Member Article

The Court of Appeal has partially clarified a significant loophole in the Telecoms Code, which was threatening to prevent the redevelopment of some telecommunications sites.

The previous iteration of the Telecoms Code was infamously labelled ‘not one of parliament’s better drafting efforts’ by the High Court. Whilst its replacement, the current Code, was intended to constitute a clearer regime for all stakeholders, it too has generated an amount of head-scratching and consternation. 

Background

A landowner’s statutory ability to terminate an agreement with an operator, which is out of contractual term but continuing by virtue of the ‘holding over’ provisions within the Code, is set out at paragraph 31(1) of the Code. This provides that:

‘A site provider who is a party to a code agreement may bring the agreement to an end by giving notice… to the operator who is a party to the agreement’ 

This termination right can only be exercised on certain grounds, the most commonly cited of which is that the landowner intends to redevelop all or part of the site comprised in the telecommunications site and could not reasonably do unless the agreement comes to an end.

The issue arose as to what was meant by “who is a party” to the code agreement that the landowner is seeking to terminate. Whilst it was clear that there would be no issue if the landowner seeking to exercise the termination rights was an original party to the agreement, a complication arises where a subsequent landowner is involved.

Paragraph 10 of the Code states who else, aside from the original landowner, will be bound by the rights created by the agreement with the operator. It provides, amongst other things, that the rights will bind both:

• a successor in title to the original landowner’s interest; and
• a person whose interest is granted directly or indirectly out of either the original landowner’s title (whether still owned by the original landowner or one of its successors). 

Paragraph 10 expressly confirms that a successor in title to the original landowner will ‘be treated as a party to the agreement’. However, it does not extend this status to any landowner with a derivative interest.

Facts

In 2003, Vodafone was granted a 15-year rooftop lease for the purposes of installing and operating a telecoms mast site (the Lease). In 2020 Vodafone came to seek a renewal of its expired Lease and by this time:

• the original landowner who granted the lease had sold its freehold interest in the building to a third party company (Gencomp); and 
• Gencomp had granted a concurrent lease of Vodafone’s rooftop site to the mast-site aggregator, AP Wireless (APW). 

The statutory renewal mechanism at paragraph 33 of the Code is drafted almost identically to the landowner’s termination mechanism at paragraph 31 and states that it can only be operated by ‘[a]n operator or site provider who is a party to a code agreement’ serving notice on ‘the other party to the agreement’. 

From a strict property law perspective and by virtue of its concurrent lease interest, APW took both the benefit and burden of the Lease and was the only party with the right to grant Vodafone a new lease of its existing site. However, it was not an original party to the Lease and as its interest was only derivative to the original landowner’s freehold interest, it was not treated as a party to the Lease by virtue of paragraph 10 of the Code. As a result, it seemed that it was not the appropriate party upon whom Vodafone should serve its statutory renewal notice.

By contrast, Gencomp was the successor in title to the original landowner and so, by virtue of paragraph 10 of the Code, treated as a party to the Lease. Following the renewal mechanism’s wording, Gencomp was therefore the party upon whom a statutory renewal notice should be served.  But, it was accepted that Gencomp had no lawful ability to actually grant the new lease sought. 

The Tribunal was therefore asked to determine which of the two parties, Gencomp or APW, was able to grant the renewal lease sought by Vodafone. 

Tribunal’s decision at first instance

The Tribunal took the view that paragraph 10 of the Code was intended to comprehensively define all those (beyond the original contracting parties) who should be treated as a party to a Code agreement. 

As a result, APW did not fall within the renewal mechanism regime and could not be served with a valid renewal notice by Vodafone. Equally, the Tribunal held that because APW was Vodafone’s immediate landlord, Gencomp could not grant the renewal lease sought and so the Code’s renewal mechanism was effectively frustrated in this scenario.

However, the Tribunal held that Vodafone could still achieve its primary purpose by exercising the separate mechanism within the Code for the grant of a brand-new lease and pursuing this against APW. 

In reaching this conclusion, the Tribunal noted that this created a ‘small but potentially important structural defect’ in the Code, since it effectively put the Code’s statutory termination mechanism out of the reach of landowners under derivative interests (such as concurrent leases). As no immediate solution could be found to this defect, permission to appeal was granted to APW.

Court of Appeal’s decision

The Court of Appeal agreed that on a literal interpretation, it was unclear whether paragraph 10 intended to be comprehensive in its definition of who should be treated as a party to a Code agreement.

However, it was guided by the purposive approach to interpreting the Code which was adopted by the Supreme Court in Compton Beauchamp and in a reasoned judgment determined that:

• the regime is intended, so far as is possible, to work in such a way that the landowner currently entitled to the benefit and burden of the Code agreement is treated as a party to it and so able to exercise the statutory renewal and termination mechanisms; and
• the Code does not exist in a vacuum and so does not override the usual landlord and tenant position, whereby the owner of a concurrent lease would be treated as a party to a previously granted occupational lease.

Overruling the Tribunal, it determined that paragraph 10 was not to be read as being comprehensive. As a result, APW should be treated as a party to Vodafone’s Lease, by virtue of its concurrent leasehold interest in the mast site and should be entitled to engage with the Code’s renewal mechanism and indeed exercise the statutory termination mechanism.

 

Vodafone Ltd v Potting Shed Bar and Gardens Ltd & Anor [2023] EWCA Civ 825

 

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