A FLORIDA judge has ruled that a major British travel company can cancel millions of dollars worth of reservations by bankrupt Irish holiday company 1800Hotels unless it receives payment in advance.
The ruling is a major blow for 1800Hotels, which has argued that its existing contracts should allow it to continue making reservations through London-based Gullivers Travel Agency (GTA), to whom it allegedly owes more than $4 million (€3.1 million).
However, Judge Caryl E Delano ruled that 1800Hotels has shown a consistent inability to pay and she amended the contract between the two companies to ensure prepayment by 1800Hotels.
The judge noted that, once a company goes into Chapter 11 bankruptcy protection, federal law temporarily prohibits parties from ending executionary contracts.
However, she accepted that judges can amend contracts when a creditor shows good cause.
GTA had argued that 1800Hotels owed it in excess of $4 million and that it would lose $30,000 to $50,000 a day for each additional day that 1800 was allowed to continue making bookings. It expected these additional sums to exceed $2 million.
In a very strongly worded briefing to the bankruptcy court, GTA accused 1800 of mismanagement and trying to make GTA pay for the mistakes of 1800’s Dublin parent company, Happy Duck.
As part of its case, GTA released an email showing it had sought to end the contract even before 1800 sought bankruptcy protection.
In an email on July 11th last, two days before 1800 filed a Chapter 11 claim, GTA’s chief financial officer William Keneally emailed 1800’s chief executive, Graham Peakin, announcing that he was cancelling the contact with 1800 and Happy Duck because “your companies have been unable to pay their debts when due”.
Mr Peakin replied: “Thanks for your help. I was expecting this. I guess we will be going into bankruptcy. Is this the last we will hear from GTA?”
In a related lawsuit, 1800 and Happy Duck had sought an emergency restraining order to compel GTA and six other holiday companies to accept its bookings. It withdrew its claim earlier this week.
