ABC v Huntercombe (no. 12) Limited & Ors (2026)

How far reaching are the undertakings transferred under the Transfer of Undertakings (Protection of Employment) ("TUPE") Regulations 2006? Do they provide a third party with a remedy against a company (the transferee) who has inherited the rights, obligations and liabilities of the former company (the transferor)? The Court of Appeal was recently asked to determine the limits of that transfer, specifically, whether a transferee can inherit potential vicarious liability owed to a third party for acts committed by an employee prior to transfer?

You would be forgiven for thinking that TUPE transfers are more commonly associated with employment disputes, and the preserve of the employment tribunal or employment-related contractual disputes. However, what is the position when a third party looks to pursue a TUPE transferee in the County Court or the High Court for the acts of an employee during a period where they were employed by the transferor?

Background

The TUPE Regulations 2006 are designed to safeguard employees when the company they work for, or part of the company, changes ownership, or where a particular service provision changes. Under TUPE, employees' contracts, and the rights, obligations and liabilities of the transferor, are inherited by the transferee.

The claimant, known by the anonymising cipher, ABC, pursued a claim against Huntercombe (the transferor), Active Young People Limited (the transferee), and two other individuals - a psychiatrist and another clinician said to be responsible for the claimant's care. Her claim related to allegations of emotional and verbal abuse and excessive restraint for a period in 2018 and 2019 during her time at Huntercombe, a privately run psychiatric facility.

The clinicians were employees of Huntercombe at the relevant time, and became employees of Active Young People Limited in 2021, when a TUPE transfer took place between the two companies. No abuse was alleged to have taken place when the facility was under the ownership of Active Young People Limited.

It was discovered that Huntercombe was in liquidation at the time the claimant sought to seek redress. Huntercombe's insurance deductible was £250,000, meaning that its insurers would only have been liable to the claimant for any sum over £250,000 had the claimant obtained a judgment against Huntercombe. It was thought the claimant's claim would not exceed that threshold and therefore Active Young People Limited and two individuals were added to the proceedings.

Regulation 4 TUPE Regulations 2006

Regulation 4 of the TUPE Regulations 2006 is as follows:

Effect of relevant transfer on contracts of employment

4 (1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.

(2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer -

(a) All the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and

(b) Any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee...

The Court of Appeal noted that when the TUPE Regulations 2006 were enacted in the UK, if a liability is passed to the transferee, the transferor’s liability is extinguished. If it is not passed, the transferee has no relevant liability. There is no joint and several liability - only one party bears liability.

The court of first instance considered:

• Is the effect of regulation 4(2) of the 2006 Regulations to transfer to Active Young People Limited any alleged vicarious liability of Huntercombe to the claimant:
  
  
  1. For the alleged torts of any employee employed by Huntercombe immediately prior to the transfer date.
  
  2. For the alleged breaches by any such employee of the claimant's human rights?
  
  
• If the answer to either issues 1 or 2 is "yes", is the effect of regulation 4(2) also to transfer to Active Young People Limited any right that Huntercombe may have to indemnity by its public liability insurers in respect of the claimant's claim for damages and costs and/or in respect of defence costs, arising from any such alleged vicarious liability?

The court of first instance found the answer to issues 1 and 2 was no.

Summary

The Court of Appeal looked to prior authority and determined that the predominant purpose of the regulations was to safeguard existing rights of employees if there was a transfer, which was "well-settled". That was the entire purpose of the regulations.

Whilst the claimant argued that there was "plainly sufficient connection between the vicarious liability and the contract of employment, primarily because, for the transferor to be vicariously liable for the acts and omissions of the employee, those acts and omissions would have to have a close connection to that contract of employment", the defendant's submission was that by reference to the regulations as a whole, "there was no connection at all between the transferor's vicarious liability owed to ABC (a third party), and the safeguarding of the rights of [the third and fourth defendants, the employees] on transfer".

The Court of Appeal agreed with the court of first instance in that Huntercombe's vicarious liability did not pass to Active Young People Limited as regulation 4(2)(a) does not extend to liabilities owed by the transferor to third parties, relying on the particular construction of "transferor's... liabilities in connection with any such contract", i.e. the contract of employment itself, and the context of the other regulations.

It was held that vicarious liability gave rise to no right that a potentially liable employee could enforce against the transferor or transferee - this was not something that could pass under regulation 4(2)(a). Whilst vicarious liability is a doctrine that ordinarily engages permitting a claimant to enforce a right against a tortfeasor's employer - to the extent the employer is liable to the tortfeasor employee - where TUPE Regulations 2006 are concerned, the claimant themselves must have a right under the transfer, and as a non-employee, that right did not exist.

A third party's rights under regulation 4(2)(a) are of course wholly different to rights an employee might have against an employer as a consequence of another employee's actions. However, the employee themselves would still have to have a right that was capable of passing under the transfer in order for the regulation to engage.

In Baker v British Gas Services (Commercial) Limited & Another (2017), an authority upon which the Court of Appeal in ABC relied, it was determined that the claimant's colleague was responsible for carrying out an inspection which the court found had not been undertaken with due care. Both the claimant and his colleague were employees of the transferor, and both individuals' employment was then transferred to the first defendant under a relevant transfer. As such, the claimant had a right that was capable of passing under the transfer, and the new employer also had a liability to the claimant that had passed under the transfer of the colleague's employment.

However, as was seen in the Employment Appeal Tribunal authority of Sean Pong Tyres Limited v Barry Moore (2024), the employment of the tortfeasor - the claimant's colleague - had transferred under the TUPE Regulations 2006, whereas the claimant's had not as he had resigned before the relevant transfer. As such, the claimant did not have a right that could be enforced against the colleague's new employer.

Practical tips

• The Court of Appeal decision reiterates that the regulations exist for the protection of employee rights. Non-employees may struggle to enforce claims for vicarious liability against transferees.
  
  
• Claimants, of course, will be able to pursue claims against the transferors in the usual way where any alleged breaches occurred during a period where the transferor employed an alleged tortfeasor. ABC looked to pursue the transferee simply due to the fact the transferor was in liquidation, otherwise it is highly unlikely the transferee would ever have been brought into proceedings.
  
  
• It is also open to claimants to bring claims against the individuals they consider responsible. Individuals may have insurance products that would respond to the claim, even if they are not of sufficient means to pay the claim themselves. Despite the TUPE Regulations 2006 themselves having no inherent joint and several liability - as they concern a straight transfer from transferor to transferee (or not, as the case may be) - any tortfeasors sued would potentially have joint and several liability to any claimant, subject to any liability determination by a court.
  
  
• It is useful to set up Google Alerts and periodically check Companies House to monitor the finances of companies to ensure that any claim is financially viable at the outset and throughout the life of the matter.
  
  
• For employment tribunal claims, claimants may wish to consider bringing in individual colleagues/former colleagues as respondents where appropriate, where claimants have a direct right of action against them. This will have to be balanced as against any adverse costs risk, however low that risk may be. Costs do not ordinarily follow the event in the employment tribunal (i.e. parties ordinarily bear their own costs), absent unreasonable or vexatious behaviour.
  
  
• Solvent transferors transferring their entire business or parts of service provisions to transferees should ensure they are sufficiently insured for claims that are later brought, particularly those that have longer limitation periods, or for claims of childhood sexual abuse, where there may be no defence of limitation.

How we can help

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The information in this article is correct at the time of writing. It is intended as general guidance and should not be treated as legal advice. Every situation turns on its own facts, and tailored advice should be sought before taking any action.

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