TUPE Regulation 4(2)(a) Does Not Transfer an Employer’s Vicarious Liability to Third Parties

Case: ABC v Huntercombe (No.12) Ltd & Ors
Citation: [2026] EWCA Civ 1161
Court: Court of Appeal (Civil Division)
Date: 8 September 2026
Appeal from: [2025] EWHC 1000 (KB) (King’s Bench Division, Manchester District Registry, HHJ Bird)

1. Introduction

This appeal addressed a narrow but high-stakes question under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE 2006”): whether, on a TUPE transfer, the transferor employer’s vicarious liability to a third party for torts allegedly committed by an employee pre-transfer passes to the transferee under Regulation 4(2)(a).

The appellant (“the claimant”) alleged mistreatment during a 2018/2019 placement at a privately run psychiatric hospital operated by the first respondent (“the transferor”). In March 2021, the hospital undertaking transferred to the second respondent (“the transferee”) under TUPE. Two clinicians (referred to in the judgment as “D3” and “D4”) were employees before and after the transfer. All alleged wrongdoing occurred before the transfer.

The practical driver was insolvency and insurance structure at the transferor level: the claimant sought to pursue the transferee on the basis that TUPE had shifted vicarious liability for pre-transfer conduct. The Court of Appeal (Bean LJ, Coulson LJ giving the leading judgment, and Sir Launcelot Henderson) dismissed the appeal.

2. Summary of the Judgment

The Court of Appeal held that Regulation 4(2)(a) does not transfer an employer’s vicarious liability owed to third parties for employees’ pre-transfer torts (and treated the pleaded human rights allegations as falling to be answered the same way). Such liability remains with the transferor.

The court endorsed the result below but refined the framing: rather than focusing on “direct” liabilities, it was “better simply to say” that TUPE Regulation 4(2)(a) does not extend to third-party vicarious liability for pre-transfer acts.

3. Analysis

3.1 Precedents Cited (and How They Informed the Decision)

• EU-consistent interpretation as the methodological starting point
  The court stressed that TUPE, deriving from the Acquired Rights Directive, must be construed by reference to the Directive’s purpose: Schulte Deutsche Bausparkasse Badenia AG [Case C-0350/03) [2003] All ER (EC) 420 (at [71]). The sequencing—Directive first, then domestic text—followed Swift (Trading as AS Swift Move) v Robertson [2014] UK SC 50 and Martin v Lancashire County Council & Bernadone v Pall Mall Services Group Limited & Ors [2001] ICR 197.
• The Directive’s “no more and no less” employee-rights focus
  The court relied on the settled characterisation that the Directive safeguards employees’ enforceable rights against the new employer: British Fuels Limited v Baxandale and Wilson v St. Helens Borough Council [1999] 2 A.C.52. That framing was central: if the employee has no right capable of being “safeguarded” in relation to the asserted liability, it is unlikely to be within the Directive/TUPE scheme.
• The breadth of “in connection with” and its contextual limits
  While acknowledging that “in connection with” is “of the widest import” (Ashville Investments Ltd v Elmer Contractors Ltd [1989] 1 QB 488), the court adopted the warning that it is a “protean” phrase drawing meaning from context: Coventry Waste Limited v Russell [1999] 1 WLR 2093 (with supporting references to Re Nanaimo Community Hotel Limited [1944] 4 D.L.R. 638, Johnson v. Johnson [1952] P. 47, and the contextual approach endorsed in Barclays Bank PLC v HMRC [2007] EWCA Civ 442). This underpinned the court’s insistence that “connection” must be evaluated against the Directive’s employee-rights purpose and TUPE’s internal structure.
• Doane rejected as unpersuasive on the core point
  The only case directly addressing third-party vicarious liability on transfer was Doane v Wimbledon FC [2007] 12 WL UK 2 (a county court decision). The Court of Appeal treated its reasoning as flawed because it did not grapple with the key premise: the employee has no right, under the employment contract or otherwise, to have the employer vicariously liable to third parties.
• Distinguishing employee claims (which transfer) from third-party claims (which do not)
  The court treated cases about employees’ own claims as consistent with its conclusion:
  • Martin v Lancashire County Council & Bernadone v Pall Mall Services Group Limited & Ors [2001] ICR 197: employer duties (including in tort/occupiers’ liability) owed to employees transfer because they are part of safeguarding employee rights.
  • Baker v British Gas Services (Commercial) Limited [2017] EWHC 2302 (QB); [2018] P.I.Q.R. P3: a vicarious liability to an employee claimant can transfer—because it is the employee’s right being safeguarded, and it fits TUPE’s information regime.
  • Alamo Group (Europe) Ltd v Tucker (EAT) [2003] ICR and Beckmann v Dynamco Whicheloe Macfarlane Ltd (ECJ) [2003] ICR 50: emphasised the protective purpose and breadth of transferred rights/duties where connected to the employment relationship.
• Vicarious liability as “parasitic” and the indemnity backdrop
  The court used orthodox authorities to explain why vicarious liability does not “protect” employees. It cited Majrowski v Guy's and St Thomas's NHS Trust (for “course of employment”), and stressed the employer’s entitlement to recover from the employee: Lister v Romford Ice and Cold Storage Co. Limited [1957] A.C. 555, restated in Lifestyle Equities CV v Ahmed (SC) [2025] A.C. 1. It also referenced the Civil Liability (Contribution) Act 1978 to show that, even absent full indemnity, contribution principles could leave employees exposed.
• Protection of the transferee as part of the Directive’s balance
  The court accepted a secondary objective of fair balance, referencing ISS Facility Services NV v Govaerts and another [2020] I.C.R 115, and treated TUPE’s internal “information” mechanisms as reflecting that balance.

