No Transfer Here: Where TUPE Liability Ends

By Craig Peel, Principal Lawyer

Background

The Court of Appeal considered an important question about the scope of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The case arose from a claim brought by ABC, a former patient at a privately run psychiatric hospital operated by Huntercombe Hospital. She alleged that during her admission in 2018 and 2019 she was subjected to mental and verbal abuse by staff and was restrained on more than 200 occasions. She sought damages against a number of defendants, including the organisation that later took over the hospital's operations following a TUPE transfer in 2021. 

The claimant argued that, when the undertaking transferred from Huntercombe (No.12) Limited to Active Young People Limited (AYPL), liability for the alleged wrongdoing of employees also transferred. Specifically, she contended that AYPL became vicariously liable for the alleged acts and omissions of two clinicians who had been employed by Huntercombe before the transfer and who subsequently transferred to AYPL under TUPE. 

At first instance, the High Court rejected that argument, holding that TUPE did not transfer an employer's vicarious liability to third parties for acts committed by employees before the transfer. The claimant appealed, arguing that regulation 4(2)(a) of TUPE transfers all liabilities "under or in connection with" contracts of employment and that this wording was sufficiently broad to encompass vicarious liability claims.

Outcome

The Court of Appeal dismissed the appeal and upheld the High Court's decision. It held that an employer's vicarious liability to a third party for the alleged torts of employees committed before a TUPE transfer does not pass to the transferee. Instead, that liability remains with the transferor employer. 

The Court stressed that TUPE must be interpreted in light of the purpose of the Acquired Rights Directive, from which the Regulations derive. The Directive is designed to safeguard the rights of employees when an undertaking changes hands. The Court concluded that an employee has no enforceable right arising from an employer's vicarious liability to a third party. As a result, such liabilities do not fall within the type of rights and obligations that TUPE is intended to transfer. 

The Court also noted that TUPE contains detailed provisions requiring transferors to provide information about employment-related liabilities and claims before a transfer takes place. There is no equivalent requirement in relation to claims brought by third parties. This supported the conclusion that Parliament did not intend transferees to inherit unknown third-party claims arising from events that occurred before the transfer. 

In reaching its decision, the Court distinguished cases involving employee claims, such as personal injury or failures to provide a safe system of work, where the rights belong directly to employees and therefore transfer under TUPE. Claims by external third parties stand on a different footing because they do not arise from rights exercisable by employees themselves. The Court therefore confirmed that TUPE cannot be used to impose liability on a transferee for pre-transfer wrongs simply because the alleged wrongdoers transferred employment under the Regulations. 

Comments / Key takeaways

This judgment provides valuable clarification on the limits of TUPE liability. The Court of Appeal reaffirmed that the primary purpose of TUPE is the protection of employees and the preservation of their employment rights when a business changes hands. It is not intended to create new rights for third parties or to expand potential defendants in existing litigation. 

For employers involved in business transfers, the decision is welcome confirmation that they will not ordinarily inherit unknown third-party claims arising from acts allegedly committed before the transfer. The Court recognised that imposing such liabilities would be difficult to reconcile with TUPE's information-sharing regime, which focuses on employment-related liabilities rather than external claims. 

For trade unions and workplace representatives, the judgment highlights the distinction between employee rights, which are generally protected and transferred under TUPE, and liabilities owed to third parties, which are not. The case confirms that where claims are brought by employees themselves, TUPE continues to offer broad protection. However, claims brought by service users, patients or other third parties will not automatically transfer to a new employer simply because the relevant employees transferred under TUPE. 

ABC v Huntercombe (No.12) Limited and Others [2026] EWCA Civ 1161