Green (Supervisor of the IVA of Wright) v Wright

A trust of assets created by an individual voluntary arrangement does not end merely because the supervisor issues a completion certificate. The IVA must contain clear terms requiring that result. A provision ending the trust on defined termination does not ordinarily extend to completion. Release of the debtor from arrangement debts removes personal liability but does not extinguish the debts for identifying creditors or administering the trust. Accordingly, assets falling within the IVA at its commencement, including after-discovered claims, remain subject to the trust after completion unless the arrangement clearly provides otherwise.

The debtor entered an individual voluntary arrangement in 2007 incorporating modified R3 Standard Conditions. Most assets held at commencement were placed on trust for creditors, alongside obligations to make income contributions. The arrangement provided for release from debts on issue of a completion certificate, but expressly ended the trust on termination.

After completion, the supervisor received settlements of PPI mis-selling claims relating to policies taken out before the IVA. It was common ground that the claims were property subject to the IVA. Deputy District Judge Langley held that the sums were not subject to the trust. HH Judge Hodge QC affirmed that decision: [2015] EWHC 993 (Ch); [2015] BPIR 806. The issue on the second appeal was whether the trust survived completion and attached to the settlements when discovered.

The Court of Appeal allowed the appeal. Lord Justice David Richards gave the judgment, with which Lord Justice Irwin agreed.

1. Construction and purpose. The IVA was an alternative to bankruptcy. Its purpose included making available to creditors property which would have formed part of the debtor’s bankruptcy estate at commencement. That context supported an expectation of clear terms if the trust was intended to end on completion. The arrangement distinguished completion from termination. Paragraph 28(3) expressly ended the trusts on termination within paragraph 11, but contained no comparable provision for completion.
2. Effect of release. The definitions of Creditor and Debt fixed the creditor class by reference to debts, liabilities and obligations existing at commencement, applying section 382 of the Insolvency Act 1986 with the necessary modifications. Release under paragraph 9(2) removed the debtor’s personal liability. It did not extinguish the debts for the purposes of identifying creditors or administering the trust. The position was analogous to bankruptcy: section 281(1) of the Insolvency Act 1986 releases a bankrupt from bankruptcy debts without ending the trustee’s functions or creditors’ rights of proof. The statutory moratorium under section 285(3) is distinct from release.
3. Application. The Court of Appeal applied the guidance in Re N T Gallagher & Son Ltd [2002] EWCA Civ 404 that a fully constituted arrangement trust does not end without a provision requiring that result. Arrangement property therefore remained subject to the paragraph 28 trusts after completion, and the PPI claims remained within them. Paragraph 27(3) did not address the effect of completion, and the Scottish decisions relied upon were of no assistance. The appeal was allowed.

• Court of Appeal (Civil Division) allowed the supervisor’s second appeal: [2017] EWCA Civ 111.
• High Court of Justice, Chancery Division HH Judge Hodge QC affirmed the County Court decision: [2015] EWHC 993 (Ch); [2015] BPIR 806.
• Burnley County Court Deputy District Judge Langley held that the PPI settlement sums were not subject to the trust.