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You are here: BAILII >> Databases >> England and Wales High Court (King's Bench Division) Decisions >> ABC v Huntercombe (No.12) Ltd & Ors [2025] EWHC 1000 (KB) (24 April 2025) URL: https://www.bailii.org/ew/cases/EWHC/KB/2025/1000.html Cite as: [2025] EWHC 1000 (KB) |
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KING'S BENCH DIVISION
Manchester |
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B e f o r e :
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ABC |
Claimant |
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- and – |
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(1) Huntercombe (No.12) Limited (2) Active Young People Limited (3) Dr. Veerraju Banisetti (4) Dr. Mark Tattersall |
Defendants |
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Catherine Foster (instructed by Kennedys Law) for the First Defendant
Alexander Macpherson (instructed by DAC Beachcroft) for the Second Defendant
Jasmine Chan (instructed by the Medical Defence Union) for the Third Defendant
Victoria Heyworth (instructed by the Medical Protection Society) for the Fourth Defendant
Hearing dates: 10, 11 March 2025
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Crown Copyright ©
His Honour Judge Bird :
Introduction
a. Is the effect of regulation 4(2) of the 2006 Regulations to transfer to the second Defendant any alleged vicarious liability of the First Defendant to the Claimant:
i. for the alleged torts of any employee employed by the First Defendant immediately prior to the transfer date. [Preliminary Issue 1].
ii. for the alleged breaches by any such employee of the Claimant's human rights? [Preliminary Issue 2].
b. If the answer to either issues 1 or 2 is "yes", is the effect of regulation 4(2) also to transfer to the Second Defendant any right that the First Defendant may have to indemnity by its public liability insurers in respect of the Claimant's claim for damages and costs and/or in respect of Defence Costs, arising from any such alleged vicarious liability? [Preliminary Issue 3].
The Hearing
The European and Domestic legislative framework
"it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded."
"The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee."
4.—
(1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.
(2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer—
(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and
(b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee.
(3) Any reference in paragraph (1) to a person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to a relevant transfer, is a reference to a person so employed immediately before the transfer, or who would have been so employed if he had not been dismissed in the circumstances described in regulation 7(1), including, where the transfer is effected by a series of two or more transactions, a person so employed and assigned or who would have been so employed and assigned immediately before any of those transactions.
…
(6) Paragraph (2) shall not transfer or otherwise affect the liability of any person to be prosecuted for, convicted of and sentenced for any offence.
(7) Paragraphs (1) and (2) shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it of an employee who informs the transferor or the transferee that he objects to becoming employed by the transferee.
The Court's Task
(a) is not constrained by conventional rules of construction
(b) it does not require ambiguity in the legislative language
(c) it is not an exercise in semantics or linguistics
(d) it permits departure from the strict and literal application of the words which the legislature has elected to use
(e) it permits the implication of words necessary to comply with Community law obligations
(f) the precise form of the words to be implied does not matter and
(g) The only constraints on the broad and far-reaching nature of the interpretative obligation are that the meaning should "go with the grain of the legislation" and be "compatible with the underlying thrust of the legislation being construed"
The Issues
10. The first and second preliminary issues effectively pose the question: what "liabilities…. in connection with" the contracts of the third and fourth defendant have transferred to the second Defendant (see Reg.4(2)(a))? Mr Fetto KC does not argue that the relevant liability arises "under" the transferred contract but does submit that the relevant liability is transferred.
a. first, what is the precise nature of the relevant liability which Mr Fetto KC contends has been transferred? It is the transferor's liability to the claimant. The liability arises either as a vicarious (or secondary) liability in respect of the actions or omissions of the transferor's employees (in the case of tort claims) or as a liability imputed to the transferor as a result of breaches of the Claimant's Human Rights (a primary liability arising under sects. 6 and 7 of the Human Rights Act) and (in either case) it is owed to the claimant who was not an employee of the transferor.
b. Secondly, what is the purpose of the Directive? It is the safeguarding of employee rights after a transfer of employment.
c. Thirdly, what is the nature of vicarious liability?
i. In a passage quoted in Doane (see below) from Majrowski v Guy's and St Thomas's NHS Trust [2006] UKHL 34, Lord Nicholls said:
"Vicarious liability is a common law principle of strict, no-fault liability. Under this principle a blameless employer is liable for a wrong committed by his employee while the latter is about his employer's business. The time-honoured phrase is "while acting in the course of his employment". It is thus a form of secondary liability. The primary liability is that of the employee who committed the wrong…."
ii. Charlesworth and Percy on Negligence (15th edition chapter 7) describes the basis of vicarious liability (describing it as a "doctrine") as without any "coherent or agreed jurisprudential underpinning" (para.7-08 adopting the words of Tipping J in the New Zealand case of S v Attorney General [2003] 3 NZLR 450 (CA)) but with policy justifications based on "a combination of loss-spreading, deterring behaviour likely to cause harm and, broadly,
the justice of the case at hand."
