In TUPE (Transfer of Undertakings Protection of Employment) transfers, vicarious liability for employee torts transfers to the transferee because it is a liability 'in connection with the contract of employment' under Regulation 42 of TUPE 2006. This interpretation aligns with the Acquired Rights Directive's purpose of protecting employees by ensuring their rights continue unchanged during business transfers, and prevents the absurdity of the transferee receiving the employer's contractual indemnity against the employee while not receiving the corresponding vicarious liability to third parties.
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ABC (Appellant/Claimant) v Huntercombe (No. 12) Limited and Others (Respondents/Defendants)
Added:This is an [clears throat] appeal in the matter of ABC and Hunter and others.
>> Yes, Mr. F.
>> May please lordships. My name is Fet IP on behalf of the appellant with Mr. Edwards. Uh the first respondent, Hunter scheme number 12, limited involuntary liquidation is not represented today, but I understand has contacted the court uh in writing. Um the second respondent represented by known for Mr. McFersonen is the other active participant in this appeal. Uh the third and fourth respondents represented by Miss Chan and Miss Hworth respectively taking neutral positions.
Yes, >> my lord. This is an appeal by the uh claimant from an order uh which is at page 41 in the core bundle made on the 17th of November last year. I should say that you have additional core bundles.
They are identical but we noticed that we in our copies had glitches in the pageionation and so those have clear continuous pageionation.
>> A bit late.
>> I do apologize, isn't it? I mean, we've had to mark them up by reference to tab numbers, which they have had, but getting a pageionated bundle on the morning is not very helpful.
>> I apologize.
>> Already marked up the marked up the documents.
>> I I think you should assume we're actually physically going to be using the old version, but by all means say, and that's page 87.
>> Thank you.
The orders made by his honor judge bird sitting as a high court judge in the Manchester district registry deciding preliminary issues you should have and I should check you should have apart from the two bundles core and supplementary and the authorities bundle a supplemental authorities bundle from Mr. look first and may I check but that is with you.
Thank you.
Subject to your leading I will if I may open with some preliminaries I will begin with underlying facts and find my way through to the issues before you on this appeal before your lordships on this appeal. The appellant was detained at the age of 16 under the mental health act for over four months at the Hunter Hospital Maiden Head in 2018 and 2019.
And her case in a nutshell is that while there she was repeatedly, physically, mentally, and verbally abused by hospital staff, and that her treatment amounted to gross violations of basic care standards and her convention rights, including articles 3, five, and 8.
She was on her case physically restrained alone over 200 times during her 4 month detention.
And in short, rather than doing her good, the treatment to which she was subjected caused her serious and long-term injury.
Could I just interrupt say I'm sure everybody in court is aware of it but the identity of the claimant is protected by an anonymity order which remains in force. I'm grateful to logistics.
There are over 50 similar claims behind this one regrettably brought by other former patients at the Hunterkum Hospital Maiden Head and other hospitals in the Hunterkum group which have been issued and served and are due for case management in the high court in the autumn.
Uh this appeal is important to those claims also.
Is there a date for the case management conference?
>> Not yet. It's anticipated that it'll land in September, my lord.
>> Right. And the hearing in October or September?
>> Uh September's vacation. I just wondered.
>> Yes, we it's Master Cook who's managing, >> right?
>> And I believe that September is available, but it may it may turn out to be October.
>> Yes. All right. Well, I um once we've risen, if the parties could keep us informed so that if there [clears throat] is a date um because obviously there will be the question of the judgments.
>> So if if we could be kept informed as to when that that hearing gets fixed, that would be good. Certainly. Thank you.
The first defendant now in now in liquidation owned and operated the hospital at which the appellant suffered these experiences on her case.
Uh it transferred its business to the to the second defendant of the second respondent in March of 2021. And it's uncontroversial that the transfer of undertakings protection of employment regulations, the GP regulations 2006 applied to that transfer.
The first defendant has public liability insurance, but we're told it's subject to a very large per claim deductible of a quart million pounds. That's something that Mr. McFersonen refers to in his skeleton argument such that the appellant and other victims in her position would not, if successful against the first defendant, recover a large proportion of the damages to which they would otherwise be entitled.
And it's the appellant's case that by virtue of the chupy transfer of the hospital business, the first defendant's precarious liability at common law for the tors of its employees at the time of transfer and its imputed liability for their human rights breaches passed to the to the second respondent which is a trading and solvent entity. We understand its insurance position to be uh no better than the first defendants.
Um but it is a trading and solvent entity and those employees included not only the consultant psychiatrists responsible for the appellants treatment but of course all staff within the hospital responsible for other aspects of her care nurses matrons etc. The transfer will not have applied to everyone but it will have applied to uh a proportion. It did certainly apply to the two psychiatrists who were the responsible clinicians under the mental health act for her treatment uh responsible for her case. In the words of the act that the third and fourth respond >> the third and fourth respondents. Yes.
Obviously were adequate public liability insurance available, it wouldn't have been necessary to join either.
A preliminary issue trial was ordered of the question whether vicarious and imputed liability transferred under the TP regulations under regulation 42 and if so whether public liability insurance cover transferred with it.
Uh and the trial took place in March last year.
And the preliminary can be seen from the wording of the order my lords at uh page 41 of the full bundle.
The preliminary issues are set out at page 42 second page of the order.
So that's tab four.
The appeal is from the responses of the judge, the earned judge to the questions at issue one where a negative response was given to the question of whether vicarious liability transferred.
So far as issue two is concerned, the judge found that had he been had he found the other way, he'd have found that the insurance transferred with the liability and there's no appeal from that finding and the it's common ground between the parties that imputed and vicarious liability go together.
So the focus of this appeal and my submissions will be and Mr. McFersonen's will be on the vicarious liability question.
>> [snorts] >> the judgment is just behind the the order starting at page 44.
If I may turn now to the grounds of appeal, starting at page 15, they begin in earnest at page 16.
[clears throat] Your lordships will will have seen that they're subdivided and I will address the individual elements but in essence we say that the judge ered in firstly his construction of regulation 42 [clears throat] of the TP regulations simply in failing to hold that vicarious liability is a liability in connection with the contract of employment for the purposes of that provision.
And secondly, that he failed to interpret that regulation in a manner consistent with the acquired rights directive which it implements.
And had he done so, we say he would have held that transfer of prearious liability was consistent with it.
Before addressing the substance of those grounds, uh, may I take your lordships through the relevant provisions?
The regulations appear at the start of the authorities bundle.
Yes. Beginning at page three, if I could ask you to turn to page seven, please.
[clears throat] Regulation three addresses what a relevant transfer is. A transfer to which the regulations apply.
[snorts] Regulation 31A, if I may draw Lord Chip's attention to that, is that such a transfer a transfer undertaking business or part of an undertaking or business uh takes place where there's a transfer of an economic entity which retains its identity.
An economic entity is further uh defined at regulation 32. An organized grouping of resources which has the objective of pursuing an economic activity whether or not that activity is central or ancillary.
Regulation four which is at the heart of this appeal is at page 11 and regulation 41 provides that where a relevant transfer takes place. to a transfer of the nature addressed by regulation three.
Unless the employee objects, that's the [clears throat] objection under paragraph 7 referred to at sub paragraph 1.
The transfer does not terminate the employment the contract of employment of that person but rather such contract uh end of the paragraph shall have effect after the transfer as if originally made between the person so employed and the transferee that is what by agreement took place here.
so far as the transferred employees are concerned.
And then 42 on the completion of a relevant transfer all the transfers this is 2a all the transfer's rights powers duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transfer.
But that's the key provision which we say the judge interpreted incorrectly.
While regulation 4 is open, may I also direct your lordships to uh paragraph 6 on page 12 where there are reservations. There's a reservation at six in respect of criminal liability which is expressly said not to transfer And at regulation 10 on page 25, there is a further reservation in respect of certain provisions relating to occupational pensions.
Before leaving the regulations, I should mention briefly regulation 11 uh onwards which deals with notification uh of employee liability information.
