The principal sum of a secured debt (whether or not called in prior to the commencement of a moratorium) is non-eligible debt and therefore neither a qualifying debt nor a moratorium debt.
In the combined appeals of Forbes v Interbay Funding Ltd [2025] EWCA Civ 690 and Seculink Ltd v Forbes (No. 2) [2025] EWHC 524 (Ch), the Court of Appeal considered a point of construction concerning the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Moratorium) (England and Wales) Regulations 2020 (the regulations).
Under the regulations two types of moratorium may be created – a breathing space moratorium and a mental health moratorium. The definition of the debts caught by both moratorium (moratorium debts) is the same. If a debt is a moratorium debt then during the moratorium period creditors are precluded from taking enforcement actions without permission and also lose all right to interest accruing during that moratorium period.
Moratorium debts include a qualifying debt defined by regulation 5(1) as “any qualifying debt or liability other than a non-eligible debt”. ”Non-eligible debts” are defined at regulation 5(4) and have a number of categories including “secured debt which does not amount to arrears in respect of secured debt”. “Arrears” are defined at regulation 2 as “any sum other than capitalised mortgage arrears payable to a creditor by a debtor which has fallen due and which has not been paid…”.
In July 2016 Mr Forbes had borrowed £1,363,189.30 from Interbay on an interest only basis for 10 years. The loan was secured on a block of six rental property flats and three bungalows. Interbay had a first legal charge over the property. In 2018 Mr Forbes fell into arrears and on 21 March 2019 Interbay made formal demand for the whole capital sum due plus arrears.
In 2018 Mr Forbes also borrowed £260,000 from Seculink by way of a bridging loan secured on five properties which he owned. He defaulted and Seculink commenced proceedings which were compromised by a Tomlin Order dated 17 July 2021. He defaulted on the obligations of that Tomlin Order.
Subsequently he applied for, and was granted, a mental health moratorium which commenced on 2 July 2022. On 9 May 2023 Interbay claimed possession which claim was granted by a district judge and upheld by HHJ Evans Gordon. Seculink sought a determination that the debt owed to it was not a moratorium debt. This application was initially rejected by the court on the grounds that it lacked jurisdiction but determined on appeal by Sir Anthony Mann who held that the principal sum was not a moratorium debt.
Mr Forbes appealed in both cases. The Court of Appeal did not allow an additional skeleton argument to introduce the contention that the Interbay debt was a mixed debt on which possession could not be granted (as was argued in Bluestone Mortgages Ltd v Stoute & Anor [2025] EWHC 755 (Ch)). The key issue on appeal was whether the principal amount owing in respect of the secured debts was a non-eligible debt within the meaning of 5(4) of the regulations and so excluded from the definitions of “qualifying debt” and “moratorium debt”.
This turned on whether the principal amount of the secured debts amounted to arrears. The court of appeal was not persuaded by the attractive simplicity of the argument advanced that the definition of arrears was broad enough to include a principal sum, called in but not paid. Arrears has a more restrictive meaning and that natural meaning was supported by the wording of the regulations.
The inter-play between regulation 5 and regulation 7(9) (which limits the recovery of interest during the moratorium period) and the treatment of secured debts in the insolvency context more widely also supports the more restricted interpretation. The principal secured sum did not constitute arrears and the appeals were dismissed.
Elizabeth Haggerty is a barrister