David Terence Forbes v Interbay Funding Limited

The Court of Appeal considered the construction of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Moratorium) (England and Wales) Regulations 2020, in particular whether the principal amount of a secured debt called in before the start of a moratorium is a "non-eligible debt" under Regulation 5(4)(a) and so excluded from the definition of a "qualifying debt" and a "moratorium debt". The court held that the word "arrears" in the Regulations should be read in its ordinary sense as referring to unpaid instalments or similar missed payments, as further informed by the definitions in Regulation 2 and by the context of Regulations 7(9) and 7(10). On that construction the principal sum of a secured debt is a non-eligible debt and not a moratorium debt, whether or not it had been called in before the moratorium commenced.

In reaching that conclusion the court relied on contextual reading of the Regulations (including the specific exclusion of "capitalised mortgage arrears"), consideration of the effect of Regulations 7(9) and 7(10) on interest, and comparison with the treatment of secured debt in other personal insolvency regimes. The court also noted, without placing decisive weight on it, that established interpretive principles (including the presumption against clear interference with proprietary rights) supported resolving ambiguity in favour of secured creditors.

This case comprised two combined appeals by the borrower, Mr Forbes, against determinations that the principal amounts of two secured loans were not "moratorium debts" under the Debt Respite Scheme Regulations 2020. One appeal concerned a loan from Interbay Funding Limited secured by a first legal charge; the other concerned a bridging loan from Seculink Limited secured by multiple properties and governed by a Tomlin order. Both loans were in default and had been the subject of enforcement or possession proceedings when a mental health crisis moratorium was obtained.

The principal issue was statutory construction: whether the principal amount of a secured debt, where that principal had fallen due prior to the moratorium application, falls within the exclusion in Regulation 5(4)(a) as a "secured debt which does not amount to arrears in respect of secured debt", and hence is a non-eligible debt excluded from the moratorium protections. If the principal were a moratorium debt, creditors would in general be prevented from taking enforcement action and prevented from recovering interest accruing during the moratorium (subject to the carve-out in Regulation 7(9)).

Procedural history: Interbay commenced possession proceedings after formal demand. The county court made an order for possession on 24 July 2023; HHJ Evans-Gordon (on appeal from that order) considered the statutory construction issue and concluded the principal was not a moratorium debt. That decision was appealed to the Court of Appeal with permission. In the Seculink proceedings, after interlocutory steps including an initial jurisdictional refusal by HHJ Baucher, Sir Anthony Mann (sitting in Chancery Appeals) determined on 11 March 2025 that the principal was not a moratorium debt; that decision also went to the Court of Appeal with permission.

The Court of Appeal analysed the Regulations, notably the definitions in Regulation 2, the definition of "qualifying debt" in Regulation 5, the exclusion in Regulation 5(4)(a) of secured debt unless it is "arrears in respect of the secured debt", and the restrictions on creditor action in Regulation 7(6)–(10). The court concluded that the Regulations use the term "arrears" in its natural and contextually informed sense to mean missed instalments or similar sums which had fallen due but not been paid, and expressly exclude "capitalised mortgage arrears". Reading the Regulations as a whole, and having regard to the specific limit in Regulation 7(9) that, for secured debt, the interest freeze applies only to interest accruing on arrears, the court considered it untenable that the principal capital called in before the moratorium should be swept within the definition of arrears.

The court also considered the practical and legal consequences of the contrary construction. It observed that including called-in principal as moratorium debt would mean secured creditors could lose the right to interest accruing during potentially long moratoriums, producing a significant departure from established treatment of secured creditors in insolvency regimes. The court accepted that interpretive principles protecting proprietary rights supported the respondents' construction where the Regulations were ambiguous, though it did not rely on that principle alone.

Issues framed by the court:

• Whether the principal amount of secured debt which has fallen due before a moratorium is a "non-eligible debt" under Regulation 5(4)(a) and therefore not a "moratorium debt".
• Consequent questions about the creditor's ability to require payment of interest or to take enforcement action during the moratorium if the principal were a moratorium debt.

Court's reasoning in brief: The Court of Appeal interpreted "arrears" contextually and purposively as unpaid instalments and related sums, not as a label covering the whole principal called in; it relied on the text of the definitions (including the separate treatment of capitalised mortgage arrears), the limitation in Regulation 7(9) on interest protection for secured debt, and comparative analysis with insolvency law. The court concluded the principal sums were non-eligible debts and therefore not protected moratorium debts. The appeals were dismissed.

Appeal dismissed. The Court of Appeal held that, read in context, the Regulations distinguish the capital principal of a secured debt from "arrears"; "arrears" refers to unpaid instalments or similar missed payments (excluding capitalised mortgage arrears). Accordingly the principal sum of a secured debt called in before the moratorium is a non-eligible debt under Regulation 5(4)(a) and is not a qualifying or moratorium debt. The court relied on the statutory definitions, the limitations in Regulation 7(9) concerning interest, and comparison with insolvency regimes; interpretive principles protecting proprietary rights lent additional support to the respondents' construction.

Appeals to the Court of Appeal against decisions below. Interbay proceedings: claim form issued 9 May 2023; County Court (Deputy District Judge Waschkuhn) order for possession 24 July 2023; HHJ Evans-Gordon considered the moratorium point and (3 June 2024) granted permission to appeal but dismissed the appeal; permission to appeal to the Court of Appeal granted by Lewison LJ (23 September 2024). Seculink proceedings: Tomlin order 17 June 2021; HHJ Baucher dismissed an application on jurisdiction (2 January 2024); Sir Anthony Mann allowed an appeal on jurisdiction and determined the principal was not a moratorium debt (11 March 2025) [2025] EWHC 524 (Ch); permission to appeal to the Court of Appeal was given and the two appeals were listed together. The Court of Appeal handed down judgment on 6 June 2025 ([2025] EWCA Civ 690).