Vol 17 (2020) - Issue 3

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Re Debenhams Retail Limited [2020] EWCA Civ 600

Synopsis

In Re Debenhams Retail Limited, the Court of Appeal has held that by accessing the UK Government's Coronavirus Job Retention Scheme (the 'JRS') and paying employees that had been placed on furlough, administrators will have clearly adopted the relevant contracts of employment for the purposes of paragraph 99 of schedule B1 to the Insolvency Act 1986.
The decision upholds the judgment of Trower J in the High Court ([2020] EWHC 921 (Ch)), which also followed the decision of Snowden J in Re Carluccio's Limited [2020] EWHC 886 (Ch).
The Court ruled that an administrator's intentions (even objectively determined) are not relevant to the question of 'adoption'. The question is whether the administrator has taken active steps to continue the employment of the relevant employee. Accessing the JRS and paying furloughed employees is sufficient for the contracts of employment to be adopted by the administrators, even if no other actions are taken by the administrators in relation to the furloughed employees.
The Court of Appeal's decision provides important clarity on this area of the law and will be of clear relevance to administrators appointed while the JRS is in operation.
The Court accepted that there may be good reasons of policy for excluding action restricted to implementation of the JRS from the scope of 'adoption', however, such exclusion cannot be accommodated under the law as it stands.