Credit Capital Corporation Ltd v Watson & Anor

Under a loan agreement providing for increased default interest, the contractual redemption date is not extended merely because a later agreement permits interest payments for an additional period. Where the principal remains outstanding and monthly interest is unpaid, the contractual default rate may apply from the specified date. Later payment of sale proceeds does not restore the lower rate where the contractual conditions for default interest have already arisen. A party cannot introduce a substantive challenge to the interest rate at the stage of checking the judgment calculation when that challenge was not pleaded or pursued at trial.

The judgment concerned the sum payable following an earlier judgment in favour of Credit Capital Corporation Limited against Mr Watson. The court had directed the exclusion of valuation fees and security costs and required the outstanding loan balance to be recalculated.

Mr Watson subsequently disputed the application of compound interest at 3% per month. He contended that a January 2017 loan agreement extended the period during which interest was payable at 0.99% per month, and that sale proceeds received in August 2017 prevented or reversed the default rate. The claimant maintained that the contractual default rate applied from 13 April 2017 and that the new challenge was procedurally too late.

1. Disposition. The defendant’s procedural and substantive objections were rejected. The claimant was permitted to enter judgment for £1,253,130, payable forthwith, consistently with the order of 31 March 2021.
2. The dispute at this stage concerned the calculation of compound interest, not the contractual rate of interest. The claim and account had proceeded on the basis of 3% monthly default interest from April 2017. The defendant had not positively challenged that basis in the Defence and Counterclaim. It was therefore too late to raise the issue while merely checking the judgment calculation.
3. On the proper construction of clause 6.1, the redemption date under the January 2016 agreement remained 13 January 2017. The January 2017 agreement enabled the defendant to pay interest at 0.99% per month for the following three months. It did not extend the original redemption date or create a further six-month period before default interest could apply.
4. Under clause 6.1.3, the rate increased to 3% per month once three calendar months had elapsed from the redemption date while money remained outstanding. Independently, the final sentence of that clause applied the 3% rate where monthly interest due under clause 6.1.2 remained unpaid. No interest was paid from 13 April 2017. The contractual conditions for default interest were therefore satisfied.
5. The later sale proceeds did not alter the position. The default rate had already arisen, the proceeds did not discharge the outstanding sums, and there was no contractual basis for reverting to 0.99% per month. Compound interest consequently continued at 3% per month.

The judgment records consequential proceedings following an earlier judgment handed down on 2 March 2021. An order dated 31 March 2021 required the defendant to provide any alternative calculation by 15 April 2021 and provided for judgment to be entered if he failed to do so. The present judgment determined the defendant’s objections to the revised account.