Vodafone Ltd v Potting Shed Bar and Gardens Ltd (formerly known as Gencomp (No.7) Ltd)

Hearing dates: 10 and 11 May 2023

Approved Judgment

This judgment was handed down remotely at 10.30am on 14 July 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This appeal from the Upper Tribunal (Lands Chamber) ( “the UT”) concerns the Electronic Communications Code ( “the Code”). The Code is found in sch 3A to the Communications Act 2003 and was introduced in 2017 as a replacement for an earlier code. It enables operators of electronic communications networks to acquire what are called “code rights”, including rights to install and keep electronic communications apparatus on someone else's land.

The Claimant (and Respondent to the appeal), Vodafone Ltd, ( “Vodafone”) is an operator for the purposes of the Code. It had a lease of a site in Bingley, Yorkshire, which had originally been granted in 2003 by the then freehold owner. In 2018 a subsequent freehold owner granted a concurrent lease (or lease of the reversion) to the Appellant, AP Wireless II (UK) Ltd, ( “APW”). The effect of that was that APW became entitled to the reversion on Vodafone's lease. Vodafone's lease was granted for a term expressed to expire in 2018, and it wished to obtain new code rights. It applied to the UT for this purpose. But the application gave rise to a question, which was summarised by the UT as follows: where a concurrent lease is entered into by a site provider after it has entered into a code agreement, what procedure must the operator follow under Parts 4 and 5 of the Code to obtain a new code agreement?

Unfortunately the Code does not give any clear answer to the question. The result is that preliminary issues were heard in the UT by Martin Rodger QC (now KC), the Deputy Chamber President ( “the Deputy President”). He gave his decision on 17 August 2022 at [2022] UKUT 223 (LC) ( “the Decision”). I do not attempt to summarise it here but in essence he rejected APW's contentions. He did however give APW permission to appeal, and APW contends on this appeal that he was wrong. Vodafone seeks to uphold his decision.

The other party joined to the proceedings is the current freeholder. It is a company now called Potting Shed Bar and Gardens Ltd but formerly (and at the time of the Decision) called Gencomp (No 7) Ltd, and it is convenient to refer to it as “Gencomp” as the Deputy President did, and as counsel before us did. It has taken no part in the proceedings, either in the UT or on appeal.

The facts

The facts were agreed before the UT, and I can take them from the Decision which contains a convenient summary at [30] to [39].

The Old Fire Station in Market Street, Bingley has in modern times been used as a bar. It is a building of generally two storeys but it incorporates a noticeably higher tower. In 2003 the then owner of the freehold, Publico Ltd, ( “Publico”) agreed with Vodafone that Vodafone could use the tower for installation of antennas and other telecommunications equipment. The agreement took the form of a deed dated 14 November 2003 under which Publico agreed that Vodafone should have the right to install, keep and operate not more than 9 antennas on a specified part of the building (including in particular the tower), together with various ancillary rights, for a period of 15 years from the date of the deed in return for an annual fee. The parties are agreed that this deed took effect as a lease. It was expressly excluded from Part II of the Landlord and Tenant Act 1954. I will refer to it as “the Lease”.

At the time the relevant code was the predecessor to the Code, conveniently referred to as “the old code”. A code called the Telecommunications Code had originally been enacted as sch 2 to the Telecommunications Act 1984. This code was substantially amended by the Communications Act 2003. As so amended, it was referred to in s. 106 of the 2003 Act as the “electronic communications code”, and this was the old code in force at the date of the grant of the Lease.

The Digital Economy Act 2017 repealed the old code and replaced it with the Code, which was inserted as sch 3A into the Communications Act 2003. The Code came into force on 28 December 2017. There were transitional provisions in sch 2 to the Digital Economy Act 2017, the effect of which is that a subsisting agreement made under the old code has effect, after the coming into force of the Code, as an agreement made under Part 2 of the Code, subject to certain modifications: see sch 2 para 2(1). One of the preliminary issues decided by the UT was whether the Lease was a subsisting agreement when the Code commenced: see the Decision at [41] to [52]. The Deputy President's answer to that issue was that it was, and that has not been appealed, with the effect that it is not now disputed that the Lease has effect as an agreement made under Part 2 of the Code. It is not suggested that any of the modifications to the Code in the transitional provisions are relevant in the present case.

Publico had been dissolved in 2010, and by 2018 the freehold owner of the Old Fire Station was a company called Potting Shed Trading Ltd. On 22 June 2018 Potting Shed Trading Ltd granted APW a concurrent lease of part of the building, namely the tower from the 2 ^nd floor up, with its roof and airspace above. (There may be issues as to precisely what is included in the demise as on the one hand the property demised is said to comprise the Tower, defined as the entire tower/chimney stack from 2 ^nd floor level up including the elevations, but on the other hand it is said not to include any structural parts of the Tower. We have not however been concerned with any such issues). This lease ( “the Concurrent Lease”) was for a term of 40 years ending on 21 June 2058. It was granted for a substantial premium and at a peppercorn rent.

In November 2018 the term expressed to be granted to Vodafone by the Lease came to an end. But, as appears below, the Lease was in effect continued under the Code.

In December 2019 Gencomp purchased the Old Fire Station, and it was registered as the freehold owner on 19 March 2020.

The effect of the grant of the Concurrent Lease

There is no dispute as to the effect of the grant of a concurrent lease as a matter of the ordinary law of landlord and tenant. The Deputy President gave an impeccable summary of the position in the Decision at [57] to [58], and since there is no suggestion that this contains any errors, it is simplest to reproduce it as follows:

“57. A concurrent or overriding lease is one granted subject to and with the benefit of a lease which is already in existence. The term of the concurrent lease begins before the expiration or other determination of the existing lease. Although the concurrent lease does not carry with it the right to immediate physical possession of the land comprised in the lease, it does confer on the lessee the immediate right to the rents and profits of the land and the benefit of the covenants in the original lease as from the beginning of the concurrent term. (See Woodfall, Law of Landlord and Tenant, vol 1, 6.018).

58. At common law the grant of a concurrent lease operated as an assignment of the reversion on the original lease for the duration of the concurrent term but following the commencement of the Landlord and Tenant (Covenants) Act 1995 that is no longer the case. Where the original lease is granted after 1995 the second lease now operates as a genuine lease of the reversion; pursuant to section 15(1)(a) of the 1995 Act the concurrent lessee is entitled to enforce the original tenant's covenants including by forfeiture. Theoretically, the concurrent lessor (which remains lessor under the original lease) may also be entitled to enforce the covenants in the original lease but as between it and the concurrent lessee, it is the concurrent lessee which is now entitled to receive the rents and enforce the covenants in the original lease (Megarry and Wade, Law of Real Property, 10th ed para 19.114).”

In the present case that means that the effect of the grant of the Concurrent Lease was that APW became entitled to the reversion on the Lease and entitled to payment of the rent due under the Lease. There is therefore a chain of interests under which Gencomp as freeholder is APW's landlord and APW as holder of the Concurrent Lease is effectively Vodafone's landlord. This chain where the freeholder is the landlord of a concurrent lessee, who in turn is landlord of an occupying lessee, seems at first sight analogous to the case where the freeholder grants a lease to a head lessee, who in turn grants a sub-lease to an occupying sub-lessee. As will appear, however, the two situations are not the same and the differences may be significant.

The Code

It is convenient next to refer to the provisions of the Code. The background to the introduction of the Code is set out in the judgment of Lady Rose JSC (with whom Lord Hodge DPSC and Lords Sales, Leggatt and Burrows JJSC agreed) in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2022] UKSC 18 (“ Compton...