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Navigating Court’s Jurisdiction on the Role of Debt Breathing Space and Mental Health Crisis Moratoriums

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The recent case of Seculink Ltd v Forbes (2024) gives insightful guidance on the court’s jurisdiction to determine a qualifying debt in accordance with the breathing space regulations, which I will refer to as “the Regulations”.

Regulatory Framework:

  • Breathing Space Moratorium: A short term delay of a 60-day period where interest, fees and charges are frozen and enforcement action by creditors are paused.
  • Mental Health Crisis Moratorium:  A long-term (no built-in specific duration) pause on the period of interest, fees, charges and enforcement action by creditors.
  • Role of DAP: DAPs must review debts under Regulation 30 within 35 days of initiating a moratorium (Regulation 18). If a creditor is unsatisfied with a DAP’s review, they can challenge it through a court application (Regulation 19).

Background:

Seculink Ltd (the Claimant/Appellant) advanced a bridging loan to Mr Forbes (the Defendant/Respondent), which was secured by charges over various properties owned by Mr Forbes. Mr Forbes ultimately failed to repay the loan and possession proceedings commenced in respect of the properties.

At the first hearing of the enforcement application, Mr Forbes claimed that he had the benefit of a breathing space moratorium under the Regulations. The Regulations sets out two different moratoriums: the Breathing Space Moratorium and the Mental Health Crisis Moratorium. As a result, it was found that the moratorium that Mr Forbes had initiated was the Mental Health Crisis Moratorium.

Upon clarification of the moratorium that Mr Forbes had initiated, Seculink Ltd did not pursue an argument on whether the wrong notice had been given but instead argued whether the debt constituted a qualifying debt under the Regulations.

Therefore, the court was asked to consider whether Mr Forbes’ debt to Seculink Ltd fell within the scope of the Regulations.

The Judge decided that it was not for the court to determine whether the debt was a “qualifying debt” but for the Regulations to be consigned to a debt advice provider (DAP) to assess the debt’s status as “qualifying,” in accordance with the Regulations.

Consequently, Seculink Ltd appealed this decision and argued that the court should have jurisdiction to determine whether a debt qualifies as a “qualifying debt” under the Regulations.

Key issues raised in the appeal:

  1. Jurisdiction: Whether the county court has jurisdiction to determine if a debt qualifies as a “qualifying debt” under the Regulations.
  2. Access to Courts: If DAPs were the sole authority to assess debt qualifying status under the Regulations, Seculink Ltd’s fundamental right to access courts would be removed.

Conclusion of the appeal in the High Court:

  • In the appeal, the Judge concluded that Seculink Ltd’s appeal should be allowed.
  • The court has jurisdiction to determine whether a debt is a qualifying debt under the Regulations, and it is not consigned on the DAP.
  • Highlights the distinct roles of courts and DAPs under the regulatory framework governing moratoriums.

Implications to consider:

  • This case underlines that while DAPs have a core role in determining qualifying debts under the Regulations, the courts have the authority to resolve disputes over debt categorisation.
  • Creditors must understand their rights under the Regulations and initiate their review process proactively to avoid jurisdictional challenges.

This update is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this update may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.

Andrea Camero

Trainee Solicitor

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