|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Punch Partnerships (PTL) Ltd & Anor v The Highwayman Hotel (Kidlington) Ltd  EWHC 714 (Ch) (24 March 2020)
Cite as:  WLR(D) 250,  Bus LR 1051,  EWHC 714 (Ch)
[New search] [Context] [View without highlighting] [Printable PDF version] [Buy ICLR report:  Bus LR 1051] [View ICLR summary:  WLR(D) 250] [Help]
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF AN ARBITRATION CLAIM
B e f o r e :
(sitting as a Judge of the Chancery Division)
|(1) PUNCH PARTNERSHIPS (PTL) LIMITED|
|(2) STAR PUBS & BARS LIMITED||Claimants|
|- and -|
|THE HIGHWAYMAN HOTEL (KIDLINGTON) LIMITED Defendant|
|THE OFFICE OF THE PUBS CODE ADJUDICATOR||Intervenor|
Crown Copyright ©
Mr M H Rosen QC
(a) that in finding that the MRO lease proposed was unreasonable due to the length of its term, the DPCA(i) erred in law so that the Award should be set aside pursuant to section 69 of the 1996 Act, and(ii) unlawfully relied upon information received in her capacity as regulator under the 2015 Act and the Pubs Code and breached her duty to act fairly and impartially and/or exceeded her powers, so that the Award should be set aside under section 68; and
(b) in ordering the Claimants to offer an MRO lease of a particular length, the DPCA exercised a power that she did not have under the 2015 Act and/or the Pubs Code and so exceeded her powers and/or erred in law such that the Award should be set aside under sections 68 and/or 69 of the 1996 Act.
(2) The Statutory Regime
(a) where the parties could not agree the rent payable under a proposed MRO lease, section 44(2) entitled the Secretary of State to impose an independent assessor to determine the market rent; and
(b) as regards other disputes relating to the offer of an MRO lease, section 45(2) empowered the Secretary of State to confer functions on the Adjudicator to resolve such disputes and, in particular, disputes as to "whether … a proposed tenancy or licence is MRO-compliant".
(a) Regulation 29 requires the POB, upon receipt of a valid MRO notice, to send the tenant a "full response" including a proposed tenancy which is "MRO-compliant";
(b) Regulation 30(2) specifies that a proposed tenancy will only be MRO-compliant if "its term is for a period which is at least as long as the remaining term of the existing tenancy"; and
(c) Regulation 31 specifies that the terms of a proposed tenancy shall be regarded as unreasonable if they (i) include a break clause exercisable only by the landlord; (ii) impose a service tie in respect of insurance (other than buildings insurance); or (iii) include terms which are not common in non-tied tenancies;
(d) Regulation 58(3) provides that, in the event that the tenant or pub-owning business refers the dispute to arbitration, that arbitration must be conducted in accordance with "(a) the rules regarding arbitrations issued from time to time by the Chartered Institute of Arbitrators; or (b) the rules of another dispute resolution body nominated by the arbitrator."
(a) under Regulation 32 the tenant or the POB may refer the matter to the Adjudicator (who, pursuant to Regulation 58(2), must either arbitrate the dispute or appoint another person to do so);
(b) under Regulation 33, if the Adjudicator rules that the POB "must provide a revised response to the tied pub tenant", such "revised response" must be provided within 21 days of the ruling;
(c) under Regulation 34, the parties have a 56 day negotiation period, from the provision of the full response under Regulation 29 or the revised response under Regulation 33, in which to agree terms; and
(d) under Regulation 35, if an MRO tenancy is proposed during the negotiation period which the tenant considers is not MRO-compliant, it may again refer the matter to arbitration.
(3) Factual background
(a) on 6 December 2016, Punch sent its "full response" to the Tenant pursuant to Regulation 29(3) of the Pubs Code, including a proposed MRO tenancy to replace the existing tied tenancy, for a period matching the remaining term of the existing tenancy;
(b) on 3 January 2017, the Tenant (dissatisfied with PTL's full response) referred the dispute to arbitration alleging that the terms of the proposed tenancy were unreasonable on many grounds but without objecting to the proposed period;
(c) in an award made on 5 January 2018, the DPCA as arbitrator (as from November 2017) upheld three of those objections, holding that terms were unreasonable which (i) required the payment of a deposit of six months' rent; and (ii) the payment of insurance annually in advance and which (iii) triggered repair obligations;
(d) on 24 January 2018 Punch submitted a "revised response" seeking to address those points concerns;
(e) on 7 February 2018, the Tenant (rejecting the revised response) made a second referral to the PCA for arbitration in which it contended that the period of the proposed tenancy was unreasonable; and
(f) on 26 April 2018, the parties were notified that the DPCA was to act as arbitrator in respect of the second reference.
"… it is Star Policy to offer to the Tied Pub Tenant (TPT) an agreement which is as long as the remaining term of the existing tenancy, as stipulated in the Pubs Code or a term of 10 years whichever is longer…there may be instances where an alternative duration may be offered, but this is not common practice".
(4) The Award
"41. When I was on the point of completing my award at the end of January 2019, as regulator I came into possession of information regarding the Respondents' policy in respect of the lease length that it would offer in its proposed MRO tenancies…
"53. Given that the length of the term of the proposed lease must not be unreasonable, it is for the Respondents to show what their reasons were for offering the lease length that they did and that they were reasonable ones. They have not shown their reasons…
"54. Having failed to put forward a reason for having chosen not to apply its usual policy to lease length, I find that the Respondents had no good reason for its choice, and that the lease length proposed is unreasonable and not compliant."
