The pubs code adjudicator’s (PCA) office faces potential court action unless it withdraws an advice note it published on 2 March.
The note centres on PCA advice for market-rent-only (MRO) option-compliant proposals for tied tenants and pub-owning businesses (POBs) and was published in light of recent arbitration awards made by PCA Paul Newby and deputy PCA Fiona Dickie.
Its publication has prompted a strong reaction from two pub companies, Ei Group and Greene King. They have written to the PCA warning that they will instruct legal representatives to begin claims for a judicial review unless the note is formally retracted.
‘Wrong procedure’ claim
Both companies object to the publication of the advice, stating that the note is unlawful. They suggest that the PCA has overstepped its remit and used the “wrong procedure”, making the advice invalid.
A letter from Ei’s legal representatives, dated 27 April 2018 and seen by The Morning Advertiser (MA), sets out the POB’s concerns and its intention to potentially bring about a judicial review if the issue is not resolved. It highlighted the PCA should have “consulted with the appropriate persons, including Ei” before taking any action and added “there are aspects of the advice notice that are contrary to the Small Business, Enterprise & Employment Act 2015 (SBEEA) and/or the pubs code”.
The letter takes issue with the advice that “an MRO-compliant tenancy may be either in the form of a new tenancy or the existing tenancy varied by deed” and “the choice of vehicle for offering an MRO-compliant tenancy is subject to an objective standard rather than the election of the pub-owning business”.
It also said that contrary to the advice note “it will be argued on behalf of Ei, that the code does not permit an MRO-compliant tenancy to be offered by way of a deed of variation. It can only be offered by a proposal of a new tenancy”.
Ei’s letter requested a response from the PCA by 4pm on 11 May, however, it did not say that a failure to respond would automatically trigger further action. At the time of publication, MA understands that Ei had not yet started a claim for a judicial review.
A further letter from Greene King’s legal representatives, also seen by MA and dated 18 May, states that “documents such as the advice note cannot be used to rewrite legislation”.
It raises similar issues to the Ei letter, including concerns about the PCA’s lack of consultation on the advice note before it was published. It states that the advice – “an MRO should be consistent with the core principles of the pubs code (fair and lawful dealing, and no worse off)” – is “wrong in law” and that the PCA has gone beyond its statutory powers in stating that MRO is not the same as a negotiation on the open market.
This letter represents a formal precursor to bringing a judicial review unless the PCA withdraws the advice note and confirms that the note “will not be relied on in any way”. If this does not happen, the letter says “in the absence of an acceptable response within the next 14 days, we [the legal representatives] are instructed to issue proceedings for judicial review”. At the time of publication, this deadline had not passed.
Left in limbo
Threats of legal action leave tenants in limbo as to whether they can accept the advice note at face value. However, it remains live on the PCA website and can be viewed at https://bit.ly/2xAtz5x, it also contains the caveat “this advice note will be kept under review and updated as appropriate”.
Even if the threats of potential legal action do not come to fruition, the issue is likely to be reignited on 26 June when the Business, Energy & Industrial Strategy (BEIS) Committee is scheduled to hold a one-off evidence session with Newby and Dickie to discuss the operation of the pubs code and the performance of the PCA.
At the time of publication, the PCA said it was unable to comment on the issue at this stage.