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Debtor Keeps PPI Cash after Discharge from Trust Deed

Following  the Court of Session’s  decision in Dooneen Limited & Others v Mond, the Sheriff Appeal Court has issued its judgement in the case of Donnelly v RBS which centred on a PPI payment.

Mrs Donnelly borrowed money from RBS, and afterwards, became insolvent and entered into a Trust Deed, from which she was discharged some seven years later. RBS was not paid in full from the proceeds of the Trust Deed.

Some months after her discharge from the Trust Deed, Mrs Donnelly became aware she had a claim for mis-selling of PPI and submitted a claim to RBS, which they accepted.  However, they did not pay Mrs Donnelly the full amount and “set off” her compensation against the money owed by her prior to her Trust Deed, claiming “set off”.  The Sheriff originally found in favour of RBS and Mrs Donnelly appealed.  Meantime the Court of Session determined that the PPI payments in cases such as these should fall to the debtor, in such circumstances.

Unsurprisingly, the Sheriff Appeal Court has followed this reasoning and despite some impressive legal arguments from RBS, overturned the original decision and fell into line with the Court of Session.

Unless Dooneen is appealed to the Supreme Court, it is now the position that once a Trust Deed is discharged, the debtor should receive any monies from a PPI claim, so long as the claim arises after the discharge.  The Banks may not “set off” any claim for monies outstanding.

If you have any insolvency queries or wish to discuss this matter further, please contact your usual Morisons’ contact or Pamela Muir, Partner, Insolvency and Restructuring.

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