Public Sector

IV Fund Ltd SAC v Mountain


The court has reasserted the ability for a mental health moratorium to be overturned in circumstances where the medical evidence provided by a debtor is insufficient. Consequently, the court upheld the decision made in Axnoller Events Limited v Brake & Ors.


A bankruptcy petition was initially presented by the IV Fund Limited SAC against Mr Mountain based on two court orders. Prior to the first hearing, Mr Mountain applied for a breathing space moratorium. This was not opposed by the creditor and was duly put into effect.

Three days after the expiration of the breathing space moratorium, Mr Mountain applied for and secured a mental health crisis moratorium. This was accepted by the relevant debt advisor with evidence. However, the bankruptcy court was not provided with medical evidence from an approved professional, therefore, the Judge ruled that any applications to cancel the moratorium could be made on an expedited basis.

An application was made by IV Fund Limited SAC to seek the cancellation of the mental health crisis moratorium.


The court considered the following issues.

First, the court determined whether there had been material irregularity under Regulation 17(2) of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) 2020. The Creditor claimed that Regulation 17(2)(c) was not met by Mr Mountain. This part of the Debt Respite Scheme details that a creditor may request a review on the grounds of material irregularity if the debtor has sufficient funds to discharge or liquidate their debt.

Second, the court assessed whether unfair prejudice was suffered by the Creditor.


  1. Whether there had been a material irregularity

The judge summarised that the evidence for the Debtor having sufficient funds to discharge the debt was “at best equivocal.” This is because Mr Mountain’s evidence on his ability to pay was not based on funds being immediately available, but instead on the reasonable time being provided to raise funds for payment.

Therefore, the judge dismissed the Creditor’s objection on this point.

  1. Whether unfair prejudice was suffered by the creditor

Unfair prejudice

The judge analysed the scope of unfair prejudice in the context of Regulations. This phrase is not defined in the Regulations. The judge highlighted a statement made by Lord Merriman P in Wood v Wood which stated that “any uncertainties in a given case can be resolved by resort to the burden of proof.”

The judge went on to place an emphasis on the importance of the quality of evidence placed before the court. He detailed that, in the context of a mental health crisis moratorium, evidence should be from a suitably qualified professional and include a diagnosis, treatment and prognosis. The court considered that this was important to enable an objective approach and allow the court to undertake its own balancing exercise.

The judge outlined that there was unfair prejudice in this case based on 14 factors. These included the fact that the Debtor’s health had not impaired him from seeking a breathing space moratorium, nor prevented him from filing a fourth witness statement and attempting to seek a re-finance of various corporate developments.

Medical Evidence

The judge also contended that the medical evidence filed with the court was wholly inaccurate. This was on the grounds that the report provided was not written by the consultant who had seen Mr Mountain and that the evidence itself was limited and only included generalities around diagnostic assessment. The judge highlighted that the evidence provided included a medication review and treatment plan alone which would not suffice.

On this basis, the court made an order cancelling the mental health crisis moratorium.


This case serves as a reminder of the necessity for quality evidence to be provided by debtors to the court when making applications to the court. Moreover, it demonstrates the balancing act which the court is prepared to take when approaching applications to seek the cancellation of mental health crisis moratoriums’. This is beyond a strict legal test and the specific circumstances of each case are highly important.