Martin v Lancashire County Council, Court of Appeal - Civil Division, May 26, 2000, [2000] EWCA Civ 155,[2000] IRLR 487,[2001] ICR 197

Resolution Date:May 26, 2000
Issuing Organization:Civil Division
Actores:Martin v Lancashire County Council

Case No: QBENF/1999/0213/A2






His Honour Judge Fawcus and


Blofeld J.

Royal Courts of Justice

Strand, London, WC2A 2LL

Tuesday 16 May 2000

B e f o r e :






(Transcript of the Handed Down Judgment of

Smith Bernal Reporting Limited, 180 Fleet Street

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Mr. John Hand Q.C and Mr. Andrew Hogarth (instructed by Messrs Thompsons of London for the Respondent in the 1st Appeal and by Messrs O. H. Parsons and Partners of London for the 1st Respondent in the 2nd Appeal)

Mr. Adrian Lynch (instructed by Max Winterbottom LLB of Lancashire County Council for the Appellants in the 1st Appeal)

Mr. Colin Edelman Q.C. (instructed by Messrs Davies Lavery of Maidstone for the 1st and Appelllants in the 2nd Appeal)

Mr. Ronald Walker Q.C. and Mr. Stephen Worthington (instructed by Messrs Hextall Erskine of London for the 2nd Respondent in the 2nd Appeal)



As Approved by the Court

Crown Copyright ©

Lord Justice Peter Gibson:

  1. There are two appeals before us, each raising the same primary issue. Where there has been the transfer of an undertaking to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") apply, is a liability of the transferor in tort to an employee, which has accrued before the transfer, transferred by TUPE to the transferee? Differing answers have been given to that question in the High Court in the two cases, and in earlier County Court cases. The second case also raises a further issue in circumstances where the transferor had effected an employers' liability insurance policy: is the insured employer's right to an indemnity under the policy in respect of a liability to an employee transferred by TUPE to the transferee? Both issues are of some general importance.

  2. In the first case the Claimant, David Martin, alleges that while working for the Refuse Department of the Defendant, Lancashire County Council ("the Council"), between 1978 and 1993 he suffered progressive injury to his back and neck and on 23 February 1991 a specific injury to his wrist. By s. 3 Employers' Liability (Compulsory Insurance) Act 1969 ("the 1969 Act") the Council, like other public bodies, are exempted from the requirement in s. 1 of that Act to have employers' liability insurance. Such bodies are expected to be their own insurers. In fact the Council did have a policy but one which carried a large excess, so large that the insurance would not have enabled the Council to recover under it.

  3. On 13 May 1993 the Council transferred their entire waste disposal and refuse services including the business in which Mr. Martin worked to an independent waste disposal company, Lancashire Waste Services Ltd. ("LWS"). That was effected by a Transfer Scheme and Business Agreement dated 15 May 1993 and made pursuant to s. 32 of and Sch. 2 to the Environmental Protection Act 1990. By clause 9.2 it was expressly stated that TUPE should apply and that pursuant thereto the contracts of employment between the Council and its employees (as defined; Mr. Martin was named as such an employee) and certain collective agreements would have effect after the transfer as if originally made between LWS and the employees (or their trade union). For the sake of completeness I should mention two further provisions of the agreement. Clause 3.2 provides for the inclusion in the transfer of all liabilities of and incurred in connection with the business and assets which were transferred (save for any taxation liability already incurred). Clause 8.2 provides that LSW should indemnify the Council against all liabilities in respect of any act or omission on the part of the Council prior to the transfer, provided that where any such act or omission resulted in a third party making a claim or suffering a loss in respect of injury, details of that claim or loss or incident are supplied by LWS to the Council within 28 days of the transfer. But we have not heard argument on the effect of those clauses, and I say nothing further about them.

  4. Mr. Martin commenced proceedings against the Council on 21 August 1995, claiming damages for personal injuries. By their Amended Defence the Council took the point that by virtue of TUPE any right of action or cause of action possessed by Mr. Martin and arising from his employment by the Council became on and after 13 May 1993 a right or cause of action against LWS. The case was then transferred to the High Court where His Honour Judge Fawcus, sitting as a Deputy High Court Judge, was asked to determine the following matters as preliminary issues:

    (1) whether the rights of [Mr. Martin] as against [the Council] have been transferred to [LWS] by virtue of [TUPE];

    (2) whether [Mr. Martin's] claim ought to be struck out as disclosing no cause of action against the [Council].

