Accountant in Bankruptcy wins latest PPI case

david-menzies By David Menzies, ICAS Director of Insolvency

10 February 2017

The Sheriff Appeal Court has ruled that the Accountant in Bankruptcy (AiB) can be re-appointed as trustee to deal with a former bankrupt’s PPI which “fell into her lap”. David Menzies looks at the decision.

In the latest round of court cases involving PPI discovered after an individual’s insolvency discharge, the Sheriff Appeal Court has overturned a decision in Aberdeen Sheriff Court which concluded that the AiB (as former trustee) had no interest in seeking an application to be reappointed, allowing a PPI settlement claim to be distributed for the benefit of creditors.

In the opinion issued by Sheriff Principal Lewis, the Sheriff Appeal Court decided that the original judgement was incorrect and that the AiB did have an interest in the matter and was therefore entitled to make the application and to deal with the PPI settlement.


The AiB was appointed Permanent Trustee in the sequestration of Gordon Stephen in September 2006 and was discharged in November 2009. At some point after that, the Bank of Scotland sent to the AiB a cheque for £8,378.30 representing a PPI settlement claim. The AiB had not previously been aware of the existence of the PPI claim.

The AiB applied to the sheriff in Aberdeen under section 63(1)(b) of the Bankruptcy (Scotland) Act 1985 for the re-appointment of the AiB as Permanent Trustee to allow her to manage and distribute the funds to creditors.

Mr Stephen could not be traced and the application was therefore not opposed. A hearing was scheduled, however, as the sheriff had, on the same day the application was received, issued a decision in AiB v Sadler SQ27/07 where the facts were very similar to the application in this case.

The Sadler application had been opposed and, after hearing detailed argument, the sheriff had concluded that the AiB no longer had an interest as this had terminated at the point of her discharge. The sheriff subsequently took the same approach in this case on the basis that the AiB had chosen not to appeal the Sadler decision and “it would have been completely inappropriate … to come to a different view on a case involving similar facts.”

It is well understood that a sequestration does not come to an end by the discharge of a debtor or the discharge of the trustee unless creditors had been paid in full or there had been a discharge on composition. The sequestration of Mr Stephen had therefore not come to an end. The question was whether the former trustee had “an interest” to make the application for re-appointment as an application under s63 can only be made by such a person.

The sheriff in his original decision took the view that a trustee who had been discharged “has no continuing interest in the sequestration… After discharge there is nothing left for the trustee to carry out.”


The Sheriff Appeal Court agreed with the sheriff: after discharge the trustee has no duty to investigate potential sources of recovery. It was noted, however, that on this occasion the “AiB did not go searching for funds – they fell into her lap.”

They, however, disagreed with the sheriff that there are no continuing duties on the trustee following discharge, referring to a decision of Sheriff Holligan of Edinburgh Sheriff Court in the case of AiB v Croxford 2015, who said:

“The office of trustee in sequestration is an important public office. I should be slow to hold that discharge from that office strips the former holder of all obligations of professional responsility…” The Sheriff Appeal Court saying that it would in their view be a “dereliction of duty were the AiB to do nothing.”

The Sheriff Appeal Court concluded that the approach adopted by the sheriff in interpreting s63 was incorrect and that the “interest” is determined by the particular circumstances relating to that sequestration. The interest in this case was to allow the AiB to intromit and distribute funds which are an asset of the sequestrated estate.

The opinion also noted that the difficulty which the sheriff  considered had arisen had now been resolved through the introduction of section 58B of the Bankruptcy (Scotland) Act 1985. The sheriff had relied on this to bolster his view that there had been a gap in legislation previously to deal with assets discovered after discharge of the trustee. The Sheriff Appeal Court noted, however, that this was incorrect as the new legislation was brought in to allow “a cheaper, faster administrative method, avoiding recourse to the courts” for the AiB to re-appoint a trustee.

As a matter of law, it was concluded that the AiB did have an interest to bring forward the application and the original decision was recalled and the application to re-appoint the AiB as trustee was granted.


Many were previously surprised by the sheriff’s decision in Sadler. The case, however, usefully reinforces that a sequestration does not come to an end on the discharge of the trustee.

It is also clear from the opinion that discharged trustees, although not expected to continue to look for unrealised assets, are not absolved of all professional obligations on discharge and that if assets or information comes to light after discharge they should consider what action is appropriate to take in the circumstances.

The opinion also made some pointed observations relating to the detail (or more correctly the lack of detail) within the application submitted to the court. This serves as a useful reminder that the court will expect to be told why, in law, the sequestration had not come to an end, the identity of creditors in the case and how they are expected to benefit from the application.


  • Insolvency

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