Pub companies: follow-up - Business, Innovation and Skills Committee Contents


Supplementary memorandum submitted by Simon Clarke

BRULINES

SUMMARY OF THE MAIN POINTS

  The BESC report recommended (paragraph 98) that "given the impossibility of distinguishing between beer dispensed and sold, beer run off and disposed of preparatory to serving, and water used to clean the lines, we believe pubcos should not be allowed to rely on data from Brulines equipment to enforce claims against lessees accused of buying outside the tie."

On publication of the BESC report, James Dickson, Brulines Chief Executive, stated the following:

    "…it was considering legal action over claims made in the report questioning the accuracy of its equipment. However, MPs are covered by Parliamentary privilege. At best, it's irresponsible. At worst it's scandalous. They are very lucky to have that after writing this trash. But I take heart from the fact that very little credibility will be given to them, given the current furore over their expenses."1

      In another article, Brulines, said that the report was a "misrepresentation" of its products and that no member of the BEC had sought clarifications from it on either of the claims made. The company said: "The BEC inquiry appears to have relied upon one specific example (and some unstated others) and assume that this is representative of 22,000 public houses. The report's findings in relation to Brulines and dispense monitoring were ill informed, one sided, misleading, and unrepresentative."2

      Brulines were specifically referring to the submissions of David Law. Members of the Committee may recall that individuals who had offered written submissions were asked if those submissions could be forwarded to parties for response. Contrary to James Dickson's implication that Brulines were not afforded the opportunity to respond to the submitted allegations of inaccuracy, unjust and inappropriate use of their equipment, the BESC Volume II evidence actually contains their response, via Enterprise Inns, Ev 113 confirming they were given and took the opportunity to comment.

      As one might expect, from a company founded by Derrick Collin who was convicted of conspiracy and blackmail at Ipswich Crown Court in 1986, the response in Ev 113 was misleading.

      The equipment and overall system continue to provide misleading and inaccurate information, as demonstrated most recently by a Brulines calibration visit to the Eagle Ale House. In summary the only dispense between 10 and 11 o'clock on 13 November 2009 was by a Brulines technician who was in direct telephone contact with the analyst at head office. The technician dispensed from four product lines, it was acknowledged by the analyst but the system failed to record the dispense, a false reading of 33% inaccuracy. The difference between Brulines dispensed and delivered beer figures is currently 700 gallons over an 18 week period, over 20% difference over what has been delivered. A negative variance of around 200 gallons over the same period would attract suspicion of buying out and, other than their word a, licensee would have no defence.

      The Fair Pint Campaign has obtained an expert's report into the Brulines equipment, concluding that the equipment is materially inaccurate and as such is not fit for the purpose to which it is put by pub owning companies, and the opinion of counsel in relation to the use of Brulines equipment by pub owning companies and its promotion by Brulines plc. which concludes that criminal offences may have been committed by some of the parties involved and that "consideration should be given to making a complaint to the Office of Fair Trading over the practice considered in this Advice, a practice that has caused so much understandable consternation among lessees."

      Finally, I have received an email from Wendy Martin, Director of Policy for LACORS, on the issue of the Brulines equipment which indicates there are concerns, a methodology of testing has been established, but appears not to have been published to Trading Standards authorities and is denied by Trading Standards in Stockton-Upon-Tees, and that Brulines are failing to voluntarily cooperate with LACORS and provide equipment for type approval testing.

    BRULINES OVERVIEW

  The pub owning companies, and brewers that operate tied leases, are continuing to employ a system and equipment supplied by Brulines plc. for the purposes of monitoring the dispense of draught products (beer, lager and cider) by pub tenants. In most cases the lease provides the landlord with the power to enforce the installation of such equipment on the premises. The lease normally further grants the landlord rights to enter the premises on reasonable notice to inspect the equipment and makes it a breach of the lease for the tenant to interfere with the equipment.

  Reports from Brulines are used by pub owning companies to accuse tenants of "buying-out"—purchasing tied products from sources other than the nominated supplier of the landlord. The accusation is often conducted in an aggressive way using electronically enhanced information from Brulines plc. to threaten the tenant with legal action unless a "fine" (usually of an arbitrary quantum) and an administrative charge are paid, and a "confession" signed. The landlord will often present the evidence obtained from Brulines as compelling evidence against the tenant that will persuade a Court of the tenant's breach rendering it hopeless for the tenant to offer a defence or to go to the cost of doing so. The letters and draft "confessions" from pub owning companies are worded in such a way as to imply that remedies against the tenant, such as judgement in the courts or forfeiture of the lease are mere formalities when of course the landlord would need to properly make out their case in the court in the usual way.

  In the last BESC report the Committee were rightly critical of these procedures and the company, Brulines plc., who supply the equipment and data. Your Chairman attended on site at the Eagle Tavern to inspect the equipment for himself and to witness its inaccuracy. Since that time The Fair Pint Campaign has obtained an expert's report into the Brulines equipment from SGS, the world leader in inspection, verification, testing and certification. The work in preparing the report was carried out Dr Phil Mark, SGS's National Manager for Engineering and Instrumentation in the UK. The report concludes that the equipment is materially inaccurate and as such is not fit for the purpose to which it is put buy pub owning companies.

