[2024] UKUT 00429 (LC)

The facts in Gencomp were that shortly before expiry of a subsisting 15-year lease of a site to an operator, the landlord’s successor in title granted a concurrent lease of the reversion to APW. The operator served para 33 notices on each of the concurrent lessor and the concurrent lessee but contended that it was the notice on the concurrent lessor that was valid, as APW was not a party to the code agreement. APW contended that it was a party, by virtue of the concurrent leasehold interest vested in it.

The Court of Appeal concluded that APW was right, and that it was the relevant person on whom the operator had to serve any para 33 notice. The ratio decidendi of the decision seems to me to be that:

An assignee of a licensor’s interest in a site is a different case, for which the Code makes express provision. Such a person, who is not under the general law bound by the burden of the licence agreement, is bound by the code rights: para 10(2)(a) of the Code. Being bound by the code rights and entitled to the benefit of the licence terms, the licensor does in reality then stand in the shoes of the licensor, and so it is unsurprising that the Code, by para 10(3), expressly provides that such a person is to be treated as a party to the agreement. There is, however, no equivalent provision in the Code in relation to an assignee of an operator’s interest under a licence agreement.

Nugee LJ, who gave the only reasoned judgment of the Court, pointed out, at [58], that:

“… code agreements are intended to be long term agreements, continuing despite the expiry of their contractual terms, and capable of surviving both a change of site provider and a change of operator. One would expect that the provisions of the Code which depend for their application on a person being a party to the agreement would also be capable of continuing to apply despite a change in the identity of the site provider or operator.”

It would not, therefore, serve the purpose of the Code if the identities of the parties to a code agreement were limited to the original parties save only for the case of the additional person identified in para 10(3) of the Code.

It is for that reason that Mr Lees KC, who appeared before this Tribunal for On Tower, argued that it must be intended that the assignee of a licence agreement, who is interested in the site as operator to the exclusion of the original party to the licence agreement, is to be regarded as the operator who is party to a code agreement for the purposes of Part 5.

The judgment of Nugee LJ does not support that conclusion, however, at least without a material extension of its reasoning. An assignment of a licence agreement does not make the assignee subject to the burden of the agreement, unless they undertake to perform the obligations on the part of the licensee. Para 16 of the Code does not apply to subsisting agreements; and there is no provision in the Code equivalent to para 10(2)(a) making a successor to the original licensee bound by the obligations of the agreement. An assignee will not be subject to the burden of the agreement, and thereby “stand in the shoes of” the assignor, in the sense identified in Gencomp, unless it is bound by the obligations of the assignor.

Nugee LJ referred to the Law Commission report, which itself refers to the desirability of assignments “where one Code Operator comes to stand in the shoes of another Code Operator” (para 3.17), and opines that “A change of Code Operator in itself should in most cases be immaterial to the Site Provider” (para 3.20). His Lordship referred also to the right approach to construing the Code, summarised by Lady Rose JSC in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2022] 1 WLR 3360 (“Compton Beauchamp”) at [106]as:

“… to work out how the regime is intended to work and then consider what meaning should be given to the word ‘occupier’ so as best to achieve that goal”.

(The issue in Compton Beauchamp was whether an operator occupying the site could be the “occupier” within the meaning of the Code, or whether the “occupier” was necessarily someone other than that operator.)

Giving his concluding reasons for the decision in Gencomp, Nugee LJ said at [75]:

“Applying that approach, it seems to me that the regime is intended to work in such a way that the person currently entitled to the benefit and burden of the agreement as operator, and the person currently entitled to the benefit and burden of the agreement as site provider, are parties to the agreement and can exercise the rights conferred by Part 5 of the Code. That can in my judgement be achieved by construing paragraph 10(3) as not intended to define exhaustively who is to be treated as a party to the agreement. On that basis APW, being currently entitled to both the benefit and the burden of the Lease by virtue of the Concurrent Lease, is to be regarded as a party to the agreement...”