There is a notification process that goes with a transfer under the regulations. Obviously the relevant parties doing the deal can arrange whatever information sharing they choose. This is the obligatory [clears throat] notification and those provisions, the notification and the remedy at at regulation 12 has been held to be provisions for transfer.
That's the Alamo case to which I will come. Alamo case I should say.
Uh coming to the end of the preliminaries, may I ask your lordship to turn to the acquired rights directive, please, which is at page 52 of the authorities bundle.
It is the recital that we see at page 52 that which is important to the issues before your lordships is uh or most important is three.
It's 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.
And we say that the learned judge took too narrow approach to that.
And finally, article 31 of the directive at page 54.
This is the provision behind regulation 42.
Article 31. The transfer'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.
Of note is the following paragraph that member states may provide for joint and several liability as between transfer and transfere.
Uh that has not happened in the in the regulations.
Uh UK parliament declined to do that.
So what's the effect of that?
It could have been jointly and severally li the transfer and the transfere could be jointly and severally liable but parliament didn't do that. So >> so the >> the transferee if it if it's [clears throat] transferred the transferee is solely liable.
>> Yes. For that which transfers. Yes.
>> If it was transferred. Yes.
With those preliminaries in place, I come to ground the first ground of appeal uh and ground 1A which is that the judge failed to give the ordinary and natural meaning to regulation 42A and particularly the phrase in connection with the contract of employment.
For reference, this is paragraphs 43 onwards of the appellence skeleton argument.
[cough] Yes.
>> Yes. It may assist your lordship to have regulation 4 open by way of reference. It was page 11 of the authorities bundle.
appears in several places of course in the B standing back. Uh any personal injury lawyer worth his salt knows when they encounter an employment contract in the fact of their case that two liabilities on the employer's part flow from that fact the fact that there is such a contract such a relationship in place.
The first is a liability for health and safety at work. the liability for harm that the employee might suffer in the course of his duties, his or her duties at work due to dangers at work.
And the second is liability for the employee if he or she harms others while at work or acting in the course of employment.
Precarious liability.
They're different liabilities, but they are both connected with flowing from the fact that the contract of employment is there.
And there's more to say, but that is this ground and this submission in its essence.
that precarious liability obviously logically is a liability in connection with a contract of employment.
Particularly so when one considers the ingredients of the carouser liability.
There must not only be a contract of employment, an employment relationship that the liability only attaches if the relevant harm is done in the course of the employees employment for which there is a close connection test.
The wrongdoing must be so closely connected with the acts the employee was authorized to do employed to do.
That the wrongdoing may fairly and properly be regarded as done in the ordinary course of employment.
[clears throat] It's a trit proposition I appreciate. We see it in multiple Supreme Court authorities that have come through in recent years on precarious liability. It features in one of them in the authorities bundle the case of Madovski uh at paragraph 25.
Um I won't take your lordships to it, but if your lordship's note it's page 366 of the authorities bundle. Just remind me of the tab in the authorities bundle.
12. Thank you very much.
Both are torchious liabilities. Both the liability for harm suffered by the employee at work and harm caused by the employee at work.
There is authority from this court, the key authority for the purpose of this appeal, the case of Martin and Bernardone, that liability of an employer for in tort for breach of its duty to take care for the safety of employees at work passes under GP.
And we say the same applies to vicarious liability. It is connected with the contract of employment and it is a strain on the natural meaning of those words in regulation 42A to see it otherwise.
the learned judge uh respectfully neglected that starting point >> but it's not necessarily the right starting point and you're dealing with regulations which are implemented in order to give effect to a directive I mean there's lots of authority in the bundle about the approach which should be adopted in those circumstances including the principles set out in this court in the voting case and I'm sure you're very familiar with.
Uh so why should the natural and ordinary meaning of the words be the correct starting point rather than the question of looking for the purpose of the directive uh which should guide one's interpretation of whatever the language has been used.
Well, my lord, I I don't suggest that the two are siloed completely, but in order to know first of all whether the provision is consistent with the directive, which is the first step in that process, one must ascertain its meaning.
>> Absolutely. I mean, that's what we're all searching for. But the question is what is how you set about that task. And if you were considering an ordinary act of parliament without any EU law uh connections, you would naturally start with the language and that might well be where you where you end up as well. On the other hand, the authorities seem to be very clear that where you're looking at domestic legislation introduced in order to implement a directive. Uh the task is rather different because the whole purpose at any rate at the time when these provisions were brought in was to ensure compliance with the directive which is a part of the overriding legal order of community law to which the whole domestic statute book is subject >> my lord. Yes. And so [clears throat] and and the authorities to which I think your lordship is referring are very clear that where one interprets a provision on its natural and ordinary meaning and that natural and ordinary meaning undermines or is inconsistent with the directive that the provision seeks to implement then one must interpret read down uh accordingly and can do considerable violence indeed.
>> Yeah. Absolutely. to the wording.
>> It may be this is just a quibble about the order in which one approaches it, but I'm just slightly taking issue with your emphasis on the clear and natural meaning as as a matter of ordinary English as the starting point rather than part of a more holistic exercise which mustn't lose sight of the fact that it's a a directive which is being implemented.
>> No, no, that's absolutely right, my lord. Um, another way to put it might be this, that, um, the learned judge did not start by asking whether the meaning of of the provision was consistent with the directive.
>> I mean, plainly that's got to be considered at some stage as before you reach a conclusion. And that's really all I'm putting to I don't think you're disagreeing.
>> No, no, I don't think I am, my lord.
>> Um, and and it's it's really those two elements that we say he failed to do. He he failed to find the ordinary natural meaning and see whether that was consistent with the directive. If it was, then there's no need to do violence to the interpretation or change the interpretation to which one has come on the basis of the directive.
[clears throat] Forgive me lords. I'm just looking to see whether Yes, I think it might assist.
Mlords, if I go to the case of Swift and Robertson, to which the learner judge went very early on in his approach to this wording.
>> Yes. Um so at paragraphs 9 and 51 of the judgment then a judge said that swift was the starting point. It's at page 402 in bundle at tab 14 Uh my lords, if I could ask you to go to paragraph 20 at page 408, there we see the section in uh Lord Kerr's judgment on the correct approach to interpretation of the regulations in that case.
and the citation of the case of Shter where the European Court of Justice says what I submit at least corresponds with the last submission I made that the key is to find an outcome consistent with the objective pursued by the directive.
We see that at letter H The same point appears in the following paragraph 21, a reference to Vodafone 2 and Sir Andrew Morit's victim from paragraph 7 of that case on page 409 of the of the authorities bundle four or five lines down. In summary, the obligation on the English courts to constru domestic legislation consistently with community law obligations is both broad and farreaching.
And it's at that point that we get into the um the points that were quoted by the learned judge and appear also in learned McFersonen's skeleton argument that there's a broad and far-reaching power which doesn't require a trigger ambiguity for example to bring domestic legislation into conformity into consistency with the underlying EU law.
But this isn't a situation where the interpretation, the natural interpretation as we say was inconsistent with the directive.
I'll of course develop that, but that is our position.
And the judges cutting straight to that process which was inapt led to him taking a an excessively narrow approach to the construction of the regulation.
I should mention that it's not suggested or hasn't been suggested to this point on behalf of the second respondent that our interpretation is inconsistent with the directive.
The suggestion is that it doesn't further the director's purpose which is not the same thing. doesn't take things further.
[clears throat and cough] And the learned judge, and this is ground 2A from recollection, didn't consider that either, whether the interpretation contended for by the second respondent, which he upheld, was consistent, more consistent, less consistent with the directive than the one put forward by the appellent.
I will submit that ours is the more consistent fits better with the purpose of the directive.
Finishing the point about consistency, I should take you to your lordships to the case of Martin.
Not for the first time. Um, at Well, it is for the first time, not for the last time, forgive me. Page 243, uh, tab 8 This was the decision I mentioned earlier in which the court of appeal this court held that the liability of an employee of an employer for health and safety at work passes. [clears throat] is it it goes somewhat further than that as well to which I will come but the relevant provision for the purposes of the submission I'm making at this point is paragraph 16 uh in the judgment of Lord Justice Peter Gibson at page 251 that the regulations it wasn't in dispute it in that case 1981 regulations which are the predecessor to the 2006 regulations before your lordships must be given a purpose of construction having regard to and so far as possible consistently with the underlying directive that will be important Uh when I come to address ground two, um if I may, I will revert to ground one for now. I think it will I hope it will be a more organized way for me to approach the issues in the appeal.
