Case No. UKUT-152-(LC)-UTLC-Case-Number:-LC-2021-240

The legal principles113.Paragraph 17 of the Code provides as follows:“(1) An operator (“the main operator”) who has entered into an agreement under Part 2 of this code may, if the conditions in sub-paragraphs (2) and (3) are met—(a) upgrade the electronic communications apparatus to which the agreement relates, or(b) share the use of such electronic communications apparatus with another operator.(2) The first condition is that any changes as a result of the upgrading or sharing to the electronic communications apparatus to which the agreement relates have no adverse impact, or no more than a minimal adverse impact, on its appearance.(3) The second condition is that the upgrading or sharing imposes no additional burden on the other party to the agreement.(4) For the purposes of sub-paragraph (3) an additional burden includes anything that—(a) has an additional adverse effect on the other party's enjoyment of the land, or(b) causes additional loss, damage or expense to that party.(5) Any agreement under Part 2 of this code is void to the extent that—(a) it prevents or limits the upgrading or sharing, in a case where the conditions in sub-paragraphs (2) and (3) are met, of the electronic communications apparatus to which the agreement relates, or(b) it makes upgrading or sharing of such apparatus subject to conditions to be met by the operator (including a condition requiring the payment of money).”114.As the Tribunal explained in Dale Park, at paragraphs 18 to 26, paragraph 17 of the Code derives from a recommendation of the Law Commission in its report The Electronic Communications Code (Law Com no 336, 2013). That report recommended that consideration for Code rights should continue to be paid at a rate that reflected the value of those rights to the operator. The ability of a site provider to control sharing and upgrading was a valuable right under the old Code, because it enabled provision for additional payment to the site provider. Sharing was particularly important because provisions for “payaway”, as it was called, were often imposed whereby the operator had to pay to the site provider a proportion of the licence fee paid by the sharers. The recommendation from which paragraph 17 is derived would have enabled that practice to continue, while guaranteeing the operator a minimum level of sharing and upgrading for which it would not have to pay.115.That rationale for paragraph 17 has now disappeared, with the change in the basis of consideration. And as the Tribunal observed in Dale Park (paragraph 25), while the minimum level of upgrading and sharing in paragraph 17 is a useful starting point there is no need for the operator to produce any particularly compelling evidence for wider or unlimited rights, and such rights should not be regarded as unusual. That approach was approved by the Court of Appeal at [2021] EWCA Civ 1858, paragraphs 54 to 66. The claimant in that reference and in this, On Tower, is a wholesale infrastructure provider whose business depends upon the ability to share its equipment and to upgrade it where necessary to meet its customers’ needs. Some of the witnesses for the respondent in Dale Park lived within yards of the mast and expressed concerns about loss of amenity, and possible disturbance from noise, as a result of unspecified future upgrades and the presence of sharers on site and on the access to it; their interests were found to be adequately protected by other provisions of the agreement, including those preventing the operator from causing a nuisance, and the operator’s business needs were found to justify unlimited rights to share and upgrade its electronic communications apparatus.The terms in issue in the three draft leases116.On each site On Tower seeks unlimited rights to upgrade its equipment, and to share the occupation and use of the sites and the Code rights “with providers of electronic communications networks for the purposes of the provision by them of their networks.” The terms in the current leases117.As to upgrading, there is no limitation in the subsisting Port Talbot lease on adding to the equipment on site or on upgrading it; at Huntingdon there is no express restriction on upgrading but the landlord’s consent (not to be unreasonably withheld) is required for any addition to the equipment on site. The 2018 lease of Audley House prevents the addition of aerials and antennae without consent, qualified as at Huntingdon, and confers the right to upgrade in terms corresponding to the rights in paragraph 17 of the Code, save that the upgrading of apparatus belonging to EE Limited or Hutchison 3G UK Limited (the operators who were using the site when the 2018 lease was entered into) is unlimited.118.As to sharing, the 2018 lease of Audley House gives On Tower the right to share to the extent (broadly) permitted by paragraph 17, save that unlimited sharing is permitted so far as EE Limited and Hutchison 3G UK Limited are concerned. The pre-Code leases for Port Talbot and Huntingdon allow sharing subject to the landlord’s consent and subject to a 30% payaway (which would be void under the new Code insofar as it applies to the rights conferred by paragraph 17).119.It is important to be aware also of the relevant terms of APW’s intermediate leases.120.There is no express restriction on upgrading equipment in any of the intermediate leases. The definition of the permitted use includes the “replacement, improvement … of Equipment” (broadly defined to include both electronic and non-electronic communications apparatus installed by the undertenant pursuant to the rights contained in the existing or any future leases); the Port Talbot lease also gives APW the right to attach equipment to “any exterior surface of the Estate” (meaning the superior landlord’s surrounding property), subject to the superior landlord’s qualified consent. Alterations and additions to the sites at Audley House and Huntingdon need the superior landlord’s qualified consent, but not at Port Talbot. 