Small Business, Enterprise and Employment Bill

Written Evidence Submitted by Mr Ron Piper and Miss E. Piper

(Formerly of The Sir John Barleycorn, Hitchin, Herts. SG5 2JZ) (SB 63)

1. Summary

1.1. Based on our experience of the self –regulatory process we have concluded that a statutory system is required to facilitate continuous improvement in the relationship between PubCo and tenant with the intermediation of an independent adjudicator.

The Government has already committed to introducing a new Statutory Code and independent Adjudicator to ensure that publicans who are tied to a pub owning company are treated fairly and to deliver fairness and to enshrine in law the long accepted but largely ignored principle: that the tied licensee should not be worse off than a free of tie licensee.

1.2. We have been associated with the pub industry for over 29yrs and for the last 11yrs tenants of Punch Taverns at The Sir John Barleycorn. In 2003 we took over the Sir John Barleycorn (myself and daughter aged 15 - being a single dad) having taken out a loan of £15000.

We were the 4th landlord in 5yrs & were informed we were the last chance saloon and despite Punch’s practices eventually become the longest serving landlord in the pubs history.

1.3. So how did our ‘partner’ treat us? From the onset we experienced heating problems which took over a year to fix with new boiler. It then took 3yrs of complaints to solve problems in the cellar; inc out of date lines; but only when the cooler finally broke down. We have had leaks in toilets, roofs that have taken months to repair.

We asked for a lease at the Barleycorn as we had which was put on hold when we were asked in 2005 to take on another pub The Peartree, Bassingbourn with a promised investment plan and refurbishment to help us turn that around as well; with the idea of that after 2yrs we could sell the tenancy thus securing our future and lease at the Barleycorn which now had become our home.

1.4.The Peartree was at a high rent due to the planned refurbishment program that was supposed to be on taking over the pub but took over 9 months and a lot of complaints to actually materialize and even then was of low standard with floors buckling, tiles falling off walls and electrical problems. From the outset were writing to Punch stating they had broken their agreement, asking for a rent reviews due to breach of contract with regard to refurbishment etc and that we were under financial strain. Punch ’s reply was to send bailiffs in without notice adding a further cost of £800 . Believe it or not during this time we were offered a 3 rd pub on a cheap rent with the idea of that we could use this pub to make money to help pay off the debts, but still no rent review , no arbitration or anything else as requested. We refused.

1.5. Eventually Punch said I could re-assign at a cost of £1000 plus a penalty clause of £15,000 for selling within 2yrs. In the end they took us to court and evicted us from the Peartree. We lost all our deposit, f& f and the remaining debt of £16,878.86 (predominately made up of fines & solicitors fees added before and during court cases)) was transferred to the Barleycorn account on 05/03/2007. The new tenants of the Peartree however were offered a revised reduced rent - We were victims of the great pub ‘churn’ as indeed were the new tenants within a year.

1.6. This obviously put a great financial burden on us and eventually in 2009 it was decided that I (R.Piper) had no option but to go bankrupt . Punch agreed to transfer t he Barleycorn tenancy into a Ltd Co with Miss E. Piper acting as guarantor (E.Piper - da ughter 20yrs old with a child of 5 months on benefits) with no credit check and once again tr ansferred the debt – this time of £2235.03 (inc fines/solicitors)

1.7. It was at this stage that the agreement also changed , but without notification.

We continued to have problems with non-r epairs and maintenance issues inc. gable end repairs where light and weather was emitting into loft for over 17 months .

In 2011 it was reported that the premises had ‘undersized gas pipes’ and in Feb. 2013 th e Gas Service Inspection disconnected our cooker in the Kitchen which is in the pub itself. There is no k itchen upstairs in the residential area so we were left without means to use a cooker with a 4yr old living there. This was due to ‘undersized pipes’ that was 1 st reported in Sept 2011 as NCS - There wa s nothing wrong with the cooker itself.

1.8. When we complained to Punch they decided that instead of honoring their legal and moral duty to start legal proceedings for eviction over trespass as the Ltd Co had been dissolved despite the BDM being informed and us being told that as long as Miss E.Piper was still guarantor this was acceptable as my bankruptcy was due to finish and we could do a new tenancy etc.

This precedent had already been set in court with in the case of Punch v Eastcote Arms which is well documented.

Eventually after nearly a year and at a cost of £1000 to ourselves to re-instate Ltd Co to transfer the tenancy they discontinued the case in Jan 2014 . However they then started eviction proceedings for Rent arrears despite us being in dispute, notifying them of the reasons for withholding rent and awaiting PICAS hearings that were put on hold due to court action.

1.9. In Feb of this year 2014 at the next Gas Inspection it was classed as ‘At Risk’ and the gas to the whole premises was almost cut off. We were allowed to keep it on due to my Granddaughter living above. Punch eventually changed the pipe work first reported in 2011 but we were still unable to use the cooker as it needed new cut-off valves and extraction. Over all this period Punch has stated that they are not prepared to pay for extraction etc for a pub that does little or no food.

