[2024] UKUT 00429 (LC)

The Code (introduced by the Digital Economy Act 2017 to replace a previous version, which the Electronic Communications Act 2003 had substituted for the Telecommunications Code in Schedule 2 to the Telecommunications Act 1984) is a statutory scheme that overlies, but does not entirely replace, the general law of contract and landlord and tenant.

There is an important distinction between agreements made before 28 December 2017 and agreements made on or after that date. For subsisting agreements, certain provisions of the Code that apply to agreements made after that date (“new agreements”) do not apply, and transitional provisions in Schedule 2 to the 2017 Act make provisions that are different in certain respects for their continuation and termination from the provisions that apply to new agreements. The Government accepted the Law Commission’s recommendation that new rights conferred on operators, e.g. to share apparatus and assign code rights to other operators, should not apply retrospectively to subsisting agreements. In other respects, however, in particular the continuation of code agreements that expire or are terminated, subsisting agreements and new agreements are treated alike.

The starting point with the Code is the concept of “code rights”, which can be agreed or can be conferred by the court (which in England and Wales means the FTT or this Tribunal). These can be shared and assigned, and various persons are bound by and have the benefit of them. There is a clear distinction between code rights and the agreement by which they are conferred. A person with the benefit of code rights does not necessarily have the full benefit of the agreement that conferred them. “Code rights” are defined in para 3 of the Code (as amended) as comprising 12 different kinds of right in relation to land and any operator. They include rights:

These rights are conferred on “operators”, who are persons who have been approved by Ofcom to provide electronic communications networks or infrastructure systems for the use of electronic communications network providers, and in whose case the Code has been directed to apply. There is therefore a defined class of operators: a person who has not been given an Ofcom licence and had the Code applied to them cannot be an operator.

Part 2 of the Code is concerned with conferring code rights, who is bound by them, and their exercise. Para 9(1) provides that:

“A code right in respect of land may only be conferred on an operator by an agreement between the occupier of the land and the operator.”

Although, as stated, code rights can be conferred by the court, under Part 4 of the Code, the order of the court takes effect as an agreement under Part 2 made between the parties (paras 20(4), 22).

Para 10 in Part 2 makes provision for who is bound by code rights. It is of importance to the resolution of Issue 1 and was central to the arguments in Gencomp, and accordingly I set it out in full:

Para 11 in Part 2 states that an agreement under Part 2 must be in writing and be signed by or on behalf of the parties to it. That applies also to any variation of an existing agreement. Accordingly, an agreement for the purposes of the Code – and therefore a “code agreement” as defined in para 29 – cannot be an informal agreement, or one that arises by implication from the conduct of an occupier of a site and an operator.

Para 12, which is headed “Exercise of code rights”, states:

“(1)

A code right is exercisable only in accordance with the terms subject to which it is conferred.

(2)

Anything done by an operator in the exercise of a code right conferred under this Part or Part 4A in relation to any land is to be treated as done in the exercise of a statutory power.”

The remaining sub-paragraphs then specify circumstances in which sub-paragraph (2) does not apply.

Part 3 of the Code contains the new provisions relating to assignment of agreements, rights to upgrade and rights to share apparatus. It renders void an agreement to the extent that it prevents or limits assignment of the agreement to another operator (para 16(1)), and provides (para 16(4)) that:

“From the time when the assignment of an agreement under Part 2 of this code takes effect, the assignee is bound by the terms of the agreement.”

Importantly, para 16 is excluded in relation to subsisting agreements (Para 5 of Schedule 2 to the 2017 Act). Accordingly, while there is no distinction between leases, licences and wayleaves which are new agreements, so far as transmission of the burden of obligations in the agreement is concerned (so that, contrary to the general law, an assignee of a licence agreement is bound by the burdens of that agreement), the distinction remains in the case of subsisting agreements. By virtue of s.3 Landlord and Tenant (Covenants) Act 1995 (replacing the doctrine of privity of estate), the assignee of a lease is bound by the burden of tenant covenants in the lease; however the same does not apply to the assignee of the benefit of a licence. Under the general law, the benefit but not the burden of a contract may be assigned: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 86 (“Lenesta Sludge”).

Part 4 of the Code provides for the court to impose an agreement, by which a person confers a code right on an operator. It enables an operator, without restriction, to give someone a notice setting out the code right that the operator seeks and stating that they seek that person’s agreement to the terms proposed. This is material because, APW argues, even if On Tower is precluded from serving notices under Part 5, if it is not “a party to a code agreement”, it still has the right under Part 4 to seek equivalent code rights. Indeed, as decided in Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd [2019] UKUT 338 (LC) and Gravesham Borough Council v On Tower UK Ltd [2024] UKUT 151 (LC), it is only in circumstances in which an operator does not have Part 5 rights that they can give notice under Part 4 to acquire new rights.

Where an operator gives notice under para 20 of Part 4 and then applies to enforce it, the court can make an order for an agreement only if two conditions are satisfied. First, that prejudice caused to the recipient of the notice is capable of being adequately compensated by money. Second, that the public benefit (sc. benefit from access to a choice of high quality electronic communications services) likely to result from an agreement outweighs the prejudice to the recipient. The court is precluded from making an order under para 20 if the recipient intends to redevelop the land to which the code right would relate (para 21).

