Seculink Ltd v Forbes

The court can determine if a debt is a qualifying debt in a breathing space.

Summary

The High Court held that the courts have jurisdiction to determine whether a debt is a qualifying debt under the Debt Respite Scheme Regulations at any time during a moratorium.

The High Court also held that a creditor does not require the court's permission to continue proceedings up to the point of obtaining judgment during a moratorium.

Background

Mr Forbes took out a a bridging loan of £260,000 with Seculink Ltd. The loan was secured against five of Forbes' properties. When Forbes defaulted on repayment, Seculink started possession proceedings against all five properties. The parties agreed to deal with all the proceedings under a Tomlin order. Forbes did not comply with the terms of the Tomlin order and Seculink applied to enforce it.

Forbes entered into a mental health crisis moratorium. Seculink argued that the debt was not a qualifying debt. It applied to the County Court for permission to continue with proceedings up to the point of judgment.

County Court decision

The County Court held that the only way to challenge inclusion of a debt was by making a review request under regulation 17 and, where necessary, an application to court under regulation 19. Seculink had not made either application within the prescribed time limit, so the court did not have jurisdiction to determine whether the debt was a qualifying debt.

Seculink would need the court's permission to proceed with an application to enter judgment under regulation 10. The court refused permission.

Appeal of County Court decision

Seculink appealed.

In response, Forbes argued that it would be an abuse of process to allow creditors to challenge inclusion of a debt without using the review process set out in regulations 17 and 19.

The court's decision

The High Court held that the courts have jurisdiction to determine whether a debt is qualifying for a moratorium.

It also found that a creditor does not need the court’s permission to continue proceedings, and it was not an abuse of process for Seculink to challenge the inclusion of the debt.

The court has jurisdiction to determine a qualifying debt

The High Court held that a creditor can choose to follow the route in the regulations as this is likely to be simpler and quicker, but it does not prevent the creditor seeking a legal decision in the court at any point.

Parliament cannot have intended to exclude the court from deciding whether a debt is a qualifying debt where a decision had first been made by a debt advice provider.

Permission not required to continue proceedings

The High Court found that Seculink did not require permission of the court to continue the existing proceedings up to the point of obtaining judgment.

Regulation 10 sets out how existing legal proceedings are affected by a breathing space moratorium. The court held that regulation 10(8) ensures permission is sought if the courts were making an order regarding an enforcement step.

The court held that regulation 7(2)(b) specifically refers to a creditor requiring permission to take a 'step'. Regulation 7(2)(b) does not apply to the continuing of proceedings because this is not an 'enforcement step' listed under regulation 7(7).

Abuse of process

The High Court held that it was not an abuse of process for Seculink to question the inclusion of the debt during existing proceedings.

If an arguable legal point arises it would be a waste of time and effort to go through the hoops of the regulations only to end up in the same court.

Comments

The High Court did not have time to address whether the debt was a qualifying one. This will be dealt with at a further hearing.

The case provides some relief to debt advice providers. It confirms that they should not be expected to make a final legal decision as to whether a debt is a qualifying one and therefore a moratorium debt.

In cases where the inclusion of a debt might be questioned, clients should be advised that a creditor could issue legal proceedings to deal with this outside of the statutory review process and there might be costs risk associated with this.