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That was the decision in Green-v-Wright that was handed down in the Court of Appeal on 1 March 2017 and sought to address the following issues:
  • Whether a trust created in an Individual Voluntary Arrangement (IVA) terminates on completion.
  • What is the definition of a ‘creditor’ for the purposes of an IVA?
  • What is the effect of a certificate of completion?
Court of Appeal Ruling:
Complete may mean no such thing – if there is a trust, it continues as do the liabilities therein.  The obligations of the individual may have been fulfilled but assets comprised in the trust, which come to light even years later, will go to the supervisor.
PPI receipts in practice:

It is common for IVA terms to include all assets, except those specifically excluded, and that they are held on trust.  So when a debtor receives a PPI refund that was in existence prior to the completion of an IVA, it is likely to be an asset of the IVA.  Therefore, where there is a trust clause, this ruling means that the refund must be paid to the former Supervisor of the IVA for onward payment to creditors.
Richard Rones said:

"The judgment is clear in that an expressly created trust can only be terminated by specific terms."

Those terms must provide for what will happen to the trust assets.  This case deals with the scenario where there were no such terms of termination – as in most IVAs I have seen.

It was previously believed that because an IVA was complete, and therefore the debtor released, that creditors were compromised and no longer existed – if there are no beneficiaries, no trust.   In such a scenario the PPI funds should revert to the debtor. The Court of Appeal has disagreed and appears to be following the way in which Bankruptcy works – realisation and distribution of assets can continue long after a bankrupt has their discharge.

The decision is an interesting one and will certainly be of concern to:
  • People who have completed IVAs and have, or plan to make, a PPI claim.
  • Insolvency Practitioners who may have to decide what to do with funds they didn’t expect or want.
  • Historical lenders if they are paying out a PPI claim – they will have to consider if a beneficiary was ever in an IVA and if so, who should get the funds.
On the plus side, at least there is now clarity for an issue that has caused some concern for some time although there may be more work that needs to be done where it was previously assumed an IVA had completed!
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