INSOLVENCY

In re Allders Department Stores Ltd (in administration): [2005] EWHC 17

ChD: Lawrence Collins J: 16 February 2005

The administrator of three companies sought directions in relation to the treatment of statutory liabilities for redundancy or unfair dismissal which would be due if the administrator terminated the contracts of employees of the companies. The administrator proposed that those liabilities should not be given priority under paragraph 99 of Schedule B1 to the Insolvency Act 1986, nor regarded as "necessary disbursements" by the administrator in the course of the administration under rule 2.67(1)(f) of the Insolvency Rules 1986 and accordingly should not be treated as expenses of the administration but as unsecured claims.

The administrator applied for directions.

Lawrence Collins J held:
Redundancy payments or unfair dismissal payments were not liabilities which were payable in priority to the administrators' expenses by virtue of paragraph 99 of Schedule B1 to the Insolvency Act 1986 because they were not liabilities which were "wages or salary". The general administration expenses provisions in rule 2.67 of the Insolvency Rules 1986 should not be construed to override the lex specialis of paragraph 99, and the liabilities would not be "necessary disbursements" by the administrator in the course of the administration for the purposes of rule 2.67(1)(f). Accordingly, statutory liabilities for redundancy or unfair dismissal due to employees of the companies following termination of their employment were not payable in priority as an expense of the administration.

Directions accordingly.

Appearances: Richard Sheldon QC and Felicity Toube (DLA Piper Rudnick Gray Cary UK LLP) for the administrators; William Trower QC (Treasury Solicitor) for the Attorney General.