In Kaye v Lees [2022] EWHC 3326 (KB), Mr Justice Swift considered an application under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the regulations).
A mental health crisis moratorium made under the regulations provides a debtor receiving mental health crisis treatment with certain protections from creditors. Such a moratorium had been in place when a warrant for possession was obtained and executed on 8 Leysfield Road, London W12, by Mr Kaye and when the purported sale of that property took place with the mortgage outstanding on the property being satisfied.
The fact that a moratorium was in place resulted in the court in earlier proceedings declaring that the obtaining and execution of the warrant and the sale of the property were null and void (Lees v Kaye and another [2022] EWHC 1151 (QB); [2022] EGLR 25). This led to the application before the High Court. Mr Kaye sought a declaration that he was (by subrogation) a creditor of the respondent and that his debt was qualifying under the regulations. He additionally urged that under the regulations the moratorium should be cancelled as being unfairly prejudicial. He also sought the court’s permission under the regulations to take enforcement action (namely possession and sale of the property).
The court agreed that the applicant had become a subrogated debt holder under the regulations. When the property had been sold, he had settled the outstanding Santander mortgage secured on it such that the respondent’s liability was discharged. He did so under mistake, believing that payment was required under a valid court order. Although the respondent argued that this payment had been without authority (such that there was no restitutionary right), that was not the correct analysis. The payment discharging the respondent’s liability was made under mistake; she had been unjustly enriched by its discharge and consequently the applicant should be subrogated to the lender’s rights.
Under the regulations a creditor has an opportunity to request a review of the moratorium. This request should occur within 20 days of the moratorium commencing or 20 days of an additional debt. While satisfied that the applicant was (by subrogation) a creditor of the respondent, the debt owned to him was not an additional debt under the terms of the regulations. It did not, therefore, provide the possibility of a fresh period of review of the moratorium.
Further, the court rejected the suggestion that it had a power to hear an application for review made out of time. The language in the regulations was prescriptive. Permission for enforcement under regulation 7(2) was also refused. To permit an enforcement action the court had to be satisfied that the enforcement was a reasonable step and that it would not have a detrimental effect. Detriment was to be given its ordinary meaning and was not required to be limited to mental health detriment (even though the moratorium in place was a mental health moratorium). The detriment should be more than de minimis, and removing the respondent from the property would be such a detriment.
Although the judge expressed doubt as to whether the respondent continued to meet the requirements of the regulations, the application had to be approached on the basis that the moratorium was properly granted and that at the time of hearing it was properly in force.
The judge also observed that the regulations place great burdens on mental health professionals and debt advice professionals, and that all must act with scrupulous care. Debt advisors are not in a position to second-guess medical evidence, but they must ensure the evidence is cogent, closely assess it and seek clarification where necessary before concluding that the requirements for a moratorium are met.
Elizabeth Haggerty is a barrister
