The most recent case of Seculink Ltd v Forbes (2024) provided useful guidance on the operation of the debt-breathing space regulations. 

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 came into force on 04 May 2021 to provide eligible debtors with a period of protection from their creditors. This period of time is known as a moratorium (and colloquially referred to as breathing space). 

This case related to whether the court has jurisdiction to determine if a debt is a ‘qualifying debt’ for the purposes of Breathing Space Regulations.

The Appellant, Seculink Ltd, advanced a bridging loan of £260,000 to the Respondent, Mr Forbes on 12 October 2018 for a term of four months. This loan was secured by charges over five of Mr Forbes’ properties. The loan was not repaid and possession proceedings in respect of all five properties were commenced by Seculink Ltd. The proceedings were settled by a Tomlin Order on 17 June 2021. The terms of settlement were breached by Mr Forbes and Seculink Ltd applied for enforcement of the Tomlin Order, seeking payment and possession of the five properties. 

Mr Forbes claimed that he had the benefit of a moratorium under the regulations. Seculink Ltd had been sent a notice under the moratorium procedures specifying that a breathing space moratorium had been initiated. 

Although Seculink Ltd received notice of a breathing space moratorium, the moratorium that had actually been initiated was a mental health crisis moratorium (a different type of moratorium). Seculink Ltd argued, in existing proceedings, that the debt in question was not a ‘qualifying debt’. 

The Judge did not decide whether or not the debt was a moratorium debt, or a qualifying debt, because she held that that was not a matter for the court; it was an issue which the regulations consigned to the debt adviser with functions in relation to such matters. 

Whether the Judge was correct to conclude that a qualifying debt was not a matter for the court was the principal issue which arose on the appeal.  In the appeal, the High Court found that the regulations did not expressly exclude consideration of whether a debt is a qualifying debt by the court (other than by the Regulation 19 Process). 

The starting point to determine a moratorium is the presence of ‘qualifying debt’. Under Regulation 6, a moratorium debt is any qualifying debt: 

1. that was incurred by a debtor in relation to whom a moratorium is in place;
2. that was owed by the debtor at the point at which the application for the moratorium was made; and
3. about which information has been provided to the Secretary of State by a debt advice provider under these regulations.

If a debt is not a ‘qualifying debt’ then it cannot be the subject of a moratorium.

Within this case, it was determined that it cannot have been Parliament’s intent to exclude the jurisdiction of the court to decide the legal aspect of qualifying debts, in favour of the debt advice provider (in accordance with Regulation 17).

The High Court also found that the Regulations do not impose a general bar on continuing pending actions without the permission of the court. 

Ultimately, the court has jurisdiction to address any question of a debt being ‘qualified’ or not.