EE Ltd & H3G UK Ltd v Stephenson & AP Wireless (II) UK Limited [2021] – Duncan upheld and O’May disapplied

England and Wales

In EE Limited and Hutchison 3G UK Limited (the “Operators”) v David Paul Stephenson and AP Wireless II (UK) Limited (the “Site Provider”), the Operators brought an application under paragraph 33(5) of the Electronic Communications Code (the “Code”) seeking an order for termination of an existing code agreement and entry into a new code agreement conferring code rights on the Operators.

Background

The Site Provider had granted the Operators a lease for a term of 13 years from and including 17 May 2006. When the new Code came into force on 28 December 2017 the lease became a “subsisting agreement” and it therefore took effect as a new Code agreement, subject to modifications made by the transitional provisions. As such, the Code agreement continued after the expiry of the contractual term until it was terminated under Part 5 of the Code.

In 2019, the Operator served on the Site Provider a notice pursuant to paragraph 33(1) of the Code, requiring the Site Provider to agree the terms of a new Code agreement. The terms for the new Code agreement could not be agreed and so Operators brough an application to the Upper Tribunal.

Decision

Following a case management conference in January two preliminary issues were held to be tried as follows:

  1. Whether the claim for the termination and replacement of the subsisting Code agreement with a new agreement is bound to fail in circumstances where the Operators do not aver a site-specific need for the termination and replacement of the subsisting agreement; and

  2. Whether the Operators’ alternative claim for the Upper Tribunal to make a different order under paragraph 34 (other than under paragraph 34(6)) is bound to fail in the absence of full particulars of the alternative form of order sought and the site-specific need for such order.

The Upper Tribunal held that:

  1. The Scottish decision in Duncan (overturned by the Court of Session on appeal) could be applied in England and Wales and in turn the additional rights conferred by the Code, like the free right to share and upgrade and the new consideration and compensation provisions, are themselves a reason for the grant of a new Code agreement. The Operator therefore did not have to provide a site-specific justification for the replacement of an expired agreement with a new Code agreement.

  2. The principle established in O’May - where there is a generally applied presumption against a change of existing lease terms under the 1954 Act – was not applicable to Code agreements. Whilst the Tribunal acknowledged that the structure and provision of the Code is similar to the 1954 Act, it noted that the underlying purpose of the 1954 Act was very different from that of the Code. Whilst the 1954 Act seeks to protect business tenants from loss of goodwill and business interruption, the Code seeks to ensure operators can exploit sites more flexibly, quickly and cheaply than had previously been the case which in turn will result in a lower cost to consumers. The Tribunal should have regard to the terms of the existing agreement, but should consider the menu of orders in paragraph 34(13) of the Code and take into account all the circumstances when deciding what order to make. The Tribunal emphasised that site providers "are required to put up with a degree of change in the public interest of facilitating the provision of a choice of high quality networks".

  3. If a Code notice served by operator proposes termination and a new agreement an operator cannot then apply to the court for modification of the existing agreement on different terms. The ‘sweeper’ wording in the Operator’s notice for a new Code agreement or “such other order” was too vague and was accordingly struck out. The Tribunal stated that purpose of the Code notices is allow the parties up to 6 months to try to reach agreement on what has been proposed. This purpose would have been undermined if the Operator could then apply for an order that had not been previously identified.

Full judgement available here.

Co-authored by Mia Spedding.