You don't [clears throat] want anything else from Martian at this stage?
>> At this stage, no. The point I make is simply that the approach it took, which I will rely on in my in in my submissions to come, that was lying behind the approach of the court, the purpose of the directive and interpreting the regulations consistently with it.
>> Yes.
>> That much is not in dispute. No, no, indeed. My lord, the the judge proceeded having not carried out the exercise of identifying the natural ordinary meaning and asking whether it was consistent with the directive in its purpose.
then held that liability had to be that is to say liability that transferred had to be direct in order to transfer. It had to be directly connected with the contract of employment. That's paragraphs 56 uh um me 52A of the judgment.
So the holding was the decided cases show that the connection between the liability of a transfer and the contract must be direct in the sense of being a liability the transfer has to an employee if the liability is to transfer.
So having failed to start with the meaning, the natural meaning and asked whether it was consistent with the directive, the judge then arrived at a at a very narrow interpretation that those words in connection with the contract of employment were limited to a direct connection in the sense of being a liability owed by the transfer employer to its employee.
There was only one decided case as it happens on the point and that had gone the other way. That was the case of Duan, his honor judge Robinson in Sheffield County Court which had held that precarious liability did transfer.
The other decided cases didn't deal with vicarious liability and they certainly didn't in my submission confine the wording in the way held by the judge or legitimize reading in the word direct into regulation 42A.
That is the sort of thing that one does when one finds inconsistency and none had been found with a directive and none had been found.
And in truth, and this is where I return to Martin, the decided cases emphasize the breadth of that terminology.
If your lordships still have Martin open, uh, may I ask you to turn to page 243 in the bundle? So they >> forgive me. That's the the heading.
>> Um, it's paragraph 17, which I take you on page 251 over the page 252.
In the course of Lord Justice Peter Gibson's reasoning, he cites a memorandum on the acquired rights of workers uh prepared by the European Commission in 1997 [clears throat] and and cites it quotes it bottom of page 251 over to 252.
Your lordships will see that the section on 252 from the end of the second line states the transfer is bound by all the transferables obligations resulting from an employment contract or an employment relationship including those which arose before the date of transfer.
In the court's view, that's the ECJ at the time, the director refers unreservedly to the transfer's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of transfer.
>> What what does that tell us that wasn't on the wording of the director?
>> It's the it's emphasizing the breadth, my lord. the director refers unreservedly to the transfer's rights and obligations arising from a contract of employment. So for example, there's no suggestion that it's confined with to the parties to that contract and indeed they're not words that we're interested in, are they? I mean when you said the there were plenty of authority for the breadth of the terminology I assumed you meant liability in connection with because that's the terminology in the regulation this is dealing with arising from resulting from which on one view is narrower so I I I think actually in connection with is your better point it is >> rather than an EU memorandum about different wording My Lord, yes, I accept that. I'm uh I'm It's the It's the first stop on a route through Lord Justice Peter Gibson's judgment.
>> Okay.
>> Um and Lord Justice Peter Gibson does refer [laughter] interchangeably in some places to the wording of the directive and the wording of the of the regulation.
Uh, paragraph 35.
Uh, we come to the regulations.
Uh, rather than reading it out, my lords, may I invite you to read paragraph 35 in full?
Yes, there the point is made indeed by Lord Justice Pet Peter Gibson that the phrase in connection with is is broader than in the direct than the phrasing in the directive and indeed that the reser reservation for the reservation in respect to criminal liability indicates that even that would or might transfer were the reservation not there and similar comments are made uh at paragraphs 36 where Lord Justice Peter Gibson refers to the farreaching effect of the 1981 regulations and at 38 Eight.
Yes. Uh, six lines down. The language of regulation 52 is wide enough without any express reference to torturous rights and liabilities.
The reasons already given and this is in relation to the finding that liability and negligence was transferred. Negligence uh in relation to the employees health and safety at work was transferred.
This is still good law, isn't it? If if if your client had been an employee bringing [clears throat] personal injury claim against originally against the trans and the employee was transferred undoubtedly the claim would lie against the transfer right.
Yes.
Yes.
And so the the question is whether that breadth in connection with the contact of employment extends to vicarious liability.
We say yes it does. Uh and indeed it it obviously does.
Um the the breath is further to can further be illustrated by the way the court of appeal treated liability under the occupiers liability act in this case which follows at paragraph 39.
Now liability under the 1957 act is of course imposed on occupiers and is statutory in nature.
It doesn't arise from the contract in the ordinary sense of that wording that is the wording of the directive doesn't arise from the employment relationship.
It one one can certainly use the phrase it flows from uh in certain circumstances but it's a statutory liability imposed as it were from above and here it was held to transfer in the same way as the duty in respect of health and safety at work.
Uh Mrs. Bernardone had been injured on hospital premises. She was a catering assistant in the course of her employment with her then employer Palm Services.
That activity had been taken over by the trust and liability as occupier under the statute transferred from one employer to the other. And that was because it was in the course of her employment that she that she had gone into the relevant place, the relevant storm and sustained injury.
So it arose in connection with her contract of employment.
>> Yes. [snorts] So it was >> 39 >> factually in connection with her contract of employment.
It went with the employment relationship.
to push it another way.
Just as vicarious liability goes with the employment relationship, various liability for what the employee does wrong, goes with the employment relationship, it is like occupiers liability as it were imposed from above. It's a common law doctrine, but it goes with the employment relationship as on the fact the occupers liability did here.
And then less direct still at paragraphs 45 onwards, this court held that the liability of the employers liability insurer to indemnify the transfer in respect of the accidents at work suffered by the employee transferred to the transfery to the new employer and that was in our submission clearly not direct.
It was parasitic one could say but it was indirect so far as the employment relationship was concerned.
Is there is there a liability to indemnify ordinary claim against um an employer straight occupier personal injury by an employee.
The cause of action being that another employee, the tour visa did something negligent to cause injury.
Um the claim is usually brought against the employer because employee may have no money and may not personally be insured.
But um is there a a legal liability on the employer to indemnify the employee in respect of the employees personal liability?
>> Yeah.
>> What he's done at work it would depend on the contract terms but not on the face of it.
>> Mr. Well, first I think it's going to rely on listister and romford ice to say in law >> not in the real world but in law the in liability to indemnify is the other way around.
>> Yes.
Yes. Well, there's a problem with that, my lord, which is there can be absolutely no doubt that liability under the contract of employment passes from transferral to transfer.
So the liability of the employee to indemnify the employer which is contractual must pass to the transferee and it's absurd in my submission for the indemnity to pass but the liability not.
need this is we need to unpick this a bit. I mean um [snorts] I was a personal injury lawyer once listister and Romford ice has always been notorious as being >> contrary to what most people think should happen in real life anyway >> to majority of the house of lords held that the duty of the employee who may usually is uninsured is to indemnify by the employer who is insured and thus the insurance company against all liability. And if he's bankrupted, too bad. Um there is no um [clears throat] uh you say the um that you say that there's a liability to indemnify liability on the employer to indemnify the employee and I'm not sure >> no my lord no [clears throat] sorry you referred to listister and I immediately thought of the liability on the employee >> under the contract to indemnify the employer so in a situation where there is vicarious liability by the employer of the employer for whatever the employee has done wrong listister says that whilst the employer must pay out the damages the employer has a right of indemnity in respect of those damages from its employee because [clears throat] the employee owes it a duty to take reasonable care and skill in the course of his or her duties.
>> And that is a contractual duty, a contractual indemnity, a term which passes on transfer without a doubt. It's part of the employment contract.
So what I'm saying is it's it cannot be relied upon in favor of the respondent's position that the indemnity somehow renders absurd or undermines the appellants interpretation of regulation 42A actually works the other way. The transfere gets the indemnity.
