This case involved a dispute over the interest rate applicable under an unusually drafted mortgage. The dispute centred on a clause that read:
If the Lender elects to call up the loan pursuant to a default by the Borrower, interest on the Principal Sum shall be calculated at 10.5% per annum and shall be payable on demand.
There was a default (late payment of interest) but the mortgage was not immediately called up. Nevertheless the lender sought interest at 10.5% from the inception of the loan. The judge found this to be untenable because the above clause clearly made interest at 10.5% applicable only from the date the loan was called up (post termination) and not from the date of default and not from inception.
The lender also sought to apply a compounding clause post-termination but the judge held the above clause cancelled the compounding clause by providing for simple interest post-termination. The lender sought to compound with monthly rests pre-termination but the judge held only annual rests were provided for.