Can a Trust Deed Be Re-Opened To Capture PPI Claims?

Claiming Back PPI after Scottish Trust Deeds

Many people seek to recover PPI after being discharged from their trust deed. Our 2014 article on the recovery of mis-sold payment protection insurance article explained that:

• If your trustee hasn’t been discharged from your protected trust deed, any PPI compensation payment is going to be sent to them for the benefit of your creditors. Trustee discharge is separate to your own discharge (and can happen a long time afterwards). You can check whether your trustee has been discharged here.

• Some financial institutions have taken the view they could keep PPI money due to you in order to set it off against debts they wrote off in connection to your trust deed. A Court ruling in January 2017 appears to have found against one bank that has taken this position, but further legal wrangling might yet take place before certainty exists in this respect.

The above remains true, but last year we began to hear from a steady trickle of people that their ex-trustees were trying to re-open their Scottish trust deeds. This was being done to “capture” a PPI claim payment that was now being paid out. Our forum member “Pascal12” explained his experience of this very well in this forum thread.

Are Trustees Allowed to Re-Open Trust Deeds?

To re-open a trust deed in Scotland, the ex-trustee would have to get permission from a court. It’s not something that can happen without a judge agreeing to allow it. Their former customer (who had previously been discharged) could object to this at court, or instruct their legal representatives to object on their behalf.

By July 2015 we’d heard from our first forum member that their trust deed had been re-opened and once again appeared on the Register of Insolvencies. This could only have happened with the permission of the court.

Since then there have been several legal challenges against trustees seeking reappointment to trust deeds that they had previously discharged themselves from. Most recently a trustee has found himself on the losing side of such a case, and subsequently lost again at appeal. While this trustee may yet still appeal the decision further at the Supreme Court, the regulatory professional body ICAS concluded that trustees will now stop seeking reappointment at court.

This situation could well change quickly if there are further legal developments in the future.

Are Creditors Allowed to Withhold Payment of a PPI Claim?

Creditors have always been very cautious about making PPI claim payments to persons that are insolvent or who were previously insolvent. They’re at risk of having to make the payment twice if they accidently pay an individual claim funds that should have rightly been paid to their trustee. As a result they’ll sometimes send a PPI claim payment to an ex-trustee rather than to the individual claimant. The ex-trustee might then forward the payment to their ex-client if they consider that to be the correct course of action. They might also return the funds to the bank with written confirmation that they can safely pay their claimant directly.

If the ex-trustee has informed them that they intend to re-open the trust deed to “capture” the funds, the bank has typically supported them in this process.

Could you have forced the bank to pay you directly in the interim? You could have tried to take legal action, but this is likely to be expensive, slow, and carries no guarantee of success. You could also take the matter to the Financial Ombudsman, but this is also likely to be slow and also carries no guarantee of success.

Isn’t This Very Unfair?

When you sign a trust deed in Scotland, you commit to your assets being used to repay your debts. The potential to make PPI claims was one of those assets. It’s effectively something you’ve given up at that time in return for the chance to clear your unsecured debts.

If a trustee fails to make a PPI claim that they should have done, or if their client fails to inform them about a possible PPI claim, it’s seems quite unfair on the affected creditors that they don’t receive this money.

Could it be fair to a creditor that such a lump sum ends up going instead to an individual that didn’t fully repay them a debt which was owed? Many would think not.

It’s also the case that other comparable types of personal insolvency can capture relevant assets even after they’ve been closed. This already happens with bankruptcy, and it happens with IVAs elsewhere in the UK. Some people might ask why protected trust deeds should be any different.

However, it’s also understandable that individuals want to see a finishing line beyond which they can totally put their trust deed behind them. Being discharged personally, and the trustee being discharged subsequently, both are important landmarks many that have been in a trust deed.

The re-opening of a case later could be psychologically painful, bringing back bad memories that had been mentally consigned to the past. It’s easy to understand why people would be angry or upset about this happening in connection to their affairs.

It’s important to know however that it’s only the trustee that is re-appointed to capture the PPI funds for the trust deed. The ex-debtor isn’t affected similarly by any such re-opening. They remain discharged at all times and they do not become subject to the restrictions of a trust deed again. Their credit record should not be affected at all.

There may be a practical issue to overcome for a few people in the event that insolvency searches are carried out. This is because the insolvency will appear on the Register of Insolvencies until one year after the trustee has been discharged (again). Such insolvency searches often accompany property purchases. The solicitors involved may need to further confirm that you have been previously discharged, which may create a short delay.

Getting Up To Date Information

This subject is regularly discussed in our forum. Please visit the forum periodically if you’d like to check whether there have been any legal developments regarding this subject.