The first High Court decision on furlough

[anonymous-user]

https://www.bailii.org/ew/cases/EWHC/Ch/2020/886.h...


Snowden J, giving directions as to what the Administrators of the Carluccio Italian restaurant chain can do re furlough of employees.

Edited by anonymous-user on Tuesday 14th April 05:12

[anonymous-user]

Any chance of summary?

[anonymous-user]

Will try later - I'm working just now. The decision is mainly to do with the superficially somewhat recondite but practically very important subject of what happens to employment contracts when Administrators are appointed over a company.

Top tip for all employment lawyers, and all commercial litigators - read up on all forms of insolvency process!

[Sa Calobra]

Carluccio's went bust before the furloughed scheme though?

[Eric Mc]

Sa Calobra said:

Carluccio's went bust before the furloughed scheme though?

Are they not in administration?

This means they still exist and will still have staff to pay. And did they enter administration before or after 28 February, the key date for whether furloughs rules can apply.

[hutchst]

'The inclusion of the words may reflect the fact that the furore caused by the decision in Paramount left deep scars that seem to have passed down through the generations of insolvency practitioners; or it may reflect the fact that even after an adverse decision of the House of Lords and 25 years to reflect on it, old habits die hard.'

[Sa Calobra]

Eric Mc said:

Are they not in administration?

This means they still exist and will still have staff to pay. And did they enter administration before or after 28 February, the key date for whether furloughs rules can apply.

Late March

[Red Devil]

Sa Calobra said:

Eric Mc said:

Are they not in administration?

This means they still exist and will still have staff to pay. And did they enter administration before or after 28 February, the key date for whether furloughs rules can apply.

Late March

- Very late. For those who missed it.

Bailii said:

An administration order was made on 30 March 2020 by ICC Judge Mullen

[anonymous-user]

Thesprucegoose said:

Any chance of summary?

The furlough scheme enables an employer to place staff on furlough, and the Government then pays funds to the employer for it to pay to the staff.

BUT Carluccio's is in administration, a form of corporate insolvency, and the administrators have to pay out funds that the company receives according to rules applicable to such insolvencies, and there was a danger that the refunds received under the furlough scheme would fall into the general pot of company assets and not be earmarked for the furloughed employees.

Much of insolvency law is concerned with competing claims for limited assets, and the office holders in a corporate insolvency have to get the payments right or face adverse claims.

Employee claims do not necessarily have priority over other claims, but can do where the Administrators adopt the contracts of employment.

The Administrators therefore asked the Court for directions on what to do.

The Court had to consider how the concept of adoption of the contracts of employment fitted in with employees who are not working, because they are furloughed. There is some complexity as to adoption of contracts, and the Judge discusses the case law on this at some length.

The Judge interpreted the relevant provisions so as to enable the Administrators to pay furloughed employees amounts equivalent to those received from the Government.