A recent decision at Glasgow Sheriff Court has given guidance on the circumstances in which it is appropriate for a former trustee in receipt of a PPI refund to apply to be re-appointed to a sequestrated estate.

Earlier this year, the Sheriff Appeal Court ruled that a trustee in sequestration may apply to be re-appointed to the estate of a bankrupt in order to deal with assets discovered only after the bankruptcy comes to an end. This is not an uncommon occurrence. There have been numerous applications since the Appeal Court's ruling, many involving refunds of PPI which were not known about at the time of the bankruptcy.

A recent decision of the Sheriff at Glasgow has, however, sought to temper the Appeal Court's judgment somewhat, and may restrict the circumstances in which a trustee may successfully make an application.

The Sheriff noted at the outset that he has a discretion over whether to grant such an application, notwithstanding the Appeal Court judgment. It is clear that the Sheriff had raised concerns about the application prior to the hearing, indicating that he required further information in order to exercise his discretion. Having then heard from the trustee's solicitor, and considered the paperwork before him, the Sheriff refused the application.

In doing so, the Sheriff explained in his reasoning that from the information provided it did not appear that any party would benefit from the re-appointment of the trustee 'other than the professionals involved'. While the Sheriff had been given a breakdown showing that there would be a small dividend to creditors, he expressed some doubt as to whether there were any such creditors based upon the submissions made to him, and could not in any event say whether the benefit to the creditors would be 'meaningful'.

It was a matter of admission that the former trustee had received no claims in the sequestration during the original period of appointment, and while he proposed to utilise part of the fund to employ agents to trace such creditors, there was no indication that any creditors existed or would lodge claims. The Sheriff also noted that the application did not address the question of whether matters could have been resolved informally and observed that the application generally contained insufficient detail.

For trustees in receipt of PPI refunds who are considering an application to be re-appointed to an estate, therefore, this case has some clear messages:

  1. Before embarking on the application, ensure that there are creditors who will benefit from the asset involved and that thought has been given as to what will be distributed to those creditors at the end of the process;
  2. If the likely distribution to creditors is not 'meaningful', that will count against the application;
  3. Trustees should ensure prior to making the application that some attempt has been made to contact the debtor and resolve matters on an informal basis; and
  4. If there is little or no benefit to anyone other than the trustee themselves, it is likely that the application will be refused.