1.10. Due to these problems we withheld some rent until all work was carried out and are looking at a counter claim for all the stress which has taken its toll on our health/ quali ty of life for our whole family.

Once again another pubco scam came into play –

2. T he Anti-set off clause:

2.1. The majority of leases contain a clause called ‘anti-set off’ which is the cause of many publicans losing their home, job and business when the situation reaches the point of legal procedures by the pubco.

2.2. We withheld rent due to historical complaints concerning Health/Safety and whilst we went through the ‘voluntary’ Code of Practice and PICAS. However the pubco can apply for forfeiture 14 days after default, irrespective of any lease or code of practice breach claims that the publican may have against their pubco which can result in the loss of business, homelessness and unemployment, leaving many of us never having the opportunity to pursue our legal rights or any other form of redress for the now recognised abuses as they are evicted before they get anywhere near a court to seek settlement for failures, or breaches, by their pubco.

Our own PICAS case was ‘stalled’ due to legal action by punch.

3. PICAS:

3.1. We exhausted Punch’s complaints procedure over a period of time and eventually complained to PICAS on 21/5/13 concerning various issues as highlighted above.

All statements were filed with the defendant replying on 3/7/13 and yet the case was put on hold on 26/7/13 due to court action that punch had bought against us after we initiated the complaint. The reason given by PICAS was ‘The process will not, and can not, deal with legal issues’

3.2.In May 2014 after various correspondence PICAS copied us in on a letter to punch that stated that even though there was a new possession hearing that ‘This is not to say however that the complainants cannot progress their complaint in respect of the issues they have identified (e.g. Repairs/redecoration, maintenance, role of Pub Co Business Manger, renewing the tenancy, gas cylinder claim, pricing, fines/solicitors costs)...must not contain any legal argument’ –

3.3.The question has to be asked is WHY were we not advised or allowed to do that a year earlier instead of being put on hold? We have also requested information from PICAS under FOI Act 2000 regarding correspondence between BBPA, BIIBAS, PICAS & PUNCH concerning our case and who instigated the case be put on hold and were informed ‘that PICA-Service does not come within the jurisdiction of this legislation’.

3.4.It is our conclusion that all the above are so heavily interlinked and funded by the pub companies that it is not and cannot be classed as ‘independent’ and would call into question the bias that appears on the committee with ‘conflict of interests’. Even when found guilty it is only ever the ‘spirit of the code’ that is breached - NO it’s the code!

3.5. On the BBPA site it states - ‘This diversity of membership enables us to speak up for the industry, championing its cause, whilst also being able to credibly claim a wide representative base.’ & ‘The Association exists to promote and protect one of the nation’s most iconic and important industries’. Yes it’s the industry that funds it – NOT the tenants – Therefore it represents the pubco’s only – it’s biased. As an example please note the following:

3.6. Letter to BBPA 30/10/13 - ‘I also request copies of the letters sent and received from Stuart Gallyot - Punch Taverns, Punch’s Solicitor, Jonathan Neame - Chairman BBPA and Jane Hartsholme – BIS’ NO RESPONSE

3.7. Miss B. Simmonds BBPA response on various occasions has been –‘I’ve nothing further to add’

3.8. Jonathan Neame (Chairman) – No response

3.9. The BBPA have claimed in their submission that claimed ‘Self-regulation is working. It is flexible, low-cost, effective - and legally binding’

But in our own court case when fighting against eviction and stating that we would like an adjournment until the outcome of our PICAS case, Punch Taverns in official court papers logged at Luton County Court stated on 17 th July 2013 that:

(3) The IFC is a non-statutory code , to which Pub Companies, such as the Claimant, voluntarily subscribe. The IFC is not, therefore, enforceable in law.

(4) Similarly, a PICAS determination is not legally binding. Whilst it might be stating the obvious, PICAS has no jurisdiction to make binding decisions or orders in respect of legal issues, such as determination of leases, arrears rent or otherwise.

(5) Neither is PICAS a mediation service.

3.10. The BBPA Pub Company Submission have also claimed that: ‘Brewers rely on tied pubs for their route-to-market. Without the tie, many British breweries would close’ – Were you aware that last year Punch delisted Timothy Taylors to all its pubs with a letter giving alternatives and also have done over the years to various breweries ? Many local breweries cannot supply to punch at the low rate required by punch to make such a mark-up and also that despite such an impressive list of breweries most are unavailable due to depots not stocking them.

3.11. The BBPA also claims it will: ‘Review the self regulatory system regularly – a suggested timeframe is every three years – by an independent body or person; and promote PIRRS, PICA-Service and the provisions of the Code across the entire leased and tenanted sector and raise awareness’ – facts indicate otherwise.

