Tue 31 Jul 2018

PPI claims and personal insolvency

Payment protection insurance (PPI) claims have been a hot topic over the last few years and with the deadline for claims of August 2019 having been fixed by the Financial Conduct Authority it’s likely that we’ll all continue to hear about them (and, no doubt, get the odd cold call or text message about them) for a while yet.

Given that the ability to make a PPI claim has been widely advertised and with individuals able to make claims themselves, it’s perhaps no surprise that a number of legal issues have arisen. There have been a number of cases before the courts in recent years in connection with whether a PPI claim paid out after an individual is discharged from sequestration or from a trust deed, but where the PPI was mis-sold prior to the date of sequestration or start of the trust deed, belongs to the trustee or to the individual.

There have been a run of cases considering this point in connection with trust deeds, with one (Dooneen Ltd & Others v Mond) having been appealed to the Supreme Court. The appeal hearing took place on 3 July 2018 and the Supreme Court’s judgment is awaited.

In the meantime, the issue of re-appointment of a trustee in sequestration after a PPI award has been considered again, this time by Sheriff Napier at Aberdeen Sheriff Court in the Application of Gordon Maclure as the former trustee on the sequestrated estates of David Johnston-Oates.


In this case the debtor, David Johnston-Oates, had been discharged from sequestration in December 2012. His trustee was discharged in December 2013. No dividend was paid to creditors. In July 2016, the trustee became aware that the debtor had pursued claims against the Bank of Scotland for repayment of PPI and was awarded payment of over £36,000.

The lending in connection with which the PPI claims were made pre-dated the date of sequestration and the debtor had forgotten about the previous lending when disclosing his assets and liabilities to the trustee. During the sequestration, the trustee had agents investigate whether any PPI claims could be made on the basis of the information contained in the debtor’s disclosure.  No claims were identified, which is perhaps unsurprising given that the trustee and his agents were unaware of the earlier loans in respect of which the claims were granted.

Having now become aware that the debtor was entitled to payment of £36,000 from the bank, the trustee applied to the court to re-appoint him as trustee in order that he could deal with the funds and make payment to creditors.


The trustee's solicitor referred to the earlier decision of the Sheriff Appeal Court in Accountant in Bankruptcy, Applicant and argued that the current application satisfied the requirements set out in that case, namely that the application identified creditors who might benefit from the re-appointment and it would not only be professionals who benefitted through additional fees. 

The trustee advised the court that the value of the award exceeded the costs involved in re-appointment and the recovery, management, realisation and distribution of the assets. The trustee estimated that after repaying a creditor that had funded an earlier litigation by the trustee against the debtor and deducting his own costs and legal fees, there would still be around £7,000 available for the benefit of creditors.

Amongst other points, the debtor’s solicitor argued that any divided to creditors would be negligible and there would be no real benefit to creditors. They also argued that the trustee had delayed in raising the application for re-appointment and that the court should not exercise its discretion to allow re-appointment. They referenced the 5 year time limit from the date of sequestration on applying for re-appointment through the Accountant in Bankruptcy (contained in sections 58B - D of the Bankruptcy Scotland Act 1985) and suggested that a similar time limit should be imposed on applications made to the court.  The current application had been raised 8 years after the date of sequestration.


Time Limit

Sheriff Napier held that he did not consider that the ‘time limit applied to a purely administrative procedure should be read into a judicial one’ and that where there is no time-limit specified in the legislation or suggested by the court in Accountant in Bankruptcy, Appellant there can be no such limit. The Sheriff did note that a ‘very lengthy delay in discovery of assets or in an application being made … may be a factor to be taken into account in the exercise of the Sheriff’s discretion.’

Benefit to creditors

Sheriff Napier agreed with the reasoning of Sheriff Deutsch in the case of Patullo, petitioner from last year in saying that the ‘purpose of re-appointment is not to benefit the professional involved in the sequestration and that where there is discretion that discretion should not be exercised in favour of re-appointment if that is the only benefit.’ Sheriff Napier was satisfied that this was not the case in the current application and that even after the trustee’s expenses were repaid there would be funds left to distribute to creditors. He took that view that although the dividend to each creditor would be modest, this should not preclude re-appointment.

The Sheriff commented that it ‘would be a dereliction of duty for the trustee not to apply for re-appointment having become aware of …’ the funds. The Sheriff  granted the re-appointment of the trustee.


What’s clear from the judgments so far is that a discharged trustee has an interest in a PPI award made after their discharge and can seek re-appointment to allow them to deal with the award but that they’re only likely to be re-appointed where they can satisfy the court that there will be a benefit to the creditors and not just to the professionals involved. Whilst the time limit of 5 years applicable to administrative re-appointment via the Accountant in Bankruptcy does not apply to an application to the court, it would likely be best to lodge any such application as soon as practicable given that, as per Sheriff Napier, a very lengthy delay may be taken into account.

And now we wait for the  judgment of the Supreme Court in Dooneen ….

Make an Enquiry

From our offices we serve the whole of Scotland, as well as clients around the world with interests in Scotland. Please complete the form below, and a member of our team will be in touch shortly.

Morton Fraser MacRoberts LLP will use the information you provide to contact you about your inquiry. The information is confidential. For more information on our privacy practices please see our Privacy Notice