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Transfer of Undertakings - and Liabilities

The Transfer of Undertakings Regulations continue to astonish in their breadth and importance. In Bernadone v Pall Mall Services Group Ltd et al QBD Times 2 August 1999, a business was transferred. At the time of the transfer, there remained outstanding a court action by an employee against the vendor company for damages for personal injuries under the Occupiers Liability Act 1957. When the business was transferred, the right of the first employer for an indemnity from his insurers under his employer's liability insurance, became transferred to the new transferee under the regulations.

Even though in this case, the action had not been pleaded as between employee and employer under the Health and Safety legislation, the court held that, because it could have been so pleaded, the regulations, which are extremely widely phrased, did operate to transfer liability to the new employer. The rules (Reg 5 (2)(a)) read that 'all the transferor's rights powers, duties and liabilities under or in connection with any ... contract [of employment] shall be transferred by virtue of this regulation to the transferee"

This rather extraordinary decision again puts the cat amongst the pigeons for any purchaser of a business. It can be relatively easy to calculate obligations he takes on as regards employees who have acquired rights not to be unfairly dismissed. How on earth is he to calculate such liabilities?

This case afforded one partial answer, namely that the transferor's right to an indemnity from his insurers was transferred with the employee, so that the transferee was insured against such liability, but the case does not settle the issues which might arise from a claim where either the insurance did not cover it, or the insurance was in some way invalidated.

Once more, caveat emptor - let the buyer beware.

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18 October 2013 http://www.swarb.co.uk/lawb/empTranUnd9908.shtml 199 18 October 2013