[2024] UKUT 51 (LC)

The claimant’s argument, in very brief summary, is twofold: first, that the Site is land because the enclosure of electronic communications apparatus is not the sole purpose of the Kenton Road exchange, and second that the purpose of the definition of land in the Code is not to prevent the grant of Code rights over this sort of building. The respondent says that that is indeed the purpose of that definition, and moreover that BT’s sole purpose for the building is the enclosure of electronic communications apparatus.

Three things are helpfully not in dispute.

The first is that that the Kenton Road exchange has always contained electronic communications apparatus.

The second is that the building is a structure “designed or adapted for use in connection with the provision of an electronic communications network” as paragraph 5(1)(d) requires, because of course the respondent operates a communications network and nowadays it is electronic.

The third relates to the rest of the contents of the building, as to which the claimant relied upon a witness statement by its Head of Portfolio Management, Mr Alexander Barnes, and the respondent relied upon a witness statement by Mr Stephen Prance, its Operational Estate Manager. Neither was cross-examined about that part of their evidence and in any event we have seen the building. It is not in dispute that it contains the office, storage and welfare facilities that we described at paragraphs 6 and 7 above. The building contains things that are not electronic communications apparatus.

Accordingly the issue is whether the “the sole purpose” of the Kenton Road exchange “is to enclose other electronic communications apparatus” as paragraph 5(3) requires in order for this building to be electronic communications apparatus.

It is worth saying a few words about how the exclusion of electronic communications apparatus from the definition of land in the Code came about. It was not one of the recommendations of the Law Commission in its 2013 Report (The Electronic Communications Code Law Com No 336) from which most of the Code’s provisions were derived. As is well-known, although the government accepted most of the recommendations made in that Report, it rejected the key recommendation that the consideration to be paid for Code rights should continue to be determined by the market. Instead, it determined that consideration should be assessed without regard to the value of the rights to the operator. As paragraph 24(3)(a) puts it, the market value of the right 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.”

The result of that provision is that rates of consideration under the new Code are considerably lower than they were under the old Code that was in force before December 2018.

That policy by itself would have left the infrastructure providers, such as the claimant, in difficulties. Their business depends upon their making a profit from granting rights to use their apparatus; and the mobile network operators need the infrastructure providers to stay in business to provide costly infrastructure such as masts. The solution to that problem is the definition of “land” in the Code; as we said above, the effect of the exclusion of electronic communications apparatus from the definition of land means that an agreement granting the right to place antennae on a mast is not a Code right, and the infrastructure provider can continue to require a consideration that reflects the value of that right to the mobile network operator.

The Explanatory Notes published with the legislation that introduced the new Code said this at note 403:

“Paragraph 5 defines electronic communications apparatus i.e. the apparatus which can be installed on, under or over land. This definition is important for two reasons. Firstly, it defines the scope of what can be installed and kept on land under the provisions of the code. Secondly, because paragraph 108(1) specifically provides that land does not include electronic communications apparatus, anything that falls within the definition of ‘electronic communications apparatus’ (as it is set out in paragraph 5) cannot have code rights imposed against it. This has the practical effect of ensuring that one code operator cannot seek to exercise code rights against the apparatus of another (or indeed against the apparatus of a person who is not a code operator).”

Ms Tozer KC pointed out that the Code is intended to be “technology neutral”; in other words it is not intended to give any particular technology an advantage over any other, and specifically it is not intended to favour mobile operators over fixed-line operators. That is seen in paragraphs of the Law Commission’s 2013 report at paragraphs 1.32 and 1.33 and is uncontroversial. Going back to the Explanatory Note just quoted, the definition of “land” in the Code is designed to ensure that a Code operator such as the claimant cannot seek to exercise Code rights against the apparatus of another such as the respondent. That too is uncontroversial.

The question remains: at the date of the Site Lease was the sole purpose of this building the enclosure of electronic communications apparatus? We have to look at the situation at the date of the agreement, in 2021, although it was common ground that the building and its purpose are the same now as they were then.

The respondent says that the sole purpose of the Kenton Road exchange is the enclosure of electronic communications apparatus because that is what the respondent built it for and has retained it for. Now that the equipment is becoming redundant it no longer wants the building, which emphasizes the point. Ms Tozer KC argued that “purpose” in this context has a subjective meaning. She referred to the Oxford English Dictionary, and argued that to find the purpose of an object we have to ask what it is intended for. The OED gives as an example “The purpose of temporary classrooms is … to cope with rapidly shifting population densities”; obviously a child may leave their pencil case in the temporary classroom at lunchtime, but the purpose of the classroom is not to enclose the pencil case but for teaching children in. One’s home may have bats in the loft, but the purpose of the building is to house one’s family and not to house the bats.

Ms Tozer KC referred to a number of authorities where the word “purpose” in a statute has been given a subjective meaning. She began with the proposition that in the absence of evidence of subjective intention, purpose may be inferred (Inland Revenue Commissioners v Mills [1975] AC 38 (HL)), but that where there is such evidence it is important. In Smyth-Britt v Chubb [2004] 2 WLUK 621 the question for the Employment Appeal Tribunal was whether the claimant’s employer had subjected him to detriment “for the purpose of preventing or deterring him” from engaging in union activities (contrary to section 146(1) of the Trade Union and Labour Relations (Consolidation) Act 1992). It was held that the “purpose” in section 146(1) was the purpose of the employer, and was the object desired or sought to be achieved, not the consequence or effect of the employer’s actions. And in R v Spooner (ex p Arun DC) [2007] EWHC 307 (Admin)the question was whether a “pet ambulance” was used “for the purpose of carrying passengers”, because if so it needed a taxi licence. The Administrative Court found that in 95% of cases only an animal was carried, whereas in the other cases the owner went too; it was found that it was no part of the driver’s purpose to carry people, although he occasionally did so.

