TUPE: The difficulties in disease litigation
A look at the difficulties in determining the correct defendant in occupational disease litigation where the claimant has been TUPE transferred.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 apply when a business or part of one is transferred to a new employer or where a contractor takes on a contract to provide a service for a client from another contractor. This should be distinguished from an asset only sale where no employees would transfer.
The Regulations first came into force in 1981 and implemented the European Communities Acquired Rights Directive (ARD) (prior to the TUPE Regulations 1981, the ARD only had direct applicability to public bodies).
The effect of the Regulations is to preserve a then current employee’s terms and conditions. Further the buyer inherits all rights and liabilities and obligations arising from those contracts of employment. Therefore any acts or omissions of the seller before the transfer are treated as having been done by the buyer. For this reason it is critical, that the buyer obtains appropriate indemnities from the seller in respect of all pre-transfer liabilities. Martin v Lancashire County Council and Bernadone v Pall Mall Services Group  WL 571232 confirm that in addition to the transfer of liability in tort for personal injury, the seller’s right of indemnity under its employer’s liability insurance also transfers to the buyer. The question therefore arises as to who is the correct Defendant to be sued, the buyer or the seller? Both cases confirm that the buyer is the correct Defendant to be sued.
The difficulty in disease litigation (particularly long tail diseases) is that employment often ceased many years ago. If the alleged employer still exists it is rare for them to have retained documentary proof of the Claimant’s employment dating back many years. The Claimant’s National Insurance Employment History (which the Claimant’s Solicitor should have obtained from HMRC) should be considered in light of Companies House records and searches in order to confirm employment (unless the Claimant has any old wage slips or other proof).
It is wise to consider the Claimant’s letter of claim, medical report and witness statement if available in detail. The Claimant should explain all of his relevant employers where excessive exposure is alleged and whether or not his employment was continuous between any such employers and appropriate questions raised, if this information is not provided. If a Claimant left Employer A and started working for Employer B carrying out the same job as before and providing the transfer took place post 1 January 1981 then the TUPE Regulations 1981 (or 2006 if post 6 April 2006) will apply.
Claimant’s Solicitors will often ask for sight of the copy contract confirming the TUPE transfer, but this will often be unavailable due to the passage of time and frankly should be not be necessary given the above. Claimants will recall whether or not they gave their notice or were dismissed prior to obtaining a new job on their own merit; as opposed to simply being moved from employer A to Employer B and continuing as before. As a result Claimants are the best people to answer whether or not there has been a TUPE transfer; providing their Solicitor is familiar with TUPE Regulations and case law.
Claimant’s Solicitors regularly seem to forget that it is solely the Claimant’s duty (or arguably the Claimant’s Solicitors duty) to identify the correct Defendant in any Court Proceedings they choose to issue. If a mistake is made and the incorrect Defendant is pursued, then upon discontinuance or Summary Judgment that Defendant should seek its costs from the Claimant. If the Claimant has BTE or ATE insurance funding those insurers may have to meet the Defendant’s costs. However, more often than not this will be a legal error by the Claimant’s Solicitors- and consequently should be personally liable to pay the Defendant costs on the Claimant’s behalf.
If a Claimant alleging industrial deafness / noise induced hearing loss worked for Company A as a road worker whilst they had the contract for repairing a Local Authority’s roads and he subsequently transferred to Company B in 1982 (when they secured the road work services contract), then Company B would be the correct legal Defendant. Company B would remain the correct legal Defendant even if the Claimant did not allege excessive noise exposure with them, for instance if Company B immediately introduced adequate hearing protection to reduce the noise level. In the co-joined Court of Appeal cases of Martin and Bernadone (see above) LJ Peter Gibson confirmed that there can be no doubt that upon a TUPE transfer; a liability which is transferred, ceases to be enforceable against the seller (upholding the decision in Allan v Stirling DC  ICR 1082). As such to sue Company A in our scenario above would be incorrect and would entitle Company A to a discontinuance or Summary Judgment.
Claimants frequently mistake similar named Companies for each other. A Solicitor on the Claimant’s behalf may attempt to argue that these Companies are “one and the same”, particularly if they are within the same Group of Companies, and that the action should be allowed to proceed. The House of Lords case of Salomon v Salomon & Co  AC 22 established that a Company has its own legal personality distinct from its shareholders/owners and thus a Court cannot make such a leap between two distinct legal entities. This was applied in JH Rayner Ltd v DTI  AC 418 and the fairly recent case of Carlton & Granada v The Football League  EWHC 1650.
In reality all of the insurers for a period of employment may decide not to take issue with such an inaccuracy by the Claimant. This may be the case where all of the insurers want a swift economic settlement or want to avoid the expense of a Claimant restoring a dissolved Company to the Register of Companies. Conceding such a point should only be considered where there is a full insurance history and where all of the insurers are in agreement. The danger otherwise is that other contributing insurers may subsequently disagree with that decision and refuse to contribute.
In their simplest form, the TUPE Regulations are relatively straightforward. However, care should be taken by the buyer of a new business, involving the transfer of employees, to ensure that wherever possible due diligence is undertaken to ensure that details of all insurance policies (from time to time in force) are provided. In the absence of those policies, an indemnity should be obtained from the seller, as it is the current employer against whom proceedings will be issued and liability sought.