In Houssein v London Credit Ltd [2025] EWHC 2749 (Ch), Mr Richard Farnhill, sitting as a Deputy Judge of the Chancery Division, considered whether a default interest rate of 4% per month under a 1-year bridging loan agreement constituted an unenforceable penalty.  His judgment, handed down on 23 October 2025, is significant in explaining the application of the Supreme Court’s decision in Cavendish Square Holdings BV v Makdessi [2016] AC 1172 in the context of a default interest rate which a lender can impose in response to any one of various possible defaults under a loan agreement.

This judgment was the second occasion on which this case had come before the court for trial.  Following a trial in 2023, the same judge had concluded that the default rate was an unenforceable penalty [2023] EWHC 1428 (Ch).  That finding was overturned by the Court of Appeal in 2024 [2024] EWCA Civ 721 and the question was remitted for reconsideration by the original trial judge.  The judge has now concluded that the default rate was not a penalty.  In reaching that conclusion, the judge analysed the contractual events of default as protecting one or other of five separate legitimate interests which the lender had in the enforcement of the loan agreement.  The judge then considered whether the default rate was extortionate by reference to each of those legitimate interests.  In adopting that approach to a default rate which could apply in a variety of circumstances, the judgment gives guidance on the application of Cavendish which will be important to all lenders, particularly those in the bridging sector.

The borrower also sought to rely on several offers of repayment made to the lender (including offers for more than the sum due at the time they were made) as a ground for barring the lender’s ongoing claim to interest.  The judgment rejected the borrower’s argument in reliance on those offers, emphasising the lender’s right to insist on repayment in accordance with the original terms of the loan and providing useful guidance on the law of tender.

    London Credit Limited was represented (in both the Court of Appeal and at the subsequent rehearing) by Giles Wheeler KC, instructed by Donna Newman and Peter Sequeira of Stephenson Harwood.

    The judgment can be found here.