Star Pubs & Bars Ltd v The Pubs Code Adjudicator
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morris |
| Judgment Date | 17 May 2021 |
| Neutral Citation | [2021] EWHC 1291 (Admin) |
| Docket Number | Case No: CO/4053/2020 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 17 May 2021 |
[2021] EWHC 1291 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mr Justice Morris
Case No: CO/4053/2020
Catherine Callaghan QC and Naina Patel (instructed by DLA Piper Solicitors) for the Appellant
Adam Heppinstall QC and Conor McCarthy (instructed by Government Legal Department) for the Respondent
Hearing dates: 28 and 29 April 2021
Approved Judgment
Introduction
This is a preliminary hearing in the appeal by Star Pubs & Bars Ltd (“Star”) against a penalty of £2 million (“the Penalty”) imposed by the Pubs Code Adjudicator (“the PCA”) pursuant to section 58(3) of the Small Business, Enterprise and Employment Act 2015 (“the 2015 Act”).
The issues to be determined at this preliminary hearing, pursuant to my order dated 9 March 2021, are as follows:
(1) Star's application to amend its Notice of Appeal to add a ground of appeal as set out in its Amended Grounds of Appeal: (Issue 1);
(2) Star's application for permission to rely on the witness statement of Lawson Mountstevens dated 1 December 2020: (Issue 2);
(3) Star's application for specific disclosure and inspection of three categories of document: (Issue 3);
(4) Whether, in an appeal under section 58(3) of the 2015 Act, Star may appeal against the imposition of a financial penalty or its amount on the basis that findings in the investigation report published under section 54, which are relied upon as grounds for the imposition of the penalty, or taken into account when calculating the amount of the penalty, were unfair, unjustified, incorrect and/or do not justify the imposition of a penalty. Depending on the answer to this question, the further question arises as to whether Star's related claim for judicial review should be heard at the same time as the final hearing of the appeal: (Issue 4);
(5) Whether the issue of whether the appeal should proceed by way of “rehearing” or by way of “review” should be determined in advance of the final hearing of the appeal, and if so, the substance of that issue: (Issue 5).
The first three issues are raised by Star's application notice dated 1 December 2020.
The Factual Background
The PCA and the Pubs Code
The PCA is the creation of Part 4 of the 2015 Act. The 2015 Act also makes provision for the creation of a statutory code, found in the Pubs Code etc. Regulations 2016 (known as the Pubs Code), to regulate various aspects of the commercial relationship between pub-owning businesses (“POBs”) and their tied pub tenants (as defined in sections 68–70 of the 2015 Act). Ms Fiona Dickie is the PCA. Star is the pub estate business of Heineken UK Limited and is a POB within the meaning of the 2015 Act. At the end of June 2019, it operated over 2000 tied pubs in England and Wales.
In broad terms, section 43 of the 2015 Act makes provision for POBs to offer their tied pub tenants a “market rent only option” (“MRO”) in specified circumstances. This is an option for a tied pub to go free-of-tie and pay a market rent. A “tie” (or more specifically, a “product tie”) obliges a tenant to sell alcohol supplied only by the landlord or its nominee. A “stocking requirement”, with which this appeal is concerned, is essentially a requirement to stock beer or cider produced by a brewer landlord, but which permits the tenant to purchase such stocks from any supplier and also to sell beer or cider produced by the brewer landlord's competitors (see sections 68 and 72). A stocking requirement is not regarded as a tie under the 2015 Act (see sections 43(4)(a)(ii), 68(5) to (7) and 72), and so can properly be included in an MRO-compliant offer.
MROs are offered pursuant to an MRO procedure set out in the Pubs Code (see section 44). The PCA has certain functions in connection with the MRO procedure, including adjudicating on whether a proposed tenancy is MRO-compliant (see section 45). An MRO-compliant tenancy must not contain unreasonable terms and the Pubs Code specifies terms which are unreasonable (see section 43(4) and (5)). The PCA also has separate investigatory and enforcement powers in relation to the Pubs Code. These are sections 53 to 58, with which this appeal is concerned.
The relevant statutory provisions
Section 53 of the 2015 Act, headed “Investigations”, provides as follows:
“(1) The Adjudicator may investigate whether a pub-owning business has failed to comply with the Pubs Code if the Adjudicator has reasonable grounds to suspect that—
(a) the business has failed to comply with the Pubs Code, or
(b) the business has failed to follow a recommendation made under section 56.
