It has taken over 20 months, but we now have a reported decision from the High Court in England on the operation of the new moratorium provisions introduced by the Corporate Insolvency and Governance Act 2020. Sir Alastair Norris, sitting as a High Court judge, has rejected a creditor's attempt to bring a moratorium to an end following a monitors' decision not to terminate the moratorium.

The decision will be helpful to insolvency practitioners faced with the question of whether to terminate a moratorium in situations where they might "think" the debtor company is unable to pay pre-moratorium debts for which the company does not have a payment holiday during the moratorium.

There has been much debate within the insolvency profession as to how the courts would interpret the moratorium provisions. In what will hopefully be a sign of things to come, the courts have recognised that in many cases decisions by monitors will be seen as matters of commercial judgment for the monitor and for which the monitor will be given considerable latitude.


The companies with the protection of the moratoria were the operating companies (OpCos) within the Corbin & King restaurant group. The applicant – who was challenging the monitors' decision - had provided loan facilities to the group's ultimate holding company (TopCo) and on 19 January 2022 issued a notice of demand under those facilities. The OpCos had guaranteed the loan facilities and on 21 January 2022 the applicant demanded under those guarantees. TopCo was placed into administration on 25 January 2022.

While the moratorium provides a "payment holiday" from any pre-moratorium debts, excluded from the category of debts in respect of which there is a "payment holiday" are any debts "arising under a contract or other instrument involving financial services". It was a matter of agreement that the contracts of guarantee were contracts involving financial services.

The OpCos were not in a position to pay the sums demanded under the guarantees. The argument for the applicant was therefore straight forward. The legislation is clear that the monitor must bring the moratorium to an end if the monitor "thinks that the company is unable to pay" a debt for which there is no payment holiday.

However, notwithstanding the inability of the OpCos to pay the debt, the monitors considered it was likely that the principal loan would be repaid in full in the reasonably near future. This was on the basis that an offer that had been made by a third party to the administrators of TopCo, which it was thought would result in the repayment of the loan in full. The monitors decided not to terminate the moratoria, which resulted in the application to the court.


The duty to terminate a moratorium only occurs once the monitor "thinks" that a particular state of affairs exists. That same expression can be found in paragraph 3(3) of Schedule B1 to the Insolvency Act 1986 and the courts have already determined that in the context of an administrator's decision on which statutory objective to pursue, the administrator's decision is only open to challenge if it was made in bad faith or was clearly perverse.

Both sides in the case were agreed that the question was whether the thinking of the monitors produced a result that was clearly perverse, in the sense that no reasonable monitor could have reached it, and so was "irrational".

"…the company is unable to pay…"

The applicant argued that the OpCos were unable to pay the debt and that was the end of the matter. The court however agreed that, at least insofar as liabilities under a guarantee are concerned, it was legitimate to consider the extent to which that liability might "evaporate" by payment of the principal debt. It was appropriate for the monitors to take account of the ability of TopCo to discharge its debt.

The judge also considered that a company "is able" to pay a presently due pre-moratorium debt if it has the "immediate prospect of receiving third party funds or owns assets capable of immediate realisation." The judge held that what was "immediate" was a matter of commercial judgment for the monitor, bearing in mind that anything over 5 business days requires specific assessment. Therefore, in the circumstances of this case, did Topco have the immediate prospect of repaying the loan?

Fast moving

The initial offer to the administrators of TopCo was to purchase TopCo's direct and indirect interests in the OpCos for a sum equal to the total indebtedness of TopCo. The judge did not consider that this was an offer that the administrators could accept immediately. The administrators were required to conduct a marketing exercise and open sale which would make an immediate realisation impossible.

However, by the time of the hearing before the court a revised offer had been made of interim funding sufficient to replace the principal loans. This, the judge considered, did offer the prospect of the immediate receipt by TopCo of funds sufficient to discharge the loan and relieve the OpCos of their guarantee liabilities.

Therefore, initially the monitors ought to have terminated the moratorium, but now the position had changed and the decision not to terminate could not be said to be a decision that no reasonable monitor could have arrived at. The fact that at the point of the application the decision of the monitors had fallen "on the wrong side of the line as being one which no reasonable monitor applying the correct test could have reached" did not prevent the court from taking account of the change in circumstances. It was accepted that the court's discretion on whether to bring the moratoria to an end fell to be exercised as at the date of the hearing.

In exercising that discretion the court assessed the harm suffered by the applicant to be less significant than the harm suffered by the OpCos if the application was successful and the applicant was able to commence insolvency proceedings against the OpCos. The court had regard to the fact that that each OpCo was trading successfully and there was an immediate prospect of the applicant's debt being repaid and so the guarantee liability evaporating.


Insolvency practitioners will welcome the purposive interpretation applied by the court and the indication that courts will allow monitors considerable latitude when it comes to making decisions on matters of commercial judgment. It will hopefully be a decision that encourages the use of the moratorium in situations where there are realistic prospects of saving a business but breathing space is required to make that happened.

Whilst a decision of the English High Court, should other courts in the UK be asked to determine similar issues we would expect those courts to find this decision to be relevant and persuasive.


Andrew Scott

Senior Associate

Lucy McCann