Automated Summary
Key Facts
A case concerning the financial terms of a new agreement under the Electronic Communications Code (Schedule 3A to the Communications Act 2003) for a site at Allenby Road Reservoir in Southall, Middlesex. The Tribunal determined that the annual consideration should be £3,300 for a ten-year term with an annual right to break, and ordered compensation of £7,500 for professional fees. The case involved Affinity Water Ltd (the respondent) and EE Limited and Hutchison 3G UK Ltd (the claimants), regarding the use of a water tower for telecommunications equipment.
Issues
- The tribunal determined that compensation under paragraph 25(1) of the Code includes professional fees incurred before the Code rights were conferred, as the phrase 'loss or damage that has been sustained' includes expenses incurred in claiming Code rights. The tribunal assessed legal expenses at £6,000 and valuation fees at £1,500, totaling £7,500.
- The tribunal determined that for the purpose of a paragraph 24 valuation required by paragraph 34, the subject site must be assumed to be vacant, despite the parties' consensus to the contrary. This is a significant point of law in Electronic Communications Code valuations.
- The tribunal applied the three-stage Hanover Capital valuation approach, considering benefits to the site provider, adverse effects of the agreement, and other relevant factors. The tribunal determined an annual consideration of £3,300 for a ten-year term with an annual break clause.
Holdings
The Upper Tribunal determined an annual rent of £3,300 for the new agreement, incorporating a 10% uplift for the flexible break clause, and ordered compensation of £7,500 for the respondent's professional fees incurred in negotiating the lease. This ruling followed a detailed valuation using the Hanover Capital three-stage approach, considering site-specific factors including security costs, maintenance, and the presence of multiple telecom operators on the Allenby Road Reservoir water tower site.
Remedies
- The Tribunal ordered the claimants to pay £7,500 in compensation for professional fees incurred by the respondent in connection with the new lease.
- The Tribunal ordered the termination of the existing agreement and required the parties to enter into a new agreement for a ten-year term with annual rent of £3,300.
Monetary Damages
7500.00
Legal Principles
The Tribunal applied the arm's length principle in valuing the Code agreement, requiring that the hypothetical transaction between a willing buyer and seller be conducted at arm's length. The Tribunal noted that a pre-existing relationship between buyer and seller (such as a site provider and an existing operator) would not constitute an arm's length transaction, as it would introduce advantages and disadvantages not present in the market. The Tribunal concluded that the subject site must be assumed to be vacant for the purpose of a paragraph 24 valuation under the Electronic Communications Code.
Precedent Name
- On Tower v Green
- New Zealand Government Property Corp. v H.M. & S.
- Cornerstone v Marks & Spencer
- London and Quadrant
- EE & H3G v Morriss
- Vodafone v Hanover Capital
- Harbinger Capital Partners v Caldwell
- F.R Evans (Leeds) Ltd v English Electric Co Ltd
Cited Statute
- Tribunals, Courts and Enforcement Act 2007
- Landlord and Tenant Act 1954
- Communications Act 2003, Schedule 3A
Judge Name
- Martin Rodger QC
- P D McCrea
Passage Text
- 34. These decisions provide guidance not only on an approach to valuing sites on the artificial assumptions required by paragraph 24, but more broadly on the levels of consideration which parties can expect the Tribunal to determine in other cases. Without taking account of any special features or particular sensitivities which a particular location may exhibit, we would be surprised if the value of Code rights fell significantly outside the ranges indicated by previous decisions concerning sites with similar characteristics. 35. To what extent evidence of market transactions provides as reliable a guide is a separate question. The adoption by the Tribunal of the rather cumbersome and artificial three-stage approach to valuation under paragraph 24 of the Code, rather than the more familiar comparative method based on market evidence, is driven by the requirement to make the 'no-network' assumption. It would be attractive to be able to by-pass the artificiality of this approach and to refer directly to market transactions, but there are obvious dangers in doing so.
- 82. That figure assumes a ten-year term and a final allowance is required to reflect the benefit to the claimants of the flexible break clause. Mr Stott suggested an allowance of 9% but, in keeping with what we think would be the hypothetical parties' preference for round figures, we apply an uplift of 10%, to arrive at a rent of £3,300 a year. 83. It is necessary at this point to stand back and consider whether this makes sense in the light of other evidence, and in particular whether it is consistent with the pattern of value which is emerging from the other Tribunal decisions which we have tabulated in paragraph 31 above. We agree with Mr Stott that, in principle, the consideration likely to be agreed for a water tower under the statutory hypothesis should fall somewhere between that of a greenfield site, and an office or commercial building. We would expect it to be closer to the upper end of that range than the lower, because the tenant is being provided with a ready-made structure on which to install its apparatus (for whatever purpose it wishes to use it) and because the site provider has greater involvement in providing access and maintaining the site. A headline figure of £3,000 a year (£3,300 with the additional benefit of the break clause) fits appropriately into the pattern of previous Tribunal decisions.