There's no doubt about it because it's under the contract.
liability passes >> because this is all based on your premise that the carrier liability is transferred.
>> My lord, no, forgive me. Um, this is a term of the contract which passes regardless.
So the the obligation of the employee to use reasonable care and skill in the course of his or her duties which gives rise to the right to indemnity passes to the new employer to the transferee and that's that's on the strict wording of regulation 42A.
It's a liability under the contract.
So that must pass.
And if vicarious liability doesn't pass, then we're left with the transfer all being vicariously liable, but no longer having the indemnity that the House of Lords and Listister says the employer has.
Yes.
You premised that on the basis that the precarious liability passed under regulation 4 >> which your case but if that's wrong >> then it doesn't pass which is the respondent's case then the point doesn't arise.
If it's if it's wrong that vicarious if I'm if your lordship's fin against me that vicarious liability doesn't pass.
>> Yeah.
>> It will nevertheless remain the case that the the terms written into the contract and implied into the contract do pass. That is already the law my lord. So the indemnity passes the right to indemnity found held to exist by listister in in listister passes.
>> So the situation as we if if Melan premis McFersonen is right about the law. Then the law is that the transfere holds the indemnity following the transfer even though the transfer is vicariously liable.
>> Why?
Well, if if Blenfrren is right that the carous liability doesn't pass, then whatever the employee, the recalstant or negligent employee did before transfer, rendering the transfer vicariously liable, that precarious liability to the to the victim remains that of the transfer.
That's the respondent's position.
Now ordinarily well the law is that the employee has an obligation to indemnify under the employment contract following listister >> the employer. So the employer can take advantage of a contractual indemnity against the employee, >> the [clears throat] negligent employee for whom it is vicariously liable. That will not apply post transfer if the law is as Melania friend says it is because the indemnity the contract has passed to the transferee.
The transfer doesn't have that right.
Doesn't have a contract anymore with the employee, the transferred employee.
[clears throat] >> So, cutting to it, I was building to it perhaps a bit too slowly, my lords. Um, >> maybe a [clears throat] bit too quickly.
[laughter] So the position is that and I and I I'll come round back to it if well that that'll be my plan unless your lordship stop me is that in law it is absurd for vicarious liability not to transfer. One of the reasons for that, perhaps the best reason for that in strict pure law is that the indemnity transfers and Malone friend has included a recent authority confirming that the indemnity still exists. The contract indemnity still is very much a feature of our law today.
So as a matter of law for that indemnity to to make any sense, vicarious liability must transfer. Then you have the liability and the indemnity together.
held by the transfer.
>> [clears throat] >> Thank you.
>> Thank you, my lord. I'm conscious that it may help if I finish this point by reference to the specific wording of the regulation. Yes. 42A. It was page 11 of the authorities bundle. Your audience may have it elsewhere.
Just going back to the wording which I find tends to refuse to stick in my mind.
um to a what on the on the commission relevant transfer all the transfer's rights powers, duties and liabilities under or in connection with any such contract shall be transferred.
So putting that wording to my to the submission I've just made, the indemnity is under the contract.
There's no question about it. It transfers. We say vicarious liability is in connection with the contract and should also transfer. And the fact that the indemnity does transfer renders things absurd otherwise as a matter of law but also bundle.
um at paragraphs 45 onwards [clears throat] and the most the most straightforward forgive me it's a long chunk but if I could if I could invite your lordships to read paragraphs 45 to 49 your lord may prefer to do that >> I don't know whether your lord prefer to do that now or in the break but no let's do it now >> thank Yes, your lordship would have seen that uh Mr. Tradman Kings Council sought to uh urge the court against holding that liability under the insurance contract, the employer's liability insurance policy, liabilities and rights under that policy could be held to be in connection with the contract of employment. Uh and the court firmly held that they were the effect of paragraph 48.
And the conclusion the important point is that the right arises from it and is in connection with the contract of employment because the liability insured under the contract is such a liability.
The point I make simply I'm not drawing a direct analogy with the carous liability. The point I I make simply is that there is there's emphasis exemplified in the Martin case of the breadth of in connection with the contract of employment. It extends even to rights and liabilities under the insurance policy taken out by the employer in respect of the damages that it might need to pay out to its employees for accidents at work.
There is no basis for confining it to direct liabilities from the transfer to the transfer. Martin already goes beyond that and the judge was wrong to confine it in that way.
Before moving on from the width of the terminology, uh I I should deal in anticipation [clears throat] to some extent with an authority that Malone friend has put in his bundle, Barkclays Bank and HMRC.
This is the first case in the respondent supplemental authorities bundle which addresses this point in a different context.
That is to say the breadth of in connection with the wording in connection with I think at this stage I have to confess that I'm not sure I have the supplementary authorities bundle. I have got the supplementary [snorts] bundle.
It's not the same thing.
>> I believe Len friend has a spare.
>> I do my very kind of you. Thank you.
Thank you very much.
>> Yes, Bartley is an >> Yes. Uh my lord, I I don't yet know quite what Milan will make of this case.
It's not a tupy case. uh it comes uh from his side of the courtroom. It's a case about uh the wording in connection with in the context of tax liability.
The question was whether a payment made by by Barclay's bank to compensate uh retired workers for the withdrawal of a scheme they were running to help them with their tax returns whether that payment was liable to tax. And the critical question was whether it was given in connection with uh past service.
And what was held at first instance by the special commissioner was uh in order to be in connection with past service, there had to be effectively a direct connection. It had to be a remuneration, a reward for past service.
So a similar sort of ruling from that made by the judge in this case and uh a chain of Supreme Court judges to be led to the opposite conclusion. The case was argued by Ingred Similar similar QC as she then was.
The special commissioner was overturned by Mr. Justice Richards as he then was and it was Lady Justice Arden who gave the as she then was who gave the leading judgment of this court and the paragraph which bel friend has emphasized is paragraph 18. It's at page seven in the supplemental authorities bundle.
where something is said about the expression in connection with the case of Coventry Waste and Russell is cited.
Pausing for a moment to give an Lordship the opportunity just to read that citation. [clears throat] >> [snorts] >> Yes.
Having to do with might well be a good ordinary natural meaning. uh the I think what may what it may be relied upon for this paragraph is the second part of that citation that the phrase is a pertinion which tends to draw its meaning from the words which surround it. Uh there's another part to that in this judgment of Lady Justice Arden as she was uh though I [clears throat] should say in passing that that citation relates to dealing with and we see the last words in it a problem created by ambiguity. This is this is not a case of formal or syntactical ambiguity.
But in any event, it's paragraph 30 that is the as it were the denim of the reasoning in this section of the judgment and the there the answer is given by Lady Ardan.
to a submission that sought to confine the meaning [clears throat] of the phrase in connection with past service by reference to the fact that this legislation related to retirement schemes in some way.
And at paragraph 30, Lady Ardan states that one must examine not just the provision but the context.
first sentence.
But the context, fifth line, will not of itself justify the court in limiting the provision to that context and thus reducing its apparent scope unless there's some indication in the legislation that this is what Parliament intended.
Rather at the last sentence, the limitations prescribed by Parliament are the limitations that should apply.
And the sentence before that, Parliament has used a broad expression, namely the expression in connection with. Having cast the net widely, Parliament has drawn it in particularly by imposing a limit that there should be a connection with service. And that is what we have here in my submission in connection with the contract of employment. It's a broad >> [clears throat] >> uh expression and must be taken to have been deliberately used as such.
Well, in if one were interpreting a domestic statute accepting, I think I do speak for myself in connection naturally, sorry, the natural and ordinary meaning of phrase in connection with very broad. Um, but does that necessarily apply here?
>> That of course is the is the question at the heart of appeal, my lord. And uh, in a nutshell, we say and we we've said from from the outset, it's not a concession. We never said anything else.
We we've always said not every connection suffices.
And we we entirely accept that that is right.
But we say that vicarious liability is an obvious candidate to fall within that phrase. It's consistent with the directive. The anomaly to which I've referred earlier in law arises if it doesn't transfer.