  5. The Judge on 12 February 1999 declared that TUPE did not transfer liability in tort from the Council to LWS. The Judge adopted the reasoning of His Honour Judge Neligan in Cramer v Watts Blake Bearne & Co. plc, unreported, 31 December 1997. The second issue did not arise. He gave permission to appeal.

  6. In the second case the Claimant, Theresa Bernadone, was employed by the First Defendant, Pall Mall Services Group Ltd. ("Pall Mall"), as a catering assistant in St. Ann's Hospital in North London. On 18 December 1996 she hurt her hand in an accident at work. On 1 April 1997 the Second Defendant, Haringey Health Care National Health Trust ("the Trust"), took over the activity carried out by Pall Mall. Until that takeover, Pall Mall had an employers' liability insurance policy ("the policy") with Independent Insurance Ltd. ("Independent") in force. In 1998 Mrs. Bernadone commenced proceedings in the Central London County Court against Pall Mall for damages for negligence and breach of statutory duty under s. 2 Occupiers' Liability Act 1957. Mrs. Bernadone then joined the Trust as a Defendant and on 6 October 1998 amended her Particulars of Claim to allege in the alternative that when the Trust took over from Pall Mall there was a transfer of an undertaking to which TUPE applied and that Pall Mall's liability to compensate her passed to the Trust which became liable for the acts and omissions of Pall Mall. In its Amended Defence Pall Mall admitted and averred that there was a relevant transfer to which TUPE applied and that any liability rested with the Trust. The Trust by its Defence denied that liability had been transferred to it under TUPE. Alternatively it averred that by TUPE the rights of Pall Mall under the policy were transferred to the Trust.

  7. The District Judge ordered that a preliminary issue be heard in the High Court. Two preliminary issues were agreed before the Master:

    (1) whether the Trust had become liable for the acts and omissions of Pall Mall by virtue of TUPE;

    (2) whether the policy by virtue of TUPE was deemed to have been entered into by the Trust.

    The second issue was later amended by consent to "whether the right of [Pall Mall] to an indemnity in respect of [Mrs. Bernadone's] claim under the policy .... is by virtue of [TUPE] transferred to [the Trust]."

  8. On 5 March 1999 a Third Party Notice was issued by the Trust to Independent. On 25 May 1999 Independent was given liberty to appear at the hearing of the preliminary issues.

  9. The preliminary issues came before Blofeld J. He was not referred to the decision of Judge Fawcus. He answered both preliminary issues in the affirmative, holding that TUPE did transfer the liabilities in tort of Pall Mall to the Trust and that TUPE conferred on the Trust the right to an indemnity under the policy in respect of Mrs. Bernadone's claim by virtue of an implied term in Mrs. Bernadone's contract of employment that she would be protected by employers' liability insurance. He ordered Independent to pay Mrs. Bernadone's and the Trust's costs. He gave permission to appeal and cross-appeal.

  10. On the second issue it is not in dispute, even by Mrs. Bernadone whose argument had been accepted by Blofeld J., that he was wrong to hold that there was such an implied term. Whilst there is an implied term of a contract of employment that the employee should not be required to do an unlawful act (such as driving on a public road without insurance), there is no implied term as to insurance under the 1969 Act, the object of which is that the employer should have insurance against his own liability for causing injury to his employees. In Richardson v Pitt-Stanley [1995] Q.B. 123 this court held that non-compliance with the 1969 Act does not give rise to any civil liability for breach of statutory duty, even on the part of the directors of a company who are, with the company, exposed to criminal sanctions for non-compliance with the 1969 Act. Mr. Hand Q.C. for Mrs. Bernadone reserved the right to challenge the correctness of that decision if this case goes further. However, it is in issue before us whether the transferor's rights under its employers' liability insurance in respect of an employee are transferred by TUPE.

  11. There are therefore two main issues for us to decide. The first is whether the liability in tort of an employer to an employee is transferred by TUPE. On this Mr. Hand for Mr. Martin and Mrs. Bernadone argues that it is not transferred, as does Mr. Walker Q.C. for the Trust. Mr. Lynch for the Council and Mr. Edelman Q.C. for Pall Mall and Independent argue to the contrary. The second issue is whether Pall Mall's rights under the policy were transferred. On this Mr. Hand...

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