Examination of Witnesses (Question Numbers
60-77)
MR BRIAN
JACOBS, MR
CLIVE DAVENPORT
AND MR
PAUL DALY
18 NOVEMBER 2008
Q60 Roger Berry: How can that be
made easier for the tenant? How can the tenant's case be made
without prohibitive cost when it comes to rent reviews?
Mr Daly: I think it should be
illegal to do that without a lawyer present. If a guy is weak,
it is either eviction or he does this; he has two choices.
Q61 Roger Berry: He would have to
pay for a lawyer.
Mr Daly: There could be some sort
of body that helps with that. In that extreme situation there
could be a trade body or something available.
Mr Jacobs: I think the fundamental
problem is that rents have historically not been constructed on
a fair, open, transparent basis. The two recommendations in the
last report, 144 and 145, set out so clearly what should be done:
full detail, prudence, knowledge, fairness. Everything was in
there. All that had to be done was for it to be followed. If that
was followed most of the tenants when it came down to actually
looking at their rent review would understand all the little bits
that made it up and they could argue on the basis of openness
and transparency. That cannot happen as it is at the moment. The
big problem with arbitration of course is that arbitrators are
primarily valuers who are indoctrinated into the principle of
ignoring the value equation.
Q62 Chairman: Can I just ask if you
are aware of pubcos ever deliberately misrepresenting to new tenants
the history of a pub?
Mr Jacobs: I cannot actually give
you any examples personally, no
Mr Daly: They might not say something.
Q63 Chairman: The political lie,
the sin of omission rather than the sin of commission.
Mr Daly: Yes. I do not have any
personal experience. They might leave things out but I do not
know if they put things in.
Mr Jacobs: I think if you look
at the web pages of companies like Admiral and Enterprise and
probably Punch and so on and so forth, they will all say in there
"We are a partnership with the tenants". That one word
"partnership" suggests fairness; it suggests equality
of treatment. We know that is not true so does that answer your
question?
Q64 Mr Weir: It seems fairly clear
that there is an imbalance of negotiating power between tenants
and the pubcos. I think that is something the last committee commented
on. I have spoken to Consumer Focus about other matters and they
did make the point that small businesses do not have consumer
protection and they are not covered by the Unfair Contracts legislation.
I wondered particularly perhaps for the FSB whether you looked
at the rights of small businesses as consumers of services from
larger organisations and do you think there should be a business
equivalent of the Unfair Contract Term regulations?
Mr Davenport: That is a difficult
one because you have to be very careful about how you balance
that out between bias towards the small business and bias towards
pubcos shall we say in this case. Consumer protection—which
is what it is effectively—can cause you more problems that
you created in the first place. I think an open market that is
capable of acting fairly and equitably within itself will level
out fairly quickly the problems that there are occurring now.
I do not think we need to have consumer protection.
Q65 Mr Weir: Given the situation
where there are massive pubcos and individual tenants, how do
you achieve that open market without some sort of regulation to
give greater rights to tenants entering into these contracts?
Are there any particular terms within contracts that you think
should be unenforceable by the courts?
Mr Daly: Basically it is the tie.
Mr Jacobs: When push comes to
shove the whole problem exists around the existence of the tie.
If the tie was not there we would probably not be having this
discussion because the pubs would be surviving and the valuers
would be valuing on a fair, equal basis.
Q66 Mr Weir: I am somewhat surprised
at your answers because you have told us all through this that
tenants are struggling because of the might of the pubcos. I am
asking you if there are any particular things in law that can
be done to redress the balance and you do not seem to believe
there are. You mentioned the ties and Mr Daly made a very good
point earlier on that the companies will re-balance your model
to take account of that, so I am struggling to see what you are
asking Parliament particularly to do that will make the position
of tenant fairer.
Mr Jacobs: It is simple. One,
remove the tie; two, make the Trade and Industry Committee's recommendations
1.44 and 1.45 a statutory requirement. Problem solved because
everything would have to be fair.
