The saga of the Administration of HMV in 2013 made headlines not only for the sorry state into which a once-great business had fallen, but also for the mess it made of deciding whether or not to accept vouchers during the Administration. I blogged about this here, here, here, and here. The legal issues were not entirely straightforward, and those posts tell a tale of me working them out in real time. I concluded that, for so long as the shops were trading normally, there was no legal basis for them to refuse to honour vouchers. However, in a liquidation, liquidators can disclaim contracts – including vouchers; and even if they don’t disclaim them, they would rank as unsecured creditors in the insolvency, leaving little practical redress.

Many of the issues with vouchers have been clarified by the Consumer Protection (Gift Vouchers) Act 2019 (also here), inserting a new Part 4A in to the Consumer Protection Act 2007 (also here), which effectively brings the issue within the remit of the Competition and Consumer Protection Commission (CCPC). The main change ensured that vouchers are valid for at least five years, even if they are expressed to be valid for shorter periods. The CCPC has an excellent page on the current state of the law here.

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. All this came flooding back to me as I read a piece by Conor Pope in the Irish Times:

Consumer watchdog intervenes as New Look refuses vouchers in closing down sale

British fashion chain announced last week it was shutting its 26 shops in the Republic

Some New Look shoppers have been left furious after the retail chain refused to accept its own vouchers as payment for purchases made during its closing down sale.

The CCPC told the Irish Times that the 2019 Act “contains no exemption for sales of any kind, including closing-down sales”. I agree that the 2019 Act does not contain any provisions permitting vouchers to be ignored in closing-down sales. But that is only part of the story. These closing down sales are taking place as part of a court-ordered liquidation, so the liquidator can disclaim the vouchers. There is no statement in the Irish Times story that the liquidator has done so; as a result, the vouchers 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. So, even where vouchers are valid, if a retailer in liquidation refuses to honour them, there is no practical remedy for the holders. 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; and, as I said above, calls to do something like this in 2013 were not heeded in the 2019 legislation. Perhaps the matter might be considered again, Minister?

The CCPC also told the Irish Times that it is “currently negotiating with the liquidators to ensure those with vouchers are not left out of pocket”. I hope this bears fruit; but it is too late for those who were unable to use their vouchers on Sunday. And any change of tack on the part of the liquidators will be out of the goodness of their heart (ha!), in search of good publicity (but this is hardly a significant issue for a liquidator), rather than because of any obligation on their part to do so, or of any enforcement power on the part of the CCPC. I’m not going to hold my breath.

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.