Important decision for debtors, lenders and insolvency practitioners
A dispute over Voluntary Arrangements which recently went to the High Court in Manchester on appeal before His Honour Judge Hodge QC, will have important implications for banks, lenders, Insolvency Practitioners and individuals who have entered into individual voluntary arrangements (IVA’s).
The question for the court was – when a certificate of completion is issued at the end of an IVA, is that really the end of the story for the debtor, or could unknown or pre-existing assets still come into play, perhaps even years after the individual believes that his debts are cleared and his IVA concluded?
First case of its kind
The case, which is believed to be the first of its kind, involves an individual whose IVA had come to an end in January 2013. Closing documents including the Certificate of Completion were issued and in this case, the certificate confirmed that the individual had no further liability to creditors bound by the IVA.
Following closure it was discovered that the individual had funds owing to him as a result of PPI claims. Such funds were paid to the former Supervisor as they were considered to be assets comprised within the IVA which should be utilised for the benefit of creditors.
Court in favour of debtor
At first instance the court found in favour of the debtor and that decision was upheld by the High Court in Manchester on appeal. The Court has ordered that the proceeds of the PPI claims are due and payable to the debtor. The Court focused on a number of factors and crucially the content of the closing documentation confirming release of the Supervisor and extinguishing the debtor’s liability to the IVA creditors. The former Supervisor now has 21 days to decide whether or not to take this to the Court of Appeal in London.
Dispute will be very costly
Kathryn Maclennan, a solicitor at Stephensons LLP who represented the individual concerned, said:
“With tens of thousands of IVA’s closing, this case will have an impact on the whole insolvency industry, as well as the banks and lenders who are paying out on PPI claims and possibly other claims – are they discharging the funds to the right people? This kind of dispute can be very costly and of great concern to individuals who have entered into IVA’s and also to Insolvency Practitioners who will be concerned to ensure they adopt best practice.”