On Tower UK Limited v British Telecommunications PLC

Under the Electronic Communications Code, a site provider cannot rely on paragraph 31 to terminate a code agreement merely because a contractual break clause is exercisable. The agreement must first expire or be contractually terminated in accordance with its terms. Contractual requirements, including notice, specified grounds and conditions, remain effective. Where a contract contains specific termination rights and a residual right to terminate for any other reason, the residual right cannot circumvent protections attached to a specific right. An evidential error warrants setting aside a decision only if it rendered the decision unjust. The appeal succeeded on the statutory construction and contractual break-notice issues, but failed on the evidential ground.

On Tower held a lease of part of the roof of a BT telephone exchange under which it exercised Code rights. BT served a contractual break notice and a notice under paragraph 31 of the Electronic Communications Code. The Upper Tribunal held that the lease was a code agreement and that both notices were valid: [2024] UKUT 51 (LC). On appeal, On Tower challenged the requirement for an exercised break clause, the Upper Tribunal’s reliance on unadmitted evidence, and the interpretation of the lease’s termination provisions. The central questions were whether a paragraph 31 notice could rely on an exercisable but unexercised break right, and whether BT had an available contractual termination right.

Disposition. Lord Justice Holgate, with whom Lord Justice Popplewell and Lady Justice Asplin agreed, upheld the appeal on grounds 1 and 3. Ground 2 failed. The contractual break notice and the paragraph 31 notice were invalid.

1. Statutory continuation and contractual termination. Paragraph 30(2) provides for statutory continuation when a code right ceases to exist under the contractual agreement or the agreement is contractually brought to an end. It does not make a break notice ineffective, dispense with contractual requirements, or cause an agreement to end merely because a break clause is exercisable. The parties remain bound by their contractual bargain until expiry or valid contractual termination. The reasoning in Cornerstone Telecommunications Limited v Compton Beauchamp Estates Limited [2022] UKSC 18 supported the conclusion that Part 5 operates only after statutory continuation begins.
2. Break clauses and paragraph 31. A site provider relying on a break clause to found a paragraph 31 notice must exercise the contractual right in compliance with the clause and agreement. This includes any required notice, specified ground, condition precedent or condition subsequent. Where the clause is exercisable only on specified grounds, the relevant ground must be stated so that the operator can assess its position. The statutory scheme does not override those contractual protections.
3. Construction of the lease. Clause 5.8(b)(v), permitting termination for any reason other than those in sub-clauses (i) to (iv), could not be used where BT’s real reason was disposal of its interest in the site. That reason fell within sub-clause (i), which required an actual disposal or agreement to dispose. No such disposal or agreement occurred within the relevant period. Sub-clause (v) was therefore unavailable, and the break notice was invalid. The paragraph 31 notice was also invalid even on BT’s alternative construction of the Code.
4. Evidence. The Upper Tribunal wrongly relied on an unadmitted witness statement. Applying Keith Davy (Contractors) Limited v Ibatex Limited [2001] EWCA Civ 740, that error did not require the decision to be set aside because the admissible evidence and pleaded case provided ample support for the finding that BT wished to surrender its interest.
5. Additional reasoning. The court noted that repudiatory breach principles provide further support: an unaccepted repudiation does not terminate a contract. That reasoning was additional to the principal construction of the Code.

• Court of Appeal (Civil Division). Allowed the appeal on grounds 1 and 3 and rejected ground 2.
• Upper Tribunal (Lands Chamber). Held that the lease was a code agreement and that both the contractual break notice and the paragraph 31 notice were valid: [2024] UKUT 51 (LC) .