First Tier Tribunal cautions against unreasonable costs in negotiating MSV Agreements under the Electronic Communications Code

Cornerstone Telecommunications Infrastructure Limited v The Timberyard Plot 2 Nominee (No1) Limited and The Timberyard Plot 2 Nominee (No2) Limited

In a decision under the Electronic Communications Code, the First-Tier Tribunal denied the Respondent site provider a substantial proportion of its transactional and legal costs for the negotiation a multi-site visit agreement. The decision is warning that such costs must be reasonable and proportionately incurred amidst a background of increasing and disproportionate costs incurred by site providers

Cornerstone sought a reference under paragraph 26(1) of the Electronic Communications Code (‘the Code’) for the imposition of a multi-skilled visit (‘MSV’) agreement, following a Timberyard’s failure to engage with Cornerstone over an extended period in respect of a high value property.

The reference resulted in a hearing due to a single term of the MSV agreement remaining in dispute, which the Respondent subsequently conceded. The parties were unable to agree costs, due to the excessive sums claimed by the Respondent site provider, Timberyard, in respect of its legal and transactional costs incurred in the negotiation of the MSV.

Paragraph 84(2) of the Code entitles a site operator to receive as compensation its expenses, including reasonable legal and valuation expenses. That is, however, subject to these costs having been reasonably incurred.

The Tribunal accepted that the conduct of Timberyard had been unreasonable in respect of some aspects of the litigation, ordering payment of only 22% of the sums sought.

The decision

Transactional costs

Timberyard claimed transactional costs in the sum of £23,925.50, comprising solicitors’ transactional fees of £8,655.00 and specialist agent’s fees of £15,270.50.

In assessing transactional costs, the Tribunal was required to (i) to identify what constitutes transaction costs and (ii) to determine whether those transaction costs are reasonable. The Tribunal considered those two issues in relation to both the solicitors’ transactional costs claimed and the fees of the specialist agent.

In respect of the solicitors’ costs, the Tribunal found there was nothing in the solicitors’ transactional time sheet which appeared to be obviously outside the normal range of transactional costs. It accepted the submissions on behalf of the Claimant, however, that the lack of detail in the Respondent’s time sheet made a detailed assessment difficult, and that it had failed to establish that all the claimed costs were incurred. Despite repeated requests from the Claimant, the Respondent had failed to provide any breakdown of the constituent figures and therefore had denied the Claimant the opportunity to question the reasonableness of those amounts.

The Tribunal held that given intrusive rights were being sought with the potential risk of damage to the building, the Respondent had been justified in instructing specialist London solicitors. The Tribunal held, however, that the exclusive use of Grade A fee earners at rates in excess of the Guideline Hourly Rates throughout the transactional phase was unreasonable given the simple and straightforward draft MSV agreement.

The Tribunal was not persuaded that the Respondents instruction of a specialist telecommunications agent was reasonable and found that her invoice and time sheet provided “no evidence of work over and above what the specialist lawyers could be expected to carry out” at [40]. It had not been reasonable to engage the agent, therefore, the fees were not recoverable from the Claimant as expenses under paragraph 84(2)(a) of the Code.

The Tribunal found that the Timberyard had “failed over an extended period of time to co-operate and engage fully with the Claimant” and determined that the Respondent’s reasonable legal transactional costs were £4,000 [37].

Litigation costs

The Respondent claimed £40,833.53 in litigation costs which are covered by paragraph 96 of the Code. The matters a tribunal must have regard to in making an order for litigation costs include (a) the extent to which any party is successful in the proceedings, and (b) any unreasonable refusal to engage in alternative dispute resolution.

The Respondent argued that where, as here, the parties have not agreed that there should be no order for costs, the Tribunal’s usual order is that the operator should pay the site provider’s costs in full. It argued to the fact that no unnecessary work had been carried out by the Respondent’s lawyers and that the costs incurred were proportionate given the high value of the property [44] – [45].

The Tribunal accepted that notwithstanding the usual order, it nevertheless retained an unfettered discretion as to costs.

It was submitted that the Respondent had behaved unreasonably and that that had led to costs being unreasonably incurred in, inter alia, failing to supply documents for over a year, failing to engage with the Claimant in a timely manner, and objecting to works that were never sought, which resulted in delay and increased costs. The Tribunal agreed that the manner in which the Respondent had conducted some aspects of the proceedings was unreasonable, and ordered that the Claimant pay just £10,000 towards the costs of the Respondent, to reflect both the extent of the  success and the proportionate costs of achieving it, remarking that “The Respondent need not have incurred nearly as much as it has. The Respondent does not appear to have heeded the clear message of the Deputy President” expressed in previous costs decisions [61].

Discussion

The decision is yet a further warning to site providers not to engage in unreasonable conduct and to limit costs to what is proportionate and reasonable. Whatever the outcome, parties cannot necessarily expect to recover their costs incurred. Despite the usual order being that an operator should pay a site provider’s costs, the Tribunal retains an unfettered discretion and will exercise it to make considerable reductions to the costs sought.

Jaysen Sharpe, instructed by Osborne Clarke appeared for Cornerstone Communications Infrastructure Limited. The full judgment can be accessed here.