The Appeal in the case of EE Limited & Hutchison 3G UK Limited v Duncan has been followed closely by operators and landowners alike.
The case involves a lease of a telecommunications mast which is running by tacit relocation (had passed their contractual expiry date). Operators served notices under the new Electronic Communications Code (“the Code”) to terminate the existing lease and replace them with new agreements under part 5 of the Code. The case called before the Lands Tribunal in August 2020 and the landowners were successful in having the operator’s applications dismissed on the basis that the operator had not stated a relevant case to terminated the existing agreement, in that the operators had not stated what particular needs of the operator in relation to the individual site were not sufficiently provided for under the existing lease. The original decision of the Lands Tribunal related to 9 sites, 8 of those cases were sisted pending the outcome of the appeal in EE Ltd & Hutchison 3G UK Ltd v Duncan.
The appeal concerned a mast on Wester Dullatur Farm, North Lanarkshire owned by Mr John Stewart Duncan. A lease had been entered into with EE Ltd (and then assigned to itself and 3G UK Ltd) in 2003, which expired in 2012. Thereafter the lease continued from year to year by way of tacit relocation.
The operators appealed to the Inner House of the Court of Session who handed down their judgement on 7 May 2021. This is the first judgement of the appeal court in Scotland on the new Code. The main issue concerned the proper approach to paragraph 33(14) of the Code which states that when determining which order to make under the paragraph, along with all the circumstances of the case, the tribunal must have regard in particular to certain factors, the first being “(a) the operator’s business and technical needs”. The Tribunal commented that Parliament had “set the bar as high as need”. Only something rendering an agreement unduly onerous or restrictive would allow “judicial cancellation of an existing contract”.
The submission for the operators in support of the appeal were that the new code was designed for the roll out of, and investment in, new electronic communications equipment, something which was being impeded by the old code. It should be interpreted broadly and in accordance with its purpose. The Tribunals introduction of a (high) hurdle for the operator to demonstrate a “business and technical need” was incorrect. It was inconsistent with the purpose of the code.
The appeal was successful. The Inner House considered that the Lands Tribunal had set the bar too high. The opinion of the court was delivered by Lord Malcolm. The opinion of the court considered the background to and the policy aims of the new code and the reforms introduced. The context was widespread acceptance of the importance of digital communications in respect of economic growth, productivity gains and social interaction.
The appeal did confirm the Land Tribunal’s approach that a lease running by tacit relocation was a subsisting agreement for the purposes of the Code, and therefore the modification procedure under Part 5 of the Code was available to the operators.
The Appeal thereafter confirmed that operators do not require to do more than point to the current lease arrangements as being out of step with the minimum rights available under the new code, for example in terms of assignation. Existing sites under the new code are therefore equivalated with new sites in terms of the Code.
Implications for landowners:
The decision of the Inner House is a frustration for landowners, who may question the purpose of retaining a telecommunications mast on their land. The Code’s “no scheme” valuation mechanism, creates an entirely different landscape for operators and landowners, and is more akin to the rights of utility providers.
The appeal makes it clear that the operators have followed the correct process to terminate leases running by tacit relocation. New leases will then seek to be agreed under the Code, which critically for Landowners will likely see a reduction in rent payable under the “no network scheme” basis for assessment of rent and compensation. Landowners can expect to see an increase in the number of applications made to the Lands Tribunal to terminate leases running by tacit relocation now that the Appeal in Duncan and others has been decided in the operators’ favour.
Landowners should take specific advice in relation to questions arising from the telecoms leases to ensure that they are given the correct advice on the implications of the Code for their existing or future telecoms leases.