Examination of Witness (Question Numbers
60-79)
BBPA
8 DECEMBER 2009
Q60 Chairman: Obviously, I am encouraged
to hear you say that; it is what I want you to say, but the fact
remains that on 29 September our report was described by Enterprise
as "ill-informed and based upon hearsay rather than evidence".
Therefore, I am not filled with confidence that the optimism you
express will be translated into practice.
Mr Darby: I understand that. Equally,
I ask you to understand that in response I have had some fairly
strong words with my colleagues at Enterprise. You are right.
If you are trying to win trust and confidence in the industry
you have to behave with decorum and I think that message is very
clearly understood by my colleagues in Enterprise which was a
very active member of the working party.
Q61 Ian Stewart: For 20 years I was
regional secretary of the Transport & General Workers Union
for the food and drink industry. I dealt with most of the breweries.
That is the interest I declare. When you made your statement you
presented it as though the relationship between your organisations
and customers was all sweetness and light and completely equitable
and acceptable. Is it not the case that your organisations have
more power than your customers and what you do is push customers
to the edge of acceptability and sometimes they go over the edge?
Mr Darby: As you would expect
I disagree with that.
Q62 Chairman: Are you talking about
from your personal perspective or Marston's?
Mr Darby: I was going to ask whether
you wanted me to respond in terms of Marston's Pub Company or
as an industry?
Q63 Ian Stewart: Both.
Mr Darby: As an industry I would
make the point that fundamentally we will have successful pub
businesses in the long term if tenants and lessees can make a
decent living out of pubs. You know as well as I do that if tenant
or lessees across the business cannot make an acceptable living
there will be business failures, churn and dissatisfied relationships
and also in the short and medium term the business will under-perform.
That is not good business. It is no different from when I dealt
with Sainsbury, Morrison and Waitrose. I knew that if they were
not happy with the terms provided when I was with the beer company
sooner rather than later there would be a problem.
Ian Stewart: Do you not accept that in
the relationship you describe customers of Sainsbury and Waitrose
have more power than publicans?
Q64 Chairman: For me the crucial
issue here is the revelation of the power exercised by big businesses
in relation to small ones.
Mrs Simmonds: This independent
review system, which has clear accreditation by BII which will
go out and seek the views of licensees and name and shame companies
and eventually take away the accreditation of those company codes
if they are not followed, gives much more information and power
to the individual lessee to take it up with the BII if it is believed
the code is not being followed.
Q65 Mr Hoyle: Pub beer used to be
twice as expensive as supermarket beer. The fact is that now it
is four and a half times as expensive in pubs as in supermarkets.
That tells me that the supermarkets have the power over you at
the same time that you have power over the publicans and that
is what has gone wrong in the industry.
Mr Darby: I could probably speak
for hours on end about what is going on with alcohol in supermarkets.
I have worked in this trade and we are not comparing apples with
apples. In particular in the case of supermarkets alcohol is one
of the few product groups that can be promoted in a store to build
traffic. A shopper will change his or her decision as to which
supermarket to use, so there is a different dynamic going on in
supermarkets. The point I am trying to make—forgive me if
I did not get to it quicker—is that if our tenants and lessees
cannot make a long-term sustainable good living from their pubs,
they know how to from the start because they are given a very
clear explanation of what we think the pub is capable of doing.
Q66 Chairman: That has not been so
in the past.
Mr Darby: Absolutely. The whole
point about the BBPA revised code is that it will be an absolute
obligation for us to make that information clear; indeed, we will
recognise it as a success if a prospective tenant or lessee with
a particular interest in running a pub that is local to him—perhaps
he has drunk in it in his youth—sees the figures and says
it is not a business he wishes to run. If he walks away then the
code will have worked admirably. We must get to a situation—this
code does it—where a new tenant or lessee coming into the
industry never says after the event that he did not know what
he was signing up to. I appreciate that that has been an issue
and it underpins a lot of the trouble we have had over the past
year or two.
Q67 Chairman: Perhaps I may deal
in parenthesis with assignments of leases.
Mrs Simmonds: There will be a
requirement on the assignor to have as much information as is
provided to the lessee. That information must be provided and
the pub company must be satisfied that whoever the lease is assigned
to has that information. There is no doubt that that has created
problems up to now. Just as negative equity occurred in housing
a lot of people have bought leases at prices which are different
from what they are now worth.
Q68 Chairman: Enforceability is really
the key. What happens if the pub company breaks the code? The
old code was broken or ignored by pub companies. What happens
now?
Mrs Simmonds: If the pub company
breaks its code the BII will be undertaking telephone and online
surveys so that complaints can be registered. Those complainants
will remain confidential. A summary of the information will be
reported to the individual pub company and feedback will be given.
If there is a persistent code breach it will result in the removal
of accreditation.
Q69 Chairman: What is "persistent"?
Mrs Simmonds: Measurement will
be by repetition of a particular non-compliant practice or a cumulative
picture, so it is up to the BII and the board, which has on it
representatives of lessees as well as members of the BII, to deal
with it. They will be able to pick it up eventually and take it
away. There is absolutely no doubt that these codes will be dealt
with by a court of law.
Q70 Chairman: This is a very important
point. Explain that to me at greater length.
