Star Pubs & Bars Ltd v Aidan McGrath

JurisdictionEngland & Wales
JudgeMr Justice Freedman
Judgment Date16 June 2021
Neutral Citation[2021] EWHC 1640 (Ch)
Docket NumberCase No: BL-2020-002244
CourtChancery Division
Date16 June 2021

[2021] EWHC 1640 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Freedman

Case No: BL-2020-002244

Between:
(1) Star Pubs & Bars Ltd
(2) Punch Partnership (PTL) Ltd
Claimants
and
Aidan McGrath
Defendant

In the Matter of an Arbitration

Between:
Aidan McGrath
Claimant
and
(1) Star Pubs & Bars Ltd
(2) Punch Partnership (PTL) Ltd
Defendants

Caroline Shea QC (instructed by DLA Piper) for the Claimant

Kerry Bretherton QC (instructed by Pannone Corporate LLP) for the Defendant

Hearing dates: 16 & 26 April 2021

Approved Judgment

Mr Justice Freedman

I Contents

SECTION NUMBER

SUBJECT

PARAGRAPH NUMBER

I

Contents

II

Introduction

1–14

III

The Statutory Scheme

15–22

IV

The submissions of the parties as recorded by the Arbitrator

23–24

V

The Arbitrator's decision

25

VI

Submissions of the Landlord

26–35

VII

Submissions of the Tenant

36–38

VIII

Discussion

39–55

IX

Section 68

56–64

X

Section 69

65–71

XI

Conclusion

72

II Introduction

1

This is a challenge under section 68 of the Arbitration Act 1996 (“Section 68”) and/or an application for permission to appeal under section 69 of the Arbitration Act 1996 (“Section 69”) against the award dated 1 December 2020 as amended on 16 December 2020 (“the Award”) of Mr Nigel Davies as arbitrator (“Arbitrator”). By the Award, the Arbitrator determined that the Defendant Mr Aidan McGrath (who will be referred to as “the Tenant”) had served a valid request for a rent assessment proposal (“RAP Request”) pursuant to regulation 19(2)(a) of the Pubs Code etc. Regulations 2016 (“the Code”).

2

The Tenant is a tied pub tenant (a “TPT”) within the definition of section 70(1) of the Small Business Enterprise and Employment Act 2015 (“the 2015 Act”) of Croham Arms, 1 Croham Road, South Croydon, Surrey, CR2 7BH (“the Pub”). The Tenant's lease of the Pub commenced on 19 March 2010 (“the Lease”) for a term of 10 years. His tenancy (“the Tenancy”) has the protection of the Landlord and Tenant Act 1954 (“the 1954 Act”).

3

The rent was last reviewed on 19 March 2015, which was the last cyclical rent review date (prior to the issues in dispute in these proceedings).

4

On 29 August 2017 Punch Partnership (PTL) Ltd was acquired by Heineken UK Ltd. Star Pubs & Bars Ltd operates the pub for Heineken UK Ltd. Star Pubs and Bars Ltd and Punch Partnership (PTL) Ltd are the Claimants and are collectively referred to as “Landlord”. Star Pubs & Bars Limited is a “ pub-owning business” within the meaning of section 69 of the 2015 Act.

5

On 16 August 2019 the Landlord served a notice pursuant to section 25 of the 1954 Act (“the Section 25 Notice”) and set out the proposed terms for a new lease for a term of 10 years at an annual rent of £45,000 per annum. The parties have agreed successive extensions of time regarding the deadline for the Tenant to apply to the court for a new tenancy in accordance with the provisions of the 1954 Act.

6

The Section 25 Notice was deemed to have been received two days after it was posted on 18 August 2019. The Tenant says that he did not actually receive the Section 25 Notice until 12 November 2019 when it was handed to him at a meeting. However, the deeming provision takes effect, and the Court has no power to extend his time for responding to the section notice.

7

On 19 November 2019, the Tenant served a request for a Market Rent Only (“MRO”) Lease. On 25 November 2019, the Landlord wrote to the Tenant rejecting the MRO notice. The Landlord said that by Regulation 23(2)(b) of the Code, such a request had to be served within 21 days of the receipt of a relevant section 25 notice. In this case, the Section 25 Notice was served out of time and was therefore invalid. The Tenant referred this dispute (“the First Dispute”) to arbitration on 29 December 2019. On 9 March 2020 the parties agreed in writing to extend the period for making an application for a new tenancy to 19 June 2020 (in default of such agreement the period for such an application would have ended on 20 March 2020). A number of subsequent agreements extended time further.