It's the other big duty that an employer owes where there's an employment contract. The other big liability that goes with an employment contract along with liability for health and safety at work. And it's dependent on it's not just the contract isn't just incidental the contract of employment precarious liability depends on the contract of employment being there and the employee doing something closely connected to his duties under it to his status as employee.
the culmination of the of the judge's reasoning and I've I've addressed how in my submission the judge went off course uh with respect in his addressing of this this question of interpretation the culmination was that the judge ended up land judge ended up giving a different meaning to the phrase in connection with depending on whether whether he was dealing with rights or liabilities. And we see that at paragraph 52 of the judgment.
[clears throat] It's at page 59. Forgive me in the Tab five.
The non judge held in my judgment the decided cases show this is in his resolution section conclusion section.
Firstly, the connection between the liability of transfer on the contract must must be direct in the sense of being a liability the transfer has to an employee if the liability is to transfer.
I've addressed why that is wrong in my submission.
And if the transfer has a vested or contingent right against a third party which which arises purely as a result of such a liability that right will also transfer.
So in 52A the liability that passes must be direct otherwise it doesn't pass.
But in B a [clears throat] right doesn't have to be direct.
Well, it's a right that arises as a result of that liability.
>> Yes. So, it's indirect.
>> It's it's it's it's not a right generally. It's I mean I I'd understood 52B to be giving effective or summarizing those passages you took us to in Bernardon.
>> Yes.
>> Effectively.
>> Yes. And that so the the point goes with the one I've made earlier that in my submission the judge has has ended up um reaching a conclusion that is internally inconsistent because inevitably the insurance contract is not a direct matter between employer and employee.
It's indirectly connected with the contract of employment. Speaking for myself, I don't not sure I find direct and therefore indirect very helpful. Um um it's a question of whether it arises in connection with the contract and and you can see why in Bernard only having found that the employer had a liability as employer to the employee that that was therefore a liability that was transferred. Um it it you could see it follows on from that that any insurance in connection with that liability would also be in connection with the contract >> my lord. Yes. Yes.
>> So you you can see that but I I certainly speak for myself. I follow that submission. Uh Mr. Are we leaving in connection with >> essentially? Yes.
>> All right. Well, I don't think it's going to make any difference at all, but I if you and Mr. McPearson could indulge me um and perhaps ask your juniors to to look for it. There was a case of in connection with in this court called Asheville against Elmer's reported in 1989. When you look at the representations who was attending on that court, you will realize why I know about the case.
Um, it was my first ever reported case.
It simply says that in connection with our words of the widest import, which I don't think is going to be controversial, but um I'd be grateful if you'd look at it just to make sure that there isn't anything else in there. And as I say, as um um my judicial career comes to an end, it's rather nice to have a case was my first reported case uh uh on the same point. Thank you, madam woman.
>> I don't think it may I think you were all fine. It makes no difference at all.
I'm >> grateful.
>> My lords, I think you still have the judgment open. Uh and the the next point which is ground 1d as it happens. I've almost got to the end of ground one. uh is that the Lena judge seemed to uh also confine liabilities that passed to those which were in his words fundamental parts of the employer employee relationship. That's 54.
And we say that simply doesn't work. If that was what the judge intended to do, that's how we read that paragraph, then it is also wrong. It is uh excessively narrow and obviously so in the light of the Martin case.
Neither Wilson and Clyde Cole nor Baker and British Gas stands for that proposition.
Uh there are fundamental obligations of the employer to the employee that go with the employment contract. That's what Wilson's uh says. Uh they are enforced in Baker. Uh but there is there was no basis in law in our submission for that finding if indeed that was the import of what the judge was doing there at paragraph 54.
The words are are broad and they need to be given the breadth that they have subject of course to the other um criteria for interpretation. those criteria leaving the directive aside our subsidiary and with the directive consistency is the is [clears throat] the keystone and it's the directive that I now come now the the learned judge as I've said didn't address consistency with the directive at all he plumbed straight into the factors the methodology that one would follow if dealing with an incon inconsistent legislative provision uh and as I've submitted he didn't address therefore whether either interpretation put before him was consistent or inconsistent with the directive [snorts] but we say our interpretation is right and it's consistent with the directive on its ordinary natural meaning it's Right. And it's consistent with the directive as well.
And indeed, it is more consistent, if that's the right way to put it, better accords with the directive and its purposes, than the interpretation put forward by the second respondent.
>> The >> So, just on my note, we're moving to ground two.
>> We are, my lord. Yes. Forgive me for not making that clear.
Thank you.
>> Yeah, >> the [clears throat] relevant objective of the directive is that to which I took your lordships earlier at recital number three, the protection of employees in particular to ensure that their rights are safeguarded.
So the objective is the protection of employees in particular or especially to see that their rights are safeguarded.
Now where an employee has committed a tort in the course of his or her employment, the doctrine of vicarious liability means that the employer is the primary target of ensuing litigation.
That is the real world position.
And if the employer is solvent and/or insured, then the claimant will often, one might even say usually, not sue the employee as well, naming the employer as sole defendant.
[snorts] The that is that provides some comfort and restricts the exposure that an employee would otherwise have to litigation.
If a carious liability doesn't transfer bearing in mind that public liability insurance is not compulsory like employers liability insurance, it rests with the transfer which is likely to be the more financially fragile entity might not be adequately insured and so the employee will be exposed as here.
In a sense this case is the perfect storm.
The insurance is inadequate. The employer is bankrupt. The transfer is bankrupt. That is the vicariously liable liable party on the respondent's position.
If vicarious liability transfers, it transfers to an economic entity which is the more likely to be solvent minimizing the employees potential exposure.
So the position that accords better with protection of employees is that vicarious liability transfers. It doesn't just fit with the law and the wording the natural wording of the regulation.
It also fits with the relevant purpose of the directive.
And this is something that tendency probability that the transfer all will be the more fragile economically of the two parties to the transfer is something that is mentioned uh in Martin uh at paragraph 34 and in the case of Litster rather than Listister Litster by Lord Oliver. Um, and I I I think I probably ought to take your lordships to both those references.
>> Yes.
>> Um, so Martin is paragraph 34, tab 8, paragraph 34.
[clears throat] And it's the from the third line, the economic entity carrying on the undertaking after the transfer will be the transfer. 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.
The obvious reason for that being that the transferee is equipped to compensate.
[clears throat] In Litster, it's put even more explicitly.
Uh Litster is at tab six, page 170.
and the relevant reference is 562 H within the in in the internal [clears throat] pageionation. Take [snorts] page 186 of the authorities bundle between G&H. In fact, it may, I think, be assumed that those who drafted both the directive and the regulations were sufficiently acquainted with the realities of life to appreciate that a frequent, indeed possibly the most frequent occasion upon which a business or part of a business is transferred [clears throat] is when the original employer is insolvent.
So that an employee whose employment is terminated on the transfer will have no effective remedy for unfair dismissal unless it's capable of being exerted against the transfer. Well, the same applies to >> [snorts] >> Who is the target of a claim arising from a tor committed in the course of that employment and the argument against that on behalf of the second respondent we're returning to a a previous submission.
The argument against that is well that's not really protection of employees because of the clawback because of the indemnity that the employer has against the employee.
But I've already addressed why that doesn't help the respondent by way of objection because it's inconsistent in law. The indemnity transfers.
So in fact both positions assist the appellant both the legal reality which is that there is an indemnity and the indemnity and the liability ought to go together.
So both should transfer otherwise it's absurd.
And the practical reality even in listister it was the insurer not the employer going for the former employee or the the employee the tort visa the practical reality which is that generally speaking employers don't take advantage of that clawback and so the employee is in reality better protected if the liability the carous liability is with a solvent employer Can you just for my benefit can you articulate in a sentence what you say the right is of an employee in relation to vicarious liability.
It [clears throat] is the right to >> uh I don't say there is a right my lord I may be slapped on the wrist by those those next to him behind me for that but it doesn't look like it. There isn't a right. Um it is but the this is not protection of employees rights in the legal sense. This is protection of employees and that is the way the um the recital of the directive expresses its purpose.
protection of protection of employees, in particular of employees rights.
>> So, so you don't say there is a right, you say it is covered by the general word protection.
>> Yes.
