A case in the High Court has determined that in some instances, licence holders are not responsible for the actions of others who may otherwise rely on the licence that is in force.
On 3rd April 2009, the Divisional Court ruled that a pub-owning brewery that had decided to hold premises licences in its own name, rather than have them held by its tenants, was not criminally liable for breaches of licensing conditions committed by its tenant, simply by virtue of the fact that it (the Brewery) held the licence.
Although some reports suggest that this case absolves the holders of premises licences from criminal liability for breaches of licence conditions, it does not do anything of the sort – the holder of a premises licence might still be vicariously liable for the acts of its employees, servants or agents or because the Licensing Act specifically makes the holder of the Licence responsible.
On the face of it, the judgment applies to tenanted pubs where the Brewery (or pub-owning company) has decided that the premises licence should be held in its name rather than that of the tenant.
In fact, the judgment has more far reaching implications.
For example, Local Authorities and private landowners who, following the DCMS Guidance have obtained licences for areas of land that might from time to time be used for licensable activities (such as a circus, carnival or even a rock concert) now have the comfort of knowing that if some errant performer does something that they should not have done, the mere fact that they hold the premises licence will not end them up in Court along with the real culprit.
The facts in the case were straightforward and never in dispute.
Hall and Woodhouse is a family owned brewery (Badger Ales), established in 1777 and owns about 250 pubs across the south of England. About a third are directly managed and the remainder are tenanted (although a handful are on long term leases). With the exception of those few long leases, the premises licence for each pub is held by the Brewery.
The licence for one of the tenanted pubs, the Stepping Stones in Poole, was subject to a number of conditions that had been “carried over” under “grandfather rights” or imposed following an application to convert and simultaneously vary the “old” licences (a Justices On-Licence, a Public Entertainment Licence and a section 77 Special Hours Certificate) when the Licensing Act 2003 came into effect.
A number of breaches of those conditions occurred – for example, live music was only permitted until 11 p.m. but had been provided after that hour and the beer garden had remained open after the last permitted hour.
The licensing authority prosecuted the tenant and the DPS (who was the tenant’s employed manager) and both pleaded guilty to offences of “carrying on a licensable activity on or from any premises other than in accordance with an authorisation” contrary to section 136(1)(a) of the Licensing Act 2003.
The Brewery was also prosecuted for the same offences and (under s. 136(1)(b)) for knowingly allowing such a licensable activity to be so carried on.
Before the trial itself, the prosecution offered no evidence against the Brewery under section 136(1)(b), thereby acknowledging that the Brewery was ignorant of the breaches and had not knowingly allowed those to occur.
During the trial before Deputy District Judge Pattinson at Bournemouth Magistrates’ Court, the prosecution accepted that on the nights in question, the entertainment had been provided by either the tenant, his manager or persons employed by them and that (although the premises were the subject of a tie), all alcohol had been sold by or on behalf of the tenant, rather than by or on behalf of the Brewery.
In short, the Brewery argued that unless the prosecution could prove that the licensable activities complained of had been “carried on” by the Brewery (as opposed to the tenant or his manager), the Brewery could not be guilty of an offence.
The prosecution argued that as holders of the premises licence, the Brewery was “carrying on a licensable activity at the premises” and could only escape criminal liability under section 136(1)(a) if it could afford itself of the “due diligence defence” under section 139. No evidence had been called on behalf of the Brewery to establish any “due diligence defence” and a conviction must therefore follow.
The Deputy District Judge accepted the prosecution’s argument and convicted the Brewery, fining it £250 for each offence and ordering it to pay costs of about £6,500.
His stated reasons for doing so were as follows:-
“I was satisfied beyond reasonable doubt that the (Brewery) was carrying on a licensable activity from the premises for the following reasons:-
“(i) Section 16 of the Licensing Act specifies a restricted list of persons who may apply for a premises licence. The only basis upon which the (Brewery) could apply was “as a person who carries on, or proposes to carry on, a business which involves use of the premises for the licensable activities to which the application relates”.
“(ii) I was satisfied that use of the term “involves” denotes a broad range of business including that of a landlord receiving rent from premises being used for such a purpose, as in this case.
“(iii) In making the application for the licence, the (Brewery) must have considered itself to be carrying on a business which involves use of premises for licensable activities.
“(iv) The grant of premises licences and enforcement of any conditions in them are fundamental to the licensing system and enforcement of it. To find otherwise would be to undermine the whole basis of the licensing regime and to negate the effect of the offences in Section 136(1)”
Following the conviction, there was a debate about how to proceed. The options were an appeal to the Crown Court, a Judicial Review, a Case Stated or no appeal at all.
The last option was summarily dismissed – whilst the decision was not authoritative, if left unchallenged, other Licensing Authorities were likely to follow suit. The Brewery faced a stark choice – transfer all premises licences to its tenants or run the risk of being found criminally liable for any breach of condition committed by a tenant. Neither option was palatable. If the licences were held by the tenants, then (for example) a disgruntled tenant could simply surrender a licence – whilst the Brewery could register its interest as freeholder or superior landlord, it would have to act very quickly to re-instate a surrendered licence, particularly if the Licensing Authority “took its time” over notifying the change to the register. What if there was an application to review the licence? Unless the Brewery held the licence, it might not find out that an application had even been made (let alone determined) until it received a notification of a change to the Licensing Register and by then, it would be rather too late.
