21 days’ notice of its intention to make an arbitration referral to the PCA in relation to these allegations.

On 6 July 2020, the POB responded to the allegations in the TPT’s letter, stating that there was no basis upon which a referral to the PCA was justified at that time.

The TPT proceeded to make a referral for arbitration to the PCA on 16 October 2020.

3. Issues in Dispute

The dispute concerned various issues, the first of which was whether the TPT’s referral was time-barred pursuant to section 49(4) Small Business, Enterprise and Employment Act 2015 (“the 2015 Act”) and had therefore been brought out of time. This was, fundamentally, the initial threshold point to be determined by the arbitrator, as all other issues raised by the TPT would fall away if it was found that the TPT’s referral was time-barred pursuant to section 49 of the 2015 Act.

Section 49(4) of the 2015 Act requires that before referring a dispute to the PCA for arbitration, the TPT must give the POB notice of its alleged non-compliance and must refer the dispute to the PCA within 4 months beginning with the first date on which the dispute could have been referred.

The POB claimed the referral was time barred as the alleged non-compliance took place in either November 2018, when it first provided the information and advice to the TPT, or otherwise in January 2019 when the POB agreed the TPT’s business plan.

The TPT claimed that the referral had been brought in time, asserting that the process of making a referral was a two-stage process – stage one of which was giving 21 days’ notice of the dispute to the POB, and then stage two being the making of a referral to the PCA within 4 months of completion of stage one. The TPT asserted that it had duly given 21 days’ notice to the POB on 20 June 2020, and that stage two of the process had commenced thereafter, with a requirement to refer the dispute to the PCA within 4 months, and that as the referral had been made on 16 October 2020 that it had been brought in time. The TPT also argued that if the referral had been time barred, the PCA would have rejected it as it would not have been arbitrable.

4. Decision of the Arbitrator

The arbitrator found for the POB, and that the TPT had made its referral for arbitration well outside of the 4-month time limit.

The arbitrator considered that it was clear that the drafters of the legislation anticipated that the window of opportunity or time limit for making a referral for arbitration of a non-Market Rent Only (MRO) dispute should be 4 months from the date of the relevant event taking place.

Allowing TPTs to make referrals without limitation of time would expose POBs to referrals for an indefinite period of time.

The arbitrator also rejected the TPT’s argument that the PCA had implicitly accepted that the 4-month time limit did not apply by having allowed the referral to proceed.

As the arbitrator found that the TPT’s referral was made outside of the time limit, the TPT’s claim failed, and all other issues referred by the TPT were not determined.