IV Fund Limited SAC v Frank James Mountain

A court may determine an application to cancel a mental health crisis moratorium where the creditor has complied with the statutory review procedure and the application is closely connected with existing High Court proceedings. “Unfair prejudice” under the Breathing Space Moratorium and Mental Health Crisis Moratorium (England & Wales) Regulations 2020 is assessed objectively by balancing the relevant interests on the evidence. In a bankruptcy petition, prejudice is not confined to the applicant creditor because bankruptcy is a collective process affecting creditors generally. Litigation-related stress does not ordinarily justify an adjournment where the evidence shows that the stress will recur and the medical evidence does not establish a useful prognosis. The moratorium was cancelled because its continuation unfairly prejudiced the creditor and the medical evidence was inadequate.

The Creditor had presented a bankruptcy petition against the Respondent. A 60-day breathing space moratorium was later followed, after the Respondent became self-represented, by a mental health crisis moratorium. The Creditor sought cancellation under regulation 19 of the Breathing Space Moratorium and Mental Health Crisis Moratorium (England & Wales) Regulations 2020, alleging material irregularity and unfair prejudice.

The Respondent sought an adjournment on medical grounds but did not attend the hearing. The court considered whether the application should proceed, whether the eligibility and payment-related requirements were met, whether continuation of the moratorium unfairly prejudiced the Creditor, and whether the application had been properly brought in the High Court.

1. The adjournment application was refused. The court was able to assess the medical evidence as part of the cancellation application. Litigation-related stress, without more, did not justify an adjournment where the stress was likely to recur and the Respondent had continued to conduct substantial litigation. The court applied the guidance in Decker v Hopcroft, [2015] EWHC 1170 (QB), Levy v Ellis-Carr, [2012] BPIR 347, and Forrester Ketley v Brent, [2012] EWCA Civ 324.
2. The application was properly before the High Court. Although regulation 19 referred to an application to the county court, jurisdiction was not exclusive where the challenge was closely connected with existing High Court bankruptcy proceedings. The court followed the approach in Axnoller Events Ltd v Brake, [2021] EWHC 2308 (Ch), and accepted that Form N244D was sufficient.
3. No material irregularity was established. The evidence did not show that the Respondent had sufficient funds immediately available to discharge or liquidate the petition debt as it fell due. A possibility of raising funds within a reasonable period was insufficient.
4. Continuation of the moratorium caused unfair prejudice. The expression was undefined and required an objective assessment and balancing exercise. The relevant prejudice was the stifling of an expedited bankruptcy petition, bearing in mind the collective interests of creditors, the history of delay, the Respondent’s substantial participation in the litigation, and the absence of persuasive medical evidence addressing the treatment, severity, prognosis and likely timescale for improvement.
5. The court therefore cancelled the mental health crisis moratorium. It directed notification under regulation 19(5)(b), lifted the stay on the bankruptcy petition, and ordered that the petition be relisted. The court noted that the moratorium might also have been vulnerable for non-compliance with regulation 29, but that issue was unnecessary to the decision.