No more Mr Nice Guy…injunction to prevent further moratorium
The recent High Court decision in Ivan Kaye -v- Amanda Lees [2023] EWHC 152 (KB) (27 January 2023) has sent shockwaves through the legal profession as it marks a departure from the more lenient approach taken in previous cases. The High Court’s decision to cancel a debtor’s mental health crisis moratorium under the Debt Respite Scheme and grant an injunction preventing the debtor from obtaining a further moratorium without permission, is a significant development in this area of law.
Background
The case involved Mr Kaye, a well-known actor, and Ms Lees, an author, who jointly owned a freehold property that was divided into two leasehold maisonettes. In a legal dispute between the two, Mr Kaye won a judgment and subsequently secured a Final Charging Order over Ms Lees’ leasehold interest in her ground floor flat. He then enforced the order and obtained an Order for Sale, resulting in Ms Lees’ eviction and the sale of the property. However, it later emerged that Ms Lees had been subject to a Mental Health Crisis moratorium, which had commenced on the same day that Mr Kaye enforced the Order for Sale. Accordingly, the court held that her eviction and the sale of the flat were null and void and ordered that the position be restored to what it had been prior to enforcement.
Debt Respite Scheme
Under the Debt Respite Scheme, debtors are granted legal protection from their creditors through two types of moratoriums: a ‘Breathing Space’ moratorium, which lasts for up to 60 days, and a ‘Mental Health Crisis’ moratorium, which lasts while any medical treatment continues, plus 30 days. Once effective, the moratoriums require creditors to stop all action relating to their debt and apply the protections. If creditors have already commenced legal proceedings, these must be put on hold, including any enforcement action.
Judgment
Mr Kaye’s application to cancel the fourth Mental Health Crisis moratorium granted to Ms Lees was based on the grounds that she did not satisfy the criteria for its grant and that he was unfairly prejudiced. He also sought an order preventing her from obtaining any further moratorium that would prevent him from enforcing the judgment debt.
The judge considered the application and held that two conditions had to be satisfied before the criteria for initiation of a Mental Health Crisis moratorium could be met: (1) the debtor is suffering from a ‘mental disorder of a serious nature’, and (2) the debtor is receiving ‘crisis, emergency, or acute’ care or treatment. The judge concluded that Ms Lees did not meet these conditions and therefore cancelled the moratorium and granted the injunction.
Related Facts
The decision follows a series of cases in which debtors have successfully obtained moratoriums, leading to concerns about the effectiveness of the Debt Respite Scheme in protecting creditors’ rights. The High Court’s decision in this case appears to signal a change in approach, indicating that the courts will now take a more robust stance in ensuring that moratoriums are only granted in appropriate circumstances.
Key Takeaway
The case serves as a warning to debtors that they cannot rely on the Debt Respite Scheme to frustrate creditors’ legitimate interests. The courts will not hesitate to cancel moratoriums where they are found to have been improperly obtained, and may even impose injunctions preventing further applications.
Conclusion
The decision in Ivan Kaye -v- Amanda Lees reinforces the importance of ensuring that there are proper safeguards to prevent the abuse of the Debt Respite Scheme. While it is vital that debtors who are genuinely experiencing financial difficulties and mental health crises are protected, it is equally important that creditors’ rights are respected. The courts must strike a balance between these competing interests, and this decision demonstrates that, in appropriate cases, they will take decisive action to protect the rights of creditors.
