More PPI issues (Continued)

Many practitioners will have seen our recent briefing on the cases of Doneen Limited v Mond and Donnelly v The Royal Bank of Scotland. Matters have developed further and not as insolvency practitioners would have liked.

Doneen Limited v Mond

On 20th July 2016 the Inner House of the Court of Session issued their decision in the appeal. In short, the insolvency practitioner contended that Lord Jones had been wrong to hold that the debtor’s discharge terminated the trust and reinvested the debtor in unrealised estate (including PPI compensation). The Inner House disagreed. The Lord Justice Clerk delivered the opinion of the court and held that Lord Jones was correct. Amongst other points, the court held that a trust deed was different from a statutory process such as sequestration, distinguishing the case we have previously mentioned Whyte v Northern Heritable Securities. The Inner House’s approach was to analyse the construction of the wording of the trust deed. They were in no doubt that in the present case “discharge” meant termination of the trust and reinvestment in the debtor of unrealised estate.
This judgement has the potential to create a number of difficulties; not least that creditors will not be entitled to share in PPI compensation in such cases. Subject to permission being granted we understand it may yet be appealed to the UK Supreme Court. However, given that we understand the English approach may well be similar in relation to individual voluntary arrangements as the one the Inner House has taken, it is by no means certain that the position will change. At this stage, the positon therefore is that in trust deeds with wording in the same terms to the Mond appeal, discharge will mean termination.

Donnelly v The Royal Bank of Scotland

It remains to be seen how the Donnelly litigation will now proceed in light of the Mond decision. However, the Sheriff Appeal Court recently refused a joint motion to remit the case to the Court of Session. A full judgment may therefore follow in due course.


It will be necessary for insolvency practitioners to examine the particular wording of trust deeds. However, if wording matches the wording in the Mond appeal, it is difficult to see, unless there is a successful appeal to the UK supreme court, how it will be possible for trust deed cases to be reopened where the debtor has been discharged.  This briefing note is current as at 25th July 2016 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).

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