Court of Appeal rejects Houssein challenge to default interest and tender principles

The Court of Appeal has dismissed a challenge brought by Nuray Houssein and her family against London Credit Ltd, upholding findings that a 4% monthly default interest rate on a £1.881 million secured loan was not a penalty and that settlement offers made during a refinancing dispute did not amount to a valid tender capable of stopping interest running.

Handing down judgement on 1 July 2026, Lord Justice Lewison, with whom Lord Justice Newey and Lord Justice Arnold agreed, dismissed the appeal from a decision of Richard Farnhill, sitting as a Deputy Judge of the Chancery Division, following a remitted hearing.

The underlying dispute arose from a loan taken out in 2020 by CEK Investments Ltd, a company owned by Mr and Mrs Houssein, secured against a portfolio of properties including the family home at 71 Hamilton Road and five buy-to-let properties. The facility letter prohibited residence at any secured property, a structure adopted because the lender, as an unregulated moneylender, could not lawfully secure a loan against a borrower's home. The judge at first instance found that an inspection intended to confirm the family home was vacant had in fact been a sham, and that London Credit's representative was aware the family remained in residence at drawdown, a state of knowledge imputed to the lender itself. This meant the default relied upon to justify enforcement action had effectively been waived, rendering invalid any claim to default interest before August 2021.

Following an earlier Court of Appeal decision in 2024 that remitted the question of whether the default rate was a penalty, and a fresh issue as to whether correspondence between the parties' solicitors amounted to a tender sufficient to stop interest accruing, the deputy judge held against the borrowers on both points. The Court of Appeal agreed.

On tender, Lewison LJ reaffirmed that equity's willingness to stop interest running notwithstanding non-payment depends on money actually being tendered and kept available for the lender to accept, tracing the principle through Edmondson v Copland, Shearer v Spring Capital Ltd and Ҫukurova Finance International Ltd v Alfa Telecom Turkey Ltd. None of the three letters relied upon by the appellants met that threshold. Each was conditional on matters including the release of security before the debt was repaid in full, the availability of financing that had not yet been secured, or resolution of the separate dispute over default interest. The court rejected an argument that the doctrine established in Ҫukurova extended to offers a lender ought to accept as a matter of equity rather than contract, finding no basis for such an expansion where the loan itself remained legally outstanding.

On the penalty issue, the court applied the test from Cavendish Square Holding BV v Makdessi, asking whether the default rate imposed a detriment out of all proportion to the lender's legitimate interests. The deputy judge had identified a "Credit Risk Interest", finding that the viability of refinancing the loan was precarious and vulnerable to any factor affecting interest rates available to the borrowers, justifying an above-market default rate. Lewison LJ found no identifiable flaw in that reasoning sufficient to disturb an evaluative judgement, rejecting arguments that the judge had wrongly assessed rental income, loan-to-value considerations, or the timing of matters relevant to the contractual analysis.

Lord Justice Newey, while agreeing the appeal should be dismissed, reserved his position on a hypothetical scenario in which a borrower holds a binding but time-limited commitment from an alternative lender, suggesting the question of whether such a commitment could constitute available funds for tender purposes remains open for a future case.