Kaye v Lees [2023] EWHC 758 (KB)
Injunctive relief preventing a debtor from accessing breathing space moratoriums under the Debt Respite Scheme (Breathing Space Moratorium (“BSM“) and Mental Health Crisis Moratorium (“MHCM“) (England and Wales) Regulations 2020, SI 2020/1311 (the Regulations) was not granted. This was despite the creditor challenging the moratorium in earlier proceedings.
Instead, injunctive relief was only seen to be appropriate where a debtor was abusing their rights under the Regulations. The high threshold was not achieved, as a debtor has an unfettered right to make an application.
Mr Kaye, a creditor of Ms Lees, had been prevented from enforcing a judgment debt against Ms Lees. Pursuant to the Regulations, she had obtained four MHCM’s for treatment she was receiving for adjustment disorder.
Mr Kaye successfully challenged the previous, on grounds that the debtor was ineligible. To prevent Ms Lees from seeking further BSM’s for two months, he also obtained injunctive relief.
During this time, Mr Kaye enforced a possession order against Ms Lees’ property whilst having two potential buyers.
Mr Kaye was worried that when the prohibition expired Ms Lees would apply for another Breathing Space Order or a Mental Health Crisis Moratorium to undermine the sale. Mr Kaye put forward that the moratorium process had been misused as applications had been repeated without Ms Lees being focused on making a plan regarding the owed sums. Subsequently he applied for further injunctive relief.
The case centred on whether to extend an injunction to stop Ms Lees from making an application to a debt advisor for a mental health moratorium under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (“the Regulations”) unless she had obtained prior approval from a Judge of the High Court
The judge held that although moratoria may have been granted improperly in the past, he could not conclude that the court should make an injunction to stop Ms Lees from making further applications for a BSM or MHCM.
The court had sympathy for Mr Kaye, however noted that the complaint related to the way the debt advisors dealt with Ms Lees’ applications.
The judge stated, “Parliament has given debtors an unfettered right to apply to a debt advisor for a BSM or a MHCM and, even where a moratorium is set aside by the court, have not placed constraints on debtors applying for a new moratorium” [45]. So, a debtor cannot be stopped from making an application for a further breathing space moratorium, due to a debtor’s unfettered right to make an application.
The judge held that granting injunctive relief is only appropriate where a debtor abuses their rights under the Regulations.
The judge noted that the scheme of the Regulations is that debt advice providers are required to perform a quasi-judicial function of adjudicating on applications made by debtors for either BSM or a MHCM.
The judge noted that there was no evidence that debt advisors had worked with Ms Lees to develop a realistic payment plan for dealing with her debts, or any proposals to Mr Kaye or his solicitors in relation to discharging her debts.
Eligibility of the debtor and appropriateness should be contemplated by a debt advisor, when reviewing the application under the Regulations. The judge noted it was highly unlikely Ms Lees would put together an application making it appropriate for her to be granted a BSO or a MHCM. Despite this, he did not think it was right to grant the injunction.
The judge commented that the decision of a debt advisor to grant a moratorium would be a quasi-judicial decision. If the debt advisor failed to apply the tests under the Regulations correctly, this could be challenged by a creditor.
The decision reviews the legal duties and quasi-judicial functions of a debt advice provider when adjudicating on applications made by debtors for either a standard breathing space or a mental health breathing space.
The consideration of applications by debt advisors should be contemplated under the Regulations. Eligibility of the debtor and appropriateness should be reviewed by a debt advisor, when reviewing the application under the Regulations.
Granting injunctive relief was held to only be appropriate where a debtor abuses their rights under the Regulations. A debtor has an unfettered right to make an application, and consequently cannot be restrained from making an application for a further breathing space moratorium.
The court found that the central purpose should be on the development of a realistic payment plan, as opposed to an attempt to trying to cancel the debt.
The decision notes the ability of creditors to challenge the decision of the debt advisor to grant a breathing space moratorium.