On Tower UK Ltd v AP Wireless II (UK) Ltd

Factual and Procedural Background

This appeal concerns the electronic communications code in schedule 3A to the Communications Act 2003 and, in particular, the meaning of "party to a code agreement" in Part 5 of the Code. Two sets of proceedings arose from sites in The City. Company B (the operator currently exercising code rights) served notices under paragraph 33 of the Code seeking new agreements or leases at reduced rents and thereafter made references under paragraph 34. Company A (the registered proprietor) contended Company B was not a "party to a code agreement" and sought striking-out of Company B's references. The First-tier Tribunal (Judge Jackson) held Company B was a "party to a code agreement" on the basis that it was entitled to the benefit of the agreements. On appeal to the Upper Tribunal (Judge Fancourt), the Judge concluded that an assignee who "has assumed the primary responsibility for performing the obligations" (for example by covenanting with the assignor) is a "party to a code agreement", found Company B had given such covenants and dismissed Company A's appeal. With permission, Company A appealed to the court which delivered the opinion summarized here.

Legal Issues Presented

1. What is the meaning of "party to a code agreement" as used in Part 5 of the Code—does mere vesting of the benefit of a code agreement in an assignee suffice, or must the assignee also have assumed the burden (or "primary responsibility" for performing the obligations)?
2. Which operators are entitled to make applications under Part 5 (notably paragraphs 32–35) when benefit and burden of a code agreement have become divorced?

Arguments of the Parties

Appellant's (Company A) Arguments

• An assignee should be treated as a "party to a code agreement" in place of its predecessor only if it is currently entitled to both the benefit and the burden of the agreement (i.e. directly liable to the landowner for performance).
• Mere acquisition of the benefit without a corresponding obligation to the site provider does not make the assignee stand in the original operator's shoes for the purposes of Part 5.

Respondent's (Company B) Arguments

• It is sufficient that the benefit of the code agreement has vested in the assignee by assignment for the assignee to be a "party to a code agreement".
• Alternatively, paragraph 12(1) of the Code or benefit-and-burden principles mean that the necessary obligations pass to the current operator.
• The Code should be interpreted purposively so as to enable the operator actually exercising code rights to invoke Part 5.

Table of Precedents Cited

Court's Reasoning and Analysis

The court proceeded from common ground: code rights may arise by lease, easement or licence; under general law assignment normally transfers benefit but not burden; Gencomp established that the Code treats assignees who hold both benefit and burden as parties. The central difficulty was the situation where the benefit and burden are split. The court analysed Part 5's structure and practical operation: notices under paragraphs 31 and 33 contemplate a single operator and a single site provider being "parties to a code agreement" who can serve notices, counter-notices and apply under paragraph 34; many provisions (e.g. the Tribunal's consideration of the "operator's business and technical needs") naturally point to the operator actually exercising the code rights.

The court considered three possible approaches: (i) that mere benefit suffices (the First-tier Tribunal's approach and Company B's argument); (ii) that the assignee must have assumed primary responsibility for performance (the Upper Tribunal Judge Fancourt's approach); and (iii) that the assignee must be under direct obligation to the site provider (Company A's case). The court found difficulties with the Judge Fancourt solution on grounds of certainty (primary responsibility may depend on inter-operator arrangements unknown to site providers) and with Company A's solution as impractical and inconsistent with Part 5's design (it would leave the operator actually exercising code rights unable to use Part 5 and force reliance on Part 4, contrary to the Code's structure and purpose).

Balancing textual indicators and statutory purpose (including Parliament's objective of facilitating deployment and maintenance of communications infrastructure), the court concluded that Part 5 best fits an interpretation under which an operator who is merely entitled to the benefit of a code agreement is to be treated as "a party to a code agreement" for the purposes of Part 5. The court acknowledged tensions in reconciling this with some literal terms of Part 5 but considered the purposive reading more consistent with the Code's aims and practical operation.

Holding and Implications

APPEAL DISMISSED

Direct effect: the First-tier Tribunal's decision that Company B was a "party to a code agreement" and could invoke paragraph 33 was upheld; Company A's appeal was dismissed. The court held that an operator who is merely entitled to the benefit of a code agreement falls within "party to a code agreement" for Part 5 and so may make applications under that Part. The opinion explained practical and purposive reasons for this construction; it did not purport to create a rule beyond the interpretation applied to the facts of these proceedings.