Acquired Rights, Not Acquired Wrongs

Huntercombe Hospital in Maidenhead carried public liability insurance with a deductible of £250,000 per claim. The company that ran it is in liquidation. A former patient who says she was restrained more than 200 times during four months there in 2018 and 2019 therefore had a defendant, a policy and, on the figures her advisers were given, nothing to recover. More than fifty other former patients are in the same position.

That is why she sued the company that runs the hospital now.

In ABC v Huntercombe (No. 12) Ltd [2026] EWCA Civ 1161 the Court of Appeal held that she could not. Active Young People Ltd took the hospital over in March 2021 under a relevant transfer, and with it the contracts of the two consultant psychiatrists who had been ABC’s responsible clinicians. Her case was that Huntercombe’s vicarious liability for their acts and omissions was a liability “in connection with” those contracts, so that regulation 4(2)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 carried it across to the transferee. HHJ Bird rejected the argument on a preliminary issue in April 2025. Coulson LJ, with Bean LJ and Sir Launcelot Henderson agreeing, has now rejected it again, on cleaner grounds.

Words or purpose

Niazi Fetto KC for ABC started with the words. “In connection with” is a phrase of the widest import; an employer is vicariously liable only for wrongs committed in the course of employment; the connection between that liability and the contract is therefore as close as a connection gets. Alexander Macpherson for the transferee started with the Directive. The Regulations implement it, so the court reads them to serve its purpose, which is to safeguard the rights of employees on a change of employer. A hospital patient has no such right.

Coulson LJ took the second route and said so at [29]. Domestic legislation made to implement a Directive is read in the light of the Directive’s purpose, with the latitude described in Vodafone 2 v HMRC [2009] EWCA Civ 446: no requirement of ambiguity, no exercise in semantics, and permission to depart from the strict words provided the reading goes with the grain of the legislation. Lord Slynn had stated the purpose in Wilson v St Helens Borough Council [1998] UKHL 37: the employee can look to the transferee to perform the obligations the employee could have enforced against the transferor, “no more and no less”.

The judgment gives five reasons; three of them are the same reason. Regulation 4(2)(a) transfers the transferor’s liabilities under or in connection with the transferring employee’s contract. Vicarious liability is a secondary liability, parasitic on the employee’s own liability to the person injured, and Mr Fetto conceded that neither psychiatrist had any right against Huntercombe in respect of it. A liability that answers to no right of the employee is not one the Directive protects, so it is not a liability “in connection with” the contract in the sense the Regulations use. It is, Coulson LJ observed at [43], the Acquired Rights Directive.

The fourth reason is the one with teeth for transactional practitioners. Regulation 11 makes the transferor hand over employee liability information before the transfer: the identity and age of every transferring employee, their section 1 particulars, disciplinary and grievance history within two years, and every court or tribunal claim brought or reasonably expected from an employee. Regulation 12 sanctions non-compliance. There is nothing about claims by anyone else. If Parliament had meant the transferee to inherit third-party claims, it would have had to say what the transferee was entitled to know about them. It said nothing. On ABC’s construction Active Young People took on more than fifty claims worth, potentially, millions of pounds, with no entitlement even to learn that they existed. Coulson LJ found the omission deliberate [53]-[54].

The fifth is ordinary legal principle. A defendant with no involvement in the events does not become liable for them because of a transaction with which the claimant had nothing to do, absent clear permissive words: there are none [57]. The judge below had reached the same result by requiring a “direct” connection, meaning a liability owed to an employee, and by describing transferable liabilities as “fundamental” parts of the employment relationship. Coulson LJ dropped both words: “direct” would generate argument, and the distinction between fundamental and ordinary obligations obscures rather than illuminates [68], [73]. The holding is stated without gloss. Regulation 4(2)(a) does not extend to the transferor’s vicarious liability to third parties for the pre-transfer acts and omissions of its employees.

What happens to the earlier cases

Doane v Wimbledon Football Club Ltd and ors [2007] 12 WLUK 2, the Sheffield County Court decision in which a footballer’s claim for a negligent tackle followed the tackler from Wimbledon to Milton Keynes, had survived nineteen years without being tested above county court level and does not survive this judgment. HHJ Robinson thought it a real benefit to the transferring player that his new employer would handle the defence of the claim; Coulson LJ answered that the benefit does not exist in law, because the employer, not the employee, is the party with the indemnity [50].