[snorts] >> Yes.
You're saying protection from personal liability.
Yes, >> that's the >> protection in practice there.
>> Yes.
>> Perhaps not in law from personal liability.
>> Yes. But it it's the very point that is adverted to in the in the Martin case at paragraph 34.
But there it's a different liability that's being dealt with.
Well, there it's the liability to the employer. Sorry, to the employee.
>> Yes, exactly. So, employees are better protected.
>> A liability effectively to a third party.
>> Yes. Yes. It's a liability to a third party, but it is for something for which the employee is the tort visa.
>> Yes.
>> So, and and has committed the tort in the course of their employment. Is there a connection?
>> So that that the uh the employee in [clears throat] a various liability situation, the employee is in law primarily liable.
>> Yes.
>> The employer's vicarious liability is secondary as a matter of law as a secondary liability. But >> your argument is that in the practical sense um there is protection for an employee if the employer is vicariously liable.
>> Yes. If the employer is is vicariously liable and worth suing >> and that's >> and in that connection, do you rely on what Judge Robinson said in Dwayne about it being the to the benefit of the employee?
>> Yes. Yes. It corresponds with what is on judge Robinson said in that case. I do go further though. I haven't yet but I will >> um obviously waiting. [laughter] >> Uh well [laughter] I will do so immediately. the um there's a further purpose for vicarious liability in which we see within not just the majors judgment which is in the authorities bundle but also in the extracts from Charlesworth and Percy which um land friend has included within the bundle.
Uh if I could start with those, the the purpose I should say uh is that precarious liability serves the amilaration of standards for employees.
And the point is simply that again arising out of this practical reality that the transfer all will generally be the weaker economic entity often insolvent as here that beneficial effect will only be felt in the transferred economic entity under the management of the new employer.
It's um page 55 of the authorities bundle.
So this is a an extract from Charlesworth and person on negligence included on lender friend dealing with policy behind vicarious liability at 709 at the bottom of page 55.
Admittedly by reference to um Basley and Curry Supreme Court of Canada um but it appears again in Madovski.
We see the authors state that the second major policy consideration behind career stability is deterrence of future harm.
Employers were often in a position to reduce accidents and intentional wrongs by efficient organization and supervision.
Failures take such measures might not suffice to establish a case of tortious negligence directly against the employer. for beyond the narrow band of employer conduct that attracted direct liability in lay a vast area where imaginative and efficient administration could reduce the risk the employer had introduced into the community. Holding the employer vicariously liable for the wrongs of its employees might encourage the employer to take such steps and hence to reduce the risk of further harm. Well, not if the employer is defunct and indeed no longer employing the relevant employee, [clears throat] but only if precarious liability transfers to the new employer deemed to be the employer abio following the transfer.
The relevant passage in Madroski is paragraph 9. It's page 362 of the authorities bundle.
[clears throat] And there Lord Nichols addresses the fact that there are a variety of policy factors going into the doctrine of vicarious liability and deals with this one in the last few lines uh about seven lines up from the bottom of that paragraph. It means also that the financial loss arising from the wrongs can be spread more widely by liability and higher prices. In addition and importantly, imposing strict liability on employers encourages them to maint maintain standards of good practice by their employees. For these reasons, employers are held liable for wrongs committed by the their employees in the course of their employment.
>> Sorry, where are you reading from?
>> Oh, sorry, man. It's um internal pageionation 122, letter E, bottom of paragraph nine.
>> Oh, right. Yep. Yep. Yep. Thank you.
So in my submission, the interpretation, the natural and ordinary interpretation that carous liability is a liability in connection with the contract of employment accords with and is consistent with the directive and its purpose, its relevant purpose.
It's well to say something as well about parliament's purpose in achieving that policy. A the effect of regulations three and four of the of the of chupy is that effectively the employment relationship is transferred as it were lockstock and barrel from the transfer to the transferee.
There are very few exceptions.
And the new employer is deemed to have been the employer Abinio.
That's Parliament's purpose. That's part that's Parliament's mechanism as it were for achieving the directives purpose.
It's [snorts] anomalous, illogical for vicarious liability not to go with it. The employer before was vicariously liable for what its employees did wrong that caused harm in the course of their employment.
The relationship has now moved and everything in connection with that employment contract has moved.
Parliament thereby ensuring it's quite a blunt instrument thereby ensuring that the policy aims of the directive are fulfilled.
But that is its purpose and it's illogical anomalous to that purpose for vicarious liability to be left behind just as the previous employer was vicariously liable because employer so should the transfer be that fits with the way parliament has gone about fulfilling the purpose of the directive.
If if that assuming that's right, then is it not surprising that other than a case involving one footballer being injured by another, there are no cases in which it was found that vicariously liability was transferred.
>> It was the point I was about to come to, my lord. Uh, no it's not. Uh, in my submission it's not. Um, it Martin and Bernardone post-dated the 1981 regulations by 20 years.
So even that internal liability, torsious liability, that question didn't arise for 20 years after the original TP regulations.
Uh we're dealing with a highly specific set of circumstances which is not often encountered. It it requires that a tort is committed in the course of an employes's employment giving rise to a claim. That's already a limited cohort giving rise to a claim that is pursued limited again.
And in the context of that claim, the employee is or has been subsequently transferred under TUP [snorts] as opposed to all the other things that might have happened coming to the end of their employment. changing jobs, maintaining the same job, being dismissed, whatever it may be.
And the claim has been brought but not resolved by the time of transfer.
And in practice, those are the essentials. In practice, the insurance position needs to be in some way defective because it's common ground that the public liability insurance would pass.
But in any event, if an insurer is picking up the bill, then the precise name on the claim form may be a mere formality where there's an insurance problem as here.
Then there's a question over both the exposure potential exposure of the employee who is the tort visa and on the victim side finding the solvent defendant.
So only then does the issue arise and then the choice essentially in as it were policy terms or perhaps I should say stark the stark reality of the choice is that either liability lands on the transferee which is likely to be trading solvent maybe insured fully insured or on the talk visa employee or employees being sued personally leaving the third party victim him potentially having no remedy.
But it's not surprising that this is rare.
The team which I leads which I lead and more importantly our clients find themselves in that particular perfect storm.
so far as uh and I'm I'm moving on to deal with some of the points made by my friend.
So far as what is said to be the absurd or anomalous consequences of this interpretation, um the first point to say is that it's right. If it's right, then the fact that there is complexity associated with its practical outworking is not a reason to say that it's wrong. But there is complexity anyway, whichever way this goes.
because that is what TP does following Martin and Bernardone.
If for example there's a fire at a car showroom or a concert or a music festival then if the car's liability doesn't pass um then but employers liability does then there's a different defendant depending on whether you are a visitor or an employee on those premises.
There just are complexities created by the operation of GP here. There will be complexities or anomalies as it were either way.
Uh and care must be taken in my submission not to interpret legislation by reference to the circumstances in this particular case.
It's something that the authors of Benan council specifically against. If I may take you to the relevant section at page 63 I should say that you you will have seen citations from Benyan in the skeleton arguments that was the previous edition a new edition came out in June this year so >> right >> the sections in the authorities bundle are from that edition It's an enormous chunk of Ben. I couldn't find what was being relied on, but you're going to tell us.
>> I I I will, my lord. Yes. Well, at least some of it. Um, >> that's [snorts] from I mean, it's useful to put in the to include in the title page of the relevant work has been copied.
>> Yes. Yes, indeed.
>> Without points like that.
>> Thank you, my lord.
uh page 63 at the bottom in the in the section entitled core principles.
Um but the legislative attention may be undermined more subtly in a case by a party suggesting to the court the legisl legislature cannot have intended the legislative provision in in question to have a particular result in the circumstances that arise in that case.
The true position is that the legislator does not legislate for individual cases but sets down general rules that govern all cases to which the rules apply. The question for the court's not whether the legis legislator intended to produce a particular result in a particular case but whether and if so how the legislative provision applies to the case before it.
Um, and a second caveat within the pages of Benan, if I may, at page 107 in the bundle towards the bottom of the page under the heading anomalies both ways, it It may happen that each of the opposing constructions produces an anomalous consequence. This will lessen the case for a strained construction.
