Clarifying termination rights under the Electronic Communications Code

Summary

In the recent case of Vodafone Limited v Icon Tower Infrastructure Limited and AP Wireless II (UK) Limited, the Upper Tribunal has given much needed clarity on three of the four possible Electronic Communication Code (“Code”) termination grounds (substantial breaches, redevelopment and public benefit).

The claim was heard by the Tribunal at a joint hearing along with a claim under the Landlord and Tenant Act 1954 (the “1954 Act”) claim between Vodafone Limited v AP Wireless II (UK) Limited as both had similar preliminary issues and it is an important decision.

Vodafone was successful on each of the preliminary issues in the two claims, meaning that it could renew its agreements in respect of the two sites. The detailed (98-page!) judgment from the Upper Tribunal gives welcome guidance to the industry on the application of the grounds of opposition under the Code (in schedule 3A to the Communications Act 2003), in the first contested Code renewal to go to trial.

Many of the principles set out in the decision are of wider interest and relevance to site providers looking to terminate existing Code agreements, particularly those in connection with redevelopment. We explore these in further detail below.

First Claim – “Steps Hill Farm”

The Claimant, Vodafone, sought to renew its existing Code agreement of the Steps Hill Farm mast site. Icon, the site provider, who is also an OFCOM registered infrastructure company, sought to terminate Vodafone’s Code agreement on various grounds (substantial breaches, redevelopment and public benefit) and required the removal of its apparatus.

The preliminary issues were:

1)    Substantial Breach – whether Vodafone’s Code agreement ought to come to an end as a result of substantial breaches. Icon argued that Vodafone had breached the alienation provisions in its agreement due to its relationship with Cornerstone (an established infrastructure provider);

2)    Redevelopment – whether Icon intended to redevelop all or part of the land to which Vodafone’s Code agreement relates, or any neighbouring land, and could not reasonably do so unless Vodafone’s agreement came to an end. Icon had built its own mast near the Steps Hill site and argued that its proposed decommissioning and removal works on both a neighbouring site and the Steps Hill site was redevelopment which could not reasonably be carried out without terminating Vodafone's agreement; 

3)    Public Benefit – whether or not the Paragraph 21 test was met. As a reminder, this test has two conditions which must be met: the first is that the prejudice caused to the site provider by the grant of the Code agreement is capable of being compensated by money and the second is that the public benefit likely to result from the making of the order outweighs the prejudice to the site provider. Icon argued that Vodafone's site caused prejudice which was not capable of compensation by money in connection with the operation of its new site, and that such prejudice was not outweighed by the public benefit of Vodafone's site remaining in situ.

The Upper Tribunal’s Decision

1) No substantial breach –In deciding this ground, the Tribunal reviewed in detail the complex contractual agreements between Vodafone and Cornerstone and the factual evidence around the operation of the site. The Tribunal accepted Vodafone’s submissions that Cornerstone managed the site as its agent and that the agreements did not result in the transfer or sharing of the Code rights in the existing agreement in a way which breached its provisions. 

2) Intention to redevelop not proven – The Tribunal considered each element of Icon’s proposed redevelopment works which related to both the Vodafone site and neighbouring land and some of which had already been done. Icon was not successful in demonstrating an intention to redevelop in respect of any of the proposed works.

Key Takeaways

These are our key takeaways from the Tribunal’s decision on redevelopment:

• Works to the agreement land and other land - Despite Paragraph (c) referring to redevelopment of “all or part of the land… or any neighbouring land”, the Tribunal accepted Icon’s submission that redevelopment works can be works both to the land to which the Code agreement relates and neighbouring land.
• Works to Neighbouring Land - When considering redevelopment works to neighbouring land, the Tribunal confirmed this implied a test of geographical proximity, but accepted that it was not necessarily limited to adjacent occupiers and was capable of extending more widely.  There must be sufficient physical proximity to the land on which the operator’s apparatus is installed.
• Works already completed - The test of intention is the same as ground (f) in section 30(1) of the 1954 Act (i.e. the site provider has to prove a firm and settled intention to carry out the relevant work of redevelopment which is not likely to be changed and that there is a reasonable prospect of the works being carried out. The Tribunal confirmed that the language, requiring that the site provider "intends” to carry out the works rules out the concept of an intention to carry out works which have already been completed.
• Time limit – ground (f) of the 1954 Act expressly states that the intention which must be proved is an intention to carry out the relevant works “on the termination of the current tenancy” but there are no equivalent words in Paragraph (c). The Tribunal confirmed it was important that the site provider be required to evidence their proposed timetable of works and that it was implicit that the intention was to commence the works within a reasonable period of the Code agreement coming to an end.  Such reasonable period will be fact sensitive and will take account of the requirement to remove the existing apparatus.
• Removal of mast - Works to apparatus only are not qualifying works as they are not works to “land”. So, deconstruction of the existing mast only, is not redevelopment. In an important finding for Infrastructure Companies who are site providers, the Tribunal did confirm that the removal of an existing mast to facilitate the erection of the site provider’s own mast on the same site, could be redevelopment.   

3) Public benefit test met – In terms of the first condition, the Tribunal considered Icon’s submissions around the risk of potential planning enforcement (its planning approval for the new Mast required the removal of the Vodafone mast and other equipment). The focus here was on Icon not being able to make lawful use of the new tower, rather than the risk of a legal battle with the planning authority. Also considered were potential reputational losses due to failure of investment in the alternative site, but the Tribunal considered that the losses were really down to its financial investment in an alternative site and there would be nothing unjust in compensation being confined to money.

For the second condition, Icon had sought to argue that, because there was an alternative site available, there would be no public benefit to renewing its lease. However, the Tribunal found that forcing Vodafone to migrate to the new tower would deprive it of the advantage of paying a Code rent for the site (as it would have to pay a commercial rent to Icon). The Tribunal confirmed it was only required to consider whether the public benefit likely to result from allowing Vodafone to renew outweighs the prejudice to Icon and not any wider disbenefits of Vodafone staying on its current site.

Second Claim – “Pound Hill”

Again, Vodafone as claimant sought to renew its existing lease of the Pound Hill site under the 1954 Act (the “1954 Act”). AP Wireless, the landlord, in this case argued that due to Vodafone’s relationship with Cornerstone, it was not in occupation of the site for the purposes of its business as required by the 1954 Act.

The Upper Tribunal sat as the County Court and decided on the facts that Vodafone remained in business occupation of the site for the purpose of the proceedings. In determining this finding, it was found that due to their nature, in -person management activities at telecommunications sites were less relevant in determining business occupation than may be the case in other 1954 Act renewals. 

Implications of the decision

The Upper Tribunal decision for Steps Hill is important, being the first contested termination case under the Code which has proceeded to trial and involving detailed consideration of three of the four Code termination grounds.  

Whilst on these specific facts, Vodafone was successful in renewing its agreement, particularly in the context of redevelopment, we are pleased to see that the Tribunal’s thorough and detailed commentary is consistent with the policy of the Code and it remains the case that works of redevelopment properly falling within Paragraph (c) should not be prevented by Code rights.