Yesterday the Inner House of the Court of Session issued its opinion in the appeal of Dooneen Ltd & Others v Mond [2016] CSIH 59.

The appeal was brought by Mr Mond seeking to overturn the decision of the Lord Ordinary, Lord Jones.

Facts & Outer House

On 26 September 2006, the Debtor granted a Trust Deed in favour of his creditors. Mr Mond was appointed as his Trustee in terms of the Trust Deed (“the Trustee”). In November 2010, the Trustee made a “first and final distribution” to creditors under the Trust Deed. In early 2015 the Debtor appointed a claims company to pursue a claim for mis-selling of PPI. The mis-selling claim had been an asset of the Debtor when he granted the Trust Deed but had come to light only after the “first and final distribution” was made. In April 2015, the Debtor received compensation of £55,000 for the mis-selling claim (“the PPI monies”). It was accepted by the parties that the PPI claim was an asset which vested in the Trustee at the date of execution of the Trust Deed.

The dispute between the parties boiled down to who was entitled to receive the PPI monies. The Debtor argued that the Trust Deed had come to an end when the Trustee had made the “first and final distributionof £22.41 on 10 November 2010, which meant that the Debtor was entitled to receive the PPI monies. The Trustee argued that the Trust Deed had not come to an end on the making of the “first and final distribution”, which meant that he was entitled to receive the PPI monies for the benefit of creditors.

The Lord Ordinary, after analysing the terms of the Trust Deed, held that on the making of the “final distribution” to creditors the Trust Deed had indeed come to an end. The effect of the Trust Deed coming to an end was to re-invest the Debtor of all assets conveyed to the Trustee under the Trust Deed, including the mis-selling claim. The Debtor was therefore entitled to receive the PPI monies.

Inner House

The Trustee appealed the Lord Ordinary’s decision to the Inner House. The question that the Inner House was asked was: “whether the Lord Ordinary was correct to find that, in terms of the trust deed, the making by the trustee of a distribution to creditors brought the trust to an end, with the result that neither the trustee nor the creditors have any claim on the compensation?” The Inner House has answered that question in the affirmative and confirmed that the Lord Ordinary’s analysis of the Trust Deed was correct and that the making of the “final distribution” did bring the Trust Deed to an end. The Debtor is therefore entitled to receive the PPI monies.

What’s next?

Whilst this decision turns on the terms of the individual Trust Deed granted by the Debtor, the Court did make some general, helpful, points. In particular, if the Trust Deed provides for the Trust to terminate on the making of a final distribution and that final distribution is made, then the Trust will come to an end. The termination of the Trust has the effect of discharging the Debtor and reinvesting in the Debtor any assets which have not been realised by the Trustee. As a result, if an asset comes to light after the Trust Deed has terminated, such as a PPI claim, then it is the Debtor who will have the right to that asset.

This might not quite be the end of the story for Trust Deeds and PPI claims, however, as there is at least one other appeal pending dealing with similar issues.