Vicarious liability does not travel with the staff: the Court of Appeal keeps third-party claims out of TUPE

When a business changes hands under TUPE, does the old employer’s vicarious liability to an injured third party travel across with the staff? On 8 September 2026 the Court of Appeal said no. In ABC v Huntercombe (no.12) Limited [2026] EWCA Civ 1161, the Court dismissed the claimant’s appeal and held that regulation 4(2)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 does not transfer a transferor’s vicarious liability to third parties.

What the case was about

ABC claims damages arising out of her placement at Huntercombe Hospital in Maidenhead, a privately run psychiatric facility owned and operated by the first defendant (para 2). She alleges that during four months in 2018/2019 she was mentally and verbally abused by a large number of staff and restrained on over 200 occasions; every relevant event predated the transfer (para 3). In around March 2021 the undertaking transferred to Active Young People Limited (AYPL), and the third and fourth defendants, her consultant psychiatrist and responsible clinician, moved with it (para 2). ABC first sued Huntercombe alone, then found it in liquidation with a £250,000 per-claim insurance deductible thought likely to wipe out most or all of her damages, so she joined the others, arguing that AYPL had inherited the vicarious liability. His Honour Judge Bird rejected that (para 4). More than 50 similar claims await a case management conference in the autumn (para 3).

What the Court of Appeal decided

Lord Justice Coulson gave the judgment, with which Sir Launcelot Henderson and Lord Justice Bean, Vice-President of the Civil Division, agreed (paras 75, 76). The starting point is the Acquired Rights Directive rather than the Regulations (paras 27, 29), and its primary purpose is to safeguard employees’ rights on a change of employer (paras 30, 32). Counsel for ABC conceded that an employee has no relevant right against the transferor in respect of its vicarious liability to a third party (para 33) — rightly so, because that liability is secondary, “parasitic always on the direct liability of the employee to the third party” (para 44). Nor does it protect the employee in practice: on Lister v Romford Ice, restated by the Supreme Court in Lifestyle Equities CV v Ahmed, the employer may recover a full indemnity from the negligent employee (para 46).

“In connection with” is language of the widest import (para 37), but also a protean phrase that draws its meaning from the words around it (paras 38, 51). Read against the Directive’s purpose, vicarious liability to a third party does not arise in connection with the contract of employment (para 51). The Regulations point the same way: regulations 11 and 12 require the transferor to hand over detailed employee liability information and penalise failure, yet say nothing about third-party claims — deliberate policy, not an omission (paras 52, 53). Had more than 50 claims potentially worth millions passed, AYPL would have had no entitlement to know even of their existence (para 54). Rather than adopt the judge’s “direct liability” formulation, the Court held simply that regulation 4(2)(a) does not extend to vicarious liability to third parties for pre-transfer acts (para 73). Doane v Wimbledon FC, the one county court decision the other way, was held to contain a central flaw (para 50), and the appeal was dismissed (para 74).

Why it matters

• Vicarious liability stays with the transferor. Cold comfort where the transferor is insolvent, but the point is now settled at appellate level (paras 42, 73).
• Employee-facing liabilities still transfer. Baker v British Gas and Bernadone survive: a liability owed to the employee, and the insurance claim enforcing it, do pass (paras 63, 64, 67).
• The information regime was the tell. The absence of any regulation 11 equivalent for third-party claims drove the construction (paras 52, 53, 54).
• Written with the linked claims in mind. The judgment was produced ahead of the autumn case management conference (para 3), and the Court called the claim opportunistic (para 59).

Read the full judgment: ABC v Huntercombe (no.12) Limited [2026] EWCA Civ 1161 (The National Archives).