Further clarity on the public benefit test and terms of a Code Agreement

Published 11 septiembre 2020

Cornerstone Telecommunications Infrastructure Limited v University of the Arts London [2020] UKUT 0248 (LC)

With this decision comes further guidance, though no real surprises, on a number of aspects of the not so new Code. Although, in this case, the decision went against the operator, the clarity it provides should provide useful guidance and help expedite negotiations for new agreements.

Any decision which helps increase the speed at which telecom sites can be rolled out should be welcomed.

Facts of the Case

• Cornerstone Telecommunications Infrastructure Limited (Cornerstone) sought rights to install telecommunications equipment upon the London College of Communications (the Building).
• The landowner, University of the Arts London (UAL), was a freeholder of the building and had entered into an agreement to sell it to a developer and take a lease back for three years. During the three year period the developer would, as part of a wider development, build a new college for UAL on nearby land and once ready, UAL would move in and terminate their lease. The building would then be demolished and the area redeveloped.
• EE Limited and Hutchison 3G Limited had agreed with UAL to enter into an agreement pursuant to paragraph 26 of the Code for their site on the Building and a consent order was made by the tribunal on 7 August 2020. Such an agreement does not benefit from the protection of part 5 of the Code and as a result the operators will not have a statutory right to continue to occupy after the end of the agreement.
• Cornerstone served notice pursuant to paragraph 20 of the Code on UAL and applied to the tribunal after a period of negotiation. UAL was prepared to enter into a paragraph 26 agreement but not an agreement that benefitted from the protections of part 5 of the Code.

Decision

UAL opposed the paragraph 20 notice on the basis that the test under paragraph 21 of the Code (the public benefit test) was not met. The test is as follows:

1. Subject to sub-paragraph (5), the court may make an order under paragraph 20 if (and only if) the court thinks that both of the following conditions are met.
2. The first condition is that the prejudice caused to the relevant person by the order is capable of being adequately compensated by money.
3. The second condition is that the public benefit likely to result from the making of the order outweighs the prejudice to the relevant person.
4. In deciding whether the second condition is met, the court must have regard to the public interest in access to a choice of high quality electronic communications services.
5. The court may not make an order under paragraph 20 if it thinks that the relevant person intends to redevelop all or part of the land to which the code right would relate, or any neighbouring land, and could not reasonably do so if the order were made.

UAL could not use redevelopment to oppose the making of an order as it was not the party with the intention to redevelop the land. UAL submitted that the result of an order granting a code agreement to Cornerstone would be that it no longer had control and the ability to meet its contractual obligations with the developer. It would need to secure vacant possession of the Building and as a result of the workings of parts 5 and 6 of the Code it would not be able to do so by the required date.

In order to remove Cornerstone UAL would need to enter into stressful and expensive litigation and there would be a risk of not being able to meet its contractual obligation and being served with an injunction by the developer.

UAL was prepared to enter into a paragraph 26 agreement on the basis that part 5 of the Code would not apply however a paragraph 26 notice had not been served and Cornerstone was not seeking an agreement under that paragraph of the Code.

Cornerstone’s response was that UAL would still have time under parts 5 and 6 of the Code to remove them from the Building before they were contractually obliged to do so (even if it involved litigation) and the use of paragraph 26 of the Code was not appropriate here as it circumvented the security of the Code and was a way of contracting out, something which the lawmakers did not wish the parties to be able to do.

The Tribunal agreed with UAL and decided that;

1. The stress, damage to the relationship with the developer and reputational damage caused by UAL being unable or having to use litigation to remove Cornerstone could not be compensated by money and as a result the test in paragraph 21(2) was not met.
2. Paragraph 26 could be used in this instance. When determining whether it is appropriate to use paragraph 26 the Tribunal will consider the facts of each site and determine whether it is suitable or an attempt to avoid the protections of the Code. There is no hard and fast rule on how long a paragraph 26 agreement can be for. However the Tribunal could not impose a paragraph 26 Agreement here as one was not sought by Cornerstone.

Impact for operators and landowners

This decision is the first to give guidance on the paragraph 21 test and the points to take from the outcome are as follows:

• When determining the test under paragraph 21 of the Code the level of prejudice the site provider must show must be "very high”.
• Nonetheless, operators should be wary of seeking an order under paragraph 20 where a landowner has stated an intention to redevelop (even where the development could be many months or years away) and can prove it.
• The tribunal will not entertain the availability of any alternative sites (and that discounting exercise extends to potential sharing arrangements with other operators).
• The "net public benefit" test (encouraged in some corners) is of no merit.
• A paragraph 26 (interim) Code agreement may be for any length of time which is considered by the Tribunal to be appropriate (there is no limitation).
• The Tribunal will not allow the use of paragraph 26 to impede Code. I.e. landowners cannot insist on an agreement being made by paragraph 26 where an agreement under paragraph 20 (if not consensually) would, ordinarily, be pursued.

The Tribunal also considered the terms of the agreement (in the event that their decision was later determined to be incorrect on appeal) and provided very helpful commentary on a number of points in dispute. The decision makes it clear that these comments are obiter however they are a useful insight of the views of the Tribunal. A large amount of clauses were in dispute and the Tribunal commented on the level of hostility between the parties by calling it unseemly and unnecessary in which they treated each other as enemies. The approach taken by the Tribunal was to make pragmatic judgements based on evidence from the parties about the practical approach they would take when exercising the rights. A selection of the clauses are as follows:

1. The conditions in paragraph 17 of the Code may or may not be included in a Code Agreement depending upon the nature of the site. The appearance of the building didn’t matter in this case therefore the requirement not to materially alter the appearance of the equipment was not justified. This shows that the blanket requirement of unlimited equipment/sharing rights is probably unsustainable, except in exceptional cases. It also shows that the blanket requirement to include the paragraph 17 conditions does not work and each site will need to be assessed on its own merits.
2. Site providers may insist on a guarantee on assignment. The ‘where reasonably required’ wording favoured by operators is not to be included as the intention of the lawmakers was for the site provider to be able to require a guarantee on any assignment to an operator.
3. Both parties should act reasonably in negotiations and may be at increased risk on costs for failing, in the tribunal’s eyes, to do so.
4. The agreement does not have to specify the items of equipment to be installed by the operator. The Site Provider can include protections in the agreement, such as requirements not to make their building unsafe, obtain planning permission, comply with ICNIRP requirements and, where appropriate, comply with the paragraph 17 conditions to ensure that the operator’s rights are limited.