Houssein and others (Appellants) v London Credit Limited and another (Respondents)

Permission to Appeal application lodged

Case summary
Permission to Appeal
Previous proceedings

Case summary

Case ID

UKSC/2026/0131

Parties

Appellant(s)

Mrs Nurray Houssein and Houssein Ali Houssein (as executor of the estate of Ali Houssein deceased) and CEK Investments Limited

Respondent(s)

London Credit Limited [and Victoria Liddell and Annika Kisby (as joint Fixed Charge Receivers)]

Issue

Issue: (i) where a mortgagee, by its conduct, has a substantial or operative causal effect in preventing/delaying a mortgagor from redeeming a loan, in what circumstances will equity intervene to make a special order as to interest and thereby disallow interest that is said to have accrued; and (ii) whether a default interest rate in a facility of 4% per month compounded monthly (equivalent to approximately 60% per annum), which is triggered by heterogeneous events of default, is an unenforceable penalty within the meaning of Cavendish Square Holding BV-v-Makdessi [2015] UKSC 67.

Facts

This case concerns a dispute arising from a bridging facility which the Respondents provided to the Appellant (“The LCL Loan”). Under the terms of the Facility Letter interest was charged at a rate of 1% per month, and default interest of 4% per month was payable on an event of default or late payment. There were representations and covenants to the effect that the borrower was not to reside in any of the properties over which security was taken, with a breach of these provisions leading to default. Drawdown of the LCL loan took place on 7 August 2020, and an inspection on 6 September 2020 confirmed that the Appellants remained in residence at one of the properties over which security was taken (71 Hamilton Road). The Respondents served notices alleging breach of the non-occupation clause, and asserted entitlement to default interest accruing from 7 September 2020. In March and April 2021, the Appellant advanced replacement finance proposals; LCL refused these offers. The lower courts determined that these proposals did not constitute tenders. On 14 May 2021, LCL accepted payment of £1.2 million, and charges were released over three of the properties. At the contractual Repayment Date on 7 August 2021, the total sum payable was £629,991.79. In October 2023, the Appellants proposed payment of the outstanding balance with cooperation from the Respondents being necessary for the replacement finance to complete. On 12 October 2023, the Appellants’ solicitors confirmed that they were in funds for a £630,000 net advance. The High Court judge initially considered that there was no default in this case, as the interest rate amounted to an unenforceable penalty. Upon appeal to the Court of Appeal, this question was remitted to the High Court judge who then determined that the default interest rate did not amount to a penalty, and that the Court could not invoke the equitable jurisdiction to make an order as to interest. The Court of Appeal then dismissed the Appellants’ appeal.