[clears throat] It may nonetheless be necessary to weigh the anomalous instant to each construction against each other.
So we say that the natural ordinary meaning and the practical and legal considerations to which I've referred your lordships all militate in favor of the interpretation that the appellent puts before you. [clears throat] There are complexities both ways.
What we learn friend refers to as patchwork. There will be patchwork in practice. There already is.
Um but in my submission, anomalies is too strong a word. In fact, um they are complexities. They're complexities that the courts are able to deal with.
Aortionment, um evidence. These are matters that the courts are used to and it's important to bear in mind as well that they're also matters consequences that the the two contracting parties transfer and transferee are able to address as between themselves in whatever bargain they strike on the transfer.
They're not reasons to go behind uh what in our submission is the right interpretation.
Before leaving Bellian, I should draw your attention directly to the citation from Pearson, the case of Pearson over the page at 108 where Lord Justice Buckley said, "Arguments by reference to anomalies in the construction of a statute of this kind do not seem to me to afford very val any very valuable assistance. The ingenuity of council can almost always produce possible anomalies in either direction and that has been the case in the present matter and indeed now in this one I have given you an example >> and in fact every case that's argued in this court [laughter] the ingenuity of council throws up um arguments that construction X is absurd or construction Y is absurd.
>> Yes, >> we have to do our best. Yes indeed. And I say that the practical out these practical outworkings points um one one can find examples hypothetical examples but they are no good reason to depart from uh the sound interpretation which in our submission we put before this course dealing with such an example put forward by me friend and this is at paragraph 23 of his argument that of a commercial agent Sorry, give me the paragraph reference again.
>> Uh, yes, it's paragraph 23 [snorts] of another friend's argument, a sort of floodgates example.
um that an employer has an employee who acts as its commercial agent.
Are all the contracts that that employee negotiates connected with the contract of employment such that they transfer on our interpretation and all liability for uh those those contracts whether well or badly negotiated?
And the answer is simply no and obviously no because the they aren't sufficiently connected with the employment contract. The relevant contracts are those made with the commercial partners.
The transfer for for liability to pass the liability has to be in connection with the contract of employment. These are liabilities in connection with the contracts made by the agent with the commercial trading partners. Those are separate contracts.
They clearly don't transfer.
They're not connected with the contract of employment.
Contrast vicarious liability which depends on the relationship of employer and employee and requires the employee to be committing harm in the course of his or her employment.
Then a further example at paragraph 50.
uh where it goes over the page. Take the case of a large oil multinational company which employs a maintenance team to service an oil well and the maintenance team commits an error.
>> Sorry, where is this?
>> Sorry, my lord. It's paragraph 50 of me friend skeleton argument but the [clears throat] example begins over the page top of top of page top of page 160 of the bundle. Um, just in from the top. Take the case off.
Well, it's just about conceivable, but it involves a large multinational oil company in in reality having no public liability insurance. If the vicarious liability transfers, then so does the public liability insurance that the large multinational oil company will almost certainly have.
But of course it is possible that the standard trend from economically fragile to economically sound in the transfer will not always be the case. Of course that's right. But it is generally the case as recognized in the appellet authorities.
We have cases within this cohort. Not this specific case of course one case is before your lordships but the 50 that 50 plus that lie behind.
There are cases where claimants were treated either side of the transfer line and so they straddled the transfer. Inevitably there is a patchwork there. As I say the complexities are complexities are unavoidable especially in multi-party litigation.
uh and indeed historical litigation such as this.
So in our submission, none of these floodgates or alarmist points should deter the court from giving the legislation its natural meaning uh which serves parliament's intention in securing continuity of employment and its corolleries and in using wide phrasing and is consistent in our submission with the purpose of the directive indeed serving its purpose protecting employees both in that the carous liability is more likely to rest with a solvent entity And that ongoing entity will have the reforming obligation or impetus that the carous liability brings.
My lords, I think I have not quite in the organized way I had originally sought covered the grounds of appeal and their subgrounds.
clear haven't left any speaking part to Mr. Edwards.
[laughter] >> He has a just in case speaking part but that is right my lord I'm afraid. Yes.
>> Thank you very much.
>> Yes.
So your lordships, I'll start if I may um with the proper approach to construing legislation that implements a European directive. Um because it is our position that the judge was right to say that that's the starting point and that there isn't any gateway or any threshold before the court should apply the principles in Swift. Robertson.
[snorts] Um, our position is that the principles in Swift are of general application.
They apply whenever there is an issue of construction and you have legislation which is intended to implement European directive. The principles are I would characterize them as pervasive throughout the construction process.
They are not [cough] in a silo.
[clears throat] I think was a phrase that was used. They're not to be accessed only if uh a certain test is passed.
They are um uh broadly of broad effect and they do as has already been remarked give your lordships much greater interpretive freedom than might have been the case in relation to purely uh domestic legislation.
And so I will, if I may, take you back to Swift, which I'm conscious you've looked at before.
Um, and it's the authorities bundle. Um, starting at uh page 403,4.
Um and I do think it is worth just introducing what this what this case is about. Um is a case about consumer protection rather than employee protection uh in the context of a contract that was made at the consumer's home and European regulations give consumers a right of cancellation those circumstances pursuant to a council directive.
And what the Supreme Court found in Swift is that if you applied a literal interpretation to the regulations, uh, that would negate the purpose of them.
The purpose was to protect consumers, to give them this right of cancellation.
And the court expressly found that if you read those regulations literally, uh, there was no such protection.
And in those circumstances, the court thought it appropriate to apply a purposeive interpretation and override the literal words of the regulation in order to give the consumer this right to cancel.
And it's at page 408 when Dr. Pur sets out the applicable principles.
Um and in my submission these this um this section is absolutely key uh to unlocking the meaning um of the um the words that we're concerned with here. So paragraph 20 national court must interpret domestic legislation so far as possible in the light of the wording and purpose of the directive which it seeks to implement. is now [clears throat] well settled as that reference to the shorty case.
When hearing a case between individuals, the national court is required when applying the provisions of domestic law adopted for the purpose of transposing obligations laid down by a directive to consider the whole body of rules of national law and to interpret them so far as possible in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objective pursued by the directive.
Um so that is the the overarching principle. Um and then by reference to the Vodafone case various particular features of this approach are set out. Um and they are um startling startlingly empowering if I can put it that way. they've entitled the court to act in interpretively in ways that go beyond uh perhaps a conventional approach. [clears throat] So the principles uh are listed starting uh on page 409 at letter B.
It is not constrained by conventional rules of construction.
It does not require ambiguity in the legislative language.
It is not an exercise in semantics or linguistics and that came through in particular in the swift case where the literal words were overwritten.
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.
And F the precise form of the words to be implied does not matter.
And then below that an internal paragraph 38 uh the point made by council which was accepted was the only constraints on the broad and far-reaching nature of the interpretive 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.
So my lords, I do say for those reasons that there is no initial threshold which needs to be passed. That appeared to be the appellant's position in their skeleton. But I think with some gentle probing, Mr. Fetto has accepted that. Um the judge was correct to say the starting point when looking at uh regulations such as these is the approach set out in swift.
Um and I rely in particular on the principle that that approach does not require any initial ambiguity.
Now it's the respondent's case that the words in connection with are in fact ambiguous.
Um and the ambiguity there in my submission which I'll go on to develop is that that ambiguity would justify a purpose approach even under conventional principles of construction.
But in any event held expressly we don't need that ambiguity in order to adopt broad uh and purposive approach.
So what is the purpose of these regulations?
Um well um it's been explored in various of the authorities that is that are before your lordship in Bernard's own uh Lord justice Peter Gibson described it as to safeguard the rights of employees on a change of employer by a transfer of an undertaking and that's paragraph 34 of his judgment in Bernardo to safeguard the rights of employees when a transfer happens and that encapsulation of the purpose is also uh was also the one identified by Lord Sllin in the Wilson and St. Helens case uh which again in my submission is of importance safeguarding employee rights. Um so if I could take you please to that Wilson case where we see Lord Sllin identify uh the purpose regulations.
