The 5% payment percentage announced by Chester Street's liquidators this week has been blasted as an appalling decision that will leave thousands of asbestos victims in a unwinnable Catch 22.

Pricewaterhousecoopers liquidator Daniel Schwarzmann said the percentage could rise once the level of future asbestos-related claims had been ascertained.

He said Chester Street's creditors could now start paying out asbestos victims but, if the creditor was insolvent, victims had to make direct claims against Chester Street.

Thompsons Glasgow solicitor Frank Maguire, who is representing hundreds of victims, said once legal costs had been paid out of the money, creditors would be left with nothing.

“They're in the invidious position of only getting their costs paid at 5% and their payout at 5%, but Chester Street will have its entire costs paid,” Maguire said.

The typical award of £100,000 for a case of mesothelioma will be slashed to £5,000 – minus costs.

Maguire has called upon the Treasury to investigate the processes that allowed Chester Street to go into liquidation. It has said it will not act until the liquidator's report is in.