Jurisdiction(s):
United Kingdom

Default interest across multiple events of default: Houssein v London Credit clarifies Makdessi legitimate interest test and enforceability in bridging finance (England and Wales)

Published on: 17 December 2025

Published by a LexisNexis Commercial expert

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Article summary

Houssein & others v London Credit Ltd & others [2025] EWHC 2749 (Ch)

The High Court had earlier held in 2023 that the Default Rate amounted to an unenforceable penalty. The Court of Appeal, however, concluded that the judge had misapplied the principles in Cavendish Square Holding BV v El Makdessi (Makdessi) and sent the question back for fresh determination. Under Makdessi, the inquiry is whether a default rate serves a legitimate interest and, if so, whether the amount demanded is still extravagant, exorbitant or unconscionable. A striking aspect of the July 2020 bridging facility letter agreed between London Credit Ltd (LCL) and CEK Investments Limited (CEK) (the Facility Letter) was the wording of the ‘Default Interest Provision’. It stated that, if an event of default under the facility (Event of Default) occurred and payment was not made, interest would run on the overdue sum from the due date until payment at the Default Rate. The Default Rate was engaged by any Event of Default, which encompassed breaches of several distinct primary obligations. At the resumed High Court hearing, Mr Justice Farnhill undertook a careful examination of the Makdessi framework as applied to the issues in question before the court...

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