TUPE and third-party liabilities: The Court of Appeal draws the line in ABC v Huntercombe (2026)

Hollie Patterson of 12KBW identifies the practical takeaways for employment and personal injury practitioners of the effects of a TUPE transfer on vicarious liability.

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Introduction

Recent months have delivered a number of court judgments on vicarious liability, including Burger, Bethel and X v Lord Advocate. The latest Court of Appeal decision in ABC v Huntercombe (No. 12) Ltd & Ors [2026] EWCA Civ 1161 provides important guidance on the scope of the liabilities which transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).

The issue was a novel one: where an employee transfers under TUPE, does the transferor’s vicarious liability to a third party for that employee’s pre-transfer wrongdoing also pass to the transferee?

The Court of Appeal unanimously held that it does not. Although the facts arose in the unusual context of a personal injury claim against the former operator of a psychiatric hospital, the judgment has wider significance for employers and practitioners advising on TUPE transfers. In particular, it provides useful guidance on how the words “under or in connection with” in Regulation 4(2)(a) should be approached and confirms that, broad though they are, they are not unlimited.

Factual background

ABC was a patient at Huntercombe Hospital, a privately run psychiatric facility, for approximately four months in 2018 and 2019. She alleges that she was mentally and verbally abused by staff and restrained on more than 200 occasions.

In around March 2021, the undertaking transferred from Huntercombe to Active Young People Limited (“AYPL”) for the purposes of TUPE. Two doctors who had been involved in ABC’s care were employed by Huntercombe before the transfer and subsequently by AYPL. All of the events underlying ABC’s claim occurred before the transfer.

ABC initially sued Huntercombe. However, Huntercombe entered liquidation and it is understood that their public liability insurance is subject to a £250,000 deductible per claim. ABC therefore sought to establish that Huntercombe’s vicarious liability for the alleged acts and omissions of the transferring employees had itself transferred to AYPL.

HHJ Bird rejected that argument in the High Court. The Court of Appeal upheld his conclusion.

Decision

What does Regulation 4(2)(a) transfer?

Regulation 4(2)(a) provides that, following a relevant transfer, all of the transferor’s “rights, powers, duties and liabilities under or in connection with” the transferring employee’s contract pass to the transferee.

ABC’s argument had an apparent linguistic attraction. Vicarious liability arises where there is a sufficient connection between an employee’s wrongdoing and their employment. Why, therefore, was the transferor’s resulting liability not a liability “in connection with” the employee’s contract of employment?

Coulson LJ accepted that the phrase “in connection with” is capable of being very wide. However, both parties accepted that there had to be some limit: as counsel for ABC put it, “not every connection suffices”.

The key question was therefore what determined the necessary connection.

Coulson LJ emphasised that the appropriate starting point was the Acquired Rights Directive from which TUPE derives, rather than simply the ordinary meaning of Regulation 4(2)(a).

The primary purpose of the Directive is to protect employees when there is a change of employer and, in particular, to safeguard their rights. Regulation 4 therefore had to be interpreted consistently with that purpose.

That was fatal to ABC’s argument.

An employee has no enforceable right to require their employer to be vicariously liable for their wrongdoing. Vicarious liability is a secondary liability owed by the employer to the injured third party. It does not create a corresponding right belonging to the employee.

Indeed, Coulson LJ pointed out that the assumption that vicarious liability somehow protects an employee is legally questionable. Under Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555, an employer may in principle recover an indemnity from an employee for damages paid as a consequence of the employee’s negligence, a principle recently restated by the Supreme Court in Lifestyle Equities CV v Ahmed [2025] AC 1.

The fact that the transferor is vicariously liable therefore does not confer upon the employee a TUPE right requiring protection on transfer.

This led to the Court’s central conclusion.

The expression “in connection with” must be read in light of the employee-protective purpose of the Directive. The transferor’s vicarious liability to a third party neither gives rise to a right on the part of the employee nor forms part of the employer’s protection of that employee, and, as such, the Court of Appeal found that it does not have the necessary connection with the contract of employment for the purposes of Regulation 4(2)(a).

Importantly, however, the Court did not formulate a general rule that only contractual liabilities, or even only what might be labelled “direct” liabilities, can transfer.

Indeed, Coulson LJ expressly considered that the High Court’s use of the expression “direct liability” might be imprecise and lead to further argument. The narrower and safer proposition was that Regulation 4(2)(a) does not extend to a transferor’s vicarious liability to third parties for the pre-transfer acts and omissions of its employees.

That distinction is important when considering earlier authorities.

Why Bernadone and Baker are different

In Martin v Lancashire County Council; Bernadone v Pall Mall Services Group Ltd [2001] ICR 197, employees injured at work had claims against their employer arising from matters such as a failure to provide a safe system of work. The Court of Appeal held that relevant liabilities passed under TUPE.

Similarly, in Baker v British Gas Services (Commercial) Ltd [2017] EWHC 2302 (QB), the transferor’s vicarious liability arising from wrongdoing which injured another employee transferred to the transferee.

Those cases were not inconsistent with the result in Huntercombe. The crucial distinction was that the liabilities in Bernadone and Baker were liabilities owed to employees whose employment-related rights were within the protective purpose of TUPE. The judgment therefore does not represent a wholesale narrowing of Regulation 4. Rather, it draws a boundary between employment-related rights and liabilities, which TUPE exists to protect, and vicarious liabilities owed to unrelated third parties (which are not transferred).

The wider TUPE scheme

The structure of TUPE reinforced that conclusion.

Regulation 11 requires transferors to provide transferees with prescribed employee liability information, including information about certain claims brought by employees. Regulation 12 provides remedies where that obligation is breached.

There is no equivalent regime requiring a transferor to disclose actual or potential third-party claims.

Coulson LJ considered that significant. Parliament had created machinery intended to ensure that a transferee knew about the employee liabilities it was assuming. If substantial liabilities to third parties were also intended to transfer automatically, it would be surprising for TUPE to provide no corresponding mechanism by which a transferee was entitled to learn of them before the transfer.

What happened to Doane?

The Court also declined to follow the County Court decision in Doane v Wimbledon FC [2007] 12 WLUK 2, which had reached the opposite conclusion.

In Doane, the court had considered that transferring vicarious liability benefited the employee because the employee could look to the employer for protection against a third-party claim. Coulson LJ identified the fundamental difficulty with that reasoning: the employee had no such enforceable right. The supposed benefit therefore could not provide the employee-rights justification necessary to bring the liability within Regulation 4.

Comment

The decision provides a number of useful lessons.

First, “in connection with” is broad but not boundless. A factual connection with a transferring employee’s employment will not, without more, bring a liability within Regulation 4(2)(a).

Second, the purpose of TUPE is central to identifying the necessary connection. The question is not simply whether employment forms part of the factual chain giving rise to liability, but whether the liability falls within the employee-protective scheme which TUPE is intended to preserve.

Third, third-party vicarious liabilities for pre-transfer acts remain with the transferor. They do not move automatically with the employee whose conduct generated the liability.

Fourth, that does not mean third-party liabilities can be ignored when businesses transfer. Historic tort liabilities may remain commercially significant and should still be investigated and allocated through contractual warranties and indemnities, together with appropriate consideration of insurance arrangements.

Finally, practitioners should be cautious about expressing Huntercombe too broadly. The Court deliberately declined to adopt an overarching “direct liability” test. The ratio is more focused: TUPE does not transfer a transferor’s vicarious liability to third parties for the pre-transfer acts or omissions of transferring employees. That narrower formulation is likely to be the most important takeaway from the judgment.

Hollie Patterson