A creditor who paid an outstanding mortgage to comply with a court order was subrogated to the mortgage lender’s right to recover the debt.
Summary
Kaye was a creditor in Lees’ Mental Health Crisis Moratorium (MHCM). Kaye paid Lees’ mortgage to Santander after enforcing a CCJ by an order for sale.
The court subsequently ordered that the enforcement of the order for sale was null and void. Kaye applied to court for:
a declaration that he was subrogated to Santander’s right to enforce the mortgage debt
Lees’ MHCM to be cancelled under reg 19 Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020/1311 and
permission to take enforcement action under reg 7(2)(b)
The court agreed that Kaye was subrogated to the rights of Santander. Subrogated rights means someone who has paid a debt on behalf of someone else steps into the shoes of the original creditor and can enforce the agreement.
In this case, the court refused to cancel the moratorium or give permission for enforcement action.
Background
Kaye obtained an order for sale to enforce a CCJ against Lees. Two eviction dates were cancelled after Lees obtained MHCMs.
Another eviction was scheduled for the day after Lees obtained a third MHCM. This time, the eviction went ahead. On 24 February 2022 Lees applied to court for a declaration that the eviction was null and void under reg 17(2).
Request to review moratorium
Lees' application was heard on 13 May 2022. It was successful but Kaye had sold the property on 10 March 2022 and paid Santander the outstanding mortgage of £188,963.
Kaye asked Lees’ debt adviser to review the MHCM on the basis that he was subrogated to the Santander mortgage, which was an “additional debt” under reg 15. This triggered a new time limit for requesting a review, under reg 17(4). The request was refused on the basis that it was not an additional debt so the request was out of time.
Court application
Kaye applied to the court for a declaration that he was subrogated as a creditor to the Santander debt. He also applied for cancellation of the moratorium under reg 19 because it unfairly prejudiced his rights and asked for an order under reg 7 for permission to repossess and sell Lees’ property.
The court’s decision
The High Court decided:
Kaye was subrogated to Santander’s right to collect the mortgage
the application to cancel the MHCM under reg 19 failed because his request to the debt adviser for a review under regulation 17 was out of time
to refuse permission for possession and sale of the flat under regulation 7 because it would be detrimental to Lees
Subrogation
The court found that Kaye had acted under a mistake when he paid Santander in accordance with the order for sale. Lees had the advantage of this payment and had been unjustly enriched and Kaye should be subrogated to Santander’s rights as creditor.
Application for cancellation of MHCM
The court considered reg 13 and found that Kaye was a creditor by assignment of the Santander mortgage. This did not create an additional debt. A regulation 19 application must be preceded by a review under regulation 17, and Kaye's request under regulation 17 was out of time.
The court said that the time limits set by the regulations ensure that any review is conducted promptly. There was no basis for extending time.
Application for permission to enforce debts
The court considered regulation 7(5) which states that permission to enforce can only be given if enforcement will not:
be detrimental to the debtor, or
significantly undermine the protections of the moratorium
Kaye argued there was no evidence that eviction would be detrimental to Lees or that it would undermine the protections of the moratorium, because she had taken no steps to devise any sort of payment plan during previous moratoriums, so was unlikely to take advantage of the current moratorium for the purpose it is intended to serve.
The court disagreed and found that eviction would “as a matter of ordinary language” be detrimental to Lees.
Comments
This case provides clarification about a number of key points relating to MHCMs, including reviews and time limits.
Extending time limits
As part of its consideration, the court helpfully confirmed that time limits under the regulations cannot be extended.
Application under regulation 19 when no review by a debt adviser has been carried out
The court found that a regulation 19 application failed in this case because a regulation 17 review had not been carried out. It said that the position might be different if a debt advice provider declined to act in response to a request under regulation 17 which was made within the permitted time.
Eligibility for an MHCM
The court did not make a decision about whether Lees continued to be eligible for a MHCM but said it had “doubt” that she did.
The MHCM was cancelled as a result of another set of court proceedings.
The court said that debt advisers must be prepared to closely assess available information and seek clarification or further information as necessary, before concluding that the conditions for continuation of a mental health crisis moratorium are met.
Find out more about breathing space and mental health crisis moratoriums.
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