The Court of Appeal in Houssein v London Credit Ltd [2026] EWCA Civ 830 has upheld the decision of Mr Richard Farnhill, sitting as a Deputy Judge of the Chancery Division, that a default interest rate of 4% per month in a 1-year bridging loan agreement did not constitute an unenforceable penalty ([2025] EWHC 2749 (Ch)).

The Court of Appeal judgment also provides an unusual appellate decision on the law of tender and the circumstances in which the Court will exercise an equitable discretion to disallow the continued recovery of interest after a lender has refused a tender of repayment.

This was the second occasion on which the case has come before the Court of Appeal.  At the first appeal in 2024 ([2024] EWCA Civ 721), the Court of Appeal had overturned the trial judge’s finding at the original trial that the default rate was an unenforceable penalty and remitted the issue to the trial judge for further consideration.  The decision at the remitted hearing that the default rate was not a penalty has now been upheld.

As an additional ground for seeking to bar the lender’s ongoing claim to interest, the borrower relied on several offers of repayment made to the lender (including offers for more than the sum due at the time they were made).  These offers were funded by offers of refinancing from new lenders and, in that context, were said by the borrower to amount to tenders of payment the refusal of which barred the lender from continuing to recover interest on the loan.  The Court of Appeal upheld the trial judge’s rejection of that argument, including his refusal to exercise a discretion said to have been established by the Privy Council decision in Çukurova Finance International Ltd v Alfa Telecom Turkey Ltd [2016] AC 923.  In doing so, the Court of Appeal has provided an important modern restatement of the law on tender and the circumstances in which a refusal of a tender will result in the recovery of interest being disallowed.

London Credit Limited was represented (on both occasions before the Court of Appeal and at the remitted hearing before the trial judge) by Giles Wheeler KC, instructed by Donna Newman and Peter Sequeira of Stephenson Harwood.

A copy of the judgment is available here.