"61. In submissions dated 4 June 2018 [the Landlords] argued that, properly interpreted, the legislation [the 2015 Act and the Pubs Code] did not empower me to order the precise terms of the revised response…[and] my powers are limited to ordering the service of a revised response, but not to determining what that revised response must contain. However, I find no support for such a construction in the legislation pursuant to which I derive my powers, the drafting of regulation 33(2) being broad.
"62. I take the view that the reference to my powers in that regulation is not exhaustive. Its language is permissive, in that it does not restrict me in the scope of any ruling I may make as to the terms of the revised proposal. I must arbitrate the dispute, and that means that I should ensure that [the Tenant] obtains a compliant MRO proposal without the need to refer for further arbitration on the terms of the MRO lease. History indicates to me that the parties are unable to negotiate to an effective agreement, and therefore in this case I have determined that I should order the compliant lease term on which the revised proposal must be made. [The Landlords'] interpretation of my powers under regulation 33(2) is such as to provide the potential for locking a tied pub tenant into a cycle of litigation. Such delay would place a greater burden on the tenant than on [the Landlords] as a huge international brand with deep pockets."
(5) The 1996 Act - jurisdiction
"(1) The tribunal shall - (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined….
"(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.
"(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may - (a) remit the award to the tribunal, in whole or in part, for reconsideration, (b) set the award aside in whole or in part, or (c) declare the award to be of no effect, in whole or in part. The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration."
"… All awards shall be made in writing and shall be final and binding on the parties. The parties shall carry out all awards without delay. By adopting these Rules, the parties waive their right to any form of appeal or recourse to a court or other judicial authority insofar as such waiver is valid under the applicable law."
(a) section 51(5) of the 2015 Act and Regulation 58 of the Pubs Code provide that the statutory arbitration will be 'conducted in accordance' with those Rules. Thus only those rules associated with the conduct of the reference are engaged, and this did not extend to Article 34 of the ChIArb Rules, which is concerned with the form and effect of an award, including "appealability", and was not incorporated in the procedure of the arbitration now in issue; and
(b) in any event, the applicability of the ChIArb Rules to the conduct of arbitration was not "agreed by the parties" for the purpose of section 68, but was imposed by the 2015 Act as statute (and in other cases could be potentially imposed by the choice of the arbitrator given that power under section 51 of the 2015 Act).
(6) The challenges to the finding that the period offered was unreasonable
(a) The alleged unreasonableness of a period expiring with the current tied lease
"Retaining the consultation proposal that an MRO-compliant tenancy must be for a minimum of at least five years or the remainder of the existing tenancy, whichever is the shorter, would not provide a realistic MRO offer for tenants. It would create an inequality where tenants could have to exchange security of tenure in exchange for an MRO compliant tenancy…
"Equally establishing that an MRO-compliant tenancy must be for the greater of a period of at least 5 years or the remainder of the existing tied tenancy would have distorting consequences in that tenants would be able to obtain additional security of tenure through the mechanism of the MRO option."
(b) The alleged misuse of the Landlords' information
"In my judgment, documents seized by a public authority from a private citizen in exercise of a statutory power can properly be used only for those purposes for which the relevant legislation contemplated that they might be used. The user for any other purpose of documents seized in exercise of a draconian power of this nature, without the consent of the person from whom they were seized, would be an improper exercise of the power. Any such person would be entitled to expect that the authority would treat the documents and their contents as confidential, save to the extent that it might use them for purposes contemplated by the relevant legislation".
"In my view, where information has been obtained under statutory powers the duty of confidence owed on the Marcel principle cannot operate so as to prevent the person obtaining the information from disclosing it to those persons to whom the statutory provisions either require or authorise him to make disclosure…
"The extraction of private and confidential information under compulsion from a witness otherwise than in the course of inter partes litigation is an exorbitant power. It is right that such information should not be generally available but should be used only for the purposes for which the power was conferred."
"The PCA is aware of both the need to separate the roles of regulator and arbitrator and to be as transparent as possible about the way it carries out each of these roles…
"In discussions with pub companies or any other person or body, the PCA will never discuss individual cases which are or may be the subject to arbitration…
"The PCA is aware that parties to arbitrations are entitled to have full confidence that the arbitrator has no conflict of interest and conducts arbitrations fairly. A further safeguard is provided through the oversight of the PCA's Compliance Officer, who will take all necessary steps to ensure that there is a clear separation of functions and that neither the PCA nor the Deputy PCA does anything that could compromise that confidence or give rise to a reasonable perception of bias."
(c) The questions of reasonableness and justice in the Award
(a) but for the alleged procedural irregularity, the outcome of the arbitration may have been different, because if the DPCA had not used that information in the arbitration, she may have concluded that the period of the lease offered was reasonable; and
(b) if the Award is permitted to stand, the Landlords would face an invidious choice between complying with their regulatory obligations to provide information requested by OPCA, which can then be deployed in a private arbitration with a tied pub tenant to their disadvantage, or refusing to comply with their regulatory obligations which is a criminal offence under the 2015 Act, punishable by a fine.
(7) The challenge to the finding that the Landlords must offer a 5 year period
"Parliamentary sovereignty means that Parliament can, if it chooses, legislate contrary to fundamental principles of human rights. The Human Rights Act 1998 will not detract from this power. The constraints upon its exercise by Parliament are ultimately political, not legal. But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual."
"…The accepted test now seems to be that there is substantial injustice if it can be shown that the irregularity in the procedure caused the arbitrators to reach a conclusion which, but for the irregularity, they might not have reached, as long as the alternative was reasonably arguable."