8

On 19 May 2020, the Tenant served a notice requesting a rent assessment proposal pursuant to regulation 19(2)(a). On 9 June 2020, the Landlord rejected the request for a rent assessment. It did so in an email. The Landlord argued that the lease contained a provision for annual uplifts in accordance with RPI. It contended that RPI reviews which had taken place over the previous five years were rent reviews. The Landlord also contended that it was impossible to carry out a rent review in the light of the emergency situation.

9

The Tenant referred the further dispute (“the Second Dispute”) to arbitration on 23 July 2020. The referral form required the Tenant to complete a box. The form has two headings in relation to the type of issue. The first was “Non-Market Rent Only dispute in connection with…” with a series of boxes of which the Tenant crossed that which stated, “Duties of the [Pub Owning Business] POB in relation to Rent Assessments”. The second was marked “Market Rent Only dispute in connection with…” followed by a series of options none of which were completed.

10

On 1 September 2020 the First Dispute proceeded to arbitration (“the First Arbitration”). Mr T. Molloy determined that the Tenant did not serve a valid MRO notice within the requisite period. He reached this conclusion on the basis that the Section 25 Notice was deemed to have been received two days after it was posted. His decision is conclusive on this issue.

11

The Tenant filed a Statement of Case in relation to the Second Dispute on 14 October 2020. The issue which he addressed was whether the request which was served was valid. On 4 November 2020, the Landlord served a Defence. At paragraph 3 of the Defence, it was denied that the TPT was entitled to serve an RAP Request. At paragraph 4 it was contended that the RAP Request was invalid. On 18 November 2020, the Tenant served a response to the matters raised within the Statement of Defence. At paragraph 3 of the Response, the Tenant contended that it was irrelevant whether the TPT's receipt of a Rent Assessment Proposal would serve as another MRO ‘trigger’ event or not. The Tenant contended “This dispute solely concerns whether our notice was valid or not in line with regulation 19(2)(a). The [Landlord] is not entitled to reject a valid notice on the basis that they seek to protect themselves from the implications of that notice. All that is relevant is whether the notice itself was valid or not.” The Tenant alleged that there was nothing within the Pubs Code to prevent a TPT exercising multiple rights and pointed out that there was nothing in the scheme to prevent the service of a separate notice in line with a separate clause.

12

The Second Dispute proceeded to arbitration on 1 December 2020 (“the Second Arbitration”). The Arbitrator held that the request for the rent assessment was valid and that the Landlord should send a rent assessment proposal without delay.

13

On 14 December 2020 the Landlord sought clarification regarding the decision of the Arbitrator in relation to the Second Dispute. The Arbitrator responding by emails of the same date. A clarified arbitration award was issued on 16 December 2020.

14

The Tenant failed to comply with procedural time limits. He delayed for at least 17 days in entering an acknowledgment of service, and failed to seek relief from sanctions in that regard until 7 April 2021, which was a further 2 1/2 months later. As regards the application for permission to appeal (but not the section 68 challenge), he ought to have filed a notice of his opposition to the appeal if he wished to oppose the application for permission to appeal and a skeleton argument both within 21 days after the time required to acknowledge service, that is by 29 January 2021: see PD62 12.6–12.7. This does not apply to the section 68 challenge where the skeleton argument may be served not later than the day before the hearing date: see PD62 6.7. The Tenant served the Respondent's Notice and the skeleton argument on 31 March 2021. I heard the Tenant's applications to extend time and for relief from sanctions on 16 April 2021 in respect of the time for filing notice of opposition to the section 69 appeal and skeleton argument. I allowed the applications, but reserved costs until after the outcome of the applications which are the subject of this judgment.

III The Statutory Scheme

15

Section 42 of Part 4 of the 2015 Act required the Secretary of State to make regulations about practices and procedures to be followed by pub-owning business in their dealings with their tied pub tenants. Those regulations were referred to as “the Pubs Code”. By section 42(3) of the 2015 Act, the Secretary of State was required to ensure that the Code is consistent with:

“(a) the principle of fair and lawful dealing by pub-owning businesses in relation to their tied tenants;

(b) the principle that tied tenants should be no worse off than they would be if they were not subject to any product or service tie.”

16

Section 42 of the 2015 Act anticipated that the Pubs Code would impose a series of obligations upon the pub-owning businesses. Various of these obligations relating to a market rent only option were identified in sections 43 – 45 of the 2015 Act. Sections 48 – 52 of the 2015 Act provided for arbitration by an Adjudicator. By...

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