Telecom agreements not trumped by Code wording, court rules

The Court of Appeal in England and Wales confirmed that contractual termination provisions within an ECC agreement are not ousted or replaced by termination provisions within the ECC – in stark contrast to the position under the Landlord and Tenant Act 1954 (1954 Act). The ECC’s termination provisions, by comparison, apply only to an ECC agreement which continues after contractual expiry as a result of statutory intervention.

Alicia Foo of Pinsent Masons said the Court of Appeal judgment confirms the freedom of parties to contract and provides welcome clarity.

The ECC provides telecoms operators with rights to install, operate and maintain electronic communications apparatus (ECA), such as mobile phone masts or broadband cabinets, on land owned by others. A central purpose of the ECC was to make it cheaper and easier for apparatus to be deployed, maintained, shared and upgraded. The ECC applies to agreements entered into after the ECC took effect on 28 December 2017 with transitional arrangements also applying – usually referred to as “Code agreements”.

In 2021, On Tower was granted a lease by BT which allowed it to use a roof on a telephone exchange building, for the purpose of installing a mobile mast and other ECA. This agreement included a break right, allowing for early termination if written notice was given. BT subsequently served a termination notice to end On Tower’s occupation of the roof. This triggered a chain of further events and a dispute arose, among other things, as to whether the building itself could be considered ECA and if On Tower therefore had rights under the ECC, to prevent its eviction from the roof.

The case was considered by the Upper Tribunal (Lands Chamber), which ruled last year that On Tower did have rights under the ECC on the basis that its 2021 agreement with BT constituted a Code agreement.

Notwithstanding that, the Upper Tribunal sided with BT on other issues in dispute, including determining that BT did not need to actually exercise any contractual right to terminate but it was sufficient that it could exercise a contractual right to terminate. On the basis that BT could have contractually terminated the 2021 agreement, it was held that BT was entitled to terminate the 2021 agreement by following the termination provisions within the ECC.

On Tower challenged the ruling before the Court of Appeal, which has now agreed with the company that the Upper Tribunal erred in law.

The Court of Appeal held that a distinction is to be drawn between the ECC and the 1954 Act, which applies in England and Wales. The 1954 Act governs legacy Code agreements between landowners and telecoms operators that were put in place before, as well as renewed after, the ECC took effect.

The 1954 Act is explicit that a tenancy subject to Part 24 of that Act, which deals with termination, will not come to an end unless terminated in accordance with the Part 24 provisions. The ECC, the Court of Appeal, said “does not contain language to the same effect”.

Giving his leading judgment for the court, Lord Justice Holgate said: “The draftsman of the Code has simply provided that the continuation of a code agreement … begins when the contractual agreement comes to an end in accordance with the terms of that agreement. The focus on whether a code right ceases to be exercisable under that agreement does not involve any suggestion that the Code’s termination provisions are substituted for those contractual terms.”

The court therefore largely upheld On Tower’s appeal, also finding that the Upper Tribunal had erred by finding that the break notice served by BT was valid.

Lord Justice Holgate said: “Where a site provider relies upon a break clause in order to found an entitlement to serve a [termination] notice, it must exercise its right to break the contractual term in compliance with the terms of that clause and the agreement. That will include compliance with the requirements for the exercise of the break clause. Where a break clause may only be exercised on a particular ground or grounds, that reason will need to be stated by the site provider, as the Upper Tribunal held, so that the operator may investigate and assess that issue and its position under the code agreement.”

Alicia Foo of Pinsent Masons said: “The Court of Appeal has upheld the freedom of parties to contract, confirming that the ECC does not have primacy over the right to contract – but applies once contractual rights have expired. Practitioners will welcome the judgment for clarifying that the Code cannot be used to determine agreements in breach of contract.”