The Authorities
Martin and Bernadone
'In my opinion, the overriding emphasis in the European Court's judgments is that the existing rights of employees are to be safeguarded if there is a transfer. That means no more and no less than that the employee can look to the transferee to perform those obligations which the employee could have enforced against the transferor. … The object and purpose of the Directive is to ensure in all Member States that on a transfer an employee has against the transferee the rights and remedies which he would have had against the original employer.'
"…. The economic entity carrying on the undertaking after the transfer will be the transferee, and in general the employees are more likely to be protected if the rights and obligations to be transferred are more rather than less comprehensive. But such rights and obligations must of course fall within the limiting words "arising from a contract of employment or from an employment relationship". It would seem to me to be surprising if the rights and obligations were to be limited to contractual claims and to exclude claims in tort. Why should there be such a dividing line (in accordance with the distinction in English law between tort and contract) in a Community Directive? It is the more surprising when the language used in the Directive is broad ("arising from") and when it is not only a contract of employment but also an employment relationship (which is plainly something different) from which the rights and obligations must arise…
36 It is to my mind significant that by common consent all contractual rights and liabilities are transferred. They are not limited to those which are still contingent. Thus, fully accrued rights and liabilities are transferred. That demonstrates the far-reaching effect of the 1981 Regulations. But if such contractual rights and liabilities are transferred it is hard to understand why tortious rights and liabilities are not transferred. There will be many circumstances which enable an action to be brought either in contract or in tort or both….
37 Does such a tortious liability arise from the contract of employment (in the words of Directive 77/187) or under or in connection with that contract (in the words of regulation 5 (2)(a))? I would not say that it arose under the contract, but I have no difficulty in saying that it arose from or in connection with the contract. In this context the observations of Lord Wright in Wilson & Clyde Coal Co Ltd v English [1938] AC 57 are helpful. He referred, at p 78, to "those fundamental obligations of a contract of employment . . . for the performance of which employers are absolutely. responsible". "The employer's obligation" was said, at p 81, to include the provision of a proper system of working. The duty of care arises out of the relationship of employer and employee, and in my judgment any liability for its breach arises from and is in connection with the contract of employment. (emphasis added)
38 In the present cases, although Mr Martin and Mrs Bernadone sued in negligence, they could have sued in contract for breach of an implied term to provide a safe system or place of work. I would hold, in agreement with Blofeld J, that the liability in negligence was transferred to the transferee under the 1981 Regulations. The language of Reg5(2) is wide enough, without any express reference to tortious rights and liabilities for the reasons already given, and, so construed, accords with the Directive and its purpose."
"The Regulations therefore must if possible be construed in such a way as to ensure that on the transfer the employee is not deprived of rights against his employer, which he would otherwise have, had he continued to be employed by the transferor and arising out of or in connection with his contract of employment with the transferor."
"The transferor prior to the transfer has a vested or contingent right to recover from his insurers under the employers' liability policy in respect of the liability to the employee. On the basis of the conclusion reached on the [transfer of liability in tort] , that obligation arising from or being in connection with the contract of employment is transferred by the 1981 Regulations to the transferee. It follows that the transferor's vested or contingent right to recover from his insurers is a vested or contingent right to recover from them in respect of a liability to his employee arising from or in connection with the employee's contract of employment." (emphasis added)
"Mr Edelman QC would read into Directive 77/187 and the 1981 Regulations words limiting the relevant rights and obligations [arising out of or in connection with the transferred employee's contract of employment with the transferor] so as to exclude rights and obligations under contracts with third parties. The transferor employer's right is to recover from the insurers an indemnity in respect of the transferor's liability arising from or in connection with the contract of employment. That is the very liability which the transferor was required to insure under the 1969 Act. True it is that that right is under the contract of insurance with third parties, the insurers. But the important point is that the right arises from and is in connection with the contract of employment, because the liability insured under the contract is such a liability." (emphasis added).
