On 21 December 2022 the High Court handed down judgment in Kaye v Lees [2022] EWHC 3326 (KB), which further clarified the position of creditors under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) Regulations 2020. The case concerned the application of time limits under the Regulations in which creditors can apply to cancel a moratorium, which prohibit most forms of enforcement against a debtor. Whilst breathing space moratoria are time-limited to 60 days, mental health crisis moratoria can endure indefinitely, which will pose significant problems for creditors.
Mr Justice Swift found that unless creditors apply for a review and cancellation of a moratorium within the prescribed time limits, the court has no jurisdiction to cancel a moratorium, regardless of the reason why a creditor did not apply in time. This is despite the existence of successive moratoria, and the court expressing reservations that the debtor in this instance even met the criteria to qualify for a mental health crisis moratorium.
Mr Kaye succeeded in obtaining a declaration that he is subrogated to the debtor’s mortgage, having sold her property under an order for sale to enforce judgment debt from January 2019. A previous finding of HHJ Dight CBE (Kaye v Lees [2022] 1 WLR 5121) had found that the sale was null and void because of Regulation 7 of the Regulations. Mr Kaye had redeemed the debtor’s mortgage as part of that sale, before being required to hand possession back to the debtor.
The Regulations will pose significant challenges for creditors. Their application is still being tested, and those advising creditors should consider the judgment and its implications.
Philip Judd acted for the Applicant, Mr Kaye, instructed by Simon Braun of Perrin Myddelton.
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