On 1 August 2025, the Supreme Court delivered its judgment in the case of Hopcraft and another (Respondents) v Close Brothers Limited (Appellant) and the linked cases 1.
Following the Supreme Court ruling, the Financial Conduct Authority (FCA) has confirmed its plans to consult on a scheme to compensate motor finance customers who were treated unfairly. The consultation is expected to be published by early October and it’s the FCA’s stated intention that any redress scheme would come into operation in 2026.
As there is uncertainty about the scope of any scheme and the quantum of any possible awards, the potential recoveries for the creditors of insolvent estates are also uncertain. The RPBs therefore consider it unnecessary for office holders to undertake investigations into potential claims across their current portfolios of individual voluntary arrangements (IVAs), protected trust deeds (PTDs), sequestrations or bankruptcies or any such closed appointments. At this stage any such work would be highly speculative, and any attempt to recover the costs of investigations would fail to meet the test in Statement of Insolvency Practice 9 that payments to an office holder from an estate should be fair and reasonable reflections of the work necessarily and properly undertaken.
Further, the RPBs do not consider it would be appropriate for office holders to delay the closure of any IVAs or PTDs where the debtor has complied with their obligations in anticipation of an uncertain future compensation award. To delay closure would be contrary to the requirement that a fair balance is struck between the interests of the debtor and their creditors.
Finally, the FCA has stated publicly that its aim is to make any scheme easy for consumers to understand and participate in, without needing to use a claims management company (CMC) or law firm. Office holders should not at this stage be seeking to instruct a CMC to assist with potential future claims nor should they be encouraging debtors to engage a CMC.
Given the publicity about the Supreme Court case, it's possible that debtors may ask office holders about the treatment of any compensation claims they think they may be able to claim.
- Someone who is currently in an IVA, PTD or sequestration which is due to close before the launch of any redress scheme should be informed that they will be able to keep any award made after the closure of the IVA (subject to any terms in the IVA regarding the continuation of the trust) or PTD or after the discharge of the trustee in sequestration.
- Where the IVA will continue after the launch of any redress scheme, debtors should be informed that any award could form part of the estate, subject to the terms of the IVA). Debtors who have entered a PTD or bankruptcy in Scotland should be informed that any award will form part of the estate.
- Someone who is considering entering into an IVA or PTD or applying for sequestration should be made aware of the treatment of any potential compensation payments. For PTDs, bankruptcy and sequestration cases, any future compensation payment will form part of the estate, irrespective of the discharge of the debtor.
The FCA intends to consult on its proposals and then review the feedback before launching any scheme. The RPBs will provide more guidance once the FCA has explained how any scheme will work.
1 Johnson (Respondent) v FirstRand Bank Limited (London branch) t/a Moto Novo Finance (Appellant) and Wrench (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant))