In February 2015, the High Court in Manchester heard an appeal relating to PPI refunds after an IVA has satisfactorily completed:
- the original decision was that the PPI compensation should go to the debtor not the IVA’s creditors;
- the IVA supervisor appealed this decision – this appeal was rejected – here is the full Green v Wright appeal judgment;
- there is a summary here: Setting a precedent for IVAs and PPI refunds – Green v Wright;
- permission has now been given for a further appeal to the High Court in London – planned for May 2016 it was delayed as there weren’t enough judges (!)
UPDATE – the Green v Wright appeal was heard on 15th November 2016. The Appeal Court verdict is expected in early 2017.
How important is this case?
Kathryn Maclennan, a solicitor who represented the debtor in the case, says:
“This judgment not only affects my client but also thousands of others whose IVAs have now been successfully closed. Those individuals may want to re-examine their individual cases if PPI payments have been made to the Supervisor following the IVA’s completion.
The decision could also have significant impact on the way the banks, lenders and insolvency practitioners deal with and manage PPI payments in IVA’s going forward. Lenders will need to ensure that they are discharging such payments to the correct party and insolvency practitioners should be mindful of adopting best practice.
The decision has brought some much needed clarity to the issues surrounding PPI claims in IVA’s, but the judgement could also prove very costly for the insolvency industry and banks in particular. Banks will need to be mindful that simply making PPI payments to the Supervisor may not always be the correct course of action. Insolvency practitioners will want to consider their back book of cases where debtors will want clarity on these issues. The scope for payments to be made to individuals could run into significant amounts.”
So if you have had an IVA, this court case may be important for you. This article looks at who is most likely to be affected and, if you are one of those people, has some thoughts on what you should and should not do now pending the further appeal. There are basically four groups of people.
(As always with articles about IVAs, I have to start by pointing out that I am not a lawyer, I have not seen the terms of your IVA, and this article is not legal advice. See below for good places to get legal help and advice.)
1) your IVA hasn’t finished
If you haven’t yet received your completion certificate, this case doesn’t affect you at the moment. The right to make a PPI claim is usually an asset of the IVA which the supervisor is entitled to realise and distribute to the creditors. In the Green v Wright case, if the PPI refund had been paid before the IVA completed, there would have been no suggestion that the debtor should have received the money.
It isn’t likely to be to your advantage when your IVA ends, either. The judge noted that:
“If the debtor and the supervisor wish to make specific provision for the supervisor’s powers to continue after the conclusion of the IVA in relation to possible PPI mis-selling claims, then the remedy is for the supervisor to insist upon a special agreement with the debtor to the effect that any moneys received from such a mis-selling claim shall be paid to the supervisor, and distributed to the creditors, notwithstanding the conclusion of the IVA.”
Some IVA firms have already been asking debtors to agree to this sort of “PPI Extension” in order for their IVA to be able to be closed promptly. After this court case, I would expect all firms to do this. You could refuse but, as the judge went on to say,
“If the debtor is not prepared to agree to such a modification of the terms of the IVA, then the supervisor has it within his power simply to withhold the issue of a certificate of completion.”
As the PPI mis-selling saga continues, lenders are having to pay out on some claims which they previously rejected. So even if your IVA firm has already gone through the process of reclaiming PPI, it is possible more PPI refunds could become available in future.
On this basis it is likely that your IVA firm will simply refuse to close your IVA unless you agree that any PPI reclaimed after your completion certificate has been issued should be paid to the IVA form for your creditors.
2) you agreed to a PPI Extension before your IVA ended
If you agreed to a “PPI Extension” (see above) before your completion certificate was issued, then this legal case doesn’t affect you, instead it is the terms of your PPI Extension that matter. And that says that after your completion certificate PPI will continue to go to your IVA firm. I don’t know of any reason why this can be challenged.
3) your IVA completed satisfactorily and you haven’t agreed to a PPI Extension
Here the Green v Wright case may be applicable – it will depend on the wording of your IVA and of your completion certificate.
If there haven’t yet been any PPI refunds after your completion, it is probably sensible for you to do nothing until after the further Green v Wright appeal is heard. If that further appeal confirms the current judgement, then you will be able to apply for PPI refunds in the expectation that these will be paid to you.
If there have already been some PPI refunds that have been paid to your IVA firm, I suggest you write to your IVA firm and ask for the money to be repaid to you as per the Green v Wright case. In practice nothing may happen until after the appeal, but I would send the letter now.
If a lender contacts you to say that you are eligible for a PPI refund I suggest you sign the papers to accept it. If the lender then says it will be paid to your IVA firm, I suggest you write to the lender saying that your IVA has completed and the money should be paid to you as per the decision in Green v Wright. Send your IVA firm a copy. This refund is likely to be in limbo until the further appeal is heard.
If a lender sends you a cheque Don’t spend it, however tempting this is. Even if the Green v Wright decision is upheld, it may still not be relevant for you because it will depend on the wording of your IVA and completion certificate. If you tell your IVA firm, their response may clarify the situation, for example if they say you have to send them the money because you signed <this> or because <this> clause is included in your completion certificate – at that point you may decide you need further advice, see below.
If your IVA firm asks you to authorise it or a claims management firm to make PPI reclaims, you should consider refusing to do this. If the firm says you are obliged to, ask them to explain why and if you are not satisfied with the answer take further advice, see below. Grant Thornton have been asking some of their clients with completed IVAs to authorise a new PPI investigation, see this article.
4) your IVA completed, then you agreed to the IVA firm reclaiming PPI
This seems to me to be a more difficult situation. It isn’t clear to me what you will have gained by agreeing to this, so it may be possible that your IVA firm should not have asked you to do this. If your IVA firm suggested that you had to do this, this could be described as misleading, especially if it happened after the Green v Wright appeal when the IVA firm was aware of the court case and you were not.
Getting further advice
If you feel you need further advice on your situation at the moment, for example if you have been sent a PPI refund cheque and are unsure whether you should tell your PPI firm, good places to go include:
- your local Citizens Advice Bureau or Law Centre – here the advice would be free;
- a solicitor that has experience of personal insolvency cases – here you would probably have to pay.
Once the situation is clearer after the further appeal, I would hope standard ways of applying can be found, avoiding the need for most people to have to get their own legal advice.
You are welcome to comment below on this article, but please note that I can’t give you legal advice on what you should do or whether Green v Wright applies in your situation.