Court clarifies moratorium debt under debt respite scheme

Introduction

The High Court, presided over by Sir Anthony Mann, delivered a significant judgment on 11th March 2025, addressing the classification of debts under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) Regulations 2020. The case involved Seculink Ltd, the appellant, and David James Terence Forbes, the respondent, and revolved around the interpretation of 'moratorium debt' within the context of secured debts.

Background

The dispute originated from a bridging loan of £260,000 provided by Seculink Ltd to Mr Forbes, secured against various properties. The loan, which included a 2.5% monthly interest rate and a 12% default interest rate, became contentious following Mr Forbes' default. The parties had previously settled the matter through a Tomlin order, but subsequent defaults led to further legal proceedings.

Legal Issue

The central question was whether the principal amount of a secured debt, once due, constituted a 'moratorium debt' under the Regulations. The Regulations define 'moratorium debt' as any qualifying debt, which excludes 'non-eligible debts' such as secured debts unless they are considered 'arrears.'

Arguments

Seculink Ltd, represented by Mr Tom Morris, argued that the principal amount should not be classified as 'arrears' and thus should remain outside the moratorium's protection. In contrast, Mr Martin Westgate KC, representing Mr Forbes, contended that the principal amount, once due, should be considered 'arrears' and thus eligible for the moratorium.

Judgment

Sir Anthony Mann ruled in favour of Seculink Ltd, determining that the principal amount of the secured debt did not qualify as 'arrears' and therefore was not a 'moratorium debt.' The judgment highlighted anomalies in the Regulations' drafting, particularly the exclusion of 'capitalised mortgage arrears,' which supported the interpretation that principal amounts should not be classified as 'arrears.'

Implications

This ruling has significant implications for creditors and debtors under the Debt Respite Scheme, clarifying that principal amounts due under secured debts are not protected by the moratorium. The decision underscores the importance of precise legislative drafting and the potential for further legal challenges in similar cases.

Conclusion

The High Court's decision provides clarity on the scope of 'moratorium debts,' potentially influencing future cases under the Debt Respite Scheme. The judgment may also impact ongoing appeals, including a similar case pending in the Court of Appeal.

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