Decision

Marston's - Award summary – March 2022 - 1

Published 8 June 2022

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.

1. Summary of Findings

The Arbitrator held that a Pub Owning Business (“the POB”) had responded to a notice from a Tied Pub Tenant (“the TPT”) served under section 26 of the Landlord and Tenant Act 1954 (“the 1954 Act”) seeking a renewal of its tenancy in a manner which was consistent with the principle of fair and lawful dealing as referred to under regulation 41(c) of the Pubs Code etc Regulations 2016 (“the Pubs Code”) and s42(3)(a) of the Small Business Enterprise and Employment Act 2015 (“the SBEEA”). The Arbitrator also held that the POB did not subject the TPT to any detriment when the TPT exercised its rights under the Pubs Code.

2. Background

The pub was a tied pub. There were preliminary and without prejudice discussions between the parties to move to a Market Rent Only (“MRO”) lease. During this time, the TPT served a s26 notice under the 1954 Act seeking a renewal of its existing tied tenancy. The POB served a counter-notice under s25 of the 1954 Act seeking to terminate the existing tenancy on the basis that the POB wished to run the pub for its own business.

Separate legal proceedings were brought in the County Court under the 1954 Act, which were eventually settled with an agreement that the TPT would vacate the pub on an agreed date and receive statutory compensation.

However, the TPT subsequently complained to the POB about the conduct of the business development manager (“the BDM”) with whom the TPT had been previously negotiating about the potential for a MRO lease. The TPT put the POB on notice of their intention to make a referral to the PCA for arbitration on the issue of whether through the conduct of their BDM they had breached regulations 41(c) and 50 of the Pubs Code, in relation to the principle of fair and lawful dealing with TPTs, and not subjecting a TPT to any detriment for attempting to exercise rights under the Pubs Code, respectively. The complaint was then subsequently referred to the PCA for arbitration on these issues.

3. Relevant Legislation

Regulation 41(c) of the Pubs Code provides that “the [POB] must ensure that each of its business development managers…- (c) deals with [TPTs] in a manner that is consistent with the principle referred to in section 42(3)(a) of [SBEEA]”. As specified below, that is the principle of fair and lawful dealing by POBs in relation to their TPTs.

S42(3) of the SBEEA notes that the “… Secretary of State must seek to ensure that the Pubs Code is consistent with… - (a) the principle of fair and lawful dealing by [POBs] in relation to their [TPTs]”.

Regulation 50 of the Pubs Code specifies that “[a POB] must not subject a [TPT] to any detriment on the ground that the tenant exercises, or attempts to exercise, any right under these Regulations”.

4. Arbitrator’s findings

(1) Regulation 41(c) of the Pubs Code

At the time the TPT served its s26 notice and the POB served its s25 notice, there had already been preliminary discussions as to the nature of the parties’ future contractual relationship. An MRO lease was only one option under discussion amongst others. The Arbitrator held that when the POB served its s25 notice both parties knew that several options were under negotiation and that as such there was no legitimate expectation that a particular outcome would be entered into and that either side was free to withdraw from the negotiations. Accordingly, the Arbitrator held that the POB was free to respond with a s25 notice, and that such action was in accordance with the established scheme under the 1954 Act.

The Arbitrator therefore found in the POB’s favour on this issue.

(2) Regulation 50 of the Pubs Code:

The Arbitrator held that there was sufficient evidence to suggest that the POB’s s25 notice was not served as a direct result of the TPT’s s26 notice or its exercise of any rights under the Pubs Code. Accordingly, the Arbitrator found that the POB did not subject the TPT to any detriment due to the TPT’s service of its s26 notice or its exercise of any rights under the Pubs Code.

5. Decision

The Arbitrator dismissed the TPT’s claims that the POB had acted in breach of regulations 41 and 50 of the Pubs Code. The Arbitrator ordered each party to pay their own costs.