On Tower UK Ltd v BT Plc: can serving a Telecoms Code para 31 notice override the need for a break notice?

Summary

In the recent Court of Appeal (CA) decision of On Tower UK Ltd -v- British Telecommunications Plc, the CA found that a landlord or site provider with the benefit of a break right in its telecoms agreement must serve notice on the operator to exercise that right before serving any termination notice under paragraph 31 of the Telecoms Code. Contrary to the Upper Tribunal's previous decision, it is not open to a landlord or site provider only to serve a paragraph 31 Notice to terminate a telecoms agreement in circumstances where a contractual break right exists.

Background

BT leased the roof of the telephone exchange building at Kenton Park Parade, Harrow to On Tower. The lease (which attracted the protection of the Code) expired in 2030, but there was a right for BT to break the lease early in a number of stipulated circumstances (i) to (v).

On 30 October 2022, BT served two notices on On Tower:

• A break notice expiring on 8 November 2023, and
• A Paragraph 31 Code termination notice expiring on 8 April 2024.

On Tower resisted the effect of these notices and the matter went to the Upper Tribunal. It decided that the notices were valid to terminate On Tower's lease, so On Tower appealed. 

Basis of appeal

A Paragraph 31 termination notice can be served giving 18 months' notice to terminate a telecoms agreement at a time when the agreement "could have been brought to an end" by the landlord/ site provider.

On Tower's argument was essentially that:

• BT's break notice was invalid as it should have relied on circumstance (ii) as opposed to circumstance (v) (the details of these circumstances are not relevant for the purposes of this note)
• If the break notice was invalid then the Paragraph 31 notice was ineffective, as it was not served at a time when the lease "could have been brought to an end" by BT.

BT's case, in summary, was that

• A Paragraph 31 notice could be served at a time when the lease "could have been brought to an end"
• That wording meant that a valid Paragraph 31 notice could be served to bring a telecoms agreement to an end at a time that the agreement could otherwise have been brought to an end by a break notice, whether or not a separate break notice was actually served.

The Court of Appeal sided with On Tower. It was not the function of the Code to enable a landlord or site provider to bring a Code agreement to an end earlier that the parties had bargained for in its terms. If, therefore, there was a break right that would enable an agreement to be terminated early, then that right had to be validly exercised so as to bring the contractual arrangements to an end, before the landlord's rights under Paragraph 31 could come into effect. 

Because the CA agreed no valid break notice had been served (as the wrong circumstance had been relied on), On Tower's contractual arrangements with BT continued, and the Code on its own gave BT no power to terminate such arrangements early.

Comment

It is quite possible to see why the Upper Tribunal was persuaded that the words "could have been brought to an end" only require the theoretical possibility of a break notice being servable when a Paragraph 31 notice is served, rather than that such a break notice had actually to be validly served first. After all, the wording gives an impression of conditionality rather than finality ("could have been" rather than "has been"). 

However, the CA were very firm in asserting that this would unjustifiably give the Code the power to override contractual provisions, which was not its purpose. 

The judgment is not entirely clear as to whether, in practice, a landlord or site provider must wait until a break notice has expired and any pre-conditions to its validity shown to be satisfied before a Paragraph 31 notice can then be served, or whether it suffices simply to serve the break notice and then a Paragraph 31 notice (say) the next day. If the latter is possible, the question arises as to what happens if any pre-conditions to the effectiveness of that break notice cannot be satisfied; presumably that would (eventually) nullify the effect of the Paragraph 31 notice, but it may have become necessary for an operator to issue tribunal proceedings to protect its position under the Code in the meantime , which could (in the event) amount to a waste of time and costs.