121.As to sharing, in each intermediate lease APW can “share or part with possession or occupation of the whole or any part or parts of the Property” subject (as we noted above at paragraph 42) to notifying the superior landlord; there is no consent requirement (clauses 13 of the Audley House and Huntingdon leases, 14 of the Port Talbot lease); there are “payaway” provisions in the Audley House and Port Talbot leases (paragraph 118 above).The issues in dispute (1): should the right to share and upgrade be restricted to paragraph 17 rights?122.As to both sharing and upgrading, APW seeks to restrict On Tower’s rights to the sharing and upgrading permitted by paragraph 17 of the Code, so as to have no more than a minimal adverse impact on the appearance of the site and to impose no additional burden on the landlord (whether by restricting its enjoyment of the property or causing it any additional loss or expense).123.This is obviously unwelcome to On Tower for the same reasons as it was in Dale Park. Sharing is its business, and upgrading its equipment is a necessary part of the service it offers to its customers. APW is obviously entirely unaffected by the appearance of the equipment as it has no presence of its own on the sites.124.For APW, Mr Clark says that it is necessary to restrict On Tower to the paragraph 17 rights in order to protect the superior landlord on each site. Mr Thacker in his statement expressed concern that no details had been given about any proposed upgrade, and said that an upgrade could damage the superior landlord’s property. Mr Clark observes that electronic communications equipment is inherently ugly; for anything to look so bad that it falls outside the provisions of paragraph 17 it would have to be pretty extreme. The superior landlord needs to be protected from that, and in that sense paragraph 17 is generous and On Tower is unlikely to need rights that go beyond it.125.The fact that no details of potential upgrades have been provided is unsurprising, because technology moves on quickly and On Tower understandably cannot say what it will need even just a few years hence. The aesthetic qualities of telecommunications equipment are a matter of opinion, but it is clear in the present case that they are unimportant. Each site is in an industrial area. Each is quite small, which limits the size and the height of new equipment. APW itself will be unaffected by its visual impact in any event. 126.As to additional burdens caused by sharing or upgrading, again there should be none for APW which has no presence on the site. It is difficult to imagine how the superior landlord, or indeed any other neighbour, could be troubled by upgraded or additional electronic communications equipment, save for the impact of, for example, the actual work of removing the current mast and putting in a new one in order to support 5G, as Mr Holloway said is likely. It is of course possible that sharers might cause damage to the superior landlord’s surrounding property, whether or not the restrictions sought by APW are imposed; liability for that damage will fall both upon the sharer and upon On Tower. Insofar as APW’s intermediate leases require the landlord’s qualified consent for any new or additional equipment on any of the sites, APW will not be in breach of this condition by virtue of upgrading carried out by On Tower exercising rights granted to it by the order of the Tribunal.127.We note that in the Dale Park case there was evidence from individuals who were going to be immediately aware of changes to the site, and they were nevertheless found to be adequately protected by the other provisions of the agreement. In the present references no evidence of any actual concern by any individual, or of the superior landlord, has been produced and the nature of the sites means that visual impact is unimportant. 128.The concerns expressed about the extent of the rights to share and upgrade are not realistic; On Tower’s need for unlimited sharing and upgrading rights is obvious and integral to its business. Accordingly the rights to share and upgrade equipment on each site are not to be limited by the terms of paragraph 17 of the Code.