Similarly, said Ms Tozer KC, the question for the Tribunal was: what was the respondent’s objective in owning the building? The reason why BT has the Kenton Exchange is to house telecommunications equipment, although other things happen there too. Once the equipment has been decommissioned, which is going to happen soon, the respondent will dispose of the building, its purpose having disappeared.

In response Mr Lees pointed out that none of the cases cited by Ms Tozer was about the “sole purpose” of anything. Moreover, while “purpose” can be subjective, whether it is or not depends upon the context. In all the examples given, “purpose” is necessarily subjective. A gift has a “purpose” only because it is intended by someone for a particular purpose. The unlawful behaviour complained of in Smyth-Britt v Chubb was necessarily assessed from the point of view of the employer’s intention. As for R v Spooner (ex p Arun DC), it is not clear that this was a subjective test. The court looked at the proportion of journeys on which only a pet was carried; it was asking what the journey was for, rather than looking at a subjective intention.

But in the present case, Mr Lees argued, the Tribunal has to look at the purpose of the building objectively. What is it for? Clearly it is for a number of things, not just for enclosing equipment.

In any event, even on a subjective construction Mr Lees argued that while BT’s main purpose was the housing of its exchange equipment, it had subsidiary purposes: the accommodation of its staff and the provision of welfare facilities. These are not analogous to uninvited bats in the loft; they are things that the respondent deliberately does in the building, and will do elsewhere once the building has been disposed of.

We agree with Mr Lees on this point. Whether “purpose” is subjective or objective will depend upon the context; and we agree that cases that have construed the word “purpose” may not be on all fours with the position where the statute says “sole purpose”. In the present case it is not and has never been the sole purpose of this building to enclose electronic communications apparatus. We take the view that that is the outcome both of a literal and of a purposive construction of the statute.

Taking first the literal words, we would read “purpose” in an objective sense here. Nothing in the wording of the Code or in the context requires us to look at the purpose of any person whether in acquiring or retaining or maintaining a building, and to broaden the enquiry in that way is to add a gloss to the statutory wording. We are to look simply at the purpose of the building, and therefore to ask what it is for or what is its function. And its function is the accommodation of telecommunications apparatus and the provision of office, storage and welfare facilities. That is what the Kenton Road exchange is for. Certainly its main purpose has been to house apparatus and that was why it was built the way it was, and that is why it is still owned by the respondent. But it is a long way from being a building that has no other purpose. The purpose of the building is wider than just the containing of electronic communications equipment.

Second, as to the mischief that the words of the Code were designed to address, we have referred above to the Explanatory Note which makes it clear that the idea is to prevent one operator from making use of another operator’s equipment at a price determined under the Code. In CTIL v Keast [2019] UKUT 116 (LC) the Tribunal (Judge Cooke) said at paragraph 31:

“The Code regulates the legal relationship between Code operators and occupiers of land. It does not create or regulate legal relationships between Code operators. They are a matter of private contract, subject to regulation by OFCOM. In particular it is not the policy of the law to give Code operators access to each other’s equipment on favourable terms (in particular as to consideration; see paragraph 10 above). So the Code prevents what Mr Watkin tells me are called “blue on blue” applications for Code rights by providing that Code rights can be obtained over “land”, and stating in paragraph 108 that”

“‘land’ does not include electronic communications apparatus”.

If the claimant’s rights were to connect its apparatus to the equipment within the Kenton Road exchange then those would not be Code rights. But it is not making use of the respondent’s apparatus. The placing of the claimant’s apparatus on the roof does not deprive the respondent of its investment in its own equipment or damage its business model or erode its profit; it does not create the mischief that these provisions of the Code were designed to address. It is not, in the terms used in Keast, a “blue on blue” situation.

We would add that the definition of “land” in the Code does go a little wider than necessary to prevent “blue on blue” applications. Imagine a building belonging to an infrastructure provider whose sole purpose is to enclose electronic communications equipment; there is nothing else in it. An agreement for a mobile operator to connect to the equipment in that building would obviously not be a Code agreement. An agreement that allowed another operator to place equipment on the top of that building is equally not a Code agreement because of the definition of “land” in the Code; yet such an agreement is not a ”blue on blue” agreement and one might have thought that it fell outside the policy. Nevertheless it is not a Code agreement. That may be accidental overkill; or it may be a deliberate policy in order to give additional protection to infrastructure providers. It does not matter which. The provision benefits all landowners, and all types of Code operator, who have buildings whose sole purpose is to enclose electronic communications apparatus.

Furthermore, an agreement that enables a mobile operator to place electronic communications apparatus on the roof of a building whose purpose is wider than the enclosure of apparatus is a Code agreement, whether or not such a building belongs to an infrastructure provider. The provision is neutral between technologies and between business models.

The Kenton Road exchange does not have as its sole purpose the enclosure of electronic communications equipment and accordingly the Site Lease confers Code rights and is a Code agreement.