Background
Ali Houssein and his wife Nuray obtained a £1.881 million loan from London Credit Limited (LCL), an unregulated moneylender, secured by residential properties including their family home at 71 Hamilton Road. The facility letter required that neither the borrower nor related persons occupy 71 Hamilton Road. In July 2020, LCL’s representative conducted an inspection which the court found to be a “sham” designed to create the appearance that the property was undergoing renovation when the Housseins still resided there. The representative and others involved were aware of the true position.
LCL drew down the loan on 7 August 2020. Shortly thereafter, LCL learned the Housseins continued to occupy the property. On 8 September 2020, LCL declared an event of default based on breach of the non-residence covenant and appointed receivers. Ali Houssein died in December 2020. Between January and April 2021, the Housseins (through their solicitors) made multiple offers to refinance and repay the loan, arguing these offers should stop interest running at the default rate of 3% per month above the standard 1% rate.
The High Court judge held that: (1) LCL’s own knowledge of the breach at drawdown waived the default, invalidating LCL’s enforcement actions and default interest claims before 7 August 2021; (2) the borrowers’ refinancing offers were insufficient to stop interest running; and (3) the default interest rate was not a penalty. The borrowers appealed on issues (1) and (2).
The Court’s Holding
The Court of Appeal (Lewison, Newey, and Arnold LJJ) affirmed the judgment. Lord Justice Lewison reaffirmed the foundational principle that interest on a secured loan continues to run until the lender receives payment or the borrower executes a valid tender. A valid tender requires the borrower to actually set aside the tendered funds so they remain immediately available for the lender to accept—not merely to offer to pay at some future date or upon conditions.
The court rejected the appellants’ submission that refinancing cases should modify this principle to allow interest to stop running upon receipt of a binding commitment from a new lender (even conditional on release of the old security). Lord Justice Lewison reasoned that to do so would undermine the essential bargain between lender and borrower: the borrower receives use of the lender’s capital and must pay interest for as long as that use continues. If the new lender’s funds are not yet available and the borrower still has the old lender’s money, interest must continue.
The court examined the three letters of offer dated 16 and 23 March and April 2021. Although the letters specified timelines (e.g., refinancing by mid-April 2021), they were conditional on LCL releasing its securities and remained contingent on the new lender’s willingness to proceed. Critically, the funds were not set aside and immediately available. The judge’s finding that the borrowers had “cavilled, prevaricated, temporised and delayed” in negotiations, retaining the capital as a negotiating tactic, weighed against a finding of valid tender. The court held these offers did not constitute tender in law.
Key Takeaways
- A valid tender to stop interest requires the borrower to set aside and make immediately available the full amount due—not merely offer conditional future payment or evidence a commitment from a replacement lender.
- In refinancing contexts, the traditional tender doctrine is not modified; if new funds are not yet available, the borrower continues to benefit from the old lender’s capital and must pay interest on it.
- Correspondence indicating vague, contingent, or strategically delayed repayment proposals will not constitute tender, even if settlement negotiations are ongoing.
- A lender’s willingness to negotiate or delay enforcement does not amount to acceptance of a conditional offer; the borrower must demonstrate readiness to perform immediately.
Why It Matters
This judgment clarifies that borrowers seeking to stop default interest accrual cannot rely on refinancing proposals or conditional offers of payment, no matter how imminent the prospective closing date may be. The ruling protects lenders’ interests by requiring that money actually be set aside and available before interest stops running, preserving the core bargain: use of capital carries a cost. For borrowers, the decision means that strategic negotiations over refinancing terms will not interrupt interest accrual—only actual payment or true legal tender will do so.
The case also reflects the court’s skepticism toward parties who use refinancing discussions as a delaying tactic while retaining the lender’s capital. By anchoring the tender doctrine to the borrower’s actual possession and use of the lender’s money, rather than to future conditional commitments, the Court of Appeal maintains a stable, predictable rule for secured lending that applies equally regardless of the borrower’s refinancing circumstances.