Seculink Ltd v David James Terence Forbes

Under the Debt Respite Scheme Regulations, called-in capital secured by a mortgage is not “arrears” merely because it has fallen due. The expression “arrears in respect of secured debt” distinguishes the secured capital from arrears arising on that capital. The definition of “capitalised mortgage arrears” is an important contextual indication that mortgage capital was intended to remain outside the moratorium. Accordingly, called-in mortgage capital is non-eligible secured debt and is not a moratorium debt, although unpaid sums such as interest or other arrears may remain protected.

This was an appeal from the county court concerning the effect of a mental health crisis moratorium under the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020. The court had previously determined that it had jurisdiction to decide whether the disputed liability was a moratorium debt, leaving the substantive construction issue for a further hearing.

The parties agreed that £260,000 represented outstanding principal under a secured bridging loan and that other unpaid sums constituted arrears. The central issue was whether the called-in principal was itself “arrears” within regulation 5(4)(a), and therefore a moratorium debt.

1. The court decided that the called-in capital was not a moratorium debt. The consequences for the underlying enforcement proceedings were left for further argument after hand-down.

2. A moratorium debt must be a qualifying debt under regulation 6. A qualifying debt excludes a non-eligible debt under regulation 5(1), and regulation 5(4)(a) treats secured debt as non-eligible except to the extent that it amounts to arrears in respect of secured debt.

3. The definition of “arrears” in regulation 2 is broad, but it does not require the principal of secured debt to be treated as arrears. In the context of regulation 5(4)(a), “arrears in respect of secured debt” is properly understood as arrears arising on the secured capital, rather than the capital itself.

4. The express exclusion of “capitalised mortgage arrears” from the definition of arrears was a significant contextual indicator. If all called-in mortgage capital, including capitalised arrears, were automatically “arrears”, that exclusion would serve no rational purpose. The Regulations instead indicated that mortgage capital was generally intended to remain within non-eligible secured debt.

5. The court considered competing anomalies in the parties’ constructions. The interpretation treating called-in capital as arrears would make the treatment of capital depend arbitrarily on when it was called in and could cause accruing interest to become irrecoverable under regulation 7(10). Those consequences reinforced the construction adopted.

6. The principle of legality was noted but did not materially assist. The issue was resolved by construing the language and structure of the Regulations in light of their apparent purpose.

The judgment arose in an appeal from the county court. The High Court had previously ruled in [2024] EWHC 3339 (Ch) that it had jurisdiction to determine whether a debt was a moratorium debt, but left the substantive question for this hearing.