Out-Law Legal Update
High Court guidance will reassure banks acting to freeze accounts suspected of holding proceeds of crime
Out-Law Analysis | 04 Jul 2019 | 11:53 am | 9 min. read
Of the Upper Tribunal (Lands Chamber)'s decisions on the topic over the past 18 months, two are now pending appeal with the Court of Appeal - while a further issue in one of the most recent cases has been stayed pending the outcome of one of those appeals. This level of litigation - and appeals - is understandably causing some nervousness in the telecoms market, with site providers and operators seemingly holding off on reaching consensual agreement on renewals of their leases pending some more certainty over the state of the law.
Although the majority of tribunal decisions to date have favoured operators over site providers, operators would be well advised to redouble their efforts on winning over the hearts and minds of site provider communities if they wish to avoid being left significantly out of pocket when embarking on litigation under the Code. However, the tribunal has also made it equally clear that it will not hesitate to cap the costs of any 'winning' party that in its view are excessive - consistent with the general judicial approach to costs.
The tribunal has so far adopted a purposive approach in its interpretation of the Code, and has made clear it has no patience for banal technical legal arguments which seek to frustrate the purpose of the Code, which is ultimately to help secure the government's vision for Britain's digital future. Such arguments have been a feature in the arguments made by site providers. However, it has also made it clear that it is likely to take a dim view of operators which seek to abuse their responsibilities as custodians of statutory powers by seeking overly broad rights under the Code, or which unthinkingly seek rights from site providers which they simply do not need or which pose insurmountable hurdles for site providers in any given context.
The tribunal is also unlikely to be sympathetic towards any party seeking the costs of Code litigation in which they have run up significant costs on aggressively pursuing points on which they could sensibly have conceded, even if that party was ultimately successful in its arguments.
The Electronic Communications Code governs the relationships between site providers and operators of electronic communications services licensed by Ofcom. It gives operators certain rights to install, inspect and maintain electronic communications apparatus including masts, cables and other equipment on public and private land, even where the operator cannot agree the necessary rights with the site provider.
This level of litigation - and appeals - is understandably causing some nervousness in the telecoms market, with site providers and operators seemingly holding off on reaching consensual agreement on renewals of their leases pending some more certainty over the state of the law.
A new Code, intended to support the government's vision for the UK's digital future, came into force on 28 December 2017. Among other measures, the new Code restricts the ability of landowners to charge premium prices for the use of their land by basing the consideration paid on the underlying value of the land. At the time, the government said that it expected the new Code to deliver significant cost reductions to the telecoms sector while ensuring that site providers receive fair payment for the use of their land.
The three recent cases have prompted some strident commentary from judges on the conduct of both parties, while some questions remain outstanding. The cases are Cornerstone Telecommunications Infrastructure Ltd (CTIL) v Keast (8 April 2019); Evolution (Shinfield) LLP & others v British Telecommunications plc (15 April 2019); and CTIL v Central Saint Giles & Clarion Housing Association (7 June 2019).
The dispute in this case involved a mast site established before 2007, when it was leased to Vodafone. The Vodafone lease is protected by the 1954 Landlord and Tenant Act (1954 Act). The contractual term of the lease expired in 2015, but Vodafone remains in occupation of the site.
The judge in the case was required to consider four preliminary issues:
Judgment on this issue has been stayed pending a related appeal, and will be eagerly awaited as many telecoms operators occupy their sites under business tenancy protection under the 1954 Act which will not apply once they obtain a new Code agreement. However, a number have applied for Code rights whilst their 1954 Act rights still subsist.
Site providers have argued that operators should not be able to maintain 1954 Act protections while at the same time seeking Code rights, which would allow them to pay less by way of consideration determined under new Code principles. It remains to be seen which way the tribunal will decide.
This argument was given short shrift by the judge, who described the notion that the site provider could have been misled by the discrepancy as "fanciful". However, it is worth pointing out as the argument is an example of some of the alarmist tone being used by site providers, who have sought to rely on this as a means of invalidating the notice and requiring the operator to start again.
An operator should be careful to seek all the rights it wants the tribunal to grant as part of its submission. Should the site provider be in fact misled, pressurised or inconvenienced by the operator's notice, as it attempted to argue in this case, then in the words of the judge: "this is a matter which may be relied upon by the tribunal in the exercise of its discretion as to what are the appropriate terms to be imposed upon the occupier of the land".
This argument turned on whether CTIL was unable to seek Code rights over land already containing electronic communications apparatus (ECA), such as a mast or concrete base, as the definition of 'land' in the Code excludes ECA.
This argument was rejected by the judge, who said that the prohibition "does not mean that it is impossible to acquire Code rights over land where ECA is present". Here, CTIL had "applied for Code rights over land, not over ECA". ECA "installed pursuant to Code rights, however firmly affixed to land, does not by virtue only of that attachment become land in accordance with the common law".
