Telecommunications – Electronic Communications Code – Consideration and compensation – Parties agreeing to enter into new agreement conferring rights under Electronic Communications Code – Upper Tribunal required to determine consideration and compensation payable – What assumptions tribunal required to make about site and notional transaction when determining consideration payable – Whether respondent entitled to recover professional fees incurred before order made conferring Code right – Terms determined accordingly
The respondent was a statutory water undertaker which owned Allenby Road Reservoir in Southall, Middlesex. In 1998 its predecessor granted a 20-year lease of an area of land at the reservoir together with the right to install electronic communications apparatus on the land and on top of its adjoining water tower. The lease was contracted out of the security of tenure provisions of the Landlord and Tenant Act 1954.
As it expired after the commencement of the Electronic Communications Code (the Code) on 28 November 2017, it was classified as a “subsisting agreement” for the purpose of the transitional provisions. When the lease expired, the landlord’s interest was vested in the respondent, while the tenant’s interest had been assigned to the claimants, who were operators entitled to the benefits of the Code.
On the expiry of the lease, the parties agreed that under paragraph 34 of the Code they should be directed by the tribunal to enter into a new agreement conferring rights under the Code. They also agreed most of the terms of a new 10-year lease but were unable to agree the consideration for entering into the agreement and any initial compensation to which the respondents were entitled under the Code.
Held: The terms were determined accordingly.
(1) An order under Part 5 and paragraph 34 could only relate to a site over which the operator already had Code rights. The question was whether and on what terms the operator might continue to exercise those rights. The reality was almost always that the new lease was of an equipped site. The question was whether the statutory valuation hypothesis required that that reality be modified and that the circumstances of the notional transaction be taken to be different from those on the ground on the valuation date.
(2) Paragraph 24(1) of the Code provided that the consideration payable by an operator to a site provider under an agreement imposed under paragraph 20 was to be an amount representing “the market value of the relevant person’s agreement to confer … the Code right”. Paragraph 24(2) explained that that was: “… the amount that, at the date the market value is assessed, a willing buyer would pay a willing seller for the agreement – in a transaction at arm’s length, on the basis that the buyer and seller were acting prudently and with full knowledge of the transaction, and on the basis that the transaction was subject to the other provisions of the agreement imposed under paragraph 20”.
Paragraph 24(3) introduced further assumptions but did not include an express assumption that the Code rights to be valued were being conferred in respect of a site which was vacant. However, for the purpose of a paragraph 24 valuation required by paragraph 34, the subject site had to be assumed to be vacant.
(3) It was axiomatic that both the willing buyer and the willing seller were hypothetical persons: FR Evans (Leeds) Ltd v English Electric Co Ltd (1978) 1 EGLR 93.
That inevitably required the further assumption that an actual occupier had vacated the site by the valuation date. A negotiation between a site provider and an operator who was already in occupation following the expiry of a previous agreement was not a negotiation at arm’s length. The assumption that the actual occupier was not present on the site usually carried with it the further assumption that the items which the occupier would be required or entitled to remove when leaving the site had been removed. The same assumption was necessary in a Code valuation to respect the express direction that the consideration was arrived at by a negotiation in the market conducted at arm’s length.
(4) The general approach to be adopted to valuation was the three-stage approach considered in Vodafone v Hanover Capital [2020] EW Misc 18 (CC); [2020] EGLR 35, in the light of information about other comparable transactions or relevant tribunal decisions. Without taking account of any special features or particular sensitivities which a particular location might exhibit, it would be surprising if the value of Code rights fell significantly outside the ranges indicated by previous decisions concerning sites with similar characteristics. Where a three-stage assessment had been undertaken and both parties had attributed a specific value to a particular type of burden or benefit, their agreement on that component might nevertheless provide a useful reference point: Cornerstone Telecommunications Infrastructure Ltd v London and Quadrant Housing Trust [2020] UKUT 282 (LC); [2020] PLSCS 187, Vodafone and On Tower UK Ltd v JH & FW Green Ltd [2020] UKUT 348; [2020] PLSCS 229 considered.
In the present case, the tribunal was satisfied that the sum of £3,300 a year represented the market value of the respondent’s agreement to confer the Code rights agreed between the parties for a 10-year term with the claimants having an annual right to break.
(5) Where the tribunal made an order under paragraph 20 of the Code imposing a new Code agreement, paragraph 25(1) provided that it might also order the operator to pay compensation to the site provider for any loss or damage sustained as a result of the exercise of the Code rights to which the order related. By paragraph 84(2), such compensation might include payment for reasonable legal and valuation expenses. Those provisions were applicable in this case by virtue of paragraph 34(11).
The intention of paragraph 25 was to allow compensation to be ordered at the time a Code agreement was imposed for losses sustained before that time. It was therefore necessary to understand the reference to loss “sustained as a result of the exercise of the Code right” as including expenses incurred as a result of a claim for Code rights.
The tribunal would make an order under paragraph 34(6) of the Code terminating the subsisting Code agreement with effect from a date to be agreed and ordering that they enter into a new agreement on terms previously agreed between them at an annual rent of £3,300. The claimants would additionally pay compensation totalling £7,500 in respect of professional fees.
Stephanie Tozer QC (instructed by Winckworth Sherwood LLP) appeared for the claimants; Tim Calland (instructed by Birketts LLP) appeared for the respondent
Eileen O’Grady, barrister
Click here to read a transcript of EE Ltd and another v Affinity Water Ltd
