A debtor’s right to make an application for a moratorium under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (“the regulations”) should not be curtailed by an injunction but these moratoriums should form part of an overall process of sorting out financial affairs and developing a plan to pay debts.
In Kaye v Lees [2023] EWHC 758 (KB), Deputy Judge Lock KC refused to extend an injunction restraining the defendant from making an application to a debt adviser for a mental health moratorium under the regulations.
The defendant had made multiple previous applications and been successful in obtaining various moratoriums (which affect a creditor’s rights to enforce a debt). The claimant was of the firm view that the moratoriums had been granted by debt advisers without sufficient scrutiny and been used to thwart his legitimate efforts to recover his debt. He therefore sought (and obtained) an injunction to prevent further applications without court sanction.
When he sought an extension of the injunction, the court considered the matter afresh. It accepted that the past moratoriums may have been wrongly granted. In relation to the previously granted mental health crisis moratorium (MHCM), there was insufficient evidence of a mental health crisis (as opposed to an ongoing medical condition). There did not appear to be proper consideration of whether the MHCM was appropriate (an important part of the statutory framework), in particular whether the debtor was proposing to use the time granted by any moratorium to take advice with a view to devising a realistic plan for the repayment of some or all of the debts.
If a moratorium is simply granted to give protection from enforcement (and not as part of an overall process of seeking to sort out financial affairs and develop a plan to pay the debt), there is a strong case that it was granted for an improper purpose. However, past failings did not mean that a future application would also be wrongly granted. The purpose of injunctions is to prevent a legal or equitable wrong, and as the regulations allow applications to be made then the right to apply should not be fettered.
Debt advisers have clear duties under the regulations and are required to carry out a quasi-judicial function. If a future moratorium is granted as a result of a debt adviser failing to apply the tests under the regulations correctly, this could (at least in theory) be challenged by way of judicial review. The debt adviser would be an Interested Party who would have to explain his decision-making to the court and be the person potentially liable for costs.
Although debt advisers may try to resist such a judicial review by arguing that a review mechanism exists within the regulations if (in this case) a sale of property would be lost by reason of the delay caused by following the statutory machinery, the court could see that it could be argued that there was no “adequate alternative remedy” to a judicial review.
Elizabeth Haggerty is a barrister
