Axnoller Events Ltd v Brake & Anor (mental health crisis moratorium) (2021) EWHC 2308 (Ch)
I’m not going into any detail on the background to this judgment. It forms part of what has been by any measure truly epic litigation, which has yet to culminate in a possession trial on one property and en eviction trial on another property (with the parties’ roles reversed). If you have several days to spare, the many and varied previous judgments are worth a read, not least as offering intermittent lessons in how not to litigate. However, this is the first judgment dealing with debt moratoria and applications (or claims) to cancel a moratorium under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 so it is of considerable interest.
Anyway… the situation here was that one of the defendants had entered a debt moratorium on the basis of mental health crisis. The defendants had had substantial costs orders made against them, and a couple of further costs orders were made against them shortly after the moratorium had been entered. The claimants applied to have the moratorium cancelled on the basis that it created an unfair prejudice to them.
The High Court made a number of procedural findings:
The cancellation application should be by claim form, not application in existing proceedings, as it is a freestanding request, affecting all debts in the moratorium, not just those in specific proceedings. (This application was allowed to proceed, given the novelty, but future ones likely won’t.)
The claim should be issued in the County Court, but this does not prevent a possible claim in the High Court where – for example related proceedings – make that more appropriate. The regulations do not oust the High Court from jurisdiction.
There should be signed witness statements in support and there may be cross examination on the evidence.
Post moratorium events can be considered, for example an improvement in mental health.
On the immediate issues in this case:
The post-moratorium costs orders were not caught by the moratorium. The moratorium does not extend to debts accrued during the moratorium.
On unfair prejudice:
While in part this was a matter of balancing the detriment to the creditor by being unable to enforce a debt against the detriment to the debtor by having the moratorium removed. However, the application in this case was to cancel the moratorium entirely, so that it would impact other debts, not just those owed to the applicants. A tailored cancellation order specific to certain debts could potentially be made, but this was not what had been applied for.
There was a lack of evidence from the applicants on any alleged improvement in the defendant’s mental health. But also, the medical evidence from the defendant did not address prognosis, timescale or indeed why the removal of the moratorium would adversely impact the defendant’s mental health when he was clearly involved in an ongoing way as a party and witness in the litigation.
The applicants argued it was unfair to them to allow the defendant to ‘hide behind’ the moratorium on costs orders while still maintaining the litigation. This was not accepted by the court, but unless orders were made on the post-moratorium costs orders.
The applicants argued that the point of the moratorium was to seek debt advice and there was no evidence that this had been done, so the moratorium had been sought in bad faith. The court disagreed, specifically with regard to a mental health crisis moratorium, (and noting that the 2018 Treasury report outlining the scheme had specifically referred to those in mental health crisis having difficulty meeting the debt advice requirement of the ‘debt’ route). The Court also noted that the cancellation had been applied for almost immediately after the moratorium had begun.
The application was refused.
On a note of caution, this is the first ‘moratorium’ related decision. It is also (given the history of this litigation) quite likely to be appealed (and indeed cross-appealed). So this is unlikely to be the last word. However, it is worth taking note of the issues around evidence (for claimant and defendant), the fact that a mental health crisis moratorium will not be lightly cancelled without cogent reasons and evidence (though the defendant will also have to provide solid evidence), and that cancellation claims should be targeted at specific relevant debts.
And do it by claim form…
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