Kaye v Lees (2023) EWHC 758 (KB)

We saw an injunction being made to prevent Ms Lees from seeking a further mental health crisis moratorium here. In this judgment, Mr Kaye had sought an extension of that injunction. The Court refused to extend the injunction:

Parliament has given debtors an unfettered right to apply to a debt advisor for a BSM or a MHCM and, even where a moratorium is set aside by the court, have not placed constraints on debtors applying for a new moratorium. On each occasion on which an application is made, the debt advisor undertakes a quasi-judicial decision-making process in order to decide (a) whether the statutory criteria are met and (b) whether it is appropriate to grant the requested moratorium. The primary decision maker on this matter under the Regulations is the debt advisor, not the court. If a moratorium is granted, the Regulations provide that, as a consequence, it will affect the right of the creditor to take enforcement action.

In my judgment, given that parliament has given these unfettered rights to a debtor and has allocated primary decision making to the debt advisor, it would not be right to grant an injunction which sets up a different decision-making structure. I consider that a creditor cannot properly ask the court to remove these statutory rights from the debtor for a period of time or to subject the exercise of those rights to judicial supervision when that is not part of the statutory scheme. The claimant is, in effect, asking for a period of time during which the statutory rights of the debtor are suspended or applications can only be made with prior judicial approval when this is not part of the framework brought in by Parliament. If Parliament had wanted to give the court the right to suspend the right of the debtor to make applications in defined circumstances or had wanted to give the court the power to vet applications before they are made, it could have included that power within the Regulations. It is of significance that it did not do so.

However the court confirmed the position set out in the previous judgments that the debt advice provider deciding on whether a moratorium should be given has to be satisfied that the debtor is receiving mental health crisis treatment (my emphasis) and has to have adequate evidence from the approved mental health professional that this is so.

The debt advice provider is required to decide whether the debtor meets the qualification criteria under the Regulations, including whether the debtor owes one or more qualifying debts. In the case of a MHCM, the debt advice provider is also required to decide whether “an approved mental health professional has provided evidence that the debtor is receiving mental health crisis treatment”. I agree with the observations of Mr Justice Swift in his judgment in this matter of December 2022 and with HHJ Dight CBE in his judgment of January 2023 that the proper construction of the Regulations requires a focus on the word “mental health crisis”. It follows that the fact that an individual has a long-standing mental health condition or is in receipt of regular mental health treatment in an acute or community setting will not usually be sufficient, of itself, to amount to evidence that the debtor is receiving mental health crisis treatment. The medical evidence ought to focus on whether the debtor is genuinely suffering from a mental health crisis and thus whether he or she needs protection from creditors because his or her decision-making is being affected by that mental health crisis. Mental health treatment for serious conditions is often a slow process and can continue over many years and, in my judgment, it is not part of the purpose of these Regulations to give mental health patients permanent or semi-permanent protection from their creditors. Swift J and HHJ Dight were right to focus on the fact that a MHCM is protective tool which can properly be used to protect a debtor during the period of a mental health crisis but is not intended to be available as a permanent shield against creditors for anyone who is in receipt of mental health services, outside of a mental health crisis situation. Clearly it is for the AMHP to use his or her clinical judgment to decide whether the patient is or is not in a period of mental health crisis, but debtors are only entitled to be granted a MHCM if there is evidence from the AMHP that the debtor is suffering from a mental health crisis. That reasoning is supported by the fact that a MHCM is potentially open ended because, once it is granted, it continues until one of a number of events has happened including “the end of the period of 30 days beginning with the day on which the debtor stops receiving mental health crisis treatment”. Debt advice providers should thus ask themselves whether the evidence from the AMHP genuinely shows that the debtor is in mental health crisis as opposed to receiving regular or on-going treatment for a mental health condition. That does not appear to have been the approach adopted in this case.

Further, the court took a strong view that the debt advisors in this matter had not understood their quasi-judicial role or the need to develop plans for discharging debts:

First, he does not appear to have appreciated that the fact that a debtor was in receipt of on-going mental health treatment did not, of itself, mean that the test under the Regulations was met, namely that the debtor was receiving treatment of a sufficient severity to meet the threshold to be able to be described as being treatment for a mental health crisis. As explained above, the word “crisis” must have been chosen by parliament deliberately and hence the type of treatment that met the statutory criteria was more limited than on-going treatment for a serious mental health condition. Secondly, under Regulation 17(a), the creditor is entitled to ask the debt advisor to cancel the MHCM on the basis that its continuing existence “unfairly prejudices the interests of the creditor”. Thus, if an application is made to the debt advisor on that basis, the debt advisor has a legal duty as a quasi-judicial decision maker to make a decision on that issue. It is not open to a debt advisor to refuse to make a decision on whether there is unfair prejudice when the Regulations require him or her to do so.

There is also no evidence that, throughout the repeated granting of moratoria in this case, the debt advisors have worked with Ms Lees to develop a realistic plan for the payment of her debts or have advanced any proposals to Mr Kaye or his solicitors for the discharge of her debts. If, as appears to be the case, the moratoria were simply granted to give Ms Lees protection from enforcement and not as part of an overall process of seeking to sort out her financial affairs and develop a plan for her to pay her debts, then there is a strong case that the moratoria were granted for an improper purpose.

There are clear issues here for debt advisors to consider in the operation of the moratorium schemes, and in particular on evidence of AMHPs and on assessing unfair prejudice.