On the other hand, if the licences were still held by the Brewery and a tenant breached a condition, how could one rely on a defence of due diligence in circumstances such as those in this case? How can a brewery legislate or put measures into place that virtually guarantees that a tenant will not (on a whim perhaps) decide to carry on a birthday party karaoke evening (as was one of the instances here) beyond the permitted hours. Simply writing a tenancy agreement that asserts that the tenant will not do such a thing would not suffice – the argument was made during the original hearing and not accepted by the trial judge.
That left a choice – High Court or Crown Court.
By now, the significance of the case had begun to dawn and there were those who favoured a Crown Court appeal. If the Judicial Review route was even to be contemplated, all other avenues of appeal had to be exhausted first which meant that the “JR” route was also excluded at this stage.
The perceived advantage of appealing to the Crown Court was essentially that if the argument was lost, there was always the option of an appeal to the High Court and comparably little publicity in the meantime. If the appeal was successful, that would be an end to the matter unless of course the Licensing Authority appealed….
All the indications were that this would be a “test case” and financial considerations played their part – bluntly, why risk running what was a technical argument before a Crown Court Judge who was unlikely to have any real knowledge of what is, after all, a very specialised area of law and then face the prospect of having to incur the cost of an appeal to the High Court?
The decision to ask the Deputy District Judge to state a case was the obvious answer.
The case stated posed two questions:-
(i) For the purpose of Section 136(1)(a) of the Licensing Act 2003 are the acts of third parties imputed to the premises licence holder as a matter of law?
(ii) If this is not correct, was I right to find in this case that the Appellant was carrying on a licensable activity?
The appeal came before Lord Justice Richards and Mr Justice Owen on 3rd April 2009.
Almost at the outset, Lord Justice Richards observed that the entire issue was that of the statutory construction of s.136(1)(a). He observed that detailed skeleton arguments and comprehensive bundles had been filed by both parties which he and Mr Justice Owen had read. He invited submissions from Professor Roy Light for the Borough of Poole (who had also appeared in the court below) and, following those, the Court retired without hearing any response from Philip Kolvin QC (who appeared for the Brewery).
Delivering judgment, Lord Justice Richards said that s.136(1)(a) was directed at persons who as a matter of fact, carried on licensable activities and was not focused upon holders of premises licences as such – an offence could be committed where there was no licence in existence at all. Had Parliament intended to make the holder of a premises licence (criminally) liable for any breach (of conditions), it would have said so.
He rejected Prof. Light’s argument that policy considerations required that the holder of the licence be liable under s.136, pointing to the review mechanism and observing that a licence holder who “knowingly allowed” a breach of condition committed an offence under s.136(1)(b). He went on to say that policy arguments did not compel or justify the construction of s.136(1)(a) that Prof. Light contended for.
He observed that there were important differences between the language of s.136 and of s.16 and endorsed the comment by the authors of Paterson’s to the effect that the language of s.16 was broad enough to permit a freehold owner of a pub that was to be let to a tenant applying for a licence. He said that it was a fallacy to merge the two sections together so as to treat the landlord as providing a licensable activity.
Referring to the Guidance, he said that it could not alter the effect of s.16 nor the distinction with s.136 and expressly rejected the Respondent’s submission that the holder of a licence was carrying on licensable activities. He also commented that nothing in the tenancy agreement assisted (this included a clause to the effect that the tenant covenanted not to do any act that might would put the landlord as holder of the premises licence at risk of prosecution).
He dealt with the first three reasons given by DDJ Pattinson in the case stated on the basis that the DDJ had found that simply because the Brewery had made the application for the licence (strictly for conversion but this mattered not), they must be taken as providing licensable activities at the premises – he disagreed.
As to the final reason, he asserted that this said nothing about the construction of s.136.
He went on to say that the reference to the word “imputed” in the first question posed for the case stated suggested a deeper error on the part of the Deputy District Judge and that no such imputation was permitted.
In conclusion, Richards LJ said that s.136(1)(a) was concerned with actual conduct and that the holder of a premises licence was not vicariously liable under the section as a matter of criminal law.
As there was no reasonable basis upon which the Brewery could have been found as a matter of fact to have been carrying on a licensable activity, the convictions were quashed and not remitted back for a re-hearing. Cost orders in favour of the Brewery were made both in respect of the appeal and the original trial.
It was a very clear and strong judgment. No application for leave to appeal was made.
The case dealt with a tenanted pub and it is clear that where (for example) an employer holds a licence and an employee breaches a condition, the employer would prima facie be guilty of an offence under s.136(1)(a) and would have to rely on the “due diligence” defence in s.139.
Had the conviction been upheld, it is estimated that 15,000 pubs would have been affected. The likelihood is that Breweries such as Hall & Woodhouse would have arranged to transfer licences to their tenants and re-written their tenancy agreements in the process, rather than risk being prosecuted for breaches of conditions that they not only did not condone but knew nothing about.
Local Authorities, encouraged by the DCMS Guidance, would have had to re-think licensing public open spaces. Suppose for example that a town square was licensed for music from 11 a.m. until 11 p.m. but a busker set up for business at 9 a.m? If there was a licence, the Council could find itself prosecuted but perversely, if the town square did not have a licence, there would be no basis to prosecute unless the Council owned the land and had “knowingly allowed” the unlicensed activity to take place.
