Should a debtor’s right to a Mental Health Crisis Moratorium be limited?

The Court has recently been asked to consider the extent to which, if at all, a debtor’s right to apply for a moratorium should be limited.

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (“the Regulations”) introduced two forms of relief for individual debtors; firstly a Breathing Space Moratorium which gives a person in debt a 60 day pause in enforcement action from their creditors and secondly, a Mental Health Crisis Moratorium (“MHC Moratorium”) which prevents creditor enforcement action against a person receiving mental health crisis treatment for such period as that person continues to receive mental health crisis treatment for a mental disorder of a serious nature.

Under the Regulations, a key role is played by a “debt advice provider” who is required to decide whether the debtor meets the qualification criteria. In the case of a MHC Moratorium, the debt advice provider is also required to decide whether “an approved mental health professional has provided evidence that the debtor is receiving mental health crisis treatment” and whether the moratorium is “appropriate” and consistent with the statutory purposes of the Regulations, namely the overall process of sorting out financial affairs and developing a plan to pay debts.

In the case of Kaye -v- Lees [2023] EWHC 152 (KB) earlier this year, the Court cancelled a MHC Moratorium and granted an injunction preventing Ms Lees from seeking a further moratorium under the Regulations.  The defendant, Ms Lees, had previously made numerous applications and had been successful in obtaining various Breathing Space and MHC Moratoria which the claimant argued had unfairly prejudiced his position.  The Judge held that “the High Court has the power to restrain potential abuses of the scheme by placing sensible limits on the ability to access it”.  The Court determined that Ms Lees had abused the Regulations and granted injunctive relief preventing her from making a further application for a moratorium for a period of two months so as to allow Mr Kaye time to complete the sale of Ms Lees’ property in order to satisfy her outstanding judgment debt to him.

Shortly before the end of the two-month injunctive period, Mr Kaye applied to extend the injunction for a further period which enabled the Court to consider the matter afresh (Kaye -v- Lees [2023] EWHC 758 (KB)).  The Court held that whilst Ms Lees had likely abused her rights under the Regulations in relation to previous applications, she should not be prevented from seeking a further moratorium. Notwithstanding the history of the matter, it did not follow that Ms Lees would fail to meet the necessary eligible criteria in the future and in any event, it was for a debt adviser to make such determination.  The Judge, David Locke QC, held that it was not appropriate for the Court to extend the injunction, commenting that there was no provision in the Regulations which curtailed a debtor’s right to apply for further moratoria.

The Judge indicated, however, that where a moratorium is granted as a result of a failure by a debt advice provider to correctly apply the tests under the Regulations, such decision could be challenged by way of judicial review.  If such application were made, the debt advice provider would need to explain the reasoning for reaching his decision and the Court would decide if the debt advice provider had acted lawfully or not.

The latest decision in Kaye -v- Lees is unhelpful in the short term for creditors facing a challenge to enforcement action on either basis.   It may transpire however, that if debt advice providers fail to properly exercise their duties going forward, they will be subject to further judicial scrutiny which may, in due course, result in them undertaking a more detailed analysis of the evidence, in particular the evidence of approved mental health professionals, before granting a moratorium.

If you require advice on any aspect of personal insolvency from a creditor or debtor perspective, please contact Sarah Mower or John Bradshaw in our Insolvency & Business Recovery Team.

Sarah Mower is a chartered legal executive and specialist in Insolvency & Business Recovery at Barker Gotelee Solicitors.

For more information on our range of legal services, please call the team on 01473 611211 or email