Debt Respite Scheme: Whether costs were to be paid on account where a debt respite moratorium was in place (Axnoller Events v Brake and another; Brake and others v Chedington Court Estate Ltd – 2021)

An early decision relating to the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, this case addresses whether a breathing space or mental health moratorium resulted in the removal of a requirement to pay judgment debts and/or costs orders.

The background

In Axnoller Events v Brake and another; Brake and others v Chedington Court Estate Ltd [2021], Mr Brake was granted a mental health crisis moratorium. A costs schedule was served, together with submissions requesting an order that a payment of costs on account be made prior to agreement of a detailed assessment of costs. The Brakes submitted that the moratorium was ‘good reason’ to prevent the order being made to require payment of costs being made on account, on grounds that:

• payments on account in principle are intended to make some immediate payment to a successful party;
• the moratorium meant that payment would not result in such a payment;
• an order for payment of costs on account would not benefit either party, and could be of further detriment to Mr Brake’s mental health;
• no prejudice would be suffered by the applicant party, as an application could be made at a later date.

The decision

The High Court found in favour of the applicant and decided that the mental health moratorium did not prevent an order for payment on account of costs being made. The court referenced the Civil Procedure Rules rule 44.2(8):

“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”

Any order where a sum is to be paid on account creates a debt, but in this case the debt was not a moratorium debt because the moratorium existed before a liquidated debt was created. A contingent liability of an uncertain amount was created by the order which stated that the Brakes pay costs to be assessed; those costs only became liquidated debt once due and owing, following agreement or assessment.

There was a benefit to the applicant party in making the order that payment on account of costs be made, and this benefit outweighed the risk of mental health deterioration on Mr Brake.

Advice and action

This case provides valuable guidance for parties dealing with Debt Respite Scheme moratoriums in the infancy of the Regulations. Where a debt is only a liquidated debt after the moratorium comes into existence, an order that payment be made on account of costs may be made in accordance with the usual rules.

It is likely that courts will consider cases on their facts as to whether a costs order should be sought, which will depend on whether sufficient benefit is to be gained from such an order. The courts will assess how long moratoriums are likely to be in place and the circumstances of each individual.