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What happens with PPI claims after a Trust Deed?

Sharon McDougall - Updated - 8th May 2024 - 2 minutes to read

How does entitlement to PPI work during and after a Trust Deed in Scotland?

Part of an insolvency practitioner’s duties in administering your Trust Deed is to establish eligibility to reclaim any mis-sold Payment Protection Insurance - or PPI. If they find that you’re entitled to a refund while the Trust Deed is in place, these monies will be used to repay creditors, in addition to your normal monthly Trust Deed payments.

It could therefore be the case that even if you have a successful claim for mis-sold PPI, the full amount you may be able to reclaim could be used against your remaining debt held within the Trust Deed, with you receiving nothing from the claim. Despite this, you should not let this put you off applying for a PPI refund if you feel you have a valid claim.

This is because, the money you may be able to get back from mis-sold PPI could be enough to make a significant difference to the outstanding balance of your Trust Deed, which could allow you to complete the Trust Deed earlier than planned. In order to end your Trust Deed early, the amount would have to cover the debts which remain outstanding under the Trust Deed as well as all fees and interest incurred during the process. If you have a valid claim for mis-sold PPI, your Trustee will complete these calculations on your behalf and let you know whether the amount is enough to complete your Trust Deed.

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What happens to PPI after a Trust Deed has ended?

Until recently, if an individual received payment from a successful PPI claim even after their Trust Deed had come to an end, the money received would still need to be passed over to the Trustee rather than the individual being able to keep their refund. This changed, however, due to a court case which introduced something called the Mond ruling.

What is the Mond ruling in relation to Trust Deeds and PPI?

The Mond ruling means that individuals will be able to keep any PPI refund should this come about after the Trust Deed has successfully completed and the individual has been discharged.

Dooneen Vs Mond
The Supreme Court issued a judgment in the appeal case of Dooneen Ltd (t/a McGinness Associates) and another v Mond. The debtor in the case was Dooneen Ltd and the appellant was Mr Mond who disputed entitlement of PPI compensation after final distribution.

The dispute in question was whether the debtor was entitled to the PPI compensation after the Trust Deed had been discharged and final distribution was made. The appellant argued that the final distribution had not been made as the assets of the debtor were not exhausted, nor was the creditor paid in full. As a result, the appellant argued that the PPI compensation should be distributed to the creditor.

As the existence of the PPI claim was not apparent at the time of final distribution, nor was the compensation deliberately concealed, Lord Reed and four other justices ruled in favour of Dooneen Ltd. As a result, the debtor was able to retain the PPI payment.

The judge also said that proper clarity should always be exercised when a final distribution is made by the creditor to avoid consequences as such and to eliminate ambiguity around the status of the Trust Deed, including the discharge date of the Trust Deed.

This Supreme Court judgment clarifies uncertainties deriving from previous cases. It establishes that a creditor is not entitled to assets which are discovered after the final distribution has been made in relation to the Trust Deed, or after a Trust Deed has been discharged.

To receive independent, unbiased advice on how a Trust Deed could affect your entitlement to a PPI refund, call the team at Scotland Debt Solutions. We have offices around Scotland, and can help you decide whether making a claim would be worthwhile.

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Sharon McDougall


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