Mr Davenport: I am no lawyer at
all but when you deal between a tenant and a company you are entering
into a contract effectively. If that contract is damaged then
you should be able to withdraw from that contract. If that is
the case, then tenants are not able to do that so you are constraining
the tenant beyond his abilities within open contract law.
Q67 Mr Weir: The theory about contract
law is that both parties entering into a contract do so freely
and do so in a fair balance. From the evidence we are getting
there is not a fair balance between pubcos and tenants.
Mr Davenport: That is correct.
Q68 Mr Weir: It has been suggested
to us, for example, that perhaps the tenant should be able to
surrender a lease without a financial penalty or rather with a
minor financial penalty by giving, say, six months notice. Do
you think that would be a fair way of allowing a tenant a way
out of a 21 year contract?
Mr Daly: I am saying get rid of
the tie but you are saying should we fail to do that.
Q69 Mr Weir: Yes.
Mr Daly: I did this initially
completely off my own bat because I wanted to get free of the
tie, but then I started getting e-mails from people (because there
was a bit of press about my involvement) who had lost their houses,
lost their lives, their family were all out, then it began to
take on a bigger symbolic meaning for me. I could just sell the
lease and be done with it and go back to my free of tie lifestyle,
but I say you are right, if we fail—which we should not
do—those people should be allowed some respite from they
hardship they have been put under so they do not end up homeless.
Mr Davenport: Because it is not
equitable and under general English law equitability should be
there and it is not there at the moment.
Mr Daly: They should not just
be ground to the dirt like they are, no way.
Q70 Mr Weir: You would accept that
there has to be a change in the law to make these contracts more
fair then, going back to the original point?
Mr Davenport: I am not going to
make a commitment about whether there should be a change in the
law; that is not for me to say.
Mr Weir: I find that an interesting response.
Q71 Mr Binley: Was the balance between
the tenant and the landlord more even before the Monopolies Commission
and this place got involved?
Mr Jacobs: I would say it was
fair then, yes, going back to 1986 when the brewers were in the
chair. The strange thing is that the pubs were in a far better
position and strangely enough the consumer had much more care.
Q72 Mr Binley: So the lesson is,
you are frightened of this place getting involved even further.
Mr Jacobs: That is right.
Mr Daly: It seems to me like if
you rented a house and you thought you were getting it for less
rent but you had to buy all your food from your landlord and you
were not allowed to go to Tesco, you were not allowed to go to
Morrisons, ASDA or anywhere. That is just madness.
Q73 Mr Weir: You are harping back
to the golden age before the Monopolies and Mergers Commission
but has the brewery industry itself not changed in intervening
years? There are much fewer brewers, they have become much more
internationalised.
Mr Jacobs: That is very true and
I think that one of the things that removal of the tie for everyone
except for the brewers with less than 500 pubs would in actual
fact promote beer back into the country, back to its origins.
Let us get the pubs back to their origins; let us get the brewing
industry back to its origins.
Q74 Mr Weir: You are not calling
for a general relaxation for brewers, but just to allow small
brewers—
Mr Jacobs: Yes, 500 and less.
Mr Daly: Actual brewers.
Q75 Mr Weir: I understand that, but
the suggestion is being made that it was much better when the
brewers were dealing directly and I am just wondering that that
may be fine for small brewers but I am not sure that some of the
large international conglomerates would be any better.
Mr Jacobs: The brewers looked
after their tenants and they looked after their customers; today
you have none of that.
Q76 Chairman: You are asking for
brewers with 500 pubs.
Mr Jacobs: Five hundred pubs and
less.
Q77 Chairman: That is brewers with
500 pubs and less or any brewer can have up to 500.
Mr Jacobs: A brewer can develop
up to 500 but he cannot have more.
Chairman: Thank you very much indeed.
If, on reflection, you feel there are things you did not have
a chance to say or wish to clarify in writing, we are very open
to your presentations. Thank you for coming today; thank you for
your written evidence. We are very grateful to you. Thank you
very much.
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