Case law update July 2023 on Mental Health Crisis Moratoria

In the ongoing saga that is Guy v Brakes, the High Court has made directions in relation to an application to cancel Mrs Brake’s mental health crisis breathing space.

Guy & Ors v Brake & Ors [2023] EWHC 1560 (Ch) is the latest instalment in a very long set of proceedings between creditors (collectively known as the Guy parties) and the Brakes, now involving Breathing Space — specifically the Mental Health Crisis Moratorium (MHCM).

Mrs Brake’s MHCM included a joint court costs debt with her husband. The Guy parties have already successfully applied to court to enforce this but have now applied to cancel Mrs Brake’s moratorium citing material irregularity and unfair prejudice.

What this case was about

This was a preliminary hearing, known as a directions hearing. The judge made decisions about what the parties need to do and what evidence they need to provide for the main hearing, which will be in September 2023.

Rethink, as the debt advice provider (DAP) administrating the moratorium, and the NHS Trust of the Approved Mental Health Professional (AMHP) have been joined as respondents to the case. This means they are entitled to participate in the hearing. In previous cases where MHCMs have been cancelled, DAPs and AMPHs have not been party to proceedings.

Applications to cancel a moratorium are covered by Regulation 19 of the The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (‘the regs’) and the grounds for cancellation are in Regulation 17. Our article How can a creditor cancel a breathing space? goes through the process. The grounds are:

17(1)

(a) the moratorium unfairly prejudices the interests of the creditor, or

(b) there has been some material irregularity in relation to any of the matters specified in paragraph (2)

17(2)

(a) the debtor did not meet the relevant eligibility criteria when the application for the moratorium was made,

(b) a moratorium debt is not a qualifying debt, or

(c ) the debtor has sufficient funds to discharge or liquidate their debt as it falls due

The Guy parties are applying to cancel Mrs Brake’s breathing space on the grounds of both unfair prejudice and material irregularity in relation to the eligibility criteria. They argue that Mrs Brake didn’t meet the eligibility criteria for a MHCM set out in reg 28(2)(e) as she was not ‘receiving any other crisis, emergency or acute care or treatment in hospital or in the community from a specialist mental health service in relation to a mental disorder of a serious nature.’ We have no information yet on what they intend to argue for the unfair prejudice ground.

What the court decided

The judge ordered evidence to be disclosed for the main hearing. He decided that information relevant to the case should be included even if it was:

• Correspondence between Rethink and the NHS Trust
• Documents recording communications between the respondents and/or any third parties relating to the moratorium, including notes of meetings and telephone conversations — essentially case notes

He specifically ordered disclosure of the Evidence of Mental Health Crisis Treatment Form.

The judge also ordered Mrs Brake to consent to a medical examination from an independent expert appointed by the Guy parties.

What this means for advisers

Although this is just a preliminary hearing and did not decide the point about irregularity or unfair practice there are some important notes here for advisers.

Both Rethink as the debt advice provider and the NHS Trust were joined to the case as respondents. This was because ‘they took part in the process which led to the decisions under challenge, and therefore have an interest in the integrity of those decisions. They will be entitled to participate in the substantive hearing of this application.’

This comes with the requirement to disclose evidence, an important reminder for advisers that it is essential to keep comprehensive, detailed and accurate case records.

The possibility of a DAP being joined to a case is something the advice sector has been speculating about since the introduction of breathing space. Whilst there are reputational and costs risks to this, it will provide advisers with the opportunity to make sure that all relevant information is before the court, and that the decision takes the DAP’s input into account.

Although he made clear that the issues would be discussed at the substantive hearing, Judge Matthews also made some interesting comments around eligibility for a MHCM at paragraphs 19–28 of the judgment.

Mrs Brake argued that the court couldn’t overrule the AMHP’s decision on her mental health condition, relying on paras 2.5 and 5.10–5.13 of the original 2021 version of the guidance.

2.5

“A ‘mental disorder of a serious nature’ means any mental health problem, disorder or disability of the mind that the AMHP considers to be of a serious nature”

5.10

The creditor cannot request a review of this kind on the grounds that they disagree about the individual’s mental health crisis treatment. Nor can they challenge an AHMP’s professional decision-making via this route.

5.12

If the debt adviser does not cancel the MHCBS, and the creditor remains unhappy with the debt adviser’s decision, the creditor can also ask a court to review whether a MHCBS should be cancelled, on the same grounds (unfair prejudice or material irregularity). Again, the court is not considering the individual’s mental health crisis treatment and cannot be asked to review an AMHP’s professional decision-making via this route.

Whilst reserving the decision for the main hearing, the judge noted that the guidance didn’t reflect the language of the regulations. The regulations suggest that the tests of whether a mental health disorder is serious, and whether treatment meets the criteria are objective — there will be a material irregularity if these are not met even if the AMHP thinks they are. If this is the case, the AMHP’s opinion will be valuable as evidence but ‘will not be conclusive.’ He noted that the update to the guidance had revised these sections significantly and removed entirely the statements in 5.10 and 5.12 asserting that creditors and the court weren’t able to challenge the AMHP’s decision making. He also emphasised that he could see no power in the guidance to override the regulations.

Given the specific order requiring a copy of the evidence form to be produced, it looks likely that the main hearing will address how this is used. This will be valuable information for advisers. Previous judgments have referred to the evidence form but not looked in detail at its role.

The order for a medical examination also referred to the possibility that the court would consider the questions around mental health and treatments as an objective test. Although standard in cases such as personal injury, this is a new development for breathing space and, if it becomes a trend, it’s likely to be extremely daunting for clients. Costs for expert witness evidence will also be added to the costs of the case.

The judgment doesn’t bring new points to breathing space case law at this time. The bulk of the case is about disclosure rules, but the breathing space sections are certainly worth reading as a clear and relatively succinct summary of how the courts are viewing the MHCM eligibility criteria, and the conflicts between the guidance and the regulations.

Update:
This case has been cancelled, as Mrs Brake’s mental health crisis moratorium ended on 22 July 2023. You can find brief details in Guy & Ors v Brake & Ors (Re Moratorium Cancellation Costs) [2023] EWHC 3179 (Ch). No costs order was made as ‘the major part of the substantive application’ (whether Mrs Brake was eligible for the moratorium) was not decided. This means that each party will be responsible for their own costs.

Further reading

Our other articles on breathing space cancellation cover:

• How a creditor can apply to cancel a breathing space
• A detailed discussion of case law relating to applications to cancel in practice, including how the courts are interpreting the reg 17 grounds of unfair prejudice and material irregularity
• Enforcing a debt through a breathing space moratorium
• How you can support your client with potential challenges and address risks right from the start of a moratorium

Megan Lloyd is a Debt Expert in the Expert Advice Team at Citizens Advice.

The information in this article is correct as of the date of publication and was updated on 9 January 2024.

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