Martin v Lancashire County Council [2001] ICR 197 and Bernadone v Pall Mall Services Group Ltd [2001] ICR 197 are explained as what they were: claims by injured employees against their own employer for its own negligence, which transferred because the employer owed them to the employees, together with the right to indemnity under the employers’ liability policy. Baker v British Gas Services (Commercial) Ltd [2017] EWHC 2302 (QB), in which an engineer injured after the transfer by negligence before it recovered from the transferee, fits the same pattern: the victim was the transferring employee, so his claim was the kind of thing regulation 11 would have disclosed [62]-[64]. Sean Pong Tyres Ltd v Moore [2024] EAT 1, where the harasser transferred and the victim did not, sits with it from the other side.

The rule after all four is the one I put in January when the High Court decision came out: liability travels with the victim’s contract, not the tortfeasor’s. It now has Court of Appeal authority for the third-party case. Baker answers the victim who transfers, Sean Pong the victim who stays behind, Huntercombe the victim who never worked there at all.

The distinction is finer than it looks on a first reading, so here it is as two questions put to the person holding the claim. Who committed the wrong, and whether the wrongdoer moved, never enters into it: the transferring employee’s claim moves whether the wrong was the transferor’s own breach (Martin; Bernadone), a colleague’s who moved too (Baker) or a colleague’s who stayed (Vernon v Azure Support Services Ltd UKEAT/0192/13, where the point was conceded).

Two consequences follow the claim into the green box: the right to the transferor’s liability insurance (Bernadone) and the time limit already running against it (Vernon). The insurance point cuts the other way too. A claim that stays with an insolvent transferor stays with its deductible, which is where ABC began.

The Lister indemnity and the 2023 Act

The second of the five reasons is that vicarious liability protects the employee in practice no more than in law. Under Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 the employer that pays out is entitled to a full indemnity from the negligent employee, a principle the Supreme Court restated without qualification in Lifestyle Equities CV v Ahmed [2024] UKSC 17 at [36]; and even without Lister, the employer would claim a 100% contribution under the Civil Liability (Contribution) Act 1978. So the psychiatrists are in the same position whether ABC sues them or sues their employer [46]-[49].

Personal injury practitioners will read that passage twice. Employers’ liability insurers agreed in 1959, in the aftermath of Lister, not to pursue employees for the indemnity save in cases of collusion or wilful misconduct, and Coulson LJ’s own aside that the principle is “not free from controversy” gestures at why. Mr Fetto’s submission that in the real world the employee shelters behind the employer was closer to the practice than the judgment allows. It changes nothing, because the first, fourth and fifth reasons do not depend on it, but it is the passage transferee counsel will cite and claimant counsel will pick at.

A second point the court did not have to reach. The transfer was in March 2021. Section 22(5) of the Retained EU Law (Revocation and Reform) Act 2023 keeps sections 2 to 4 of that Act off anything occurring before the end of 2023, so the Directive-first method and the Vodafone 2 latitude applied without argument. For a transfer after that date section 3 has removed the supremacy of EU law, and whether the duty of consistent interpretation went with it is unresolved. Mr Fetto’s “start with the words” would then be a stronger opening. My view is that the result would be the same, because the regulation 11 asymmetry and the absence of permissive words are points about the Regulations rather than the Directive, and both stand on their own.

Practical points

• A transferee does not inherit the transferor’s vicarious liability to patients, customers, visitors or anyone else for what transferring employees did before the transfer. The warranty and indemnity package on third-party claims can be shortened accordingly.
• Claims by transferring employees against the transferor for its own negligence do transfer, accrued or contingent (Baker), and so does the right to the transferor’s insurance for them (Bernadone). Read the regulation 11 information against the employers’ liability policy, not only the disclosure letter.
• A claimant facing an insolvent transferor has the Third Parties (Rights against Insurers) Act 2010 against the insurer, subject to the deductible, and the individual employees, who remain primarily liable. In ABC the two consultants are defendants with the Medical Defence Union and Medical Protection Society behind them. Nursing and support staff have no indemnifier, which is the gap the appeal was trying to close.
• The fifty similar claims go to a case management conference this autumn; Coulson LJ wrote the judgment with that in mind [3].

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