Court of Appeal decides PPI claim remains with IVA Supervisor
Supervisor strikes back – PPI 3. In the latest Court decision concerning PPI claim funds received after an insolvency process has completed, the Court of Appeal decided that the PPI claim remains with the IVA Supervisor. David Menzies looks at the decision and how the legal position in England & Wales and Scotland now differs.
The Court of Appeal in England has issued a long-awaited judgement in the case of Green v Wright. The case is the latest in a series of court cases in the UK concerning PPI funds which were received or identified where a debtor had been subject to a voluntary insolvency process but had received their discharge prior to the PPI funds being identified.
These have the effect that after the debtor and trustee have received their discharge from a trust deed, any subsequently discovered PPI claims will be paid to the debtor. Both cases are in the process of applying to the Supreme Court for permission to appeal.
The situation in England and Wales (and probably also in Northern Ireland) following the latest decision in Green v Wright would appear to be different. However, as I shall explain further on, it is perhaps not as different as it might first appear.
Court of Appeal decision
A detailed analysis of the Green v Wright decision is available from the website of CoffinMew Solicitors who acted on behalf of the Supervisor in the case.
In summary, the Court of Appeal held that where the supervisor of an individual voluntary arrangement has issued a completion certificate and assets of the debtor come to light after the issue of the completion certificate, they are caught by the terms of the trust in the debtor’s proposal.
The decision turned on the specific wording of the IVA proposal and variations agreed. Crucially, there were no provisions in the arrangement which dealt with the termination of the trust which had been created to deal with assets delivered up as part of the arrangement.
Both parties agreed that the PPI claim was an asset at the commencement of the arrangement. Thus, the PPI claim which subsequently came to light remained in trust and is available to the arrangement Supervisor.
At first glance, it appears there now is a difference between the position in England and Wales and Scotland for the same issue. It is, of course, correct that a trust deed and an IVA are vastly different insolvency procedures.
This is despite them both being similar in their overall objective of providing debtors with a mechanism of debt relief through the voluntary surrender of assets and surplus income for a fixed duration.
It is correct that the effect of the decisions in the Scottish and English cases result in divergent treatment of PPI claims post debtor and IP discharge. In Scotland, the PPI funds will go back to the debtor while in England the funds in the same position will benefit creditors.
On closer analysis, however, the court decisions are consistent. The key issue is whether the trust created to deal with the assets has terminated or not.
This very specifically will depend upon the terms of the IVA or trust deed. The difference arises because in the case of Green v Wright the IVA was constructed using the R3 Standard Conditions (version 2) which, the Court determined, did not contain any provisions to terminate the trust on completion.
It did contain provisions to end the trust where the arrangement terminated (failed) but that was different from the arrangement completing. The trust deeds in the Scottish cases did contain termination provisions (although discussion was on how those termination provisions were to be interpreted).
All the cases decided have been dependent on the specific wording of the IVA or trust deed documents. IPs and debtors therefore need to consider the specific wording in the documentation relating to their case.
That said, the documents used in the cases referred to were widely used at the relevant time and therefore the decided cases are likely to have a potential wider impact.
It is, of course, right that there is certainty for debtors, creditors and IPs around the completion of the arrangement. Documentation used to form an IVA or trust deed should contain clauses clearly setting out when the trust will terminate and what will happen to unrealised or undiscovered assets.
Permission to appeal to the Supreme Court has not been granted therefore no application to appeal will be submitted by the debtor.
The decision therefore appears to settle the matter in relation to ‘all asset’ IVAs. Many supervisors have delayed issuing completion certificates to debtors pending the outcome of Green v Wright and this decision should now at least allow such cases to be progressed and for debtors to receive their completion certificate.