Recovering legal costs under the Electronic Communications Code: advice for landowners

The use of electronic communications services (such as internet services and mobile networks) has increased exponentially over the last two decades, with such services now regarded as essential. According to Ofcom’s recent Telecommunications Market Data Update, there were 28.6 million fixed broadband lines at the end of Q3 2023, an increase of 528,000 (1.9 per cent) year-on-year, and the number of active mobile subscriptions was 88.7 million at the end of Q3 2023, up 1.5 million (1.7 per cent) from the year before. The needs of local communities and the UK economy as a whole have necessitated ever increasing access to 21^st century communications networks, including high speed broadband and 4G/5G mobile connectivity which, in turn, has brought the legal framework governing such electronic communications services, and the relationship between landowners and operators, into the spotlight. The new electronic communications code (the Code) which came into force on 28 December 2017 was designed to simplify the process for operators to gain access to land to install infrastructure required in the creation and operation of their networks and, thereby, (in theory at least!) improve coverage, capability and capacity.

Under paragraph 26 of the Code, electronic communications operators have the right to apply to the Tribunal for an order imposing interim rights to access land to carry out a “Multi-Skilled Visit” (MSV). An MSV involves preliminary surveys carried out by a variety of contractors on behalf of the operator to assess whether certain land or buildings are suitable to accommodate electronic communications apparatus. For many landowners, the receipt of a notice served under paragraph 26 of the Code is the first indicator that their land may become subject to statutory Code rights and, unlike statutory of tenure legislation, Code rights cannot be excluded (or “contracted out” of). The operator in question may then apply to the Tribunal for a court order which imposes Code rights on an interim basis. Pursuant to paragraph 26(2) and 26(8) of the Code, if an order provides for the parties to be bound by an access agreement: (a) for the period specified in the order; or (b) until the occurrence of an event specified in the order, the agreement will bind the parties on an interim basis and, from the time when the period expires or the event occurs, then the relevant person has the right to require the operator to remove any electronic communications apparatus placed on the land. 

Almost six years on from the introduction of the Code, the question of access for carrying out an MSV (let alone the installation of electronic communications apparatus) continues to be a source of friction between landowners and operators. One particular area of contention has been in relation to the recovery of legal costs.

Good news for landowners?

In the case of Cornerstone Telecommunications Infrastructure v St Martins Property Investments and another [2021] UKUT 262 (LC), the operator had requested an order under paragraph 26 of the Code for an interim access agreement to be imposed on itself, the freeholder, and the commercial tenant in order to be granted access to the roof of a building known as “1 London Bridge”. The purpose of access was to facilitate the carrying out of an MSV. The parties had spent considerable time and resources on negotiating a draft form of access agreement, but there were a number of outstanding issues, including the matter of legal fees. The tenant had instructed a firm of City solicitors whose fees came to a little over £11,000 for the transactional work of advising on and negotiating the agreement (but excluding the costs of litigation). The operator argued that the fees were excessive and suggested that the reasonable costs of negotiating an agreement of this sort ought to be no more than £750, although the operator had offered a contribution of £1,500. On the subject of legal fees, the Tribunal made a number of comments:

• Negotiation: It had no reason to doubt that the figure of £11,000 was the sum which had been incurred and that the efforts made by the respondent’s solicitors were reasonable in their endeavours to do their best to negotiate favourable terms for their client. The fact that they may have eventually conceded points which they initially resisted did not mean that their work had been undertaken unreasonably. The costs figure was also not significantly different from the level of compensation ordered by the Tribunal in other cases.
• Complexity: The operator had put forward a relatively complex form of agreement, including provisions on which a reasonable building owner would expect to be advised. It should not have come as a surprise to the operator therefore that the resulting negotiations were not completely straightforward; costs could have been reduced if the operator had chosen to use a simpler form of agreement.
• Full legal costs: The notion that an operator was only required to contribute towards the legal expenses incurred by the site provider, thereby leaving the site provider out of pocket, was incorrect.  The site provider was entitled to recoup its reasonable legal expenses in full. In this case, the site provider was therefore entitled to the recovery of its reasonable legal expenses in the sum of £11,000.

Whilst this case provides comfort for landowners on the recovery of their reasonable legal costs, the following should be noted:

• Litigation costs: The Tribunal noted that this type of litigation ought to be capable of being conducted at modest expense, proportionate to the matters in issue. The operator had incurred litigation costs of £30,500, a figure the Tribunal thought was hugely disproportionate for a case where the principle of access was not in dispute, and the site provider’s litigation bill was more than twice that amount! Such litigation costs were not recoverable (but see the case of EE v HMRC below which may offer landowners some comfort).
• Circumstances: The Tribunal stated that the figure awarded in this case should not be regarded as setting a norm, as each case will depend on its own facts and circumstances. In this case, the Tribunal took into account the nature of the building in question, which was high value, of a distinctive design and high specification, and occupied a very prominent location in Central London. As such, it was reasonable for the site provider to engage City solicitors and for its solicitors to have taken the points which it had taken.