It is tab seven starting at page 203 and the section I would take you to starts at page 234 of the authorities bundle [clears throat] and leave out the bits about what I submitted. Indeed, you're also I just um saw your name at the top of that that page, but at the very bottom of page 234, uh Lord Slim says this. In my opinion, the overriding emphasis in the Court of Justice's judgment is that the existing rights of employees are to be safeguarded if there is a transfer.
And I pause there to note that of course Mr. Fetto when when pressed by the bench does not identify an employee right but the protection of which is secured by his construction though we're told that is the overriding purpose of the regulations and then it also goes on to say this that means no more and no less than that the employee can look to the transferey to perform those obligations which the employee could have enforced against the transfer all no more and no less than the obligations which the employee could have enforced.
Not anyone else employee of obligations owed to employees or put another way employee rights.
That is we are told uh the overriding purpose of the regulations.
The [clears throat] purpose is certainly not uh in my submission to ensure that non-employees can enforce liabilities against the transfer.
Now the construction of the regulation drives to the conclusion that that is what was intended. I'm not suggesting that this encapsulation of the purpose of the regulations uh is a trump card, but it is striking that although regulation 4 is written in very broad terms and I do accept that the purpose of the of the regulations focuses on the obligations owed to the employee.
And Lords does use a limiting phrase, no more and no less. It doesn't go beyond that. But those rights must be preserved, protected in full and there should be no um deraggation from from those rights.
So in those circumstances um as as you appreciate your lordship it's not controversial between us that employers liabilities to an employee will transfer as found in in the Bernardone case but we do say that the the thrust the underlying grain of the regulations I suppose uh is not directed at obligations owed to non-employees.
I would also ask you to note while we're looking at Wilson that this characterization of the uh the purpose of the regulations is entirely consistent with what was held in Bernard Dome about the insurance position because the transfer of those insurance rights does serve to safeguard employee rights and their ability to enforce right?
It is squarely within the purpose identified by Lord Slim gives employees access to an insurance fund to meet any liability that is owed to them. Um and of course if those rights to that insurance fund didn't transfer then in the event of transfer insolveny uh their employee rights would have been eroded.
um and that would be contrary to the purpose of regulations.
So that in my submission is the the purpose the grain the overriding thrust of the regulations that should be borne in mind at all stages uh of the uh process of construction.
There is one other purpose of directive that the ECJ has held should be taken into account which perhaps can be seen as a matter of common sense but in my submissions is extremely important. Um and that is the balance between the interests of the employees on the one hand and the interests of the transferey on the other.
The purpose of the regulations is not to take every step possible to benefit employees to the detriment of transferies.
The purpose of the regulations is to rise a fair balance between the interests of the two.
And to make that submission good, um please could I direct you to the um IC facility services against Govert case that is in my supplementary bundle authority. So the red bundle.
So this is uh tab two starting at page 12.
Um, and I direct you please to page 17 and it is paragraphs.
[cough] Apologies, it's not page 17.
That's my mistake. Page 39.
No, you don't mean that.
>> I put it my references have got >> stick with stick with p well page 17 has got a sideline and paragraph 25 >> looks as though it might be relevant.
>> Yes, right first time. So, paragraph 25 um it recites what we're familiar with now that the overriding purpose of the regulations intended to safeguard the rights of employees in the event of a change of employer.
Um and and the purpose of that directive is to ensure as far as possible that the contract of employment or employment relationship continues unchanged with the transfer.
But then at paragraph 26 uh the European Court of Justice held as follows. In addition, it must be stated that although in accordance with the objective of that directive, the interests of the employees concerned by the transfer must be protected, those of the transferee who must be in a position to make the adjustments and changes necessary to carry on his business cannot be disregarded.
There's a reference there to a case called Werehop and the court went on directive 2001/23.
So did the acquired rights directive does not aim solely to safeguard the interests of employees in the event of transfer of an undertaking. It seeks to ensure a fair balance between the interests of those employees on the one hand and those of the transfer on the other.
And we will see that we go on uh we'll see that in my submission when we look at the scheme of the regulations themselves.
Yes, the protection of employee rights is paramount.
But that is not the only thing that the regulations seek to do. They seek to ensure a fair balance [clears throat] between protecting those rights of the employees and the interests of the transferee the new employer on the other.
and your lordships. It's at this point that I would turn to the regulations themselves um and ask you um to consider them not just regulation for but to consider them as a as a coherent hole or to understand the scheme that is set out in those regulations and what to achieve. So we're back in the main authorities bundle and the regulations as you know uh start of page three.
Um so we looked at regulation four that preserves the employees employment contract. The transferee is the new employer.
Regulation five I'd ask you to note relates to collective agreements entered into with trades union and the effect of regulation five um is that the transfer will preserve existing collective agreements by the former employer of the trade trades union in so far as they apply to a transferring employee.
So again squarely on point these are employee rights that are being protected um by the regulations.
Similarly regulation six deals with uh trade union recognition.
The provision protects employee rights by ensuring that if you have a trade union that's recognized before the transfer, it is also recognized after the transfer.
um at least where the transferred undertaking maintains a distinct identity. That's the um qualification on that. But again, my point is it is focused squarely on employee rights as we recognize them.
And regulation seven is is important. It protects transferred employees against being dismissed because of the transfer.
Again, the precise terms perhaps don't matter so much as the subject matter is aimed at protecting employee rights.
But then the regulations do something quite interesting at regulation 11.
there is a a special provision which seeks to ensure that the transferee uh so that's that's my client for these purposes is given as much information as possible in relation to liabilities owed to employees.
So we see that at page 26, regulation 11, notification of employee liability information.
And what this regulation seeks to do is to require the transfer to provide the transfer with detailed information about liabilities owed to employees.
We see there the transfer must must provide um and I'm reading from 11 2 C uh information about any disciplinary or grievance proceedings from employees.
information about any court or tribunal claim from employees either ones that have been issued already or which the transfer reasonably believes may be issued.
The transfer is also required to provide information about any collective agreement negotiated with the union.
That's a letter E.
And this requirement has teeth thanks to regulation 12 if the transfer fails to comply and regulation 12 gives the transfer a remedy against transfer and the right to damages.
Now you might well at first blush think what on earth has this got to do with regulation 4? Um but my point is that this is this is a sensible scheme to ensure that the transfer of liabilities to the the liabilities owed to employees is as smooth and as seamless as possible.
And I would submit it's clearly aimed at that that second purpose of the directive that we looked at in the ECJ case of ISS facility a fair balance between the interests of the employees and the transfer.
These regulations are not intended to protect employee rights or perhaps it will make the claim smoother and indirectly perhaps it may assist employees as well. They are aimed at creating a fair balance between imposing these liabilities on the transfere uh and the and employee rights.
uh and they're intended I in summary I would submit to try and avoid any nasty surprises for the transferee in so far as the transfer reasonably can can avoid that by giving them the appropriate information.
Now lit I'd ask you to note there is no equivalent provision requiring the transfer to give any notice of any potential torchious liabilities owed to non-employees to third parties.
Let me just look again at the um at the information section which you showed us about claims by employees.
11 uh 11.
>> Yes.
>> 2D. Yes.
>> 112D. information of any court or tribunal case, claim or action brought by an employee against the transfer law within the previous two years or that the transfer has reasonable grounds to believe that an employee may bring arising [snorts] out of his or her employment.
So that it is limited of course to liabilities owed to employees.
What why would the draftsman not consider But the transferee would be helped by information about other claims if it was intended that those claims liability for those claims would transfer and this provision is of a piece in my submission with the entire scheme of the regulations.
They are laser light focused on protecting the rights of employees, protecting the rights for example of employees to sue their employer and in so far as is reasonable giving the transferee as much assistance um to ensure a smooth seamless handover because the old case are set out in these regulations is that there's no obligation whatsoever for a transfer all to give information about liabilities to third parties in tort because in my submission did not envisage that liabilities in tort to third parties as opposed to employees could transfer.
[clears throat] [cough] Oh, would that be a convenient moment to break off?
>> Indeed. Yes.
>> 2:00 rise.
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