PPI Compensation: the IVA or the individual

In the recent case of Green (Supervisor of the IVA of James Patrick Wright) v Wright, the Court of Appeal considered the impact of a completion certificate and the payment of PPI compensation post the issue of the certificate.

Facts

On 31 August 2007, Mr Wright proposed an IVA incorporating the R3 Standard Conditions.

On 9 October 2007, the proposal was approved subject to modifications.

Mr Wright complied with all of his obligations under the IVA including the recovery of three PPI claims which were brought into the IVA. A further two PPI claims had been made, however these were refused.

On 17 January 2013, the IVA supervisor issued a completion certificate which stated:

“the arrangement is now completed and the debtor is released from all liabilities to creditors bound by the arrangement.”

Subsequent to this completion certificate, Mr Wright's two additional PPI claims were accepted towards the end of 2013, and the IVA supervisor received payments from Barclays and RBS for £17,556.74 and £6,950.12 respectively. The IVA supervisor therefore issued an application for directions.

First instance

The DDJ ordered that the sums should be paid to Mr Wright. The DDJ relied upon (1) the completion certificate, (2) that under paragraphs 9(2) and 27(3) of the Standard Conditions all debts owed by Mr Wright had been extinguished and there was no subsisting trust, and (3) that the holders of the debts could no longer be treated as creditors.

The IVA supervisor appealed to the Court of Appeal.

Appeal

The Court of Appeal allowed the appeal and reversed the DDJ's decision. The Court of Appeal held that:

• Paragraph 28 of the Standard Conditions provided that upon “termination” of the IVA the trusts would cease, and that in this case there had not been a termination but the IVA had merely been completed
• The release of the debt is not necessarily the same as extinction or discharge of a debts.
• The debts and the IVA trust continues to exist but cease to be part of the debtor's personal obligations.
• It would undermine the purpose and spirit of voluntary arrangements if the trusts created by then came to an end on completion in the absence of an express provision.

The court relied upon Re NT Gallagher + Sons (2002) in which it was held that without an express termination of the IVA the monies were subject to the IVA trust which continued despite the issuing of a completion certificate.

Summary

This case highlights that the completion of obligations under an IVA and the issuing of an IVA completion certificate will not terminate the IVA trust, and as such PPI monies and the like remain payable into the IVA trust for the benefit of the creditors. The debtor’s assets will not be free of the IVA’s reach post-completion.

Practically, each case will depend on its facts (in particular they will depend on the set of Standard Conditions used).

IVA supervisors should be aware of this issue, especially given the deadline for PPI claims.

For more information please contact Alexandra Withers.