The High Court has granted permission to the Irish arm of fashion retailer New Look to pay a tax bill of nearly €2.7 million, as the company puts together a survival plan amid financial losses due to the Covid-19 pandemic.

Mr Justice Denis McDonald made the order after New Look said its tax affairs needed to be up to date before it could avail of the Employment Wage Subsidy Scheme (EWSS) for workers.

Monday’s hearing was in advance of an application by the company, for hearing on Tuesday, to have an examiner appointed.

Landlords who are owed rent arrears on New Look premises opposed the company’s request to pay Revenue, saying its insolvency was “contrived”, and the tax payment would reduce assets available for other creditors’ claims.

Examiner

New Look Retailers (Ireland) Limited, which operates 27 stores and employs 475 people, had an interim examiner appointed after it sought protection of the courts due to its financial difficulties.

On Monday Kelley Smith said, to be eligible for the EWSS, the company must have a tax clearance certificate which would be available only when its taxes were fully paid.

“Revenue’s position is absolutely clear, that the tax affairs in the context of the insolvency process must be up to date before the subsidy can be claimed,” she said.

The court heard the €2.687 million bill included PAYE, PRSI and a VAT return of just over €1 million. There would be a “real” cost to the company of €200,000 if the EWSS application was not made by the end of September, because it could not be backdated, Ms Smith said.

Arthur Cunningham, for the Revenue Commissioners, said the “factual position” was the company could not avail of the EWSS without a tax clearance certificate.

Warehousing, or deferral of tax debt, was unavailable during an insolvency process.

Rossa Fanning SC, for a number of landlords, said New Look had cash reserves of €15.6 million and had been profitable for two years.

There was “something counterintuitive” in a company that was saying it was insolvent, “asking to pay €2.7 million today so it can save €200,000 a month”.

“You can’t contrive your own bankruptcy while sitting on a big pile of €15.6 million in cash, having the capacity to pay your outstanding rent and declining to do so,” Mr Fanning said.

He said it was a decision on the part of the company not to pay its debts as they fell due.

“It’s absolutely open to this company on the basis of cash flow to pay all of its landlords in full,” he said. Either the company was not insolvent or the insolvency was “technical, contrived or strategic”.

‘Unseemly haste’

There was an “unseemly haste” in the application being made a day before the petition for examinership, Mr Fanning said.

He asked the judge not to make the order and to “at the very least defer a decision”.

Mr Justice McDonald said the court’s view was the entire amount had to be paid to qualify for the EWSS, and a case for urgency had been made because after Tuesday, any benefit from the scheme for September would be lost.

While he acknowledged the “strongly held views” of the landlords, the “safer course” was to make the order authorising the payment.

Ken Fennell of Deloitte was appointed as interim examiner earlier this month.

Mr Fanning, with Brian McGuckian, was appearing on behalf of companies which are the landlords of New Look’s stores in Liffey Valley Shopping Centre, Dublin; Navan Town Centre, Co Meath; Fairgreen Shopping Centre, Mullingar, Co Westmeath; and the Castlewest Shopping Centre, Ballincollig, Co Cork. The landlords believe New Look was seeking “to ride on the coat-tails” of a Company Voluntary Arrangement undertaken by the UK parent company.