Case on Breathing Space Regulations

In West One Loan Limited v Salih (County Court at Central London, HHJ Monty QC, 30 March 2022), Julian Gun Cuninghame appeared for the defendant borrowers on an application by a bridging loan lender to cancel a breathing space moratorium obtained by one of four joint borrowers under The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis)(England and Wales) Regulations 2020 (“the 2020 Regulations”) and for an injunction to restrain all four borrowers from obtaining further moratoria under the 2020 Regulations.

One of the borrowers had previously obtained a 60 day breathing space moratorium that prevented the lender from enforcing a possession order for that period. The lender had run out of time to challenge the moratorium. When a second borrower obtained a further 60 day breathing space moratorium, the lender challenged it by application in the possession proceedings in the County Court at Central London, alleging material irregularity and unfair prejudice, and applied for an injunction. By the time that the application was heard, the breathing space moratorium had ended and the judge was not willing on grounds of utility and jurisdiction to determine the challenge to it. The judge found against the lender on its argument that the three other borrowers were “subject to” to the first breathing space moratorium such that they could not each apply for their own breathing space moratorium for 12 months after the first breathing space moratorium had expired. Thus, in theory, the four joint borrowers could apply for 240 days of breathing space moratoria in each year. However, the judge granted the injunction sought by the lender on the basis that the jurisdiction to challenge a breathing space moratorium for unfair prejudice included where joint borrowers apply for successive moratoria to avoid paying their debts rather than to explore a debt solution. He concluded on the basis of the past procedural background of the borrowers opposing enforcement of the possession order that the borrowers were applying for successive moratoria to avoid paying their debts rather than to explore a debt solution and were openly abusing the 2020 Regulations.  The judge also referred to Axnoller Events Ltd v Brake [2021] EWHC 2308 (Ch) [2021] 1 WLR 6218, which discussed the purpose of and procedure for the 2020 Regulations in the context of a mental health crisis moratorium.

Copy of judgment available here: West One v Salih