Mental health crisis moratorium cancelled as the debtor did not meet the criteria.
Summary
Kaye was a creditor in Lees’ Mental Health Crisis Moratorium (MHCM). Kaye applied to cancel Lees' fourth MHCM under regulation 19 of the Debt Respite Scheme Regulations 2020.
An MHCM is a moratorium for a debtor receiving mental health crisis treatment defined in regulation 28(2). The court held the definition was not met when Lees applied for the fourth MHCM. On the evidence available the court found Lees was not:
suffering from a serious mental health disorder
receiving crisis, emergency or acute care or treatment
The court found Kaye was unfairly prejudiced by the moratorium. Lees did not attend the hearing and was not represented. She had made no attempt to settle the longstanding debt.
The court cancelled the moratorium. It also granted an injunction preventing Lees from applying for moratoria for two months.
Background
The County Court had awarded Kaye damages due to harassment and nuisance caused by Lees. The debt was enforced by way of an order for sale and writ of possession.
Court proceedings
Kaye evicted Lees from her home on the fourth attempt. Kaye sold the property. The High Court held the eviction and sale null and void as Lees had entered a second moratorium.
Read our case summary of Lees v Kaye.
Lees’ mortgage was subrogated to Kaye. In this case, the court refused to cancel the moratorium or give permission for enforcement action.
Read our case summary of Kaye v Lees.
Lees' fourth moratorium
The debt advice provider accepted Lees was receiving "any other crisis, emergency or acute care or treatment in hospital or in the community from a specialist mental health service in relation to a mental disorder of a serious nature".
The provider was satisfied that "an approved mental health professional (AMHP) has provided evidence that the debtor is receiving mental health crisis treatment."
The provider's role is to enter a client into a moratorium under part 3 of the regulations.
Kaye unsuccessfully sought a review with the provider under regulation 17. Following this, Kaye applied to court to cancel the moratorium under regulation 19.
The court's decision
The High Court cancelled Lees' moratorium on the grounds of:
material irregularity
unfair prejudice
It also granted an injunction preventing Lees from entering further moratoria.
Material irregularity
The court held that Lees was not entitled to enter a moratorium as there was material irregularity under regulation 17(2)(a). There is material irregularity if the debtor did not meet the eligibility criteria for a moratorium.
The only evidence of Lees' illness and treatment was correspondence from two professionals. The court was not satisfied that Lees' condition, adjustment disorder, was a "mental disorder of a serious nature". It was also not satisfied that she was "receiving any other crisis, emergency or acute care or treatment in hospital or in the community."
The court held regulation 28(2)(e) should be read consistently with regulation 28(2)(a) to (d). The debtor must be suffering from a severe disorder which in other circumstances would justify overriding the free will of the person. The care must go beyond routine treatment.
Unfair prejudice
The Court decided Kaye had been unfairly prejudiced by the moratorium.
The court carried out a balancing exercise as considered in Axnoller Events Limited v Brake.
It considered:
the amount of debt
the period the debt was outstanding
Lees' lack of attempts to settle the debt
the fact Lees continued to work
The court held Lees had not explored options to deal with the debt and this was not in the spirit of the regulations.
Comment
This case raises questions about how a debt adviser should assess a debtor's mental health treatment when considering an MHCM application. Advisers should be aware that the court might examine medical evidence in addition to an AMHP form to support the assertion that a debtor is receiving qualifying treatment.
The court will consider the debtor's steps to explore a debt solution when deciding whether the creditor has been unfairly prejudiced.
Regulation 18(3) allows debt advice providers to continue an MHCM where cancellation would be unfair and unreasonable to the debtor.
The debt advice provider's responsibilities are in the regulations and guidance.
HM Treasury creates the form an AMHP completes to provide evidence the debtor is receiving qualifying treatment. It has been made aware of this judgment.
Find out more about breathing space and mental health crisis moratoriums on Shelter Legal.
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