Evidencing intention: insights from Queen’s Oak Farm

Summary

Following the decision in October of last year to impose a Paragraph 20 Code agreement at Queen’s Oak Farm, Northamptonshire (the “Site”), the First-tier Tribunal (Property Chamber) (the “Tribunal”) has now handed down its decision on the appropriateness of a redevelopment break option and height restriction clause included in that agreement. In doing so, the Tribunal reveals a particular willingness to challenge the credibility of a site provider’s evidence when balancing its competing interests against those of an on-site network operator. 

Ruling in favour of the operator, the case spotlights the challenges faced by site providers looking to restrict operator’s Code rights and is a subtle yet important reminder of the lengths to which the Tribunal will go in order to determine genuine intentions in telecoms disputes.

Background

The previous ruling – discussed in more detail here – rejected the argument from the site provider, Icon Tower Infrastructure Limited (“Icon”), that it had established an intention to develop its Site within the meaning of Paragraph 21(5) of the Code. With the redevelopment ground dismissed, the Tribunal held that the statutory conditions for imposing a Code agreement in favour of the operator, On Tower UK Limited (“On Tower”), had therefore been satisfied.

By the time the present proceedings were heard, the parties had agreed all terms of the Code agreement except for those set out below:

1. Landlord’s redevelopment break date: Icon sought a contractual redevelopment break option (on 18 months’ notice to match the Code) exercisable immediately or, in the alternative, from two years; On Tower agreed to the inclusion of a break option but argued this should be exercisable from five years, giving a longer term certain.
2. Height restriction: Icon sought a restriction preventing On Tower from replacing or increasing the height of its mast beyond 22.5m until after the landlord break date; On Tower challenged this restriction entirely.

The Dale Park Test

In outlining the factors it would consider to determine the appropriateness of these disputed terms, the Tribunal drew on the much-cited ‘Dale Park Test’ and, in particular, the Upper Tribunal’s most recent formulation of this test as set out in Ewefields Farm:

1. First, the Tribunal would consider the nature of the proposed term and why it was needed, in light of public interest considerations;
2. Second, the Tribunal would consider competing objections and whether the term should be omitted or amended to minimise loss or damage;
3. Third – and if the term was not already considered inappropriate – the Tribunal would consider whether it could impose further terms to minimise loss or damage;
4. Fourth, the Tribunal drew directly from Ewefields Farm to reconfirm that the onus is on the site provider to evidence its loss or damage; and 
5. Fifth, drawing again from Ewefields Farm, the Tribunal stated that any such loss or damage must be caused by the exercise of Code rights (themselves).

Whilst the original formulation of the Dale Park Test had concerned terms of an agreement that were desired by an operator - as opposed to a site provider (as is the case here) - the Tribunal was able to look past this consideration on grounds that the Dale Park factors were, in essence, aids to assist in the balancing of, on the one hand, an operator’s need for reasonable flexibility and tenure with, on the other hand, a site provider’s proprietary right to redevelop its own land. For exactly the same reason, the Tribunal was similarly receptive to case law concerning the Landlord and Tenant Act 1954.

The Tribunal ultimately reasserted the position in Vache Farm: the real question is whether the site provider can persuade the Tribunal of a genuine intention to redevelop and, if so, whether that intention should override the operator’s right to, in this case, five years of term certsin.

Redevelopment Break Right

The Tribunal first considered On Tower’s business needs and, in this respect, placed particular emphasis on its role as a ‘neutral host’. Despite On Tower’s admission that there was no pending upgrade project at the Site, the Tribunal was persuaded by On Tower’s argument that a landlord break exercisable on commencement would undermine On Tower’s ability to make any realistic investment decisions at the Site, whilst also rendering the renewal proceedings “entirely pointless”. 

Icon relied on an argument of loss and damage resulting from its inability to redevelop. Its primary grounds for doing so were twofold and supported by evidence relating to (1) board minutes of Icon and its parent company and (2) the existing planning position at the Site.

Contrary to the finding of the previous trial, which rejected Icon’s redevelopment intention on grounds that this intention was contingent on an unlikely migration of mobile network operators, the board minutes submitted to the present proceedings suggested that the redevelopment of the Site formed part of Icon’s wider infrastructure programme and was never conditional on securing mobile network operators. 

However, having filed the board minutes five days before the hearing, On Tower invited the Tribunal to “treat those Board Minutes with considerable scepticism” and suggested that they were created for the purpose of the litigation. After questioning witnesses, the Tribunal appeared unconvinced of the credibility of Icon’s evidence, stating:

“[W]e are unpersuaded as to the fixity of that new intention. It is clear that the Board convened ‘at the last minute’, very shortly before the hearing. In addition, there is absolutely no supporting evidence as to the settled nature of Icon’s new proposal for redevelopment without an MNO […] We find that it is wholly improbable that a business of the size of Icon and the wider APW group would decide to proceed with any business proposal without a business plan being in place.”

The Tribunal also considered that the absence of a site candidate information pack, tower return model and internal rate of return were also factors which challenged the credibility of Icon’s redevelopment intentions.

In respect of planning, Icon argued that it had received confirmation from the local council that prior approval was not required for the development works and that if the landlord redevelopment break could not be exercised for the first five years of the Code agreement it would lose the benefit of that decision. Icon also argued that it would suffer loss resulting from the increasing inflationary costs of development work as time continues to pass. After outlining again that this point had been raised at the ‘last minute’ before the hearing, the Tribunal took the view that, beyond the modest cost of having to reapply for prior approval, Icon had failed to show why it could not obtain further consent in the future should it choose to exercise its break right in five years.

Height Restriction

The rationale for a provision that would prevent On Tower from replacing its existing mast or increasing its height above 22.5m until after the earliest landlord break date was premised on Icon’s desire to participate in the commercial benefit that might follow any such replacement or increase in height. The Tribunal therefore identified this as an argument for “loss of commercial opportunity”, which it refuted for three reasons:

1. First, the Tribunal viewed the argument as purely speculative; 
2. Second, the Tribunal had seen no evidence that Icon had entered into discussions with alternative operators for the purposes of demonstrating a commercial opportunity; and 
3. Third, the Tribunal considered that a loss of opportunity was not a loss caused by the exercise of Code rights.

This was despite that, by its own admission, On Tower had no current business need to increase the size of its mast and despite the arguments put forward by Icon in respect of its own redevelopment intentions.

Key Implications and Takeaways

Whilst the decision may, at first glance, appear to continue a line of operator-favourable Tribunal decisions, it nonetheless offers a number of important lessons for site providers.

Notwithstanding the supposedly low-bar set for the inclusion of landlord redevelopment break options under the 1954 Act, the decision reinforces that a site provider must do more than articulate a redevelopment strategy and must substantiate it with contemporaneous, structured evidence which is well thought-through. Speculative or late-stage assertions are likely to weaken the credibility of the evidence presented. 

In parallel, the decision confirms that an operator’s need for investment certainty will remain a significant factor when determining the term certain of a Code agreement, with limited tolerance for restrictions that undermine the commercial viability of its site operations.

CMS has a market leading telecommunications disputes practice. If you would like to discuss any of the aspects of this decision, please contact the authors. 

Article co-authored by Thomas Carter, Trainee Solicitor.