High Court declared eviction and sale of a debtor's property ‘null and void’ under the Debt Respite Scheme regulations.
Summary
The High Court held that the eviction of a debtor protected by a mental health crisis moratorium and the enforcement of a charging order by sale was ‘null and void’.
The eviction was a prohibited step under regulation 7 of the debt respite scheme.
References to regulations in this case summary are The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 SI 2020/1311.
Background
Lees was evicted on 13 January 2022 following entry into a mental health crisis moratorium (MHCM) under the debt respite scheme on 12 January 2022. The moratorium commenced the following day. The moratorium ended on 12 February 2022 and Lees re-entered the moratorium on 15 February 2022 to date.
The eviction was scheduled by the court to enforce an order for sale, obtained by Kaye following a successful claim for damages against Lees for negligence and harassment.
In the damages claim, Lees was ordered to pay Kaye the sum of £297,888. This amount included the sum of £12,000 awarded for distress and anxiety. Kaye secured the judgment debt with a charging order.
Lees applied to court on 24 February 2022 for a declaration that the eviction was ‘null and void’, followed by an objection on 10 March 2022 to the transfer of the registration to a third party after the property was sold.
Kaye argued that:
the moratorium was not in effect on 13 January 2022
regulation 7(13)(a) confirms a moratorium has no effect on a charging order in place before the start date of the moratorium
the debt is ineligible under regulation 5(4)(i) because it includes an amount for personal injury
Lees no longer had any interest in the property due to the making of the charging order and therefore, cannot object to the transfer of the registration
The court's decision
Kaye’s arguments were unsuccessful.
The court was shown confirmation of Lees’s registration into the moratorium, including the date on which the moratorium started under reg 36(1). Kaye’s solicitor was notified on the morning of 13 January 2022. There was no evidence to suggest the contrary.
Regulation 7(13) states a moratorium has no effect on a charging order in place before the start of the moratorium. The court held that it is 'the existence or status of the charging order, which is to remain unaffected by the existence of a moratorium'. A charging order is not a secured debt by definition under regulation 2 because it is neither a secured credit agreement, a hire-purchase agreement, nor a conditional sale agreement.
A charging order remains unaffected by the moratorium to ensure the creditors retain their security throughout the period. The moratorium prevents the enforcement of the charging order where it relates to a qualifying debt.
The judgment debt was £297,888, including a sum of £12,000 paid to Kaye for distress and anxiety. The judge was of the opinion that Kaye’s award for distress and anxiety did not amount to a personal injury and referred to Brown v Commissioner of Police of the Metropolis [2019] EWCA Civ 1724. In addition, there is a difference between the word ‘include’ and ‘consist’, and 'the natural meaning of the expression is that the liability comprises only a personal injury award'. Kaye could not rely on regulation 5(4)(i) because the whole sum does not comprise solely of an ineligible debt.
The making of the charging order does not transfer Lees' interest to Kaye. It provides Kaye with a proprietary interest in the property. The order for sale was to allow Kaye to sell that interest. Kaye sold the property to the second respondent on 10 March 2022. The sale became ‘null and void’ as this was in breach of regulation 7.
Lees was allowed back into the property.
Comments
This case provides clarity on the issue of whether a charging order can be enforced due to the wording of regulation 7(13)(a).
Regulation 7(6)(c) is clear that a creditor is prevented from taking ‘any enforcement action in respect of a moratorium debt’, and this is echoed under regulation 10(5). If the charging order is to secure a qualifying debt, an order for sale application is prohibited.
The court confirmed that a charging order is not a secured debt under the debt respite scheme.
Interestingly, although Lees had been evicted, the fact a moratorium was in place still gave them protection in that reg 7(7)(b) was in effect. This meant the sale of the property was a step to enforce the order for sale, which is why the court ordered the sale of the property null and void.
This case provides an argument based on the judge’s opinion that any sum relating to personal injury must be the whole sum for it to be a non-eligible debt under regulation 5(4)(i). It should not include a sum relating to a moratorium debt.