Nuray Houssein & Ors v London Credit Limited & Anor

A borrower does not stop interest on a secured loan merely by offering to repay or refinance. A valid tender requires the whole sum properly due to be immediately available, set aside for the lender, and accompanied by continuing readiness and ability to pay. A lender’s refusal, or demand for more than is due, does not remove those requirements. Equity has no general discretion to suspend interest merely because repayment has been obstructed. For default interest, the question is whether the secondary obligation is out of all proportion to the lender’s legitimate interest in enforcing the primary obligation. An appellate court will not reweigh that evaluative judgment without an identifiable flaw. The default rate in this case was not a penalty.

The appellants were borrowers and guarantors under a secured loan made to CEK Investments Ltd by London Credit Ltd. After the lender sought to enforce the security, the borrowers argued that various repayment and refinancing proposals had stopped interest running. They also challenged the contractual default rate as a penalty and contended that statutory interest would be unavailable if the rate was unenforceable.

At the first trial, the High Court held that the default rate was a penalty: [2023] EWHC 2382 (Ch). The Court of Appeal held that the judge had adopted the wrong approach and remitted the issue: [2024] EWCA Civ 721. On remission, the judge held that the borrowers had not made a valid tender and that the default rate was not a penalty: [2025] EWHC 2749 (Ch). The appeal concerned the requirements for stopping interest, the penalty analysis, and the contingent statutory-interest issue.

The Court of Appeal unanimously dismissed the appeal. Lewison LJ gave the leading judgment. Newey LJ and Arnold LJ agreed with his reasons, subject to Newey LJ’s reservation concerning a possible future refinancing case.

1. Tender. Interest ordinarily continues until repayment. Equity may stop it after a valid tender because the lender could have had the money, but the borrower must tender the whole amount properly due, keep it set aside and immediately available, and remain ready and able to pay. The distinction between a tender and an offer to repay was supported by Edmondson v Copland [1911] 2 Ch 301, Shearer v Spring Capital Ltd [2013] EWHC 3148 (Ch) and Barratt v Gough-Thomas [1951] 2 All ER 48. The proposals here were conditional, uncertain, unsupported by immediately available funds and, in some respects, conditional on resolving the default-interest dispute. They were not tenders.
2. Equitable jurisdiction. The exceptional jurisdiction discussed in Ҫukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 4) [2013] UKPC 20 concerned relief against forfeiture where appropriation had discharged the debt at law. It did not create a general discretion to suspend interest on an outstanding loan or eliminate the distinction between an offer and a tender. A lender’s demand for more than was properly due likewise did not displace the ordinary tender requirements.
3. Penalty. Applying Cavendish Square Holding BV v Makdessi [2015] UKSC 67, the issue was whether the secondary obligation imposed a detriment out of all proportion to the lender’s legitimate interests, assessed at the date of contracting. The judge was entitled to examine the relevant events of default separately and to recognise a legitimate credit-risk interest in preserving a precarious refinancing route. The default rate was not out of all proportion.
4. Appellate review. The penalty conclusion was evaluative. Under Re Sprintroom Ltd [2019] EWCA Civ 932, the appeal court did not conduct the balancing exercise afresh. The borrowers failed to identify a gap in logic, inconsistency, failure to consider a material factor or other flaw sufficient to undermine the decision. The contingent question of statutory interest therefore did not arise. Newey LJ expressly reserved the question whether a binding commitment from a new lender might constitute available funds in a future case.

• Court of Appeal (Civil Division) dismissed the appeal and upheld the remitted decision: [2026] EWCA Civ 830.
• Court of Appeal (Civil Division) held on the earlier appeal that the High Court had adopted the wrong approach to the penalty question and remitted the issue for reconsideration: [2024] EWCA Civ 721.
• High Court (Chancery Division) held after remission that the borrowers had not made a valid tender and that the default rate was not a penalty: [2025] EWHC 2749 (Ch).
• High Court (Chancery Division) had initially held that the default rate was a penalty: [2023] EWHC 2382 (Ch).