The “use” of tangible assets in assessing a transfer (TUPE) situation

In a Transfer of Undertakings (TUPE) situation, the use of a contracting organisation’s assets may be transferred from the outgoing contractor (the transferor) to the new contractor (the transferee) in the event of the loss of a contract.

 

Depending on the case, the “tangible asset” owned by the contracting organisation could be machinery say in the case of a large distribution or haulage firm contracting out certain services, cleaning equipment in the case of a cleaning contract, catering and kitchen equipment in the case of a catering contract, and so on.

 

 

Transfer of “significant tangible assets”

The European Court of Justice (ECJ) have ruled that the transfer of “significant tangible and intangible assets” is of significance in assessing a transfer.

 

However, what is the situation where the “significant tangibles assets” are owned by the contracting organisation, not the outgoing contractor (the transferor) who has lost the contract? In this case the use of the assets owned by the contracting organisation simply shifts to the new contractor (the transferee).

 

 

The “use” of “significant tangible assets” – how is it assessed?

Thus, how is the “use” of such significant tangible assets treated in assessing a transfer?

 

In the case of Abler (Abler v Sodexho (2003)), the ECJ held that a transfer of undertakings occurred where there was a change in catering contractor between two catering companies which supplied catering services to a hospital. At all material times, the hospital remained the owner of the catering equipment.

 

The ECJ held that the ‘use’ of the catering equipment constituted the transfer of a significant tangible asset.

 

In ‘Guney-Gorres’ (Guney-Gorres & Demir v Securicor Aviation Ltd and Kotter Aviation (2005)), where the contractor at Frankfurt airport changed hands, the ECJ’s preliminary ruling held that the facts that the assets (security scanners and equipment) remained the property of the German state, did not preclude a transfer.

 

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