Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by The Duke Public House


1.   Legal Battle

  Five years ago, I bought the "The Duke" public house, which had 14 years remaining on its lease. The original agreement was with Inns Business Properties Ltd.

  However, Inn Business Properties Ltd. were not the registered leaseholder when they granted a new 15 year Lease to the previous owner on 27 June 2002. Inn Business Properties Ltd had in fact already transferred all of its assets on 20 August 2000 to the Punch Pub Company (IB) Limited (having previously changed its name from Inn Business Group Ltd on 18 August 2000).

  On 23 October 2000 Punch Pub Company (IB) Limited sold all its assets (at a reduced valuation) to Punch Pub Company (PTL) Limited (having also previously changed its name on 18 August 2000 from Punch Tavern Ltd). Punch Pub Company PTL Limited then changed its name on 2 September 2004 to Punch Taverns (PTL) Limited.

  Inn Business Properties Limited (ie who purported to be the leaseholders of the Duke granted a Lease to the previous owner on 27 June 2002) and Punch Pub Company (IB) Limited have been dormant companies since 2000; both have not traded and both have no assets, as confirmed in their trading accounts.

  In 2004 I had a long legal battle with Punch which included the validity of the lease; I lost this at a cost of nearly £70,000.00.

  Included in the £70,000 were Punch's costs which came to the sum of £37,898.60. This had to be paid within 14 days or Punch would have achieved their ultimate goal which is to remove me from the Duke and ruin me financially. For the record, during the first hearing on 16 September 2005 at Leeds Magistrate Court, Punch informed the court that the damages suffered by Punch were no more than £600 (six hundred pounds).

  From the first day of purchasing my pub, Punch's behaviour and conduct has been overbearing and high handed including in the way in which Punch has sought to interpret and operate the lease unfairly against me, this is despite reassurances from their solicitors "in writing" that in 2004 that this would not happen.

  This all started when Punch imposed a Rate Valuation Service in 2004 and 2005. This was done by them sending an invoice for £70 per year. They insisted that I pay this amount when I am more then capable to complete and deal with these forms myself, at no cost.

  Although I had "in writing" from my BRM (Business Relationship Managers) at the time that I would not be charged for this service, as I was going to deal with the completion of this form myself, Punch still took the money out of my account without my permission. When I stopped the Direct Debt payments to Punch, this was followed by a letter from Punch's Solicitors threatening me with legal action unless I agreed to pay for this service and re instate the Direct Debt. I did not agree to this, because I felt that Punch was abusing our agreement, I decided to stop buying "Beer Tie" products from Punch, and I informed them verbally and in writing on number of occasions.

  Throughout this period, Punch continued to blatantly interpret, enforce and impose the lease unfairly against me, Punch did not deal with my legitimate concerns and complaints and most importantly, Punch threatened me with legal action, when they had no legal right to do so. They continued to try and impose on me a Rate Valuation Service; which was the start of this unnecessary legal dispute and it was then, that once again I informed Punch that I would stop purchasing my beer from them, even though I was under obligation to do.

  In August 2005, I received a letter from Punch Solicitors stating that Punch were taking me to court, to obtain an injunction against me for breaching my lease agreement.

  On 16 September 2005, Punch obtained a temporary injunction in Leeds Magistrate Court, however the Judge gave me permission to file a Defence and Counterclaim against Punch for imposing terms and conditions upon me which Punch were not entitled to do. Also interpreting and enforcing the lease unfairly against me, defence under Article 81 and all costs were reserved.

  This was then followed by a protracted course of correspondence between my Solicitors and Punch's Solicitors. During this time, Punch made no any attempt to resolve matters or bring them to an amicable conclusion.

  I did not have services of a Solicitor Up to the Injunction hearing.

  During November 2005, having obtained the services of a Solicitor, Punch "without any prior notice", made an application to Shoreditch County Court for an Order for Possession to evict me, on the grounds that I was not paying any rent. When in actual fact I had notified Punch on several occasions in writing that the rent for the premises was being held by a third party. Furthermore, The Judge during the hearing in September 2005 had not ordered the rent arrears to be paid. After much correspondence between my solicitors and Punch Solicitors the proceedings were discontinued and it was accepted that the rent had been paid.

