In the case of ABC v Huntercombe (No. 12) Ltd and others the High Court was asked to determine the extent to which liability to third parties for the acts of employees (rather than liability to employees themselves) will pass to a new employer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
The case
The Claimant was claiming that she was entitled to damages as a result of wrongs committed by two employees of a private hospital when she was an inpatient there. At the time of the injury, the hospital was owned and operated by Huntercombe (No.12) Limited (Huntercombe). The employment of the relevant employees had subsequently transferred to Active Young People Limited (AYP), under TUPE.
If the Claimant could demonstrate that she had suffered damage as a result of its employees’ actions in the course of their employment with it, Huntercombe would be liable to her for that damage via a concept known as vicarious liability. The question in this case was whether that potential liability had transferred to AYP under TUPE along with the relevant employees or whether it had stayed with Huntercombe. The Court was also asked whether, if liability did transfer to AYP, any right Huntercombe had under its public liability insurance in respect of the Claimant’s claim would also transfer, so that AYP could claim against Huntercombe’s insurers.
Outcome
The High Court found that the liability did not transfer to AYP. It decided that any liability Huntercombe owed to the Claimant, a third party, had too remote a connection to the contracts of employment of the relevant employees to fall within the automatic transfer provisions of TUPE. However, it also said that if it was wrong about this and any liability did transfer, then AYP would have the right to claim on Huntercombe’s insurance policy.
Comment
This is a point that doesn’t come up too frequently, but which could have significant implications for employers (and their insurers). Although this decision represents a good outcome for employers that acquire employees under TUPE (transferees) the question of whether vicarious liability to third parties can transfer has been decided differently in the past. On this basis, then, transferee companies should (where possible) ask as part of their due diligence ahead of the transfer whether there is a liability or potential liability to third parties arising from the actions of any of the transferring employees. If there is, transferees may wish to seek indemnity protection from the transferor and to check the terms of the transferor’s relevant insurance policies to see if any steps need to be taken to protect the transferee’s ability to claim against that insurance if required.
Abigail McKean