  Furthermore The Fair Pint Campaign has obtained the opinion of counsel in relation to the use of Brulines equipment by pub owning companies and its promotion by Brulines plc.

  On its website The company says the following:

    "In the early 1990s we created a business concept that would considerably benefit owners and operators within the UK Licensed on-trade, and especially the tenanted pub sector, to turn information into profit.

    Our core product, Dispense Monitoring, records the exact volume of liquid that passes to each fount at any minute, of any hour, on any day. It recognises the brand performance of draught beers, ciders, lagers, spirits and post mix— and helps you maintain an effective line-cleaning regime.

    All of this has proven to be so successful, we now have systems in over 22,000 pubs and manage data from more than one in three pubs within the UK."

  The assertion of accuracy is not supported by the findings of Dr Mark of SGS and the opinion of counsel is that criminal offences may be being committed by Brulines plc. It is also notable to observe that the equipment supplied by Brulines plc. is not generally used by any companies other than those owning pubs for leasing under tied arrangements where the equipment supplied by Brulines is used in connection with revenue protection. Indeed, even pub owning companies such as Punch Taverns only use Brulines in their tenanted estate and not in all their managed estate. The equipment is inaccurate and not reliable for other purposes as claimed.

  The legal opinion states that the use of Brulines to fine tied tenants means that it is probable that the equipment is "used for trade" and therefore falls under the terms of Section 7 of the Weights and Measures Act 1985.

  The Fair Pint Campaign has received a letter from Wendy Martin, Director of Policy for LACORS on the issue of the Brulines equipment. Ms Martin is of the view that:

    1. The equipment is in some cases being used "in trade" and that if so enforcement action could be taken in relation to its use. This would concur the opinion of Mr Gary Grant

    2. That Brulines has developed a method of testing the equipment in conjunction with its home Trading Standards office in Stockton-upon-Tees. Following contact with Stockton-upon-Tees, Trading Standards they seem unaware of any accepted testing method. In the absence of details I am requesting it from LACORS. Ms Martin seems to have doubts about this new agreed testing regime and confirms that it does not include the effects of external influences or the accuracy of the equipment. This is also of concern in the light of the report Fair Pint have received from SGS.

    3. That the accuracy of the equipment is in doubt and that Brulines should submit it to the National Measurement Office, part of the Department of Business, Innovation and Skills, Brulines has yet to comply with the LACORS request.

    4. If Brulines plc does not submit its equipment for testing then LACORS would consider pressing the NMO for a change in legislation to require approval of this equipment regardless of its use in trade or otherwise.

  Fair Pint are this week submitting to Ms Martin the report from SGS and also the opinion received from Mr Gary Grant with a request that further action is taken and a report published by LACORS. Ms Martin may wish to comment further before the Committee reconvening on the 8 December 2009 and I will ensure any progress is reported.

  It is the understanding of the Fair Pint Campaign that the BBPA, along with the BII and the FLVA is attempting to agree a protocol for the use flow monitoring equipment in tenanted pubs. Fair Pint understand that Brulines plc. is not a party to such a protocol and that the document does not include reference to the accuracy of the equipment.

  Fair Pint are concerned about the agreement between the BBPA, the BII and the FLVA on the use of the flow monitoring equipment. The agreement totally disregards the concerns expressed by the Business and Enterprise Select Committee about the accuracy of the equipment its inability to distinguish between the flow of beer down the line compared to water used for cleaning or even gas from kegs.

  The agreement between the BBPA, the BII and FLVA seems to totally ignore the fact that tenants have legal rights to challenge accusations made by pub owning companies about buying out of the tie and that questions of breach of contract or forfeiture of leases should properly be decided by the courts not by pub companies applying rules that they have written.

  Given the clear inaccuracy of the equipment, Fair Pint believe that Brulines cannot be relied on to police the contractual obligations of tied tenants. Fair Pint believe that action needs to be taken to prevent the use of Brulines information to fine or otherwise punish tenants for breach of contract unless the equipment is capable of certification under the terms of the Weights and Measures Act 1985.

  The findings of the experts report and legal opinion commissioned by the Fair Pint Campaign corroborate the concerns about the use of the Brulines equipment as a means of contractual enforcement originally reported by David Law and demonstrated to the committee at The Eagle Ale House in 2008. The methodology of it's use by pub owning companies is, at best, highly questionable and it is the view of counsel now that criminal offences may be being committed in relation to the claims of Brulines plc. in marketing the equipment and also in relation to Weights and Measures legislation.

  Fair Pint believe that the equipment is not fit for purpose at this time and should be removed from the premises of tied tenants with immediate effect.

COMMITTEE RECOMMENDATIONS TO CONSIDER

  Urgent LACORS investigation of the accuracy and appropriate use of the Brulines system.

  Urgent guidance to be provided to all Trading Standards authorities to enable appropriate action and enforcement of powers to implement fraud proceedings and forfeit the equipment where it is used unjustly or falsely.

20 November 2009






 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 4 March 2010