  In May of 2006 Punch made an application to The Royal Courts of Justice in the Strand in front of a "Master", Punch insisted that I had no claim against them and no grounds for a counter claim & defence against them. Punch continued to "pursue vigorously for a permanent injunction" against me. The Master stated that he did not have the power to grant a permanent injunction and said it had to be heard by a High Court Judge. Once again all costs were reserved however my costs continue to spiral upwards.

  In August 2006, I was given legal advice that I did not have sufficient funds to fight Punch under Article 81 as he anticipated my costs would be in excess of £100,000. I decided to make an application to The High Court to change my Defence & Counter Claim, on the grounds that Punch had imposed terms upon me which they were not entitled to do. Also that they had interpreted and enforced the lease unfairly against me, which included the following:

    (a)  Imposing on me services and charges for Rate Valuation.

    (b)  Delivery of Defective Goods.

    (c)  Imposing on me a Premium Rate telephone Line.

    (d)  Imposing Delivery charges for non normal deliveries.

    (e)  Deliveries made outside normal delivery hours.

    (f)  Delivery of Insurance schedule and Details of Premium Payable without explaining what I was paying for.

  Please note, under the terms of the lease, I am under obligation to buy all "Beer Tie" products exclusively from Punch, at very expensive prices and in some cases, as much as twice the price of any other suppliers.

  In October 2006 I was warned to attend hearing in The High Court in The Stand in front of a High Court Judge. By this time I run out of money and I could no longer afford the services of legal representative for this hearing.

  A month before the hearing in The High Court, I received a copy of the Insurance Schedule and "1 week" before the hearing I received full credit for two years Rate Valuation Service which Punch had imposed on me which was the start of this entire unnecessary legal dispute.

  To my surprise and amazement, the whole hearing was conducted between The High Court Judge and Punch Barristers as if I was not present. The High Court Judge rejected all my Defence and Counterclaims. And to add insult to injury regarding Premium Rate Telephone Line, The High Court Judge said that I was not under any obligation to use this line and that I can always write to Punch.

  My case was thrown out, I then had to pay all of Punch's costs. However, when The High Court Judge saw that Punch was demanding £41,000, he ordered the costs be referred to The Cost Judge unless an agreement could be reached.

  I made an Application for An Appeal and on 21 March 2007 it was refused as being totally without merit.

  In October 2007, Punch got a date for cost hearing and The Judge did not take into consideration at any time that the costs Punch were looking for was for damages suffered to the sum of no more than £600. I was ordered to pay £37,898.60. Throughout this period, Punch never once offered me any additional time or any kind of help to pay these costs. At no stage did they attempt to reach an early amicable resolution to this matter.

2.   Poor Quality Products

  The delivery of beer products are covered under the Supply and Sale of Goods Act, However Punch has had little or no regard for there obligation under this Act..

  During the legal dispute and up to few weeks ago, I still continue to receive poor quality products. In January 2008, I started receiving kegs of beer with a very short shelf life. When I double checked, I received kegs of beer with a shelf life of seven days.

  During the 2004 Enquiry, Giles Thorley of Punch informed the Committee that the shelf life of the beer products supplied has a shelf life of a minimum of three months. When I complained to Punch about this, I was told that it is only 28 days and if I received anything less than that it should be returned during the same delivery. After the delivery is accepted, Punch refuses to deal with any complaints.

  On a recent Friday evening, two kegs of Becks Vier Beer were flat. When I look at the labels these showed the Beer to have a long shelf life. However on closer examination of the barrels, I could clearly see they were in poor condition and would explain the condition of the beer within.

  I do feel the poor quality of goods supplied is part of Punch's ongoing attempts to remove me by destroying my business. The reason I say this is, if I have no beer to serve people with I have people to serve. I am still receiving barrels without seals, damaged bottles of beer and generally poor quality beer products.

3.   Premium Rate Telephone Line

  We all have to call Punch for legitimate concerns and complaints, in relation to deliveries and delivery problems, also with regards to cellar equipment and repairs and other unforeseen problems and complaints under our obligation to purchase all "Beer Tie" products exclusively from Punch.

