Quick Hits
- On 8 September 2026, the Court of Appeal held that TUPE Regulation 4(2)(a) must be read in light of the EU Acquired Rights Directive, whose purpose is to protect and ensure the continuity of employee rights upon a change of employer.
- TUPE is legislation that exists to benefit employees. It does not enable third parties to pursue transferees (in this case, Active Young People Limited) for the transferors’ (in this case, Huntercombe (No. 12) Limited) pre-transfer liabilities.
In ABC v Huntercombe (No.12) Limited and Others, the Court of Appeal considered whether non-employee third parties who had claims against the transferor, Huntercombe (No. 12) Limited, could benefit from the principle of transferred liability so that they could claim against the transferee, Active Young People Limited.
It held that the transferor’s vicarious liability to a third party for the tortious acts of its employees does not transfer to the transferee under Regulation 4(2)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The court dismissed an appeal by a former psychiatric patient (ABC) of Huntercombe Manor Hospital, who argued that the hospital’s vicarious liability for alleged abuse by its employees had transferred from Huntercombe to the transferee (Active Young People Limited), following a TUPE transfer of the hospital business in March 2021.
Background
ABC claimed that during a four-month stay at Huntercombe Manor Hospital between 2018and 2019, she was subjected to mental and verbal abuse by members of staff and was restrained on more than 200 occasions. Following a relevant transfer for the purposes of TUPE in March 2021, Huntercombe entered liquidation. ABC subsequently discovered that Huntercombe’s public liability insurance carried a £250,000-per-claim deductible, which in practice would exhaust most, if not all, of her claim for damages. Faced with Huntercombe’s insolvency and no realistic prospect of recovery from the insurer, ABC raised an argument, described by the Court of Appeal as “opportunistic,” that the liability had transferred to the transferee, Active Young People Limited (AYPL) under TUPE Regulation 4(2)(a).
Legal Framework
The TUPE 2006 Regulations stem from the EU Acquired Rights Directive (2001/23), whose preamble states that it is necessary to “provide for the protection of employees in the event of a change of employer, in particular to ensure that their rights are safeguarded.” Regulation 4(2)(a) states that upon a relevant transfer, “all the transferor’s rights, powers, duties and liabilities under or in connection with [a transferring contract of employment] shall be transferred … to the transferee.” The question in ABC v Huntercombe was whether that phrase extended to include an employer’s vicarious liability to a third party.
The Court’s Ruling
The High Court had earlier rejected ABC’s argument, holding that, for liability to transfer, the connection between the transferor’s liability and the contract of employment must be direct, in the sense of being a liability owed to an employee. Vicarious liability to a third party did not satisfy that test of “directness.” ABC was granted permission to appeal to the Court of Appeal. The Court of Appeal unanimously dismissed the appeal on the basis that only employee liabilities transfer to the transferee.
The ruling now carries practical significance. The Court of Appeal was mindful that more than fifty claims of a similar nature against the same parties will be considered at a case management conference this autumn and delivered its judgment with that timetable in view.
Key Takeaways
The purpose of TUPE is to safeguard employees’ rights in the event of a transfer; its purpose is not to transfer third-party claims to transferees. Irrespective of TUPE, the claims in the case all arose from pre-transfer events, so AYPL could not be held responsible.
ABC v Huntercombe (No.12) Limited and Others sets a timely precedent, as more than fifty claims of a similar nature against the same parties are to be considered at a case management conference this autumn.
Ogletree Deakins’ London office and Global Reorganizations Practice Group will continue to monitor developments and will provide updates on the Cross-Border and Global Reorganizations blogs as additional information becomes available.
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