3.12. Threats have also been made by the industry that to remove or restrict the tie would breach international law. However in Canada tied houses are banned , in the USA tied houses are generally illegal due to competition laws. In Punch’s own 2 ‘RISKS RELATING TO BUSINESS OPERATIONS’ statement it states:

"(ii) Competition Law and Tied Estates
Tied pub tenancy arrangements that require tenants to obtain beer (and other beverages) from a nominated supplier may constitute a breach of Article 81 (formerly Article 85) of the EC Treaty (Article 81) and/or Chapter 1 Competition Act (Chapter 1) in circumstances where the tie arrangements contribute significantly to the foreclosure of the U.K. market.

In addition, a breach of Article 81/Chapter 1 can also give rise to claims for damages against one or more parties to the contract in question. Following the recent decision of the European Court of Justice and the judgment of the Court of Appeal in Courage v Crehan,"

3.13. It is my understanding that the BIS Select Committee, the Federation of Small Business, the Forum of Private Business and CAMRA all believe that the only way to deliver the Government’s commitment is to include in the code an option for tied publicans to only pay a independently assessed market rent - a ‘market rent only’ option.

The market rent only option was suggested as far back as 1969, by the Consumer Council and quoted by the Monopolies Commission in their report ‘Beer: A report on the Supply of Beer’.

3.14. The Market Rent Only (MRO) option as it offers tenants a negotiating tool and a genuine remedy. It will tackle the above issues by instituting fair and reasonable terms at the point of use, and take forward the industry in a constructive and long-term way, at the lowest cost and in the easiest manner available. In fact, in the way recommended by every one of the All Party Parliamentary BIS Select committees, 4 times following an 8 year inquiry.

The Market Rent Only option, put simply, offers tenants the opportunity to consider whether their tied rent and any purported benefits offered by their pub owning company truly balance against the prices charged for tied products like beer. If a tenant does not feel that this balance is being achieved they can serve notice that they wish to be released from the tied purchasing obligation in exchange for an agreement like any other normal commercial agreement, like a shop or office.

3.15. MRO can be presented and applied almost immediately; any rent variation can be negotiated after notice and retrospectively adjusted. There is no need for publicans to get into debt, make complex and sophisticated choices, struggle for red-tape parity or lose all to the detriment of many. They will be at liberty to choose which ever option is going to make their business viable therefore stopping the churn at the grassroots level, before the need for lawyers and courts and to the betterment of both business partners. In a simple way it will redress the balance of power instantly. A market solution to a market problem available to all tied tenants which ensures the Government adjudicators time is better spent on other code related issues.

3.16.The manipulation of tied products and their prices is easily overcome with MRO. The beer market is currently non-competitive and closed caused by an artificial environment, absent in any other business sector, permitting it to persist, effectively keeping out the majority of the smaller 1,442 brewers in the UK as mentioned above by de-listing.

3.17.The BIS Consultation online survey resulted in 67.6% (of all respondents) in favour of a market rent only option and of the written responses from tenants, of those who answered the question should there be the market rent only option in the statutory code, 84% said there should be.

4. CONCLUSION

4.1. The industry will not regulate itself and the BBPA etc have proved they are just tools for the pub companies. They have proved time and time again that they are a law unto themselves.

4.2. If allowed the pubco’s will continue to be a law unto themselves as indicated by our own case above and recent developments by Punch to take Emily Piper (26) on JSA with a 5yr old for £30,329.49 through the courts as the ‘guarantor’ although the IFC clearly states ‘the initial stage of your application involves us conducting a credit check......Assuming you pass the credit check...’ – No credit check was carried out. Yet another breach of the IFC along with many others; once again showing their complacency - a feeling of being satisfied with how things are and not wanting to try to make them better.

4.3. The Small Business, Enterprise and Employment Bill Clause 36 states the 2 important principles:

(1) That there should be fair and lawful dealing between pub companies and their tenants;

(2) That tied pub tenants should not be worse off as a result of any product or service tie. This is not the case - They are a law unto themselves!

4.4. To echo the words of CAMRA’s Head of Communications Tom Stainer:

"We are delighted that after our 10-year campaign the Government is now introducing a Pubs Adjudicator to protect the nation’s pubs… vital that publicans, who are on the frontline of keeping our valued community pubs open, are given protection from heavy handed business practices from the big pubcos ..we urge the Government to go further by introducing guest beer and market rent only options for tied publicans’

4.5. On another legal note Punch have recently been reported to the FCA, FRC and KPMG concerning not complying with IFRS (IAS 40 "Investment Properties"), which requires annual revaluations to be undertaken with gains and losses recognised in the determination of profit and loss. Enterprise Inns are also under investigation.

At least we feel confident that these institutions will regulate and investigate as they have to report to the Secretary of State for Business, Innovation and Skills and are accountable.

October 2014

Prepared 5th November 2014