28/6/24
HOUSSEIN v LONDON CREDIT LIMITED [2024] EWCA Civ 721
The court reviewed principles applicable to penalties and default interest. The trial judge had not applied to correct test. He had not asked if the default rate (an additional 3% per month) was a secondary obligation, had not separately considered factors relevant to whether the lender had a legitimate interest in charging the default rate, wrongly considered the lender’s subjective intention, and had not asked whether the default rate was extortionate, extravagant and/or unconscionable in the light of any legitimate interest in charging it. Whether the rate was penal was remitted for reconsideration. If the default rate was penal, on its proper construction the credit agreement made no provision for any other rate so the lender would be left with a claim to statutory/equitable interest. The judge had also been wrong to make an issue based costs order without having considered which party was the overall winner and whether that party’s costs should be discounted. The judge had been entitled to refuse to order costs in the indemnity basis.