  This premium rate telephone line was imposed by Punch from the 30 January 2004. I challenged this when I noticed my telephone bills were increasing in April/May 2004. However I received no response from Punch. Please note, they have changed the number recently but it is still a premium rate number. I have still received no response to my complaints from Punch regarding the new number.

  Under the 0870 premium telephone line rates, Punch can charge up to 10p per minute and Punch can vary this charge at any time they wish to do so. The financial benefits to Punch using the 0870 number are:

    (i)  Punch earns money from every phone call received, whatever the reason;

    (ii)  Punch has the benefit of making phone calls to any UK land line for FREE, no additional costs to Punch;

    (iii)  Punch does not have any monthly and annual charges; and

    (iv)  Punch earns money from any phone call received 0870 number when diverted to UK land line.

  The unfairness of these charges is also seen by the fact that Punch does not incur any charges whatsoever by making calls to their tenants as a result of having the benefit of the 0870 number. All the charges are therefore being borne by the tenants. Furthermore these are the only contact numbers, so there is no way of contacting them without incurring this charge.

4.   Accounting Practices

  It was in The Guardian this time last year, regarding Punch Taverns and Giles Thorley, so called The Boss of Punch Taverns. How much money he is earning and how he is the third highest paid Director in the country. Giles Thorley got £10 million in 2007 and similar amounts in previous years.

  It was also in the news at the same time and also covered in the TV News on all channels, how big companies pay very little or no tax and one of the sectors mentioned which pay little or no tax was the pub sector, ie companies like Punch Taverns.

  I had to carry out great deal of research regarding Punch and their activities to help to win my case. I have obtained from the Companies House over 50 Punch accounts @ £3.00 each. One of the areas I needed to research was titles and company accounts to find how my pub got transferred from one company to another and who had the correct title.

  One of the accounting practises which made things very difficult was the constant change of names of Punch companies, just before and just after the Punch company sells or and transfers its assets to another Punch company at very reduced market valuation, when the property prices at the time were increasing, they then no pay tax and it becomes a dormant company. All these Punch companies are now dormant companies with losses and in some cases very large losses.

  In one of the Punch accounts, about four years ago, The Spirit Group was sold by a Punch Company with a £144 million loss as one off bad debt, changed its name and became a dormant company, with very big losses. Last year another Punch company bought it back when they were rumours of a higher bidder.

  Is also appears that these dormant Punch Companies issue or and keeps on issuing shares to the Directors of Punch and always the highest amount of shares issued to Giles Thorley and in some cases, the second highest to Robert McDonald, the Finance Director who retired this time last year. It appears on paper that Punch Taverns PLC which was in the 100 of The Stock Market until early part of this year exists for the benefit of "The Directors of Punch Taverns. There is a site on the internet which lists all shares which must be reported.

  It may be a coincidence but the man who might be responsible for these accounts, The Financial Director left Punch Taverns this time last year. Another Punch Director, Mr. Francis Patton also left last Christmas.

5.   Punch and Gambling

  Punch has joined up with various gambling companies to provide and encourage gambling in the in their nearly 8000 pubs, ie. Punch Tavern's with a new "On Line Casino".

  Imagine the scenario, William Hill or Ladbrokes customers, while gambling and most of the time losing money, are able to buy alcohol in any betting shop and be under the influence of alcohol and carry on gambling and carry on losing more money.

  Now imagine the scenario the other way. People drinking alcohol in pubs and while they are drinking many of these Punch tenants and leaseholders will be obliged to sell these casino cards or encourage gambling to their customers to make ends meet and make considerably more money for Punch Taverns. This is due to the pressure being put on tenants and leaseholders though so called BRM's.

  As everyone knows, a smoking ban is affecting the pub trade. Punch is constantly coming up with more ideas or and ways, regardless of the coincidences, to make more money for Punch in order to be able to cover their very heavy debts and borrowing.

  One of the conditions in the lease which Punch used against me to help to win their case is that, Punch has got the right to introduce other services and in a nutshell, Punch can introduce and impose on their tenants and leaseholders any other services they like.

