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

The Code and the imposition of Code rights7.The Code came into force on 28 December 2017. It defines a number of rights that might be needed in order to operate a telecommunications site, for example to install equipment, to carry out works, to connect to a power supply and so on. It provides that those “Code rights” may only be conferred on an operator – that is, an operator designated under section 106 of the Communications Act 2003 as one to which Code rights may be granted – by agreement with the occupier of land. Where that agreement is not forthcoming, and the operator has given the requisite notice under paragraph 20 and the test in paragraph 21 is satisfied, then the Tribunal may impose upon the operator and the occupier of land an agreement that confers Code rights upon the operator.8.That agreement will normally be a lease although it may be a licence. It will therefore have a contractual term. Part 5 of the Code, paragraphs 30 to 35, makes provision for what is to happen when that term expires. Part 5 of the Code and the provisions that apply to the terms of a new Code agreement9.The effect of paragraph 30 of the Code is that when the contractual term of a Code agreement expires, “the code agreement continues so that—(a) the operator may continue to exercise that right, and(b) the site provider continues to be bound by the right.”10.Paragraph 31 enables the site provider nevertheless to bring the code agreement to an end by giving notice; and either party may give notice under paragraph 33 requiring the current agreement to be changed or a new agreement to take effect. Where there is a dispute the matter may be referred to the Tribunal.11.Paragraph 34 sets out the orders that can be made in such references; paragraph 34(5) enables the Tribunal to order the termination of the existing Code agreement and to order the operator and the site provider to enter into a new agreement that confers Code rights on the operator, on such terms as they agree or on terms ordered by the Tribunal under paragraph 34(10).12.In the present references, On Tower wants a new agreement for each site, which is not opposed, but the parties cannot agree the terms. Paragraph 34(11) states that paragraphs 23(2) to (8), 24, 25 and 84 apply to an order under paragraphs 34(10) as they do to an order under paragraph 20. Paragraph 23(5) requires:“(5) The terms of the agreement must include the terms the court thinks appropriate for ensuring that the least possible loss and damage is caused by the exercise of the code right to persons who—(a) occupy the land in question,(b) own interests in that land, or(c) are from time to time on that land.”13.Paragraph 24(3) states that the consideration payable by an operator under an agreement imposed by paragraph 20 (and, as we have just seen, under an agreement which is the subject of an order under paragraph 34(1)) is to be assessed on the assumption :“that the right that the transaction relates to does not relate to the provision or use of an electronic communications network.”14.The effect of that assumption is that rents under the Code are in general considerably lower than those payable under its statutory predecessor, because the operator pays the landowner only what the landowner could have got by way of rent of the site for its current use or an alternative use, which in most cases is an insignificant sum, rather than a rent that reflects the value of the site to the operator (as did rents under the old Code).15.Paragraph 34 also provides as follows:“(12) In the case of an order under sub-paragraph (10) the court must also have regard to the terms of the existing code agreement.(13) In determining which order to make under this paragraph, the court must have regard to all the circumstances of the case, and in particular to—(a) the operator's business and technical needs,(b) the use that the site provider is making of the land to which the existing code agreement relates,(c) any duties imposed on the site provider by an enactment, and(d) the amount of consideration payable by the operator to the site provider under the existing code agreement.”16.Two of the sites under consideration in the present references have been operated by On Tower under agreements made under the old Code. The transitional provisions in the Digital Economy Act 2017 make provision for them to be continued after their expiry and for Part 5 of the Code to apply to them with modifications. The most important modification is that paragraph 34(13)(d) is not applicable to a subsisting agreement, for obvious reasons because of the change in the basis of consideration in the Code. The agreement relating to Audley House was entered into in 2018, but it expressly provides that its terms were negotiated before the Code came into force and its rent agreed without regard to the provisions of the Code.The approach to be taken to disputes about the new terms17.The Tribunal has now had to consider a number of references relating to the terms of new Code agreements under Part 5. A common theme has been the argument made on behalf of site providers that the terms of new Code agreements should mirror those terms of the old agreement. Comparison has been made with the position on the renewal of business tenancies under the Landlord and Tenant Act 1954 and that principle in O’May v City of London Real Property Co Ltd [1983] 2 AC 726 that there is an onus on a tenant seeking different terms to justify the change. 18.It is now well-established that that argument is not correct. Despite the similarity between paragraph 34(12) and section 35 of the Landlord and Tenant Act 1954, the Court of Appeal in On Tower UK Limited v JH and FW Green Limited [2020] UKUT 348 (LC) (“Dale Park”) has confirmed that decisions relating to the latter will not necessarily apply to the former. The purposes of the two provisions are different. The Court of Appeal said at paragraph 49:“The weight to be attached to the fact that a term was included in the existing code agreement will in part turn on its consistency with the aims of the Code. If the relevant term cannot be thought to be in conflict with those aims, the case for replicating it in the new agreement may be compelling. Plainly, the position will be different if the term is at variance with the objectives of the Code. In practice, the terms of a code agreement entered into since the introduction of the Code are more likely to accord with its purposes than those of an agreement which pre-dates the Code.”19.The Court of Appeal at paragraph 46 quoted with approval the decision in EE Limited v Stephenson [2021] UKUT 167 where the Tribunal (The President, Fancourt J) said:“53 … The purpose underlying the Code is to ensure that operators can use and exploit sites more flexibly, quickly and cheaply than had previously been the case, at lower than market rents, in furtherance of the public interest of providing access to a choice of high quality electronic communications networks, while providing a degree of protection to site owners’ legitimate interests.”20.In Dale Park at paragraph 61 the Tribunal said that in making decisions about the terms of a renewed agreement:“… it may be helpful to think in terms of a balancing process between the claimant’s requirements and the respondent's concerns, but the Code does not put it like that. Perhaps a better way to look at it is as follows. 62. First, the Tribunal should consider the term the operator seeks and the reason why it needs the term in question in order to pursue the business for whose purposes it received its Ofcom direction and in light of the public interest in a choice of high quality telecommunications services. 63. Second, the Tribunal will consider the concerns or objections raised by the respondent and whether in order to minimise loss or damage in accordance with paragraph 23(5) the term should not be imposed, or should be imposed to a limited or qualified extent. 64. If those concerns do not prevent the imposition of the term and do not require its qualification, then the Tribunal will consider whether, in imposing that term, it should also impose further terms to minimise loss or damage.”21.In the present references many terms are sought by the site provider which the operator does not want, and we have to look at whether the effect of those terms upon the claimant’s business and the efficiency of its operations are in the public interest. Where it can be seen to have an unhelpful effect upon the claimant’s business we then have to consider whether the term sought, or another term to similar effect, is necessary in order to cause “the least possible loss and damage” to the site provider.