The Court of Appeal has ruled that employers’ vicarious liability to third parties does not transfer to new employers under Transfer of Undertakings (Protection of Employment) legislation.
The landmark judgment, handed down on 8 September 2026, establishes that TUPE Regulation 4(2)(a) must be read in light of the EU Acquired Rights Directive, which exists solely to protect employee rights.
The case, ABC v Huntercombe (No.12) Limited and Others, centred on whether a former psychiatric patient could pursue a transferee business for alleged pre-transfer abuse by staff.
ABC claimed that during a four-month stay at Huntercombe Manor Hospital between 2018 and 2019, she was subjected to mental and verbal abuse by members of staff and was restrained on more than 200 occasions.
Following a relevant TUPE transfer in March 2021, the original operator, Huntercombe (No. 12) Limited, entered liquidation, leaving ABC facing serious obstacles to recovering damages.
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, ABC argued that vicarious liability for the alleged staff abuse had transferred to the transferee, Active Young People Limited, under TUPE Regulation 4(2)(a).
The Court of Appeal described this argument as “opportunistic” and unanimously dismissed the appeal, finding that only employee liabilities transfer to a transferee under the legislation.
The High Court had earlier rejected ABC’s argument, holding that any liability transferred under TUPE must be directly owed to an employee, which third-party vicarious liability is not.
Regulation 4(2)(a) of the TUPE 2006 Regulations 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 Court of Appeal found that this provision could not be stretched to cover an employer’s vicarious liability to a person who was not a party to any contract of employment.
The ruling reinforces that TUPE legislation is designed exclusively to protect employees, not to provide third parties with an additional route of recovery against transferee businesses.
The court noted that all claims in the case arose from pre-transfer events, meaning Active Young People Limited could not logically be held responsible for conduct that predated its involvement with the hospital business.
The judgment carries considerable practical significance, as more than fifty claims of a similar nature against the same parties are due to be considered at a case management conference this autumn.
The Court of Appeal delivered its judgment with that broader timetable in mind, giving transferees and their insurers much-needed clarity on the scope of TUPE liability ahead of the forthcoming proceedings.