The Pubs Code – a victory for the tied tenant
The Pubs Code etc. Regulations 2016 (“the Pubs Code”) and the Small Business, Enterprise and Employment Act 2015 (“the 2015 Act”)
Under the Pubs Code etc. Regulations 2016 (“the Pubs Code”) and the Small Business, Enterprise and Employment Act 2015 (“the 2015 Act”), the large pub companies (including EI Group, Punch and Greene King) are, on a trigger event arising, required to offer their tied tenants the opportunity to take a free of tie (or market rent only) tenancy, enabling tenants to compete better in the market and source their alcohol from third parties other than the company they are tied into.
The Pubs Code and the 2015 Act set out a procedure to follow where a trigger event arises and allows for any disputes to be referred to the Pubs Code Adjudicator (PCA) as the arbiter of what terms should or should not apply.
The intention behind the Pubs Code is that the decision of the PCA should be binding on the pub company and the tenant, with the whole process intended to be quick and certain for all concerned.
It is arguable that the big pub companies have taken advantage of the process and have sought to drag out the Pubs Code procedure to their own benefit and to the detriment of the pub tenant.
This is illustrated by a recent case in which GL Law was involved, which came to court in June 2020.
EI Group Plc v John Clarke & Lesley Minnett
In EI Group Plc v John Clarke & Lesley Minnett  EWHC 1858 (Ch), GL Law acted for the pub tenants in successfully defeating the pub company’s (in this case, EI Group) attempt to challenge the PCA’s decision.
In this matter, the tenants had served a notice on 1 November 2016 triggering the entitlement to a market rent only tenancy. The matter was referred to the PCA on 8 December 2016. The PCA made two awards, the first on 2 August 2018 and the second on 4 September 2019. Both were largely in favour of the tenant.
Despite the awards, the pub company chose to challenge the decisions (and in particular the second one) further and issued an application in the High Court in November 2019 seeking permission to appeal the decision.
The pub tenants, who up to this point had represented themselves with assistance from a pub tenant support organisation, were faced with a High Court challenge to the PCA decisions which, if successful, would have had significant repercussions to their ability to trade effectively and where they were in effect already 3 years down the line from when they asked for a market rent only tenancy.
GL Law’s team, headed by Richard Gore, head of commercial dispute resolution, and counsel, Duncan MacPherson of 1 Essex Chambers, agreed to represent the tenants under conditional fee agreements and appeared at the hearing in June.
Mr Justice Miles had to consider whether the arbitrator had made an error of law in his findings and whether, despite any error of law, the court could be confident that the arbitrator would have reached the same result in any event on independent, alternative grounds.
The Judge concluded that there had been an error of law as the arbitrator had misinterpreted the comparison test to be applied to a tenant seeking a market rent only tenancy. The 2015 Act did not require a comparison between the original lease and the proposed lease to determine whether a particular term(s) would leave the tenant worse off but that was the test the arbitrator had applied.
The pub company succeeded, therefore, in establishing an error of law and the Judge agreed that the case raised issues of public importance in light of the numerous disputes between pub companies and their tenants.
One might have thought that would be an end to it.
However, the exercise the Judge had to complete was to assess whether, despite the error of law, the arbitrator would have reached the same decision he had in any event on alternative and independent grounds.
Addressing each of the disputed clauses in the proposed lease in turn, the Judge concluded that, where relevant, there was sufficient, alternative evidence to support a finding that the arbitrator would have reached the same conclusion despite having applied the 2015 Act incorrectly.
On that basis the Judge dismissed the application preventing the pub company from prolonging the matter any longer and allowing the tenants to finally obtain their market rent only lease.
Richard Gore said: “The court’s decision is a victory for the tied tenant. It is significant as it confirms that the pub companies cannot simply expect to get their own way as a result of prolonging their legal challenges. In this case, my clients had to wait 3 and a half years for the lease they requested in 2016 through a process which is intended to be quick and efficient. Just because the PCA adjudicator mis-interprets the law incorrectly does not necessarily mean that the decision will be overturned on appeal.”
Specialist dispute resolution solicitors
If you are a tied tenant for one of the large pub companies considering exercising your right to a market rent only lease, or in the middle of the process, then we will be happy to discuss the position with you. Contact our specialist dispute resolution solicitors by calling 0117 906 9400 or email firstname.lastname@example.org