The judge did, however, make slightly puzzling comments about whether it was permissible for an operator to acquire Code rights over land containing ECA where it was not in 'friendly relations' with the rival operator. According to the judge, such a request would be "pointless" as any rights granted "would not enable the claimant either to use or to remove the ECA; it would be trespassing upon and interfering with another's goods if it did so".
The Code regulates the legal relationship between Code operators and occupiers of land. It does not create or regulate legal relationships between Code operators, which are a matter of private contract subject to regulation by Ofcom. In particular, it is not the policy of the law to give Code operators access to each other's equipment on favourable terms.
This was another argument by the site provider that by seeking rights which the tribunal was unable to confer, the operator invalidated its application and therefore had to start again. This was dismissed by the judge as a blatant attempt to obstruct government policy of permitting the rollout the telecommunications network by increasing costs and making the operator jump through all manner of hoops.
The site provider argued that certain terms such as would be found in a typical lease should be outside of the jurisdiction of the tribunal to consider - such as warranties, the right of the operator to install a generator and the right to restrict the site provider's access to the site.
The limits on the tribunal's jurisdiction to grant such rights were rejected: the judge agreed with CTIL that "all the terms of the draft agreement are in principle within the jurisdiction ... but all are a matter of discretion. They may or may not be granted in due course, but none of them is out of bounds". However, although the operator was successful in this case, the tribunal warned that operators "should not count [their] chickens. All the draft terms can be considered as a matter of discretion, and the claimant may have an uphill struggle to persuade the tribunal that some of them are appropriate".
This was an interesting case over which party bears the cost of relocating ECA. A consortium of developers sought an order from the tribunal to remove a telecoms cabinet from a publicly-maintained footway at a roundabout near a village south of Reading. The cabinet belonged to BT, and was properly installed by BT in 2011 under its street works rights under the previous Code. It contained fibre optic cables and other ECA and was connected to ducts, cabling and joint boxes running beneath the footway. As a result of planning permission for a new housing development, the BT cabinet now lies on the route of a proposed new exit from the roundabout, and must be relocated so that the redevelopment can proceed.
The tribunal held such high costs were not necessary and had been incurred, in part, as a result of them refusing access to their land or buildings for surveys. This should be taken as a warning to site providers not to unnecessarily prevent access during preliminary hearings and not to expect the automatic return of all costs incurred during the legal process.
The developers sought to take advantage of paragraph 38 of the new Code, which they say enables the owner or occupier of neighbouring land being entitled to require removal of ECA kept on other land which "interferes with or obstructs a means of access" to and from the neighbouring land. They also argued that, unlike the position under the previous Code, the removal had to be at the expense of BT. There were technical arguments over the ambit of paragraph 38 as to exactly when it applied – whether to an existing means of access or a future/potential means of access - and the tribunal found in favour of BT, stating that its cabinet and ECA did not obstruct a means of access.
The tribunal took into consideration the clear policy reasons behind the new Code, saying that if the developers' arguments succeeded, this did not explain "why a piece of legislation intended to improve electronic communications services for the benefit of the public accelerating and simplifying procedures for installing and retraining infrastructure by operators should include such significant rights for owners of neighbouring land to require the removal of apparatus at the expense of the operator when such rights are contrary to the general law regulating relations between neighbours". Of note was BT's assessment of the time and potential costs of the relocation of the cabinet and ECA: 32 weeks - some eight months - and almost £300,000. This figure was disputed and not a question the tribunal had to determine, but it is worthwhile for site providers to be aware of the potentially significant costs involved when relocating ECA.
This case concerned rights of access for survey under the new Code. The tribunal's judgment came with a warning against excessively technical arguments about the form of Code notices where no question of jurisdiction is engaged.
Although the parties reached agreement in the end – including on the level of indemnity to be given by CTIL, £10 million - the tribunal gave warnings to both parties about their "disproportionate, inappropriate and unacceptable" behaviour. Firstly, it warned CTIL against requesting more powers than were necessary to carry out its functions in order to avoid being seen as "oppressive" and "alarming the respondents", as was viewed in this case.
Secondly, it noted that the site providers should not automatically expect to receive the full amount of their legal fees despite having 'won' their case. Here, the site providers' original request of £100,000 was reduced to an award of £5,000 each. The tribunal held such high costs were not necessary and had been incurred, in part, as a result of them refusing access to their land or buildings for surveys. This should be taken as a warning to site providers not to unnecessarily prevent access during preliminary hearings and not to expect the automatic return of all costs incurred during the legal process.
In addition, the tribunal warned that it was "not attracted to excessively technical arguments about the form of Code notices where no question of jurisdiction is engaged". The site providers' evidence was substantially viewed as directed to these sorts of arguments, while it was further noted that other evidence provided about the building was, although "very interesting ... not terribly relevant to the dispute".
Alicia Foo, Ian Morgan and Rhiannon Saunders are property disputes experts at Pinsent Masons, the law firm behind Out-Law.
08 Apr 2019
22 Feb 2019
Out-Law Legal Update
High Court guidance will reassure banks acting to freeze accounts suspected of holding proceeds of crime