UK: Court of Appeal confirms no service provision change where client changes

The Court of Appeal has upheld the EAT's decision that the service provision change provisions of TUPE cannot apply where the client to whom services are being provided changes at the same time as the change in service provider.

This ruling is good news in particular for purchasers of property portfolios: although new managing agents are commonly appointed, the owner of the property also changes so there is no service provision change under TUPE even though the services are being provided in respect of the same property.

However, in some cases there might still be a transfer of a business, that is, the transfer of an economic entity which retains its identity.  Elias LJ noted simply that it is arguable whether the identity of the client might be viewed as an essential element of a business (such that a change of client would lead to a change in its identity).  It remains best practice to address the risk and potential costs in the contractual documentation. (Hunter v McCarrick, CA)

The need for the client to remain the same also prevented there being a service provision change in the case of SNR Denton UK LLP v Kirwan.  The EAT ruled that solicitors appointed by an administrator were acting for the administrator, not the company.  Therefore there was no TUPE transfer of an in-house solicitor who had been carrying out similar activities for the company prior to administration, because there was a change of client.  The activities may also have fallen within the exclusion of short-term services from the scope of TUPE.