Doane
35. The Judge's approach to Reg 4(2)(a) was to begin by analysing its constituent words (see paragraph 47). He concluded that "nothing could be clearer than the operative words of Reg [4(2)(a)]". A liability "arising vicariously out of or by virtue of a contract of employment is classically a liability "in connection with" such contract…" (paragraph 49). At paragraph 52, having completed the textual analysis, he said "Tempting as it is to leave matters there, Mr Lewis [counsel for MK Dons] has made cogent submissions to the effect that this is not the meaning of the Regulation, and those submissions demand detailed consideration".
"Does such a tortious liability arise from the contract of employment (in the words of Directive 77/187) or under or in connection with that contract (in the words of regulation 5(2)(a)? I would not say that it arose under the contract, but I have no difficulty in saying that it arose from or in connection with the contract."
"A Claimant such as Mr Doane, seeking to establish that an employer of the primary tortfeasor is vicariously liable for the tort of his employee, must establish that the act or omission in question arose in the course of the employee's employment with the employer. Thus, if called upon to do so, Mr Doane must prove that Mr Holloway was in a contractual relationship with Wimbledon at the material time. Unless he can do so he has no prospect of recovery against Wimbledon. Thus Wimbledon's potential liability to pay damages to Mr Doane is plainly "connected with" its contract with Mr Holloway."
"taking care of all the matters pertaining to the defence of any claim arising out of negligence related to his employment. Those matters may well include his employer arranging legal representation, undertaking the defence of any claim and indemnifying him against any liability, which would be the position if the employee's right to be indemnified transfers to the new employer. Those matters represent benefits of such importance to the employee that it seems to me inconceivable that Parliament intended to exclude transfer of the relevant liability to a new employer. Had that been the intention of Parliament, and given that the purpose of the legislation is the protection of the employee, I would have expected to see clear exclusionary words in TUPE"
a. The Judge placed too heavy an emphasis on the words of the regulation. In doing so he treated the question of construction as mainly "an exercise in semantics or linguistics". This is an impermissible approach.
b. The Judge's 2-step approach (to ask if the contended for construction is consistent with the words of the regulation and then ask if that construction leads to some "benefit") is impermissible. Whilst the Judge considered if his interpretation resulted in a benefit to the employee he did not consider if it safeguarded any relevant rights. The benefits the Judge referred to are not, in my view, strictly "rights".
c. The Judge was wrong to conclude that Bernadone did not run contrary to the approach he took. In my view it does. The rights in that case could be said to have arisen "in connection with" the transferred contract because they were identical to fundamental rights under the contract between the employer and employee. The apparently transferred obligation in Doane is of an entirely different character: it is not owed by the employer to the employee but by the employee to a third party. Even if the vicarious liability for the acts of an employee can be said to be a liability owed by the employer to the injured party, it is not "fundamental" to the employment relationship. The primary obligor is the employee.
Sean Pong Tyres
"'Connected with' is a term that can have a narrower or wider meaning depending on the context, and it seems to me that, in this context, the connection between the liability and the contract needs to be direct. In all the cases, save for the part of Bernadone that was concerned with the insurance indemnity, the connection between the liability and the contract has been direct: the right or liability has arisen under or in connection with the transferring employee's contract with his employer, in the sense of being a right or liability owed by one party to that contract against the other, albeit sometimes in tort rather than contract. The insurance indemnity in Bernadone was different, as it was a right and liability under a third-party contract, but it is apparent from the Court of Appeal's judgment that strong policy arguments pushed the Court towards the conclusion that the insurance indemnity transferred…"
Other cases
Resolution
a. The connection between the liability of a transferor and the contract must be direct, in the sense of being a liability the transferor has to an employee if the liability is to transfer; and
b. if the transferor has a vested (or contingent) right against a third party which arises purely as a result of such a liability, that right will also transfer.
53. In the present case, if the transferor has any real "liability" at all, it is not owed to its employee. It follows that the connection is too remote. The relevant "direct" liability here is the liability of the employee to the third party. The only liability that attaches to the transferor ("a blameless employer") is the secondary (or indirect) no-fault liability "…. for a wrong committed by his employee".