  Once this starts, due to poor trading in the pubs partially due to the smoking ban, it will lead to plans to turn each pub into "Small Pub Casinos" and kill off the "Traditional British Pubs".

  It has always been illegal to gamble with money in a pub, and paying for this voucher to gamble or and any other form of gambling is no different. The customer gambling in a pub under the influence of alcohol (a person drinking a pint or two pints is under the influence of alcohol).

  Punch Taverns, the biggest pub company, should not be able to get away with any loopholes or and clever ideas and start to impose this "Service" on their nearly 8,000 leaseholders and tenants. There are many tenants and leaseholders struggling out there. Punch will put pressure and make deals with tenants and leaseholders in return to introduce On Line Gambling in Punch pubs, especially the vulnerable and the ones struggling to make ends meet.

6.   Rent Review

  It is a myth that rent reviews are carried out by BRM who is someone working closely with you and understands your business and the area etc. I have had so my different BRM's it is impossible to build a proper working relationship when things are constantly changing and their conduct.

  My rent review was carried out by "Portfolio Manger" just like an Estate Agent and whose ultimate goal is to increase the rent by whatever means possible. I informed this "Portfolio Manager" that I have successfully agreed a reduction in my Rates with the Rates Valuation Officer working for the Government. This was due to the fact that my turnover is not going up and is actually going down and all over heads and running costs are constantly increasing.

  Portfolio Manager's response was, Punch does not operate like that and they look at the market value etc and Punch works out the rent if the Pub was going on the market on that day and it had nothing to do with the trade. I have got the copies of the correspondence and to cut a long story short, he demanded an increase or we have to go to Arbitration as per his letters.

  Please note, my lease is index linked and it goes up automatically every year according to the official government statistics.

  Bearing in mind I have had a legal battle with Punch and no funds available, I had no alternative but to agree to the increase because I could not afford the additional legal cost for Arbitration. It is very clear to me that Punch would use all means possible to increase the rent:

    "The most important reason why Punch likes to control Rate Valuation is that if the rate does not go down, it automatically justifies the rent increase".

7.   Punch and Freeholder

  Since the rent review with the Portfolio Manager, I have been approached on number of times to agree to be repositioned regardless of the consequences to me and my business. Punch does not own the freehold and the freeholder needs my pub to develop the site which Punch is in agreement.

  Furthermore, I have learned that the freeholder wanted to develop the site for some years now and I believe it is for this reason; Punch has dragged me through the High Courts at very considerable expense and finical ruin, in the hope they would remove from the premises and allowing them to proceed with any redevelopment plans unhindered by my presence.

8.   City

  Due to a fall in share prices, The City started to look very closely at the Pub Companies and especially Punch who have the largest debt and borrowing. And I quote" Investor concern over the health of the nation's two biggest pubs groups, Punch Taverns and Enterprise Inns, gained momentum over the summer and shares in both have now lost more than half of their value since the start of the year". You do not need any better proof or and hard evidence better then from the City Analyst and I quote:

    1. "Morgan Stanley's Jamie Rollo said that rents have been growing faster than inflation and pub sales while pub co profits have been growing at a faster rate than lessees, financial assistance is on the up and the number of pubs available for lease is rising. "Rents have been rising for at least 15 years now, he went on to say and I quote "There is also some evidence that pub companies have been taking a bigger share of the pie than their lessees.

    Rollo said that monitoring of the pubs available on Punch and Enterprise's websites showed an increase in lessees exiting the industry with between 14-16% of the estate now vacant—up from 12-14% last year.

    2. Merrill Lynch analyst Jamie Rollo wrote in a recent research note that 20% to 30% of Punch and Enterprise's leased pubs were now uneconomic, with licensees making less than the 20,000 pounds a year considered necessary to make a pub worth running.

    3. Mark Brumby of Blue Oar Securities was also critical of Punch and Enterprise's treatment of tenants. "They've ratcheted up rents time and time again and jacked them up to such a point where the pubs are running on a margin which is uneconomic," he said.

