The High Court cancelled a mental health crisis moratorium on the ground of unfair prejudice due to insufficient medical evidence.
Summary
IV Fund Limited SAC, the creditor, applied to the court to cancel Mr Mountain's mental health crisis moratorium under regulation 19 Debt Respite Scheme Regulations 2020.
The High Court cancelled the moratorium on the ground of unfair prejudice. Mr Mountain provided insufficient medical evidence and his mental health did not stop him taking part in proceedings.
Regulation references in this summary are to the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.
Background
IV Fund petitioned for Mr Mountain's bankruptcy. Before the final bankruptcy hearing, Mr Mountain entered a breathing space moratorium. After this expired, he entered a mental health crisis moratorium.
Application to cancel moratorium
IV Fund applied to court to cancel the mental health crisis moratorium under regulation 19. Their main argument was that the moratorium unfairly prejudiced IV Fund under regulation 17(1)(a). Their reasons were that:
there was a risk that Mr Mountain could dispose of his assets
the moratorium was being used to frustrate the bankruptcy proceedings
the medical evidence was insufficient
IV Fund also argued there was material irregularity under regulation 17(2)(c) because Mr Mountain had funds available to pay the debt.
A hearing was scheduled to decide whether the moratorium should be cancelled. The court ordered disclosure of medical evidence by Mr Mountain prior to the hearing, which was provided.
Mr Mountain requested an adjournment of the hearing on medical grounds. The court refused to adjourn and proceeded with the hearing.
The court's decision
The High Court held that the moratorium should be cancelled because it unfairly prejudiced IV Fund. It also decided there was no material irregularity.
Unfair prejudice
The court said there is prejudice to all creditors in a mental health crisis moratorium. The question to be decided is whether this prejudice is unfair.
The court held that the prejudice was unfair in this case because:
the medical evidence provided by Mr Mountain was limited, too general and not persuasive
Mr Mountain's mental health did not stop him from being able to deal with these and other related proceedings
The court applied the reasoning of the judge in Axnoller Events Limited v Brake & Ors, and said that a balancing exercise between the interests of the debtor and creditor had to be carried out. Read our case summary of Axnoller Events Limits v Brake & Ors.
Material irregularity
The court held there was no material irregularity. It said there was no evidence that Mr Mountain had available funds to pay the debt immediately.
Comment
This case provides further clarification on how the ground of unfair prejudice in regulation 17(1)(a) is to be interpreted. When a creditor requests a review of a mental health crisis moratorium on the ground of unfair prejudice, the debtor's medical evidence is a relevant consideration.
This is a concerning decision. It suggests that debt advice providers must assess a debtor's mental health and the persuasiveness of medical evidence when they respond to review requests on the ground of unfair prejudice. Debt advice providers are not mental health specialists, and this is arguably too onerous a task.