Linda Connolly had €40 in vouchers for clothes retailer New Look that she was given as a Christmas present and was one of many shoppers who found they could not use them at the chain’s closing-down sale last month.
“I went out to Liffey Valley and they wouldn’t take my vouchers,” she writes. “I know it’s not much but I didn’t think they could do this. I’m just looking for some advice if at all possible as I don’t know what to do.”
Another reader called Patrick contacted us on behalf of his 12-year-old daughter, who was similarly disappointed when she tried to use the vouchers she too had been given as a Christmas present, in the closing-down sale.
Instead, the 12-year-old was handed a form and told to send it to the liquidator’s office.
“I suspect the vouchers are now worthless,” Patrick said. “But I’m surprised the vouchers were refused given the stores were still open and trading.”
He wasn’t the only one who was surprised by New Look’s decision not to accept the vouchers despite the fact it had long since pocketed the cash for them.
But first a bit of context. The British fashion chain announced on February 20th that it was shutting its 26 shops in the Republic after deciding the Irish business was no longer viable having amassed debts of €17.7 million.
A High Court hearing heard it had built up debts to such an extent that its UK-based parent company was withdrawing financial support.
The company appointed KPMG Ireland as provisional liquidators to oversee the winding down of the business and announced that a closing-down sale would begin on Sunday, February 23rd.
Now, it is not uncommon that vouchers lose their value when a company goes into liquidation, with impacted consumers becoming what is known as unsecured creditors. However, the consumer watchdog, the Competition and Consumer Protection Commission (CCPC), said the Consumer Protection (Gift Vouchers) Act 2019 “contains no exemption for sales of any kind, including closing-down sales”.
[ Consumer watchdog intervenes as New Look refuses vouchers in closing down saleOpens in new window ]
The CCPC said its officers “contacted the liquidators in this case ... regarding a number of consumer protection concerns”.
“In our correspondence, we sought clarification on arrangements for the use of gift vouchers by consumers,” the CCPC said.
But is seems unlikely voucher holders will have any realistic chance of getting their money back under the law, according to Eoin O’Dell, an associate professor in Trinity College Dublin’s law department.
On his Cearta blog he recalled HMV going out of business in Ireland in 2013 (it subsequently opened a shop on Dublin’s Henry Street) and “the mess it made of deciding whether or not to accept vouchers during the administration”.
He said the law was that, as long as the shops were trading normally, there was no legal basis for them to refuse to honour vouchers.
However, he said that in a liquidation process the same rules don’t apply.
“Liquidators can disclaim contracts – including vouchers; and even if they don’t disclaim them but decline to honour them, they [the voucher holders] would rank as unsecured creditors in the insolvency, leaving little practical redress.”
He said that many of the issues connected to vouchers were clarified by the 2019 Act referred to by the CCPC this week.
But he noted that “calls for legislation to protect consumers who were sold vouchers fell on deaf ears during the HMV vouchers saga of 2013, and the 2019 Act did not address this issue”.
He agreed with the CCPC that the 2019 Act does not contain any provisions permitting vouchers to be ignored in closing-down sales.
[ New gift voucher regulations to come into effectOpens in new window ]
And he pointed out that if the liquidator did not “disclaim the vouchers” they “continue to be valid”.
“If they are declined, the holders can sue for their value; but this claim in a liquidation ranks very low: the voucher holders, as unsecured creditors, come after the liquidators’ claims, the Revenue, and secured creditors such as banks. In a liquidation, when these debts have been satisfied, there is usually little or nothing left to be divided amongst all the unsecured creditors, including the voucher holders.”
That means that even where vouchers are valid, “if a retailer in liquidation refuses to honour them, there is no practical remedy for the holders”.
O’Dell added that that failures by retailers to observe obligations in respect of vouchers imposed by the 2019 Act amount in many cases to criminal offences, “and if failure to honour vouchers, particularly in the context of a restructuring or winding-up a company, were similarly to constitute a criminal offence, this might concentrate minds in a liquidation. But that is not the case.”
He concluded by saying it is “a sad state of affairs for consumers and, given that the HMV saga had already shown the issues very clearly in 2013, it is a pity that the 2019 legislation did not resolve them. The only certainty is that there will be more such sorry stories in the future.”
