Telecommunications – Electronic communications code – Consideration and compensation – Claimants making reference to Upper Tribunal under paragraph 34 of Electronic Communications Code for order requiring parties to enter new lease of existing telecommunications mast site – Whether respondents entitled to consideration for unexceptional rural site – Whether compensation available for inability of site provider to use site – Whether appropriate to determine compensation – Terms determined accordingly
The claimants were both “operators” within the meaning of the Electronic Communications Code. They jointly owned an estate of leased telecommunications sites which they managed through a joint venture company.
The first respondent was the owner of Pendown Farm near Truro in Cornwall, which included an existing telecommunications mast site (the site). The second respondent was a property investment company active in the telecommunications sector. Its business involved the aggregation of existing telecommunications sites by the acquisition of leasehold or freehold interests in them. It sought to insert itself between the original site provider and the operator, so enabling it to receive the rent due for the site and to deal directly with the operator in occupation, including when the time came for the grant of a new lease. The second respondent aimed to make use of its scale and resources to profit from its sites. It had a large portfolio in the UK and Ireland comprising many thousands of sites.
The claimants made an application under paragraph 34 of the Code for an order requiring the parties to enter into a new lease of the site. The principle of an order was not opposed but issues arose concerning the terms of the proposed new lease, including the rent payable and the need for compensation for loss or damage which might be sustained by the respondents as a result of the exercise of the rights and whether it could be determined at this time.
Held: The terms were determined accordingly.
(1) The agreement to be imposed in this case would be a lease, and the “consideration” provided for by paragraph 24 of the Code would therefore be a rent. Unnecessary time and expense had been incurred in attempting to value the site by reference to real-world telecommunications transactions. All the transactions to which reference was made were lettings of land for the sole purpose of its use in connection with the provision of a telecommunications network. But the object of paragraph 24 was to ensure that value attributable to the use of the subject land for that purpose was excluded from consideration: Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] UKUT 107 (LC); [2019] PLSCS 65 and Cornerstone Telecommunications Infrastructure Ltd v London and Quadrant Housing Trust [2020] UKUT 282 (LC); [2020] PLSCS 187 considered.
Evidence of real-world transactions for telecommunications sites was not promising material on which to base a valuation under paragraph 24. The real market was not the same as, or even similar to, the hypothetical open market which paragraph 24 required the tribunal to assume. The unwillingness of site providers to enter into transactions was an important feature of the real world but was not a feature of the market which paragraph 24 assumed. The commercial purpose which underlay real-world transactions was specifically to be ignored in identifying the factors which would influence the hypothetical transaction: EE Ltd and another v Affinity Water Ltd [2022] EGLR 10 followed.
(2) The structured approach first identified in Vodafone Ltd v Hanover Capital Ltd [2020] EGLR 35 (which arrived at a valuation by attributing a value to each of the factors which would be likely to influence parties negotiating a letting on the paragraph 24 assumptions (a negotiation which never occurred in reality)) placed very little reliance on real-world transactions. The only exception so far allowed had been where parties to a comparable letting attributed a specific value to the security arrangements at a site.
In future, parties should avoid the expense of preparing evidence of real-world telecommunications transactions and analysis on the comparative method where the relevant assessment was being undertaken under paragraph 24 of the Code. However, where a particular site was said to have an alternative use value which was more than nominal, a comparable assessment based on transactions for that alternative use would be valuable.
(3) Under the principle in Tulk v Moxhay (1848) 2 Ph 77 the covenant in the intermediate lease, restricting the use of the land demised to the second respondent to communications uses, would bind the claimants and any other sublessees. It did not follow that because a site had only a very limited use, a person who wanted to take it for that use would be prepared to pay only a nominal sum. There was therefore no reason in principle why the site could not be valued having regard both to the contractual restriction on its use and to the no-network assumption.
There was nothing particularly unusual about this example of a rural mast site. Looked at in the round, there was no reason to depart from the figure which the tribunal identified in On Tower UK Ltd v Green [2022] EGLR 3 as the letting value, on the paragraph 24 assumptions, of an unexceptional rural site remote from any housing. Therefore, the rent under the new lease would be £750 a year.
(4) Compensation was payable under paragraph 25(1) of the Code where a site provider or other relevant person had sustained, or would sustain, loss or damage as a result of the exercise of the code rights imposed by the tribunal. Where the tribunal was satisfied that loss or damage would be sustained, it had a discretion whether to quantify that loss at the time it made its order imposing the code rights, or to wait until a later date: paragraph 25(2).
In the present case, there was no evidence that second respondent had been prevented from implementing any intention to develop a mast of its own on the land. Had it intended to do so, it would have been in a position to object to the imposition of new rights in favour of the claimants, but it had not done so. The better course was to make no determination and to leave the second respondent to make such further compensation claim as might be advised at a time of its choosing: EE Ltd v Islington London Borough Council [2019] UKUT 53 (LC) applied.
Oliver Radley-Gardner QC (instructed by Winckworth Sherwood LLP) appeared for the claimants; The first respondent did not appear and was not represented; Wayne Clark, Fern Schofield and Mike Atkins (instructed by Eversheds Sutherland International) appeared for the second respondent.
Eileen O’Grady, barrister
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