The recent case of Forbes v Interbay Funding Ltd; Forbes and Seculink Ltd [2025] EWCA Civ 690, decided by the Court of Appeal addressed key issues surrounding the interpretation of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Moratorium) (England and Wales) Regulations 2020 (“the Regulations”).

Background of the Case

The case involved arguments from Mr Forbes, who contended that once the principal sum of a secured debt becomes due and remains unpaid, it should fall within the broad language of “any sum payable to a creditor by a debtor which has fallen due and which the debtor has not paid.” He argued that this should qualify it as “arrears,” and thus a protected debt during a moratorium period.

What are the Regulations?  

The Regulations were created under s.6 of the Financial Guidance and Claims Act 2018 (“the Act”). The Act provides for a debt respite scheme which is designed to do one of the following:

• Protect individuals in debt from the accrual of further interest or charges on their debts;
• Protect individuals in debt from enforcement action; and
• Help individuals in debt and their creditors to devise a realistic plan for repayment of their debts.

The Regulations provide for two types of moratorium:

1. Breathing Space Moratorium – aimed at individuals experiencing general debt problems.
2. Mental Health Crisis Moratorium – specifically for those undergoing treatment for a mental health crisis.

Mr Forbes’ matters relate to a mental health crisis moratorium which protects a category of debts defined as “moratorium debts”. The Regulations place restrictions on creditors when a moratorium is in place, barring creditors from: (1) charging interest, fees or penalties on moratorium debts; (2) taking enforcement action, including legal proceedings or repossession; and (3) instructing agents to pursue any of the aforementioned actions.

Moratorium debts include any “qualifying debt” that existed at the time of the moratorium application and reported by a debt advisor to the Secretary of State. A “qualifying debt” is defined as “any debt or liability other than a non-eligible debt”. The regulations provide a list of categories of debts that are “non-eligible” debts. In the context of Mr Forbes’ case the applicable category is a “secured debt which does not amount to arrears in respect of secured debt”. The Regulations define a “secure debt” as “(a) a secured credit agreement, (b) a hire purchase agreement or (c) a conditional sale agreement”. Mr Forbes’ matter related to secured credit agreements. In this instance, the abovementioned restrictions do not apply to secured debts, as defined above, but only apply to the overdue amounts of the secured debts.

After reading the previous paragraph, the reader will appreciate why the Regulations were in need of clarification. Mr Forbes’ case answered the question of whether the principal amount of a secured debt can be considered “arrears”, thus making it a qualifying debt during a moratorium. The term “arrears” is defined in Regulation 2 and states:

“any sum other than capitalised mortgage arrears payable to a creditor by a debtor which has fallen due and which has not been paid at the date of the application for a moratorium in breach of the agreement between the creditor and the debtor or in breach of the legislation or rules under which the debtor incurred the debt or liability.” 

“Capitalised mortgage arrears” is defined as any arrears in relation to a mortgage that have been added to the outstanding balance to be paid over the duration of the mortgage.

Court Decision

The main question to be decided in the court of appeal was whether the principal amount of the “secured debt” could be considered a “non-eligible debt”. Mr Forbes argued that the phrase “any sum … payable to a creditor by a debtor which has fallen due and which the debtor has not paid” was broad enough to cover the principle sum outstanding. The court disagreed citing the following key points:

1. The term “arrears” in the Regulations naturally refers to missed periodic instalments—not full principal sums that become due.
2. The court emphasised that the Regulations clearly distinguish between arrears and capitalised mortgage arrears. Arrears are generally understood as unpaid instalments, not the entire debt that becomes due.
3. Accepting Mr Forbes’ interpretation would lead to inconsistencies—for example, preventing creditors from collecting interest simply due to the timing of when the debt was called in relative to the moratorium’s start. Such a result, the court noted, would be arbitrary and unjustified.
4. In other insolvency regimes (e.g., bankruptcy, debt relief orders), secured debts remain outside the collective process unless the creditor voluntarily surrenders security. The Regulations appear to mirror this approach, reinforcing the view that principal sums should remain non-eligible.
5. The court invoked the principle that laws interfering with proprietary rights must do so in clear and express terms. Since the Regulations are ambiguous on this point, they should be interpreted in favour of preserving the rights of secured creditors.

Conclusion

The court concluded that the principal sum of a secured debt—whether or not it had been called in before the moratorium—does not qualify as "arrears" and is therefore not a qualifying or moratorium debt under the Regulations. Accordingly, secured creditors retain their rights in relation to such debts, and the appeal was dismissed.

The Court of Appeal’s decision significantly limits the scope of protections under the Debt Respite Scheme for secured creditors by clarifying that the principal amount of secured debts is not treated as arrears and thus not subject to moratorium restrictions; this preserves creditors’ enforcement rights over the full debt, reducing uncertainty and protecting their security interests while emphasising that any legislative interference with such rights must be explicit, which may encourage creditors to be more confident but also cautious when engaging with debt respite arrangements.

Written by: Simeon McKenzie, CS Litigation Paralegal 

Please contact us if you would like more information about the issues raised in this article or any aspect of debt recovery on 020 8290 7400 or email info@jpcreditsolutions.co.uk

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