A debtor entered into an IVA with his creditors. He complied with the terms of the IVA and a certificate of compliance was issued by the IVA supervisor. Subsequently, the debtor received two PPI settlement payments from banks. The supervisor applied to court for directions as to whether the payments were caught by the trust created by the IVA. The Deputy District Judge held not and the High Court agreed on appeal. The supervisor was given permission to appeal to the Court of Appeal.
- The debtor argued that the trust had ceased because, as he had complied with the IVA terms, he had been released from his debts and therefore there were no beneficiaries to the trust and therefore there was no longer a trust
- The Court of Appeal disagreed and allowed the supervisor’s appeal. Lord Justice David Richards compared the IVA terms on release of debt to bankruptcy, as the definition of ‘Creditor’ under the proposal related to a debt in a bankruptcy, and held that whilst both processes release the debtor from its debts, bankruptcy does not extinguish the debts themselves. On that basis, as the debts subsisted, beneficiaries continued to exist and as there was no provision for termination of the trust on issue of a certificate of compliance, the trust remained in place and attached to the payments
Going forward, if a debtor wants to terminate any trust created by an IVA proposal on issue of a certificate of compliance, that should be expressly provided for in the IVA proposal.