3.2 Legal Reasoning

(A) Directive purpose determines the relevant “connection”

The court’s central move was to anchor “liabilities … in connection with” (Regulation 4(2)(a)) to the Directive’s purpose: to safeguard employees’ rights on a change of employer. The claimant conceded that employees (here, D3 and D4) have no right against the employer concerning the employer’s vicarious liability to third parties. That concession was decisive: without an employee right to safeguard, the asserted third-party liability did not fall within the Directive’s purpose and therefore could not sensibly be pulled into Regulation 4(2)(a) through expansive language alone.

(B) Vicarious liability does not “protect” employees (in law or in practice)

The claimant argued that transferring vicarious liability offered “protection” to employees because a new employer would “take care” of claims. The court rejected this on legal fundamentals: vicarious liability is a secondary liability of the employer to the injured claimant, “parasitic” on the employee’s primary wrongdoing. It confers no enforceable benefit on the employee, and the employee may remain financially exposed via a Lister v Romford Ice and Cold Storage Co. Limited [1957] A.C. 555 indemnity (reaffirmed in Lifestyle Equities CV v Ahmed (SC) [2025] A.C. 1) or contribution principles under the Civil Liability (Contribution) Act 1978.

(C) TUPE’s structure confirms the intended scope: employee claims, not third-party claims

The court treated Regulations 11 and 12 (employee liability information and remedies) as a powerful structural indicator: TUPE builds a detailed regime to ensure a transferee is informed about employee claims and liabilities that will transfer. There is no corresponding regime for third-party claims. Given the potentially massive and unknown exposure (the judgment referenced over 50 similar claims, potentially worth millions), the absence of any disclosure mechanism was taken as evidence that third-party vicarious liability was not meant to transfer.

(D) Policy coherence and legal principle

The court emphasised the “counter-intuitive” and legally exceptional nature of imposing pre-transfer liabilities on a transferee for events it neither caused nor had any entitlement to know about under TUPE. If the law were to create such an unusual third-party right, the court expected “clear permissive wording” in the Directive or Regulations. None existed.

(E) Refinement of the first-instance “direct liability” formulation

Although agreeing with the outcome, the Court of Appeal cautioned that describing the test as requiring “direct” liabilities could be imprecise. The preferable statement of principle is categorical: Regulation 4(2)(a) does not transfer the transferor’s vicarious liability to third parties for employees’ pre-transfer acts/omissions.

3.3 Impact

• Limits on claimant strategy in insolvency/insurance-gap scenarios
  The case closes off an attempted route to recovery where the transferor is insolvent or underinsured (or effectively uninsured due to a deductible), by preventing claimants from re-targeting liability to a transferee solely because a TUPE transfer occurred.
• Transactional certainty for transferees
  The reasoning reinforces that TUPE’s bargain is principally about continuity of employment rights and obligations, not the transfer of unknown third-party tort exposures, which would otherwise undermine pricing, due diligence, and risk allocation in corporate transactions.
• Clarifies the meaning of “in connection with” in Regulation 4(2)(a)
  The decision demonstrates that broad language is controlled by (i) the Directive’s purpose and (ii) TUPE’s internal mechanisms—especially Regulation 11.
• Likely influence on mass and institutional litigation
  With multiple related claims pending, the decision provides a clear case-management and pleading boundary: claims for pre-transfer harm must ordinarily be pursued against the transferor (and/or the primary tortfeasors), not the transferee by TUPE proxy.

4. Complex Concepts Simplified

• TUPE transfer: A legal mechanism that preserves employees’ employment and many employment-related rights/obligations when a business (or part of it) changes hands.
• Acquired Rights Directive (2001/23/EC): The EU instrument underpinning TUPE, aimed primarily at safeguarding employees’ rights on a change of employer.
• Vicarious liability: A rule making an employer liable to an injured claimant for wrongdoing by an employee committed in the course of employment, even if the employer itself was not at fault. It is “secondary” because it depends on the employee’s primary wrongdoing.
• “In connection with”: Broad wording that can capture non-contractual liabilities linked to employment, but whose scope is controlled by context and statutory purpose.
• Lister indemnity: The (controversial but affirmed) principle that an employer who pays damages due to an employee’s negligence may seek full repayment from the employee: Lister v Romford Ice and Cold Storage Co. Limited [1957] A.C. 555, restated in Lifestyle Equities CV v Ahmed (SC) [2025] A.C. 1.
• Employee liability information (Regulation 11): A TUPE disclosure regime requiring the transferor to provide the transferee with specified information about employees and employee claims—supporting the inference that TUPE is not designed to shift unknown third-party claims.

5. Conclusion

ABC v Huntercombe (No.12) Ltd & Ors [2026] EWCA Civ 1161 establishes (and clarifies at appellate level) that TUPE Regulation 4(2)(a) does not transfer a transferor’s vicarious liability to third parties for employees’ pre-transfer torts (and aligned human-rights allegations). The decision is firmly rooted in the Acquired Rights Directive’s employee-rights objective, the “protean” nature of “in connection with,” and TUPE’s structural focus on employee—not third-party—liabilities.