    4. Brumby expects the rate of closures to go down before the Christmas holiday season before accelerating again in January. "The pubs will bend over backwards to stay open for the second half of December which is a complete windfall. The first week of January is going to be when reality dawns," he said.

    5. Charles Stanley analyst Sam Hart believes Punch's balance sheet is overleveraged and further measures in addition to the dividend suspension will be required to shore up cash. "Debt covenants will probably have to be renegotiated and the possibility of a rights issue, debt-for-equity swap and disposals cannot be completely ruled out," he said.

    6. The Financial Times quotes analyst Charles Winston of Redburn Partners, who believes that Punch must sell around £335 million worth of pubs to avoid further refinancing. "Punch's problem is that it has placed pretty much all of its assets into securitisations but it has left some debt outside," analyst Charles Winston told the paper. "Given that the cash is likely to be trapped within all three of the group's securitisations in the coming years, this asset/debt mismatch means that it really has very few options".

9.   PR by Punch and BRM's

  Since it was announced that there would be an Enquiry into Pub Companies again, the trade papers, which are all clearly influenced by the power of the Pub companies are full of PR exercises regarding how well and how much the Pub Companies are helping, all their tenants. I registered my complaint with my BRM about these press reports which are very biased and untrue but I have not heard anything from Punch or and from my BRM.

10.   Monopoly

  There is no competition between The Pub Companies. Each pub company does as they please at the considerable expense of their tenants & leaseholders.

  All Pub Companies have very large buying & controlling power from all beer manufactures and all Pub Companies control pricing. It is for this reason; we constantly see major price differences between pubs and supermarkets.

  As I quoted above—Morgan Stanley... "There is also some evidence that pub companies have been taking a bigger share of the pie than their lessees"

  Mark Brumby of Blue Oar Securities was also critical of Punch and Enterprise's treatment of tenants.


  Punch's conduct and Punch's representatives conduct including providing false and inaccurate information for the Injunction and Summary Judgment is well documented. Punch, in fact alleged that it had been denied access to the property on various occasions when such allegations were clearly untrue.

  Despite numerous requests, from myself and my previous solicitors HLF, as of today's date, I still have no idea what was carried out in my pub by the Punch's representative or agent on 24January 2006 when I was absent from the Pub—wires were cut and despite requests as to what was carried out in my absence, I have not been given any information whatsoever.

  Recently, during another visit by Punch's representatives, after the inspection, report was produced and asked a member of my staff to sign this when I was not present. No copy of this report was left. After many complaints, a copy has been provided but despite all complaints to Punch & BRM, no one informed me of what is written in this report.

  Given Punch's conduct, I am of the firm opinion that Punch would use any threat to enforce the Injunction against me, as they did previously when Punch's representatives Brulines, who on occasions when they have attended my property, have made it clear that they can do what they like as they have the benefit of the Injunction.

  As I mentioned earlier, Punch has nearly 8000 tenants and leaseholders. If Punch is allowed to abuse their power and position, blatantly interpret, enforce and impose the lease unfairly by imposing Rate Valuation Fee's, Delivery Charges, Premium Rate Telephone line's, Defective Products and other new conditions, services and charges as Punch wishes, on every £100 obtained unlawfully by Punch, it is £1 million pounds clear profit to Punch. On every £1,000 obtained unlawfully by Punch, it is £10 million clear profit to Punch and I am of a firm belief that Punch employ BRM's for this reason bearing in mind the conduct of BRM's

  If Punch is allowed to make such profits in breach of their implied obligations and/or when they are not entitled to impose such charges by abusing the power or position then I would suggest that Punch is making an unlawful and wrongful profit:

    "Punch is a very ruthless company and they do not take any prisoners. Punch is getting away with what is not in the lease agreements. Punch, blatantly interprets, operates, enforces and imposes the lease unfairly towards all Punch's nearly 8000 tenants and leaseholders, Punch imposes new services and conditions, Punch does not deal with legitimate concerns and complaints, Punch always threatens with legal action, when this fails, Punch drugs hard working leaseholders & tenants through High Courts of this Country at considerable costs and financial ruin, unless you agree to submission and ONLY under Punch's terms".

22 September 2008

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