(2) Should sharing be restricted to Code operators?129.Next, the respondent seeks to restrict the right to share so that On Tower can share only with Code operators (that is, operators who have had the Code applied to them by section 106 of the Communications Act 2003). That is what is conferred by paragraph 17 and the respondent says that the right should go no further. On Tower’s customers include some non-Code operators and it wants to be able to share without the restriction proposed by APW.130.APW’s intermediate leases impose no restriction at all on the identity of those who share or even take future sub-leases of the sites. At Port Talbot and Huntingdon the site is not even restricted to use for telecommunications. So there is clearly no concern on the part of the superior landlords as to the identity of sharers or whether they are regulated by the Code.131.APW’s concern is that the additional right that On Tower seeks would allow organisations on site that are not regulated by the Code and that APW might therefore become bound by business tenancies protected by the Landlord and Tenant Act 1954 so that when On Tower leaves APW may be unable to rid itself of its subtenants. On Tower’s response is that its sharing agreements confer licences not tenancies and so will not attract the protection of the 1954 Act; in any event, it is obliged to give vacant possession on leaving the site and therefore APW will have a remedy in the unlikely event that its customers do not leave.132.We take the view that On Tower’s obligation to give vacant possession when it leaves, and its liability to APW if it does not, is an answer to the concern about the possibility of sub-tenants not leaving.133.Mr Clark also argued that if On Tower were allowed to share with non-Code operators then it would not be restricted to Code rents, and would thus obtain a commercial advantage by the back door. We do not understand why On Tower’s ability to charge consideration that is not restricted by paragraph 24 of the Code is any concern of APW’s, but in any event On Tower can charge consideration outside the Code in any case for the use of its equipment. This is because Code rights are rights in relation to land (paragraph 2 of the Code) and “land”, in the definitions in paragraph 108 of the Code, “does not include electronic communications apparatus”. So why APW is troubled by On Tower’s ability to take non-Code consideration from non-Code operators is not understood.134.Accordingly we conclude that On Tower’s right to share should not be limited to sharers who are Code operators. (3) Should On Tower have the right to share its equipment but not the site itself?135.The third issue is whether On Tower should have the right only to share its equipment, as paragraph 17 provides, or also to share the site itself in each case. This is not a point on which the Tribunal has heard argument before and it does not seem to have been perceived as a problem by site providers in previous references; the right to share in Dale Park was for On Tower to share the site, and that aspect of sharing was not in dispute.136.For On Tower it is said that of course in order to share its equipment it has to allow its sharers to come on to the site. We do not think that that necessarily means that other businesses have to share possession of the site, but clearly they will have to be permitted to enter, if only occasionally. Mr Clark points out that each of the leases already provides that “rights exercisable by the Tenant shall be construed as being exercisable by the Tenant and all persons authorised by them” and that therefore On Tower can permit those who share the equipment to access and enter the site as necessary. Mr Seitler QC responds that this right does not enable it to allow an operator to place a cabinet on the land within the site. There is clearly some room for argument about that, and accordingly we take the view that the additional right sought by On Tower should be granted, in view of the nature of its business needs, unless the respondent’s concerns are justified.137.Mr Clark says that there are two concerns. First, a right to share the site may lead to damage being caused by On Tower’s customers with whom APW is not in a contractual relationship. We do not understand why this arises from the ability to share the site any more than it arises from the ability to share equipment or indeed to authorise any of On Tower’s staff or customers to access and enter the site, nor why On Tower’s liability under the indemnity provision in the draft leases and its obligations to pay compensation under paragraph 25 of the Code do not protect APW. 138.Second, there is a concern that if On Tower can share land as well as equipment then APW may be bound by Code rights created by it. The point here is that, as we said above, Code rights relate to land and not to equipment. Mr Thacker in his evidence expressed concern that if On Tower shares the sites, it could create Code rights which will prejudice APW’s ability to obtain vacant possession at the end of the term. That is not correct, since APW’s interest is not derived from On Tower’s and paragraph 10 of the Code will not operate to make APW bound by any Code rights that On Tower creates. Mr Clark argues that On Tower’s drafting could be construed as APW’s agreement to be bound by Code rights; we see no reason why that would be the case. If this is a real concern it can be assuaged by the inclusion of an express proviso that APW does not agree to be bound by any Code rights conferred by On Tower upon any other person.139.Accordingly we reject the respondent’s arguments on this point and On Tower is to be permitted to share the sites as well as its equipment, with the addition of the proviso just mentioned.