Telecommunications – Electronic Communications Code – Code rights – Lease – Break notice – Preliminary issue arising as to validity of paragraph 31 notices to end code right agreements – Whether break notice in lease effective to terminate lease – Whether secondary code agreement continuing after end of primary code agreement – Whether code agreements being leases or licences – Preliminary issue determined
The first respondent was the freeholder of 11 Belgrave Road, London SW1 and the second respondent held a 25-year lease of the building from 2 November 2002. The claimants were both code operators for purposes of the electronic communications code in schedule 3A to the Communications Act 2003.
By an agreement dated 30 November 2002 (the primary code agreement), the second respondent conferred upon the first claimant the right to install and operate telecommunications equipment on the roof of the building. The primary code agreement included a break clause whereby the second respondent might terminate the agreement in order to redevelop the property.
On the same date a licence agreement was made between the then freeholder, the second respondent and the first claimant (the secondary code agreement) under which the freeholder consented to the second respondent entering into the primary code agreement and agreed to be bound by its terms.
The primary code agreement expired on 29 November 2024. However, paragraph 30 of the code provided that code agreements did not come to an end when they expired, but continued until terminated, in accordance with paragraph 31, by notice given by a site provider who was a party to the relevant agreement.
On 31 March 2010, the first claimant purported to assign the primary code agreement to itself and the second claimant. In December 2019, the first respondent served a notice on the first claimant under paragraph 31(1) of the code to end the agreement conferring code rights, without referring specifically to either code agreement. The second respondent served a similar notice.
A preliminary issue arose as to the validity of the notices. The claimants contended that the first respondent was not a party to the primary code agreement and so could not serve a paragraph 31 notice; and that the notice was served too early in view of the contractual expiry date. The claimants made similar arguments about the second notice, although the second respondent was party to the primary code agreement. They also argued that neither notice had been served on the second claimant.
The respondents’ said that they were not relying on the break clause in the primary code agreement but on a break clause in the second respondent’s lease which had been exercised on 14 December 2018 so as to bring the lease to an end on 2 April 2021. The second claimant was not a party to either the primary or the secondary code agreement and so there was no need to serve notice on it.
Held: The preliminary issue was determined.
(1) The lease provided that the break notice would only take effect if the second respondent had paid rent up to date and gave vacant possession (other than as regards telecommunications equipment). To do that it would have to get itself and its chattels out, and ensure that its sub-tenants had left. On the balance of probabilities, the tribunal had to find that the lease would come to an end on 2 April 2021. It was difficult to see how it could do otherwise. A break notice had been served. There was no allegation or evidence of bad faith. It was likely, as a matter of fact, that where a lessee served a break notice (which was irrevocable) it wished to bring the lease to an end and thought it would be able to get out, and get it sub-tenants out, by the date of the break. To say that that was unlikely was to speculate. Therefore, on the balance of probabilities 2 April 2021 was the date on which, as a result of the service of the second respondent’s break notice, the primary code agreement would come to an end but for the effect of paragraph 30 of the code. The termination date specified in the second respondent’s notice fell after that date, and the date point therefore failed so far as the notice terminating the primary code agreement was concerned.
(2) The purpose of obtaining a freeholder’s agreement to be bound by code rights granted by a lessee might be to create code rights of a longer duration than the occupier could confer. But an agreement with the freeholder did not have to do that. The secondary code agreement was an agreement by the freeholder to be bound by the code rights actually granted by the second respondent. Those code rights were vulnerable to the early termination of the lease, whether by break notice or, for example by forfeiture. The secondary code agreement made no provision for the freeholder to be bound by code rights that the second respondent could not grant. There was, on ordinary contractual principles, no possibility of the implication of a term to that effect. There was no reason of necessity or of business efficacy why any extension to its terms should be implied. The first respondent was bound only by the code rights granted by the second respondent. Those rights were vulnerable to the breaking of the second respondent’s lease. Where they came to an end by virtue of the disappearance of the second respondent’s estate, the first respondent also ceased to be bound by them: Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC); [2020] PLSCS 127 applied. Cornerstone Telecommunication Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] EWCA Civ 1755; [2019] PLSCS 201 followed.
(3) An assignment of a lease in breach of covenant was effective, whereas the assignment of purely contractual rights in breach of covenant was not. Accordingly, it was necessary to determine whether the primary code agreement was a lease or a licence and whether it was in fact assigned by the first claimant to the first and second claimants on 31 March 2010, and then on whether the secondary code agreement was a lease and, if it was, whether it was validly assigned. If an agreement granted exclusive possession for a term, it was a lease even if the parties said it was not: Old Grovebury Manor Farm v W Seymour Plant Sales & Hire (No 2) [1979] 1 WLR 1397 and Street v Mountford [1985] 1 EGLR 128 followed
On the evidence, there was no grant of exclusive possession of the roof or any right to occupy; there was a licence agreement extending to the whole roof. Therefore, the question whether it was in fact assigned did not arise. Furthermore, the secondary code agreement was a licence to the second respondent to confer code rights.
(4) The notices, addressed to the first claimant only, were valid. It remained to be decided whether the ground of termination stated in the notices, namely the site provider’s intention to redevelop the property, could be made out by the respondents.
Stephanie Tozer QC (instructed by Winckworth Sherwood LLP) appeared for the claimants; Wayne Clark (instructed by Baker & McKenzie LLP) appeared for the first respondent; The second respondent did not appear and was not represented.
Eileen O’Grady, barrister
Click here to read a transcript of EE Ltd and another v Edelwind Ltd and another
