England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
THE BUSINESS AND PROPERTY COURT OF ENGLAND AND WALES
BUSINESS LIST

		Royal Courts of Justice, 7 Rolls Buildings, Fetter Lane, London, EC4A 1NL
		24/04/2018

Mr Justice Norris:

1. There was a statutory arbitration between the appellants ("Punch") and the respondent ("Swan") under the Small Business, Enterprise and Employment Act 2015 ("the 2015 Act")and the Pubs Code Regulations 2016 ("the Pubs Code"). It resulted in an award by the Pubs Code Adjudicator dated 16^th February 2018 ("the Award").
2. An appeal can be brought against the Award under section 69 on the Arbitration Act 1996 ("the 1996 Act"). The outcome of the Award was adverse to Punch, who wish to appeal. They need the permission of the court under section 69 (2) (b) of the 1996 Act. That permission will only be given if the conditions set out in section 69 (3) are satisfied.
3. The arbitrator determined that for the purposes of the Pubs Code a "trigger event" had occurred. What is a "trigger event" is determined by reference to section 43 (9) of the 2015 Act and regulation 7 of the Pubs Code. It includes a consideration of whether the "trigger event" now relied upon was "reasonably foreseeable" at the time when the tenancy was granted. In the instant case the "trigger event" was the opening of The Walnut Tree Farm public house on or near the Adanac Business Park three miles from the pub operated by Swan.
4. In paragraph 36 of the Award the arbitrator noted the existence of a planning statement for the Adanac Triangle which referred to the proposed development of an amenity restaurant with "weekday and Sunday carvery buffet". He held:-

"On the evidence before me this information was in the public domain at the time of the grant of the lease and yet at that time neither party seems to be aware of it … Whilst one might expect both parties to have had such local knowledge… on the evidence in this case it is apparent that neither party identified it at that stage. I therefore find in this case that the opening of a competitor business of the magnitude of the Walnut Tree Farm and the effect this would have on the pubs business was not reasonably foreseeable at the time the lease was entered into, and that in keeping with the core principle of the Pubs Code of fair and lawful dealing, it is not fair now to find, with the benefit of hindsight, that it should have been reasonably foreseeable by the claimant alone."

5. The terms of regulation 7 of the Pubs Code also made it necessary for the arbitrator to decide whether the effect of the "trigger event" was directly related to changes in the local area (such as the local infrastructure, local employment, the local economic environment and local environmental factors). Swan failed to persuade the arbitrator that any of those examples applied in the present case. But the arbitrator held that the "trigger event" would qualify if it had an effect which was directly related to changes in the local area of any other sort, whether having a negative or a positive impact. He held:-

"In the absence of any prescription on this point in the Pubs Code, and adopting a purposive approach to the interpretation of these changes, it appears to me to be irrelevant to prescribe whether a change must be a positive or negative one, … I find that Condition D is primarily about changes to the local area, rather than about the effect of any such changes. …I find that the opening of a business park of the size and scale of the Adanac Park development in the locality of the Pub is a change of the type encompassed by Condition D… Furthermore, I find that the Event is directly related to the opening of the Adanac Park development which included an "amenity restaurant.. and a Sunday carvery buffet" as part of its initial plan …".

6. To obtain permission to appeal Punch must satisfy me that the holdings of law inherent in these conclusions are either "obviously wrong" or that they raise a question of general public importance and the decision is at least "open to serious doubt".
7. The time within which Swan may oppose the grant of permission has expired with only formal objection being raised in the Acknowledgement of Service; but I must still be satisfied for myself.
8. I am satisfied that the question of what is "reasonably foreseeable" for the purposes for the Pubs Code is one of general public importance (given its significance as an element in an industry-wide statutory arbitration scheme for the adjustment of the rights and obligations of operators of tied houses); and that the approach of the arbitrator is open to serious question. First, it might be said not to distinguish between what was reasonably foreseeable and what was actually foreseen. Second, it appears to mix the question of what was in fact "reasonably foreseeable" with the question of what it would be fair to treat Swan as being able to reasonably foresee.
9. I am satisfied (albeit without the benefit of adversarial argument) that the arbitrator was obviously wrong in holding that the opening of the Adanac Park business development before the grant of the lease to Swan was a "change" that was relevant to the satisfaction of condition D.
10. I accordingly grant permission to appeal.
11. However, this permission is itself subject to a condition. On the 23^rd March 2018 I ordered (on the application of Punch) that the arbitrators' award is stayed pending the outcome of the appeal. I gave permission to Swan to apply to vary that order. On the 2^nd of April 2018 Swan did so seeking an immediate order that Punch should "in any event" pay Swan's costs and losses incurred by the stay until the date of giving judgment in any appeal consequent upon Punch's application for permission to appeal "in any event".
12. In my judgment any final order in that form would be plainly wrong. Before the Court grants interim relief it frequently insists upon a cross undertaking in damages (in well settled form) being given by the party obtaining the relief, to cover the eventuality that, at the end of the day it turns out that the party obtaining the relief was not at law entitled to it.
13. In my judgment a similar position obtains in relation to this appeal. The outcome of the Award (if enforced) would be that a process would have commenced under which the tie was replaced by a market rent only option. That may (or may not) produce a lower payment obligation under the tenancy. If it does, then that lower payment obligation might, because of the stay on enforcing the Award, take effect as a date later than that on which it would have taken effect absent the appeal. If all those contingencies eventuate, and if the financial detriment to Swan is significant, then it may be appropriate for Swan to be compensated for the delay. It is inappropriate to decide all those questions in advance: but it is entirely appropriate to create the opportunity for those questions to be addressed if they arise.
14. I shall therefore direct that the permission to appeal is granted subject to the condition that

"If the Court later finds that the stay on the enforcement of the Award imposed by the order herein dated the 23^rd March 2018 has caused loss to the Respondent and if the Court also decides that the Respondent should be compensated for that loss then the Appellants must comply with any order that the Court may make."

15. I accordingly grant permission to appeal subject to that condition.