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The High Court has refused an application by a bank for an order directing the estate of a deceased borrower to pay 9% surcharge interest, finding that the rate applied to a defaulted loan was not a genuine pre-estimate of the bank's loss and was therefore unconscionable and extravagant. The court determined that the bank's imposition of surcharge interest served as a penalty to discourage breach of loan terms, rather than solely to recover costs, and lacked a commercial justification. Consequently, the bank's application for an order directing the defendant's estate to pay the surcharge interest accrued was refused.
Surcharge interest - Defaulted loan - Unconscionable rate - Penalty clause - Liquidated damages - Genuine pre-estimate of loss - Commercial justification - High Court decision - Loan agreement - penalty clauses.
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