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

Memorandum submitted by Karl Harrison

  I write further in receipt of the uncorrected transcript and letter in that regard from the Committee Office. I have written separately with one correction to my answer to Q177. I'm taking this opportunity to follow up with further information in relation to my answers to five questions. Taking each in turn:

Q 166. Please see enclosed a copy of notes in relation to the court case (not printed here) involving Punch Taverns from November of this year and to which I referred. I understand that Simon Clarke may also have provided information in this regard.

Q 167. You invited me to comment further about the enforceability or otherwise of the proposed BBPA code of practice.

  As a preliminary point I would say that we have still not seen a draft of this proposed code. I understand that it is now again in the process of being further revised. I would comment simply as follows:

    (1) Codes of Practice are commonly used by companies or sectors where the application of law is not the preferred route of those producing the codes. I think this is one of those cases. It does not seem to me that there is any serious intent here from the BBPA or its members to address the concerns raised by your Committee in its Report from May of this year.

    (2) The BBPA cannot bind all those companies that operate tied leases as they are not all members. A member of the BBPA can, in any event, resign and no longer be bound by any terms of membership.

    (3) All existing leases are deeds. A deed can only be varied by a deed and nothing else. As such, without a deed of variation then any terms of a code of practice will not be binding in the case of any existing lease. A code could only be binding on new tenants if the document is included within the body of the lease or as a schedule to it.

    (4) To be binding and effective a code of practice would need to be drafted independently, be binding upon all companies operating vertically integrated, exclusive supply agreements in the pub sector, and enforced rigorously by an independent party or the Courts. As such a statutory code, mandatory for all those companies operating tied leases, would need to be in place. In effect, a license to operate, much as already happens in other sectors, and indeed in the pub sector in the case of regulated entertainment, liquor licensing etc.

Q 177. I commented that we were taking Counsel's advice in relation to various matters concerning rent and mentioned that we would revert to you in this regard. We are indeed seeking the advice of leading Counsel on the following issues:

    — The implications of the Brooker Judgement

    — The implications of the RICS report including the potential for retrospective claims, by tenants, against experts. (RICS noted that a correct reading of the its extant guidance would leave a tied tenant not worse off than if non-tied (sic). Also noted that the RICS had not at any time endorsed any particular split of the Divisible Balance

    — The potential for clarification in the Court, of the application of current law to the valuation process in use in the pub sector.

    — The use by the VOA of an entirely different valuation system for assessing rental values in connection with the provision of Rateable Values.

  We are happy to update you in due course once we have received the advice.

Q 185. I contradicted Mrs Simmonds' (BBPA) version of events in relation to the withdrawal of the PIRRS website. Mrs Simmonds claimed it was a "technicality" whereas in fact it was due to the substantial non-disclosure of interests by chartered surveyors wishing to be part of the scheme and who failed to disclose their work for large pub-owning companies. I attach here my e-mail to Neil Robertson (CEO of the BII) of 3 November and his response of 4 November (not printed here). This will confirm to you the real reason for the withdrawal of the website, the proper behaviour of Mr Robertson and incorrect assertion of Mrs Simmonds.

Q 196. I contradicted Mrs Simmonds (BBPA) in relation to her assertion that she was not aware of the Direct Debit scheme being used in connection with the withdrawal of "fines" from tenants' bank accounts following allegations of "buying-out" supported by evidence from Brulines. I stand by my account that I made Mrs Simmons aware of this personally during the course of my meeting with her, at her offices, on Wednesday 16 September 2009. I enclose here a copy of my email dialogue with Mrs Simmonds in relation to the arrangements for that meeting (not printed here) such that you can be assured that it took place. I raised a number of issues with Mrs Simmonds at that time including the intimidation that occurred using Brulines and the removal of money from tenants' accounts using the Direct Debit scheme. As I said in my evidence to your Committee this month; not much seemed to sink in.

Q210. I referred in my answer to a document from Enterprise Inns plc in relation to AWP machines and a copy of that document is enclosed here (not printed here).

19 December 2009

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