Part 5 of the Code addresses the continuation, termination, modification and renewal of “code agreements”. These are defined in Part 5 as being an agreement under Part 2 of the Code other than business tenancies where the primary purpose of the lease is not to grant code rights. (For subsisting agreements, this exclusion is modified, and instead what is excluded is business tenancies where there is security of tenure under Part II of the Landlord and Tenant Act 1954, as well as business tenancies without security of tenure where the primary purpose of the lease is not to grant code rights.)

For code agreements, as defined, Part 5 provides for the agreement to continue, where the site provider is bound by a code right as a result of the agreement, so that the operator may continue to exercise the code right (para 30); and for the site provider who is a party to a code agreement (but not the operator) to have the right under para 31 to terminate the agreement by notice to the operator who is a party to the agreement. The notice must state a ground for termination. Para 31(1) states:

“A site provider who is a party to a code agreement may bring the agreement to an end by giving a notice in accordance with this paragraph to the operator who is a party to the agreement.”

The effect of such a notice is that the agreement terminates on the date specified unless the operator gives a counter-notice within 3 months and then applies to the court within a further 3 months for relief. The court will then decide whether the site provider has established their ground for termination. These grounds include the following:

“(a)

that the code agreement ought to come to an end as a result of substantial breaches by the operator of its obligations under the agreement;

(b)

that the code agreement ought to come to an end because of persistent delays by the operator in making payments to the site provider under the agreement;…..”

If no ground for possession is established, the court will make a different order under para 34 to modify, extend or renew the code agreement.

In addition, Part 5 gives both the site provider and the operator who is a party to a code agreement the right by notice to require the other to agree to modify the code agreement, or to terminate it and replace it with a new agreement. Para 33 provides (so far as material):

There is no doubt that the Code carefully distinguishes between code rights and code agreements, and equally between persons who have the benefit or burden of code rights and those who are parties to a code agreement. It is clear that in Part 5 it is only an operator or a site provider who is a party to a code agreement who can give or receive a Part 5 notice and apply to the court for relief. Similarly, in Part 3, as it applies to a subsisting agreement, it is only an operator who is a party to a subsisting agreement in relation to apparatus installed under land who has the right to upgrade the apparatus or share its use with another operator: Para 17(1), (2), as substituted in the case of subsisting agreements by para 5A of Schedule 2 to the 2017 Act, itself inserted by s.58(4) of the Product Security and Telecommunications Infrastructure Act 2022.

The expression “a party to a code agreement” is not defined in the Code, save that “code agreement” is defined as explained above. Any lawyer would understand the expression “a party to an agreement” to mean a person who is a contracting party, not someone to whom certain contractual rights have been assigned or someone who, by some means, has assumed one or more of the obligations in the contract. The general meaning is extended by para 10 of the Code, but to a limited extent only, as explained above.

The way that Part 5 is intended to operate strongly implies that it is the current operator, if in lawful occupation of the site in place of the original licensee, who should be able to respond to a notice to terminate, or propose changes to the code agreement. Part 5 is concerned with the future of the agreement at a time when it is due to end, and after that time. Where a previous lessee or licensee has assigned all their interest in the code agreement, it is not easy to see why they should be regarded as having the only interest in such future matters under the Code, at the expense of the assignee. I say “only interest” because no one has suggested, and it cannot have been intended, that all the successive site providers and operators are, cumulatively, parties to a code agreement for the purposes of Part 5. There can be only one (or two or more who are jointly that person).

This provides a clue about the intended meaning of the words in issue, because if there can only be one site provider or operator who is a party to a given code agreement, where there may have been successive assignments of both parties’ interests, it is necessary to have reasonable clarity about which person from time to time is the site provider or operator who is the party to the agreement. Otherwise, the operation of Part 5 – which extends and protects the operator’s rights in the site – would become uncertain.

It is also material that Part 5 applies to new agreements which are licences as it does to subsisting agreements. In relation to new agreements, on assignment of the benefit of the agreement, the burden of the agreement also passes to the assignee operator (para 16(4) of the Code). The assignor is exonerated from further liability under the agreement, upon notice in writing being given to the other party to the agreement (para 16(5)). The position is therefore clear with new licence agreements: the assignee takes the benefit and burden of the agreement upon assignment and so stands in the shoes of the assignor from that time.

These provisions do not apply to subsisting licences. An assignee of a subsisting licence will therefore not stand in the shoes of the assignor in the same way, unless they have agreed or covenanted to be bound (or are by some other means bound) by the burden of the agreement. Nevertheless, following an assignment the assignor no longer has the benefit of the agreement, and so may have no legitimate interest in the statutory continuation, variation or renewal of the agreement. The terms of paras 33 and 34 of the Code contemplate that the parties will seek to negotiate a resolution of the issues raised in a notice, which would concern the assignee rather than the assignor. Indeed, in some cases, the assignor may cease to be an operator (so that they can no longer be “an operator who is a party to a code agreement”), or may have ceased to exist by the time that a notice to terminate or a notice to agree different terms is served.