The matter of transaction and litigation costs was brought into the spotlight again in the recent case of EE Ltd and another v HSBC Bank Plc [2022] UKUT 174 (LC). This case was another paragraph 26 reference, where the operator had sought the right to access land belonging to the site provider at the rear of The Maybird Shopping Centre in Stratford-Upon-Avon in order to carry out surveys to determine suitability for an installation. The only live issue at the hearing concerned compensation and costs. The Tribunal held that the operator should pay the site provider its reasonable transaction costs in the sum of £12,500, as well as its litigation costs, in the sum of £15,000. 

The judgement itself provides helpful gloss on the Tribunal’s approach to costs in cases of this sort. It was mentioned that the there was no issue over the site provider’s entitlement to its reasonable transaction costs, ie the costs of negotiating and completing the access agreement, but costs of references under paragraph 26 were to be agreed or determined by the Tribunal. Where parties had not agreed that there should be no order for the costs of the reference, the usual approach was that the operator should pay the site provider’s costs, and this case was no exception. The Tribunal further explained that the costs incurred by a site provider in a reference made necessary because an operator wishes to have access to undertake a survey ought not, in principle, to fall on the site provider. Importantly, the Tribunal also explained that the operator had ignored the terms of a draft agreement proposed by the site provider and had instead commenced the reference without responding to them. It explained that this was an additional reason why the site provider should be reimbursed its litigation costs.

Mountain or molehill?

The above cases provide reassurance for landowners and their ability to recover their reasonable costs in relation to paragraph 26 interim agreements and references. However, such comfort must be balanced by considering the principles set out by the Tribunal in the case of Cornerstone Telecommunications Infrastructure Ltd v Central Saint Giles General Partner Ltd and another [2019] UKUT 183 (LC), which serves as a cautionary tale to operators, landowners, and occupiers alike.  In this case, the aggregate costs incurred by the parties were in excess of £100,000, which included the preparation of a witness statement that had cost £13,000 to prepare. 

The Tribunal delivered a robust criticism of the conduct of the case by the parties, which it said was disproportionate, inappropriate and unacceptable; the new Code was intended to facilitate the provision of electronical communications services without delay, and at limited cost, and these objectives risked being frustrated if preparatory stages of this process became the occasion of legal trials. Accordingly, the freeholder and tenant were awarded only a fraction of their costs, in the sum of £5,000 each. The Tribunal concluded its judgement with a clear warning: parties who refused access to their land or buildings for surveys could not expect to recover costs of the scale incurred in this case and, equally, operators could not simply demand unquestioning co-operation from property owners.  

Does an indemnity solve the landowner’s cost concerns?

Another point to be aware of in the matter of costs, is that the risk of non-recovery under statutory compensation cannot altogether be mitigated by the inclusion of an indemnity, as was demonstrated by the case of EE Ltd & H3G Ltd v Hackney LBC [2021] UKUT 0142 (LC). In this case, the site provider sought the inclusion of an indemnity to cover all liabilities, costs, expenses, damages, and losses on the basis that the Code was still relatively new and, rather than running the risk of a claim for compensation being defeated by an operator or resulting in some irrecoverable costs, it ought to have the comfort provided by a comprehensive indemnity. The Tribunal disagreed and stated that the indemnity should apply to third party costs only, on the basis that:

• Limitations on compensation: The statutory right to compensation is governed by fundamental limitations such as the need to establish causation and the mitigation of loss, whereas the proposed indemnity would effectively allow the site provider to sidestep those limitations. As the Code includes a right of compensation and not a statutory indemnity, Parliament must have considered that statutory compensation provided an adequate remedy. 
• Inherent risk: The statutory right to compensation includes a right to reasonable legal or other professional expenses. However, non-recovery of costs which have not been reasonably incurred is a risk of all litigation.
• Ofcom model agreement: The Tribunal acknowledged that the Ofcom model form of Code agreement includes an indemnity clause limited to third party claims. Whilst not bound by the model form of agreement, the Tribunal stated that it should have regard to it, given that it was the intention of Parliament for Ofcom to influence the terms of Code agreements by example.

The road ahead

The recovery of reasonable legal costs under paragraph 26 of the Code remains a source of contention between landowners and operators. Requests for access are likely to become more frequent as operators seek to increase and upgrade their infrastructure. Early discussions, transparency and information sharing will assist parties in reaching a workable way forward that balances the interests and risks involved, whilst achieving the Code’s objectives and the policies out of which the Code was engendered. 

Whilst landowners should beware of taking an overly obstructive approach, operators need to remain mindful that their statutory rights do not obviate the need to engage with landowners and occupiers constructively. In one sense, operators themselves have the opportunity to reduce the costs they are required to reimburse by ensuring that their form of documents are not unnecessarily complex and worthy of extensive legal negotiation. Similarly, whilst landowners can be reassured that they can recover their reasonable legal costs, the emphasis is on “reasonable”. All those involved should be wary of adopting inflexible positions. This will allow a productive middle ground to be reached that balances the operator’s statutory rights against the landowner’s and occupier’s concerns over the reversionary and capital value, use, and enjoyment of their properties.

For now, landowners will find much comfort in recent cases regarding their ability to recover their reasonable legal costs. Further cases may well find their way to the Tribunal, but the case of Central Saint Giles remains as a warning, perhaps, that few ought to.

With thanks to Tom Appleby, a paralegal in our Commercial Property team, for contributing to this article.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2024