Mental health crisis moratorium

Published on
3 min read

This is the first reported case concerning an application to cancel a mental health crisis moratorium made under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.

During a moratorium under the 2020 Regulations a creditor is unable to take any steps to require a debtor to pay interest or other fees or charges, or take any enforcement action, in respect of the moratorium debt.

The 2020 Regulations provide, in regulation 17, a facility for a creditor to request the debt advice provider to review whether the moratorium should continue or be cancelled, either on the basis that the moratorium unfairly prejudices the interests of the creditor, or there has been a material irregularity in relation to eligibility for the moratorium.

On receiving a request in this case the debt advice provider refused to cancel the moratorium, so the creditor applied to court to do so under regulation 19 on the ground that the moratorium ‘unfairly prejudices’ their interests.

This application was the latest in a long line of reported decisions and continuing litigation concerning Mr and Mrs Brake and the applicant creditor, who had the benefit of various costs orders against the Brakes and was the counterparty to much of that litigation.

  • The creditor argued it was not fair for the Brakes to pursue their claims against the creditor, putting them to considerable expense, whilst hiding behind the shield of the moratorium, as the Brakes could continue to litigate without paying costs orders previously made. The judge ruled that in relation to past debts the purpose of the moratorium is to provide a breathing space so the creditor was no more unfairly prejudiced than any other creditor. However, the judge also made it clear that in the continuing litigation, future costs liabilities are not covered by the moratorium.
  • Secondly the creditor argued that Mr Brake did not appear to be obtaining any advice on debt restructuring and so the moratorium was being used in bad faith to frustrate enforcement action, rather than for the purpose of sorting out the debt problem. The judge observed that the problem with this argument is that the mental health crisis eligibility for a moratorium is based on the assumption that a person suffering a mental health crisis is by definition unable to engage with debt advice and so saw no force in this argument.
  • The creditor also applied for an order that unless the Brakes paid certain costs orders in the litigation their claims should be struck. The judge refused to make the order sought in respect of costs orders incurred before the moratorium was put in place as that would amount to enforcement action defeating the purpose of the moratorium.
  • However, the creditor did obtain unless orders for post moratorium costs order.

Axnoller Events Limited v Brake [2021] EWHC 2308 (Ch)

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