(2) The Adjudicator may not carry out an investigation until the guidance required by section 61(1) has been published.” ( emphasis added)
Section 54, headed “Investigation reports”, provides as follows:
“(1) Following an investigation, the Adjudicator must
(a) publish a report on the outcome of the investigation, and
(b) consider whether to use any of the enforcement powers mentioned in section 55.
(2) An investigation report must, in particular, specify—
(a) any findings that the Adjudicator has made,
(b) any action that the Adjudicator has taken or proposes to take, and
(c) the reasons for the findings and any action taken or proposed.
(3) An investigation report need not identify the pub-owning business concerned.
(4) If a pub-owning business is identified in a report, the business must have been given a reasonable opportunity to comment on a draft of the report before publication.”
( emphasis added)
Section 55 headed “forms of enforcement” provides as follows:
“(1) If, as a result of an investigation, the Adjudicator is satisfied that a pub-owning business has failed to comply with the Pubs Code, or has failed to follow a recommendation made under section 56, the Adjudicator may take one or more of the following enforcement measures—
(a) make recommendations;
(b) require information to be published;
(c) impose financial penalties.
…” ( emphasis added)
Sections 56 and 57 then address, respectively, “recommendations” and “requirements to publish information.
Section 58, headed “Financial penalties”, provides as follows:
“(1) If the Adjudicator chooses to enforce through imposing financial penalties, that means imposing a penalty on the pub-owning business of an amount not exceeding the permitted maximum (see subsection (6)).
(2) The financial penalty is imposed by giving the pub-owning business written notice specifying—
(a) the grounds for imposing the penalty,
(b) the amount of the penalty,
(c) the period within which it must be paid, and
(d) how it must be paid.
(3) The pub-owning business may appeal to the High Court against—
(a) the imposition of a financial penalty, or
(b) its amount .
(4) Financial penalties under this section are recoverable by the Adjudicator as a debt.
(5) Financial penalties received by the Adjudicator must be paid into the Consolidated Fund.
(6) The Secretary of State must make regulations—
(a) specifying the permitted maximum, or
(b) specifying how the permitted maximum is to be determined.” ( emphasis added)
Section 60 further provides that the PCA may give “advice” on any matter relating to the Pubs Code to, inter alia, tied tenants and POBs.
The investigation of Star
On 10 July 2019 the PCA commenced an investigation into Star to consider whether Star had failed to comply with the Pubs Code in relation to its use of stocking requirements. At the same time it gave Notice of Investigation. On 30 July 2020 the PCA provided Star with a draft of its report (“the Draft Report”) and Star was given an opportunity to comment on the Draft Report in accordance with section 54(4). It is common ground that the Draft Report did not contain any reference to whether the PCA proposed to take any enforcement measures (or other action), nor, if so, what they might be. Star contends that it was given no opportunity to comment on the imposition of the Penalty, including the grounds for its imposition and its amount.
On 3 September 2020 Star provided its response to the Draft Report, running to more than 70 pages (“the Response”). In the Response, Star made reference to enforcement measures, submitting, in brief and general terms, that its conduct did not warrant the imposition of a penalty. On 7 October 2020, the PCA made a formal request of Star to provide its turnover figures for the year ending September 2020. Star provided these, by the deadline of 9 October 2020.
By a notice given to Star on 14 October 2020 pursuant to section 58(2) of the 2015 Act (“the Penalty Notice”), the PCA imposed a financial penalty on Star of £2 million. The PCA's report of its investigation into Star (“the Report”), which accompanied and supported the Penalty Notice and which was published on 15 October 2020, found that Star had breached the Pubs Code in relation to proposed stocking requirements during the period from 21 July 2016 (when the Pubs Code was introduced) to 10 July 2019 (when the investigation commenced). The Report differs from the Draft Report in that it contains a new section addressing “enforcement measures”, which summarises the contents of the Penalty Notice. The PCA determined that, in addition to other available enforcement measures, it was appropriate to impose the Penalty on Star to reflect the serious nature of the breaches of the Code, the scale of harm allegedly caused to Star's tenants by them, and Star's awareness of those breaches.
The Penalty Notice
The structure and content of the Penalty Notice is as follows. Section 3 is headed “Outcome of the investigation”. After referring to the fact that the investigation was now...
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