Mrs Simmonds: The individual agreement
will be signed by both the pub company and lessee. If the pub
company then breaks the code and it ultimately goes to the court
there is absolutely no doubt that the court will take into account
the fact that the agreement was signed by both parties. As far
as we are concerned in any dispute it is absolutely essential
that a breach of the code is taken into account by a court of
law.
Q71 Chairman: Because the code becomes
part of the contract between the landlord and lessee it is actionable
in civil law?
Mrs Simmonds: Yes.
Miss Kirkbride: That we welcome. On the
other hand, why not consider having a scheme whereby there is
a code under which when there is a disagreement the BII has its
own body to adjudicate upon it and decide who is right and who
is wrong? One of the problems facing lessees is the cost of going
to court and the difficulty it creates with the landlord, whereas
with an inhouse mandatory process the decision is one that sticks.
Q72 Chairman: But mediation did break
down in this area.
Mrs Simmonds: Yes. That is exactly
how the new scheme works. For the lessees themselves there would
be a cost; it is £1,000 to £1,500 depending on where
it is. That will take one to the arbitration system to deal with
rent review which is run by BII.
Q73 Chairman: That is purely to do
with rents?
Mrs Simmonds: Yes.
Q74 Chairman: We will deal with PIRRS
later. We are talking about a broader range of issues.
Mr Darby: The code also mandates
any BBPA member in their own individual company code to make absolutely
crystal clear what their dispute resolution process is effectively
at no cost. There should be a process where nobody incurs fees
to confront a dispute and therefore there should be an escalation
process that must be explained in each company's code of conduct.
That should be designed to ensure that both parties can resolve
any disputes as far as possible without incurring any costs by
following a very clear dispute code. That is no different from
an employee grievance process, for example, that all companies
would have.
Q75 Miss Kirkbride: Why do you say
"as far as possible"? If adjudication of the code is
a mandatory part of the process why should it ever end up in court?
What is the endgame that means it ends up in court if there is
a mandatory process that falls short of court?
Mrs Simmonds: There are two sides
to the BII: first, there is PIRRS which deals with rent reviews;
second, BII is also responsible for accrediting the codes, full
stop. It has a system whereby it will be able to remove accreditation.
It is not just to do with rent; it covers all the issues encompassed
in the code.
Q76 Chairman: But BII is in part
funded by the pubcos and some lessees become uncomfortable with
that arrangement.
Mrs Simmonds: We are very lucky
in our industry that we have a professional body in BII. We should
make greater use of it. We are one of the few industries with
a professional institute that is so interested in raising standards.
As far as I am concerned it would be considered to be independent
by all parts of the industry. Indeed, the individuals on the board
that is to be set up will not be members of pubcos; they will
be individual licensees and other representatives.
Q77 Chairman: Enterprise Inns has
said it is in favour of an independent body to provide "business
advice, legal support and representation" and apparently
is willing to provide financial support for such a body. Why has
that idea not been taken forward?
Mrs Simmonds: It made that offer
to the FLVA. We consider that the FLVA and BII between them represent
about 9,000 licensees. They would be happy to provide more funding
for that mechanism through those two bodies.
Mr Darby: In order that we do
not effectively have the same problem again it is important that
any such body is created arguably without the impetus of the pub
companies. The danger is that if we are involved in the creation
of an independent body that reviews disputes we shall be accused
of again being the paymasters of that organisation. The key to
the point made by Enterprise is that if an organisation came forward
with such an arbitration process, such as the FLVA or others,
it would be keen to support it as I am sure would other organisations
in the BBPA, but for that arbitration process to be considered
independent of the pub companies it must be those organisations
that come forward with the proposal; otherwise, we will come back
in the same loop.
Mrs Simmonds: Just as we make
the point that we have many codes of practice we do not need yet
another organisation. We have lots of organisations. I believe
that FLVA and BII adequately represent them.
Mr Clapham: RICS stated that it was encouraged
by the work you were doing. If we are to have a mandatory code
it must be one that is acceptable right across the industry. To
a large degree RICS is independent but at the same time I recognise
the connection. It seems to me that the mandatory code ought to
come from the independent input. From what we hear perhaps there
is now an opportunity to introduce a code that really can be mandatory.
Q78 Chairman: That is the theme of
the questions Mr Wright intends to put later, so perhaps that
can be banked because we will return to it. If there is a great
threat of being chucked out of the BBPA, Greene King is walking
out of it but it does not appear to have suffered any damage to
its reputation and it believes it is better off outside. We shall
be meeting Greene King later to discuss the background to its
position in greater detail. Therefore, the great sanction you
have is one that is being willingly embraced. Is Wetherspoons
a member of the BBPA?
Mrs Simmonds: Wetherspoons operates
only managed sites. Greene King continues to be a member of the
BBPA for the next year. It has announced its intention to leave
the BBPA in September next year. It has assured us—I am
sure it will also assure you later—that it has every intention
of having its code accredited and will make its contributions
to PIRRS because it is industry-funded and it will abide by any
sanctions.
Q79 Chairman: I appreciate that Wetherspoons
does not have lessees but it feels it does not need the imprimatur
of BBPA to be a reputable pub operator. If a pub company is not
happy with an adjudication it can just give a year's notice and
leave BBPA.
Mrs Simmonds: To be fair, I have
been the chief executive of BBPA for only three months. I would
hope to have a good conversation with both Wetherspoons and other
potential members of the BBPA out there and encourage them to
become members. I believe this will set a standard. This is about
raising standards of training, the information that is made available
to everybody and transparency.
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